Europlasma warns of extra delays to its refinancing exercise, at risk of a full financial/perimeter restructuring.

Europlasma issued an after-hours communiqué on 07/12/2018 about the fact that due diligence delays would not permit it to raise the hitherto expected funding before year end.

The delays are not unexpected but were already mentioned in November with the intention to be ready to raise much-needed cash resources before the end of this year.

Europlasma makes it clear that it now has to bite the bullet, including partial disposals and a deep financial restructuring. While the current market cap (c. €16m after a 25% drop on 10/12) stands at a considerable distance from the underlying value, the financial corner is pushing Europlasma’s valuation into even deeper call option territories. The current stress is obviously amplified by the global market’s one.

The wording suggests that asset disposals is a likely proposition. It is our opinion (not cross checked with management) that the group may either sell 1) Inertam, as it is a cash cow, has scarcity status most notably as an asbestos waste processor, requires limited capex (€3m to add a new furnace), and whose growth is underpinned by the partnership announced with Orano, or 2) sell CHO Power, its promised jewel, which has a protected and proven technology creating considerable growth potential once it is behind its peak cash requirements. Whilst option 1 would be comparatively easier to get going, option 2 looks somewhat extreme but may eventually net more value and capital for the group.

Earlier EPS computations were dependent on the terms of a dilutive recapitalisation. Selling assets is an alternative course which has its pluses … depending on the realisation price. We have so far used a €20m enterprise value tag for Inertam and €80m for power generation activities in our sum-of-the-parts computations.

The disposal of Inertam would come close to sorting out the funding issues of Europlasma’s green energy developments and make it a more focused investment proposition. Alternatively the disposal of power generation would leave plenty of cash indeed

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