South American power generator Rurelec was established to set up and run power stations in the 'southern cone' of Latin America. But the company suffered a massive blow when its main business in Bolivia was nationalised in May 2010. Since then all revenues have come from a single 136 megawatt (MW) plant in Patagonia that's running at full capacity and performing well. But a local profit becomes a small post-tax loss after allowing for uncovered UK expenses. The upshot is that half-year profits were overtaken by a 127 per cent tax charge.
The nationalised assets consisted of a half-owned subsidiary which was the largest power company in the region with four gas-fired plants producing 420MW of power. These have a book value of £48.8m - while the compensation claim from Rurelec is for $142.3m (£88m). Given that the company's market value is just £33m, this means the ruling at the Court of Arbitration in April is likely to have a major impact on the shares price.
Moreover, with the help of a recent $15.5m loan, Rurelec is diversifying. Its key move is to set up power plants in the north of Chile to provide electricity to copper mines fired by imported liquefied natural gas. In time - and it may not take that long - Rurelec could be supplying Chile's miners with twice as much power as its Bolivian plants produced. It's also involved in a hydropower scheme in Peru and only this week was selected as a preferred developer of a power plant in Bangladesh.
RURELEC (RUR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 7.75p | MARKET VALUE: | £32.6m | |
| TOUCH: | 7.5-8p | 12-MONTH HIGH: | 10.875p | LOW: 6.875p |
| DIVIDEND YIELD: | nil | PE RATIO: | 13 | |
| NET ASSET VALUE: | 20p | NET DEBT: | 1% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£000) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 7.21 | 37 | -0.18 | nil |
| 2012 | 6.92 | 463 | -0.03 | nil |
| % change | -4 | +1151 | - | - |
Aim: Electricity | ||||
