June 23, 2011 / 1:44 PM / in 6 years

UPDATE 3-Tonbridge Power says key project needs more funds, shares plunge

* Says current credit facilities insufficient to fund shortfall

* Needs additional funding of $25 mln

* Says other projects will be impacted

* In talks with lenders, stakeholders to address funding gap

* Shares touch lifetime low (Adds company comments, analyst quotes, details; updates shares)

By Bhaswati Mukhopadhyay

BANGALORE, June 23 (Reuters) - Shares of Tonbridge Power Inc plunged 44 percent to a lifetime low on Thursday, after the company said it will need at least $25 million in additional funding to complete a key power line, raising concerns over the project’s future.

Tonbridge is constructing an electricity transmission line linking Alberta and Montana. The C$230 million Montana Alberta Tie Line (MATL) -- Tonbridge’s first project -- has a 300-megawatt capacity over which both the United States and Canada can import and export power.

“This (the need for additional funding for MATL project) seriously puts the company’s future in jeopardy,” said analyst Ike Kaja of Salman Partners.

The Toronto-based independent power transmission developer had earlier disclosed a shortfall of $5.8 million.

Tonbridge’s other projects - the MATL Upgrade project and the Green Line project, which is designed as a 160-kilometer southern extension of the MATL line -- would also be impacted as they are tied to the MATL project, incoming Chief Financial Officer Robert McFarlane told Reuters .

Thursday’s announcement “sets back the MATL project (in terms of when it comes online) at least a year,” Kaja said.

The company said it is working towards meeting its goal of delivering an operating transmission line by end-2011.

“Our best estimate today is $25 million but it could go higher,” McFarlane said .

Analyst Kaja, however, said it may be difficult for the company to get more debt as a significant part of the project already has debt financing.

“It is going to be very difficult especially in the environment that we are in now. Most people with capital are trying to avoid risk as there is mounting fear of slowing economic growth,” the analyst said.

In late-2009, Tonbridge raised $161 million in construction and term financing through Western Area Power Administration (WAPA) from the U.S. Department of Energy.

MATL’s customers include NaturEner, Invenergy, Wind Hunter and the WAPA, according to the company’s website.

Tonbridge said disruptive court decision, contractor disputes, construction and regulatory delays led to cost overruns for the MATL project.

TROUBLED PROJECT

Last year, Tonbridge began construction on the project after five years, six regulatory permits and millions of dollars, with the lengthy development process reflecting the complexity of rules and regulators in North America.

Construction on the MATL project has been halted both in the United States and Canada following disputes with contractors and permitting restrictions.

Incoming CFO McFarlane said the company expects work to resume in July.

Earlier this month, the company said both its CEO and CFO had resigned. Chief Operations Officer Robert van Beers will take over as the chief executive from Johan van’t Hof, who had been the CEO for seven years.

The company, which has a market value of about $50 million, said it is in talks with lenders and stakeholders to address the funding issue.

Shares of the company were trading down 38 percent at 84 Canadian cents on Thursday afternoon. It was one of the top percentage losers on the Toronto Venture Exchange. (Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Sriraj Kalluvila)

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