Monday 15 October 2018

#AEG - JV WITH GEORGIA RENEWABLE POWER = FEEDSTOCK

AEG JV with Georgia Renewable Power = FEEDSTOCK!


Well hello again folks. Its been quite some wait for operational news and this has caused a bit off a sell off, which coincided with the general market correction. Not pretty. Highly stressful.

However...

Today's announcement is SPECTACULAR. Its brilliant for a few reasons which i'll come on to but for me the single best part is we now have FEEDSTOCK.

FEEDSTOCK

"GRP currently has access of fibre feedstock of up to 2 million tonnes per year, well in excess of its current internal consumption requirements"


Let that sink in a minute. 

We know we've a brilliant product line that people want, we've off takes in place across the globe, especially in Poland/Europe, but up to this point we had no actual feedstock supplies. Now we do. The whole jigsaw is now complete. We have A LOT of feedstock and can make A LOT of CoalSwitch and PeatSwitch now. The risk is practically gone. The reason the wait for the Newfoundland deal was so stressful was it was the only feedstock supply RNSed (Alberta/PowerWood still at MOU). Now we've another.

So say we can have 1 million tonnes of feedstock, how does that stack up against Newfoundland?

Clearly Newfoundland is brilliant for lots of other reasons. The asset goes on the balance sheet at $hundres of millions. We will have a 20 year contract to cut roughly 140k tonnes of wood per year, add in waste and forestry residue and that bring it up to 400k+ tonnes of feedstock id guess. The really brilliant bit about the NF deal is the 20 year part. It guarantees feedstock and therefore revenue for 20 years. As part of the deal we will have to have off takes in place for all the product produced for the length of tenure. This is in the form of off takes to Poland to make our SuperFuel with Cobant for domestic use initially. All this is happening extremely soon as per AEG and Gov of NF.

With this GRP deal we've a new massive supply of feedstock. It may end up being slightly more feedstock than the initial NF deal is but i would imagine there is for forestry in NF and Labrador coming in the future. However,  the business is derisked, we have feedstock and we will be making lots of money in the very very near term.

It does show that the JV possibilities are endless. Who knows how many of these company making JVs and other arrangements are under discussion or will be discussed in the future. AEG is synergistic with so many other power generation/forestry companies its easy to see it spreading quickly. 

UP TO 100 TONNES/HOUR

So the stated aim is to get up to 100 tonnes/hour in 3 years. Sounds decent but what does that really mean...

This is a slide from a previous presentation. If you can make it out, it basically shows that when we sell a tonne of CoalSwitch for $180, we make at least $80.

So a 5 tonne/hour plant at max capacity makes 5x24x365 tonnes a year = 43,800 tonnes
43,800 x $80 = $3.5mill profit a year. Assume it runs at 85% capacity thats still $3mill.

We will have a 5 tonne/hour plant installed in a matter of weeks producing $3mill profit a year.  THEREFORE WE HAVE POSITIVE CASHFLOW AND NO PLACEMENT NEEDED. That deserves an mcap of more than the £20mill we started the day on its own!

Now how does this look as the 100 tonnes/hr plan progresses...

5 tonnes/hr = $3million profit

25 tonnes/hr = $15mill profit

50 tonnes/hr = $30mill profit

100 tonnes/hr = $60mill profit

These numbers are not to be sniffed at! And that is just CoalSwitch and not PeatSwitch!


If our sole business was Coalswitch and our sole contract was this RNS then its a brilliant business model.
But this isn't our sole business, we have PeatSwitch and now LitterSwitch, and this isn't our sole contract! Newfoundland is arriving soon, Alberta/PowerWood is x4 the size of that again, im sure we are accessing forestry in Europe and who knows how many of these deals are nearing completion. 

I'll write more as i digest the RNS and its full implications further but WE HAVE FEEDSTOCK! The business model is complete from start to finish, now the profits come. This one deal promises to deliver ballpark $60MILLION PROFIT A YEAR in relatively short order.

LITTERSWITCH

This needs a bit of research. Sounds fascinating!! My word is there nothing this tech cannot do?




Lots of reasons to be cheerful and to buy AEG at prices very much higher than today!!!

Sunday 12 August 2018

NEWFOUNDLAND NUMEBRS FOR FUN #AEG

So as we fast approach being granted 1.2mill hectares of prime forest in Newfoundland it perhaps a good time to think of values. Just for fun...

VALUING A BIOLGIC ASSET

So did you know that IAS 41 states "he accounting for agricultural activity – the transformation of biological assets (living plants and animals) into agricultural produce (harvested product of the entity's biological assets). The standard generally requires biological assets to be measured at fair value less costs to sell."

What might this mean to AEG?


https://www.nrcan.gc.ca/forests/report/area/16399
The Boreal Shield has more forest land and wood volume than any other ecozone in Canada, these forests are relatively slow growing, producing an average wood volume of 118 m3 per hectare (ha)
118 x 1.2mill = 141,600,000m3
https://www.cbc.ca/radio/the180/the-oilers-are-canada-s-hockey-team-caregivers-need-more-than-just-recognition-and-the-power-of-dog-poop-1.4087566/softwood-lumber-what-s-a-tree-worth-anyway-1.4089386
https://www.nrcan.gc.ca/forests/industry/current-prices/13309

If we pretend all this forest is nice sawlogs then its roughly $200/m3
So that would give a value of $28bill

If we pretend the whole forest is only good for firewood at $50/m3
Gives a value of $7bill

Now lets assume im wrong by a factor of 100
That still gives a value of over $70-280mill on the balance sheet

