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Flowgroup to sell main subsidiary to Co-op as price cap looms
Flowgroup's shares plummeted on Tuesday after the company announced its intention to sell its main subsidiary, Flow Energy Limited, in the face of government energy price caps.
Flow Energy, which has 130,000 customers in the UK, is set to be sold to Co-operative Energy Limited for £9.25m following the creation of a conditional sale and purchase agreement, subject to adjustments to reflect the crystallisation of payments to suppliers, working capital and other factors.
A statement from Flowgroup read: "The headwinds facing challenger suppliers, in particular the impact of the Government's price cap and the significant number of new entrants to the market pursuing aggressive pricing strategies, have continued to strengthen."
As well as the prospect of a price cap, the company said it has also felt the effects of a cold winter and increasing wholesale prices.
Conditional on shareholder approval of the sale, proceeds are expected to be used to fully repay £2.1m of outstanding FEL working capital loan notes to Palm and Lombard Odier and to be distributed amongst the company convertible loan note holders.
"The board has concluded that the sale represents the best realistic course of action available to the company under its current constraints; proceeds of the sale are expected to return a value to ordinary shareholders of £nil," said Flowgroup's statement.
The AIM-traded company has been on a loss making streak over recent years and recorded record losses in its most recent financial report despite increased revenues.
Flowgroup has also agreed to the sale of its microCHP boiler technology and intellectual property to iGEN Technologies for an upfront consideration of C$25,000 with potential royalty payments of up to C$1,411,000 in the event that successful commercialisation is achieved by iGEN.
As of 1349 BST, Flowgroup's shares were down 61.94% at 0.03p.