Gamble on Montauk fails to pay off November 14, 2008
By Thabiso Mochiko
A move into the energy business is costing Hosken Consolidated Investments (HCI) dear. US subsidiary Montauk Energy again performed below expectations in the six months to September as it took losses from a failed hedge exercise.
Montauk posted a $7.5 million (R78.5 million) net loss after buying natural gas put options from now-bankrupt Lehman Brothers Commodity Services (LBCS). It recognised impairments of R70.6 million on the contracts.
HCI said Montauk had terminated the remaining options and exercised its rights to claim early termination damages of about $6.6 million after LBCS filed for bankruptcy last month following the collapse of Lehman Brothers.
Montauk extracts natural gas from landfills and converts it into high-energy gas and electricity.
Johnnic bought 93.5 percent in the firm for $61 million last year.
At the time Johnnic, which has since been bought out by HCI, said it planned to apply Montauk's technology to South Africa's 400 landfill sites.
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