Industry

Third Energy “forgiven” £80m loan before sale, accounts reveal

Third Energy 2

The gas production company, Third Energy, formerly owned by Barclays, has been released from a loan of more than £80m, according to its accounts.

The onshore part of the business was sold in 2019 to York Energy (UK) Holdings Limited, an associate of the American Alpha Energy.

Third Energy Onshore Limited’s latest figures, for the year to December 2018, pre-date the sale.

But they said that immediately before the transaction was completed, the loan balance had been “forgiven”.

Third Energy Onshore Limited also received £12m to “meet its known liabilities and provide it working capital”.

According to the accounts, the loan was £68,270,000 at 31 December 2018. But by the time of the sale, in July 2019, it had risen to £80,829,000.

Third Energy Onshore Limited owed the money to its parent company, Third Energy Holdings Limited, which is registered in the Cayman Islands.

The holding company had taken out the loan with Northwharf Investments Limited, a subsidiary of Barclays Bank plc.

The accounts, published today, do not say who released Third Energy Onshore from the loan or paid the additional £12m. But the ultimate parent company of Third Energy Holdings Limited is also Barclays plc.

According to the accounts:

“The amounts owed to Third Energy Holdings Limited were formerly released on 9th July 2019 when the Group and Company were sold to York Energy (UK) Holdings Limited.

“As a result of this transaction the Group and Company were released from all obligations as charger and obligor to a loan facility taken out by Third Energy Holdings Limited with Northwharf Investments Limited.”

The accounts said the injection of additional working capital allowed the group to continue operating:

“[It has] the necessary funding available to ensure that it continues to trade on the going concern basis for the foreseeable future.”

The accounts were the first consolidated statements for Third Energy Onshore Limited and its subsidiaries, Third Energy Trading Limited and Third Energy UK Gas Limited.

They reveal a loss for the year of £12.226m, up from £4.389m in 2017. Turnover was up slightly but there was a large increase in administrative expenses. The company used an accounting exception to not include a strategic report.

Key figures

Turnover (mainly from the sale of electricity): £1,439,000; 2017: £1,016,000

Cost of sales: Loss of £2,627,000; 2017: loss of £2,509,000

Administrative expenses: £10,549,000; 2017: £2,547,000

Loss for the year: £12,226,000; 2017: £4,389,000

Net current liabilities: £68,156,000; 2017: £62,379,000

Staff costs: £938,000; 2017: £762,000

Payments to directors: £424,000; 2017: £222,000

 

 

 

 

22 replies »

  1. Obvioulsy the ultimate owners couldn’t even sell the company for a profit, instead taking a hit to rid itself of this tiresome and pretty much worthless ‘asset’

        • The bank is a business hewes; it writes off unpaid loans for the tax year reducing profit i.e. less tax paid. The shareholders drive the profit margin; in response the bank will raise revenue via higher interest rates on selected products and charges on accounts to cover their losses, hence the customer pays ultimately.
          If all loans were paid the cost of banking would be significantly less to the customer overall; the use of the limited company has driven up the cost to banks as is easy to walk away from your debt and start again, unlike personal loans.
          Barclays obviously want this toxic company off the books so are literally paying to have it removed. Other ‘holding’ companies purchase these paper companies and raise further finance on them via grants or loans, ‘revalue’ the company and then siphon off the paper profit into offshore accounts so they can buy new toys such as yachts and property…

  2. A £12 million loss in the year … doesn’t sound like it’s a viable company in any way, shape or form. No wonder it was only sold for a tenner to another bunch of cowboys based in the Cayman Islands. How can these companies be allowed to operate at all?

  3. Think I will have to switch to Barclays!

    On a serious note, it was (some of) the shareholders who were pushing for banks to divest out of non core business. Only to be expected that to do so will attract a penalty here and there.

    • Some shareholders were indeed pushing for divestment from O&G. Are you seriously suggesting that the management team would take any notice of that if there was a possibility of profit to be made Martin? Writing off £80m from a dead duck seems more like cutting their losses to me, particularly as it should free them from the responsibility to restore existing sites, which could be an additional and substantial sum.

