Powerhouse waves goodbye to $7 million as hydro company sinks

A venture capital firm listed on the ASX has written off almost $7 million invested in a hydro power equipment company.

Technology incubator Powerhouse Ventures (ASX:PVL) wrote off its 23 per cent stake in Hydroworks on Thursday after the company’s final board member quit.

New Zealand-based Hydroworks makes turbines for hydroelectric generators.

The VC had maintained its faith in Hydroworks as recently as seven days ago, when director Paul Viney told Stuff.co.nz that Hydroworks had a great, if somewhat unclear, future.

Andrew Rodwell resigned as Hydroworks managing director, according to the NZ Herald, but remains as CEO.

Powerhouse wrote off its $6.8 million investment in the hydroelectric turbine maker and said in a statement to the ASX that its holding had suffered “a material degradation” and the revaluation was a result of “extreme prudence”.

“Powerhouse is aware that Hydroworks continues to face significant financial issues,” it said, adding that some value may be recovered from a restructure or a sale process.

Between April and July, all Hydroworks directors quit, including 30 per cent shareholder and founder Rik Hothersall, Powerhouse director Paul Viney, and chairman Chris Laurie who left at the end of July.

This raised questions about whether the company could continue to operate.

Powerhouse noted in its second quarter report in July that Hydroworks was in financial straits, saying it had provided “material” short term loans and help with a cost-cutting program. There were “significant future sales opportunities”, but warned it had to get its budget under control first.

Since then directors Mr Viney and Stephen Hampson have remained mum on what kind of trouble the company is in.

Stockhead called Hydroworks for comment, but the company’s phone line appeared to be no longer attended.

Mr Rodwell joined as CEO mid-way through 2016 and was expected to help turn the company around.

Hydroworks had just gained some major contracts in Australia, and raised NZ$1.4 million from a crowdfunding campaign and NZ$1.5 million in convertible notes from professional investors, which were supposed to convert to shares following a listing in Australia in 2017. The IPO fell through earlier this year.

PVL shares closed Thursday down about 9 per cent at 50c.