Rurelec PLC Trading Update re Argentina (2144Z)
20 May 2021 - 4:00PM
UK Regulatory
TIDMRUR
RNS Number : 2144Z
Rurelec PLC
20 May 2021
20 May 2021
Rurelec PLC
("Rurelec" or the "Company")
Trading Update re Argentina
Further to the announcement of 3 November 2020, the Directors of
Rurelec PLC (AIM: RUR) provide the following update on the
Argentine Resolution 220 PPA (the "Resolution"). The Resolution
governed the capacity and offtake revenue generated by the steam
turbine at Energia del Sur, S.A. ("EdS"), the Argentinian
powerplant owned by Patagonia Energy Limited ("PEL") in which
Rurelec holds a 50% interest. The Resolution expired in September
2020.
Since the expiry date, the management of EdS, together with
support from external advisers and the Rurelec Board, have been
engaged in extensive negotiations to establish a new tariff for
EdS's power generation. These negotiations are being held with
CAMMESA, the organisation that regulates and remunerates the
distribution of power in Argentina and the Secretariat of Energy
who have ultimate responsibility for the policies and tariffs that
control the generation and regulation of electricity supply in
Argentina .
Negotiations have continued for several months, during which EdS
management has had access to, what the Directors believe, are the
very highest levels of national and regional Government and also
within CAMMESA. EdS management believes it has been granted this
access because EdS is a strategically important supplier of power
in the region around Comodoro Rivadavia in southern Patagonia.
In the meantime, until a new tariff is operational, capacity and
offtake revenue generated from the Steam Turbine is being
remunerated at spot prices. If this pricing is not corrected it
will have significant adverse implications for EdS's revenue and
cash generation, which in turn would affect the timing and amounts
of any of the cash payments due from EdS to PEL and ultimately to
Rurelec. Since the expiry of the resolution in September 2020 the
only cash the Company has received from EdS via PEL was US $224k on
23 October 2020.
The Directors of Rurelec understand that EdS's management has
formulated contingency plans to reduce costs including options to
shut down parts of the EdS operation (e.g. the Steam turbine).
Whilst this is intended to restore EdS to viability it is uncertain
whether EdS will generate sufficient cash to remit to the Company
via PEL. At this point in time, there is no certainty on the timing
of the publication of the Resolution 31 new tariff in Argentina.
The Argentinian economy remains weak, and the Argentinian
Government continues to struggle with COVID-19 generated problems.
The Directors also understand that the effects of COVID-19 have
been a material factor in the delays to the finalisation of
Resolution 31 new tariff.
As there can be no guarantee as to the outcome of the
negotiations; the future viability of EdS remains uncertain. In the
absence of any assets sales EdS is indirectly the main source of
funds for Rurelec plc, and until a solution to the tariff position
is found, Rurelec will continue to experience significant working
capital pressure.
However, there are other sources of funding available to
Rurelec. The Board are actively seeking the possibility of loans
from third parties and continue to explore the sale of its other
assets, and in particular, the Frame 6B turbine in Chile and the
701 turbines situated in Italy.
Cash holdings of Rurelec PLC at 19 May amount to GBP343k.
Further updates will be provided in due course as appropriate.
For further information please contact:
Rurelec PLC W H Ireland (Nomad & Broker)
Simon Morris, Director Katy Mitchell
Andy Coveney, Director Lydia Zychowska
Tel: 020 7549 2839/40 Tel: 020 7220 1666
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END
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