MarmalukeCougar's syngas for electricity business model has...

Marmaluke

Cougar's syngas for electricity business model has relatively modest capex, good earnings, can be scaled to multiple sites and can be rolled out for several decades at least imo.

If the above is true, then it would be unreasonable conservative if the market only sought to value Cougar in terms of just a mature Kingaroy project.

Whilst this is old guidance now, the Company has indicated that $55mill investment gives 100% ownership of Kingaroy 40MW from syngas production to electricity generation to give $5mill annual profit, which at 60/40 debt/equity is a 17% IRR.

For a further $113mill for Cougar's share of upgrading to 400MW (something like $287mill would also be input by the generating client) Cougar gets $35mill annual profit, which at 60/40 debt/equity is 47% IRR.

So for an investment of something like $310k to $320k per MW of capacity, Cougar can generate about $97k of annual profit.

Multiple 400 MW projects staged to be commissioned 1 yr apart cost $113mill for the first project, $78mill ($113mill - $35mill) for the second project, $43mill ($113mill - 2x $35mill) for the third project, $8mill ($113mill - 3x $35mill) ... by which time raised capex totalling $242mill is producing annual profits of $140mill.

It is interesting that Cougar already has access to funding of $280mill. Handled correctly, and valued at a reasonable P/E of 10, the above business would be capitalised at $1400mill or $1.88/share based on the current expanded capital base of about 744mill shares (assuming full options conversion) ... this point could be say 5 yrs from now.

What happens if the business model is so successful and the ucg syngas fuelled generation is marching its way through an ambitious global program of coal fired power station replacement? It seems quite reasonable to me that once the initial stage of Kingaroy (whatever size that my finally be), the sp can begin its rise to the above kind of valuation and potentially well beyond imo.

It is also reasonable to assume that the market may begin to factor in success at Kingaroy sooner than expected.

What happens if other partners want to help develop/fund GTL and fertiliser projects? The model for these would be good but quite different to the syngas to electricity model. CTL/Fertiliser projects have more demanding capex and are very unlikely to be rolled out at a rate of about one/yr ... someone else might like to flesh in some figures for these project types.

These of course are postulations.

Regards
Dex