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Pulse seeks up to $5m in convertible notes

Monday 26th July 2010

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Retail electricity supplier Pulse Utilities will seek up to $5 million from sophisticated investors in a convertible notes issue that will lead into a proposed share purchase plan later this year.

NZAX-listed Pulse says it needs between $1.7 million and $3.5 million as "core funding" for operations, while a further $1.5 million is earmarked for use in expansion projects that the company is assessing.

The new notes issue comes with an NZX waiver under the Pre-Break announcement procedure because if the full $5 million in notes were issued, it would exceed 25% of the issued capital of Pulse.

Pulse has experienced strong customer growth, adding an average 350 new customers weekly in the last six months, although it remains a small player with 10,018 customers either on its books or in the process of switching to its service, which it says offers both competitive pricing and early access to smart metering.

In particular, Pulse says its growth increases requirements for security to be posted with the wholesale electricity market and individual electricity generators, where it buys its power for re-sale to retail customers; and with regional network lines companies.

"Until Pulse has built its business to a point where it is cashflow positive it does need to continue to raise new capital to meet these working capital requirements," said managing director Dene Biddlecombe in a statement to the NZAX.

Some $1.62 million of convertible notes that are due to mature in coming months would be repaid out of cashflow, as the company moved to become cashflow positive, Biddlecombe told BusinessDesk.

Biddlecombe and two other shareholders, Tony Famularo and interests associated with John Philpott, have all indicated interest in subscribing for $100,000 of notes each.

The offer will not be open to "members of the public", and will be available only to investors defined by the Securities Act to include wealthy or experienced eligible persons, relatives or close associates of Pulse, and professional investors.

The notes will pay 10% interest and be redeemable either for cash at face value or for Pulse shares at a fixed price of 60 cents per share.

Pulse shares are thinly traded, with none changing hands immediately this morning. Last trades were at 45 cents per share, down 35.7% over the last 12 months, and down 10% over the last six.

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