Portland Gas Share Discussion Threads

[chrismez] 30/3/2009 21:31

Surprised no one saw the article on Larne in yesterday's Sun Times Business - new idea seems to be to use the caverns to store compressed air which service wind turbines on calm days. Larne is already negotiating. I'll try to post article later if I can.

[clearsoup] 25/3/2009 16:17

Not much volume, though.
I agree about unease. This board does not have 'keep the faith' cheerleaders, nor are there similarly set analysts keeping the market primed. Credit Suisse as a major shareholder might reassure, but their presence does not give me much emotional comfort. So: hoped-for outcomes deferred are playing pretty good havoc with one's animal spirits.
At the same time I do not see how or why the risk-reward picture should have changed for the worse. That said, I would love to know what, if any, technical studies are ongoing, and whether there is likely to be any review of project feasibility/cost as a result.
Assuming that the fundamentals excluding financial feasibility are basically unchanged, rational share-price movements would therefore reflect changes in expectations about corporate financing, and changes in investor portfolio preferences. The latter two are quite volatile, so it doesn't seem hopelessly optimistic to disregard current share price weakness as 'noise'-if that's any comfort.

[mina123golf2] 24/3/2009 15:51

SP on the slide again. It is now not far short of 1 year since planning permission was granted by DCC(and the share price went to 428P)I am starting to have concerns that there is some serious problems (and by definition expensive) which are keeping joint venture partners away. Bearing in mind the UKs poor gas storage facilities you might have thought this one to be a winner but it certainly is making heavy weather of raising finance. Have you any updates or insight EACN?? I sold out all my original holding bought via Egdon at 296p and bought them all back again at an average of 55p - so personally I am not sitting on a loss BUT the feeling with PTG is now one of considerable unease

[chrismez] 16/3/2009 17:25

eacn - thank you - illuminating as ever if I may say so. C

[eacn] 15/3/2009 11:17

Chrismez, I have had very limited contact with the directors.

From what contact I have had, I suspect that Hindle is neither a born deal maker nor salesman, and is someone who finds it irksome to have to fight for funding. He gives the impression that he regards the logic of Portland as 'obvious' and has little time for those who don't have the wit to see that.

Hindle comes across as a techie with a mission: he is determined to see Portland built, and I suspect that that objective over-rides any personal ambition he may have to make a lot of money. As such I expect that he will be prepared to compromise on shareholder value, if that is the price required to achieve his primary goal.

As a techie, I suspect that Hindle finds it easier to deal with the likes of Transco, a quasi public service body, than Centrica, who are a highly commercial profit driven organisation. Transco, and the civil service, are more likely to share Hindle's view that Portland is a key strategic facility for UK plc, that 'deserves' to be built.

We have seen a great deal more press about gas storage in recent months, suggesting that someone with decent media leverage is pushing this issue quite hard at present. My guess is that the pressure is coming from politicians, possibly even the civil service. PTG doesn't have the PR muscle to command that many column inches.

That view tends to reinforce the idea that PTG may be in talks with the government or Transco over Portland. It would be classic new labour to have softened up the media before putting in place a government funded deal.

Having said all that, investors should never underestimate the difficulty in crafting government backed deals. In the late 90's I spent a lot of time trying to persuade the MOD to back a PFI bond to fund PAYD for the forces, and despite the compelling logic was unable to pull it off because there was no political imperative. Gas storage is a long term issue and politicians tend to be today's creatures.

[chrismez] 14/3/2009 14:39

eacn - with your knowledge of this company and more particularly, these directors, are they the sort that can "walk with Kings" in other words are they capable of putting together a tenable approach to the relevant Govt department/mandarins? Or are they the sort that set their sights somewhat lower and will be content to let the market play its hand.

[chrismez] 14/3/2009 01:25

Well, let the games begin - I know its a long shot but I'm hoping its govt rather than Centrica that's playing this hand!

[eacn] 13/3/2009 15:27

Possibly. It shot up to 80p in January only to fall back again. Negotiations are clearly in progress and I suspect they are leaky: any glimmer of a deal and we can expect a spike.

[ddevine] 13/3/2009 14:08

something must be up, share price has risen 3 days in a row!

[eacn] 10/3/2009 22:12

Chrismez, I agree that Centrica is not the only show in town, and that my calculations assume that government talk will not translate into action.

As for a board seat, I fear that I already have too many board committments, and PTG would probably not welcome yet another NED.

I do, however, think it would be helpful if PTG management gave one the time of day on the rare occasions I have felt inclined to call. As a director of quoted companies I have found that if a PI calls you they usually do so for a good reason and deserve an open and candid response to their questions. Hindle's habit of refusing to comment on anything shows a distinct lack of confidence and experience imo. I keep meaning to get a contact number for Davie. Anyone have one?

[chrismez] 10/3/2009 17:42

Ever thought about putting yourself forward for a position on the board EACN? Interesting sums and assumptions. Thank you.

However, does the above take into account that the UK is woefully lacking in gas storage capabilities, government concern over dependence on supplies from other countries, government intentions to invest fully in the energy space over next 20 years and government intentions to spend its way out of the crunch by investing in infrastructure projects etc etc?

I take your point eacn about gas being weak at the moment and the private sector being somewhat limited financially in what it can do (although that might improve slightly going forward) - but it seems to me there are a number of games going on at the tables at the moment - not just Centrica.

