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LONDON (Alliance News) - Rurelec PLC saw its shares rise Monday after it said it had applied to the High Court for approval to reduce its share premium account, a move that would free up funds to allow it to pay dividends to its shareholders, and was moving close to a series of alliance deals in Latin America that would also help it pay dividends.
In September, the power generation company had said it was exploring one or more "major" alliances in Latin America, in the hope of accelerating growth without relying on more capital from its shareholders as it looked to pay dividends.
"The company is pleased to report that it is close to agreement on a series of transactions which will cement its alliances and take Rurelec closer to its aim to resume dividend payments to shareholders from 2015," it said Monday.
The transactions, which are now being finalised, each assume the sale of a share stake in one of Rurelec's regional holding companies, and it expects to record development profits on the portfolio of underlying projects if the deals go through.
Rurelec has been hit by a battle to get compensation for the forced nationalisation of its Bolivian assets. It won a settlement in the summer, but the figure was well below its hopes and it was left with a deficit in its distributable reserves of more than GBP22 million leaving it unable to pay dividends.
"It would take many years of profits from operations to remove that deficit and in the intervening period the company would be unable to pay dividends," Rurelec said Monday.
"To overcome this problem, the company has applied to the High Court for permission to reduce the company's share premium account in order to eliminate the deficit and to create distributable reserves," it said.
If approved, this would permit a return to dividend payments as soon "as the company records a profit", as long as Rurelec's directors believe it prudent to pay a dividend at that time. "There can be no guarantee of the timing of any dividend payment, if at all," it said.
"At a time when shareholders may have despaired at seeing daily the large discount to net assets at which the company's shares are currently trading, the board believes that the resumption of dividend payments will position the company on the stock market as an income producing utility, in line with the company's trading performance in its early days as the first utility company traded on the AIM Market," Chief Executive Peter Earl said in a statement.
"We believe that the opportunities offered to us and our current projects reflect our credibility in South America following many years of successful power development there. We are confident that we can turn this into shareholder value as we put the difficulties of the Bolivian settlement behind us," he added.
Rurelec shares were up 16.3% at 4.65 pence early Monday.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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