Yes financing was approved but likely that the banks respective credit departments required further undertakings from RES. By the sound of it these additional requirements could either not be met by RES or PJ felt that he wouldnt be able to sell it to the equity market or potential partners he would need to bring on board.
Indicative terms that were agreed up front between RES and the banking syndicate are exactly that, indicative, and always remain subject to due diligence and to credit approval. PJ always knew that and to come out and give time frames to shareholders on likely approval dates is always a risky one. As is starting early stage projct development works with only 2% Of the funding in place. Crazy?
Banks are not there to lose money so have covenants in place to ensure that the risk is acceptable to them and the loans can be repaid. These covenants are generally standard for a project financing. The banks in South Africa are also very conservative and we are also in very difficult financial markets so banks don't have to chase deals.
The challenge now for RES is how to get this back on track and no quickly put together 2 page PowerPoint presentation is going to convince anyone. Yes there are alternative forms of funding. The debt route would be the least dilutive for shareholder. Equity will be tough to raise close to the current share price. Australian brokers are struggling with most coal stocks at the moment, with very few close to making any money and even more struggling to secure access to rail and port facilities.
What makes it any easier for RES to do it in South Africa?
Big billion dollar projects like this don't finance themselves. RES has done a great job getting to this point but now it only gets harder as PJ is now finding out. It's only going to get tougher and without a banking syndicate behind him it's going to be even tougher to convince others why they should get on board.
RES Price at posting:
27.0¢ Sentiment: Sell Disclosure: Not Held
