Pulse Energy seeks up to $6m in convertible notes offer

Pulse Energy [NZAX: PLE], the electricity retailer controlled by lines company Buller Electricity, is seeking up to $6 million through a convertible notes offer to sophisticated investors to ensure it has a big enough cash buffer as it continues to grow.

The Auckland-based company wants to raise at least $3 million of which chief executive Gary Holden and directors James Hoseason, Francis Dooley and Peter Young would subscribe to about $1.5 million, it said in a statement. Their participation required a waiver from stock exchange listing rules.

The three-year notes would pay annual interest and convert into ordinary shares on Oct. 31, 2017 at a conversion price of 10 cents per share, or a 10 percent discount to the volume weighted average price in the 20 trading days before the conversion, whichever is the lower.

The offer is only open to eligible investors and Pulse will accept oversubscriptions of an additional $3 million, it said.

The funds raised will support Pulse's growth plans, which include the launch of gas and LPG offers, which require it to hold security on wholesale electricity market purchases, lines charges, and hedge agreements. The electricity retailer currently has about 54,000 customers up from 47,316 at March 31, and anticipates turning a profit before unrealised changes in the value of financial instruments in the second half of 2015.

"It is expected that the proceeds from the note offer, forecast profits in the six months to 31 March 2015 together with other initiatives currently in progress will provide sufficient funding to meet the winter peak in 2015, provide flexibility to deal with fluctuations in prudential security requirements and enable Pulse to take advantage of opportunities which may arise in the market," it said in documents accompanying the offer.

Pulse ceded a controlling stake to Buller Electricity in 2011 to repay debt and provide capital for expansion after the minnow retailer ran out of cash and leaned on the shareholder to get it through.

Today's document shows Pulse is in discussions with Buller Electricity to potentially alter their financing arrangements to better suit the retailer's cash and non-cash requirements.

"These discussions include possible arrangements to reconstitute and extend a $500,000 term loan due for repayment in November 2014 into the peak funding facility arrangement allowing Pulse to repay and drawdown such amount as its working capital requirements dictate," the documents said.

Shares of NZAX-listed Pulse fell 1.6 percent to 6 cents, and have dropped 13 percent this year.

(BusinessDesk)