      • Oh, I think you will find Mike that many banks were forced to sell off profitable businesses, as well. Shareholders were wary as to how and why financial institutions had decided to run other businesses without previous experience and shareholder agreement. It was tolerated until there was a financial crash and then the view turned towards whether eyes had been taken off the ball and it would be safer in future for them to focus upon what they knew about.

        I have no idea how this will be accounted for, but I expect that it will be wrapped up reducing tax so not such a big deal as it first looks. A huge business making large profits can set a few tiny losses against that.

        • I’m no expert on big company finances, but I still can’t believe that enough small shareholders can ‘force’ Barclays and their ilk to do anything the board don’t want to. Big shareholders maybe. All shareholders and customers will ultimately pay for write-offs, but writing off tax affects us all, particularly aggregation of such tax write offs (and moving money off shore). Less money to do the important stuff. I don’t approve of that, even if some a more sanguine about it.

  4. Looks like the Directors of these cowboy companies doing just fine as usual!
    Liabilities increasing as normal too!

  5. Except, Peter, the figures are for 2018! So, I think your tense needs a bit of adjustment. Or not. But, as recent information will not be available for some time to come-who knows?

    Looking at the revenue side, can the operation be refreshed to increase revenue and/or reduce cost of sales? The new owners suggest that is possible. That will be the key, not what they are not going to do. Just like a new football coach who has stated he will go 4:4:2-several times-will it work? Meanwhile, some can still be excited about the past 4:3:3 and speculate about what is not going to happen. Fantasy football-seems to connect quite nicely to some of the threads here.

    • Third Energy burnt through its original Equity finance long ago. Its asset base was dwarfed by the debt it was carrying and it was worthless as a Company. The institutions who have ” forgiven” the debt are hoping that with a few more million to monetarise the release of stranded assets within its Licensed Areas , the debt free company might generate revenue. These institutions have accepted equity for debt in the vague hope that the company might now turn a profit and return a few pounds to them. And of course the fees for arranging this high risk finance will have been enormous . Lovely Jubbly.

      Poor old Collyer has been a cheerleader for the Fracking industry throughout the period that Third Energy was burning other people’s money. I think it highly unlikely that he will now be putting his own money where his mouth is. What does he mean by “refreshing the business ” ? Refreshing the business would require the consumption of gas – not yet identified- which would further increase the inventory of gas that must remain in the ground if the planet is to avoid being cooked

      This point is well understood by Mark Carney who is at pains to point out that many of the balance sheets of companies engaged in gas or oil exploration are seriously over valued. Any “new” gas sourced from basins located within the UK require basins elsewhere in the world to leave even more of their assets in the ground. The world is awash with gas. If Third Energy is to survive, it needs to reinvent itself and engage in activities which contribute to minimising damage to the planet.

      Or is this Fantasy ?

      • Oh, there I was Philip believing that UK was IMPORTING quite a lot of gas. So, UK consumption is EXISTING. Now, you may prefer that comes from outside the UK. Perfectly legit-although your motivation may be then questioned. Maybe you wish more USA gas to be brought into Pembrokeshire so poor old Philip doesn’t remain poor old Philip?

        Third Energy is now nothing to do with fracking. It has, for a long time within its previous incarnation, been something to do with UK on shore gas production. That is Reality.

        (New) Third Energy have outlined their initial plans, which is basically to take the existing gas production and make it more efficient. That is what I mean by refreshing. Whether there is the opportunity for that to happen remains to be seen. Similar has been going on in the N.Sea for a few years.

        Where poor old Collyer puts his money will be based upon reality Philip, not some fantasy based upon very scant research.

        Perhaps you can explain where the hydrogen will come from for the UK to replace fuel source from current gas boilers?? It seems it is all part of the UK “plan” without any reality of how that might happen. I have a suspicion that reality will dictate that gas is part of the UK energy mix for decades to come, either imported or produced within UK. Or, maybe fusion will win the race?

