Aim- and AltX-listed Ipsa this week announced plans to sell its UK holding company Blazeway Engineering, which owns Newcastle Cogeneration (NewCogen), to raise working capital and avoid sending the South African operating subsidiary into business rescue in the absence of other funding solutions in a tight timeframe.
With Ipsa’s working capital and creditor pressure deteriorating further after a mechanical failure of one of NewCogen’s gas turbines in November, Sloane Corporation, owned and operated by former Ipsa director Peter Earl, who left in July, agreed to acquire the operation for £1.86-million – £50 000 in cash and the balance to be settled through noncash considerations.
The independent power plant developer reiterated its “extremely” tight working capital and, as it remained reliant on the leniency of its creditors, it risked heading for administration should it fail to obtain suitable funding solutions.
“The transaction, if completed, will release Ipsa from a significant portion of its outstanding liabilities. This will, in turn, place the company in a stronger position to meet all of its remaining obligations to creditors – most notably, Ethos Energy Italia – out of other asset disposals with any residual balance for shareholders as Ipsa turns itself into a cash shell that will seek a reverse takeover,” chairperson Richard Linnell commented.
The disposal would see Ipsa deemed an Aim Rule 15 cash shell, which would require the company to make an acquisition constituting a reverse takeover within six months.
Despite the sale, the estimated £3.2-million owed to Ethos would leave Ipsa’s financial health in a critical state.
However, the company would focus on satisfying its remaining creditors through the sale of the balance of plant associated with the previously sold 701DU turbines and the collection of the receivable from power plant operator Rurelec.
As part of a 2013 deal that saw Rurelec acquiring two gas turbines from Ipsa for £16.1-million, the Latin America-focused group had been paying Ipsa’s primary creditor Ethos in installments.
Meanwhile, Sloane had already paid £50 000 towards NewCogen’s outstanding liabilities and agreed to set aside £280 000 to be drawn down and used to settle some of NewCogen’s creditors and obligations.
Any drawdown would be converted into a loan should the acquisition fail.
The sale remained subject to conditions precedent, including shareholder approval.
Ipsa’s shares remained suspended on the London and Johannesburg bourses pending the release of its financial accounts for the year ended March 31, 2015, and the interim periods to September 30, 2015.