Powerhouse writes down $6.8m value in HydroWorks to nil
Christchurch-based technology investment company Powerhouse Ventures has written off the $6.8m value of its 23 per cent stake in subsidiary HydroWorks.
The write off has also caused a domino-effect drop in the price of Powerhouse shares to 40 cents each, compared with the $1.07 price a year ago.
Powerhouse itself is 20 per cent owned by Christchurch City Council.
A decision would be made over the next two weeks about whether there were potential buyers for the HydroWorks assets. Otherwise statutory administrators might be appointed.
Powerhouse said a "material degradation" had occurred at Christchurch-based HydroWorks and it faced significant financial issues.
But Powerhouse managing director Stephen Hampson said in a statement HydroWorks held valuable technology and he hoped it would be possible to recover some value.
Problems emerged with Christchurch-based hydro-electric turbine engineering company, HydroWorks, over the past three months.
All its directors resigned even as HydroWorks issued a $2m bond issue to raise working capital, leaving chief executive Andrew Rodwell at the helm.
Rodwell has failed to return phone calls.
A Powerhouse source said there was a lot of finger pointing going on, and things were in a state of flux.
Powerhouse and HydroWorks executives were at odds with each other over various issues.
The $6.8m of Powerhouse money at risk included $4.3m of equity, which it has written off entirely, $1.3m in loans, $1m in a term deposit subject to a guarantee, and $168,000 owed by trade debtors.
HydroWorks recently completed two projects for a water company in Australia but there were problems and overruns.
HydroWorks had also been seeking two significant contracts from Indonesian companies and these hang in the balance.
Powerhouse has shareholdings in 23 early stage technology companies, all trying to raise money to develop their products commercially.
The HydroWorks investment represented 17 per cent of the Powerhouse portfolio. HydroWorks was formed from a restructure of an old Christchurch firm, Mace Engineering.
Powerhouse was required to disclose what was going on with its subsidiaries under Australian Stock Exchange continuous disclosure rules. It raised A$10m in late 2016 and listed on the ASX to be closer to sources of investment.
Another Powerhouse subsidiary, Christchurch-based CropLogic, is at the most advanced development stage with the recent issue of an A$8m prospectus to commercialise its crop monitoring technology, ahead of a planned ASX listing.
The CropLogic float has the support of its corporate advisor Sydney-based Hunter Capital Advisors which has underwritten it to the tune of A$5m and said it is committed to the success of the capital raising.
CropLogic is offering offering 40 million shares at A20c each to pay for market development, research and development, working capital, and cover the cost of listing, which it said was a certainty with the underwrite.
CropLogic managing director Jamie Cairns said a listing would also be a boon for Powerhouse as the first float in the Christchurch-based technology incubator's investment portfolio.
The Powerhouse stake of 30.6 percent of CropLogic, would be diluted to about 17.5 percent.
"CropLogic represents the first demonstration of our (investment) pathway," Powerhouse managing director Hampson said in a statement.
The CropLogic issue closes on August 15, with a proposed listing on August 31.
Meanwhile, Powerhouse is approaching its annual reporting date, and valuations of subsidiaries would confirm more details about their financial position.