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(Alliance News) - Rurelec PLC on Thursday said it has signed agreements to amend its constitutional relationship with joint venture partner Basic Energy Ltd and set out a new debt repayment schedule.
Rurelec noted Argentina's decision to impose exchange controls on US dollars. Rurelec operates in Argentina where, as a consequence of these controls, it has become necessary to obtain Argentinean Central Bank approval to repay debt between a subsidiary and its parent company.
The new shareholder agreement alters the constitutional relationship between Basic and Rurelec, each of whom own 50% of Patagonia Energy Ltd.
Further, an umbrella agreement has been signed among Patagonia Energy, Basic, Rurelec Project Finance Ltd, Energia del Sur SA, Electricia del Sur SA, and Rurelec PLC Sucursal Argentina. This umbrella agreement sets out a new schedule for repaying unsecured debts owed by Patagonia Energy to Rurelec and Basic by way of amended and restated loan notes.
These amended noted have no interest accruing and events of default and default interest of 14.32%. They mature at the end of 2039 and can be prepaid without premium or penalty.
Changes to the shareholder agreement include permission to allow part of Basic's shareholding to be transferred within Basic stakeholders without triggering right of first refusal, and for the Patagonia Energy group cash position to be reviewed every month to consider repayments or distributions.
Further, the amended loan notes are to be repaid in accordance with their terms and with the umbrella agreement. No dividends are to be paid until the amended notes are repaid. The first USD5.7 million of dividend distributions by Patagonia Energy are to be split at a Rurelec to Basic ratio of 72 to 28. After that, the ratio will be 50-50.
The umbrella agreement provisions include Energia del Sur's obligation to review cashflow and remit all permissible surplus cash to Patagonia Energy, while Patagonia Energy is obliged to remit the funds to Rurelec and Basic with the first USD5.90 million of debt repayment by Patagonia Energy to be split on a Rurelec to Basic ratio of 80-20 and the subsequent USD18.9 million on a 72-28 ratio.
In addition, the umbrella agreement includes default provisions for Rurelec and Basic, who both will have the right to default interest. Rurelec and Basic have agreed to waive any claim to interest on money already leant to Patagonia Energy with a global release of past debts, obligations, and liabilities.
Should Energia del Sur, Electricia del Sur, or Patagonia Energy be unable to pay the joint venture parties due to Argentina's exchange controls it will set the funds aside until it can pay both Rurelec and Basic.
Energia del Sur is looking for an alternative way to purchase US dollars to fulfil its obligations and expects to be able to transmit more debt repayments and dividends to Patagonia Energy - which is based outside of Argentina - but there is not guarantee this won't be blocked by the new government in Argentina.
Leftist Peronist candidate Alberto Fernandez was elected president of Argentina late last month, together with his running mate, ex-president Cristina Kirchner, who will be his vice-president. Fernandez assumes power on December 10.
Rurelec said: "There can be no guarantee that any cash can be remitted to [Patagonia Energy] in the foreseeable future, nor that any monies can, in turn, be remitted to Rurelec. Whilst this is not a problem for the company in the short term, it could ultimately result in liquidity problems for Rurelec if it was not resolved.
"The directors will continue to keep the situation under review and further updates will be made as appropriate."
Shares in Rurelec were down 11% at 0.53 pence in London on Thursday.
By Anna Farley; annafarley@alliancenews.com
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