Wigton mulls raising more capital

Wigton mulls raising more capital

Quarterly dividend payments being contemplated to calm shareholders concerns

By Durrant Pate
Observer business writer

Friday, October 23, 2020

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Renewable energy company Wigton Windfarm will definitely be returning to the equities market in the coming months to raise capital for its expansion plans, particularly in Jamaica.

In addition, the company has already set its sights on regional expansion and is now in the market with some governments and existing overseas renewable companies for joint venture opportunities. On Wednesday, at its first annual general meeting (AGM), Wigton gave the clearest indication, so far, that it will return to the equities market to source more funds for its expansion projects in Jamaica and throughout the region.

Managing Director Earl Barrett, who made the disclosure, did not indicate the method to be used to source the necessary funds via the equities market, whether by a rights issue or through another public offer.

Responding to questions from shareholders, Barrett told the AGM that both options are open for consideration.

He told the meeting, which was held virtually, that several opportunities are being opened up for Wigton's expansion, both locally and regionally, particularly given the drive throughout the Caribbean for renewable energy to replace fossil fuel. Arising from these opportunities, Barrett cited the need for additional capital.

As such, returning to the equities market for funding is definitely on the cards, especially with the much-expected request for proposal from the Government for additional renewable energy for the national grid. The Government is on record as stating that it will be going to the market to up the amount of renewable energy used in the national grid.

“If there was to be a call by the Government of Jamaica for additional renewable energy to go on the grid, there is a stipulation in the Jamaican market for such a call, that whosoever is going to make a bid, which of course Wigton is going to be in that bid, would have to have a minimum of 20 per cent equity,” said Barrett. “So you can only borrow up to 80 per cent, so chances are that for any sizeable project Wigton would be going back to the market seeking funds.”

He emphasised that the company would need to have adequate cash on hand to exploit such opportunities. In supporting this point, Wigton Chairman Oliver Holmes said any projects being developed by the company would involve a combination of debt and equity.

This, he argued, is one of the means by which the company protects shareholder value.

Barrett stated that the methodology for sourcing the necessary funding is dependent on where the project is being implemented and the amount of capital that is needed.

He told shareholders that the near term outlook for the company is very positive, pointing out that “the future lies in diversification and regional expansion, exploring potential projects in the local and regional markets and preparing for aggressive implementation post-COVID-19”.

The issue of dividend payment was discussed at the AGM, as some shareholders demanded more regular payments, questioning why Wigton doesn't follow other listed companies in going this route. Pressured by this line of questioning, Holmes committed the board of directors to consider the proposal.

However, in putting up a stout defence of the company's dividend policy, Holmes pointed to the imperative of having sufficient funds on hand to exploit business opportunities while at the same time preserving shareholder value. He was adamant about keeping cash within the company to finance particularly large projects.

“While we will consider borrowing, we have to have appropriate equity,” he said.

Turning to the financial performance of the company, net profit for the just-ended financial year came in at $662.75 million from total revenues of $2.64 billion.

Total expenses for the year amounted to $1.24 billion. Sales revenue came in at $2.42 billion, while gross profit reached $1.65 billion. Total assets accumulated to $10.60 billion, while liabilities reached $7.14 billion, leaving shareholders' equity at $3.46 billion.

Earnings per share for the year were $0.06. The average plant availability rate was 94.6 per cent with total production output of 157 million KWh.

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