Kibo Energy Share Discussion Threads

[patch13] 11/4/2018 17:00

I was looking forward tho your piece John but its honestly utter pish

[yaki] 11/4/2018 14:04

And while talking about assumptions:
Just read the article below.

2.8bln created out of thin air and duly noted in the company's accounts!

Tesco DB deficit plunges by £2.8bn after changing discount rate calculation

Supermarket giant Tesco has halved its overall defined benefit (DB) deficit after adapting its discount rate calculations to better reflect trends in long-dated corporate bond yields.

[yaki] 11/4/2018 13:46

John,
great note, but full with errors. as usual

Let me tell you that for someone who builds large and highly complex stochastic martingale based investment models, NPV calcs and project finance is child's play for me.

I am not going to go through your figures, as don't know where to start, as pretty much every statement is wrong.

I will make one observation and one comment
Observation - project finance and valuation is highly assumption based and there is usually a wide range of values, depending on what assumptions you make (eg even for mature business like Thames Water, and I worked on that deal!)
So the value I put to MCPP (300 MW) is anywhere between 100-300mln USD. The only value that matters is obviously the transaction price.

Now comment
You are saying:
" Doesn't he realise that the FCA will expect him to have disclosed his holding every time he ramps 'an uninformed '25p share price' on a public board ?"

Really, is that John C rules or have the FCA changed their rules recently.
What about freedom of speech, expressing one's views?

How absurd. I am afraid this just summarises neatly the low quality of the rest of the long piece of writing!

[lurker5] 11/4/2018 12:55

Another Nail in the Coffin


Here is my latest 'contrary' (ie correct) Kibo view as asked for by several on the 'other' board. Apologies if a bit long winded - it has to be, to fully explain the logic, for anyone not familiar with share valuation, especially for companies with 'projects ' not yet financed.

And, sorry. But someone has to put Kibo (its investors anyway) out of its misery . LC has shown over his whole stockmarket history that he has no idea (or doesn't care) how to create value for shareholders. So here's another nail in the coffin.

Essentially, nothing has changed since my first post . Quite why anyone should think signing (or even publishing details of - very unlikely) the PPA will spur the shares is a total mystery.

Ignoring for the moment the Mabesekwa acquisition (its unknown future development cost and share dilution is why the savvy have been selling) here's why Yaki's 25p value for MCPP 300MW was always nonsense.

He based it on the idea that the mine alone is 'worth' $100m, which with other spending to date will 'buy' 40% of MCPP !

To understand why that is wrong, you have to know 1) how project financing, and NPV and irr calculations work. - complicated for some maybe.

But necessary as the only way to calculate the forecast profit streams that make up the NPV's and irr - as in Kibo's Jan 2017 feasibility results . The PPA won't help, because estimating a profit needs far more detail about costs than any outsider (inc Doh!fort's naive late unlamented analyst - is he now helping SVS/Novum ramp the shares ?) can possibly know. The best and only guide is those feasibility figures, because they contain the answer already. That's the reason for doing them.

And you have to understand 2) that even if the mine were to be 'worth' a 7 times multiple of future profits (as would only be the case if listed separately on a stockmarket and therefore unavailable to be 'paid' to anyone) there is no way it would be accepted by eg GE as a 'contribution' to building MCPP. That needs hard cash. Kibo (and other equity partners) will only get a share of the project by way of past, real, spending and cash (or borrowed money) now. That's how project financing works.

Knowing the capex , and/or NPV and irr gives directly the average income over the MCPP project lifetime that produces them, and according to those Jan '17 figures, the mine alone 'looks' very profitable. (irr 69% on $17m capex - to produce which implies an average income before tax of $13.5m pa) Assuming 100% of the capex is borrowed, repayments would be $1.8m pa, leaving, after tax, a net cash flow around $9.3m pa for the first 12 years while borrowing is repaid - ie 1.5p per Kibo share. (on present shares - there'll be even more needing to be issued soon)

But that's all. The mine wouldn't be part of an 'integrated' project, and can't buy Kibo any share of the power side. Kibo's past spending on feasibility etc might 'buy' a small (2-3%) share of power, but that's all. Any significant 'Free carry' or 'development premium' is completely unfeasible for these sorts of projects for reasons below.

