Portland Gas Share Discussion Threads

[eacn] 17/7/2009 12:40

Article in FT this morning reporting that EDF Energy bought 10 salt caverns in Cheshire from British Salt for gas storage for £90m. Total capacity 36m therms.

The caverns are 200m below the surface and EDF will invest £200m overall in the site, which is next to an existing facility in Middlewich. The cavities are full of brine, which will be displaced by gas. The brine will be used by British Salt to produce salt.

The site is expected to be fully operational in 2016. This will be a short cycle gas storage facility. EDF has already developed several caverns for gas storage close to the same site. British Salt has planning permission to develop a further 11.

Portland has a capacity of 365m therms and will cost c. £450m to develop. It is short cycle storage but will have a longer cycle time than the EDF caverns.

Caythorpe, another short cycle storage project, which required £100m of capex and will provide 7.5bcf of storage (Portland will provide 35bcf), was sold to Centrica for £75m last year. Caythorpe had the same performance characteristics as Portland.

[holism] 17/7/2009 07:31

we shall see!!

[eacn] 17/7/2009 00:06

If there were any truth to the FT rumour the company would have had to issue an RNS. There was no RNS today and if there isn't one tomorrow I suspect that the rumour isn't true. Furthermore if the rumour were true I would have expected to see a larger price reaction.

[eacn] 16/7/2009 12:38

simon,

Great find. Thanks.

[simon gordon] 16/7/2009 11:52

PTG mentioned on Alphaville this morning:

NH a little thing called Portland Gas
NH building a huge gas storage facility in Dorset
NH told it has secured government debt financing for the project
NH shares up again today
NH shares up 8p to 99p
PM One to watch

[mina123golf2] 16/7/2009 07:43

eacn thank you for your reply re funding - very helpful

[dibbs] 15/7/2009 23:54

Oil and Gas back in focus in tonight in the US. Looking very good for a revisit to 100p + in my opinion. The timing of the news has certainly turned PTG around for me.

Dibbs

[eacn] 15/7/2009 20:22

mina123golf2,

My guess is that the chances of Portland getting funding for the first phase of cavern leaching are probably 75%. It could take till Q1 or even Q2 2010 for funding to be agreed, but by making sure they have the cash to last that long the odds of their getting funding have gone up imo.

Full funding for all the caverns may take a bit longer (possibly a couple of years), but sooner or later I think it will be agreed.

The problem they have got at the moment is that some in the industry are saying that we don't need storage for 25% of the annual UK consumption, but only for 25% of gas imports. While imports are projected to rise, reduced consumption during the recession has, in the view of some, pushed back the need for large scale additional storage.

What's more gas prices are low, and some in the industry are arguing that volatility in gas prices will be subdued during the recession. A hard winter, technical problems at Rough or a Russian dispute with the Ukraine, would soon put pay to that argument.

Lastly, in some quarters I have heard the argument that gas storage reduces winter summer price differentials and that therefore projected pricing for storage is too optimistic.

This is not entirely logical: gas storage pricing will be set so as to generate a return for storage operators and storage customers, and that return will in turn be determined by the investment hurdle rates demanded by those who fund these developments. Until there is an excess of gas storage, the summer winter differential will be driven by this target hurdle rate, unless there is an excess of gas supply.

Although there may be an excess of supply in the next couple of years, by the time Portland comes on line I doubt that that will be a regular occurrence in the UK, where in winter we will be increasingly reliant on European gas supplies or LPG, which remains a premium price product.

All imho, DYOR etc.

[mina123golf2] 15/7/2009 20:02

eacn Good points as usual. Could I ask you a question?? Are you of the opinion that Portland will obtain the necessary funding??

[eacn] 15/7/2009 19:51

Chrismez,

Its catch 22: they can't borrow against the assets until the project is funded, and once its funded they don't need to borrow.

My remark about borrowing against Larne was conditional on Larne being funded; the money could be used to tied them over while they wait to fund Portland.

From first hand experience I know that the lending environment is very tough at the moment even for companies with half decent balance sheets. No bank, other than a state sponsored investment bank such as the EIB (who will take for ever to make a lending decision), is going to lend to the likes of Portland on the promise of future cashflows. They want surety that the funding for the development required to generate the cashflows has been secured from other sources.

So imo Portland has had no choice but to dilute if they want to keep up the NPV of the project, which is the bedrock upon which their investment memorandum is anchored. 1.3% dilution for a potential doubling in the share price is worth it: the market certainly thinks so.

I hate dilution, but in this case I am for it. We will get our rewards in due course if funding is forthcoming.

[chrismez] 15/7/2009 18:34

Yikes - what a disgusting new name ... I mean c'mon couldn't they think of any thing more imaginative than ... infrastrata !!!!! Sounds like the name of Fiat's new 4 door saloon. Truly awful.

Anyway eacn - I agree with those laudible sentiments about preserving cash BUT NOT AT THE EXPENSE OF SHAREHOLDERS who have been loyal and have stuck with the company thru the good times (£4) and the bad (40p), like in fact yourself.

