Ann: EWC to Raise up to $75 Million Convertible Notes, page-5

Just a few major points concerning this $75 million non-renounceable rights issue:
1. EWI has fully underwritten it;
2. Proceeds will be used firstly to (partly) repay EWI $25 million working capital finance and, in the main, to advance EWC’s main projects, namely the commercial operations of the Sengkang lng project 1st 0.5mtpa train (by end 2015), and the 2x200MW Philippines power plant (as soon as possible);
3. Two installment dates: 1st installment due 12 June 2015, 2nd installment due 21 December, 2015;
4. Interest rate 2.5%;
5. Conversion to shares (at 50 cents/share) only possible for the time period commencing after 2nd installment (ie. after 21 December, 2015) and 35 business days prior to maturity date (31 December, 2018);

A few major points re: project construction progress:

1. Sengkang LNG
PLN are on track to be able to supply power to lng plant prior to its commercial operations
EWC and PLN are discussing lng off-take agreements
SKK Migas has confirmed the allocation of gas from the WASAMBO field to be allocated to PLN power plants in eastern Indonesia (ie. for such off-take agreements)
1st 0.5mtpa train to be operational during this calendar year

2. Philippines Power plant
2x200MW gas turbines placed on their permanent foundations
Construction of auxiliary equipment in progress

My observations:
Firstly, I believe that this capital injection is required to ‘speed up’ project completion as well as enabling project debt financing arrangements for these two projects being finalized.

Secondly, as notes can only be converted into shares after 21 December, 2015, there is, I assume, an expectation (by management) that EWC share price will be well above the 50cent/share strike rate prior to that date.

Thirdly, such a ‘delayed’ conversion into shares (i.e. only possible towards the end of this year), ensures that there is no dilutive effect on current shareholdings until conversions are effected.

Fourthly, unless the share price rises substantially in the next few weeks (ie. well prior to 12 June, 2015), there may be little incentive for any other shareholders and/or new investors, apart from the current top 5 to 10 shareholders, to participate in this non-renounceable pro rata rights issue. My reasoning is based on the assumption that small shareholdings (ie. up to a few million shares) can be purchased ‘on market’ at below 50cents/share. Larger ‘on market’ purchases of shares, however, may put such pressure on the share price, that it may rise above 50cents (ie. the top few shareholders cannot really buy a substantial amount of shares below 50cents/share, making it attractive for them to consider participating in this convertible note issue).

Fifthly, given that EWI has fully underwritten this convertible note issue, it will enable EWI to increase its % of listed shares it currently holds (from around 37%) to a maximum of around 44% (should it be the only party willing to subscribe to this offer).


All in all, another forceful tangible sign that EWC will be able to bring its three major projects (Sengkang lng, Philippines lng hub and power plant) to commercial operation.