But a scenario where Kibo just owns the mine is totally contradicted by the 'integrated' figures in the same RNS Its either one or the other, and the figures show why all such mine-mouth power projects - having started out hinting they have a very profitable mine - have all switched to integrated projects - basically because the power side wouldn't be profitable enough if the mine takes such a large slice.

In turn, that's because governments limit tariffs so that the overall profit return to equity investors (assuming a large element of bank loans) is just enough to attract them without causing too high electricity prices. For all such projects, that return has been around 21% irr at equity level if 75% of capex is borrowed (and about 14% at overall project level before the gearing effect of borrowing). And that accords with Kibo's figures in its RNS.of integrated project post-tax irr 15.3%, and post-tax irr for equity (assuming 75% borrowing) 'above 21%'.

To make better estimates we need up to date capex, which isn't given, except as "21% lower than $640m-$760m in the 2014 PFS."(Most of that reduction looks due to choosing the much lower capex mine option, so isn't really a significant change)

So a bit vague, but assuming project capex is now $550m, and $30m is added in past spending on the mine and IBFS, a 21.5% post-tax equity irr (ie geared up with 75% borrowing) requires annual net cash flow to the MCPP equity shareholders (who put up $145m) of around $32m pa for the first twelve years while borrowing is repaid.(which accords with the RNS 21.5% irr to equity)

Working back from that to the 100% project level - ie before repaying borrowings - pre-tax income would be around $115m pa - which ties in with the 'all-in' margin 39% quoted by Kibo (but before corporate costs.) - and with a 15.3% post tax irr on the project's total $580m capex.

So on those integrated figures (ie the most that the government approved irr would allow) if Kibo were to take $9.3m pa for a separately owned mine, there would only be $22.7m pa left for those putting up the capex for power.

Yet the power capex is $550m vs $17-35m for the mine depending whether its original cost is included. So that scenario would be completely unbalanced and unworkable, and is probably a reason why Sepco withdrew its original offer of equity (which LC hasn't admitted). And also why MCPP like all others has been switched to an 'integrated' project - where the coal transfer price is immaterial and all that counts is overall costs for the whole project.

Kibo's figures for a 69% irr 'mine alone' obviously depend on some assumed coal price. But what price ? Why would the power side pay a coal price that makes for such an unbalanced profit share ? The mine doesn't work without the power, which could build in a more convenient place and get its coal elsewhere if it has to pay a price too high to make its required return.

So Kibo can't extract that sort of profit for just the mine. And neither can the power side get more profit to compensate through a higher PPA, because that will be limited by the government's allowed irr

So an 'integrated' project treating the mine and station as one and effectively sharing the profit (and the risks and costs) more evenly according to equity contributions is the only realistic possibility. That is what Kibo's 'integrated' figures are all about.

But it makes one wonder why it released a mine set of figures which make no sense if to be integrated with the power side. - Maybe LC's usual smoke and mirrors to bamboozle the inexperienced like Yaki - or maybe he's thinking of trying to keep the mine separate and squeezing his power partners on price. But for all sorts of reasons spelled out here, that still looks unfeasible.

So instead of Yaki's ill-informed mine 'contribution' buying 40% we have to work out a more realistic scenario which accords with the Jan'17 RNS

On that, assuming Kibo's mine acquisition cost and feasibility study is treated as part of it, the 25% equity contribution to project capex becomes about $145m, of which 20% is Kibo's past contribution. Any more will either be a 'gift' or 'free carry' from the other equity partners, or will have to be paid for by Kibo in hard cash.

Working out NPV's and irr shows that for the other equity contributors (maybe GE, and a consortium of other investors) to give Kibo a 'free carry' (ie let it take, say 30% of profit but only pay 20% of cost) will rob them of part of the irr that the government will allow them to make overall, and which is set just high enough to attract them (and to cover their own loan interest).

