Consensus community valuation
06-June-2024: Update-on-proposed-acquisition-of-Genex-by-J-POWER.PDF
Plus: Genex releases Transaction Booklet.PDF
I've cobbled together the following indicative timetable from that last announcement - which is 373 pages long by the way...
As with the Renesas takeover of Altium, this J-Power takeover of Genex is going to go through. The Japanese don't like to play games, like some people do (won't mention any countries in particular). Japanese firms tend to have longer term investment horizons that allow them to pay more upfront and avoid any bidding wars because nobody else is prepared to pay any more. In other words, bid high up front and get the thing done ASAP, and be happy that you've made a good purchase, even if the returns are going to take a little longer to flow through.
Although with FIRB and the shareholder meetings to vote on the scheme and everything, it still tends to take months to actually settle. As with the Altium acquisition by Renesas, this one will also settle in August, or if the scheme is voted up, possibly on the last day of July. If the scheme is voted down, J-Power will have that on-market T/O offer open at 27 cps (half a cent less than the 27.5 cps off-market offer being voted on at the scheme meeting on the 16th July) and the on-market offer would stay open until 14th August, unless extended.
Still no word on Skip Capital's intentions - they hold 19.99% of Genex and are the largest "Subs", with J-Power being the second largest (with 7.72%).
I hold both Genex and Altium, and both were purchased at significantly lower prices than where they're being acquired now, so happy enough with these outcomes. I hear people saying they wanted to hold some of these companies forever, but realistically we rarely get the chance to hold a company for decades - there is just too much M&A that goes on. It's part of the game and in this case, both companies are being taken out at a fair price, so I'm not unhappy.
Latest update is at the bottom - scroll down - Genex is currently being taken over by J-POWER at between 27 cps and 27.5 cps (cents per share).
30-May-2021: My 2 year PT (price target) for GNX is 32 cps and I think they'll hit 37 cps within 3 to 5 years, which would give me an 80% gain on my RL buy-in price of 20.5 cps. They have some strong tailwinds behind them, as the switch from fossil-fuel-based energy generation to renewable energy generation gathers pace and momentum. What has held the industry back the most in recent years has been the inability to store excess energy for later use, but new technology - particularly in large scale battery storage solutions - is making that less and less of an issue.
Genex have just achieved financial close and begun construction of what they call their K2-Hydro project at their Kidston Clean Energy Hub, located in north Queensland, which will integrate large-scale solar generation with pumped storage hydro (hydroelectricity), so the pumped-Hydro will allow the solar energy created at Kidston to be stored and then released during periods of peak demand, even when the sun isn't shining on their solar panels.
The Kidston Clean Energy Hub already has an operating 50MW stage 1 Solar Project (KS1) and the 250MW Kidston Pumped Storage Hydro Project (K2-Hydro) is now under construction - with planned further multi-stage wind and solar projects in the pipeline.
Genex also operate the 50MW Jemalong Solar Project (JSP) in NSW which provides geographical diversification.
Genex is further developing its energy storage portfolio via the early stage development of a 50MW/75MWh standalone battery energy storage system at Bouldercombe in Queensland.
With over 400MW of renewable energy & storage projects in development, Genex is well placed as Australia’s leading renewable energy and storage company.
29-Nov-2021: Reviewing this one as it was marked as "stale". I think 37 cps by end of May 2026 (5 years from when I set it at the end of May this year - see above) is still good, and achievable. While Simon Kidston (one of the company's three founders) selling down his GNX position and then announcing on the 15th November that he would be transitioning from an executive director to a non-executive director role effective from January 1st (2022) is not a good look, it doesn't break the investment thesis in my view.
I still view them as one of the best emerging renewable energy companies available to invest in here in Australia (ie. ASX-listed) and I like their diversity across renewables, in Solar, Wind, Pumped Hydro and Battery Storage solutions. Mostly still under the radar with most larger investors, but Genex is still really just getting started. It will take a couple of years to get K2 Hydro built and commissioned, but I believe it will be worth the wait, particularly if they keep moving ahead with their other projects during the period. They do already have income coming in right now from two operating solar farms, so that's a big positive in my view for a company that is also building or planning to build a number of new projects.
01-Aug-2022: This valuation has been marked as stale, so I'm reviewing it. No change. I still think Genex is worth between 30 and 40 cents per share, or will be in the next couple of years, so 37c is OK. I note that they recently received an unsolicited and non-binding proposal (takeover offer) priced at 23c/share. While this was significantly higher than the levels they were trading at before the offer, they had become VERY cheap and I agree with the Genex Board who today declared that after carefully considering this proposal they consider that it undervalues Genex and is therefore NOT in the best interests of Genex shareholders.
See here: Response-to-Non-Binding-Indicative-Proposal.PDF
My investment thesis for Genex remains on track. While they have taken longer to get their finance packages sorted out for some of their projects, like their recent 50MW/100MWh Bouldercombe Battery Project, I believe that will improve as they grow and get more of their projects built and online, particularly once their flagship 250MW Kidston Pumped Hydro Project is up and running.
26-March-2023: Update: No Change. Same TP (37 cents). The main thing that's changed is the market's interest in Genex - they're just NOT interested - and the SP - which is now sub-15 cents/share. And some issues with the main tunnel boring at their flagship pumped hydro project at Kidston hitting some unexpected water which has cost them time and money.
They are back to full steam ahead with the project now, but their contingency money (for unexpected cost blowouts) has pretty much been used up already, so any further substantial issues could mean another capital raise at some point.
The market clearly thinks the takeover offers, particularly the higher one (@ 25c/share), were pitched too high, despite them being rejected by the Genex Board.
