My apologies for not posting this yesterday. Re: the query of @hughrigney12 regarding today's volume...I believe I can offer some insight.
Firstly, it's a sea of red out there. The market took a nosedive.
Secondly, and more importantly, we need to remember Morgan's introduced $21mn in equity to Genex from many new clients. This was an aggressive raise. Some of these shareholders may have little long-term interest in Genex, or renewable energy, and were chasing a quick flip. Yesterday, Morgan's released a report which, while mostly positive, introduced phrasing incompatible with the risk profile of some sophisticated investors. Specifically, the following: "Because a large amount of the upside potential we see is attributable to K2-H it isimportant for investors to realise that there are significant risks in GNX as financial closeis not guaranteed."
I expected some to exit today, and that more or less played out. The report also offers some insights into the cause for delay in 4Q and, perhaps, why we negotiated to the brink on the transmission deal. Summary below.
DCF has increased because we understand that NAIF will lend up to $610mand gearing will not necessarily be restricted to 80%. This in turn lowers theWACC to 2.41% (down from 2.85%).
Essentially, slightly higher net debt. Looks like NAIF are across this scenario given they've indicated flexibility on the 80% up to 87% and, obviously, extended until Jan 2021.
Furthermore, it looks like Morgan's are providing room for election delay, suggesting FID could extend to 1Q CY21, which was NAIF's deadline. All I'll add on that is that Labor are paying $1.30 and if the LNP polls closely it won't be on merit or popularity. All counterparties are aware that this is a possibility and outside the direct control of any proponent. The expectation is, of course, that it is closed by Dec 31.
I think most here would be aware there are no certainties with ~$700mn projects - even when they stack up environmentally, socially, and economically. Sometimes, good projects do not go ahead. It's not so much new information for us, but a message from Morgan's to its clients which may not have done due diligence.
Now to the good:
- Jemalong energisation still planned for December with a ramp to full output by February. Any revenue losses here are expected to be covered by UGL's $2.5mn exit payment and, depending on our Beon arrangement, potentially a cheque there. - Share price clearly impacted by delays but now offers serious risk v reward. - Bear case evaluation (without factoring Como & K2H) is still 23 cps, above today's SP - Clear pathway with Jemalong to $20mn+ revenue and well upwards from BBP
That's Morgan's summary done. Brokers know bits and pieces but this will be decided by Genex, Powerlink, and NAIF. Looking forward to a Powerlink update, shortly.
To share from my own experience, none of which hasn't been confirmed on-market but always interesting to hear perspectives. I was speaking with several key QLD Labor energy figures and in their view K2H was done, funded, and the rest was a formality, albeit a somewhat complex one. There's bullishness towards unlocking the wind potential of FNQ with Copperstring 2.0 and the Kidston line, especially.
That's about all I can share, at this stage. I trust all are safe and well.
(20min delay)