{"id":378,"date":"2022-06-09T04:10:37","date_gmt":"2022-06-09T04:10:37","guid":{"rendered":"https:\/\/bluegemresearch.co.za\/?p=378"},"modified":"2022-06-09T04:10:39","modified_gmt":"2022-06-09T04:10:39","slug":"renergen-funding-almost-secured","status":"publish","type":"post","link":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/?p=378","title":{"rendered":"Renergen &#8211; Funding (Almost) Secured"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><em>Share Code: REN \u2013 Market Cap: R5.0bn \u2013 PE: -139x \u2013 DY: 0.0%<\/em><\/p>\n\n\n\n<div class=\"wp-block-file\"><a id=\"wp-block-file--media-cf0ab0f1-b478-4803-b265-d711497f3999\" href=\"http:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2022\/06\/Renergen_Ad-Hoc-Note_9-June-2022.pdf\">Renergen &#8211; Ad Hoc Note &#8211; 9 June 2022<\/a><a href=\"http:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2022\/06\/Renergen_Ad-Hoc-Note_9-June-2022.pdf\" class=\"wp-block-file__button\" download aria-describedby=\"wp-block-file--media-cf0ab0f1-b478-4803-b265-d711497f3999\">Download<\/a><\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Phase 2 Debt Funding: Quantum Points to Larger Phase 2<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Renergen has signed a Retainer Letter with the US International Development Finance Corporation (DFC) for Phase 2 debt funding of up to $500m. The DFC provided debt of $40m in Phase 1.<\/li><li>Added to this, Renergen has received multiple Letters of Intent to co-lend alongside the DFC of up to $700m in senior debt.<\/li><li>The lenders are currently conducting a due diligence to finalize their offers &amp;, assuming a positive outcome, it leaves Renergen in the envious position to pick and choose its debt funding.<\/li><li>These lines of debt are up to $1.6bn in potential funding that\u2014when combined with potential equity funding from <a href=\"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/?p=352\">Ivanhoe Mines<\/a> &amp; the <a href=\"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/?p=362\">CEF<\/a>\u2014points a clear path to a fully-funded Phase 2.<\/li><li>Renergen is now targeting 65% gearing &amp; the implications of the amounts are that Phase 2 will be materially larger than originally envisioned; we originally assumed a c.R12bn capex cost for Phase 2, but the above figures imply &gt;R15bn \u2013 Gas projects tend to get returns to scale &amp; a c.25% larger size may produce &gt;25% more gas.<\/li><li>If we assume a c.$1bn Phase 2, &amp; Ivanhoe (capped to c.$250m) &amp; CEF (c.R1bn) both follow through for their equity <em>and<\/em> Renergen management draw down on their debt with a 65% gearing (drawing c.$650m), this implies that there remains equity funding of c.$45m or c.R700m (c.1-for-10 rights issue at current prices).<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Valuation and Implied Return: Updated for latest spot prices<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>While Phase 2 size is rising, output upgrades &amp; the Ivanhoe &amp; CEF equity needs to be pinned down for us to correctly model. These are large variables and, currently, still have conditions outstanding.<\/li><li>For now, we have kept the size of Phase 2 flat (which creates upside risk to our valuation and forecasts), assumed debt is drawn down at the end of FY 23E (but interest capitalized until FY 25E), Ivanhoe &amp; CEF follow their full equity rights, 11.5m REN shares are placed during FY 23E (1-for-10 rights issue), &amp; Phase 2 production starts during FY 25E (9 months) with steady-state in FY 26E (albeit, we have used flat spot prices as based on the current basket, ArgHe token price and exchange rates).<\/li><li>This produces a fair value of 6337cps (previously: 6344cps) &amp; 12m TP of 7491cps (previously: 7501cps).<\/li><\/ul>\n\n\n\n<div class=\"wp-block-file\"><a id=\"wp-block-file--media-cf0ab0f1-b478-4803-b265-d711497f3999\" href=\"http:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2022\/06\/Renergen_Ad-Hoc-Note_9-June-2022.pdf\">Renergen &#8211; Ad Hoc Note &#8211; 9 June 2022<\/a><a href=\"http:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2022\/06\/Renergen_Ad-Hoc-Note_9-June-2022.pdf\" class=\"wp-block-file__button\" download aria-describedby=\"wp-block-file--media-cf0ab0f1-b478-4803-b265-d711497f3999\">Download<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Share Code: REN \u2013 Market Cap: R5.0bn \u2013 PE: -139x \u2013 DY: 0.0% Phase 2 Debt Funding: Quantum Points to Larger Phase 2 Renergen has signed a Retainer Letter with the US International Development Finance Corporation (DFC) for Phase 2 debt funding of up to $500m. The DFC provided debt of $40m in Phase 1. [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[100],"tags":[13,101,60,30,16],"class_list":["post-378","post","type-post","status-publish","format-standard","hentry","category-renergen-ren","tag-equity-research","tag-renergen","tag-research","tag-small-caps","tag-south-africa"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/378","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=378"}],"version-history":[{"count":1,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/378\/revisions"}],"predecessor-version":[{"id":380,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/378\/revisions\/380"}],"wp:attachment":[{"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=378"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=378"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=378"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}