With the 110MW Waste to Energy (WtE) plant in Finland set to generate its first cash flows before year-end and the strategic expansion into high-value geothermal projects in Germany, Cindrigo is on track to position itself as one of the most interesting renewable energy developers in Europe. Despite the 37% dilution resulting from the deep discount offered to existing shareholders in the GBP 13.1 million capital raise, the company is now close to being debt-free. The planned listing on the LSE Main Market in Q1 2025 under the Commercial Companies category will bring added benefits, including increased scrutiny, transparency, and, most importantly, eligibility for institutional investments and index inclusion, potentially elevating the company to a new valuation bracket.
Operationally, our revised forecast for the 110MW Kaipola WtE plant now incorporates the option to include commercial waste in the fuel mix, supporting an annualised EBITDA of EUR 15 million by 2027. This cash flow, combined with robust support for the German geothermal portfolio—including government grants, EUR 250/MWh feed-in tariffs, and financing from the Kaishan Group—establishes a stable financial platform for future project development and enhanced support for future debt financing. The German assets, starting with an initial 80MW capacity and a total potential exceeding 300MW, position Cindrigo to capitalise on Europe’s high energy prices, decarbonisation requirements, and focus on energy security. As first cash flows and financing effectively lowers risk, we have adjusted WACC to 8.1% (9%) and now find support for a fair value of GBP 1.30-1.35 (1.19–1.27) per share, with potential upside to GBP 2.6 per share by 2029–2030, and beyond as operations scale.
Johan Widmark | 2024-12-03 12:00
First revenues from Kaipola before year-end
After necessary repair and renewal work during H2’24, Kaipola is set to start heat deliveries in December 2024, marking the onset of Cindrigo’s first cash-generative operations. Our revised projections now account for increased utilisation of commercial waste in the plant’s fuel mix, boosting revenue beyond earlier estimates. We estimate initial EBITDA for 2025 at around EUR 5m, increasing to EUR 15m in 2027. This enhanced profitability will provide a critical stream of internal cash flow to support expansion, future debt financing and operational stability.
Upgraded listing on the LSE Main Market
Cindrigo’s move to a listing on the LSE Main Market under the Commercial Companies category reflects a commitment to higher standards of governance, transparency, and scrutiny. While this upgrade entails additional costs, including sponsor due diligence, it significantly enhances the company’s credibility. Importantly, the commercial listing increases eligibility for index inclusion and opens avenues for institutional investors to invest, further solidifying the company’s long-term funding prospects.
As for the long-term growth strategy, the German geothermal portfolio, comprising three licenses in the Upper Rhine Valley with a combined potential capacity exceeding 300MW, remains a cornerstone. Development will begin with an 80MW capacity targeted for operations in late 2027. Financing for these projects benefits from a robust framework, including:
- Government Incentives: Feed-in tariffs of €250/MWh for electricity, 40% CAPEX grants for heat production, and exploration insurance to de-risk drilling.
- Kaishan Group Support: A turnkey EPC partner, Kaishan will finance 70% of EPC costs, equivalent to 40% of total CAPEX, on deferred payment terms.
This financing structure, combined with cash flows from Kaipola, ensures a strong financial base for project development in Germany.
Improved valuation and risk Outlook
With financing secured, operations in Kaipola imminent, and the prospect of a Main Market listing, Cindrigo has lowered its risk profile. The transition from pre-revenue to cash-generating status, coupled with transparent governance and institutional credibility, underpins a positive outlook for the stock.
Our revised estimates for Kaipola, alongside robust government support and Kaishan’s involvement in Germany, strengthen our valuation framework. Based on a post-money valuation of the company, we see potential for significant value creation as the future milestones are achieved. Our updated fair value range is now GBP 1.30–1.35 per share, with potential upside to GBP 2.6 per share by 2029–2030 as the German geothermal projects come online and full operational capacity is achieved.
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