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Ncondezi Energy – funding desperation continues, contention for AIM’s most expensive loan?

By Steve Moore | Wednesday 10 May 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Shares in Ncondezi Energy (NCCL) are currently more than 30% lower on the day, at around 2p, on the back of a “Project and Funding Update”.

This includes that “discussions with Shanghai Electric Power Co., Ltd are continuing with respect to the $3 million Development Agreement” and that “subject to the extension of the shareholder loan repayment date, the company has sufficient funding until the end of May”.

Hmmm. This follows an end-March update of “advanced negotiations” to finalise the development funding agreement and that “the company is engaging with the lenders under the shareholder loan and evaluating all options with respect to its repayment or refinancing”. The update added that “once the development funding is available, the company's working capital requirement for costs not covered by the Development Agreement is expected to be reduced to approximately $300,000 per annum, to cover mainly corporate costs”.

However, that still meant negotiations with potential funding partners to cover these, though currently the development funding (“the company expects to update shareholders on this process by the end of May”), and shareholder loan extension (“in advanced negotiations… a further announcement will be made as appropriate”, still need to be finalised.

It’s thus financial tightrope time – and explicitly stated that post this month anyway “the company will need to raise additional funds” and “is working on finalising a funding solution”. The funding position is not helped by “in accordance with its terms, the Shareholder Loan has become repayable and has increased from 1.5x to 2.0x the loan amount outstanding. A total of $2,192,546 has been drawn down under the Shareholder Loan and the repayment amount is now $4,385,092”.

Wow – that’s crisis funding if ever seen! And the beneficiaries? In August it was announced that the company’s biggest shareholder, Africa Finance Corporation, had “joined the existing $1.32 million loan facility announced in May 2016”. The May announcement stating the facility “with certain of Ncondezi's directors, management and long term shareholders to fund ongoing working capital requirements to finalise the Joint Development Agreement with Shanghai Electric Power Co., Ltd”!

Haha, whether to laugh or cry at this further bad joke on AIM? Natch, a strongest possible bargepole stock.

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