With top level experience of international business development, power company management, national energy policy and governance, the experienced Cindrigo team is building a diversified player within renewable energy and cleantech power. Based on a rollout of geothermic power plants yielding about 20 MGBP per 20MW-plant and year, Cindrigo plans a rapid international expansion while also eyeing adjacent technologies. A successful rollout, with a first plant operational by 2023 and a total of +200 MW in 2026, justifies a probability weighted fair value range of 1.20-2.90 GBP per share in our DCF-valuation approach, while a peer multiple valuation of 12x EBIT and 10x EBITDA 2024 supports a fair value of 2.20-2.40 GBP per share. A value solely based on the initial Croatian rollout, whereas in the long term, the company plans an expansion to 1000MW over the next decade, which without considering execution risks, would make Cindrigo a multi-billion GBP-company.
Andreas Eriksson | 2022-04-11 08:00 | andreas@emergers.se
A renewable energy source for baseload power
As the need for reliable renewable power increases in line with the need for increased electrification to meet various climate accords, geothermal power has somewhat been forgotten compared to its sector colleagues wind and solar. With the acquisition of Energy Co-Invest Global (ECG), who owns a solid platform and a strong team within geothermal, Cindrigo looks to become a high roller within the renewable energy space with a base in geothermal power plants. Through running a very tight organization, where each project is set up in its own SPV (Special Purpose Vehicle) which will limit dilution of the Cindrigo share, the company can utilize its experience from managing projects to focus on plants where the technical competence is of importance and personnel intensity is low.
Synergies across high value subsidiaries
Through ECG, Cindrigo also retains a 48% ownership of Icelandic geothermal experts GEG Power ehf., that besides holding its own project portfolio is also an EPC-contractor that Cindrigo can utilize to construct most of their new geothermal plants, where a fair share of a geothermic project cost is EPC-related. We see a geothermal multi-plant rollout as a solid fundamental driver for revaluation. Cindrigo’s first projects has 60MW capacity power plants contrcted (with potential to expand to 200 MW) in Croatia through a 90/10-partnership, with an additional two sites licensed to construct geothermic power plants with a 20 MW capacity each.
Nearby cash flow a must to unleash full potential
Our forecast is based on a rollout of geothermic plants with a total of 218 MW production, with the first one operational in 2023. For the European plants we assume an annual yield of 20 MGBP and an EBITDA of 11.25 MGBP for each 20MW. With a 90% ownership, diluted by 35% for the first Croatian projects, we expect Cindrigo to re-invest future earnings and become less dependent of an external financier, and that is when we will see the full potential of the Cindrigo business model. Based on earlier assumptions we estimate Cindrigo will reach nearly 60 MGBP in sales in 2024 and over 150 MGBP in 2025. Based on a DCF valuation approach, where the NPV of future cashflows has been probability weighted in a range of 65-85%, we see support for a fair value range of 1.20-2.90 GBP per share, while a conservative (considering expected growth) peer valuation approach on 12x EBIT and 10x EBITDA 2024 supports a fair value range between 2.23 – 2.44 GBP per share. However, we also see significant risks associated with delays and execution, as well as the importance of getting plants up and running soon to reduce the dilution of a third-party financier.
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