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Kalina Power Ltd

Wasabi Energy chairman: Rights issue required to realise potential

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Wasabi Energy’s (LON:WAS, ASX:WAS) chairman John Byrne insists Wednesday's discounted rights issue was necessary and will ensure the power specialist fulfils its potential.

The company, whose Kalina Cycle technology turns excess heat back into power, outlined plans to raise up to £8.7mln at 0.4 cents per share (0.225p), sparking a 20% fall from the share price, which now stands at 0.227p.

The rights issue will be offered to shareholders on the basis of one new ordinary share for every one ordinary share held.

Only investors based in Australia, New Zealand, Switzerland and the UK can take part in the offer.

The funds will be used to complete the purchase of the Tuzla geothermal power project in Turkey, redeem the secured debt and for working capital.

“The market’s known we’ve been unfunded for a while and we wanted to put an end to it,” chairman Byrne told Proactive Investors.

“So, rather than do a little one, we’ve said we’re going forward full-on, one-for-one, all shareholders.”

As a major shareholder – he owns 11.1% of the company’s issued share capital – Byrne says he understands the pain felt by shareholders on the receiving end of the share price fall prompted by the discount.

“I’m up there, I’ve bought more than anybody. I’ll be taking up my entitlement and I think some of our biggest shareholders will as well.”

Byrne reckons it will be the last time it comes to the market for funding. Once the company becomes cash generative as its power plants come online, it will fund itself.

“I think this gets us through,” he continues. “We’ve tried to put it off in the hope that we’d get the other things done, but that has not occurred.

“Everyone’s an expert in hindsight. I was obviously holding off to do it higher and what’s happened is that it’s gone the other way. That’s my responsibility, but I’ve got to say I’ll be taking up my interests.”

He adds: “We need to be in a strong financial position and grow from here and that’s the plan.”

Wasabi has an option to acquire up to 50% of the Turkish company which owns Tuzla.

A recent financial draft of plans at Tuzla showed an indicative net present value (NPV) of A$142 million, an internal rate of return (IRR) of 57% and EBITDA (underlying earnings) of A$19.6mln.

The potential of the Asian business, which is gearing up for an IPO, is thought to be even greater as demand for power soars in China.

Management hopes the funds raised from the rights issue will help it deliver its goal of having 25 megawatts (MW) of power generation under its watch by the end of 2015 and growing this by 25MW a year thereafter.

“If we achieve this growth, every 25MWe of owned power generation (assuming 10c per kwh feed in tariff and 8% discount rate) represents an estimated increase of approximately $120 million NPV per annum,” Byrne explains.

Quick facts: Kalina Power Ltd

Price: $0.03

Market: ASX
Market Cap: $21.75 m
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