July 2022: Australia's Genex Power gets $220 mln take-private offer led by tech billionaire | Reuters [23c/share bid, put together by Atlassian co-founder and billionaire Scott Farquhar, although the Australian Newspaper said his wife was behind it]
Also: Genex Power gets non-binding takeover offer from Skip, Stonepeak (renewablesnow.com) [same story - different source]
August 2022: Genex Power (ASX:GNX) receives revised takeover bid | The Market Herald [bid increased to 25 cents/share, also ultimately rejected].
December 2022: Scott Farquhar’s Skip walks away from joint bid with Stonepeak for Genex (afr.com)
Commsec indicates "Skip" sold their 19.99% stake in Genex on December 23rd 2022, however subsequent enquries I made directly with Craig Francis at Genex in May (CFO then, now CEO) revealed that Skip Capital do indeed STILL hold 19.99% of Genex, but that Stonepeak are no longer connected to that Skip position because their agreement with Skip to acquire Genex had been withdrawn and the partnership between Skip and Stonepeak formed for the sole reason of the aquisition bid has now been discontinued - so Stonepeak lodged the "Ceasing..." notice (on 23-Dec-2022) and Skip was mentioned in that notice as the reason why Stonepeak were previously "Subs" - and Commsec mistakenly attributed that "Ceasing" notice to Skip Capital. Long story short, Skip still own 19.99% of Genex - and Commsec are wrong - they haven't sold any.
Genex currently have one othere substantial shareholder listed on their share registry and that "Sub" is Japanese company J-Power, who have an agreement in place with Genex Power for the joint development of the Kidston Stage-3 Wind Project (“K3W”). J-Power (a.k.a. Electric Power Development Co. Ltd) own 7.72% of GNX.
Latest News (re-community concerns about pumped hydro projects) - Queensland Borumba hydro energy project sparks protests from Widgee residents (afr.com) [Article dated 24 Feb 2023]
[Somebody's been buying his shirts from Lilicloth.com].
That article does mention Genex's Kidston Pumped Hydro project but only in relation to the tunnel boring issues. The protests appear to be related to other projects where transmission lines are planned to be put through private farmland.
In a totally unrelated story, one of the co-owners of the Callide C coal-fired power station in Central Queensland has gone into voluntary administration: Intergen voluntary administration: Callide C power station co-owner goes under (afr.com) [24 March 2023, this past week]
This is only relevant to Genex in that it just puts further upward pressure on wholesale electricity prices in Queensland (Power prices rise after return of Queensland’s Callide C power station delayed again (afr.com)).
This one from early December 2022 is interesting (just before Skip pulled the pin and walked away from talks with Genex about acquiring the company): Genex founder Simon Kidston launches carbon development business called Permagen to generate ‘premium’ carbon credits (afr.com)
Anyway, I'm getting off track here. Point is, Genex has assets, both producing assets (two solar farms) and developing assets (pumped hydro, battery, wind and solar) and they're going to be worth substantially more in the future as those assets move from the construction and commissioning phases into producing or storing clean renewable energy. Most of their listed competitors have been bought out already (by overseas multinationals or by a consortium comprising a large super fund and some division of Macquarie Bank - or similar). Genex will get taken over as well, but I would really prefer that to happen later when they're worth more.
This share price drop is not a problem as it's still early days for Genex. I expect them to be hitting their straps in 2 to 5 years. Good bottom drawer stock I reckon. If there is such a thing any more...
09-Dec-2023: Update: This one has been marked as stale. No change. The investment thesis remains intact. They have announced an additional offtake agreemment only yesterday for 50% of the energy generated from their third phase at their Kidston Clean Energy Hub for the first 15 years, being their planned wind farm (K3W), having already locked in an agreement for 30% for 10 years (see here), so 80% of output from K3W is now contracted for at least 10 years (and 50% for an additional 5 years) - see here: Genex-secures-long-term-offtake-with-Stanwell-for-258MW-K3W.PDF
I posted a straw on that yesterday - see here: Genex Offtake Agreement - if you click that link you may have to scroll back through this "valuation" to get to the straw - coz that's how this site works at the moment.
So, in summary, all on track. No changes to my price target. Still holding.
13-Apr-2024: Update: Genex-enters-into-binding-TID-with-J-Power.PDF [12-Apr-2024]
That's game, set and match then.
Genex's second largest shareholders, J-POWER, whose subsidiary companies include JPGA Partners Pty Ltd, Electric Power Development Co. Ltd, and JP Generation Australia Pty Ltd, have signed a binding Transaction Implementation Deed (TID) to acquire all of the shares in Genex Power (GNX.asx).
This is fully supported by the Genex Board obviously and in the absence of a superior offer this is now going through, although the Genex shareholder meeting to vote on the scheme isn't expected to occur before July according to the indicative timetable in this announcement.
Importantly, this is a dual structure offer that is going to deliver J-POWER, a Japanese company focused on renewable energy generation and storage who already had joint ventures (JVs) with Genex and a 7.72% holding in GNX before they lobbed in a lower offer recently (rejected by the GNX Board) followed by this higher offer (which the Genex Board has approved and is recommending to shareholders) to acquire all of Genex, either full ownership of Genex via a scheme approved by the requisite majority of Genex shareholders priced at 27.5 cps, or else majority control of Genex via an off-market takeover priced slightly lower at 27 cps if the scheme is voted down at the shareholder meeting.
