The draft term sheets have been provided by a number of groups with Panax identifying a number potential funding partners that it considered would most likely complete a funding deal. These include:
- A syndicated group of Singapore based investment funds that are part of a group with prior investment experience in Asia Pacific geothermal projects and capable of providing the required equity capital;
- A European based investment fund with substantial investment in renewable energy projects in Europe and Asia that can provide the majority of the required equity capital; and
- A Chinese conglomerate that can provide the required equity and project finance requirements as well as substantial technical and development experience.
Draft terms sheet have been exchanged and are being reviewed with a number of these groups, which have either largely completed or are in the process of completing their required due diligence.
Panax is being assisted in this process by a number of parties, including two International advisory groups (one based in Hong Kong, and the other in the USA) and three Australian based advisory groups, who have been retained by Panax to assist in this process.
Sokoria and Dairi Prima
Panax said that both Indonesian electricity regulator PT PLN and Indonesia's Ministries of Finance and Energy have confirmed that all negotiations relating to the terms and conditions of the Power Purchase Agreements for the Sokoria and Dairi Prime geothermal projects in Flores and North Sumatra are now final and the final execution copies of these agreements are now being reviewed and prepared.
It added that while the final execution process for these documents is taking a little longer to complete than expected, no issues or impediments have arisen in regard to the execution of these Agreements, and it is expected that these Agreements will be executed in the very near future.
The finalisation of these agreements is a significant milestone for the company and will be the key to enable Panax to progress to finalising required project financing for these two projects.
Both Sokoria and Dairi Prime have planned initial electricity generation capacity of 30 megawatts.
Panax and its Indonesia partner PT Bakrie Power are targeting to start electricity production at Dairi Prima by late 2013, coinciding with the expected start of lead and zinc production from PT Dairi Prima Minerals' Dairi Prima lead/zinc underground mine in North Sumatra.
Electricity produced at Sokoria will be sold to PLN.
Panax has also decided to record an impairment charge of $26 million in the profit and loss statement as at 30 June 2012 to reflect the lack of progress on its Australian projcts.
While the company has drilled and tested a deep geothermal well in the Penola Project, South Australia, and has spent a large amount of time reviewing the results of the drilling and production testing, considerably more work is required to demonstrate an economically viable proposition.
Panax said that until the Australian Government commits substantial funding towards developing Australia's significant geothermal resources, it did not plan to commit any significant amount of its own funding towards progressing its Australian project, a viewed shared by the investment public.
These assets have not been written off and should any further work provide sufficient prospects for future return, all or part of the impairment charge can be reversed.
Retirement of Panax Chairman
Panax chairman Gregory Martyr will retire at the company's Annual General Meeting on 20 November 2012 and will not seek re-election.
During early calendar 2012, Gryphon Partners, an Australian based corporate advisory group of which Mr Martyr was a Partner, was acquired by Standard Chartered Bank.
Following that acquisition, in accordance with the bank's policies, Martyr is unfortunately unable to continue on non-related party boards. Following a grace period allowed by the bank to assist management on a number of initiatives, Martyr will now be retiring from the board.
The Board sincerely thanks Mr Martyr for the role he has played with Panax since its incorporation and the Company's listing on ASX in 2007 and in the initial assembly of the primary package of geothermal assets, and wishes him well.
Kerry Angel has resigned from her part time position as the company's chief financial officer and company secretary.
Managing director Kerry Parker has been appointed company secretary until a suitable replacement is found.
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