Green House Capital and Argentina Update
25/07/2022 07:00
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RNS Number : 5272T President Energy PLC 25 July 2022
25 July 2022
PRESIDENT ENERGY PLC
("President" or the "Company")
GREEN HOUSE CAPITAL MOVES INTO LITHIUM
GROUP STRATEGY EVOLUTION
President Energy (AIM: PPC), the international energy company provides an
update on the first steps made by its new Green House Capital subsidiary
("Green House or GH") and an update on Argentina and Group.
GREEN HOUSE CAPITAL
On 28 June 2022, President announced that as part of its stated objective of
demonstrable diversification of the Company's interests and migration to
businesses to which investors will ascribe higher value, it has become a 75%
beneficial shareholder in Green House, a company intended to be an incubator
for/investor in alternative energy.
Business Model
The business of GH will be to source, seed finance and incubate early-stage
opportunities in the green and/or alternative energy sub-sector. GH is
intended to hold its interest in each business within a separate special
purpose legal entity ("SPV") domiciled in an appropriate jurisdiction for
business efficacy.
Whilst it is intended that GH will initially be seeded by President in each of
its businesses, subsequent material funding will be determined by the specific
needs and characteristics of the relevant business. GH will consider in each
SPV the various monetization possibilities of the equivalent of farm out,
joint venturing, venture capital / private equity funding or IPO. This will
provide flexibility to GH to both mobilise and/or release capital in due
course. The structure will also facilitate the ability of the Group to divest
itself of any appropriate component parts to the benefit of President
shareholders.
In identifying opportunities, as stated on 28 June, GH will capitalize on
contacts and experience of its and President's shareholder and stakeholder
base.
Lithium identified as first project
The importance of lithium to the global commitment to Net Zero is well known.
The Lithium Triangle, a resource rich region of the Andes around the borders
of Chile, Bolivia and Argentina is considered to hold over 50% of the World's
commercial lithium reserves. In Argentina, one of the largest lithium
producers in the world, the resource is mostly found in the Province of Salta
- the region in which President has the Puesto Guardian Concession from which
it produces oil.
President has now entered into a Memorandum of Understanding with the
Argentina State owned company responsible for managing the energy and mining
resources of the Salta Province, Recursos Energéticos y Mineros de Salta S.A
("REMSA").
REMSA has certain properties that may have potential for lithium mining and
extraction. REMSA and the Company have agreed to set up a joint committee for
selecting areas of a minimum size of 1,000 hectares for prospecting and
initial topical exploration to determine next steps.
Whilst the Memorandum does not guarantee that President would be able to
acquire any prospective areas that REMSA and it identifies, there is a written
understanding that President would have, under a private initiative process,
both first offer and last offer rights to any areas that the Company wishes
after making such initial exploration and marks a first significant step in
the start of cooperation with REMSA in a Province in which President is
already a major investor and where it has established business and management
structure.
President is confident that the lithium market and global demand for the metal
has long term attractive prospects with the Salta Province having significant
interest from international companies including the recently announced
investment of US$825 million by Rio Tinto in December 2021 and US$962 million
by the Chinese lithium giant Ganfeng earlier this month.
Lithium, like President's oil and gas businesses, is a dollar-based business.
As such they are shielded to a material extent by the high inflation currently
being experienced in Argentina, as is further reinforced by the interest of
many international companies in both hydrocarbon and mineral production in
Argentina.
PRESIDENT'S EVOLUTION
It is important to view this announcement in the context that President has a
solid core business and robust trading position, as referred to in the
announcement dated 28 June 2022 providing shareholders with details of the
2021 Annual Results together with a 2022 trading update and outlook.
The strategic transition is intended to re-energise President with the Group
evolving into new horizons whilst at the same time benefitting from its
profitable core business which delivered profits after tax of nearly US$5
million in 2021, free cash generation of some US$13 million with turnover
projected for 2022 at over US$40 million and significant current operating
profits, material exploration opportunities as well as the 28% investment
interest in ATOME.
