React Energy Share Discussion Threads

[colp54] 24/6/2014 08:26

This from the website re Enfield - 'The project will cost in the region of Stg£45m to construct of which Stg£2.5m has already been invested by REACT Energy plc.'As trout says, it seems likely the terms on the new loan note suggests the company expects to get back a good chunk of their £2.5m.I hope the installation of my new log burner goes a bit smoother than REACT's - although worryingly the costs do seem to keep drifting up...

[troutisout] 24/6/2014 08:00

Just re-read it again,

Enfield - looks like they will have a minority holding, but with payment of a development fee. Previously they were to retain a 50% holding.
I am happier with that because they were having to borrow money while the revenues are still a long way away, I would rather they monetise their development work earlier and hold a smaller holding in the project as they can then move on to the next project with cash in hand, rather than borrowing again to development other projects.

Loan note - The 1 year term suggests they expect the Enfield development fee to come in before and be able to pay back these loan notes.

Loan notes 2 - I expect to see another acquisition, they are very clear on what the loan note money is for and the recently found piece about REACT looking at another acquisition is quite open about it.

REACT are moving into the bigger arena, where they are trying to build a large project offering, they would never have been able to do all of it, so if they are now thinking of farming greater percentage of the projects out and benefitting from development fees, this will mean they can get to progress more projects and keep the borrowing down.

Importantly for us, it may mean more interest from investors as development fees start to make the results look a lot better and monetise our assets, that at the moment are heavily financed and not generating revenues for a while yet.

Trout.

[troutisout] 24/6/2014 07:43

Morning all,

Well that update explains a lot and gives us a detailed progress report.

1. As a poster stated months ago, it would seem the Zeropoint technology is not working as it should, the Newry phase 2 now looking at a different technology provider (we know planning was changed at Enfield due to the change from Zeropoint to a Nexterra system).

2. Loan notes have been secured and £1.5m before expenses raised, it would seem the interest rate has reduced slightly to 9% and that they have all been secured so the investment by FBD and GGES management not needed. Interesting though the term has been reduced to 1 year!

3. Enfield has changed, they now look to be working to secure a payment for development work up to financial close. This is something I have tried to get answers for as it seemed they kept a % but got no payment and that concerned me that they needed to get some repayment on investments made, otherwise they would be constantly borrowing more to keep going. It looks like this is now the plan and the delay is due to the changes in heads of terms of financing.

4. As post 33 by Don stated the Altilow windfarm project has been passed to the Bord Pleanala nand the Company seem to be confident they will secure planning permission.

5. EI take equity for preference shares, have you noticed that again equity is taken at 38p, nearly double the current share price. It would seem that someone has set a minimum price to convert to equity, take shares for acquisitions. This says to me that the company and more importantly it's investors and those it has acquired from have accepted that 38p is the correct valuation for the Company's shares and that the current price is artificially low, due to a very illiquid market.

6. Old Buckenham Hall school, this project is financed by the Equitix funding and the stake held by GGES/REACT is 30%, I am not sure what the development costs would have been but not a massive sum, basically planning permissions and pre construction designs and planning.

7. The most important thing with the Enfield planning is to see what REACT end up with after the change in terms, I still think they will have a good percentage of future revenues, but I am glad the are monetising their upfront investments in these large projects because they need to keep revenues coming in until they have a larger amount of projects up and running and delivering cashflow.

DYOR,

Trout.

[ryan83] 24/6/2014 07:13

What you reckon trout? Seems REAC become the middle man for Enfield - wonder how much the development fee will be? How much they spent - I think it's over $10m from memory? Also why not say how much the development fee for the school project?

[ryan83] 18/6/2014 15:30

Nope - I tried contacting them but they are quite offish. I am looking forward to reading the upcoming trading statement and will take it from there!

[troutisout] 18/6/2014 15:02

No worries, I did the same with HAWK once I realised what he was like, very good at drumming up new PIs and making them believe they were onto something special.
UJO is a little more illiquid though so if everyone goes for the door you could be caught out.

Back to here, have you still got a holding? I know you said you would be tempted back in for some more if management started to be a little more proactive with their communications with investors. They haven't managed that yet, LOL!

Trout.

[ryan83] 18/6/2014 14:45

trout - dont worry I am aware of DB. Simply playing the UK oil & Gas sentiment mate. Cheers though!

[troutisout] 18/6/2014 08:31

Back to here, not sure what can be said here, there has certainly been delays to the financial close at Enfield and some of that can be seen to be due to a change of plans and a new type of gasifier plant. However I don't really trust the Management here when they cannot keep their shareholders updated.

They really need to work on their investor relations and PR, I can see they need a big news story to kick start that off and Enfield financial close will be that, so let's hope we see that shortly.

If they are looking at acquisitions using paper, then it is in their interests to get the share price higher, the Directors here own a huge chunk of the shares as do FBD and the acquired companies of Reforce and GGES.



Trout.

