Charisma Energy faces material uncertainty as going concern, says KPMG auditors

SINGAPORE - Catalist-listed Charisma Energy Services Limited faces material uncertainty as a going concern, its independent auditors from KPMG stated in a report on the audit of the company's full-year financial statements.

The group which owns and lease hydropower generation equipment and accommodation modules said late Tuesday night (April 3) that the KPMG auditors drew attention to three matters of material uncertainty reflected in the financial results for the year ended Dec 31, 2017.

Charisma Energy incurred a full-year net loss of US$31.36 million and its current liabilities exceed current assets by US$34.81 million as of Dec 31, 2017.

The listed group has defaulted on its loan obligations. Consequently, senior bank lenders and a shareholder can call for repayment of respectively, some US$44.52 million of secured bank loans and a shareholder loan of US$850,000.

KPMG auditors noted that no letter of statutory demand for repayment has been issued by lenders as at the date of the FY17 financial report.

The auditors stated that Charisma Energy stands to continue as a going concern only if it is able to secure lenders' support to restructure the loans and push out maturity of these loans beyond the next 12 months from the reporting date. The group also needs to generate sufficient operating cash flows in order to sustain its business.

In its Tuesday's disclosure pertaining to, and response to, the auditors' comments, Charisma Energy indicated plans to divest certain assets to bring in additional funding. The group added that its renewable energy business is expected to generate positive cash flows.

On March 29, Charisma Energy entered into a deal to buy out two companies holding power purchase agreements to operate 12 mini hydropower plants for an aggregate consideration of US$1.875 million to be settled through issuance of new shares in the listed group.

It said that the deal will raise the overall capacity of its mini-hydro power projects to 43 megawatts, up from 42 MW, with a new plant projected to enter commercial operation this October.

Charisma Energy also said on Tuesday that it is in negotiations with lenders to refinance the outstanding loans, and upon a successful refinancing, the cash flows generated from the group's operating activities will be sufficient to allow it to continue operations and meet its obligation for the foreseeable future.

"Based the aforementioned, the board is of the view that the group will be able to continue as a going concern," said the company.

Charisma Energy closed at 0.4 Singapore cent on Tuesday, up 0.1 cent.