A few people have asked about the risk issues with the International Arbitration Claim for Rurelec and the risk of non-payment. Firstly, it has to be acknowledged that any International Arbitration claim is enforceable in terms of seizing assets this doesn't mean there won't be any game playing by Bolivia. Please see the Argentina bond holders actions, to see how they're enforceable. Its not something Rurelec need but likewise, Bolivia's Bond market (capital raising for countries) will be stressed without a settlement and potentially cost more.
Its small scale compared to the Debt that Bolivia owe internationally, however this is underpinned by some significant growth within the country. Debt to GDP is a relatively low 33% at around $7B, so Rurelec's award and all the others 'are' affordable. Bolivia can afford to settle the $142m claimed (plus costs) so it's not the end of world. Likewise it's not like they don't have an asset to back this, it's not a 'whiplash' injury caused in the International Car park.
Three things expected out of the ruling:
1) Bolivia cannot be seen to agree with any ruling, it's a political game as well. The ruling party will have to appear 'the victim' within their country despite themselves causing the problem. They nationalised the asset, no one else...so I am sure we'll hear them squeal like a stuck pig! That doesn't mean they won't pay as they'll also leverage off "being seen to comply with International Law etc..." We'll pay but protest too much!
2) Any award above £50m won't be payable immediately, but will certainly underpin the SP, assuming it's above the current booked value of the claim.
3) I envisage there being some form of timescale agreed with Rurelec and Bolivia for the payment, albeit my money is on late payment. As Bolivia have agreed to transparency its more than likely they'll comply and remember the Panel does have the authority to order security for claims.
Bolivia will pay, after they had some election type profiteering of the 'hard done by Bolivian's protecting their own assets.
Friday 29 November 2013
Wednesday 27 November 2013
"You cannot be serious man!" Some Bolivian comedy & politics. (edited with improved translation hopefully!) Many thanks Rinal
Before you read the article that
was kindly left by the messengers (thank you); its important people are aware
this site is well known for guff. This "website" proclaimed that
Bolivia saved Guaracachi when it nationalised it as it was 'bankrupt.'...The first article is from 2011, but you get the idea even with the very poor translation via Google.
You can scroll down to the next article...of course a court case hinders negotiations, afterall Rurelec were left with no alternative but to file for International Arbitration because Bolivia "kindly" did sweet nothing to compensate the company bar some 'lip' service in my opinion.
Likewise, you'll note how many companies are hitting the International Arb route in the final article also highlights in bold.
Guaracachi required $ 19.5 million after nationalization.
This was 06th August 2011, alas the spin...
Since August 06 2011
PAGE SEVEN
Natali Vargas - for the Generator continue to operate from May 1 of 2010,
it had to stop paying debts with YPFB and obtain
a credit of Corani and Valle Hermoso .
"At the time of nationalization, the company had a debt of $130 million; then, for the company continue to operate, first Bolivia had to pay a debt to Yacimientos Petroliferos Fiscales Bolivianos (YPFB) for fuel, to the equivalent to $14.5 million; because if it was not paid, the company had to stop operating, the company had no cash availability or anything", described the manager of the National Electricity Company (ENDE), Nelson Knight.
The executive explained that, through this kind of loan from YPFB, the company could only continue to operate.
In addition, the subsidiaries Corani and Valle Hermoso gave EGSA five million dollars to enable it to operate, since it "had no way to pay and cover their obligations or to continue their operations". In addition, the State - exceptionally - gave permission to EGSA (Guaracachi) to pre-sell carbon credits, with which gained $4.5 million .
ENDE took charge of EGSA from May 1 of 2010, when in commemoration of the Day of the work the Government of Evo Morales nationalized, in addition the electric generation companies Corani and Valle Hermoso.
On Tuesday, during the inauguration of the IV Expoindustria, Morales announced that EGSA was bankrupt.
That position was clarified two days later by the minister of hydrocarbons and Energy, Jose Luis Gutierrez, who explained that "the President, as an example to the investors not to make mistakes, he said that we made this company bankrupt".
