Small Talk: Rurelec focuses on 'fair value' after nationalisation

Political risk is usually the part of an analyst's report that most investors ignore – after all, anyone parting with their money hardly needs to be told that investing in a company that operates in some of the dodgier parts of the world is dangerous, and especially not by someone who rarely leaves the comfortable confines of the Square Mile.

Nonetheless, those that skipped that section in the notes on Rurelec, which is listed on the Alternative Investment Market (Aim), may well now be kicking themselves. The Latin American-based power plant developer and operator lost 46.6 per cent of its value last week after Bolivia nationalised Empresa Guaracachi, a company in which Rurelec had a majority stake, transferring the assets to the state-owned ENDE.

It is not all bad news, however. Under the so-called Supreme Decree, legislation passed by President Evo Morales's government in La Paz, and agreements between the Bolivian and UK governments, Mr Morales will pay fair value for the assets, giving Rurelec about £70m in cash, according to sources close to the company. The sum more than doubles the group's market capitalisation.

"Our main focus now in Bolivia is to obtain 'fair value' for our assets as protected by the United Kingdom-Bolivia Treaty," said Peter Earl, Rurelec's managing director. "However, Rurelec is not just about Bolivia. I would like to reassure our investors that our other operations in Argentina are performing well and we are due to complete a refinancing issue of bonds in Argentina, as previously announced, now that we have obtained our key approvals from the government of Argentina for premium electricity tariffs.

"Bolivia's surprise nationalisation move was taken in the face of assurances given to the British and French ambassadors in La Paz at the end of last week that the Morales administration continued to want to maintain European private investment in the power sector. Sadly, this was not the case."



Regional SMEs begin to signal end to recession

While it may be too late for Labour (or maybe not), which built its election campaign largely on its economic competence, research suggests that the small-cap sector is roaring back to health. A survey by Insurantz.com found that small companies were largely putting the recession behind them. Just under a quarter of small retailers and manufacturers said they had reasons to be cheerful, and many said 2010 had been "better than last year".

Small caps in the North-west and South-west of England are top of the table when it comes to making a regional post-recession recovery. One in five businesses in those regions is celebrating a good start to 2010, although SMEs in the South are continuing to struggle. Fourteen per cent of southern businesses have endured a poor year so far, the poll shows.

"As the vast majority of Britain's 4.8 million businesses are classified as SMEs, it appears that the businesses that are the driving force of the economy are seeing UK plc on the slow road to recovery," said James Pickering, the company's managing director. "Just under half of our respondents said that they were seeing 'green shoots' and that is good news for us all."

Of course, it is still early days, and with the prospect of public sector cuts on the way, the economy is likely to be hit by a train later this year, which could very easily dampen the optimism expressed in Insurantz.com's research.

Ilika upbeat about unmet demand ahead of IPO

"A successful technology IPO", trumpeted the representatives of Ilika, a clean technology company. Well, steady on, that's rather jumping the gun, we think, especially since the shares do not even start trading on AIM until Friday. If the shares tank, it will be anything but successful.

Nonetheless, the company last week said that it had published its admission document to raise £5.2m, placing the shares at 51p each. The deal will give the group a market capitalisation of £18.7m. Getting the deal away was no mean feat, especially with the problems in Greece sending worldwide equity haywire, but we will see if the group, and its nomad Numis, have priced the deal properly.

"By using the materials we invent, our multinational partners can scale up and commercialise their next generation of products much more quickly," said Graeme Purdy, Ilika's chief executive.

"The new funds will enable us to accelerate further the development of materials in our chosen markets. There is unmet demand for ways of solving the problems of over-reliance on traditional forms of energy and resource, which we have the technology and business model to exploit. We think this is a highly attractive proposition and we are delighted that our new investors agree."

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