{"id":383,"date":"2022-07-18T01:00:00","date_gmt":"2022-07-18T01:00:00","guid":{"rendered":"https:\/\/bluegemresearch.co.za\/?p=383"},"modified":"2022-07-17T07:39:52","modified_gmt":"2022-07-17T07:39:52","slug":"renergen-first-gas-to-plant-ivanhoe-option-expiry","status":"publish","type":"post","link":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/?p=383","title":{"rendered":"Renergen &#8211;  First Gas-to-Plant &#038; Ivanhoe Option Expiry"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><em>Share Code: REN \u2013 Market Cap: R4.4bn \u2013 PE: -123x \u2013 DY: 0.0%<\/em><\/p>\n\n\n\n<div class=\"wp-block-file\"><a id=\"wp-block-file--media-cf75697a-07de-4479-ab9e-cc4e1c3520db\" href=\"http:\/\/v5j22kvl0zh.c.updraftclone.com\/wp-content\/uploads\/2022\/07\/Renergen_Ad-Hoc-Note_18-July-2022-1.pdf\">Renergen &#8211; Ad Hoc Update Note &#8211; 18 July 2022<\/a><a href=\"http:\/\/v5j22kvl0zh.c.updraftclone.com\/wp-content\/uploads\/2022\/07\/Renergen_Ad-Hoc-Note_18-July-2022-1.pdf\" class=\"wp-block-file__button\" download aria-describedby=\"wp-block-file--media-cf75697a-07de-4479-ab9e-cc4e1c3520db\">Download<\/a><\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Phase 1: First gas-to-plant<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>On the 8<sup>th<\/sup> of July 2022, Renergen successfully achieved its first natural gas to its Phase 1 plant. This was signified by opening the main inlet line from the gas gathering system, to the process plant and then to the natural gas filtration and pre-compression system.<\/li><li>This is a major qualitative derisking moment for the entire project and one that, strangely, its share price did not seem to notice.<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Ivanhoe Mines: Option expiry allows for better options<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>The Ivanhoe Mines\u2019 option to ramp-up their stake in Renergen (at a discount to VWAP) has expired due to unfilled conditions (we believe that the specific outstanding condition is Competition Commission approval). Ivanhoe remains a c.4.3%-shareholder &amp; there remains a potential LNG offtake deal on the table.<\/li><li>This option expiry may appear to leave a funding gap for Phase 2, but it does remove a potentially very dilutionary action (especially if the share price remains well below our fair value).<\/li><li><em>How<\/em> dilutionary? Consider that the Ivanhoe shares could have been issued at a <em>discount<\/em> to VWAP\/market price (currently c.R4bn or the low-3000cps) while the Central Energy Fund (CEF) deal values the project at c.R10bn or 6933cps (c.102% <em>premium!<\/em>). Indeed, a positive outcome from the CEF deal\u2019s due diligence should peg REN\u2019s implied fair value higher than the Ivanhoe deal.<\/li><li>Finally, as evidenced by the appetite for Phase 2 lending (<a href=\"https:\/\/v5j22kvl0zh.c.updraftclone.com\/?p=378\">see our note<\/a>) &amp; following discussions with management (they have just come back from a well-received global roadshow), we believe that the Phase 2 equity-funding should be filled <em>and<\/em> we hope it could be done so at a better price, i.e. with less dilution.<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Valuation and Implied Return: Unchanged<\/strong> <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">We have left our model and forecasts unchanged, even though they incorporate Ivanhoe\u2019s now expired options because there should still be <em>some<\/em> equity dilution for Phase 2 and this allows us to somewhat account for it in our forecasts and valuation.<\/p>\n\n\n\n<div class=\"wp-block-file\"><a id=\"wp-block-file--media-cf75697a-07de-4479-ab9e-cc4e1c3520db\" href=\"http:\/\/v5j22kvl0zh.c.updraftclone.com\/wp-content\/uploads\/2022\/07\/Renergen_Ad-Hoc-Note_18-July-2022-1.pdf\">Renergen &#8211; Ad Hoc Update Note &#8211; 18 July 2022<\/a><a href=\"http:\/\/v5j22kvl0zh.c.updraftclone.com\/wp-content\/uploads\/2022\/07\/Renergen_Ad-Hoc-Note_18-July-2022-1.pdf\" class=\"wp-block-file__button\" download aria-describedby=\"wp-block-file--media-cf75697a-07de-4479-ab9e-cc4e1c3520db\">Download<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Share Code: REN \u2013 Market Cap: R4.4bn \u2013 PE: -123x \u2013 DY: 0.0% Phase 1: First gas-to-plant On the 8th of July 2022, Renergen successfully achieved its first natural gas to its Phase 1 plant. This was signified by opening the main inlet line from the gas gathering system, to the process plant and then [&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":[],"class_list":["post-383","post","type-post","status-publish","format-standard","hentry","category-renergen-ren"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/383","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=383"}],"version-history":[{"count":1,"href":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/383\/revisions"}],"predecessor-version":[{"id":386,"href":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/383\/revisions\/386"}],"wp:attachment":[{"href":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=383"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=383"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/v5j22kvl0zh.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=383"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}