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!!!