Yesterday, in the locality Chuquisaquena de Camargo, the Head of State said that "many of the companies were in bankruptcy because of the irresponsibility of the neo-liberal mandates" [Excessive Borrowing].
However, a report from rating agency risk Pacific Credit Ratings reveals that the liabilities and debts of EGSA have been growing since the year 2006, due to obligations that were acquired by the company to purchase the Combined Cycle, which suffered a short circuit hours into its Goverment operation last year. Until March 2011, EGSA had a total financial debt of 633.9 million Bolivians, and a liability of 961.3 millions of Bolivians.
The decision was based on the fact that the project is delayed, which was more than two years, after that the turbines of this burned.
The budgeted costs for the purchase of the combined cycle was $40 million, but the cost in reality was $91 million.
Debts for the purchase of the equipment meant EGSA borrowed money from the CAF and had issued bonds.
Government did not speak of bankruptcy in 2010
When the Government of Evo Morales nationalized the three generators Guaracachi, Valle Hermoso and Corani, and the electricity distributor Elfec, he did not mention that any of them were in bankruptcy.
In his pep talk to nationalization, the May 1 2010, Morales said: "we have the obligation and the mandate of the Bolivian people, in application of the Constitution to recover (the companies of the) bad call capitalization". Also, he said that "it is the obligation of the State , to investors recognize your investment".
The early morning of that day, military troops entered the facilities of the generation plants; however, the Agent pointed out that it was "an effort to reach an agreement with transnational corporations and there was a lack of willingness to agree through dialog is the State and its institutions ".
Days later, the Government reported that it had $50 million to compensate the three generators, despite the fact that the British Rurelec PCL felt that the price for the shares of 50% in EGSA was worth more than $65 million and more than $5.5 million in dividends .
Data from the Regulatory Authority and social control in electricity (AE) reveal that from 1995 to 2009 EGSA ran $92 million and had committed $69.3 million for 2010.
Combined Cycle - The company Guaracachi
hindered its costs of borrowing by 33.46 million Bolivians
by investing in the Combined Cycle Project.
For yesterdays article
read: Attorney
claims that the solution hinders ICSID British company Guaracachi (Article 26th
November 2013) (edited with improved translation hopefully!)
The High, Nov 26 (ABI) .- The International Center for Settlement of
Investment Disputes (ICSID), which is dependent on the World Bank, it stifles a
solution with the British company Guaracachi America Inc Rurelec, denounced
Tuesday the State Attorney General, Hugo Montero.
This British company sued the Bolivian State, before the Arbitral
Tribunal, for the payment of compensation to 142.3 million as a result of the
nationalization of their assets in the Empresa Guaracachi SA (EGSA).
However, alleged that 'once more the subject is handled by the ICSID', recalling that in 2007 Bolivia denounced the convention establishing and decided to withdraw from the agency of the World Bank.
'Without recognizing its jurisdiction the Attorney through his legal team is arguing and basing on that stage has no competition and that you should separate the two issues; the Hydrocarbons Law and the nationalization, since mixing cases is unsuitable for the development of the issue, obviously for the interests of the parties', he explained.
He complained that to control the case, the ICSID takes advantage of the situation, by mixing two different subjects, and drag the item with the nationalization of the Hydrocarbons Law of 2007.
Montero said the Attorney works in defence of the interests of the Bolivian State in at least 13 cases, by conflict relating to investments after the Bolivian Government took the sovereign determination to nationalize natural resources and the companies that were privatized in the past.
"This is dragging on with the item of nationalization to
submission, consideration and competence of the forum of the ICSID, which is
totally unacceptable, it is not logical, we know how it goes this center, we
know this because we have denounced and these items are to be discussed and
know the people, we are subject, obliged to go talk to a scenario to which we
have denounced', he said.
According to the attorney, this is the cases Guaracachi America Inc
Rurelec; Chaco; Quiborax and Non Metallic Minerals; De Albertis (Sabsa); El
Mallku Khota; Sinchi Wayra should start; Caiguami; Emdigas S.A. M. ; Colquiri;
Air BP; mains (REI) and Iberdrola, S.A. , in addition to Ocampo Cataldi, who
was already completed.
