Trading Updates regarding Argentina and Chile

RNS Number : 0018E

Rurelec PLC

03 November 2020

 

3 November 2020

Rurelec PLC

("Rurelec" or the "Company")

Trading updates re Argentina and Chile

Argentina

In the announcement of 15 September 2020, the Directors of Rurelec PLC (AIM: RUR) provided an update on the Argentine Resolution 220 PPA. This resolution governs the capacity and offtake revenue generated by the steam turbine at Energia del Sur, S.A. ("EdS"), the Argentinian powerplant owned by Patagonia Energy Limited ("PEL") in which Rurelec holds a 50% interest. The Directors note that Resolution 220 PPA has now expired.

EdS management together with support from external advisers and the Rurelec Board are engaged in extensive negotiations to establish a new tariff for EdS's power generation.  Those negotiations are being held with CAMMESA , the organisation which controls the administration and distribution of electricity in Argentina and the Secretariat of Energy who have ultimate responsibility for the policies and tariffs that control the  generation and regulation of electricity supply  in Argentina.

The outcome of those negotiations, which have been taking place over several months, is currently uncertain but it is the Board's view that the strategy that is being adopted and the team that is being used to handle these negotiations will achieve an optimal outcome for EdS bearing in mind the poor state of the Argentinian economy and the effects of the COVID-19 pandemic on that economy.

Those negotiations are in their final stages, but it is not currently possible to say with certainty when they will be concluded.  The negotiation process has been extended by the Argentinian authorities beyond the time when EdS expected to have a new tariff in place as a result of political changes at the Secretariat of Energy and delays in governments processes due to the impact of COVID-19.

In the meantime, until a new tariff is operational, capacity and offtake revenue generated from the Steam Turbine is being remunerated at spot prices.  If this pricing is not corrected in the short term, it would likely have  significant adverse implications for EdS's revenue and cash generation, which in turn would affect the timing and amounts of any of the cash payments due from EdS to PEL and ultimately to Rurelec.  However, in order to maximise future net cashflow generated by EdS, the Directors of Rurelec understand that EdS's management has formulated contingency plans to reduce costs  including options to shut down parts of the EdS operation (e.g. the Steam turbine) in order to reduce associated operational costs should it be necessary.

There can be no guarantee as to the outcome of the Argentinian negotiations and accordingly the Rurelec Board is adopting a cautious view regarding the preservation of cash reserves.  Cash holdings of Rurelec PLC at 30 October 2020 amounted to £908k. Further updates will be provided in due course as appropriate.

Chile

The Group has continued to maintain the necessary environmental consents and lease obligations for the Central Illapa project and has been granted an extension to the project construction period from Ministerio de Bienes Nacionales, the Chilean Ministry of National Assets to November 2021. 

For further information please contact:

Rurelec PLC	W H Ireland (Nomad & Broker)
Simon Morris, Director Andy Coveney, Director	Katy Mitchell Lydia Zychowska
Tel: [phone]	Tel: [phone]

 

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