Annual Report details1. As of March 2011, all major civil engineering activities for SJT1 are complete, including installation of the turbine, generator, condenser, cooling tower, hotwell pumps and main transformer. What's left to do? Drilling of 2 injection wells and expansion of the 138kV switchyard. Budget of $33 million for remaining work. $12.6 million remains from the original $77 million SJT1 project loan, the balance of $20.4 million to be funded by the Sprott $50 million credit facility.
*
SJT1 is fully funded, most of the work is done, and there is no reason it shouldn't come online next quarter. The revenue from this 36MW expansion alone, which will produce revenues of $28 million per year, and $20 million in EBITDA, when it comes online will be worth Ram's current market cap of $180 million. 10X projected EBITA of $20 million = $200 million. 10X EBITDA is a reasonable measure for rapidly growing businesses.
*
2. SJT2's Fuji turbine/generator is fabricated and ready to ship (no danger of procurement delays due to Japanese earthquake). Some major civil engineering work complete, including building of foundations for turbine/generator/powerhouse and transmission lines. There is $142 million budgeted for the remaining work. Ram hasn't touched a dollar of the $160 SJT2 project loan.
*
Despite delays and drilling issues, SJT2 is fully funded. The production wells will be certified this quarter, the SJT2 project loans will be released, and construction by TIC, newly hired, will begin in earnest very soon (possibly by May when the first $70 to $98 million is released). Does that give them enough time to COD by, say, May 2012? I think it's very possible, considering the work already completed.
*
Will there be need for additional bridge funding? If the 12-1 and 9-3 wells certify in May as expected, then absolutely not. Ram will either have a $70 or $98 million influx by the end of next month, or it's going to have to go get more money from Sprott and Rick Rule. They will not be able to complete the $43 million SJT2 drilling program (injection wells still have to be drilled) without the crucial May certifications and loan releases.
*
3. Interesting note about the Geysers revised PPA. The contract rate for selling electricity has RISEN to an unknown rate (was originally $98 per MWhr in 2008 deal, now market rate of $103 perhaps?). If it's $103 then the economics of this project just improved:
*
26 MW x 8500 hours x $103 per MWhr = $22.7 million in annual revenue. Terrific numbers for a smaller project.
*
4. Conclusion: operations on the ground at SJT 1have turned around. There will be either very good news next month (wells certified, loans released, stock price back to $2) or very bad news (wells not certified, additional emergency financing required, stock price goes under $1). I'm betting on the former, but, either way, the news is coming soon.