The dual structure is designed to encourage all shareholders, including Skip Capital, Genex's largest shareholder (with 19.99% of GNX) to accept the higher offer by voting the scheme up at the July shareholder meeting, because if the scheme fails (is voted down at that meeting) then the majority of shareholders will clearly sell into the off-market takeover offer at the slightly lower 27 cps.
For some context, GNX was trading as low as 12.5 cps in August (and hit an intra-day low of 12 cps), and they were trading at around 16 cps before this offer was announced, so it's a decent premium and the first offer that the Genex Board has actually accepted - they had previously rejected at least 3 other offers, one lower offer from J-POWER, and at least two different offers from Skip Capital and a consortium that included Skip Capital and others.
The off-market takeover offer at the slightly lower 27 cps being in place if the full takeover at 27.5 cps via a scheme of arrangement (that is subject to a shareholder vote) fails, serves two purposes.
- It ensures that J-POWER are not wasting their time - they are going to gain control one way or the other. They can pay a slightly higher price for a clean 100% takeover or pay slightly less for majority control, and;
- Knowing that the off-market takeover offer is there and will be triggered immediately if the scheme is voted down means that there is a clear financial incentive for people to vote the scheme up, because if the scheme fails then existing GNX shareholders will either (a) have to sell at the slightly lower price (27 cps instead of 27.5 cps) into the off-market takeover, or (b) retain shares in a company that will be majority controlled and run by a Japanese firm, in which case the opportunity to either sell at a higher price to someone else later or to launch their own takeover offer later is removed due to J-POWER's control. Minority shareholders may then be able to sell their shares on-market, but I would anticipate very little demand for GNX shares by anybody other than J-POWER once J-POWER own the majority of GNX, so the offers are likely to be lower than 27 cps.
This of course assumes that J-POWER would gain majority control in the event that the scheme is voted down and the off-market takeover is triggered, which assumes that the majority of existing shareholders are prepared to sell their shares to J-POWER at 27 cps, and I think that is a slam-dunk assumption because we've been through the Skip takeover attempts, which obviously failed, we've noted that Skip retained 19.99% of GNX which ordinarily would be a disincentive for anyone else to have a crack at taking over Genex, and we've seen that Skip have not been inclined to make any further offers since their negotiations with Genex broke down in late December 2022, we've seen the Genex share price halve since then, and stay well below the levels of Skip's previous offers - which were 23 cps and then 25 cps - see here: Scott Farquhar’s Skip walks away from joint bid with Stonepeak for Genex (afr.com) [28-Dec-2022]
For further context, Genex was trading at 13.5 cps before the Skip bids were launched in 2022, so to see those fail and the GNX SP retrace back down to 12.5 cps has been... somewhat disappointing.
My own thoughts have been that Genex is a renewable energy generation and storage company that is developing renewable energy infrastructure that will produce income for decades and be worth substantially more when those assets are completed and in operation than what they costs to build, so if these takeover deals fall through, it doesn't change the investment thesis, it just means we remain on track to reap those rewards (TSRs) in future years - it just requires patience.
What this takeover means is that the gain is both brought forward from then to now, and also capped at a maximum of 27.5 cps, whereas if Genex was allowed to run for a few years the SP could get a fair bit above that level.
However the reality is that these sort of companies are NOT left alone to run their course - they are ALL taken out by larger players, it's just a matter of when and at what price. In GNX's case, the answers are later this year and most likely at 27.5 cps, otherwise at 27 cps.
There has been a little sceptisism that this deal would become binding despite the Genex Board being behind it this time, and so the GNX SP has been hovering around 24.5 to 25.5 cps over recent weeks. The exclusivity period that GNX had granted to J-POWER - to enable them to put together and present a binding agreement that the GNX Board was prepared to sign off on - was extended twice while J-POWER got all of their internal approvals ticked off and negotiated all of the finer details with Genex, but the deal is done now, as of Friday (12-April-2024) - it is now a binding agreement, so the GNX SP rose +6% (or +1.5 cps) yesterday (Friday) to 26.5 cps and the lowest offers in place in the market (which is now closed) are now priced at 27 cps (i.e. on the sell side), as expected.
This is an all-cash offer from J-POWER which is NOT subject to finance; it will be funded from their existing cash and debt facilities. The only hurdles left to jump over are FIRB approval and the GNX shareholder meeting in July to approve the scheme - and that meeting is really to vote on whether all of Genex gets sold to J-POWER at 27.5 cps or alternatively the majority of Genex gets sold to J-POWER at 27 cps.
Obviously Skip Capital with their 19.99% of GNX hold the keys to determine which way that goes.
In terms of the Australian Foreign Investment Review Board (FIRB), there shouldn't be any issues there, as so many of our infrastructure assets have been sold to overseas companies and pension funds so why would FIRB decide to draw a line in the sand with this one? - and if they did it would certainly be overturned on appeal.
This is not a consumer-facing company, so the ACCC have no interest in this, and J-POWER do not have enough Australian assets to create any sort of competition concerns anyway. So I do not see any hurdles at all now.
Some may remember that back in November 2013, the then Australian Federal Treasurer, Joe Hockey, blocked the US-based global grain group Archer Daniels Midland’s bid to take over Australia’s largest publicly traded agricultural company, GrainCorp because the takeover, “would not be in the national interest”. See here: Joe Hockey blocks foreign takeover of GrainCorp | Australian politics | The Guardian
I remember it well because the boss (CEO) of GrainCorp was Alison Watkins and she had clearly pimped up GrainCorp to be sold, and when that sale was blocked, she promptly quit GrainCorp and emerged as the new CEO of Coca-Cola Amatil, who I worked for at that time. What do you know, a few years after that, Coca-Cola Amatil (CCA) started "rationalising" their Australian bottling plants, and mine (Thebarton in SA) was one that got closed down (and I got another redundancy payout), then in May 2021, CCA was acquired by Coca-Cola European Partners for A$9.8 billion, forming the new largest Coca-Cola bottling firm outside of the USA.
