
Energy Absolute Plc (EA) shares plunged by the 30% daily limit on Tuesday after the founder and chief executive quit over a fraud probe and its credit rating was slashed to junk, even as the renewables company said it is seeking outside support for its business.
EA resumed trading Tuesday after revealing it has 19.5 billion baht of debt due in 2024 and is seeking one or more strategic partners. Its disclosure followed a one-day share suspension ordered by the Stock Exchange of Thailand (SET), which demanded the renewables company explain its financials and the impact of a fraud probe.
Shares were suspended on Monday when the company announced changes to its board of directors and senior management after the previous chief executive was accused of procurement fraud, which he denies.
On Tuesday, the shares fell 30% to 9.2 baht as of 10.18am. Trading volume was 9.2 million shares, or 12% of three-month daily average, as selling orders outnumbered buying requests, according to data compiled by Bloomberg.
EA has lost more than 79% this year, partly on concern at its aggressive expansion into everything from power generation and batteries to autos and the assembly of trains, ferries and buses. Founder Somphote Ahunai, who has now lost his billionaire status, resigned as CEO at the weekend after the Securities and Exchange Commission (SEC) said it was investigating him and other executives for possible fraud. He denies wrongdoing.
Last week, the SEC alleged Mr Somphote, Deputy CEO Amorn Sapthaweekul and a third individual made procurements and received benefits worth 3.5 billion baht (US$96.63 million). The named individuals deny the allegations.
EA is "in the process of negotiating and considering the selection of strategic partner(s)" to boost its strength, repay debt and develop a sustainable business. It also intends to roll over short-term loans and said it still has about 1 billion baht of revenue each month from power plants, according to its filing on late Monday.
But TRIS Rating, a strategic partner of S&P Global, said in a separate statement that the downgrade to "BB+" from "BBB+" reflects “heightened liquidity risk” for the company in the near term.
"TRIS Rating views that the corporate governance issue is likely to severely impact creditors' and investors’ appetite on EA credit risk, leading to heightened refinancing risk of its near-maturing debenture obligations," it said.
The debt appears to be little traded, and while yields on the company’s debt appear to have climbed, it’s difficult to ascertain an exact price, Ariya Tiranaprakij, executive vice president of the Thai Bond Market Association, said by phone on Tuesday.
“The true impact on the company is the investors' confidence, as there are questions about the change in top management,” Ms Ariya said. “How will the company’s business plans and policies be with the new management team?”
But Ms Ariya said EA represented a totally different case from Stark Corp, the cable wire maker whose former chairman and several other executives are being prosecuted over an accounting scandal. “Energy Absolute’s assets and operations still exist and continue to generate cash flows,” she said. “The urgent task for the company is to bring back confidence from investors, creditors and other stakeholders.”
‘Severe repercussions’
Equity analysts have also expressed concern about the company’s prospects. Thanachart Securities now recommends investors sell the stock, and UOB Kay Hian ended coverage, warning EA’s ongoing and future projects could face delays, while the fraud allegations will likely have “severe repercussions for the company’s ability to issue bonds and manage debt repayment.”
“Energy Absolute’s shares will be affected by divestments by some funds, which are required to avoid investing in the company,” Saravut Tachochavalit, an analyst at RHB Securities (Thailand), said in a report on Monday. “EA’s new bond sales scheduled this month will probably be delayed indefinitely.”
Still, EA said in a press briefing on Monday that it will proceed with plans to sell as much as 5.5 billion baht of green bonds on July 23-25.
Following Mr Somphote’s resignation, the company appointed Somchainuk Engtrakul as acting CEO and the chairman of the board effective on Sunday. It also named Vasu Klomkliang as acting chief financial officer and Chatchaval Jiaravanon and Chatrapol Sripratum as directors.
The charges against Mr Somphote, Amorn Sapthaweekul, who resigned as deputy CEO, and a third individual relate to EA’s procurement of equipment from overseas and software for a solar power plant between 2013 and 2015, the SEC said last week. Both Mr Somphote and Mr Amorn denied any wrongdoing.