GREENKO GROUP PLC THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt
about the contents of this document, or the action you should take, you are recommended to seek your own financial advice immediately from your stockbroker, bank manager, solicitor, accountant or other independent professional adviser authorised under the Financial Services Act 2008 if you are in the Isle of Man or under the Financial Services and Markets Act 2000, as amended, if you are in the United Kingdom. If you are resident outside the Isle of Man and/or the United Kingdom you should contact another appropriately authorised independent financial adviser.
If you have sold or otherwise transferred all your Ordinary Shares in Greenko Group plc, please forward this document and the accompanying form of proxy as soon as possible to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected for delivery to the purchaser or transferee. If you have sold or otherwise transferred only part of your holding of Ordinary Shares you should retain these documents and consult the bank, stockbroker or other agent through whom the sale was effected.
The London Stock Exchange has not itself examined or approved the contents of this document. AIM is a market designed primarily for emerging or smaller companies to which a higher investment risk tends to be attached than to larger or more established companies. AIM securities are not admitted to the Official List of the UK Listing Authority and the AIM Rules are less demanding than those of the Official List of the UK Listing Authority.
(Registered in the Isle of Man with registered no. 001805V)
This document should be read as a whole. Your attention is drawn to the letter from the Chairman of the Company set out in Part I of this document which recommends that you vote in favour of the Resolutions to be proposed at the Extraordinary General Meeting referred to below.
A notice to convene an Extraordinary General Meeting of the Company to be held at 12.00 noon on 9 November 2015 at Merchants House, 24 North Quay, Douglas, Isle of Man IM1 4LE is set out at the end of this document. Shareholders will find enclosed with this document a Form of Proxy for use in relation to the Extraordinary General Meeting. To be valid, the Form of Proxy must be completed in accordance with the instructions set out in the form and returned to the Company Secretary at Merchants House, 24 North Quay, Douglas, Isle of Man IM1 4LE either by personal delivery, post, facsimile transmission (+44 (0)1624 619 989) or email (mail@iqe.com), as soon as possible, but in any event, so as to be received no later than 48 hours before the time fixed for the Extraordinary General Meeting, being 12.00 noon on 7 November 2015.
The return of a Form of Proxy will not preclude Shareholders from attending and voting at the Extraordinary General Meeting in person should they so wish.
Arden Partners plc ('Arden'), which is authorised by the Financial Conduct Authority, is acting exclusively for the Company and no one else in connection with the Disposal and will not be responsible to anyone other than the Company for providing the protections afforded to customers of Arden or for advising any other person on the contents of this document or any matter, transaction or arrangement referred to herein. The responsibilities of Arden as the Company's nominated adviser and broker under the AIM Rules for Nominated Advisers are owed solely to London Stock Exchange plc and are not owed to the Company or to any Director, Shareholder or any other person. Arden is not making any representation or warranty, express or implied, as to the contents of this document.
Investec Bank plc, which is authorised in the United Kingdom by the Prudential Regulation Authority and regulated in the United Kingdom by the Prudential Regulation Authority and the Financial Conduct Authority, is acting solely for the Company and no one else in connection with the Disposal and will not regard any other person (whether or not a recipient of this document) as a client in relation to the Disposal and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in connection with the Disposal or any other matter referred to in this document.
CONTENTSPage
Expected timetable of principal events 2
Part I Letter from the Chairman of Greenko Group plc 3
Part II Summary of the principal terms of the Sale and Purchase Agreement 10
Part III Summary of the arrangements between GVL, Anil Kumar Chalamalasetty,
Mahesh Kolli, Cambourne, GEH and GEPL 12
Definitions 13
Notice of Extraordinary General Meeting 16
2015
Publication and despatch of this document 19 October Latest time and date for receipt of Forms of Proxy 12.00 noon on 7 November
Extraordinary General Meeting 12.00 noon on 9 November
(Registered in the Isle of Man with registered no. 001805V)
Directors: Registered Office:
Keith Henry (Non-Executive Chairman) Merchants House Anil Kumar Chalamalasetty (Chief Executive Officer & Managing Director) 24 North Quay Mahesh Kolli (President & Joint Managing Director) Douglas Vasudeva Rao Kaipa (Chief Financial Officer) Isle of Man
Hari Kiran Vadlamani (Non-Executive Director) IM1 4LE Vinodka Muria (Non-Executive Director)
John Rennocks (Non-Executive Director)
19 October 2015
To all Shareholders
Dear Shareholder,
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Introduction
On 14 August 2015, the Board of Greenko announced that it had signed non-binding heads of terms with GIC for the sale of all of the Company's shares in Greenko Mauritius. The Company is pleased to confirm that it has today entered into a sale and purchase agreement with GEH (a newly formed subsidiary of Cambourne (an affiliate of GIC)) for the disposal of all of the Company's shares in Greenko Mauritius and all other assets held by the Company at Completion (including the Cash).