If Alison Watkins turns up as CEO/MD of a business you work for, my crystal ball suggests there may be a redundancy payout in your future.
Anyway, nobody is going to block J-POWER's takover of Genex Power - they are just two small players in the global scheme of things and it doesn't shift things very much at all in terms of Australia's energy sector. This thing will go through with the vast majority of people, including most ASX market participants, being completely unaware that it occurred at all.
And there is no longer much in the way of arbitrage in the GNX SP. Unless you want to try to game half a cent or maybe a one cent/share capital gain on a few hundred thousand (or million) GNX shares bought at 26.5 cents. If you managed to buy 1m GNX @ 26 cps and sell them into the scheme at 27.5 cps that would be a $15K profit (before brokerage and other costs), but that would require $260K worth of capital for a +5.77% return, and if the scheme is voted down, that $15K becomes $10K and a +3.85% return (as the sell price would reduce from 27.5 to 27.0 cps).
I hold GNX shares in my largest real money portfolio as well as here. I have been selling down my position here in recent weeks, but in my real money portfolio I've left the position alone and we'll take the 27.5 cps.
J-Power’s 27.5c a share bid for Genex now binding (afr.com) [12-Apr-2024]
04-March-2024: Genex-receives-NBIO-from-J-POWER.PDF
GNX is up +32.4% (to 24.5 cps) at this point today, however they've been as high as 25.5 cps this morning, which was +37.8% above their 18.5 cps close yesterday. This non-binding, indicative and conditional proposal from Electric Power Development Co., Ltd. of Japan (J-POWER) to acquire all of the ordinary shares on issue in Genex that J-POWER and its associates do not already own (by way of a members’ scheme of arrangement) is priced at A$0.275 in cash per Genex Share, and also contains an alternative structure, under which J-POWER will potentially also, concurrently with the Potential Scheme, make an off-market takeover bid for all of the Genex Shares for A$0.270 in cash per Genex Share.
The Scheme Consideration of 27.5 cps cash per Genex Share represents a:
- 49% premium to the last closing price of Genex Shares on the ASX of $0.185 (as at 1 March 2024, being the last trading day on the ASX before the date of this announcement);
- 56% premium to the 1-month (to and including) 1 March 2024 volume weighted average price (VWAP) of Genex Shares of $0.176;
- 58% premium to the 3-month VWAP of Genex Shares of $0.174; and
- 65% premium to the 6-month VWAP of Genex Shares of $0.166.
The first 4 pages of today's announcement are reproduced below. For the full announcement, click on the link at the top of this straw.
The remainder of the announcement can be viewed here: Genex-receives-NBIO-from-J-POWER.PDF
Genex has rejected takeover proposals in prior years, from Skip Capital and also from a consortium that included Skip Capital and others, and Skip Capital still owns 19.99% of Genex today. Japanese company J-Power has plans to get around that supposed blocking stake by Skip (explained below).
Skip Capital was founded by and is run by Atlassian co-founder Scott Farquhar and his wife Kim Jackson (pictured below), and they recently teamed up with private equity giant KKR to acquire Queensland Airports - see here: KKR teams up with Skip Capital for Queensland Airports; vets EastLink (afr.com)
The IBC (independent Board committee, so the Genex Board minus J-POWER’s representative and nominee to the Genex Board, Kenichi Seshimo) intends to recommend the transaction to Genex Power (GNX) shareholders - see pages 3 and 4 of today's announcement - reproduced above.
In this AFR article published today: J-Power taps MacCap, Minters to Skip-proof Genex Power bid (afr.com), they say this:
Genex Power’s 7.72% shareholder J-Power and its bankers at Macquarie Capital have baked in two safeguards in their Monday morning bid to combat Skip Capital’s 19.99% stake.
While J-Power stopped short of naming Scott Farquhar’s Skip Capital as the reason, it’s clear that’s what its advisers were thinking of when they rebooted the dual-track bid structure seen at Azure Minerals late last year.
Skip EIF Enterprises Pty Ltd owns 19.99% of Genex and in 2022, lobbed a bid to buy it for 25¢ a share with Stonepeak Partners before walking away. Of note, it hasn’t yet committed its stake to supporting J-Power’s bid.
The second set of safeguards – no talk, no shop, no DD – is much more customary. But Genex’s ASX announcement called out Skip and related entities as parties with whom interaction is prohibited during the four-week exclusive due diligence.
To be clear, there’s no suggestion Skip or another interloper is about to hit back with a competing proposal, but J-Power is watching its back. It’s already a 50% partner in Genex’s Kidston Stage 3 Wind and Bulli Creek projects and provided it with a $35 million loan facility last year.
As for Skip, it would be interesting to see what it does with its 19.99% stake. Selling into J-Power’s bid should get some tongues wagging on the Atlassian co-founder’s ambitions to support energy transition.
“We have been a supportive shareholder of Genex, and we believe that long-term, private capital can help the company reach its full potential,” Kim Jackson said at the time.
Goldman Sachs is advising Genex.
-- ends ---
Source: https://www.afr.com/street-talk/j-power-taps-maccap-minters-to-skip-proof-genex-power-bid-20240304-p5f9jg
[by Sarah Thompson, Kanika Sood and Emma Rapaport, Mar 4, 2024 – 12.12pm]
Genex is building the Kidston Clean Energy Hub on the site of the old Kidston gold mine.
