I am a new watcher and have a few friends in the power generation businesses.
What appeals to me is the following;
- Pumped hydro is the only feasible fully renewable peaker production method, e.g. you cannot start stop geothermal, big hydro, solar and wind production.
- They will have a better margin than most peaker producers, e.g. they can start selling back to the grid at a price that is larger than the average price they bought it at + costs. This means they have a changing and typically low price-to-start (PTS).
- They will be unaffected by other commodity prices which are typically quite political, e.g. gas and coal peakers PTS will be affected by the current gas and coal markets. Coal, as we know in Australia, is a very political commodity currently.
- Not much infrastructure needed to get the project working, e.g. being an old gold mine they have almost everything needed to turn this into a pumped hydro peaker including current water off takes from a local dam + electrical grid hookup.
This is all not even considering the other projects they are focusing on. My main concerns though are the following questions;
- When the full feasibility studies are back, how do they plan to fund the capital needed for the infrastructure? Given its a bankable feasibility study this suggests its for approaching lenders which suggests it will either be a big bank loan or a large placement.
Regardless, with $9M in cash and the whole Kidston site if this drops any further you will be close to trading at cash value. I will be looking to build a position over the coming months.
GNX Price at posting:
13.0¢ Sentiment: Hold Disclosure: Not Held