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SNY finance deal summary, page-3

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CaptainBarnacles

7,719 Posts.

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10/09/14

10:41

Post #: 13951611
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Originally posted by hero of xerox ↑

I’ve been having a look at the SNY financing deal announced today…and wanted to provide some thoughts on the deal. But please…DYOR.

As a long term holder I’m very happy (actually bloody stoked) with this development which fundamentally changes SNY’s position.

The company has arranged $25 million in funding from a single entity (Vandasia) that will take a 43.9% stake in the company over two transactions.   

The averageprice of the funding comes in at 34c p/s, a 79% premium over the last traded price. Unheard of in todays market!!

This is in part being done through the purchase and exercise of 47.75 Million existing options, removing just under half of all options issued in the company – this both effectively reduces any future options overhang and reduces the total dilution to existing shareholders from the current raise, with 116.3Mil shares/100.5Mil options before the raise and 207.4Mil shares/52.7Mil options post financing.   

Two factors are important for Sunbird- the quality (and cash balance) of the investor, and the motivation for investing. Vandasia is an investment company with a specific interest in gas assets, LNG solutions, and gas-to-power projects, fronted by management with experience in delivering major industrial projects.

Vandasia’s motivations are a bit more obvious and appear to be two-fold- they intend to share responsibilities in the exploration and development of Ibhubesi (including infrastructure supply which is a complimentary money spinner), and there’s also scope to provide additional gas supply options in addition to or EARLIER than Ibhubesi can deliver first gas.

With these sort of terms there would appear to be a strong likelihood that Vandasia already has complimentary assets that could be bolted on to Sunbird and benefit from an overarching gas sales agreement with Eskom- which I believe is still in progress but is part of the conditions for the second tranche of the raise, so Vandasia must feel a conclusion is close by.

Before this financing the company had been priced as a cash poor developer likely to undertake a discounted capital raise- IMO the share value should continue to react positively to reflect this sudden change in circumstance (particularly once the first tranche is completed), along with the raising being done at a very strong premium and the removal of half of the options overhang.

In any case…further upside will be dependent on the market interpretation of the deal structure or further news catalysts.  

There’s a fairly wide range of potential catalysts, which could include: 

Completion of the first and second tranches of financing. 

Signing of a Gas Sales Term Sheet with Eskom. 

Potential for early gas supply- given Vandasia’s investment interests LNG would seem to be their first port of call.

This would work with the theory that Vandasia is also investing in Sunbird as part of a market entry/asset bolt on play into South Africa. 

Much faster progress at Ibhubesi with greater pulling power to secure a major JV partner.

Its hard not to like the deal announced today...as a result SNY is poised to become a serious player in South Africa's domestic energy supply market. SNY is a vastly different proposition today than it was yesterday.

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Another factor is that Vandasia will be at 33% if all options and perf rights were to be exercised/allocated. As a shareholder obviously I would love that - as some are at 50c - lol
IHS Price at posting: 25.0¢ Sentiment: Buy Disclosure: Held
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