* Warm Front scheme phase-out means significant funding loss
* Firm will restructure in face of government cuts
* Restructuring to cost 20 mln stg, hitting cash balance
* Shares slump 21 pct early trade, pare losses to 14 pct
(Adds shares, analyst comments)
By Golnar Motevalli
LONDON, Nov 3 British energy-saving scheme
operator Eaga Plc EAGA.L said it would have to restructure to
cope with a 70 percent slash in government funding for a major
programme, sending its shares plummeting to a two-year low.
Last month the British government said it would phase out
the Warm Front programme, which is run by Eaga and gives grants
to low-income households so that energy-saving improvements can
be carried out on their properties. [ID:nLDE69J0G8]
Government funding for Warm Front will be cut to 100 million
pounds ($160.4 million) by 2013, from 345 million, Eaga said in
a statement on Wednesday, leading it to forecast lower activity.
"As a result of this lower funding, activity in both our
Managed Services and Heating and Renewables segments, during
the current and next financial years, will be significantly
lower than the board expected," a company statement said.
"To deal with the scale and speed of the reduction in Warm
Front activity, the group is taking steps to significantly
reshape its operational structure and as a result we expect to
incur significant exceptional restructuring-related charges."
Eaga's shares shed 21 percent at the start of trade, but by
0842 GMT they pared losses to 14 percent, trading at 61 pence.
The firm said restructuring would cost 20 million pounds
over the next two years and will affect its cash position.
"We expect the group's forecast current year cash balance to
reduce by approximately 25 million pounds," Eaga said.
Eaga, which floated in 2007, said it had made good progress
on its project to install solar panels in the social housing
"Whilst further work is required to bring this project to
fruition it has the potential to deliver revenue from a
significant number of installations," the company said
Analysts at Brewin Research retained their "buy" rating on
Eaga's stock and said the solar panel project offered future
growth prospects. Other analysts were, however, less convinced.
"It is hard to see where new buyers will come from at this
stage and we see the share price as "dead money" so have cut our
recommendation to a sell," Panmure Gordon's Andy Brown said.
Execution Noble analyst David Brockton retained his "hold"
recommendation but downgraded earnings forecasts for 2011 and
Other government-backed energy efficiency schemes such as
the Green Deal, feed-in tariffs (FITs) and the Renewable Heat
Initiative will provide growth opportunities, the company said.
(Reporting by Golnar Motevalli; Editing by David Hulmes)