Valuing based on wood cut

AEG are allowed to harvest 140k solid cubic metres of wood that would be sold for sawlogs for roughly $30mill
https://www.nrcan.gc.ca/forests/industry/current-prices/13309
They will have a 20 year license so thats $600mill over the initial 20 years in revs from just sawlogs

Valuing based on Coalswitch

So we know CS increases the yield of any forest as all the waste and residue can be used to make it. It essentially doubles the amount of wood you can use above the "cutting allowance"
So 140k solid cubic metres x2 = 280k
280k m3 to tonnes needs a density calculation which can be above or below 1. I'll just assume 1:1
So 280k tonnes of CS produced.
We know from the recent AGM presentation that CS makes about $100/profit/tonne
So $28mill profit a year 
Put on a conservative PE of 15 and thats a $420mill mcap or £330mill Mcap
£330mill mcap = 33p


THEN LETS NOT FORGET THE NEXT DEAL ABOUT TO BE COMPLETED IS X4 THE SIZE!!! IN ALBERTA.




Friday 19 January 2018

AEG UPDATE - UPCOMING NEWSFLOW


So whats coming up to drive the price? Plenty!

The initial 2 weeks of the Utah Plant

As im sure you all know, the first commercial CoalSwitch plant is now operational in Utah. It is undergoing 2 weeks of commissioning and production tests. The CoalSwitch produced will be sold to  Rocky Mountain Power (part of the huge utility Pacificorp). They will be testing a mix of CoalSwitch to Coal around 20/80 or 10/90. Richard Spinks tweeted such a preparation https://twitter.com/RGSAEG/status/952676780984291330

If RMP find it burns as expected and drastically reduces emissions as expected they could use the 10/90 mix to comply with emission standards. http://www.healutah.org/epa-action-will-boost-visibility-parks/

If we look at their Hunter Power Station. It uses 4.5mill tonnes of coal a year. If they changed to 10/90 Coalswitch that would be around 450k tonnes of CoalSwitch a year. If AEG sell CS for $180/tonne then that would be revs of $81mill from that one plant alone. If its 20/80 then $162mill revs a year. This is just one of thousands of Coal fired power stations in the developed world that are trying to change to biomass. The key advantage of CS is it can be used as a like for like replacement for coal with no retrofit costing hundreds of millions. It can be ground as fine as coal and burns with the same characteristics, unlike all other pellets. 

Next up for the plant

Again RS tweeted...
 "Visiting our CoalSwitch Plant in SLC this morning, meeting the Utah team making it happen & preparing for our international Government and Investor reveal/demo in 2 weeks time. So much interest in this amazing technology around the world!"

If we take both parts
1) Government - We already know the government of Utah are all over this. California has stopped buying their "dirty" power and they are at pains to clean it up. The government of Canada are fully on board. The Newfoundland and Labrador gov are keen for CS plants to be used in canada to create clean energy and create jobs. Across the world government want coal fired power stations decommissioned or switched to biomass. Look up recent announcements from the EU, Poland and Holland especially
2) Investors - Benefit Street Partners (a $20+bill fund) have been working very closely with AEG for quite some time. They have been touring Canada with them in the DD and i would expect them to play a big role in the coming months financing the global roll out.

After the reveal, the plant will be transported to Newfoundland to continue to produce CS.

Canadian Crown Timber License 

See my previous blog on what this means to AEG and why its worth hundreds of millions to them. RS stated on a podcast that the CTL will be granted after the Utah plant is shown to work and ready for transport. I would imagine the Newfoundland gov will be at this "unveiling". Some excellent twitter DD has shown that the CTL is now free of any environmental committees, having been released by them as the final set to ministerial sign off.
As a stand alone venture, managing a huge forest is worth hundreds of millions in saw logs etc. But if we read another RS tweet... "CoalSwitch can double timberland asset values whilst providing cutting edge, relevant Biomass product hugely enhancing harvesting yields at fraction of white pellet capex & opex cost. Forest waste can generate sawlog returns from pulp and residue quality materials! Revolutionary!"

So by using the off cuts of the saw logs to create CS pellets the value of the timberlands is doubled. From hundreds of millions to, er, double hundreds of millions!!

Metis deal in Alberta

The Metis deal from a couple of years ago (for 1/10th the area of the crown timber license) was valued at $300mill and now seems to be close to finalised! RS has hinted this in podcasts and the gov of Alberta are working more closely than ever with the Metis, they got them elected after all!

Asia 

Ive already commented on the asian CS plants about to be commissioned...
The company announced that the initial 8 plants in Asia https://polaris.brighterir.com/public/active_energy_group/news/rns/story/xo6709x will produce 1.5mill tonnes of product = $240mill in revenues. 

The exact details of the JV with Lumino Capital aren’t known but I assume there will be a 50% split (again as was suggested in the broker note). = $120mill

Surprises

I know there are surprises coming. RS has said this publicly. Im guessing European CS plants are coming sooner rather than later and more in North America. Perhaps supplying Drax 4th power station??

RECAP...

1) Government and billion dollar fund investor reveal in Utah in a week or less
2) Crown timber license granted worth hundreds of millions
3) Metis deal worth $300mill coming off
4) Asia plants about to start getting built
5) If one utility or power station change to coal switch its worth tens to hundreds of millions to AEG in revs and will snowball the rest of the world into using it.

All in all i cant see this string at £20mill Mcap for much longer. Id guess a rapid re rate to £100mill mcap or more in the coming weeks as the plan is laid before us.
Don't forget RS has went "all in" with £500k of his own money not very long ago