Leigh Creek Energy's (AX:LCK) pre-commercial demonstration (PCD) continues to show progress, with funding now in place from China New Energy (CNE) and major construction contracts awarded and fabrication underway. The third and final tranche of funding of A$12.5m is due to settle after a shareholder vote later this quarter while regulatory approvals remain on the critical path in order for LCK to meet a late 2017 first gas target. Our RENAV remains at $0.26/share post equity dilution. We continue to risk our valuation with a subjective 20% chance of commercial success – we expect to revise this risking on completion of the demonstration project.
Securing South Australian power supplies
A state-wide power blackout in September 2016 led Jay Weatherill’s government to take unprecedented steps to secure South Australia (SA) energy supplies. Short-term measures have dominated recent newsflow, with Tesla (NASDAQ:TSLA) tasked to build the world’s largest capacity and output lithium-ion battery within state, and APR Energy contracted to supply 200MW of mobile dual fuel generator supply. While the bulk of this new gas-powered capacity is expected to be used to reduce instability rather than act as baseload, concerns are being raised about the state’s ability to source gas to power this generation fleet given forecast gas shortages.
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