It also established that 'Bolivia does not negotiate their interests, if
you can find a understanding and agreement with the party who is suing for an
amount of fair compensation and balanced, also documented and transparent and according
to the interests of the Bolivian State'.
Muppet-Nations & Investors (often one & same)
Hopefully people notice the sarcasm in my tone today albeit with a clear message! I had the pleasure of reading contributions/messages today as Ian is on an a non-comms hiatus from later today as he's going 'into the bush'! He's gone for near 4 weeks...I'm sure he's actually booked a safari over and above his alleged work!
Like most, I grow tired of people trying to find someone else to blame or make decisions for them. This is not a forum to obtain recommends on the share purchases, its a discussion. If you want a managed service, I'm sure there are good companies out there and I recommend you try them.
To the point of annoyance for people including myself; Rurelec is a simple story so get your pens ready those that are intellectually INCAPABLE of working this out.
They had an asset, valued at X (some may say $142m and I happen to believe its near this value), the asset(s) were reappropriated without financial restitution by the Bolivian Government and as such there is compensation to be paid. If this is really difficult to understand then please find the nearest savings bank and put your monies into a "high interest" a/c. It will save you the tedium of trying to work out the rest of the details.
So for clarity, RUR through its 50.01%-owned Bolivian subsidiary Empresa Guaracachi SA (We'll call it Guaracachi you might notice a theme!) are claiming compensation as per their RNS US$142 million 02 March 2012 . The claim is specifically for RUR's % of Guaracachi, not any other parties holding. If additional parties were added to the claim it would require a request similar to Churchill Mining's claim (RNS Link to explain process 10 May 2013). Another party, in CHL's case another subsidiary Planet (Planet Mining Pty Ltd), requested that the claims be consolidated and dealt with in one ICSID Proceeding. Is that clear enough? I hope so.
Post the resolution of Rurelec's claim, there will be one post to show all the comments (omitting names) regarding RUR's claim that are an absolute joke...some admittedly humorous but others really need to ask themselves if they should be managing their own investments. Why do people even bother if they cannot understand the basics?
However, here's one that tops the bill..."maybe bolivia have only nationalised the electricity & not company?" am I missing something????
Acquisition and Placing for Empresa Electrica Guaracachi 13 December 2005 (includes some history) for those understanding the issues, please read the link! That placing was at 42 pence and unlikely to get back there in the short-to-mid-term.
Have a good Wednesday! Atb Fraser
Monday 25 November 2013
Larry Coben Director's Dealing in shares on 22/11/13
http://www.rurelec.com/about-us/board-of-directors-and-senior-management Now no one can say the Directors aren't aligning their interests with the shareholders. I don't often rate purchases by the company as its generally over used and wrongfully to stop a falling share price. TCY TeleCity Group Plc Investegate News Thread.
I ask people to consider this when buying stock. If the directors persistently award "in the money stock" or nil cost option stock, then its fair to say they want to utilise your monies to benefit rather than their own. This is important, not just in International Arbitration Cases but all companies.
So Larry Coben now has 900K stock...I wonder if it'll be an interesting month ahead!
Saturday 23 November 2013
Rant: What is annoying about 99% of AIM companies.
I was going to snap this onto the end of the Rurelec update but I think it's important to acknowledge separately.
Simple, if a company has never delivered, what’s the odds of it delivering? You can research and consider items but the facts are there…unless of course you like the taste of jam, tomorrow, the day after and next year.
I always want people, to consider the impact of the Australian dollar depreciation, its my main FX trade. Look at the cost of gold and the likely impact on exports from Australia to China...
Rant: what is annoying about a significant % of AIM companies.