In other words, the government isn't going to allow a situation where Kibo takes a 'free carry' - which dents the return to other investors below what they will allow overall, (or which would involve a higher power tariff )- why should they ?

So whatever share Kibo wants over 20% it will have to pay for.

After the shares for Mabesekwa, and the latest cash raise, Kibo has about 400m. left unissued (unless shareholders authorise more - which they'll almost certainly be asked to do at the forthcoming AGM - to pay for LC's other 'expansion' plans and build up necessary working capital and maybe a development bond)

Assuming Kibo uses 210m to raise say £15m cash - at 7p - it could 'buy' another 10% of MCPP equity to give it 30%.

That would give it $9.6m pa (for the first 12 years) of the MCPP post loan repayments and tax income to equity shareholders. On the then 800m shares in issue, that is 0.85p per Kibo share. Bearing in mind that is before corporate etc costs, Kibo might be able to pay a 0.6p dividend.

Perhaps Mr Yaki can tell us how that dividend will be valued in the stockmarket ? (for a no-growth, limited life, dividend paying annuity it would be valued on a 10% yield basis and certainly not on a 10x PER.)

An alternative is that MCPP is directly funded by external investors or infrastructure funds. Although there won't be dilution for Kibo shareholders, the effect will be similar. Kibo will have only 20%, spread across the current 569m shares instead of 1,000m, which means 0.8p per Kibo share and, maybe, a 0.6p dividend.

Even if my figures aren't quite accurate, they show how far off the mark are the Yaki-Clappie share price projections.

(Yaki could have checked how wrong he is by thinking through how would a Kibo market cap of £141m at 25p be justified ? It has only £28m of assets now including Mabesewaka , no income to speak of for years to come, and no chance of more than a 20% share of MCPP unless it raises cash through yet more share issues. And he could have especially realised that the NPV even of the whole MCPP (of which Kibo could only have a 20-30% share) is only around £300m. And as I've proved elsewhere, the market never values such shares at more than 1/2 their NPV.

But then, the clappies don't seem to 'do' thinking.)


So whichever way you look, Kibo shares were unlikely ever to stay above 10p - even before it diluted everything recently by 49%. But even that would only have been once MCPP is up and running and paying a dividend - in probably five years time. So why would anyone pay more than the present 4 - (as it will be soon) -5-6p ? - Answer - only those who haven't done their sums.

So why was Yaki (and fellow clappies) ramping such an unrealistic and unprofessional share target ? Apart from idiocy , could it be something to do with his and their boasted large shareholding ? Doesn't he realise that the FCA will expect him to have disclosed his holding every time he ramps 'an uninformed '25p share price' on a public board ?

But we also have to explain how have these clappies so mislead themselves ? The answer is that they don't understand what a project is and its NPV and how they relate to its owner's assets and share price. They've had plenty of time to find out.

At present all that Kibo owns is the plans and studies for MCPP, which won't have any value until it's built. Kibo hasn't any funds to build, so others are going to have to stump up, in return for which they will take their chunk of its profits. And there is no way the other equity shareholders will allow anything more than a notional 'free carry'. Or that Kibo can 'sell down' anything but a small part of MCPP.

To summarise

The overall costs and profits of the MCPP have already been more or less settled - as in the Jan 2017 IBFS. They show the 'integrated' project is much more likely than Kibo keeping a separate mine, and that after tax and repayments of a 75% loan for the capex (best outcome for shareholders) cash earnings per Kibo share won't be more than 1p pa. With Kibo valued as a non-growth dividend paying share, that means no more than a 8-10p share price after expanding shares to buy a 30% share of the project.

And neither do the clappies understand that Kibo can't build a large 'Power Group without an immense expansion in issued shares, by just gathering together low return businesses such as power stations. You can only do that without damaging your share price, through acquisitions that are highly profitable and cash generating. Power Stations aren't.

