EHR EGMIn a room set for up for about 50-80 people, six persons...

EHR EGM

In a room set for up for about 50-80 people, six persons attended, including a major shareholder, and possibly an investment analyst.
Mal Lucas-Smith and Dr Ray Shaw attended; Torey was not able to attend.

Dr Shaw pointed out that an EGM is usually less well attended and more perfunctory than an AGM. The attendance was embarrassing, when I arrived at ten to 12 it was just Dr Shaw, Mal and I. Good grief, I thought, are they going to read the motions to only me? Luckily another four people turned up (and another in the last five minutes of the meeting). We did have a quorum apparently, thank goodness. It was a six hour round train trip for me to attend. The good news is everyone could have a good ol’ chat with Dr Shaw before, during and long after the meeting.

The $10-15m Funding Gap is all important. This is the take-home message of the meeting. Nothing else matters, nothing moves until we have it.

Investor Support. This was raised time and again, Shaw was clearly dismayed that Australian investors had not supported what he considered an exceptionally well financed project. They are getting mixed up between finance and equity funded, he said. I asked if the Argentine market was kinder, and he said they were no different. Shaw despaired of the Sector, saying geothermal investors had got 3rd-degree burns and that had been the only heat produced. Later Argo and I chuckled with Shaw about the madly incorrect ADIB report, and Argo rebuked on its timing. Shaw for his part agreed, and pondered whether Australia’s only geothermal analyst might provide a better report. Shaw was also very interested in receiving investor feedback on EHR’s announcements and reports. I wondered if he reads Hotcopper, but didn’t get a chance to ask.

JV. No-one is asking, ‘there is no-one interested in a mere 30MW development’
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Sovereign risk. When asked about the risk of govt appropriation Shaw pointed out the MOI with Xstrata came immediately following the recent Argentine nationalization of a part-foreign own oil development.

MidOil. Their role is advisory; they are not required to supply funding.

CIFI. When chatting with Shaw before the meeting regarding the tight timeline, he said he’d hoped the project would be running early next year. Asked when CIFI would raise the money, he was non-committal saying only that CIFI is engaged until the end of the year. ‘We can’t write cheques until CIFI is completed’ he said later.

Govt Support. Shaw ruled out direct Australian government funding ‘such as with Geodynamics’ as EHR’s projects were off-shore. I earlier asked about Argentina providing direct funding or tax breaks. This was ruled out. Shaw said the government of Argentina supported EHR with a generous tariff, and, oddly, a pricing that once power is fed-into the grid, it is purchased anywhere in the country for the same price. This is to say, there is no added costs such as transmission costs, this is ‘a benefit of a socialist country.’ On reflection just now, I wonder how that works with Spot prices? I pointed out that the environmental act stipulates an extremely low price for geothermal and is the USD120MWhe dependable or simply a mechanism of Neuquén Province? Shaw said the price was certain, and applied nationally.

Djibouti. This is on hold until further funding is obtained, and after Copahue. Shaw said the Fiale project was still idling. I pointed out the President of Djibouti’s speech this week confirming agreements with AfDB, World Bank, Sinopec, Mexico and ENEL. Shaw knew of these deals. I quoted that a group of geothermal projects including Assal were expected to commence early next year, and asked what was EHR position on that, and did it have value for the company. He said that Fiale being on hold suited EHR as they could not participate without funds, further, ‘there is a lot of talk, and no action, we have been there two years and are still waiting’. He said it did have value, but didn’t elaborate or quantify; certainly the word ‘transformational’ didn’t come up. There are no geographically-focused partners with funding sitting on the side-lines ready for Djibouti, there is simply no money at all. I was interested when Shaw mentioned EHR is scoped with a desalination project in Fiale. I can’t recall a desal plant being mentioned previously. They really need the water, he said, it’s a pretty dry place.

Kenya – don’t even ask

Development and expansion. I queried why the Alstom engineering plan due for sign-off mid-year, and the resource upgrade report promising lower development costs, had both gone missing, and wondered whether the upcoming ground work including MT surveys indicated a problem. We were immediately and strongly reassured that the resource was uncompromised, that the reports had indeed been done, but that they cost money – which we don’t have. ‘SKM and Alstom and other providers of surface work are happy to wait as Copahue is a showcase project’.
Mendoza and Xstrata were mentioned repeatedly, but there was no further news on that front. The Mendoza project has the same weather window as Copahue. I asked whether Mendoza might overtake Copahue if Xstrata proved adventurous in developing power supplies. Shaw said we’d go where the customer demand was. I could not get a clear understanding where El Pachon was located in relation to the grid. Shaw simply said with Xstrata we’d be replacing diesel.

As we packed up I thanked Mal for flying from Adelaide, but it turns out he lives just south of Sydney and finds he can participate in the business quiet well from there. Apart from that brief remark I don’t think Mal said anything. He sure didn’t look like he wanted to be there. Dr Ray Shaw carried the meeting; informative and reasonably optimistic ‘we’ll get there’ he said in conclusion, but he’s clearly doing it tough.