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Cape Town - Empowerment giant Hosken Consolidated Investments (HCI) has taken a R70m hit from the bankruptcy of Lehman Brothers Commodity Services, it was disclosed on Tuesday night.
In a trading update covering the half-year to end September, HCI said its US subsidiary Montauk Energy Corporation LLC (MEC) had recognised a pre-tax loss of $8m relating to hedges forming part of a price hedging strategy. The hedges on the natural gas price were put contracts purchased from Lehman Brothers Commodity Services (LBCS).
HCI said that as a result of the credit impairment and subsequent bankruptcy of LBCS, Montauk Energy fully impaired the carrying value of the LBCS put contracts.
Montauk Energy is a Pittsburgh-based landfill gas developer. HCI holds an indirect stake in Montauk through its controlling 51% stake in Johnnic.
Johnnic bought a 93.5% stake in Montauk Energy Capital for $61m (R428m) in 2007.
HCI's full trading update showed the group was expecting headline earnings for the interim period to come in at between 120c/share to 130c/share - well down on the corresponding interim period last year when 227c/share was recorded.
Basic earnings would come in at between 160c/share and 170c/share compared to 339c/share the previous year.
The main cause behind the drop earnings was not the Montauk impairment but rather the investment losses on the group's gaming investments - namely fair value losses on Tsogo Sun and the marked-to-market losses on its holding Gold Reef Resorts.
HCI expects to publish its interim results on Thursday.
- Fin24.com