So as shareholders we employ MD/CEO's/FD to undertake a specific role. That role should cover all elements that are required for the company to progress commercially. So why is it, you find companies paying consultancy fees to MD's/CEO/FD's and the like that should be incorporated within the role? I don't mean their overall fee arrangement and how its paid, but those additional payments. I mean the specific elements say for example, take a mining company, why should a consultancy payment be made to a CEO whose role should cover "mining finance, PR, and strategy/commercial optimisation." Its one thing I am looking at significantly, amazingly here's a thought for investors...
The fees charged (under G&A General and Administrative) expenses is far from proportional to the returns for shareholders. For me, when I see significant excess with little return I am now shorting these stocks...Yes I've so far shorted, VIY, RGM, RRR, NYO, PVCS, CYAN BLVN...the list is endless or very poor performances some because of the market conditions others because they were never in my opinion likely to return anything for shareholders long.
The companies need to start being accountable for their wages and lack of return for shareholders; I base this on their share prices...why does a party deserve near $250K+ per annum for a company never returning anything for its shareholders...those stalwarts of "long only." Something I used to be but have significantly changed...I'm a negative trader now, looking for items the market doesn't appreciate or is clearly running out of cash...80% of my book is short.
There's two Directors in particular whom I won't name at the moment, from a certain company that appear to have their 'nose' in the trough in so many ways, I'm amazed their cleaner can't claim a fee as well. It's one of the reasons I now monitor the alleged tips/recommends by many people to appraise the 'pump' or short to wait for a spike on nothing to short later...
I am now firmly engrained in companies with multimillion pound market caps above most of AIM, where their fundamentals don't add up...or do. Examples being, BT compared to SKY, the short on SKY was clear as anything. However, one chap paid vast amounts informed me I didn't know what I was talking about and hoped I got burnt. Going as far to inform me that my head was stuck up my arse…no one considered the challenges and increased cost per user to maintain them with SKY, nor did they consider that Sky is reliant on specific elements…how much will the Premier League Cost next time…analysts aren’t rating in the fear factor that Sky (LSE: BSY) will have to pay. They can’t afford to lose it..especially if Liberty come to the market perhaps taking ITV. Some say this may cause a monopoly, however I disagree...
So back to my rant, where there has been more than 3 targets missed on a company, name me a share price that hasn't halved? Of the ones I follow, short, long etc...there's not one. I'll give you a prime example of a company I have been significantly short on...actually two, just to get your brains thinking.
Look at the lack of returns, I raised this when options were awarded in Vialogy when it was significantly higher. Why would you buy, admittedly there are the one’s you’ll miss out on, such as Nighthawk’s turn around, however its better to miss one than be involved in 2 3 4 5 6…you get the idea.
So you’re thinking of a good company? I can automatically name one…
Grant of Options to Iofina Directors 12/11/2013 they should be congratulated, admittedly I’ve sold most of my stock and barely hold any now, but I had been buying for a very long time…despite significant abuse and attempts to ramp the stock, I persisted. It’s the reason I don’t read the bulletin boards now…the commentary in my view is fairly disconnected from reality.
Bulletin Boards invoke a fear or psychological element that doesn’t match the returns. Likewise paying for coverage of stocks, or live share prices? Why would you bother, your terminal should do it for you. Traders, Investors and the like should start demanding more. If you’re buying stock, get your broker to send you their coverage..you are after all paying a fee. If not move somewhere where you’re valued and coverage is guaranteed. There’s nothing up with paying for coverage if you returns are likely, however these stocks have peaks and troughs…Rant over. Apologies I try and keep this specific to certain International Arbitration Stocks, but I am what the market makes haha!
As a final thought, for those investors out there…there aren’t many now. Why do you need live prices to look at to over focus? To pay someone else for despite no doubt paying them a trading fee as well? I have prices, I pay for it, but it’s my livelihood now, 90% of my income comes from the market. It doesn't make me better than someone working in an office or not wearing jeans 99% of the time bar the odd meeting! However, people have a perception they need all these boltons to make money often paying for prices, but watching their stock go up and down and doing nothing? Sound familiar? Well if it does consider whether its viable to even bother with it.
