Andalas finalises placing for funding of Sumatran project

Indonesia-focused oil and gas firm Andalas Energy and Power finalised a discounted equity placing of 1.27bn new ordinary shares on Monday, raising £500,000 for its Sumatra-1 project in the process.

The 1,277,139,208 shares, acquired by 1798 Volantis Fund at a 10% discount to the mid-market share price, equated to 21.33% of Andalas' enlarged share capital.

Volantis also provided the group with a £2m convertible loan note facility to provide access to follow-on capital required to develop "at least one" of its wellhead independent power producer (IPP) projects through to its final investment decision.

Simon Gorringe, chief executive of Andala, said, "The funds raised in the placing enable the company to advance each of its projects. It is expected that, taken together the proceeds from the equity subscription alongside the convertible loan note would, if drawn down, provide the capital to fund the company through to the first project's final investment decision, which is the precursor to construction."

Andalas also announced on Monday that it had signed a memorandum of understanding for gas sales with PT Sinar Era Gemilang (SEG) of Indonesia for the supply of gas to its new independent power project at Sumatra-1, and had also commenced discussions with the South East Asian country's national power company PLN regarding the procurement of generating capacity.

That gas supply agreement followed the establishment of a new joint-venture between the two companies to develop IPPs in Indonesia.

Andalas and SEG had also undertaken preliminary grid stability and demand studies for the IPP at Sumatra-1, the company said in a statement.

"The Sumatra-1 IPP represents further solid progress. It not only develops and strengthens our project portfolio of IPPs but also diversifies operational and counterparty risk, being our first non-Pertamina project," Gorringe said.

As of 0920 GMT, shares had dropped 1.15% to 0.0430p.