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LONDON (Alliance News) - Rurelec PLC saw its shares rise sharply early Monday after it said it will pay off its short term loan agreement with Radix Investment UK Ltd, and would now work towards the resumption of dividend payments.
In a statement, the power generator in South and Latin America said its combined loans with Radix are now GBP550,000 and will be repaid on March 31 from the USD6.5 million proceeds Rurelec expects to get for the contracted sale of a controlling equity stake in its Canchayllo hydroelectric plant in Peru.
Rurelec has also agreed with Radix not to issue the 16.8 million warrants to subscribe for new shares in Rurelec at an exercise price of 7.3 pence per share that the parties agreed last December. The company will also pay IPSA Group PLC from the proceeds of the plant stake sale.
Last December, Rurelec got a GBP3.05 million short-term loan agreement from Radix, allowing it to make a final payment to IPSA for the two gas turbines that Rurelec bought for its Illapa generation project in Chile. The Radix facility had been due to run until the end of March.
The company has had a tough few years since its Bolivian assets were nationalised. It has been working on building its asset base elsewhere in South and Latin America through partnership agreements. It hasn't paid a dividend since its 2007 financial year.
"Our partnership negotiations are finally producing signed contracts. Rurelec has always intended to work in 50:50 partnerships in Latin America, as we have since our flotation in 2004, and that 50:50 policy continues with the exception of hydroelectric plants where our target has always been to own no more than 20 per cent of any one plant. This policy allows us to maximize our involvement with the minimal cash investment per plant," Chief Executive Peter Earl said in a statement.
"We never intended to have so many greenfield developments on the go at any one time but that policy was forced upon us by the 2010 nationalisation of our Bolivian power plants, which were the main cash generators for the group. We are now building new capacity to replace lost megawatts and we are successfully selling down stakes as we always planned to do. Radix has helped us to achieve our goals. The next step will be to conserve cash on our balance sheet in anticipation of a future return to dividends," he added.
The company said the highly-anticipated Proinversion large hydro tender process for the award of new capacity contracts has now started in Peru and Rurelec's wholly-owned Santa Rita project is expected to participate.
While the award of power purchase agreements under the tender isn't expected until the end if 2015, the release of official tender documents has allowed Rurelec's investment bank adviser to put a firm timetable in place for the selection of a partner or partners to subscribe new equity at the project level. It said participants in the partner selection process includes large regional electricity utilities, private equity funds and Asian multinationals. Rurelec expects to pick preferred partners by May.
In Chile, meanwhile, Rurelec's preferred partner for the purchase of a stake in the Illapa project has received investment committee approval to proceed to detailed binding agreements for the acquisition of a 50% stake in the project. The offer values the equity of the Illapa project at USD60 million, Rurelec said.
In Argentina, the company said it continues to work on a transaction intended to release and repay in US dollars the bulk of the company's project loans to its Energia del Sur combined cycle gas turbine power plant. It said Energia del Sur continues to perform well and remains one of the highest availability plants in Argentina, meaning it has been able to continue monthly payments to Rurelec to reduce the project loans. Rurelec has now initiated a 40 megawatt expansion project in Comodoro Rivadavia for the installation of a cycle gas turbine under a new contract with payments denominated in US dollars.
Rurelec shares were up 21.6% at 3.80 pence early Monday, making it one of the best-performing stocks on the AIM All-Share index.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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