ERG troubles may account for Utilico drop

The panel recently questioned the utilities investor after its share price slumped 29% from $1.00 per share in early February to 71 cents per share a month later.

Responding to the query Utilico says "we think it is worth noting that the following items of information which are in the public domain and may account for the reduction in the share price.

"First, at the time of announcing the interim results on February 11, the company advised that it had invested $5.54 million in ERG convertible bonds.

"Second, on February 27, ERG announced that it would be reporting a substantial loss."

The money invested in the ERG convertible bonds represents the majority of the company's interim net asset balance of $5.96 million following two capital repayments in November and December 2001,

In its interim statement Utilico said that its advisors saw the bond investment "as an attractive investment on its own merit and a suitable alternative to cash."

ERG announced on February 27 that it expected to report a loss for the half-year ended December of up to A$195 million.

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