I couldn't help myself. At 9.2 cents I topped up my holding to...

I couldn't help myself. At 9.2 cents I topped up my holding to allow expose to potential upside when (if) financing is confirmed and projects get underway. Average price now: 17.3 cents. No more purchases for me until at least construction of SA1 begins. Of course, I am also increasing downside exposure if the price falls further. DEL remains my smallest holding by far, with cash being my largest position at the moment (and 'daylight' second!).

Hopefully we will soon have the NZ and BLM projects behind us, and DEL can fully focus on the pipeline projects.

Joe's reference to "potential future BOOM projects" confused me. Upon reading through the ARENA website a few days later I accidentally stumbled across its meaning. No, it doesn't mean exponential growth and rocketship-to-the-moon type earnings growth on a chart. It means Build, Own, Operate, Maintain. In case anyone, other than myself, was unsure.

Picking up on something Dabozza mentioned last week (on Twitter) regarding the long silence from ARENA on bioenergy financing I wonder if it's actually the delay in ARENA financing which is the real issue, rather than any problems with the projects and Delorean? DEL has mentioned $33 million in ARENA funding and "at least $30 million in funding" in the past. One would have hoped that a change of government and Chris Bowen at the helm would clear some of these roadblocks. I recall seeing somewhere that $5 million was anticipated for SA1 but can't find the reference now. Perhaps not. Labor accused the Liberal goverment of going slow, and inaction, in addressing the energy transition. Maybe a lot has gone on behind the scenes which will reveal itself in the near future. That ARENA financing sure would be useful as equity towards financing.

Which brings me to the purpose of this post.

YouTube has a lot of videos showing the operations of biogas facilities, mostly in Europe and the UK. I've watched many over the past fortnight and YouTube seems to have taken the hint and started suggesting even more to me! One video in particular was very interesting. Making biogas work: A financial perspective [IDLES lecture 2021]. The speaker is a London-based director of Green Giraffe, a European company which specialises in finance for renewable energy projects not only in UK/Europe but around the world.



After watching the video a couple of times, checking out their website (https://green-giraffe.eu/) and reading their "about us" PDF document, I wonder if Hamish and Joe should give them a call (joke) instead of Planum -- as they opened an office in Sydney just two weeks ago. In all seriousness, as an investor I think it's worthwhile spending a little time researching the perspectives of renewable energy financing companies to hear their perspective of the current environment for the type of thing DEL is proposing. That way, one can compare management's comments and assumptions against what an actual financing company says about biogas plant finance, rather than take it at face value.

Chapters two and five are of most benefit. Michael Ware from Green Giraffe discusses project finance and risk for new biogas plants.



In particular, I noted the following:

* Project financing for biogas plants is different to normal financing as the renewable energy project is being financed rather than the company.
* An asset is built from which a predictable revenue stream is created for the next twenty years. The financing entity recovers its investment from the asset. A risk is that the project is not built on time, and/or is over budget.
* Solar projects are much simpler because projections of sunlight averages and therefore energy generation can be accurately inferred over a period of months/years on average. Biogas plants require trainer operators, and potentially unpredictable feedstock quality (i.e. BLM?) can affect the energy generated. The amount of gas produced may not be constant, therefore the returns can vary.
* Gearing -- banks will typically only lend 70-80% to a project. 20-30% equity is needed up-front. This would make the ARENA funding very important.
* Two accounts are typically set-up. One would need to hold at least 6 months' repayments; the other would hold at least 12 months' anticipated maintenance spend.
* Investor returns are usually higher as investors (us) are taking on more risk.



Here is a link to the video in case anyone is interested in checking it out:


The next three months leading up to Christmas should answer a few questions I have about this company. If we can secure finance, reach FID on at least one, possibly two projects, and maybe secure another eastern states operating license, I will be very happy to continue to hold and watch the projects move towards completion regardless of any short-term unprofitablity.