Pulse Utilities Secures New Funding

Media Release 21 June 2011

Pulse Utilities Secures New Funding to Secure Position as Low Cost Electricity Supplier

Pulse has entered a conditional heads of agreement with BEL to recapitalise the company to ease cash flow pressures and secure its position as an independent energy retailer.

Pulse Utilities New Zealand Ltd (Pulse) has been reliant on the financial support of Buller Electricity Limited (BEL) for several months, an arrangement that was unsustainable, Pulse Managing Director Mr Dene Biddlecombe said.

“Pulse had been unsuccessful in its latest attempts to raise capital privately, given the recent volatility and lack of understanding in electricity markets by potential investors. Directors believe this transaction will be in the best interests of the company as a rights issue will allow all convertible note holders and existing shareholders to participate in the recapitalisation,” he said.

Completing the capital raising was essential to putting Pulse back on a sound financial footing and allowing it to get through its current cash crisis and achieve its potential, Mr Biddlecombe said.

“This arrangement, subject to shareholder approval, will support continuation of our growth trajectory and position as a customer focused independent retailer. We know our model works,” he said. “We have acquired our 2010-11 target of 23,000 customers from a base of 3,000 12 months ago. We are on track to reach our new, conservative goal of over 54,200 customers by the end of the 2013 financial year.”

Mr Biddlecombe said Buller Electricity Limited shared Pulse’s vision of delivering consumers exceptional value through low cost supply.

“We are pleased to have BEL as our partner as we cement our role as the largest independent retailer in the New Zealand’s electricity market.”

The deal will see BEL, the electricity network owned by the Buller Region consumer trust become the majority shareholder in Pulse with a stake of at least 65%, up from its current holding of 8.5%.

“The investment in Pulse reflects Buller Electricity’s long-term strategy to diversify our business,” said Buller Electricity Chairman Frank Dooley. “Given the opportunities arising from announcements by both the Government and Electricity Authority to enhance competition in the electricity market, Buller Electricity looks forward to working with Pulse to help meet that objective.”

Details of the proposed transaction include:
§ BEL will provide a guarantee of $9 million for a two-year term to support prudential and other security requirements.
§ In consideration of this financial support, Pulse will pay a guarantee fee to BEL through an issue of 54 million shares at $0.05 per share (representing a 15% per annum payment on the aggregate value of the guarantees).
§ BEL will capitalise $1.12 million of existing loans that it is owed by Pulse at an issue price of $0.05 per share.
§ Pulse will undertake a rights issue to raise $7.5 million at $0.05 per share and BEL will commit to investing $5 million under the rights issue.
§ The agreement of convertible note holders will be sought to:
- have 25% of the value of the notes restructured into a 5 year interest free term loan; and
- convert the balance of the notes into ordinary shares at a rate of three shares for every one note held (which will be eligible to participate in the rights issue).

As the transactions will result in BEL lifting its stake in Pulse to at least 65%, approval by Pulse shareholders under the Takeovers Code will be sought prior to the rights issue occurring. Full details of the transactions, including an independent advisor’s report, will be issued to shareholders for consideration in approximately 6- 8 weeks time.

ENDS

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