[troutisout] 18/6/2014 08:27

Hi Ryan,

I see you are playing with UJO, beware David Bramhill, he is not to be trusted, ask anyone from HAWK and WSX. He runs companies with lots of hype and funds himself through placings, which he has a habit of getting through using lots of bucket shops, they buy the shares then sell them out for a minimal % but leaving a huge overhang.

Trout.

[ryan83] 18/6/2014 00:07

Good - about time!

[troutisout] 18/6/2014 00:03

Ryan83,

I think it will come, just need the big story to kick it off,

This from Yellow Jersey from 7 weeks ago,

"As you can see from the recently refreshed website, we are working hard with the Company to improve their communications material, as well as pushing the strong REACT story out to the business and investment press. We will be implementing new initiatives throughout the year including management presentations at investor evenings, which, as well as the Company's AGM, is the most appropriate forum for these questions. Whilst we do not have a set date for any investor evenings, as yet, I will of course keep you updated.


Again, please feel free to contact me directly with any further enquires."

[ryan83] 17/6/2014 23:56

That's the killer here! No PR, no shareholder interaction and poor MM coverage! I do however like the assets!

[troutisout] 17/6/2014 23:49

I see a few more looking in, no trades today so are we back to hibernating?

I found this earlier, I haven't seen it before and thought it was just from the GGES RNS but it is after all of the RNSs and seems to be a piece including more detailed plans from the CEO.

So much for the new Yellow Jersey PR, I cannot find anything on React Energy PLC that would constitute new PR.

[troutisout] 17/6/2014 08:23

A good start with the bid and offer ticking up a little, looks to be an adjustment after yesterday's buy on the close.
Online limits have been regularly offering 75k and then yesterday 50k, this morning they are down to 25k at the higher offer.
Chart looks like we have seen a bottoming phase, newsflow spikes this share as does the poor MM coverage, will we see the mid 20p's again before any trading update?

DYOR,

Trout.

[troutisout] 16/6/2014 18:32

The Enfield Biomass project is a 12MW Biomass gasification project located in Enfield, London. The project has secured full planning and permitting approval and is ready to construct.

The project will cost in the region of Stg£45m to construct of which Stg£2.5m has already been invested by REACT Energy plc. In May 2013 the company announced that it had selected Foresight Group as its preferred funding partner for the project. Foresight will provide a package of debt and equity facilities, which along with a co-investor will be sufficient to fully fund the project.

Under the terms of this funding package, REACT Energy will not be required to invest any further funds in the project and will retain at least a 50% shareholding in the Project SPV.

The Company recently announced that it had worked with the Foresight Group to acquire the site that the project is located on as well as signing a new lease for the Project. This transaction included an entity controlled by the Foresight Group acquiring the site of the Enfield project from the previous landlord. In conjunction with this Enfield Biomass Limited has signed a revised lease agreement for the site. While this transaction has slightly delayed financial close for the overall construction of the project it means that Foresight as the project's main financing partner now has a direct financial interest in the project.

The project has also secured a grid connection with UK Power Networks, and a long term lease is already in place for the site. The Company is currently in the final phase of discussions with a long term feedstock supplier.

The Company has chosen MWH Global Engineering as its preferred construction contractor for the Enfield Project following a competitive tender process. MWH is a leading provider of EPC construction services to the utilities and renewables sectors.

MWH have offered a turnkey solution for the construction of the entire project under a engineering, procurement and construction ("EPC") contract, which will also incorporate the supply of the gasification system. Negotiations with MWH regarding the EPC contract are progressing and moving towards a conclusion. The company expects to have a final form of contract ready for signing shortly.

Fichnter Consulting Engineers continue to assist the Company with these negotiations and all parties are working towards finalising and signing the contract in the very near future.

The Company has chosen Statkraft Markets GmBH ("Statkraft") as its preferred partner for the purchase of 100% of the electricity generated by the plant. Heads of terms for a long term power purchase agreement have been agreed with Statkraft and draft contracts are under negotiation. The Company is well advanced with discussions to finalise this agreement. The Company is in negotiations with a large multinational, located close to the Enfield Project, to purchase 100% of the heat generated by the Project. A detailed heat study and pipe route layout has been completed and the Company is in advanced discussions regarding the commercial terms of the offtake agreement.

Financial close is targeted for Q2 2014 with the project expected to be commissioned in Q2 2015 with full takeover in Q4 2015. Once operational the project is forecast to generate c.Stg£10m in turnover with c.Stg£6m in EBITDA.

[troutisout] 16/6/2014 18:30

Some buying going on of late, so there must be some people out there.

We are 2 weeks away from end of year and last year we got a trading update to coincide with the end of year. We do need some information from the Company, there are several things to look out for,

- Enfield financial close, stated on the website as due Q2 2014.
- Clay Cross planning progress
- Newry phase 2 progress
- Old Buckenham Hall School commissioning
- Construction of single wind projects at Moneygorm and Altilow started?
- Plymouth Biomass planning progress
- Loan Notes
- GGES other projects in pipeline

The big one is still Enfield Financial close, if they can demonstrate that they can close the £47m project (especially as Clay Cross and Plymouth will be similar projects), it puts this Company in the spotlight. At £4.25m market capitalisation the financial close would be a massive boost!