---
Further Reading: Why Scott Farquhar, Kim Jackson want to take Genex Power private (afr.com) [25-July-2022]
This is an interesting development today, and it's looking like a change of control transaction IS going to occur this time. I had expected Genex to get taken out at some point by a larger player, so this does not come as a surprise to me. I would have liked a higher price however, but a profit is still a profit.
12-Dec-2023: Comprehensive construction update on Genex's Kidston Pumped Storage Hydro (K2H) Project – K2H---Construction-Update.PDF - with photos - for those who are insterested. On track for energisation in 2H CY2024. [I hold GNX]
08-Dec-2023: Genex-secures-long-term-offtake-with-Stanwell-for-258MW-K3W.PDF
Genex Power (which I hold) has announced today that they've signed a 15-year power purchase agreement with Stanwell Corporation for the 258MW Kidston Stage 3 Wind Project (K3W) to be built at Kidston alongside the Kidston Stage 2 pumped-Hydro project currently under construction (K2H). Stage 1, the Kidston Solar Project (K1S) was the first phase in the development of the Kidston Renewable Energy Hub, providing approximately 145,000 megawatt hours of renewable electricity each year to the nine million Australian residents connected to the National Electricity Market (NEM). See image below.
The offtake agreement announced today for K3W covers 50% of the project generation capacity at a fixed price over the 15-year term and underpins the K3W project financing structure and confirms K3W as the next stage of the Kidston Clean Energy Hub.
K1S
The K2H upper and lower reservoirs in the foreground (at Kidston) with K1S (solar farm) behind it.
See also: Genex lands 10-year supply contract for huge Kidston wind project | RenewEconomy [20-Oct-2023]
Excerpt from that October announcement:
Listed renewable and storage developer Genex Power has landed a 10-year power purchase deal with utility giant EnergyAustralia for its proposed 258MW wind project in a major boost for its Kidston green energy hub in Queensland.
The deal means that the Kidston project will combine an existing solar farm (50MW), the 250 MW, eight hour pumped hydro storage now being built at Kidston’s disused open pit coal mine, and a new wind project. An expanded solar facility may still follow.
The deal between Genex and EnergyAustralia will account for around 30 per cent of the proposed output from Kidston Wind, which is jointly owned by Genex and its Japanese partner J-Power.
It continues a successful string of deals for Genex, which recently signed up aspiring green hydrogen producer Fortescue as the foundation customer for the first 450 MW solar stage of the huge 2GW Bulli Creek project in southern Queensland.
EnergyAustralia also has the operating rights for the Kidston pumped hydro project and will pay a fixed price for the output of the Kidston wind component, which will form part of its “firmed” renewables supply for customers.
EnergyAustralia CEO Mark Collette says the deal will bring the company closer to its goal of having up to 3GW of renewable energy capacity in operation by 2030. It is due to close its Yallourn brown coal power generator in Victoria in 2027.
"Both Kidston Wind and the Kidston Pumped Storage Hydro Project are important steps in delivering EnergyAustralia’s purpose to lead and accelerate the clean energy transformation for all,” Collette said in a statement.
Genex, meanwhile, is looking for more customers for the Kidston wind project and hopes to reach financial close in late 2024, with generation to begin in 2026. [Bear77 note: Today's announcement - see above - secures an additional 50% offtake, so they now have offtake agreements for 80% of K3W.]
CEO Craig Francis said the deal with EnergyAustralia is a significant milestone for the clean energy hub at Kidston, and a “material step” in mitigating project risk.
Francis told RenewEconomy that the wind project, to be located on pastoral leases less than 20kms from the Kidston mine, would help fill in new capacity from the new transmission link being built at the site.
He said the report into the recent fire in a Tesla Megapack module at the new Bouldercombe battery near Rockhampton is still being finalised, but the company is still hopeful to complete commissioning by the end of the month.
Giles Parkinson is founder and editor of Renew Economy, and is also the founder of One Step Off The Grid and founder/editor of the EV-focused The Driven. Giles has been a journalist for 40 years and is a former business and deputy editor of the Australian Financial Review.
---
Disc: I hold GNX shares both here and in my largest real money portfolio.
30-June-2023: Funding-Package-and-JDA-Agreed-with-J-POWER.PDF
Positive. It is a good move to replenish the contingency for the 250MW/2,000MWh Kidston Pumped Storage Hydro Project (K2-Hydro), which was depleted after the tunnel flooding ("water ingress event") that Genex reported back in November. These funds will also be used to progress the development of the multi-stage up-to-2GW Bulli Creek Solar and Battery Project (BCP) and for general working capital.
The source of this latest funding package, J-Power, a leading Japanese renewable energy infrastructure development company, already own 7.72% of Genex (GNX), making them Genex's second largest shareholder, after Skip EIF Enterprises Pty Ltd, which is part of Skip Capital, the private investment fund (that specialises in technology and infrastructure) that was founded by (and is run by) Kim Jackson and her husband Scott Farquhar, the co-founder and co-CEO of Atlassian (NASDAQ-listed Australian success story). They are billionaires (see here: Scott Farquhar (forbes.com)) and are both passionate about clean energy generation, having already tried to buy all of Genex at 23 cps (cents per share) in July last year (2022) before upping their offer to 25 cps in August, and then walking away without a deal. The Genex SP (share price) has since been down to 11 cps intra-day (on Dec. 28th) and closed as low as 13 cps. However Skip still retain their 19.99% position in Genex, and are still Genex's largest shareholders.
