Rurelec over the long term & Discussion Director Purchases (Not Rurelec)

So Rurelec wins Three New PPAs in Peru Totalling 30MW at a price of US$58 to US$60 per MWh. Not a bad pricing structure I was led to believe by a friend of mine who knows a lot more about power generation that I ever will. 

What is interesting is, for Peru it adds to the value already there. The guff from the company website (Peru overview) already shows they have 5 turbines on a hydro project (Cascade Hydro / Canchayllo/Santa Rita) in the Junin/Ancash provinces in Peru (link takes you to the RUR map). I won't bore you with the rest of the spec, you can read it yourself. However what is interesting the 30MW competitive tender process is in the same Junin Province as the current Cascade Operations (a positive in terms of costs and management issues).

Obviously cash is need, but its on its way, Peter Earl suggested that this was before Christmas, however if it isn't in my view it represents a buying opportunity.  I'm in a position where I want the news but on my terms! i.e. a Little later please if you will so the myopic and over exposed traders have to sell up and run! The delay in my view won't be because of any bad news, but because of the process and legal processes don't run on schedule most of the time (just see the Victoria Oil & Gas Arbitration Delays). Recent examples being Gulf Keystone for the muppet contingent!

The longer-term view for Rurelec is looking better than anything I could have imagined. In fact it was only in discussions around 6 months ago that I had a view of it being a sole trade on the International Arbitration decision, sell on the news and off to new horizons. This, strangely for me as I'm autistic trader (black or white in viewpoint no fences allowed), has changed, I'm not on a fence either. I firmly believe in light of the deals and the alingment of director interests means good or bad, the Directors are with you in pain or positives. 

As such I don't think they're in it for a quick kill either. I do wonder if Rurelec will in the future align itself to Santiago and delist of AIM. The benefits are massive, local support, funding and reducing listing costs. I don't envisage this straight away either, due to the support by AIM from holders, including Sterling. Without it, as a holder, you would have clearly had a situation similar to Oxus Plc (LSE: OXS). Something that Oxus seem totally oblivious to, further more refuse to answer any questions or suggestions of a placing I have put to them. One can only assume they love the 'overhang' of the ELF/SEDA on their stock.  

It shall be an interesting story ahead for Rurelec, perhaps valuations and future strategies will give more confidence in the stock post the International Arbitration award. Remember folks, they had an asset, the asset was making a profit and as such the asset has an overall value. I take the view that Rurelec will achieve the upper end of their guidance. The Arbitration panel would be hard pushed to justify a lower valuation. Of course the Bolivian Government will disagree, as they cannot be seem to be making damaging decisions for their Country. 

So the clock is ticking and Rurelec have clearly not just sat there and waited for the Arb decision. Something if I'm honest 12 months ago I'd have wanted them to do. i.e. Conserve cash and just become a shell. Yes, I actually believe that the future is looking significantly better than 12 months ago. Of course, people would be silly not to protect their position and take some off the table to bank profit. Rurelec is moving to my longer term portfolio. So in the absence of any other operational news, its 'merely' the Christmas cheer that is required now!

Director Awards (Non-Rurelec related) - On to something that I have a pet hate about, where Directors award options, some at Nil cost, but generally dilutive to the tune of around 5% of the company over a 3 year period. This style is to me unjustifiable, its not as if they've persuaded a bank or PE (Private Equity) to back an MBO. They've been appointed and generally haven't risked and aligned their interests. Excuses are "because of closed periods" or financial circumstances etc...Well I'm sorry to say, Companies are a simple Yes or No, the directors actually feel the company is viable and will improve in value so buy stock, or they don't think it has value and consider the risks unreasonable so don't buy. As such any company you're involved with, if the Directors aren't putting Skin in the game, consider it a significant risk and factor that in.

So its positive to see the likes of London Mining today, yes guidance off around 10% and allegedly a few one off issues, but the the Company was informed that on 13 December 2013 Sir Nicholas Bonsor, Deputy Chairman of the Board of London Mining, acquired 11,820 ordinary shares in the Company at a price of 100.125 pence per ordinary share. Ok its not massive, 11K GBP but the fact he's clearly stating the company has value goes some way to show the investors he agrees with his statements. Perhaps other directors will take the opportunity of cheap shares. I've been a supporter of London Mining for a long time, yes I've sold and bought, longed and shorted, but the long-term value is backed with management. The management clearly do the right deals, ok Debt expensive but at least it 'ensures' the risk of dilution to shareholders is limited! Unlike however many companies I could name!! 

Take for example Kazakhmys, they have to raise significant cash at some point, the question is, are they praying for a rise in the share price? Hmmm having been short for nearly a full year, I closed most of my mining positions as I believe they're due some positives at 'some point' so the risk at the prices they are now makes it a gamble so I'll await indicators. One of those will be fundraisings. So watch Kazakhmys, any rights issue or fundraiser is likely to impact on the SP, albeit it may be slow with opportunities to short to the "all in price post" rights issue. That was my signal for the short on BARC, if the weighted price was 287, the market had to price in the risks i.e. trading fines and penalties etc..and the difficulties they face as a bank. I'll proof read and amend later, apologies for errors as ML is on!

Atb Fraser (Now proof read "allegedly")