Alpha Energy proposes S$20m fundraising for its foray into education

Singapore

ALPHA Energy is proposing a S$20 million fundraising as it tries to diversify from oil into the education business, it said on Wednesday.

The Catalist-listed oil company on Tuesday entered into a conditional sale-and-purchase agreement with Kydon Holdings for the proposed acquisition of Kydon Learning Systems Institute (KLSI) - a Singapore-based education technology business - for S$12 million in cash and stock.

The proposed KLSI deal came after Alpha Energy entered into a non-binding term sheet with investor Didi Investments on July 6 for Didi's potential capital investment of S$20 million via a convertible loan, subject to definitive agreements to be entered into between both parties.

Didi Investments is in the learning-and-education business in Japan. It was identified and introduced to Alpha Energy through RSM Corporate Advisory, which will be paid an introduction success fee of 171.4 million Alpha Energy shares.

Proceeds from the convertible loan will be primarily used to fund the proposed acquisition of KLSI and retained for future investments in the education services sector. The five-year convertible loan has an interest rate of 6 per cent per annum and a conversion price of 0.35 Singapore cent per share, Wednesday's regulatory filing showed.

The conversion price represents a discount of about 89 per cent to the volume-weighted average price of 3.2 Singapore cents per share, based on the trades done on Nov 13, 2019 - the last full market day before the term sheet was signed.

The principal amount of S$20 million will be set off against an earlier S$1 million loan provided by Didi Investments to fund Alpha Energy's corporate expenses.

The convertible loan is subject to Alpha Energy having entered into binding settlements with all existing creditors, on terms acceptable to Didi Investments.

Through the potential diversification into providing learning and education services, Alpha Energy is looking at generating additional revenue streams while waiting for the situation in its current core business of exploration, exploitation and production of oil to improve.

The company added that in contrast to its current core business, the business of providing education services is less capital-intensive and has greater growth potential.

Its board believes there would be potential synergies and growth to be realised in the future due to the investor's potential capital investment, the viability, profitability and growth of KLSI's business and the general outlook of the education sector.

KLSI has also been profitable for the last three financial years, with a growing business presence in the ed-tech sector.

Alpha Energy separately announced on Wednesday that KPMG resigned as its auditor, following consent from the Accounting and Corporate Regulatory Authority (Acra).

KPMG's resignation took effect upon receipt of Acra's consent on Tuesday, the regulatory update showed.

In its notice of resignation, KPMG said the resignation was a result of Alpha Energy's decision to stop engaging it as an auditor. It added that it was unable to commence the audit for fiscal 2019 in view of the long outstanding fees due for fiscal 2018.

In place of KPMG, Alpha Energy has appointed Nexia TS Public Accounting Corporation as auditor. The appointment was effective Tuesday.