Shares in clean energy developer Kedco (AIM:KED) took a beating this morning after the company said it had failed to secure debt finance on suitable terms to fund the development of a new 4 megawatt gasification plant.
The Irish-based energy group announced in December that it has signed a joint venture agreement to develop the plant in Newry, Northern Ireland. Total financing for the project is £15 million, of which approximately £5 million was to be provided by Kedco.
The original agreement between Kedco and its joint venture partner saw each subscribe for 50% of the equity in a project joint venture entity ("PJV"). In addition, the remainder of Kedco's investment will be by way of a loan to the PJV which will have the right to share in the profits generated from this Newry project on a pari-passu basis with the equity.
It was originally intended that the balance of the funding requirement will be met by bank debt, however, this morning Kedco said it had thus far struggled to secure debt financing on “suitable terms”. As a result, the projected commissioning date has been pushed into Kedco’s next financial year, which starts on July 1, 2010.
Perhaps more concerning for shareholders, Kedco further warned that it would require additional funds for working capital purposes. The company is currently in discussions about possible equity or debt finance.
“The board is confident that suitable investment will be secured however, it acknowledges that there can be no guarantee such investment will be forthcoming. In the absence of suitable investment in the short-term, the board would pursue alternative means of maintaining adequate cash reserves including management of its working capital position,” Kedco warned.