Saturday, 12 July 2014

Symphony and Ranhill

I wrote several times about Ranhill Energy, here and here.

Today The Star published an article "Ranhill's utility businesses to anchor Symphony".

Some snippets:

Ranhill Group, whose oil and gas business contributed to its failed listing last year, will now be going to the market without that unit.

Ranhill’s planned reverse takeover (RTO) of Symphony House Bhd will have its water and power businesses that include a valuable water concession in Johor and operation of two power plants in Sabah.

When Ranhill first announced its intention of reversing its businesses into Symphony back in March, it comprised the utility divisions and the oil and gas portfolio.

But in late June, Ranhill said the RM800mil RTO would only include its water and power assets.

Recall that Ranhill had previously pursued an initial public offering (IPO) slated for July 31 last year but withdrew it after a non-disclosure breach relating to a suspension of a Petronas licence of an affiliate company in the oil and gas division.

Ranhill’s major shareholder Tan Sri Hamdan Mohamad was reprimanded and fined RM300,000, while the company that was to have been listed, Ranhill Energy and Resources Bhd was imposed a fine of RM200,000 by the Securities Commission (SC).

In an email reply to StarBizWeek, a Symphony spokesperson explains that the omission of Ranhill’s oil and gas division into the current RTO exercise was because the latter had slipped into the red in 2013.

Ranhill WorleyParsons Sdn Bhd (RWorley) was excluded from the initial assets to be injected into the RTO as it made losses in 2013, and by virtue of this fact we decided not to include it into the RTO,” the spokesperson says.

RWorley is Ranhill’s main O&G asset specialising in engineering procurement and construction services. It is 51%-owned by Ranhill in a joint venture with WorleyParsons Ltd, Australia’s largest oil and gas engineering company. The Australian-listed WorleyParsons holds the balance 49% in company.

According to the Symphony spokesperson, the losses that RWorley incurred was attributed to work for Petronas Gas Bhd’s liquefied natural gas (LNG) regasification plant project in Malacca. In 2011, RWorley together with Muhibbah Engineering Bhd had undertaken the RM1.07bil contract for engineering, procurement, construction and commissioning (EPCC) of topside construction work for regasification plant.

Symphony did not reveal the amount of losses RWorley had made but says that “it has been fully accounted for in 2013.”

A fund manager said that while Ranhill’s oil and gas division was to provide a growth story for its listing, he understood why a decision was made not to include that in the listing now.

A loss-making division in the RTO equation would not have been palatable. While an RTO is a fast track way for a public listing, it is still subject to approvals from the regulators,” says the fund manager.

"A loss-making division in the RTO equation would not have been palatable", I agree, but would a loss-making division in an IPO be palatable? This company was included in the IPO of Ranhill which was only cancelled at the very last moment.

The authorities really should look into this case, since there are quite a few corporate governance issues in this group.

Ranhill was a listed company before, this would be another example of a listing-delisting-relisting exercise, something I am not keen on, to put it mildly.

On another note, Symphony, the listed company which will be used for the RTO, has not exactly been a shining example of profitability. Its results of the last four years:

Year  Revenue   PATMI
2010    175m    -22m
2011    186m     -4m
2012    205m    -38m
2013     52m    -39m

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