Rurelec extends bridging loan as Argentina adds to cash crunch

Rurelec has increased its short-term loan to provide more access to working cash for the power plant developer and its operations in Chile and Peru, after short-term cash generated by its Argentinian joint venture came in lower than expected.

The AIM-listed company, whose chairman and then chief executive both threw in the towel in December following the collapse of major shareholder Sterling Trust, has upped its facility agreement to £1.2m from the £0.85m agreed in February in order to allow management more time to find long-term funding.

The extended bridging loan remains on the same terms as those agreed in February, coming due for repayment on 30 June with interest charged at 1% per month.

Rurelec, whose one executive director is former Grant Thornton accountant Simon Morris, stressed that its cash position remained "extremely tight", not helped by significantly lower than expected receipts in the first part of the year from its Argentine joint venture, which state subsidies were cut just as end-user prices have begun to increase.

While the short-term effect on the company has been to exacerbate its cash crunch, in the long-term these changes and Argentina's exchange controls relaxation are expected to be beneficial to Rurelec.

The joint venture, whose plant is otherwise performing to budget at EBITDA level for 2016 and it is meeting its third party obligations from its own resources, has in the short term effect moved from collecting debt from 45 days of revenue to 90 days of revenue.

"The company expects cash receipts for the full year to be at a similar level as 2015," said the statement, which was released at 25 minutes after the London Stock Market closed for the day on Wednesday.

Having hit a low of 0.55p in October, shares in Rurelec finished on 1.35p at the end of the session.