Alternergy board votes to divert IPO proceeds to clear deficit and focus on land-based wind projects

Alternergy [ALTER 0.83, up 2.5%; 102% avgVol] [link] revealed that its board has approved the re-allocation of P185 million of its P1.61 billion in IPO proceeds in two separate transactions. The first, which the PSE considered to be a “quasi-reorganization”, would transfer ~P42 million from its “additional paid-in capital” account to wipe out the company’s negative retained earnings account. The second would re-allocate P143 million away from future offshore wind projects and the Lamut Hydro Project, and apply that amount to its Tanay and Alabat Onshore Wind Projects which have both been qualified under the Department of Energy’s second Green Energy Auction. The re-allocation will leave only P5 million of the IPO proceeds applied to the future offshore wind projects, and remove all IPO funding from the Lamut Hydro Project. ALTER was briefly halted on Friday to allow the investing public to digest the information.

 

MB bottom-line: ALTER didn’t provide an actual justification for the quasi-reorganization move, but perhaps this is intended to allow ALTER to declare dividends sooner since a company cannot declare dividends when it carries a negative retained earnings balance. Monde Nissin [MONDE 8.94 up 0.6%; 54% avgVol] made a similar move back in April when it reallocated P7.2 billion of its IPO proceeds to eliminate a negative retained earnings balance. The movement of money into the two wind projects appears to be in response to winning qualification under the DoE’s recent auction. ALTER is pushing ahead with an aggressive P12 billion debt program to finance those projects. Vince Perez, Chairman of the ALTER board, said that “additional funds will be channeled to support the work programs” for the continuation of the predevelopment of the offshore and hydro projects.

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