Cindrigo is a relatively new established renewable energy company, supported by long historic Swedish renewable energy expertise and experience, as well as a strong international partner position. The Company’s technology is based on well-proven international standard, meeting all regulatory environmental regulations while limiting any technological risks. Cindrigo is in process of doing a listing on a regulated stock exchange in Canada. Based on an assumed expansion plan, a peer valuation and forecasted financials, this could yield a company valuation of USD 3,300 M using year 2024 as a benchmark.
Industry and market conditions
Waste is a large problem in all parts of the world, and landfilling is no longer viable. Waste-to-Energy is the only viable large-scale solution. Energy prices have increased and over a 10+ year period they are forecasted to increase further and alternatives to fossil fuels will likely become even more attractive. It could be argued that the country risk of Ukraine, where Cindrigo will build their initial WTE-plants, has decreased lately. Ukraine raised USD3 bn in 2017 in its first sovereign bond issue since restructuring their debt in 2015. In October 2018, IMF also approved additional funding of circa USD 3,500M after government accepted to reduce the large subsidy of gas price to households. Ukraine has also a strong political support from EU, USA etc. Overall it seams like with recent moves from international institutions like IMF, World Bank etc. could be a sign of investors having confidence in Ukraine’s reform programme.
Cindrigo has strong support and a valuable Cooperation with China Energy
The Government of Ukraine through the Ministry of Energy has agreed and guaranteed certain key conditions for the cities Kiev, Odessa and Bila Tserkva, with a desire for additional cities. For the initial projects in Ukraine, Cindrigo will operate in cooperation with China Energy a leading Fortune 500 company among the leaders in China’s power engineering and construction industry, who provides the full project financing required for the projects.
The business model
The business model for the projects is straightforward, with revenue generation beginning after approx. 30 months, to allow for the construction of the facilities. Cindrigo has already secured a long term PPA with the Government, which shall see all power, fuel and heat sold to the Government at pre-agreed inflation linked prices as well as a good working relations with the local municipalities. The Ukrainian Government will pay for electricity at a price set in euro, further lowering the Company’s currency risk. Each WTE plan is expected to generate annual operating cash flows over time above USD30 M, sufficient to support further expansion using internally generated funds.
Management and Board
During the project development process Cindrigo has had some ten dedicated persons whom have been engaged. In addition, the Company has also employed additional dedicated consultants in various key areas, including engineers and local partners in Ukraine, in order to secure know- how of the local markets and key contacts with governments, municipalities, authorities and sub- contractors. As a result, Cindrigo has and can combine competences in Biomass, and WTE technical and project development with local expertise. Several key persons in the Company have solid business experience ad a genuine project experience both in general and in the new energy segment.
By 2024, Cindrigo is expected to have ten WTE plants operational. At this point, adjusted for assumed minority partners and equity claims, EBITDA 2024 attributable to Cindrigo is forecasted to approx. USD220 M and increasing both organically, as well as from expanded operations with additional WTE plants. An EV/EBITDA-multiple of 13, applied to 2024 forecasted financials, yields a valuation of approx. USD3,300 M (adjusted for assumed net debt). Based on approx. 153 million shares that are assumed to be outstanding 2024, yields a share price of 25 USD.
Investment risk: Cindrigo is in different ways exposed to political, legal, tax, currency, inflation, convertibility and repatriation risks. Cindrigo, as business in general, is exposed to economic stagnation and general reduction in demand for goods and services. There is a risk that the Ukrainian Government could reduce their environmental “right doing”, which could result in a lower support and focus on the area that Cindrigo operates within.