When in fact, most people trade to often, focus on one stock too much and as is evident by discussion with other parties. Not often make money. This doesn't mean the Tom Winnifriths and Dan Levi’s of this world aren’t valuable, their traditional approach to investing (my view) should make them more valuable to the retailer without the time to cover items as much as TW & DL do. No I'm not paid to state that, it's just something I have a view on. However, from a distance I have observed the abuse, the discontent and the like said about them. Would someone really call them that to their face? Just because you have a screen to rant at, doesn’t mean you can’t at least be polite. So for those without the manners, don't bother reading this board or any board. In fact go and learn some before you start insulting yourself more..
However here’s an equation for you…
When a company returns little for its shareholders and the board cost a lot…which way is the SP going. So if a party points this out, why get abusive? Perhaps your risk profile is “of the hope they do one day return money”, but the abuse… I am lucky, I have a fail safe, I don’t read the abuse now, Ian does, poor chap, he approves or not. Likewise, if there’s negative commentary it shall be published guaranteed only if it doesn't include abuse or personal insults…
As an additional thought, not related to the above:
Investors need to be more aware of where a company is in terms of 'commercial success' (returns from shareholders). Follow Inspirit Energy to get an idea of the movement in the SP. I would have shorted this had it been available as a short. The reasons being the company will need to sell significant amounts to actually gain a return for stock holders. Once you wrap in all the costs on top of producing...
When looking at the Micro-CHP (micro combined heat and power) and the feed in tariffs. I don't form a belief that CHP on a micro level will produce "20%" of the energy for the UK. The reliance on GAS has significant risks anyway...however I'm not going to have a debate about Energy. I merely want people to follow the stock. A) with the Equity Swap Agreement B) The requirements for funding, albeit I want people to consider its possible with http://www.help-link.co.uk/boilers whom offer finance, so does BG etc...If INSP start to offer affordable finance (perhaps via the The Green Deal financing mechanism) that doesn't eat into the cost of the boiler significantly and the feed in tariffs are reliable, then there could be a case. However the cash flow required doesn't stack up to me currently. Hence the valuation at just under £10M market cap (Shares 566.77m SP: 1.75p mid) in my opinion is over-rated based on future expectations alone.
I always want people, to consider the impact of the Australian dollar depreciation, its my main FX trade. Look at the cost of gold and the likely impact on exports from Australia to China...
Have a good weekend, time for a children's party...
Sale of Jenbacher Gas Engines
Seems the discussion points of the Gas
Turbine Sale are more interesting from an Arbitration perspective than the
sale. The sale in part validates the payment made to acquire IPC, for which if
I'm honest I didn't realise there was any worth in it...as in I couldn't see
the point.
BRR discussion with Peter Earl of Sale of Turbines, plant
development & Arb Expectations (22/11/2013
I would like to thank Rinal, a Bolivian reader for assisting with news flow. What I suspect isn't mentioned on this
discussion is that the Statements and inferences by the Bolivian Government are that 'Bolivia'
will have won if they pay anything less than the amount demanded. So its gone
from 'its worthless' to now being any value less than that claimed is a
victory. Are people really that naive to not realise spin when they hear it?
Quite exciting in a 'snail like fashion'
and something before Christmas? Who knows, in some respects its a shame the
deadlines were put on it as it just creates negativity if they pass in cases like these. Albeit I have to
acknowledge every man and his dog will be emailing RURelec for updates. I pity
Peter in some respects as the expectations are more about the arb than the
power production increases, I hope he has a limit on his email box or nerves / typing skills of steel.
So a quick summary is, disposal of assets
not needed on track. Santiago Listing 'imminent', albeit I'm guessing after Xmas? Say,
after the arb settlement? As then there's something to sell into...Who knows!
But its likely RUR will have both new plants up and running by end of 2014? So
could RUR be holding long term value. Something I've only just recently started to appreciate more...
Finally, what is noted is Bolivia (and
Rurelec) gave an undertaking to the Court that the award is incontestable and
is full and final. This in my view lowers it significantly in terms of non-payment risks...
On to my rant on the next post!
