Companies: RUR ��

Value enhancement on Latin American power acquisitions has enabled Rurelec to lift annual profits 740 per cent to �17.7 million.

AIM-quoted Rurelec, which specialises in developing rural power generation projects in Bolivia and Argentina, increased pre-tax profits last year from �2.1 million to �17.69 million on turnover up from �1.9 million to �20.7 million. Chaired by Jimmy West and steered by former maverick financier Peter Earl as chief executive officer, London-headquartered Rurelec owes its turnover expansion to the acquisition of a controlling stake in Empresa Guaracachi, Bolivia’s largest power generation company – a deal that was accompanied with a �19 million placing at 42p.

The surge in profits is also the result of a �13.3 million ‘negative goodwill’ contribution, which West said arises from developing new power generation capacity at recent acquisitions at ‘below the open market value’. He added that international financial reporting standards require Rurelec to take this in as a profit, though earnings from this source cannot be distributed to shareholders as a dividend.

Earnings more than doubled to 21.17p a share and assets rose from 26.7p to 50p a share. Year-end cash also rose from �424,000 to �3.2 million, while inventories increased from �460,000 to �3.1 million.

Earl said Guaracachi, which has paid a �1.5 million dividend to Rurelec, has increased its capacity from 360MW to 440MW and is negotiating a gas feedstock for a plant at Yacuiba, Bolivia, to supply electricity to Argentina. Rurelec is also adding a 60MW capacity to its own EdS power plant in southern Argentina’s Patagonia region.

Earl claims expansion opportunities abound, not only in Argentina and Bolivia (where, he insists, the regime of President Evo Morales is benign), but also in Chile and Peru. He said the US and other international power groups have largely departed South America, leaving Rurelec, which has �100 million of debt facilities, well placed to seek deals with the local groups and US hedge funds that are replacing them.

Floated at 40p in 2004, Rurelec shares have fluctuated between 35p and 56p over the past 12 months and now stand at 54p, up 2.5p this morning, valuing the company at �37 million. They offer long-term speculative possibilities.

Rurelec	AIM	�24.02m	28.00p	-1.00p
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