logo-loader

Helius Energy may cash in on Rothes project now its has project financing in place - Ambrian

Last updated: 13:51 17 Feb 2011 GMT, First published: 14:51 17 Feb 2011 GMT

no_picture_pai

Helius Energy (LON:HEGY) will need around £14 million to develop the Rothes biomass plant in Morayshire, according to Ambrian Capital analyst Gurpreet Gujral.

Alongside a consortium of Scotch whisky companies - known as The Combination of Rothes Distillers – Helius is developing a biomass power plant that will generate up to 7.2 megawatts of renewable electricity capacity. The power will be sold into the local network.

Yesterday the company confirmed that it had secured 75 percent of total funding for the project.

The Helius CoRDe joint venture company received approval for non-recourse project finance from the Royal Bank of Scotland (LON:RBS) and Lloyds Banking Group (LON:LLOY).

“Obtaining debt financing for any infrastructure project is a key hurdle, especially during these economic times. 

“Given that Helius has overcome this hurdle, we believe the project is significantly de-risked, which implicitly increases its value - even before construction begins,” Gujral said in a note to clients.

The analyst reckons the project will cost about £50 million (capex) to develop, therefore the banks will put up around £36 million leaving Helius needing to find £14 million for its equity investment.

Gujral said that Helius might sell its stake in the project at this stage – and take early profits now - like it did with the Helius Alpha project or it may reduce its equity stake to raise the capital.

It sold Helius Alpha, a subsidiary that owned the 65 megawatt Stallingborough plant plant near Hull, to RWE Energy’s renewable arm RWE Innogy for an initial £28.14 million, back in September 2008. The deal was struck before construction had even begun and Helius is set for a further £8.8 million payment once RWE signs the first major equipment supply contract for the construction of the Stallinborough plant.

Alternatively the analyst said that Helius could fund its stake in the project from its own balance sheet, however Gujral doubts this is a likely outcome as it already has a strong pipeline of other projects that are growing in maturity. 

Gujral adds: “We believe Helius represents a good value investment opportunity. 

“Its current market cap is below its cash position and the value of an earn-out asset which should be realised this year. 

“The market is thus discounting the value of Helius CoRDe and Helius Avonmouth - a 100 megawatt biomass plant which received regulatory approval last year.”

 

Caledonia Mining tackles 2023 challenges with optimism for 2024 as it...

Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL) chief executive Mark Learmonth tells Proactive's Stephen Gunnion the company faced a challenging 2023, primarily due to poor production in the first half of the year at its core asset, the Blanket Mine in Zimbabwe, and an underperformance...

2 hours, 20 minutes ago