RE: Thoughts
We shouldn't have gone into the Private Placement with the Asian Strategic Partner, but now that its done, we must seek ways to have more adequate funds, so as to operate successfully and halt further dilution. We most have considerable cash to develop our various properties to attract investors. Especially in this these markets.
What I didn't make clear in the “Thoughts” post, was that funds from such a loan can be negotiated to have interest only payments until the first 150MW Unit comes on line during 2016 and then continue with both Principal &Interest on the $220 million over the next 7 years and to apply only when PCY gets a 40% Participating Interest in the Power Plant. If a 20% Carried Interest occurred funds could be for roughly $75 million. In either case such loans would stop further share dilution and give PCY along with its exceelent holdings an appearance of strength.
With a 20% carried interest occurred, PCY's part of Power Plant CAPEX would essentially be zero and without future conditions, If a 40% Participating Interest occurs, the conditions would be, if PCY were in arrears 7 years after the first unit came on line (which would be 10 years from the 2013, $220 milllion loan), the lender would obtain an interest in PCY as negotiated upon at the loan signing.
PCY's part of the Power Plant Power Plant CAPEX would be paid thru the Power Production assumed by all the Participating Power Plant owners, while the $220 million loan could be paid from a number of the items described below and which we are familiar with.
One must consider that during a 10 year period lots of positive things can also occur.
Most important is that PCY's earning potential would be 40% of Chandgana Power Plants earnings
During its first three years power production would increase from (150MW. to 300MW to 450MW) and average 300MW annually, then over the next 4 years power production would be 600 MW annually, giving a seven year annual average of .~470MW which a 40% Participating Interest should help pay the $220 million loan. Also, Ulaan Ovoo could well been in production for most of those years and Chandgana's other deposits could possibly be shipping naturally air dried coals with higher kcal ratings to other Power Plants in Mongolia. Removing half to three quarters of the water content from a tonne of the Changana area coals would lower shipping costs. In addition there would be a profit from 80% of the coal sales supplying the Chandgana Power Plant Then there is the possibility of PCY's interest in Wellgreen being sold or prepared for years of production.
When considering the potential of the positive developments as outlined in the above paragraph taking on a loan at a fair rate of interest should be advantageous to PCY's long term development.