Sqn Asset Finance Income Share Discussion Threads

[cc2014] 28/1/2020 10:39

Feedstocks below. If you build more and more plants and there's a fixed supply of feedstocks then price rises due to demand and supply. Possible that supply rises the more local a AD plant is to feedstock due to lower transport costs. Also likely that rising price of feedstock results in more supply as more incentive to send to AD.


Primary feedstocks:

Dairy Farm and piggery etc waste slurries
Dairy Product and other Food Processing wastes
Household Food Waste with or without Green Waste
Brewing Industry effluents and wastes
Supermarket Waste*
Municipal Solid Waste from Kerbside collections of Green Waste
Municipal Solid Waste from Kerbside collections of Green Waste and Kitchen Waste*
Catering Industry Wastes*
Organic Market Wastes*
Sewage Treatment Works sludges
Silage/ley crops (may be included and kept in storage to provide a feedstock for use to augment feed during winter seasons. Stored biomass is needed for times when the availability of other feed materials will be reduced)
Other organic wastes available locally from other process industries.

Secondary Feedstocks:
– Fish oil
– Fish waste
– Dairy products
– Milk containing antibiotic residues
– Whey
– Concentrated whey
– Sewage sludge from wastewater treatment plants
– Grease sludge from foul water chambers, sewage sumps, pumping stations, grease traps etc
– Seaweed (but check salinity first)
– Animal feed waste/residues
– Flotation sludge
– Graded organic domestic waste
– Gastrointestinal contents from slaughterhouses
– Waste from slaughterhouses. Subject to regulatory requirements in-force: All category III types and category II types that have been sterilised at 133 degrees Celcius for 20 minutes.
– Pig/ livestock slaughterhouse blood
– Poultry – chopped – category III after sterilization
– Chicken waste/ feathers (Note: Chicken Litter can be troublesome due to its high ammonia content.)
– Eggs and egg waste products
– Sawdust from mink pelt processing
– Mink feed waste/residues
– Potatoes and potato pulp
– Coffee grinds, tea leaves etc
– Fruit, including residues from fruit processing
– Lemon peel, orange peel etc
– All cereal products
– Bakery waste – flour, bread and finished products
– Grass, maize – energy crops
– Ochre-rich water/ochre from wastewater treatment as long as there is a high organic content
– Waste from jam production
– Ices, ice-cream, all forms of ice-cream products
– Margarine, out of date butter, suet
– Waste from the production of soya oil and margarine
– Distillery waste
– Soft drinks and beer
– Brewer’s yeast
– Bleaching earth with high organic content
– Glycerine, including de-icing fluids from airports
– Coolants and antifreezes. For example, monoethylene glycol (blue coolant), organic acid coolant (green and red coolant)
– Sugar, molasses, etc.
– Drug residues from pharmaceutical companies
– Soap residues from soap manufacturers
– Past sell-by date food waste
– Household collection food waste
– Food products that have been bacteriologically or chemically contaminated
– Non-food organic/ vegetable/ putrescible products
– Catering and food processing factory waste
– Organic fraction of residudal wastes after processing of municipal solid waste in Mechanical Biological Treatment (MBT) Plants
– Manure and farming slurries

[spectoacc] 28/1/2020 10:16

@CC2014 - it's all on the feedstocks costs IMO, for the ADs. No good working through slow ramp-up issues if it's not particularly viable once ramped up.

You say SQN "..Offering...yield..", but they're paying half of it out of capital post-Suniva.

They'd argue that they've worked through and worked out, all the loans that have gone wrong, feel confident on AD (where they've already sorted out several), and that Suniva was a win for them that will pay out eventually.

I'd argue that Suniva has rumbled on for years without them getting their - our - money back, that they're paying divi partly out of capital, that a dearth of investment opportunities has made them go far too big into AD, and that AD may be terminal.

For all that, everything has a price.

[eeza] 28/1/2020 10:10

Mnagement looking to be specialists in the way that Woodford was.

[cc2014] 28/1/2020 10:04

I read the accounts yesterday and updates on AD. The challenge is deciding how to value these AD assets given and what other cots there are to come to make them 100% operational at a proper level of efficiency.

Searches suggest there are now in excess of 400 AD plants in the UK now with up to 1000 more planned. So, getting the plants to operational efficiency should be easily do-able, it's more a matter of what the cost is. The technology is proven.

The feedstock costs worry me as if another 1000 come on stream that's going to put more pressure on feedstock costs. There again I thought in general the owners of these plants were signing multi-decade contracts with councils over the feedstock. Apparently not in some or all of SQN.

Now at the end of the day SQN is offering the sort of yield that in order to achieve it, there is more risk than say a 5% bond. So, I have to put all this in context of the potential return. SQN's credibility is gone but I'm not interested in that, I'm interested in whether 50p or so is a good entry price.

The way the management have handled this and further the very wide range of potential NAV write-off concerns me. The Board has appoined a third party to value the AD assets, suggesting to me they can't get the answers they want from the investment manager and one wonders if the investment manager knows what they are doing in this particular area.

