Guys calm down, looks like you're heading off the original idea of this thread.
See Post #2825329 for some earlier npv calcs, but prior to recent funding deals.
In that post I came to an NPV of around 0.05 $/share for the 40 MW plant and later about 0.50 $/share for the 400 MW plant. Again prior to recent announcements. I haven't updated the numbers for the new situation yet, but these give you an idea. I think DEX posted some numbers which were similar as well; his updates are worth reading too.
I can post my spreadsheet but don't know how?
Anyway the NPV basis stems from taking the BBY report on LNC and making some mods. These include - average wholesale power price in QLD, scaling the syngas production to meet the required value for each project and costing of the gas turbine power block. I made some changes for the gas cleanup etc. Its fairly rough but I expect it gives some reasonable indication of where it could be.
One thing I think you need to do in these valuations which I am learning others don't seem to do, is take into account the probability of success. Sure the value maybe $0.50/share for a 400 MW plant and another $1.00/share for a 1000MW plant, but does that mean the shares are worth $1.50 now? No, obviously not, cos there is no guarantee of these projects actually occurring. Maybe the 400 MW plant has a probability of 50% success, the pakistan project I expect has less than 20% probability of success. These are arbitrary values I am assigning, but there is precedent to estimate these within a reasonable range. Ascribing 100% chance of success is outside that reasonable range. Another related factor is timing. Such large power projects take about 4-5 years to become operational after final investment decision. Given there needs to be a trial first, a 400 MW plant is at least a 2 - 5 years away at Kingaroy and I expect the pakistan plant is up to 5 - 10 years away depending on many factors. So the current value should reflect these timing aspects - and the fact that many hurdles need to be crossed for the project to go ahead, let alone succeed. Obviously the further into the future a cash flow is, the less value it should be ascribed. We can try and quantify all this for some situations using the NPV approach, but I also just take a qualitative approach in many instances, since the numbers are often quite uncertain. For example, what you find from a broker report like BBY on LNC is a lot of discussion about the NPV and its sensitivity to various costs - like oil price - but there is often very little discussion on the probability of success due to technical factors and other factors. I expect that if these "innovative" type projects fail, it is most likely due to technology issues rather than commercial issues. You could do a study to estimate whether that statement is supported in practice; I expect it is.
On the other hand the last six months of trading has taught me a lot. On of the important learnings, is that most other investors and traders (excluding those on hc of course!) don't try to make such economic estimates and don't bother understanding the technology - they just go with it. That provides an opportunity to trade on the sentiment etc, but remain watchful for the fundamentals, since they will always have the final say. But the fundamentals themselves are uncertain in this arena, and that makes being a player so much more fun!!!
CXY Price at posting:
0.0¢ Sentiment: LT Buy Disclosure: Held