Their 15% returns wouldn't be enough for any miner. Their only attraction is for pension funds looking for a stable, if not very high, annuity like return which is guaranteed for 25 years by a government agency like Tanesco

If there were any chance the shares will go much above current levels, do the clappies really think the institutions wouldn't be aboard ? (Mabesekwa's Botswana investors are hardly in the world league, and they had no option but to accept Kibo's offer) They may be interested in MCPP directly. But they'd be fools to invest in Kibo itself.

And why did Kibo only have to pay c £12m for Mabesekwa ? Its said to be almost equivalent to and at the same stage as Mbeya ! Answers on a postcard.

[jimmyhoffa262] 10/4/2018 20:33

There is a 50/50 split on LSE with people who are not happy and those who seem to praise his every move. Last placing was to accelerate the MCCP, this placing is to accelerate MCIPP and MCPP. Will Botswana project cast a shadow On the MCCP again people will focus on this and we're back to "feasibility studies" This at times feels like an ongoing groundhog nightmare........on and on it goes round and roundOr is that the plan then........on and on and round and round........without never seeing the end because of this and that.......Who knows, lc at times shows his arrogance by saying one thing and doing another.

[cemsmusic] 10/4/2018 19:06

So placing today at 5.25p to raise £1.5m

[mac_steven] 05/4/2018 14:58

Deathly quiet? It's the 3rd most talked about stock!

[jimmyhoffa262] 05/4/2018 12:59

No one knows what to make of the rns all has gone deathly quiet on lse..................

[luckyvince] 04/4/2018 12:42

So the 2 x 1.25 mil trades are a rollover?? Or a crosstrade? Or

[uknighted] 30/3/2018 12:52

Technically, he hasn't missed it until midnight tomorrow - but I'm sure it will be. Whether it is LC or GoT who have missed it remains to be seen. I suspect it is the latter.

[supertag] 30/3/2018 11:26

oh well, as expected. At Least LC is being consistant with missing promised dates!

[spooks4] 28/3/2018 01:33

Even more so that the MOU is now signed with PPA due, then bring on the SML. Any time today or sooner for the SML. A Trolls worst nightmare.

[aimchimp] 27/3/2018 17:25

"Lurker5Posts: 218AnswerOpinion: SellPrice: 6.85RE: Could do with...Today 16:27In Kibo's case its balance sheet (and market cap) will comprise a value for its (limited) share of MCPP.. We already know, roughly, what that will be. It will be nothing like the extra £100m needed to justify your childish 25p share price even if that hasn't been diluted by all the extra shares Kibo is going to have to issue. That you cannot understand that basic point shows your astounding ignorance of share analysis."

[spooks4] 27/3/2018 01:45

''News leaking?''

Public articles here by RNS and the President of Tanzania is hardly a leak

[pilkersa] 26/3/2018 17:07

Only another 30% off my buy in price. Looking like I might even get my money back....

[luckyvince] 26/3/2018 16:41

It doesn't feel like bad news is coming based on today.

[simontrill2] 26/3/2018 16:32

News leaking?

[supertag] 22/3/2018 11:32

I hate it when he uses the word "shortly"!
With LC that could be another 6 months, will he

never learn?
I agree this is setting us up for a delay.
Supertag

[uknighted] 21/3/2018 12:31

I would not expect LC to be commenting on it unless it was.
However, in the vox podcast on 19/03 LC said, in a roundabout sort of way, we are ready for PPA by the agreed timeline - end of q1 - but you never know about the TG. So my reading is that this RNS is a forerunner to another next week saying the timeline has been delayed, yet again, by the TG.

[slamdingo] 21/3/2018 11:22

Nice one, thanks. Got to be Kibo?

[uknighted] 21/3/2018 10:58

The "new contractor" it would be fair to assume is Kibo.

[slamdingo] 21/3/2018 10:51

I can't see the RNS anywhere uknighted, do you have a link or can you copy and paste? Thanks.

[uknighted] 21/3/2018 09:14

RNS out, not yet shown above.