I've decided for the moment to sit on the sidelines and wait for an outrageously low price, rather than somewhere around here. A bit more information would be helpful too.

[eeza] 28/1/2020 09:50

Sells going thro at 52p now. Drop into the 40's looks nailed on.

[spectoacc] 28/1/2020 09:43

Decent volume yesterday but no indication it was more Schroder selling. Assuming their c.10% is being dribbled out - as I expect it is - will be interesting to see who takes it.

Back to the juxtaposition of a continuation vote (Nov), a Board review (current, with possible but preposterous management change), and the c.9 year average duration of the loans.

Last NAV (no NAV this month of course) was 93.68p on the ords, which sounds nice, but that includes Suniva I believe. They'll get something back on it eventually, but how much?

Then the "4.6p - 13.2p" on the ADs, with possibly a long work-out ahead (£127.7m total value). Slightly concerning that the AD problems aren't just the ramp-ups, but also the unexpectedly high feedstock costs.

So to be safe - deduct Suniva, deduct all AD, money back on both a bonus. Work out what a covered divi would look like, adjust to that.

I still think there's value at 50p, balancing the possibility of more nasties within the portfolio, with the prospect of money back on Suniva & various AD. Wouldn't want to see change of manager (far too specialised), or a long, drawn-out wind-up.

Someone just sold 66.9k at 52.67p, that's a lot nearer to where they should be buying than selling IMO.

Only in the C's here.

[cc2014] 27/1/2020 16:45

Wouldn't be surprised if Schroders putting themselves to be the new manager once continuation vote lost. Easy fees for them a la WPCT

[spectoacc] 27/1/2020 16:27

You'd think so, but there's certainly a scenario where given a choice between continuing, or winding up and taking very little for the AD/no Suniva resolution (or c.9 years to getting all the money back) leads to at least an extra year.

Schroders seem to have come to that conclusion with their selling.

[eeza] 27/1/2020 16:17

Surely zero chance of winning the cont vote.

[spectoacc] 27/1/2020 15:40

Lol @eeza. Well, if I'm true to my word, I guess my next target will be 70p to sell again ;) But I think I should probably keep quiet, don't wish to be either talking it down or talking it up.

@Dels - yes, the uncovered divi isn't a good look, suspect they'd do better to halt it until Suniva cash is in. But they won't want to rock the boat before November's vote, which they'll be desperate to win.

Trouble is, the boat is currently on the rocks.

Wonder how that buyer at 81p after the initial RNS is feeling.

[eeza] 27/1/2020 15:33

One more day like today and spec's target is met.
Need a new target spec.

[delspirido] 27/1/2020 15:30

Surely there will be a point where the dividend must be halted or at least cut. With this much money flowing out I don't know where they can justify the same dividend

[spectoacc] 27/1/2020 14:49

@chucko1 - see above - pretty sure it's SDR signalling themselves as sellers.

23p isn't enough of a gap :) No Suniva, no AD, no uncovered divi on the C's.

Tho I'm hoping the C's will fall a bit more, and will likely be a buyer of the ords eventually. SDR getting out of their nearly 10% would help.

[chucko1] 27/1/2020 14:44

Lots of frantic trades the past 80 minutes. Picked up a few more at 56.67. 23p between the ords and the Cs. I wonder if the overall market sell off induced this rapid sale - if so, not very smart.

[spectoacc] 27/1/2020 13:59

Yeah I think that SDR RNS, showing still c.9% to dump, has set the cat amongst the pigeons. Sold on Thurs so may have got a few more away on Fri.

Must be a limit to how many buyers of that large a stake there'd be. LIM are usually up for something punty but almost too much choice with Woody/Invesco out there selling everything.

Edit - a 430k trade on Thurs, nothing similar Fri or today so far.

[eeza] 27/1/2020 13:40

May reach 50p today at the rate of decline. Down 8% now. 57p bid.

[spectoacc] 27/1/2020 13:34

There's a fair bit of ammo. Wonder if they're sellers of the C's too (which I hold).

In conjunction with slightly arbitrary 50p target - not convinced SQN investable until there's more detail on the AD, both quantum of write-off and timescale for possible recovery.

And - of course - Suniva very much ongoing.

[eeza] 27/1/2020 13:32

Schroders never bother what price they sell at, they'll just keep on trashing it lower until they run out of ammo..

[spectoacc] 27/1/2020 13:19

Lol wish I'd not put a target on my head... ;)

Schroders been selling it seems. Buy high, sell low, like most insts.

For the avoidance of doubt, whilst I'm waiting for lower, I'd rather be a buyer of SQN here, at c.60p, than be Schroders and be selling.

[eeza] 27/1/2020 13:01

Another 5% leached away today (so far).
Creeping down to spec's 50p.

[spectoacc] 24/1/2020 15:46

I'm just surprised we haven't had news that the buyer post-warning was the buy-back ;)

[eeza] 24/1/2020 15:41

Yes, LG, not likely to see that price again, imo.

[lord gnome] 24/1/2020 15:31

I'm so glad that I panicked and sold out at 80p. ?

[eeza] 24/1/2020 15:30

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