Andalas Acquisition Of Bunga Mas Interest Impeded By Regulation

LONDON (Alliance News) - Andalas Energy & Power PLC on Tuesday said the financial commitment ...

Alliance News 12 February, 2019 | 4:17PM
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LONDON (Alliance News) - Andalas Energy & Power PLC on Tuesday said the financial commitment needed to acquire an interest in the Bunga Mas production sharing contract is higher than expected and could jeopardise the deal.

Shares in Andalas were down 27% at 0.60 pence on Tuesday afternoon.

The government of Indonesia provided the contractors with an agreement to convert the production sharing contract into a gross split production sharing contract. However, the contractors have chosen not to sign it due to certain issues with the terms that not been resolved to the contractors' satisfaction.

The vendor, Tilegarre Corp, has also opted not to sign the contract. No consideration has been paid or will be paid to Tilegarre until Andalas secures its interest in Bunga Mas.

Andalas said it was advised that the Indonesian government requested the contractors deposit money into an escrow "as security against a future work programme". This would require Andalas to raise significant additional capital and would harm the economics of the project.

The sale and purchase agreement for Bunga Mas remains conditional on the production sharing contract being extended on satisfactory terms. The agreement also includes Tilegarre's representation that neither performance bonds nor other financial guarantees and obligations are required under the production sharing contract.

"At this stage, this condition precedent has not been fulfilled and the representation is incorrect," Andalas said.

Back in August, Andalas entered a conditional agreement with Tilegarre to acquire an initial 25% participating interest in the Bunga Mas production sharing contract via a corporate acquisition, along with the right to increase its interest to 49% and then 100%.

The total consideration was 19.2 million Andalas shares for all 100%, with 9.6 million Andalas shares to be issued for the first 25% interest.

Andalas has incurred around GBP200,000 in legal, profession, and other direct costs concerning Bunga Mas. An update is expected on or before Monday Next week.

"We are disappointed by the recent developments at Bunga Mas. As its stands the financial commitment required for Andalas to fund its participation in the Bunga Mas [production sharing contract] would require significantly more capital than the original [sale and purchase agreement] envisaged. We are currently of the opinion that, without significant changes to the [government of Indonesia's expectations around funding the commitments it makes it very difficult for Andalas to proceed with the acquisition," said Andalas Chief Executive Simon Gorringe.

"We remain hopeful that an amicable position can be reached with [the government of Indonesia] and look forward to updating the market next week," Gorringe added.

By Anna Farley; annafarley@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar
Rating
Andalas Energy and Power PLC 0.64 GBX 21.90 -
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