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- After some major confusion regarding a hefty funding agreement, Integrated Green Energy Solutions (IGE) has explained itself to investors
- The company told shareholders in January it was receiving $400 million in funding through the Abu Dhabi Investment Authority (ADIA) and its U.S. partner, Tangier Service Enterprises
- However, two days later it was revealed that ADIA actually had nothing to do with the funding
- Today, IGE told shareholders the mistake was made by its U.S. joint venture partner GEP Fuel & Energy Indiana
- Allegedly, GEP confirmed several times that ADIA was the source of the funding, and IGE had reasonable grounds to believe this was true
- Despite the blunder, IGE insists the funding is still on the way through Tangier
- The first part of the funding was initially expected to hit IGE’s bank account by the end of January, but this date has been revised to mid-February
- Until then, it’s likely IGE shares will stay suspended by the ASX
- Shares last traded for 13 cents each on Friday, January 17
After leaving shareholders scratching their heads in January, Integrated Green Energy Solutions (IGE) has explained what went wrong with its $400 million funding deal.
The plastic-to-fuel company announced the hefty funding from the Abu Dhabi Investment Authority (ADIA) on January 15 through Tangier Service Enterprises, who IGE claimed is a U.S. partner of ADIA. However, two days later IGE back-pedalled on this announcement and confirmed that ADIA actually had nothing to do with the funding.
Shares were immediately suspended as the ASX gave the company a chance to explain itself. Today, IGE has shifted the blame to its US joint-venture partner GEP Fuel and Energy Indiana and said the partner company gave it “reasonable grounds” to believe ADIA was the source of the funding.
The original announcement
IGE originally told shareholders it would receive a US$300 million (A$400 million) funding package from Tangier Service Enterprises, a U.S. partner of ADIA.
ADIA is owned by the Emirate of Abu Dhabi and acts as an investment fund on behalf of the Abu Dhabi government.
Importantly, ADIA has over $1 trillion worth of assets under management, meaning the alleged investment was an impressive vote of confidence for IGE and its clean energy tech.
In return for the investment, Tangier would be given a five per cent interest in Integrated Green Partners (IGP) — a joint venture owned half-and-half by IGE and GEP. Tangier would also get a seat on the IGP Board, and non-voting preferred stock paying an annual dividend of 3.5 per cent of the funding balance minus any repayments made.
IGE said it planned to pay back the full funding amount over five years and thus gradually reduce the dividend payments to Tangier.
The after-market retraction
As it turns out, ADIA has never had anything to do with IGE or Tangier.
ADIA spokesperson Erik Portanger told The Market Herald the Abu Dhabi Investment Authority “has not been involved at any time either directly, or through intermediaries” with IGE.
IGE confirmed this in an aftermarket announcement on Friday, January 17, leaving eager investors who topped up their shares on the back of the ADIA funding furious and confused.
Before investors could sell off their shares, however, IGE shares were suspended by the stock market operator and the company had a moment to collect its thoughts.
The explanation
In response to the ASX’s queries regarding the funding and confusion with the funding source, IGE released a 20-page explainer yesterday afternoon.
The explanation can be summarised into two parts:
“It wasn’t our fault.”
IGE explained that GEP, its U.S. joint venture partner, was responsible for sourcing funding for the companies’ project, and it was GEP who threw ADIA’s name into the mix.
Moreover, IGE had never worked with or been in contact with Tangier prior to GEP putting forward the funding package.
The company said it received over 50 emails from GEP dating as far back as July 2019 referring to Tangier and ADIA as the source of the funding.
IGE shared an excerpt from one such email to shareholders as part of its explanation.
“[Tangier] will take the executed document … to Abu Dhabi Thursday. ADIA will loan the funds to Tangier… [Tangier] feel this is a done deal.”
Stephen Hogan, GEP CEO, 2019, from Integrated Green Energy Solutions, 2020.
IGE maintains that when it released the initial funding announcement to the market naming ADIA as the source, it had no reason to believe this was not true based on correspondence with GEP and Tangier. GEP even allegedly confirmed in mid-December the funds had been transferred from ADIA to the States for the IGP project.
It was only when ADIA contacted IGE in mid-January to confirm it was not, in fact, the source of the funding, that IGE requested clarification from its U.S. partners.
As it turns out, Tangier claims to source its funds from overseas public and private investors, many of whom are located in the city of Abu Dhabi.
How Tangier made the jump from investors in Abu Dhabi to the Abu Dhabi Investment Authority was not explained. However, GEP said Tangier brought up ADIA as a potential well-suited investment partner early on in negotiations, and perhaps this is where the confusion began.
Still, IGE maintains the mistake it was not the company’s fault but that of its partners.
“It was believable.”
Importantly, IGE said it did not just take everything it was told at face value but did its own research. The findings of the research gave the company reasonable grounds to believe ADIA was, in fact, the source of the hefty funding.
ADIA’s website highlights its focus on investing in companies working in clean energy and helping fight the impact of climate change. Along with the investment authority’s One Planet initiative, the strategic direction of ADIA and the clean energy focus meant IGE was a reasonable investment target.
Further, a clause in the conventional funding agreement between IGE and Tangier meant that no fees would be paid until after funding was received by IGE — giving the IGE Board a “high degree of confidence” that Tangier was not acting dishonestly and the company was not being swindled.
So, primarily, IGE claimed it released the news of the ADIA funding to shareholders on the basis that it was told this was the case by its partners and it had reasonable grounds to believe so.
What about the cash?
The first part of the Tangier funding was initially expected to hit IGE’s bank account before the end of January at the very latest. However, independent of the ADIA blunder, this date has now been revised to mid-February.
IGE continued to reassure investors that regardless of the recent mistakes, the funding is definitely on the way.
GEP CEO and President Stephen Hogan told the company:
“Despite the revision of the funding date, based on all the work done to reach this point, I remain absolutely confident that the Tangier funding will be delivered in February.”
Stephen Hogan, GEP Fuel & Energy Indian, 2020
Of course, GEP’s words might be taken with a grain of salt from IGE investors.
Interestingly, IGE ended the December 2019 quarter with roughly half a million dollars in cash on hand. This means the massive influx of cash from Tangier’s funding will be an unprecedented bolstering of IGE’s balance sheet.
It should be noted, however, that one of GEP’s obligations under the company’s joint venture agreement was to secure funding for IGP of no less than US$200 million (A$300 million).
As such, the news of some significant funding should not come as a surprise to those following the IGE story.
Suspensions and shareholder compensations
IGE explained itself to the ASX yesterday afternoon but is yet to see shares back up for trade. Likely, the IGE suspension won’t be lifted until the funds hit the company’s balance sheet.
As for punters who bought in off the ADIA funding news, should the funding be confirmed for IGE but just from different primary sources, there should be no need for compensation. While it means IGE may not have the vote of confidence from an investor of ADIA’s calibre, it means the funds are still there to move forward.
Essentially, shareholders in IGE can now do little but wait until February 14 when the new funding is expected to arrive.
The next steps for IGE, the ASX, and investors will rely heavily on when and if this funding arrives as IGE expects.
IGE shares were worth 13 cents each before the were suspended on Monday, January 20. The company has a $51 million market cap.
