KEDCO PLC ('REACT' or the 'Company')
REACT, the renewable energy developer and operator focusing on the production of clean energy in the UK and Ireland, today announces its audited final results for the year ended 30 June 2015.
The Annual Report is available for viewing on the Company's website www.reactenergyplc.com.
REACT also announces that the Annual General Meeting of the Company will be held at the Cork International Airport Hotel, Cork, on 18 December 2015 at 11.00 a.m.
The Notice of the AGM is being posted to shareholders today and copies are available on the Company's website www.reactenergyplc.com.
REACT Energy plc | +353 (0) 21 2409 056 |
Gerry Madden / Brendan Halpin | |
Strand Hanson Limited - Nomad & Broker | +44 (0) 20 7409 3494 |
James Harris / Richard Tulloch / Ritchie Balmer | |
REACT Energy plc is committed to operating clean electricity and heat generation plants in the UK and Ireland. The Company seeks to identify, build, own and operate renewable projects and possesses significant knowledge of energy markets, clean technologies, fuel sources, project development, project finance and project delivery. REACT currently has four operational clean energy plants generating revenue from the sale of electricity and heat. The generation of clean electricity and heat from sustainable sources has the potential to address the key energy challenges of energy security and carbon commitment and provide strong returns on capital employed.
The Company is quoted on AIM and trades as REAC. Further information on the Company can be found at www.reactenergyplc.com.
Chairman and Chief Executive's ReportOn 27 July 2015, the Group announced the restoration of its shares to trading on AIM following the successful exit of the Company from an examinership process (the procedure under Irish Law introduced to provide a mechanism for the rescue and return to health of ailing, but potentially viable, companies) (the 'Examinership'). Part of the successful exit was the raising of £1.0 million (before expenses) by way of a secured loan facility issued to EcoFinance GLI Limited ('EcoFinance') (the 'Secured Loan Facility' or 'SLF'), details of which were included in an announcement made by the Group on 15 July 2015 and is set out below.
The Company's shares were suspended from trading on AIM from 1 December 2014 at the Company's request pending a clarification of the Group's financial position. On 13 May 2015 the Group announced that it had made a petition pursuant to the Irish Companies Acts to the High Court (the 'High Court') in Ireland to appoint an Examiner to the Company. An Examiner was appointed by the Court on 20 May 2015.
The decision to seek Examinership followed the suspension of funding discussions with a strategic investor which resulted from a dispute with the landlord on the Group's Enfield site, related difficulties in financing the repowering of the Group's Newry site and actions taken by certain creditors of REACT and related companies.
An Independent Accountants Report from Grant Thornton on REACT and related companies concluded that it was possible for a sustainable and profitable business to emerge from the Examinership process, based on a restructuring of REACT and related companies. Altair Group Investment Limited ('Altair'), an existing loan note holder at that time, supported REACT throughout the Examinership process, and together with a third party strategic investor, indicated that they would be prepared to invest in REACT to facilitate a scheme of arrangement for the restructured business. REACT also announced that as part of the Examinership process it had issued a loan note to Altair for up to €500,000, the proceeds of which were used to fund the Examinership process. The High Court approved the Scheme of Arrangement on 14 July 2015 which was followed by the exit of the Company from the Examinership process on 25 July 2015. The Company announced on the 15 July 2015 that it had raised £1.0 million (before expenses) by way of the SLF issued to EcoFinance to fund the Company's on-going working capital requirements (further details on which are below).
Following the approval of the Scheme of Arrangement required as part of the Examinership process, creditors were issued with, in aggregate, 37,470,972 new ordinary shares of €0.01 each in the capital of the Company (the 'Ordinary Shares') at a price of £0.11 each (being the closing price of an Ordinary Share on the 1 December 2014, the date of suspension of the Ordinary Shares from AIM), which after issue amounted to approximately 55% of the then enlarged issued share capital. This was as a result of the conversion of €5.7 million of debt into equity. The 37,470,972 new Ordinary Shares were issued to the relevant creditors and are held by a trustee on their behalf. The trustee has entered into a 'lock-in' restriction on behalf of the creditors, whereby they are unable to dispose of the new Ordinary Shares that were received pursuant to the Scheme for a period of one year from the date of admission, being 31 July 2015.
The Group had been actively engaged in discussions with potential providers of finance including with EcoFinance, a Group which sources finance for renewable energy projects. As announced on 8 June 2015, the Group signed a conditional facility letter for the Secured Loan Facility with EcoFinance, the drawdown of which was subject to certain conditions precedent being met under the Secured Loan Facility, the Scheme being approved by shareholders and creditors and ultimately the High Court. EcoFinance is a privately owned company registered in England. It was incorporated in May 2015 as a special purpose entity specifically for the purposes of entering into the proposed REACT transaction. It enjoys relationships with a number of co- investment partners both in the UK and globally. The Secured Loan Facility comprises a five-year term loan of
£1,000,000 at 15% per annum fixed rate of interest, payable monthly in arrears. The net proceeds of the Secured Loan Facility continue to be utilised for corporate development and general working capital purposes.
The Secured Loan Facility is to be repaid by way of a bullet repayment of capital (and any accrued interest) on before the anniversary of 60 months from July 2015, which was when the Company drew-down the Secured Loan Facility.
35,300,000 Warrants were issued to Alchemy Capital Limited, a company related to EcoFinance on drawdown of the Secured Loan Facility, subject to any necessary shareholder and other regulatory requirements, which have now been obtained. These Warrants entitle the holders to subscribe for new Ordinary Shares at an exercise price of 10p per share. The Warrants are assignable and capable of being exercised for a period of seven years from the date on which the Secured Loan Facility was drawn down.
