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Wasabi Energy (LON:WAS, ASX:WAS) shares powered up on Thursday as its Turkish expansion plans were validated by some impressive numbers from its pre-feasibility study.
A financial draft of plans at the Tuzla Geothermal Power Project (TGPP) showed an indicative net present value (NPV) of A$142 million, an internal rate of return (IRR) of 57% and EBITDA (underlying earnings) of A$19.6mln.
The study was based on the installation of one of its 30 megawatt (MW) Kalina cycle units, which turns excess heat back into energy.
The PFS, which was put together by a number of third parties, including US-based Power Engineers, said power can be generated from Tuzla as early as the second half of 2016.
Wasabi’s wholly-owned Turkish subsidiary Imparator Enerji has an option to acquire up to 50% of the Turkish company which owns Tuzla.
Its 15 MW share of the plant can net Wasabi more than A$70mln. It has invested around A$10mln on the acquisition and development of the project so far and plans to spend another A$3.7mln before the end of the year.
The 57% IRR means the company will earn this money back in less than two years from the start of power generation.
Wasabi, whose shares jumped over 20% to 0.38p, said the expansion project was underpinned by an updated resources estimate. This signalled that the most-likely size (P50) of the Tuzla geothermal resource is potentially greater than 80 MW, confirming the findings of past studies.
Chairman John Byrne said: “The results of the pre-feasibility study underline the Wasabi Group's stated objective of having 25 MW of power production directly attributable to Wasabi either under construction or in operation by 2015 and maintaining that minimum growth at that rate thereafter.
He added in the statement that the Tuzla project alone has the potential to deliver 18.5 MW towards its 25 MW objective and “indications are that our Asian subsidiary can more than provide the balance”.
In fact, Byrne believes China has the potential to generate as much as 100 MW alone for the company and “maybe even a lot more than that”.
“What we’re looking at with Wasabi New Energy Asia is far bigger than Turkey,” he told Proactive Investors.
“This [Turkey] is a real project that puts real value behind the company, well over its current price. Our job now is to take this forward and deliver a couple more.”
The company hopes to complete a bankable feasibility study for the project next year, adding that it only needs to drill around four wells as part of the phase one build-out, which will give it the information required to make it bankable.
Byrne said the company is open to a number of funding options to get the project up-and-running.
“We don’t think our equity requirements will be any more than US$10mln – pretty much typical of the type of projects we are looking at, certainly in China, certainly elsewhere.
“We’ve always said that if we can get this going, the cash flow from the operation will quickly cover the equity requirements for continued expansion.”
As an existing power plant, Byrne does not see any risk in developing Tuzla with the Kalina cycle unit.
He reckons there is a good chance all three of Wasabi’s Kalina Cycle plants currently under construction can be operational by the end of the year. Two of them are currently being commissioned.
Shares rose 11.11% to stand at 0.35p.