The intention going forward is that each division of President will evolve to
have its own separate management under the Group main board. As part of the
Group refreshing and re-imagining itself whilst making use of its current
asset base, the following steps are intended:
1. Peter Levine, the major shareholder and funder of the Company, has
indicated to the Board that on or before the end of Q1 2023 he will step back
from his current broader role in the Group to focus on developing the Green
House part of President and deal making. Whilst remaining as non-executive
Chairman, supportive shareholder and funder, he will work with the directors
to restructure the Board to provide right sized, right ability management
succession that can in the future exploit the potential of President and
continue a progressive pathway for the benefit of shareholders.
2. Within the next few months, it is the current intention to propose
changing the name of the Group to reflect such evolution and business
philosophy and away from connotations of its past.
3. At the same time the Company will propose a share consolidation to move
away from the penny/micro share image and mitigating the ability of market
investors and market makers to allow or cause large volumes of shares but with
low aggregate value to affect prices. Details of both this and the proposed
name change will be notified to shareholders later this year.
Peter Levine, Chairman, commented:
"It is fact that the creation of ATOME Energy by President, its spin out and
flotation has been value accretive to President shareholders. However, the
value of the retained investment interest of nearly 28% in ATOME has clearly
not been reflected in President's share price. Our conclusion is that
investors do not ascribe proportionate value to President's core hydrocarbon
business, which therefore acts as a negative influence to the value
proposition of President as a whole. Green House marks the commencement of the
evolution of the AIM listed President Energy and emergence from the past
whilst at the same time not neglecting its present core hydrocarbon business
"The progression to a Group with separate business divisions having their own
motivated management and funding capabilities yet delivering value to the
public company shareholders has been successfully demonstrated by the spin off
and listing of ATOME Energy PLC. ATOME has created for shareholders in
President multiples of the value of money originally invested in its creation
and continues to benefit the Group through its near 28% holding
"The move of Green House into the strategically important lithium market is a
first step. We believe that by the end of this year there will be other
prospective projects coming under the Green House division
"President will capitalize on this experience and create more such
opportunities within the broader alternative energy economy
"Nevertheless, for now we must also not neglect the fact that we are also a
traditional energy company, currently with increasing turnover and profitable
core earnings from hydrocarbons. This will continue to be the case for the
foreseeable future, but with this business unit in good operational shape I
personally can turn my focus to deal-making where I believe can be of most
value
"I am energised by moving to have a focused emphasis on the innovation and
deal making I thrive upon. I will remain a major shareholder and principal
funder of President. A new, motivated Group CEO / Management team at the top
of the Group structure will be put in place before this move."
Contact:
President Energy PLC +44 (0) 207 016 7950
Nikita Levine, Investor Relations info@presidentpc.com
finnCap (Nominated Advisor and broker) +44 (0) 207 220 0500
Christopher Raggett, Tim Harper
Tavistock (Financial PR and IR) +44 (0) 20 7920 3150
Simon Hudson, Rebecca Hislaire, Charles Baister
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the
European Union (Withdrawal) Act 2018 ("UK MAR"). The person who arranged for
the release of this announcement on behalf of the Company was Peter Levine,
Chairman.
Notes to Editors
President Energy is an oil and gas company listed on the AIM market of
the London Stock Exchange (PPC.L) primarily focused in Argentina, with a
diverse portfolio of operated onshore producing and exploration assets.
The Company has operated interests in the Puesto Flores, Estancia Vieja,
Puesto Prado and Las Bases Concessions, and Angostura exploration contract,
all of which are situated in the Río Negro Province in the Neuquén Basin
of Argentina and in the Puesto Guardian Concession, in the Noroeste
Basin in NW Argentina. Alongside this, President Energy has cash
generative production assets in Louisiana, USA and further significant
exploration and development opportunities through its acreage
in Paraguay and Argentina.
It has also a 27.9% investment interest in Atome Energy PLC a green hydrogen
and ammonia producer whose shares are traded on AIM of the London Stock
Exchange.
With a strong strategic and institutional base of support, including the
international commodity trader and logistics company Trafigura, an in-country
management team as well as the Chairman whose interests as the largest
shareholder are aligned to those of its shareholders, President Energy gives
UK investors access to an energy growth story combined with world class
standards of corporate governance, environmental and social responsibility.
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