The anchors could now be off Powerhouse Energy Group PLC (LON:PHE) and its shares may be free to sail higher following a move this week to raise funds to repay a loan note which has been seen as a drag on the stock.
The green energy firm revealed on Wednesday that it has raised £2.5mln through a placing of shares at 0.8p each, the proceeds of which will largely be used to repay the convertible loan note facility with Hillgrove.
The finance house has accepted a £2mln offer to buy back the unconverted loan notes, while a final batch of the paper will be converted at 0.5p each, earning Powerhouse £1.4mln and raising Hillgrove’s holding to just over 300mln shares, around 25% of the firm’s issued share capital.
WATCH: 'Fundraise is a major turning point in the history of Powerhouse Energy'
The move should have a two-fold benefit for the group’s shares, as it caps Hilgrove’s holding, allaying fears over a massive diluting overhang, while also freeing up cash which was being thrown away in interest payments on the loan notes at a rate of around £0.5mln over the year.
Powerhouse was accruing 15% interest on the outstanding loan, so repayment will reduce its annual outgoings.
Hillgrove has agreed not to sell the newly converted shares within the next 12 months.
Meanwhile Yady Worldwide, a recent investor in the company, took £500,000 of the placing share, and has also agreed to a 12 month lock-in period in respect of its stock.
Major turning point …
In the company’s news release Keith Allaun, executive chairman of Powerhouse, called the loan note move “a significant event and a major turning point in the history of PowerHouse”.
He added: “The conversion of the Hillgrove note allows us to move forward aggressively and provides the potential to unlock the value of the company.”
Powerhouse Energy’s shares dropped over 20% on the placing news, but still held around 1.15p-1.20p a share having enjoyed a stellar start to 2017.
Even after the around 150% rise in the share price so far this year the company is still only valued at a micro £7.5mln.
This is despite the firm entering another exciting phase as it progresses with the testing of its G3-UHt system which transforms rubbish into electricity with no toxic by-products and effectively zero greenhouse gases.
Powerhouse’s last update, towards the end of last month, revealed the G3-UHt demonstration unit had been shipped from Australia bound for Blighty, and it is expected to arrive by the end of this first quarter.
The next news on where the unit will be sited in the UK, and on progress with commercial partners should hopefully follow shortly, and will likely give the stock another leg-up.