CEL Announcement dated 7 Dec 09, in relation to
Divestment of Investment in Enersave Power Pte Ltd on 18 Nov 09, for a consideration of $70,000. Principal activity of EP includes developing and managing Huizhou Richway Waste-to-Energy Co., Ltd (“HRWTE”).
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CEL Announcement dated 22 Jan 10, in relation to
Divestment of Investment in Hivern Investments Pte Ltd on 23 Dec 09, for a consideration of $10,000. Principal activity of Hivern includes the ownership and management of Changyi Enersave Biomass-To-Energy Co. Ltd (“CY”).
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CEL Circular to Shareholders dated 9 Feb 10, in relation to
1. Proposed allotment and issue of up to 1,375,000,000 Debt Conversion Shares at an issue price of $0.08 for each Debt Conversion Share to the Majority Scheme Creditors, pursuant to the Proposed Debt Conversion as approved by the Scheme Creditors under the Scheme of Arrangement;
2. Proposed allotment and issue of up to 3,404,166 Debt Conversion Shares at an issue price of $0.08 for each Debt Conversion Share to Mr Koo Ah Seang, Executive Director and Chief Executive Officer of the Company, pursuant to the Debt Equity Conversion and as part of the Proposed Debt Conversion Issuance;
3. Proposed allotment and issue of up to 1,697,917 Debt Conversion Shares at an issue price of $0.08 for each Debt Conversion Share to Mr Tan Choon Wee, Executive Director of the Company, pursuant to the Debt Equity Conversion and as part of the Proposed Debt Conversion Issuance;
4. Proposed allotment and issue of up to 2,860,542 Debt Conversion Shares at an issue price of $0.08 for each Debt Conversion Share to Mr Tay Wee Kwang, Executive Director of the Company, pursuant to the Debt Equity Conversion and as part of the Proposed Debt Conversion Issuance;
5. Proposed consolidation of every 15 existing Shares in the capital of the Company held by Shareholders as at the Books Closure Date into 1 Consolidated Share prior to the Proposed Debt Conversion Issuance, the Proposed Directors’ Issuance and the Proposed Advisers; Issuance; and
6. Proposed allotment and issue of (a) up to 10,000,000 Advisers’ Shares to Stamford Law Corporation and/or its nominees and (b) up to 140,000,000 Advisers’ Shares to TSSA and/or its nominees, at an issue price of S$0.01 for each Advisers’ Share, in satisfaction of professional fees payable by the Company to its professional advisers.
Indicative Timetable
| Date of EGM | : | 2 Mar 10 |
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| Expected date for completion of consolidation of Shares | : | 15 Jun 10 |
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| Expected date for allotment and issuance of Debt Conversion Shares and Advisers’ Shares | : | 29 Jun 10 |
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| Expected date for notice of EOGM and meeting of Scheme Creditors (to approve convertible loan and/or bond) | : | 10 Aug 10 |
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| Expected date of proposed lifting of suspended status of the Shares | : | 28 Sep 10 |
Financial Effects on NTA
| | As at 30 Sep 09 | After Share Consolidation | After Consolidation and Debt Conversion Issuance | After Proposed Transactions |
| Consolidated NTA | (193,120,000) | (192,120,000) | (83,120,000) | (83,120,000) |
| No. of Shares | 1,841,678,046 | 122,778,536 | 1,497,778,536 | 1,647,778,536 |
| Consolidated NTA per share (cents) | (10.486) | (157.291) | (5.55) | (5.04) |
Financial Effects on EPS
| | As at 30 Sep 09 | After Share Consolidation | After Consolidation and Debt Conversion Issuance | After Proposed Transactions |
| Consolidated profit after tax and minority interests | (201,650,000) | (201,650,000) | (201,650,000) | (203,150,000) |
| Wt. Avg No. of Shares | 1,841,678,046 | 122,778,536 | 1,497,778,536 | 1,647,778,536 |
| Consolidated EPS (cents) | (10.95) | (164.24) | (13.46) | (12.33) |
Conclusion
· Although CEL may be salvaged from liquidation, existing shareholders’ stake has become almost worthless i.e. Shares consolidation of 15:1 and issuing of new shares to almost the initial number of shares before consolidation, divestment of core business entities i.e. biomass energy generation.
· Although the EDs’ stakes are also diluted, they are still receiving new shares after the consolidation exercise, offsetting their dilution, compared to ordinary shareholders’ effects are peanuts.
· After all the salvaging, key beneficiaries are still the Majority Scheme Creditors, Professional Advisers and the EDs.
· It may take several years before the company can restore market confidence and see their share price recover. If existing shareholders do not buy in new shares after the lifting of suspended status, the chances to breakeven from their initial stake may be forever. Question to ask here is, "Can CEL recover from this fall?"
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CEL Announcement dated 12 Mar 10, in relation to
Deregistration Of Subsidiaries namely, (1) Ascent Energy Limited, (2) Asia Renewable Energy Private Limited, (3) Gold Fame Asia Limited and (4) Metro Power Limited.
The Subsidiaries were set up to be as intermediate holding company for biomass plant in China. The Subsidiaries were inactive since incorporation. As part of the scheme restructuring process, companies within the Group which are no longer required or have served their purpose, will be dissolved or deregistered.
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Key Lesson Learnt
In our course of due diligence conducted on companies, financial leverage is a key area to find red flags. The business prospects of the company may be promising, but if the company is too heavily leveraged for growth, it may not be able to withstand any financial impact, such the one CEL is encountering currently, resulting in forced-sale of many valuable assets.
* Vested with interest.
Warmest regards,
Leroy Ang
"When I Stop Learning, I Stop Living."
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