Ram,
There are 4 loan instruments that Valence currently uses. One is a $33K equipment lease at 9.5%. I'm going to ignore it since its not material.
Of the three, the largest is the $9,950K loan from Berg. It doesn't show up on the balance sheet as such since its discounted by the fair value of the warrants given to him for the loan. Any way, VLNC pays a floating rate which was at 9% in March. It probably is at least 9.25% now, so we can expect to pay $920K per annum. The agreement end Aug 2002, but basically we can assume it to be a completely flexible loan.
The second loan is from a bank for the Henderson facility. It is $1,564(est) at end of June, with a 10.4% fixed rate, with equal principal payments of $168K per year with a final payment of $1,436K due Dec 2001. Thus, the interest will be $163K , principal $168K for the year forward.
The third loan for the Ireland plant is for $2,946(est) at end of June, with a variable rate at 6.625%(March), with equal principal payments of $240K per year over a 15 year lifetime(ending 2011?). Thus the interest will be $195K, principal $240K for the year forward.
In sum, $1,278K in interest and $408K for principal for a total of $1,686K to June 2000, on a total of $14,460 for an effective rate of 8.84%.
So we can expect about $425K to be spent per quarter servicing the loans. This is not a big deal and VLNC should be able to service the loans from cash flow by the end of December.
As far as taxes, I'm sure that for the next year or two the operating loss caryy-forwards of over $87M will be more than enough to cover the profits generated. Tax will not be an issue for the next two years regardless of where or how its generated, IMHO.
Ram,as I hope I've convinced you that interest and taxes don't apply to VLNC! I wish that were my case! The next key item is to focus on the efficiency of the plant. This is the most important element in making VLNC wildly successful or a second-ran or worse. If we price the cells at a conservative $2/Wh-Hr then what is the operating cost per Wh-Hr? Anything below $1.5 and the stock price will shoot up like crazy on the next earnings announcement. |
