In case you missed the news, Ambre Energy—the struggling Australian energy startup that has been trying to launch a coal export business in the Pacific Northwest—has agreed to sell its entire North American coal business to its main creditor, a risk-loving private equity firm registered in the Cayman Islands.
The documents describing the proposed sale, available on the Australian Securities and Investments Commission (ASIC) website, show that Ambre will part with its entire North American coal mining and export operation for the not-so-princely sum of $18 million. That’s 100% of the Decker coal mine in Montana, 50% of the Black Butte coal mine in Wyoming, 62% of the Millennium Bulk Terminals in Longview, WA, plus the Morrow-Pacific export project in Oregon, all for $18 million in cash. The deal will give Ambre just enough to pay back some outstanding debts—but will leave the original investors in the Australian parent company with virtually nothing, save some sour memories.
Leaving aside the terms of the proposed sale, the circumstances of the announcement raise some serious questions about Ambre’s communications strategy. Even for Ambre, the Keystone Cops of the coal export world, the communications around the company’s impending sale seem remarkably uncoordinated. In fact, the news may even have caught Ambre’s North American employees by surprise.
First there’s this: Ambre didn’t announce the news on its own. When the company filed documents with ASIC, it knew that they’d shortly be made available public. But Ambre didn’t make any public announcement of the impending deal, nor did it seem to have prepared a coherent plan to communicate the news with the press or the public. Instead, the company’s management just let the news trickle out. Perhaps it hoped that nobody would notice that it had decided to sell its most valuable remaining assets for a fraction of their book value. If so, it was a terrible strategy, given how much controversy the company had generated in its short life.
Second, it’s not even clear that the higher-ups at Ambre briefed their North American employees that they were trying to sell their business. When asked about the impending sale by the Longview Daily News, Bill Chapman, head of the Millennium Bulk Terminal’s project (majority-owned by Ambre) gave a somewhat garbled account of the terms of the deal:
One of the parent companies of Millennium Bulk Terminals, which wants to build a coal export dock in Longview, announced Wednesday that a Denver-based hedge fund now has a controlling share of its operations.
Resource Capital Funds now has up to a 55 percent ownership of Ambre Energy North America, Millennium CEO Bill Chapman told the Daily News on Wednesday…“From our perspective, it’s good news that we’ve been waiting to announce.”
Chapman’s mention of RCF’s 55 percent stake in Ambre referred to an outdated agreement that Ambre finalized in 2013, which would have allowed the company’s main creditor, Resource Capital Fund V (RCF V), to increase its ownership stake in Ambre from 26 percent to 55 percent. But RCF V never actually exercised this right. And despite what the Longview Daily News story and Bill Chapman’s comments implied, the plans that Ambre just filed showed that RCF V had no intention of boosting its ownership share in Ambre to 55 percent.
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Instead, Ambre’s senior management and creditors were working towards a completely separate deal. Under the paperwork filed on November 11, 2014, RCF V would trade its 26 percent ownership stake in the parent company for a 26 percent stake in Ambre’s North American coal operations. Meanwhile a separate RCF fund, RCF VI, will take the remaining ownership stake in Ambre’s coal business. Together, the two RCF funds would own 100 percent of the voting shares of Ambre’s North American operations.
The episode speaks of a lack of clear communications, either from Ambre’s Australian offices to their North American underlings, or between Ambre and the press. Neither speaks well of the company’s communications prowess.
Third, the odd bungling of the communications about Ambre’s proposed exit from the North American coal business comes as a particular surprise, given how much the firm has spent on PR and communications consultants. After all, the financial disclosures in Ambre’s proposed sale documents show that Ambre spent $385,000 on PR consultants from Gard Communications from January through August 2014.
I’m not surprised in the least, as I’ve been predicting Ambre’s demise for a year now. They’ve been hemorrhaging cash with no hope of any profits in sight for years. This looks to me like bankruptcy by another name, keeping it out of the courts.
the port of longview will be very pleased to relieve Amber of the Alcoa sight.