PPG.L Share News (PPG)

(Sharecast News) - Plutus PowerGen updated the market on its operations and finances on Tuesday, following its announcement on 29 August that it had received notice from the non-executive directors of Rockpool Investments that its management contracts in connection with the existing six Rockpool EIS-funded flexible energy generation (FlexGen) sites were to be terminated.
The AIM-traded firm said it gave Plutus a six month notice period, with Tuesday's update focussed on the position with the company's management contracts with Rockpool, and its management agreement with Attune Energy.

It said that, following the departure of operations director Paul Lazarevic on 29 October, the firm was "potentially in breach" of their management contracts with Rockpool due to it not having the necessary competent personnel to carry out the obligations stipulated in the management contracts.

Under the management contracts, the company had a 60-day period to remedy that breach.

Following a recent meeting between Plutus PowerGen, Rockpool, the directors of Plutus's co-investee companies in the FlexGen sites, and third parties put forward by the company to run the FlexGen sites, the firm said it had been informed that the third parties had withdrawn their offer to run the sites for the period through to the end of the notice period, being on 19 February.

"In addition, the company announces that Attune Energy's management contract with Plutus has been terminated by Attune Energy on a three month notice period and with effect from 21 January," the board said in its statement.

"The company is unable to manage this standby diesel generation site due to not having the requisite in-house operational expertise and has not been able to secure appropriate sub-contractors to manage the site."

As a result of those developments the firm said it had, with immediate effect, ceased to receive management fees from its six FlexGen sites and its management contract with Attune Energy.

It said it had 60 days from 21 October to remedy the breaches following, which the management fees would be reinstated until the end of the notice periods.

"However, the company now believes it will be difficult for it to do this in the timescale afforded.

"As such, Plutus do not anticipate accruing any further management fees on its six FlexGen sites or its management contract with Attune Energy."

The firm said the loss of management fees would have a negative impact on its working capital position, as that was presently the group's sole revenue stream.

Plutus is currently owed, through its subsidiary Plutus Energy, around £0.61m in accrued and deferred fees from Rockpool, to 21 October 2019.

"There can be no certainty as to when these accrued and deferred fees will be received by the company.

"As such the company's current cash resources remain limited and the working capital position of the group is highly constrained.

"As announced on 31 October, the company has implemented a cost control strategy including board members not drawing salaries, and the board are confident the company would be able to raise further funds to enable the company's debts to be paid as they fall due, should the need arise."

Plutus PowerGen said that, while it would cease to operate the FlexGen sites, it will continue to have an economic interest of around 44.5% in each site through the separate co-investee companies which owned the standby diesel generation sites.

As previously outlined, Rockpool and Plutus had been exploring opportunities to maximise the value of the FlexGen sites, and had been seeking to secure a sale of the portfolio of the six 20MW FlexGen sites, and the one gas site they had in development, in which the firm retained a 44.5% equity stake.

The company said it was in early stage discussions on an indicative offer that had been received for the six 20MW FlexGen sites.

Rockpool was the majority investor on the sites, and would manage the negotiations on the potential sale of them.

"Should discussions progress on the sale of the FlexGen sites it is likely that the sale of the company's interests in the FlexGen sites would constitute a fundamental change of business of the company pursuant to Rule 15 of the AIM Rules for Companies given the FlexGen sites represent the majority of the company's existing operations, and as such would require, inter alia, approval of the company's shareholders at a general meeting.

"There is no certainty that a disposal of the FlexGen sites will take place or what the terms of any such potential disposal may be.

"Moreover, further to the announcement on 13 November in respect of receipt of a purported notice of requisition of general meeting, having sought legal advice the board continue to believe that the requisition notice is invalid and the company can confirm that at this stage they have not received any further communication from the requisitioners."

Plutus PowerGen said it would provide further updates at the appropriate time.

At 1407 GMT, shares in Plutus PowerGen were down 36.34% at 0.11p.