Partial sales of investee firm nets Origo up to £3.2m

Origo announced on Thursday that its investee company Niutech Energy was selling a 5.9% interest in its own operating company, Jinan Heng Yu Environmental Protection Technology, for gross cash proceeds of up to CNY 28.5m (£3.2m) in two tranches.

The AIM-traded firm noted that Heng Yu listed on China's National Equities Exchange and Quotations (NEEQ) in May 2016 and, prior to the disposals, the company held an 18.4% indirect beneficial interest in Heng Yu via Origo's 95.3% holding in Niutech.

Following the expiration of lock-up restrictions put in place in connection with the NEEQ listing of Heng Yu, Origo said it had now entered into arrangements to dispose of up to a 5.9% beneficial ownership of Heng Yu - representing approximately 30% of the company's total beneficial interest in Heng Yu - to Chinese institutional and other investors, in two tranches.

“The first tranche of the Disposals has completed and the group has received CNY 23.8m,” the board confirmed in its statement.

“An additional CNY 4.7m is expected to be received shortly, on completion of the second tranche of the disposals which remains subject to customary closing conditions.”

Cash receipts of the disposals, net of applicable taxes, costs and commissions, were expected to amount to approximately 85% of gross proceeds and would be applied towards Origo's working capital requirements, its board confirmed.

Any repatriation of capital from China remained subject to restrictions and standard processes, and the board added that it was unclear at present how long the repatriation process would take.

“The gross cash proceeds of the disposals imply a valuation of the company's total pre-disposal beneficial interest in Heng Yu of approximately $13m.

“The audited carrying value of Origo's 18.4% beneficial interest in Niutech as at 31 December 2016 was $14.2m, having increased from an unaudited carrying value as at 30 June 2016 of

$11.5m,” the board said, noting that its original investment cost was $6.35m.

Following the disposals, the company would continue to hold a 12.4% indirect beneficial interest in Heng Yu.