Saturday, June 6, 2009

AEHI gets another banker

Will the third try be the charm that works?
[Update 06/08/09]

2006_AESilverProof_O_180Alternative Energy Holdings Inc. (OTC:AEHI) issued a press release Friday June 5 that it had a new investment banker.

The banker is Source Capital Group with offices in Westport, CT. The firm describes itself a full-service financial institution, specializing in middle-market investment banking transactions, distressed and high yield debt securities, investment management, mortgages, and business lending.

Source states that it has provided equity, debt, and structured finance solutions to both public and private companies in a variety of industries, including energy, oil and gas, telecommunications, technology, biotech, and consumer goods.

The announcement comes just a few days ahead of a planned decision by the Elmore, ID, county commissioners whether to grant AEHI’s request for re-zoning a large parcel of land to build a 1,600 MW Areva EPR reactor near Mountain Home, ID.

After a contentious planning commission meeting last November, which resulted in a 4-2 decision against the rezoning request, AEHI took its case to the county. A decision could come as early as Monday, June 8.

What’s different this time?

In the past two instances, where AEHI has announced it has an investment banker to raise the $6 billion or so need to build a greenfield nuclear power plant, the firms involved have had little or no qualifications to work in the nuclear energy industry. Both subsequently disappeared from AEHI’s radar screen without ever raising a dime for the project. It isn’t clear whether Source Capital has ever worked on a nuclear plant.

oil-pumpOn its website, Source Capital Group lists generically that it has experience in the oil industry with exploration and development of energy projects. It does not list any experience in the nuclear industry nor projects of the financial size and scope of a new nuclear power plant.

Also, AEHI’s press release includes a statement from an executive with Source Capital Group. Richard Kreger, Senior Managing Director of Investment Banking for Source Capital, made the usual corporate statement about being excited to be working on AEHI’s project.

Still, that’s a change from prior instances where little if anything about the qualifications or experience of the principals in the investment firm could be found on the public record. At least Mr. Kreger has complete LinkedIN profile to tell us he has experience in the investment banking industry. That fact alone makes the AEHI press release newsworthy. According to SEC filings, Mr. Kreger previously worked on stock issues for an aerospace parts company and, based on the LInkedIN profile, for his father’s trucking firm.

FoxNews 12 of Boise reported that Source Capital Group out of Connecticut to fund $70 million for the project. The money will be used to buy the land, water rights, and pay for the license application with the Nuclear Regulatory Commission.

Don Gillispie, president of AEHI says the only thing left is to wait for Elmore County commissioners to make a decision on whether or not to approve a rezone of the property in question.

He added that if the land is rezoned its value should increase if nothing else. If things do not go AEHI’s way in Idaho, the firm has previously said that it will seek to develop a nuclear power plant in Pueblo, CO, or in Mexico, rather than continue to seek to build a reactor in Idaho.

Passing the baloney test

baloneyThe $70 million that AEHI says it has secured is enough to pay for filing an application with the NRC for a COL license for the plant. That’s high on the firm’s list of things to do to build credibility with the industry and investors.

In its first ever SEC filing last winter the firm listed cash on hand of $400,000. AEHI’s stock closed June 5 at $0.22/share against a 52-week range of $0.01 to $0.40/share.

The firm has not been taken seriously by some in the nuclear industry because of its inability to raise funds or emerge from its penny stock status. Two years ago then NRC Chairman Dale Klein made an indirect reference to the firm in a now famous “no bozos” speech. Klein said in June 2007 . . .

My subject is something that each of the five Commissioners believe in, and have said before—which is this: owning a commercial nuclear reactor is not a business for amateurs. If the nuclear power business is treated with less than the seriousness it deserves—and people begin to think that anyone can just jump on the nuclear bandwagon . . “

In September 2007 Klein, speaking at a nuclear fuel conference in Boise, ID, told the Idaho Statesman that "AEHI is not on the agency's radar screen."

To refresh readers on the pass/fail criteria of the baloney test, I am listing the short version below. A nuclear energy firm must have the following qualities to pass.

  • Public identification of investors, markets, and suppliers
  • Reactor design is already approved by the NRC
  • Filed a complete COL application with the NRC
  • Co-located with existing reactors to take advantage of existing infrastructure
  • Construction firms and suppliers have track records building nuclear power plants
  • Arrangements with manufacturers of large forgings to get them on time and within budget
  • Deals to sell electricity on an existing grid to committed customers
  • Experience in the nuclear energy industry running nuclear reactors

Getting $70 million to file a license application with the NRC is a start toward passing the test. The firm still has a long way to go to convince skeptics that it is serious about its plans to really build a new nuclear power plant in Idaho.

Updates

June 8, 2009

The Mountain Home News reports The Elmore County commissioners Monday tabled until next Monday, June 15, any decision on the rezone for the AEHI nuclear power plant. The commissioners were advised by legal counsel to limit their discussion to the rezoning action and not to the proposed use, e.g., a nuclear power plant. This could be a difficult task for these elected officials who have the unhappy task of deciding whether to over rule their own county planning commission which voted 4-2 against the land use change. No decision was made at today's meeting other than to meet again next week.

June 9th - Idaho Business Review has a complete update online


Areva EPR

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2 comments:

Rod Adams said...

Dan:

While I agree that entities need to pass at least some of your tests, I challenge the implication that entities need to pass all of them to be considered serious contenders for building and operating new nuclear power plants.

For example - some designs do not need large forgings. There are also other places besides "the nuclear industry" to gain in depth experience in running nuclear reactors. Grid connections are not required to reach some customers, and there are few small reactor designs that are already approved by the NRC. In fact, there are few designs of any kind that are completely approved - even the AP-1000 still has some reviews remaining.

djysrv said...

Rod is correct. The test is tough. It doesn't take into account small reactors.

Also, the test looks to the future. By the time most of the COL applications now pending are approved, about 2012, the NRc will likely have also finished design reviews for the major light water reactors. That should work well for everyone.