The market seemed unconcerned and unimpressed by today's funding and JDA agreement announcement from Genex, as their SP closed flat, at 15 cps, same as yesterday and Wednesday.
See the full announcement (link at the top of this straw) for full details of the new funding from, and the JDA (Joint Development Agreement) with, J-Power.
While they certainly have a number of other renewable energy generation and storage assets/projects in various stages of development - as well as two operating solar farms that are generating income already - a great deal of Genex's future succcess depends on the timely completion and energisation of K2-Hydro on schedule next year (CY 2024). Replenishing the depleted contingency funds for K2-Hydro is a smart move.
Genex CEO James Harding said in today's announcement:
“Today’s structured funding package totalling $44.5 million demonstrates the deepening of an already strong relationship between Genex and J-POWER.
“While the costs of the water ingress event at the Kidston Pumped Storage Hydro Project last year have been fully funded, we consider it prudent that additional funding is secured against any further unforeseen events during the balance of the construction program. The Loan Facility with J-POWER gives us significant buffer to complete the construction of the project and provides a non-dilutionary, cost-efficient means of securing this funding.
“In addition to the Loan Facility, the Joint Development Agreement for the Bulli Creek Project will allow us to fast-track development activities at this exciting project, which represents the next phase in the Company’s growth. Given the scale at Bulli Creek, we are pleased to welcome J-POWER as our co-development partner which will not only provide important development funding, but also de-risk the equity financing of each stage of the project through bringing significant power sector capability and balance sheet strength to the partnership.
“This funding will be instrumental in fuelling the growth of our renewable energy portfolio in Australia. On behalf of Genex, I would like to thank J-POWER for their continued support of the Company and its strategy. This collaboration reaffirms our commitment to expanding the reach of sustainable energy generation and storage assets, and together we will continue to focus on leading Australia’s transition to a clean energy future.”
Disclosure: I hold Genex (GNX) shares both here and IRL. I'm happy with this announcement.
Further Reading/Viewing:
[Click on images below to read more]
01-May-2023: As I explained in my recent #March '23 Qtr Results/Progress Straw for Genex (GNX) (that link takes you to my report on Genex, not that Straw, even though it should take you to the straw, but scroll down for a while and you'll find the straw eventually), there seemed to be a discrepancy between slide 2 of Genex's recent March 2023 Quarter Presentation (which was also used in their webinar last week) which stated that Skip Enterprises still holds 19.99% (circa 20%) of Genex...
...and the list of substantial holder movements on Commsec which says the Skip ceased to be a "Sub" of Genex on 23-Dec-2022:
I emailed Genex on Sunday to query that, and I received a reply back this afternoon (Monday arvo) from Craig Francis, Genex's CFO (Chief Financial Officer), who explained that Skip do indeed still own 19.99% of Genex Power.
This is the timeline:
28-Feb-2022: Skip Enterprises lodged a "Notice of initial substantial holder" (Form 603) to say that they now owned 11.22% of Genex - see here: Becoming-a-substantial-holder-Skip-28Feb2022.PDF
25-July-2022: Skip Enterprises and Stonepeak Partners, as a consortium, lodged a "Notice of initial substantial holder" (Form 603) that said that Skip had increased their stake to 19.99% and that Stonepeak had an agreement with Skip (which was to takeover Genex at 23c/share, an offer they had just put to Genex - which Genex sunsequently refused to put to their shareholders due to the Genex Board considering the offer was too low and did not adequately value the company and its assets) and the Form 603 was in this case lodged by "The Consortium" (comprising Skip and Stonepeak). See here: Becoming-a-substantial-holder.PDF
23-December-2022: After withdrawing their offer, which they had by then raised to 25c/share, "The Consortium" lodged a Ceasing-to-be-a-substantial-holder---Stonepeak.PDF (Form 605) which stated that, "pursuant to the termination of the Co-operation and Process Agreement dated 21 July 2022", Stonepeak were no longer substantial shareholders of Genex.
Commsec mistakenly listed this as "Skip" instead of Stonepeak because Skip were mentioned in there, however Craig Francis (Genex's CFO) explained in his email to me today that Stonepeak had lodged the "Becoming..." notice (Form 603) on the 25th July because they had signed an agreement with Skip which effectively tied them to Skip's 19.99%, but that when that agreement was terminated in late December, Stonepeak were no longer tied to Skip's 19.99% so they lodged a "Ceasing..." notice (Form 605).
At no point did Skip sell down any of their 19.99%, it's just that Stonepeak no longer had an interest in that 19.99% so they lodged the Form 605 and Commsec mistakenly attributed that notice to Skip.
I've written here at length about Skip Infrastructure (a.k.a. Skip Enterprises), which was founded by and is owned and run by Atlassian co-founder and tech billionaire Scott Farquhar and his wife Kim Jackson (but mostly run by Kim Jackson it seems), and it's pleasing that while they walked away from that 25c/share takeover offer (that the Genex Board didn't seem too keen on anyway), they have maintained their stake in Genex, i.e. Skip still own a bee's whisker less than 20% of Genex (19.99%) and slide 2 of Genex's recent presentation was 100% correct on the day it was presented (and likely still is).
Note: if you click that "here" link to go to the Genex forum where I've talked about Skip, you'll need to scroll down a bit, until you see a photo of Kim Jackson sitting sideways on an uncomfortable looking high-back lounge in an underlit room with a gold coloured wall to her right (well to the right on the photo, which would be to her left), but anyway you'll know it when you see it - that's the start of one of my longer posts about Skip Capital (a.k.a. Skip Infrastructure or Skip Enterprises or Skip IEF Enterprises Pty Ltd) - it's all the same fund, run by the same two people.
