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Rurelec – more bad news, examining further funding options

By Nigel Somerville, the Deputy Sheriff of AIM | Thursday 7 December 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.


AIM-listed Rurelec (RUR) has updated the market with regard to its dealings wth Energia del Sur in Argentina. In short, the cash ain’t flowing into Rurelec’s coffers.

As previously reported, Energia del Sur (having just repaired previous damage to its power plant in Southern Patagonia) suffered new damage to its steam turbine and although this was dealt with, it was a temporary affair which reduced output from 43MW to 21MW. Full repairs are planned in May next year.

In the meantime, EDS has a cashflow issue resulting from the loss of income and we are told that it cannot repay any debt until mid-2018. There remains the possibility of some interim payment from insurance but Rurelec tells us that:

the Directors of Rurelec are actively examining further funding options to meet its working capital requirements, should it be needed. Accordingly, until this situation is resolved the Company's working capital position remains severely constrained

Oh dear, there’s more trouble at t’mill then. No wonder former boss Peter Earl walked on his takeover approach (if it was ever a runner).

Bearing in mind the blocking vote held by Sterling Trust (itself in administration) and that shares in Rurelec have a par value of 2p (against the current 0.75p – 1p spread) that would appear to rule out an equity solution. In other words, the company is again rattling the tin to borrow a few coppers.

Given the current board’s record of keeping the lights on under duress, you can’t really rule out some further lending deal to keep Rurelec afloat. But one senses that eventually the options are going to run out, and severely constrained progresses to a trip to the administrators.

So it is still a sell.


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