Fletcher price flies on tail of Capstone

By GEOFF SENESCALL

Fletcher Energy's share price powered ahead to all-time highs yesterday, driven more by its investment in Nasdaq-listed Capstone Turbine than an expectation of takeover.

The Fletcher price closed up 33c at 835c after Capstone closed at a record $US82 a share in the US last Friday.

This close values Fletcher's 8.08 million shares in the turbine maker for hybrid electricity vehicles and small-scale stationary electricity generation at 443c a Fletcher share. When Capstone listed several months ago at $US16, it was worth 86c a share.

In the last week Capstone has risen from $US63 a share to its present price, which equates to around 100c on the Fletcher Energy share price.

While Capstone continues to rise, most of the excitement in the Fletcher Energy price in recent weeks has been driven by an expectation that it was a prime candidate to be taken over as part of the restructuring process of the Fletcher Challenge Group.

Last week Royal Dutch Shell filed for regulatory approval from the Commerce Commission to buy Fletcher Energy. It is expected to hear back from the commission later this week. Shell is believed to be the only bidder for Fletcher Energy. It is speculated that this might not be the first time Shell has gone to the commission over Fletcher Energy.

However, Fletcher Challenge's chairman Dr Roderick Deane has indicated that he wants to make a decision on the future of its three remaining divisions, which also include Forests and Building, simultaneously.

Given Fletcher Forests high debt levels it is the key to solve before the other two divisions can be dealt with. Difficulty in sorting out differences with Fletcher Forests' Chinese partner in the Central North Island is understood to have slowed the decision.

While there is considerable expectation, it is unlikely that any announcement about the future of Fletcher Forests, or the rest of the Fletcher group, will be made at tomorrow's forests results meeting.

Meanwhile, the outperformance of Fletcher Energy associate Capstone makes it difficult for any prospective buyer to take on. Fletcher Energy's Capstone shareholding now has a paper value of around $1.5 billion. Unless it can be separated out from the rest of the group, it would be a big pill for a specialised oil company like Shell to swallow. Fletcher is restricted from selling its Capstone shareholding until at least the end of the year.

Apart from Capstone, rising world oil prices are also fuelling the rise in the Fletcher Energy share price.