The Co. can't go around paying for everything by way of shares that dont exist whilst all the while diluting the holdings of your most important asset of all - your shareholders. Bit more creative thinking from a financial sense is required here such as - as you say - borrowing from various insti's against the assets.

Good news on the banking side of things is rare as hens teeth at the mo - but there are signs that some companies have managed over the past 3 months to re-negotiate debt, to secure new lines of borrowing facilities etc etc. Might we expect some news on this front from PTG?

[holism] 15/7/2009 15:05

Significant announcement today!!

[ppowerscourt] 15/7/2009 10:17

Good thing I topped up yesterday.

Ah, ......such is PTG's pattern of share price movement! Keep going, baby.

[paul p] 14/7/2009 17:16

Mina123Golf2, answering your earlier point, I feel more positive than six months ago because six months ago I didn't think there was a cat in hells chance of getting funding for the Portland project, now things are falling into place.

[eacn] 14/7/2009 12:17

Chrismez,

PTG haven't got a lot to lose by funding £300k of construction using a debenture. If they gain funding by 31.01.2010 (let's call it their longstop date) then the debenture isn't redeemed and they hand out the cash. If the funding isn't in place well there was going to be dilution anyway.

Furthermore keeping the project "on track" has a big effect on NPV, so making sure that construction continues according to timetable is literally worth tens of millions in any funding formula.

This is why I expect PTG to enter into a similar arangement for the pipeline: a two year delay in pipeline construction would have a major effect on valuation.

As for the lease payments, again it is all about bolstering PTG's negotiating position. If it looks like they are going to run out of cash funders will simply sit on their hands and wait. A 1.3% dilution to conserve 750k of cash and buy another quarter without needing to fund raise makes sense. I calculate that this move should allow PTG to keep going until end Q2 2010 without needing to raise further cash.

Buying further time also buys newsflow. By Q2 2010 we could have positive news on Larne, which, incidentally, I expect to be easier to fund than Portland, based on the company's latest figures. With Larne funded, PTG can probably survive for a prolonged period by either diluting their interest in Larne, securitising that interest in some form, or simply borrowing against the asset.

Funding is most certainly not guaranteed at this stage and it is therefore imperative that the company preserves cash and does all that it can to ensure that it is not negotiating with its back against the wall even if that means limited dilution.

[clearsoup] 14/7/2009 11:44

Topped up.

[chrismez] 14/7/2009 11:38

Hmmm - eacn - a cynic might say that commencing construction before funding is in place is perhaps a little odd and is like building the foundations to an extension on the back of your house before you have funds available from the bank. You say it is sensible to defer cashflow by using shares - I'm not sure -yet more dilution is not what this company needs. Also I'm not convinced that paying these people next door for use of their land by way shares is the appropriate way forward.

However on the bright side - the announcement of a "formal fund raising process" is good news and indicates that the company feels the time is right and that it will secure funding from one or more insti's in one form or another. If however PTG has launched this because it has no other option and in the end the fund raising goes pear-shaped, that will presumably be the end of Hindle and the beginning of a placing/rights offer to raise finance. Yet more dilution ...

So, fingers crossed.

Hindle's future seems to hang on whether he can successfully procure the funding at the right price and in the right format.

[eacn] 14/7/2009 11:00

The expected July update has materialised.

A formal fund raising process will commence shortly, suggesting that access to the data room has encouraged sufficient interest in the Portland project to convince PTG and its advisors that a fund raising is now feasible. A cynic would point out that they don't really have any other option at this stage.

The company has sensibly used its shares to defer cashflow and pay outstanding obligations. There is no mention of a lock in, so it is possible that there will be an overhang of stock. However, given the relatively positive statement on fund raising it is possible that there will be sufficient buying interest to mop up the overhang.

There was no mention of the pipeline. I assume that this will be covered by a later announcement in July.

Generally good newsflow management, with a positive tone.

[bionicdog] 14/7/2009 10:36

It is now!

[bones30] 13/7/2009 22:36

This is actually starting to look attractive again, pricewise.

[mina123golf2] 13/7/2009 22:23

Good grief here we go again - the man is out with the tealeaves and making some sort of daft prediction of 60p. Why do people do this?? Its a complete waste of time and is NEVER correct. What is the basis of the support at 60p - answer - nothing. An announcment re funding and a positive update due later this month is what is required.Will this be forthcoming?? who can say - we are a long long way from the granting of planning permissiom by DCC in May 2008.Could I suggest to the predictors amongst you to follow/read and inwardly digest the words of eacn who posts here regularly.Lastly, why, PaulP do you feel more positive now than 6 months ago??

[paul p] 13/7/2009 20:48

60p should offer support. Funding is the only thing stopping this and we desperately need it to be sorted. Do feel more positive than I did six months ago and I am confident it will be sorted

[scruff1] 13/7/2009 19:43

Why 60p mr ropey? Why not 55p or 65p?

[mr roper] 13/7/2009 15:27

Looks like 60p could be on the cards if that chart is anything to go by.

Mr. R