[eacn] 10/3/2009 11:11

Holism,

With the Lloyds and RBS Q4 numbers behind us and the government toxic asset insurance scheme now in place, I expect to see improved bank lending numbers in coming months.

Lloyds are telling their clients that new lending in 2009 will be 17% higher than in 2008, which suggests that infrastructure projects may be easier to finance in H2 2009. I would expect RBS to be saying much the same.

This is key for PTG, since they are clearly focused on debt finance, witness their concern over the lack of a futures market for gas storage, which would be less of an issue for a major with an existing internal demand for gas storage.

The outlook for future gas storage prices is currently weak, with the prospect of a prolonged period of depressed demand compounded by an upcoming glut in LPG. While the long term drivers for an increase in UK gas storage prices remain (in five years we will be highly dependent upon foreign gas supplies, increasing spot volatility), it could be some time before we are again talking of 40p a therm.

While Centrica seems to be happy to purchase depleted field assets at fairly fancy prices (once you factor in capex), it would appear that no one wants to buy the Portland project (had there been any sort of offer I would expect it to have prompted an RNS, even if the offer was rejected). Quite why remains something of a mystery, but suggests that technically the project may not be as straightforward as we have been led to believe (I find this hard to believe since the technologies involved are tried and tested).

In the circumstances the only way forward would appear to be debt finance backed by a long term deal on storage with a major at a juicy discounted price.

My analysis suggests that if PTG borrowed £100M to develop 20% of the projected final capacity of Portland and sold this capacity forward in a 10 year index linked deal ending in 2020 starting at 18p a therm, then the project would be worth between 45p and 85p a share depending on the valuation method used.

This calculation assumes that the loan interest is 5% above LIBOR and that 40% of the principal is repaid at the end of 10 years (i.e. that 60% of the principal will roll over after 10 years). My inflation assumption is 3% p.a. I have used three valuation methods: 20x dividend, assuming that the dividend is covered 2.5 times (45p); 12x post tax earnings, assuming full clawback of capital allowances (70p); and, 6x EBITDA (85p). All figures are in today's money (assuming minimal inflation in 2009 and 2010), although these earnings would not be realised until 2012.

If PTG could pull off such a deal then this could pave the way for other deals, which over time would allow PTG to realise full capacity at Portland, while retaining full ownership if the asset.

Potential customers for the storage would include Centrica, Petronas and even possibly TransCo.

This is clearly the long way round and will leave the company highly leveraged and exposed to changes in interest rates, a risk that will need to be offset by index linking of any storage contracts. The proposal only works if the spread above LIBOR remains 5% to 6%: BBB corporate bond rates would not be acceptable.

[holism] 01/3/2009 22:09

Yes agree with you eacn.No point complaining we all know personal greed and ego have allowed swathes of very inexperienced managers to be over promoted, Portland is no exception. Hindle and his team are brokers not business managers, all IMHO.What should have been an extremely good investment has turned out to be a dog for the time being. I was expecting a company such as Centrica to take it out but this has not been possible. Portland would have been an important asset in any portfolio of gas storage facilities, the question remains why has it not happened? Management strategy at odds with shareholders.

[eacn] 01/3/2009 21:13

mina123golf2,

I have not picked up on any rumours, but from experience know that this stock is "leaky" (that is to say that there often appear to be share price movements in advance of key announcements).

We are all aware that PTG is in one-to-one negotiations with potential JV partners, and presumably at some point we will get an update on those discussions.

I fear that the upshot of such discussions will be a partial funding deal, which allows PTG to retain an interest in a scaled down project, with PTG's return dependent upon a bullish outcome for future storage prices. Such a jam tomorrow deal, would imo be the second best option. I remain of the view that an outright sale of the Portland project at anywhere north of £2.50 per share would be a better deal for shareholders.

[holism] 28/2/2009 08:44

Or just a few shares bought in an illiquid share.

[mina123golf2] 27/2/2009 19:31

Interesting this movement. Yesterday the share price was down 4p almost immediately after the market opened. Throughout the day it improved to close up a very small amount.Today there has been a steady climb from the off continuing from yesterday.According to holism 888 of 891 Centrica are not looking at PTG. There was of course a recent rise to 82p before falling back to 36p. It looks as though there may be something in the wind or is it just a reaction to a long sustained fall? - perhaps eacn who posts here regularly can give us a clue?????

[paul p] 27/2/2009 19:04

The market takes a beating and out of nowhere we go up substantially! They always say the share price often moves before the general market gets to hear. I wondered wether we might be close to a financing deal but then I wondered if that sort of news would have led to a bigger rise. Certainly is out of the blue.

[chrismez] 27/2/2009 17:06

Hmmm - PP - just come in from work to find PTG on the leader board - imagine my incredulity !!!

What's going on anyone?

[paul p] 27/2/2009 16:21

Why the price hike, have I missed something or does the market know something we don't?

[holism] 26/2/2009 08:26

Centrica looks to invest £1b in gas storage, but not at POrtland. Why not I ask myself, what is wrong with Portland. Should the company be attempting to go it alone, with gas storage in such demand I fail to see why this company hasn't been able to find a joint venturer

[mina123golf2] 25/2/2009 17:49

money4me many thanks - your FFS did at least make me laugh something I have not done for ages whilst owning this bloody share. thanks again

[mina123golf2] 25/2/2009 08:24

trop and money4me Please offer a translation of your posts please, preferably in English