Locality Planning Energy (ASX:LPE) restructures to deliver $30m cash inflow

• Locality Planning Energy (LPE) will undergo a restructuring process of its on-market residential and business electricity retailing business to deliver a $30 million cash inflow
• The company says it can no longer provide competitive rates to customers through the “volatile and extreme” Queensland wholesale electricity market
• With around $30 million, LPE can meet its outstanding $21.2 million obligation to BlackRock and move to a $6 million positive net cash position once it repays a $2 million loan
• Shares in Locality are up 7.84 per cent and trading at 5.5 cents as of 1:20 pm AEST

Locality Planning Energy (LPE) will undergo a restructuring process of its on-market residential and business electricity retailing business which is said to result in a $30 million inflow of cash.

The company said it can no longer provide competitive rates to its on-market customers due to the “volatile and extreme” Queensland wholesale electricity market, and is encouraging its customers to switch providers to avoid substantial increases to future power bills.

Currently, over 70 per cent of LPE’s customers have switched to alternate providers which has allowed the company to secure $8 million in cash-secured bank guarantees that is required by the Australian Energy Market Operator (AEMO) for credit support.

Additionally, the company has closed its wholesale electricity hedge book at $22 million and increased electricity charges to legacy clients yet to transfer away.

With approximately $30 million, the company can meet its outstanding $21.2 million obligation to BlackRock Group and move to a $6 million positive net cash position once it repays an additional short-term loan of $2 million.

Chairman Justin Pettett said that this exercise is a “transformative restructuring” that will deliver a positive outcome for all stakeholders.

“In turn, [the restructuring] will free up working capital and materially strengthen LPE’s balance sheet.

“Moving forward, the Board will focus on growing the more stable strata business and developing the vertically integrated renewable assets which have the potential to create significant value for shareholders.”

Currently, the BioHub facility in Bundaberg, with its anchor tenant behind-the-meter
digital currency miner STAK Mining, is Locality’s inaugural generation asset.

Based on current estimates, STAK should commence commercial operations late in Q4 2022.

Shares in Locality were up 7.84 per cent, trading at 5.5 cents as of 1:20 pm AEST.