        “The world is awash with gas”!! You sound like John who stated something similar just before the Beast from the East! Trouble with gas and oil Philip is that where that oil and gas is and what impacts upon it, does tend to be outside the control of many who rely upon it but don’t sit on top of it. (Supply is just as important as demand in that situation.) I hope that doesn’t become too clear to you in the next few weeks, but I suspect it might. You may prefer UK military to risk their lives to try and secure you from that. Poor old Collyer would prefer they do not have to.
        But, collateral damage seems to be outside of the anti blinkers, as seen with how cobalt mining is embraced, so just another issue to be viewed the same. There do seem to be large parts of the worlds population who are required to make serious sacrifice to meet the anti agenda, yet saving the world is the excuse! Doesn’t quite add up to me.

  6. I fail to see how anyone can put a positive spin on the sale of a company that required an £80 million loan being “forgiven” and then advancing a further £12 million. Had this company not have been bailed out by Barclays one cannot help but wonder would it have gone bust as clearly there were no takers, they had been trying to sell it for some time I believe.

  7. Well KatT, there are plenty of companies that are seen as surplus to requirements and sold off-or hardly “sold”- and then become much more profitable under new ownership. Have a word with Sir Jim-he has quite a good record of doing that, and look where he is now!

    Perhaps banks are not the best at running other businesses?

    But, alternatively, you may have the solution to avoid rescues of the steel industry, ship yards etc. etc?? Unfortunate your alternative results in many out of a job when other options are available.

  8. Interesting figures! Eyewatering loss for the year to run up even more eyewatering overall debts, which fortunately don’t seem to involve threatening letters and a visit from the bailiffs like normal people and real money – just write it off with a parting sweetener. Good to see the directors doubled their money for such successful enterprise though – clearly deserving causes, unlike the taxman or local community.

    • Well, Mike, if you wanted the local community to benefit financially, then perhaps fracking may have enabled that? Now, we will not know!

      • I always want the community to benefit financially. The problem is that ‘financial inducements’ from fracking companies have to be offset by the potential damage – environmental, seismic, health – many of which will manifest themselves in the future when companies have long gone, with any profits safely offshore. Unfortunately in the case of Third Energy, they appeared to be too financially inept to even reach the stage of community bribes. They bought existing infrastructure and sites, drilled the well, secured planning permission, moved the fracking equipment on site, had the wholehearted backing of the government and Tory led Mineral Planning Authority… then fell at the final hurdle – incapable of proving their financial competence. Well worth a doubling of remuneration for the directors eh Martin?

  9. Good job Barclays therefore decided to get rid, and the business is in new hands, to see if they can make a better job of it, Mike!

    Notice more movement in N. Sea, on a somewhat bigger scale, doing something similar. “Strangely” much of that movement in N.Sea is to free up money to invest in SHALE. Goodness, some of these companies really don’t know what they are doing. LOL.

    I like your attempt to portray that financial inducements from fracking companies is established-it is not, only a small chunk of inconvenience payment has been established-and that potential damage WILL manifest themselves. Nice attempt to tip the scales with some dubious semantics, but I suspect others will also have noticed.

    “Old” Third Energy attempted to refresh assets via fracking, “New” Third Energy are following a different route. I never thought “Old” TE would get very far with their approach for a number of reasons, maybe “New” TE have a better chance? It is not unknown in the oil and gas sector, but not guaranteed. Can but hope whilst they have a go, local pollution from previous antis will not be repeated, and the flamingos can have a peaceful existence.

    • I wasn’t trying to portray anything Martin. You do have a consistently interesting way of interpreting comments. The govt and several potential fracking companies have been uniformly alluding to such community ‘inducements’ since fracking was first mooted here around 8-9 years ago. Perhaps it was always just meaningless bribery with no intention to actually part with any cash. Not surprising as some was ‘promised’ on profit, which would have presumably been offset on initial investment money and then the remainder shuffled offshore, leaving somewhere around zero.
      ‘New TE, are surely still pinning their hopes on future fracking, as watered out, barely productive wells and almost redundant infrastructure doesn’t sound like a sound business model to me.

  10. Perhaps Barclays mis-sold PPI to TE. As the bank has paid out billions to UK residents, they may not have noticed a few million here or there. But good to hear they are going to stick to their core business ( such as selling PPi or such shenanigans ) rather than dabble in the risky fossil fuel industry.

    [Typos corrected at poster’s request]

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