Anyway, just thought I better set the record straight, as I'm sure I've mentioned somewhere that Skip dumped their Genex shares when they withdrew their 25c/share offer, and it turns out I was wrong about that; they didn't sell any of them.
I do not think this means that another offer (from Skip) is necessarily forthcoming, although one might be, but it does mean that Skip weren't scared enough by anything they uncovered during their DD (due diligence as part of the takeover offer process last year) to prompt them to sell out or even reduce their exposure to Genex. They still hold the same stake that they held then. A twist on that is that it's also a "blocking stake" in that nobody ELSE can takeover Genex unless Skip agrees to sell their Genex shares. But on balance I think it's positive.
Further Reading:
'It's the silent minority': Australia's $135 billion female entrepreneur gap (theage.com.au)
30-April-2023: Catching up on a few quarterly reports and other announcements during the past two weeks, and the report from Genex is a good one I reckon.
GNX-Quarterly-ActivitiesAppendix-4C-Cash-Flow-Report.PDF
They released that back on the 20th April, and on the 27th (Thursday), they released this:
GNX-Q3-FY23-Investor-Presentation.PDF
And here's the video of the Results Webinar:
Genex Q3 FY23 Investor Presentation - YouTube
Slide 8 was the most interesting from my point of view, as they are giving details of expected cashflows over the next 32 years (through to 2055) based on their current portfolio of assets:
That's an average annual revenue of $95.6m, 83% of which is already contracted for the next 30 years, and an EBITDA margin of over 73%.
And it's all green/renewable energy production and storage assets that are producing this revenue.
There is plenty more in there, including the Q&A at the end, but this slide is a stand-out for me, in terms of quantifying the future value of the company vs. the current low share price.
Another thing that did peak my interest me was slide 1 which lists Skip Enterprises (which I assume is part of Skip Capital) as owning 20% of the company.
You might remember that Skip Capital (owned by Atlassian co-founder and tech billionaire Scott Farquhar and his wife Kim Jackson, and run by Kim Jackson) partnered with Stonepeak to bid 23c/share for Genex last year, a bid they then raised to 25c before walking away, and Commsec listed Skip as ceasing to be substantial holders of Genex on December 23rd, as shown below.
The "Substantial Shareholders List" in the bottom left corner there is taken from their FY22 Annual Report, however the subsequent trades are listed above that, and the last of those shows Skip selling 276,896,318 Genex shares and going from 19.99% to "--" and "--" can mean anything from 0% to 4.99%. 5% is the minimum threshold for substantial shareholders and anything below 5% is not required to be reported, unless you're a company director of that company (on their Board).
I'll flick them an email tomorrow and ask for some clarification on that.
Anyway, other than the shareholders piechart on slide 1, which may or may not be out-of-date, it's a good presentation I reckon.
They have just strung 4 quarters together of being cashflow positive too, so they're certainly moving in the right direction now that the tunnel boring issues at K2H (Kidston Pumped Hydro) have been fully resolved and the construction is fully back on track and the minor issues at their two operating solar farms have also been fully resolved.
Disclosure: I hold Genex shares both here and IRL.
Flagging that "after four months of due diligence" Stonepeak and Skip Capital have walked away from their indicative takeover at $0.23/share then $0.25/share and it also appears that Stonepeak have ceased to be substantial holders but it is not clear to me if that interest affects Skip.
Looks like the financials may have been a bit of a mess or not have a clear trajectory at this point in time. There were rumours that another bid would come from elsewhere so will be interesting to see what happens after the dust settles from this. I will be surprised if the sharks don't come back if/when the SP hits 10c again. Time will tell.
DISC. No longer held.
27-July-2022. OK, firstly a shout-out to @TEPCapital for his straw on this takeover offer for Genex Power (GNX) at 23cps (cents per share). You can read that straw here.
I returned from our road trip last night, so have been mostly "offline" for the past 5 days. I hold GNX shares, and I believe the Genex Board will announce shortly that they believe this offer significantly undervalues the company and it's future prospects and they will recommend shareholders take no action in relation to the offer.
I'm in the green at 23cps, and could simply take that money and rotate it into another investment, but I do think they're worth more than that. I note that Genex informed the market of this offer on Monday morning, then released this Q4 FY 22 Investor Presentation Update on Tuesday which clearly highlights their potential. I think that helps explain why they're about to say the offer is too low, despite being a good deal higher than where Genex have been trading lately.
As @TEPCapital said in his straw, "Over the past decade, the 10+ listed ASX renewables plays have gradually been de-listed over time due to takeover offers and M&A, so this has been an ongoing theme. Today, there are really only 2 pure-play ASX renewables companies left and Genex is the absolute standout."
Agree 100%.
In Monday's Receipt of Non-Binding Indicative Proposal announcement, Genex said about the members of the bidding consortium, "SEIF, part of Skip Capital, is a long-term, Australian investor in future-aware infrastructure and now holds 19.99% of the Genex Shares. Stonepeak is a global alternative investment firm specialising in infrastructure and real assets with an extensive portfolio of energy and renewables assets and a dedicated renewables investment fund."
It's worth noting that SEIF owned virtually 20% of GNX before the offer, and can go over 20% now that they've launched their offer. That could certainly frustrate any other potential bidder, so might reduce the chance of someone else coming over the top with a higher bid, although based on the M&A history in the sector (both on the ASX and the NSX), I think there could easily still be a bidding war now that Genex is "in play".