Altair provided funding to REACT by way of a loan agreement to finance the Examinership process. The existing secured debt held by Altair at that time, comprising the 9% Secured Loan Note of £1.5 million issued in 2014 and the Examinership financing facility of €500,000, was refinanced by way of a new 7.5% £2 million Convertible Secured Loan Note ('CSLN') and is secured by the same security package granted in favour of EcoFinance in respect of the SLF. This is governed by an inter creditor deed under which the SLF security plus interest and costs shall rank in priority to the CSLN security plus interest and costs. Under the terms of the CSLN, Altair has the right to convert up to £1.0 million into new Ordinary Shares at £0.10. The Company also issued 3,150,000 Warrants to Origen Capital Partners LLP, an entity related to Altair, on drawdown of the SLF. These Warrants entitle the holders to subscribe for new Ordinary Shares at an exercise price of £0.10 per share. The Warrants are assignable and capable of being exercised for a period of seven years from the date on which the SLF was drawn down. EcoFinance and Altair have entered into a separate agreement in relation to financing provided to the Company whereby EcoFinance has granted to Altair an option to acquire the benefit and security of the SLF. This is a one-year option and the price of the option is a 5% premium on the capital amount.
An exercisable right in the form of an equity kicker was attached to the Secured Loan Facility whereby 60 dealing days from the drawdown of the Secured Loan Facility, EcoFinance had the right to an amount of fully paid new Ordinary Shares in the Company up to a maximum of 3,529,412 new Ordinary Shares. Altair was also separately granted an exercisable right in the form of an equity kicker of up to 3,529,412 new Ordinary Shares on the same basis as EcoFinance. On 21 October 2015, the Company announced that both EcoFinance and Altair had exercised their rights under the equity kicker agreements and the Company accordingly issued, in aggregate, a total of 7,000,000 Ordinary Shares to EcoFinance and Altair.
The main objective of the fundraising was to facilitate an exit from the Examinership process and the restoration of trading in the Company's shares on AIM. Warrants granted as part of the fundraising have a total maximum subscription value of approximately £4.7 million (if exercised in full).
The net proceeds from the fundraising continue to be used to fund general working capital across the Group. The Directors believe that the fundraising will provide the Group with adequate resources to develop a plan to enhance the value of its principal assets. Development of, and revenue generation from, the principal assets of the Group will require additional financing which the Directors expect to be sourced in due course.
The Group is a renewable energy project developer and operator. The Group takes projects from 'Greenfield' (greenfield land) stage to 'Shovel Ready' stage (projects where planning and development is advanced enough that, given sufficient funding, construction can begin within a very short time frame) with turnkey construction contracts and financial packages in place. Debt and equity partners are sought to fund the construction phase in return for a share of the project equity.
The Group's business is broken down into Biomass Combined Heat and Power (CHP) projects in the UK, Biomass Heat Projects in the UK and Wind Turbine projects in Ireland and the UK.
It is the intention of the Group to retain and, with the help of its new investors, to develop all projects within its pipeline.
Newry Biomass is a 4MW Biomass advanced gasification project located in Newry, Co. Down, Northern Ireland. The project is a joint venture with Farmer Business Development plc ('FBD') the Company's main shareholder. Newry Biomass Limited is a 50.01% subsidiary company of REACT.
Planning permission for waste to energy plant converting 25,000 tonnes per annum of virgin wood was received in May 2009. The project cost £11.7 million to construct and was funded through shareholder equity and loans. REACT invested £5.75 million and currently retains 49.11% of the economic benefit of the project, whilst FBD has 50.89%. Due to underperformance of the original gasification technology, a decision has been made to repower the project with a new technology. Accordingly, the project is currently on a 'care and maintenance' programme, pending additional funding required to engage a new technology provider, which the Company is currently in negotiations over.
The Enfield Biomass project is a 12MW Biomass gasification project located in Enfield, London. The project has secured full planning and permitting approval and is ready to construct. The Group obtained an updated planning permission for converting 66,000 tonnes per annum of Grade C wood waste in January 2014. An environmental permit was received in April 2012. As part of the Scheme of Arrangement, the Group has ceased to pursue the legal action, which was announced on the 3 June 2015, in relation to the Enfield Biomass Limited property lease agreement and has agreed to the revocation of the existing lease on that site. New discussions in relation to the future of this site will be commenced shortly and further updates will be made as required.
In Derbyshire, the Group, together with its partner Larkfleet Energy, is seeking approval to construct and operate a 12MW biomass conversion power plant. The planning application has been made. A decision on planning is expected to be announced in due course.
The Group is also the project developer and operator of three existing cash generating Biomass Heat power plants in the UK and has five projects in development to be built over the near term.
Equitix ESI Finance Limited ('Equitix') through a special purpose vehicle ('SPV'), which is 70% owned by Equitix and 30% by the Group, provides REACT with access of up to £5 million of committed project finance from the Green Investment Bank and a number of institutional investors. The Group sold the Culford and Kimbolten projects into the SPV for an agreed consideration. The Group also receives development and on- going management fees from the SPV.
The Culford School Biomass Heat plant in Suffolk, which has a 15-year Heat Supply Agreement, has been in operation for over two years. The Kimbolten School Biomass Heat plant in Cambridgeshire, which also has a 15 year Heat Supply Agreement, was recently brought into operation. In November 2013 the Group also signed a 20-year Heat Supply Agreement with Old Buckenham Hall School in Suffolk and the Biomass Heat plant was recently brought into operation.
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