And a wonderful plan it appears to be.Doing all the right things(but as slow as can be for the benefit of shareholders)
1/do what's expected of you by the market and your lenders.
2/Get rid of bbi at $250m discount(the banks wouldn't have had a bar of this unless they thought it might force premature liquidation at a loss for them in the middle of financial chaos)Get rid of low income or non profitable power stations(done)
2/liquidate piffly stuff---$7m contract
3/consolidate what you've got--Buy out remainder of neighbourhood energy $6m--build new generation capacity
4/do what's expected of you by your shareholders---mull all the piffly offers you've been getting--take your time-to allow resource tax-carbon tax issues to be resolved-and allow the VALUE OF THE COMPANY AND THE CASH SITUATION TO IMPROVE DAILY
5/invest profitably in the business to increase value---Tolling agreement(from loss to profit at no risk on one power station).install and pay for new turbine($65M of which $40m or so was cash).Fix Redfern issues(another $5m? investment)Push HARD for customers for retail outlets(neighbourhood power etc.)Trebbling what you get for your power.
6/setting a date 6m away (4mo to go)and letting shareholders know the won't have to wait forever to find out what's happening.
I suspect the company has entered into a conditional agreement for one or more assets and that allows some due dilligence or proof of productivity or correction work done.
I suspect it is probably REDFERN Power station(the one that gets half its coal for free for 20? yrs)and a period to prove its remedial work is successful and its value is naturally higher,given it is not covered by the banks security and has its own seperate financing arrangement.What is it worth i wonder.Cost? project loan $240m outstanding for life plant? but that loan has been getting paid down by around $5m every 6 months(condition of its financing).
7/ letting the squeeze stay on the lenders(YES,SHAREHOLDERS HAVE AGREED TO TURN THEIR LOANS INTO EQUITY,BUT ITS NOT PRUDENT to do the paperwork TO DO SO YET,UNTIL A FEW FURTHER ISSSUES ARE RESOLVED),pushing them to be more ammenable WHILE THEY HAVE NO CHOICE (because we are obviously keeping within our financial covernents)
8/Patience
9/the bonus for the directors involved naturally comes at the end.When they recieve offers to be on more prestigious boards at real fat paychecks due to the skill they have shown here.They can have REAL SAVVY REPUTATIONS with what they are doing if and when it comes off.Pride is a powerful driver. I for one think think they've done a wonderful job of making a purse out of a sows ear so far. Just waiting for them to fill it with some cash.I don't doubt they will.
Face it if our equity is up, the loans go down,we make a profit all is well.P.S. that to reflect the billion in equity on the balance sheet and the $420m owed would be about a $1.20 a share.Big revaluations will occur within the next 12 mo. i figure as most of the last writedowns on business values will reverse(namely energy trading and redfen impairment).
AEJ Price at posting:
5.9¢ Sentiment: None Disclosure: Held