Trout.

[troutisout] 12/6/2014 00:02

Cheers Don,

Someone posted here that they had heard of problems with Newry initial production and I wonder if that meant a quick change around with the Enfield and other sites to the Nexterra gasification plant? The good things is that Zeropoint is modular and so they would have added more capacity as they went along where as the Nexterra will be up and running at full MW, even if it will take longer to construct.
I just wonder if they are trying to bundle financing for more than Enfield, adding Clay Cross for example, both going to use same technology???

There is still too much here to jump ship, these Biomass plants will be generating £7m EBITDA on £12m revenues.

DYOR,

Trout.

[1973don] 11/6/2014 18:20

I have looked at the Altilow planning decision.

Being from Ireland all planning decisions on Wind farms are refused initially by local county councils and are passed on to a higher authority (Bord Pleanala) to make the ultimate final decision. This ensures that local politicans are not harangued by the locals over contentious plannings and they can blame the big city people if planning is successful even if they are in favour themselves. A

[1973don] 11/6/2014 16:17

Trout - interesting link to Enfield Planning decision.

Section 2.3 is interesting (see below) and throws up questions about the Newry Project which uses Zeropoint gasification technology. Looking at Zeropoint's website it seems they have no other projects other than Newry i.e. no established record. REACT need to explain what is happening in Newry and why they are not using the same technology in Enfield!!!

On the plus side Nexterra seems to be a proven and established gasification technology according to their website i.e. the number of projects on their website plus their technology has reached financial close on a project in Birmingham.

"Due to funding constraints and the preferences of principal lenders in the
proposed industrial use, the current application is borne out of a change in
the technical requirements of the biomass plant from what was described
as a modular gasification system produced by a United States based
company, ZEROPOINT, to a NEXTERRA gasifier produced by a
Canadian based company with an established track record of
manufacturing gasifiers in the biomass energy sector. In this regard,
principal lenders consider this form of technology more investable than the
previous incarnation of the scheme and hence the current application
seeks to make appropriate amendments to the design of the built form to
accommodate the technical requirements of this form of technology."

[colp54] 11/6/2014 10:09

A little buying interest, but not quite enough to set the share price alight!The company's seemingly indifferent approach to communication could suggest supreme confidence - there again perhaps there's just nothing to say...

[troutisout] 10/6/2014 17:35

Another downside is the lack of MM coverage, which leads to ridiculously small limits and inability to trade within the spread, this also stops people trading and that leads to the share being unloved and shunned by investors and MMs moving the price around at will.

Dropping the price today on £400-£500 pound trades, only to see all of them bought by one buy at the end.

Trout.

[troutisout] 10/6/2014 16:41

Sorry the link to Enfield decision,

[troutisout] 10/6/2014 16:40

I have tried to communicate with the Company about some things and they have been rather obtuse to say the least, their PR company is the same, both using the line that we as shareholders have to wait for RNSs for information. Unfortunately they don't seem to issue them!

Firstly I found some interesting stuff about a month ago and tried to ask for more info, it would seem that while they were telling us that Enfield was due for financial close shortly there were changing the planning permission due to financiers wanting another type of gasifier (the Nexterra one rather than the Zeropoint modular one they are using at Newry). This was finally granted at the end of January, but with a long list of conditions. So why haven't we got Financial close as yet? Well they may still be working through stuff, but it seemed in the bag and yet has taken an age!

Also just over a month ago planning permission was refused for the Altilow 12MW wind farm, this again is in the public domain but the Company refused to discuss it, telling me that AGMs were the time to ask questions, well surprise they use the excuse that they cannot discuss things with individual shareholders, but they aren't able to do so at an AGM without disclosing it to the market, so to say they can at an AGM but not to an individual communication is wrong.

So I am very unhappy with their response, I hold too many to reduce without ripping the share apart and I also still believe this is a good investment. If we do get financial close on Enfield followed by Clay Cross, then we are away at the races. I am a little concerned that the wind farms may find it harder to get permissions now and that they seem to be constantly branching out but unable to close some of these projects and get them into construction.

I also asked about the Loan notes as I was interested in investing a decent size into them but nothing back. I think this company is an example of one that shouldn't be listed, the Directors don't seem to understand AIM rules properly and the main holders really control the Company. The good thing is with each company they acquire the Management end up with an equity stake and they all seem happy to hold such stakes (the latest acquisition is subject to a tie in for 12 months).

Their website states they expect financial close in Q2 2014, so we are weeks away from the end of that, I can see from the planning details that there is a lot to do before construction can start, but would have expected the financiers to commit by now!

Good Luck,

Trout.