Thursday 7 November 2013
Oxus Plc - why this EFF & International Arbitration Coverage
It’s interesting that a number of parties have been
utilising the opportunity to acquire further stock over the longer term in Oxus Plc. I don't know who Mr A F Gibbons is
nor is it fair that people suggest or pry into his life in an attempt to find
the individual. I wish him the best of health etc...He’s working to the same
accord as other shareholders in acquiring.
There would have been a significant increase in the
SP if it was not for the Darwin Equity Finance Facility (EFF Agreed on the 13 March 2013).
It raises a question of why Oxus uses the EFF. It contradicts all of
their efforts in securing and using the Third Party Funding from
Calunius Capital (01 March 2012) but
significantly dilutes the settlement (to a degree) and negatively impacts on
any share price appreciation with an almost permanent short on the stock.
Something I'm not innocent of myself however this is purely because of the EFF
and protecting my position.
Perhaps the company should agree with shareholders
on the register if they wish to participate in a) one off placing or b)
regularly placing with a tie-in agreement till after the arbitration or April
2014 whichever happens sooner? Total shares
in Oxus now stand at 470,675,089 as of today. Another option would be to
sell some litigation type bonds at a premium solely secured against any such
award. Total shares in Oxus now stand at 470,675,089 as of today,
with by my estimated a likely 60M ish further shares to be issues.
Churchill is clearly
temperamental because of the known reasons; however I would not want to be
trading purely on a technical analysis as the ratio of risk to reward clearly
overrides any 'common-sense'. Yes Churchill will be irrational, for the nervous
hold to the end, for the brave trade between the ranges...if that's your
appetite. Finally, as a positive coverage positive coverage (ShareProphets.com
by The Closet Chartist) is starting to occur for the
International Arbitration Companies currently in the process of 'protecting
their rights'. Will this make a difference? I doubt it...
Long Live these amazing IPO's,
Foxton's, Daily Mail & Twitter, can there be a forth? Lloyds Bank perhaps?
Have a good evening/morning!
BBC HARDtalk Video on Dewi Fortuna Anwar - Adviser to the Indonesian Vice President
Thanks to 5 posters and a few emails on this. Quite pertinent..
Wednesday 6 November 2013
Rumours & Volume & other elements impacting on Indonesia
It's unsurprising that today had such a spike on small volume. Firstly there's rumour, albeit clarified by the company today in CHL statement regarding share price movement (06th November 2013).Where there is no reason for the share price movement...
Well I'll start with the rumour; it comes with a caveat of 'risky' to say the least. There is rumour in Indonesia that that Government is trying to 'clear' up their issues and it’s more than possible for them to be speaking with Churchill Mining. I find the timing very unlikely, surely one would wait until after the Jurisdictional Ruling before engaging in such a process. However, my view is the jurisdictional issues are merely a game stalling exercise during the process. My simple view on International Arbitration process:
1) They had an asset that had considerable value, we won't debate the difference whether Discounted Cashflow, Profits or Net Asset Values or what the figures represents.
2) Their investment in the asset was not protected and the process was abound with issues that Churchill should have been protect by the Regency of East Kutai. Alas this was more the opposite, nevermind the conflicts of interest that were there for the majority of the Regency 'determinations.'
3) For those having read the Appeal Transcripts, my view is it was a farce nevermind as clear as mud.
So when considering the above, the Foreign Investment Company (Churchill) was not protected either by the Appeal Court or by the Regency and as such they're owed compensation for the loss in value/value of the asset plus associated costs and disbursements.
Very basic description of the Jurisdictional Arguments, as such Indonesia is compelled to comply with the International Arbitration Agreement, Churchill was a Foreign Investment Company that had its assets unlawfully removed = payment.
Anyway, back today, it was unsurprising the price rise with the rumours, but also the stock is so tightly held 1.4M will make it move especially if someone is gaining a position. Time will tell...
Interesting times ahead assured….
Forgot the discussion of the Indonesian Minimum Wage Rises which may have an impact on investment and growth in the Country, will discuss another time!
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