By Dr. Michael Green
It was not hard to choose Coro Energy as one of Align’s top recommendations for 2021. With the growth in energy demand in South East Asia being amongst the fastest in the world, we see Coro as being a really compelling play based on this huge opportunity in rapidly developing interests in both renewables and gas.
Recently, investors learnt that Coro’s renewable energy interests in South East Asia have just stepped up a gear or two with the acquisition of Global Energy Partnership Limited (GEPL), a developer of renewable energy projects across the region, alongside a fund raise which provides the company with fresh capital to invest in its enlarged asset base. Both the acquisition and fund raise are subject to approval by Coro shareholders at a General Meeting to be held on 15th March 2021.
Coro is acquiring its 100% interest in GEPL in exchange for 142.5 million new shares, which gives the vendors a 15% stake in the company (pre-fund raise). It is really good news that CEO Mark Hood will be joining Coro, securing an experienced clean energy executive to deliver on the company’s growth strategy for South East Asia.
Not only is Mark the co-founder of GEPL but he also has more than 20 years’ experience in utility scale energy projects at all stages of development and asset transition. His expertise spans projects that have been delivered for BP and Cairn Energy in locations including Bangladesh, Rajasthan, Greenland and Algeria. He also brings extensive experience in rejuvenating off track organisations and projects, along with proven expertise in ensuring the delivery of projects and portfolios to increase company value. With experience in oil and gas as well as clean energy, Mark looks clearly like the right sort of man to be heading up Coro, and will be supported by his GEPL co-founder Michael Carrington, who will join Coro as Chief Operating Officer.
This acquisition provides a portfolio of operated renewable energy opportunities in South East Asia totalling 4 GW, with an initial focus on two high graded opportunities in the Philippines – a 100MW solar project and a 100MW onshore wind project. The GEPL team has done the pre-feasibility work on the projects and established key relationships in-country. Now the projects need further capital to take them forward – which is what directors’ James Parsons and Andrew Dennan are awfully good at.
The case for energy investment in the Philippines appears strong. Annual electricity demand is forecast to increase by 65GW by 2040 which is all down to a young and growing population as well as a rapid growth in GDP per capita. Apparently, there is strong long-term Power Purchase Agreements (PPA) pricing to support renewable energy, low off taker risk and no subsidies required. At the same time there is supportive legislation for renewable energy, which is transparent, objective and clearly defines the desire to move away from fossil fuels. If that was not enough, the government there has invested heavily in grid infrastructure, which is continuing, and really is seen to support the deployment of new generation assets.
In terms of funding these opportunities, the company has raised a total of £4.5 million through a placing with new and existing investors and up to £0.5 million through an open offer at 0.4p per share. These funds will be employed on important strategic initiatives including:
- Investment in the first 200MW projects in the Philippines;
- Funding the company’s share of Duyung costs through to a Final Investment Decision which is expected mid-2022; and
- Providing the company with working capital runway to undertake a debt restructuring exercise later in 2021.
With cash on hand the company expects to be fully funded to Q2 2022, adopting a conservative set of assumptions.
Investors are seeing the company at an important strategic point where it is pivoting from a legacy oil and gas vehicle into becoming a South East Asian focused low carbon energy company. The latest deal along with this fund-raising exercise and strengthening of the executive team accelerates the company’s energy transition strategy and diversifies the asset portfolio, bringing in operated assets which will complement the non-operated Duyung project and ion Ventures investment, and drive news flow which looks like it could become a compelling spate over the coming months.
This year we are expecting to see a few big commercial milestones being announced: the securing of energy service contracts for Philippines projects, approval of the Duyung Plan of Development by the Indonesian authorities, execution of the Duyung Gas Sales Agreement, debt restructuring process and a divestment of the Italian portfolio.
This will all nicely lead to the Duyung FID in 2022. At the same time there will also be the ongoing news flow resulting from the maturation of the wider GEPL project pipeline alongside the evaluation of and the participation in ion Ventures’ project pipeline where the company holds a right of first refusal for investment.
We initiated coverage on Coro Energy with a Conviction Buy stance and a target price of 1.50p in December 2020 when the shares were trading at 0.275p. At the current price following the latest moves, we are more than happy to reiterate our stance.
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