"The Indicative Proposal is expressed to be subject to a number of conditions, including, but not limited to the satisfactory completion of the Consortium’s due diligence, the receipt of all necessary internal approvals, the unanimous recommendation of the Genex Board, and the execution of binding transaction documents to give effect to the Potential Transaction. The Indicative Proposal also states that implementation of the Potential Transaction will be subject to the approval of the Foreign Investment Review Board (FIRB)."
So this is far from a done deal and could easily fall over, particularly if the Genex Board do what I expect them to do and recommend that shareholders ignore this offer.
I am not selling. IMHO, 23cps for Genex is too low.
On the other hand, MACA (MLD), another company I hold received a takeover offer priced at $1.025/share (announced yesterday) from Thiess, who have already done their DD, and the offer is fully supported by the MACA board who are unanimously recommending that MACA shareholders accept the offer. MACA is trading at between 99cps and $1/share today, which is probably too low when this deal has very little chance of falling over. There are very few conditions that need to be satisfied and all the hard work (including getting the MACA Board onside) is already done.
However, like with the Genex takeover offer, any dividend declared by the company will reduce the amount of the takeover offer by the same amount. Genex won't be declaring any dividends, but I think MACA (MLD) will, and I think it's likely to be at least 2.5c once again, as they have been paying every 6 months for a few years now. If MACA declare a 2.5cps FF (fully franked) div in August, Thiess will reduce their offer price from $1.025 to $1.00, however the dividend would come with around 1c worth of franking credits, so that would mean that for those people who can make full use of those franking credits (and not everyone can I know) the amount received would be in the order of $1.035. I'm happy to sell my MACA shares at pretty much any price over $1/share, particularly when their latest MD and CEO (Mike Sutton, who was ex-Downer Mining) finished up 5 days ago (on 22nd July) and a new guy (an internal appointment) has just taken over. MACA's metrics have mostly gone backwards over recent years, so they are certainly not one of the best mining services companies out there at this point. And I'm happy to let them go at $1.01 to $1.035, but I'll likely wait for their results and their dividend to be declared before making a decision because I think the chance of that particular takeover deal falling over is pretty slim. There is also far less of a chance of a higher offer coming through than there is with Genex. There is a chance, but I wouldn't rate it as a big chance by any means.
Genex on the other hand has assets that PE (Private Equity), super funds, and other funds would like to get their hands on, and the options in the stock-exchange-listed renewable energy generation and storage space (in the Australian region) are reducing, so there will likely be further interest IMO.
No need to take any action at this point I reckon.
I need to go on holidays more often!
16-July-2021: Noosa Mining Conference Presentation
plus: Links to Reports on GNX by Intelligent Investor, Euroz, Canaccord Genuity, Ord Minnett and Morgans
Disclosure: I hold Genex Power (GNX) shares.
Edit: Link to broker reports fixed.
Executive Directors can have any number of reasons to sell but that's a lot of shares. Options are well out of the money too. It would help explain recent share price weakness.
Not held - but am tempted, there's not many companies that have provided the market with a revenue forecast until 2055.
22-Dec-2020: Kidston Hydro Project - Genex Final Investment Decision (FID)
23-Dec-2020: Commencement of Early Works Program at Kidston Hydro Project
No movement yesterday (22-Dec), but GNX rose +12.82% today (23-Dec) on the back of this (from 19.5cps to 22cps, i.e. +2.5 cents). They briefly traded as high as 28cps in early August before raising capital at 22cps. I am not a GNX shareholder, but they're on my watchlist. I currently have similar exposure (to renewable/sustainable energy production such as hydro and wind power) through IFT - Infratil.
29-Oct-2021: Update: I bought a GNX position in April (2021) - in two tranches - @ 20.25 cps and 21 cps. They've traded above that level ever since then, up until today when they dropped -6.82% (or -1.5 cps) to close at 20.5 cps ($0.205). I don't have a problem with that. I view Genex as a long term holding. They are only early stage now, just getting started really, and as long as they execute well, as they have done so far, they should be worth multiples of their current SP in the years to come. It will take some time however.
I still hold IFT (as mentioned above), and they're doing OK also. Making all the right moves. IFT are a lot bigger and have been going a lot longer too, so they have an enviable track record. GNX are well under the radar, and busy establishing their own track record, from scratch. Very different companies at very different stages but both have plenty of upside IMHO.
Image: Kidston Pumped Storage Hydro Project site, with the Kidston Stage 1 Solar Farm in the background, also owned by Genex.
[I hold GNX shares. I am excited about Pumped Hydro - or Pumped-storage hydroelectricity (PSH) - which is not a new technology but is underutilised in my opinion as an energy storage solution, especially in Australia. It is perfect for storing wind and solar energy to enable that energy to be released when there is no wind or sun - in times of peak demand. The main downside is that you need the right location or else it becomes very costly to construct. Genex have the perfect location, being old gold mining pits in FNQ (far-north-Queensland) that have filled up with water and are on two different levels, which is a requirement for pumped hydro, as it relies on gravity when water is flowing from the upper reservoir to the lower reservoir via a turbine that generates electricity. And they now have everything in place, including the financing, and have commenced construction of K2-Hydro which they own 100%. Further Reading: (from mid-March, 2017, about Pumped Hydro, not about Genex): https://www.climatecouncil.org.au/turnbull-s-pumped-but-should-we-be-what-s-the-deal-with-pumped-hydro-energy-storage]
20-May-2021: Broker Briefing Webinar & Updated Corporate Presentation
Also: [this morning] GNX Achieves Financial Close for Kidston Hydro
[I hold GNX shares.]
