The Magnis Energy Technologies Ltd (ASX: MNS) share price is climbing in afternoon trade today and is now changing hands at 31 cents each.
At one point today, Magnis' shares surged 7% to an intraday high of 33 cents, before levelling back out to the current market price.
Magnis shares have been on the move since the company released a response letter to the ASX just before the opening of trade today.
Here's what we know.
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What did Magnis Energy release today?
It appears that on 22 September the ASX compliance department flagged a couple of takeouts from recent announcements Magnis has made and wrote a "please explain" letter.
Specifically, the ASX mentions updates made in May and September, that list Indian utilities company Sukh Energy as a key stakeholder.
Back in May, the company advised it had secured an estimated US$655 million of orders in binding offtakes, however did not disclose the names of any counter-parties in the orders.
Then speculation regarding Sukh Energy's financial health and balance sheet began to place doubt on Magnis' dealings with the Indian energy giant.
This came after a release in September that advised of a 5-year, US$160 million offtake agreement with electric mobility manufacturer Omega Seiki.
As such the ASX asked Magnis to front up and wave away the cloudiness surrounding these issues, to which it has done today.
The company explained that it is well aware of Sukh Energy's business operations, its key customers, and its financial health.
Curiously, the ASX asked Magnis if it were aware that Sukh Energy "has no revenues and assets of $70,000, as lodged with the Indian corporate regulator?".
Magnis stated in response that, "Yes, to the best of the company's knowledge, the financial information referred to (in the question) is correct".
That means that Magnis has signed deals worth $1.2 billion with a company that has no revenues and a small asset base, so it appears written from the ASX's letter.
Of the US$655 million in offtake orders announced earlier this year, Magnis expects that around US$243 million will be attributable to Sukh Energy.
That's 37% of all the sales exposed to the one customer and/or its subsidiaries. Magnis Energy doesn't appear to be worried though and is confident all parties will maintain solvency just fine.
Bringing it all together in conclusion to the ASX's cross-examination, Magnis said:
Based on the Company's understanding (as set out above) and the matters referred to above, Magnis is confident that Sukh Energy has, or will have at the relevant time, the financial resources necessary to satisfy its obligations under the iM3NY off-take arrangements.
Time will tell to see if more unfolds from this story.
Magnis Energy share price snapshot
The Magnis Energy share price has climbed 55% this year to date, bringing its 12-month return also to 55%.
Its been on the downward slope this past month, having slumped 15% into the red, which has carried through to this past week.
Despite this, Magnis Energy shares are ahead of the S&P/ASX 200 index (ASX: XJO)'s return of about 25% in the last year.