The Sale and Purchase Agreement provides that GEH will acquire the Company's interest in Greenko Mauritius, the Cash and the Share Application Monies, subject to certain conditions, for an aggregate cash consideration of approximately £162.8 million. Following Completion and based on the Assumptions, the Company is expected to have cash resources to make capital returns to Shareholders of up to approximately 100 pence per Ordinary Share in aggregate, with a planned initial capital return of 98 pence per Ordinary Share.
Completion of the Disposal will require, inter alia, the approval of Shareholders in accordance with the requirements of the AIM Rules. The level of Shareholder approval required is more than 50 per cent. of Shareholders voting in respect of the Disposal.
In addition, this document also sets out in paragraph 7 below the investing policy in accordance with Rule 15 of the AIM Rules that will be adopted by the Company upon completion of the Disposal in respect of which the Company will also need to seek Shareholder approval. The level of Shareholder approval required is more than 50 per cent. of Shareholders voting in respect of the Investing Policy.
The purpose of this document is:
to provide Shareholders with the background to, and rationale for, the Disposal;
to explain to Shareholders why the Independent Directors have decided to proceed with the Disposal, subject to Shareholders' approval;
to set out proposals for the future of the Company and the current understanding of the expected return of capital to Shareholders;
to provide details of the investing policy to be adopted by the Company after completion of the Disposal; and
to provide details of the Extraordinary General Meeting at which the Independent Directors are unanimously recommending Shareholders vote in favour of the Resolutions to approve the Disposal and the adoption of the Investing Policy.
Anil Kumar Chalamalasetty, the Chief Executive Officer & Managing Director of the Company, and Mahesh Kolli, the President & Joint Managing Director of the Company, have agreed to enter into new service agreements with the newly formed GEH Group pursuant to which they will continue to participate in the management of the GEH Group in accordance with the terms of the new service agreements respectively and under the guidance and supervision of the GEH and GEPL boards. GVL, which is associated with ACMK (a current shareholder of the Company in which Anil Kumar Chalamalasetty and Mahesh Kolli have a controlling interest), will also invest in GEH and execute a shareholders' agreement on Completion. Accordingly, Anil Kumar Chalamalasetty and Mahesh Kolli have not participated in any Board vote regarding the Disposal due to the potential for a conflict of interest.
At the end of this document, Shareholders will find a Notice of Extraordinary General Meeting, which has been convened for 12.00 noon on 9 November 2015 at Merchants House, 24 North Quay, Douglas, Isle of Man IM1 4LE, at which the Resolutions will be put to Shareholders for approval. It is important that Shareholders complete, sign and return the Form of Proxy for use at the Extraordinary General Meeting enclosed with this document, whether or not they intend to attend the Extraordinary General Meeting. The completion and return of a Form of Proxy will not preclude Shareholders from attending the Extraordinary General Meeting and voting in person, should they so wish.
If the Resolutions, as set out in the Notice of Extraordinary General Meeting, are passed the completion of the Disposal will be subject to the satisfaction of certain other conditions which are more fully described in paragraph 3 below and in Part II of this document. Whilst the timeframe for the satisfaction of the conditions is difficult to estimate, it is currently expected that Completion will occur in November 2015.
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Description of Greenko Mauritius
Greenko Mauritius is a Mauritius incorporated subsidiary of the Company and serves as the holding company for the Company's trading activities, which comprise the development, ownership and operation of clean energy projects in India. Cambourne and GEEMF hold the remaining issued shares in Greenko Mauritius and, with effect from 1 July 2015, such shares are capable of being exchanged for shares in the Company. As at 1 July 2015, Cambourne and GEEMF were entitled to exchange investments in Greenko Mauritius valued in accordance with the contractual arrangements between the Company and each of Cambourne and GEEMF at £143,015,562 and $106,024,000 respectively, for shares in the Company at the prevailing share price.
As at 30 June 2015, the estimated unaudited consolidated gross assets of Greenko Mauritius and its subsidiaries amounted to approximately $1,518,552,181, and its estimated unaudited consolidated loss for the six months ended 30 June 2015 was $107,669,897 (including exceptional item).
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Summary of the Disposal
Pursuant to the terms of the Sale and Purchase Agreement, the Company has conditionally agreed to dispose of all of its shares in Greenko Mauritius and all other assets held by the Company at Completion (including the Cash) for an aggregate cash consideration of approximately £162.8 million, payable at Completion.
The Disposal is conditional, inter alia, upon:
the passing at the Extraordinary General Meeting of the Resolutions approving (a) the Disposal and
(b) the adoption of the Investing Policy; and
an irrevocable waiver from the Bondholders in respect of the change of control of Greenko Mauritius resulting from the completion of the Disposal being granted and receipt of consents from the Bondholders to certain other amendments to the indenture relating to the Bonds.
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Background to and reasons for the Disposal
Greenko is a mainstream participant in the growing Indian renewable energy industry and a market leading owner and operator of clean energy projects in India, operating a portfolio of wind, run-of-river hydropower, natural gas and biomass assets. The Group is focused on building new utility scale wind farms and hydropower projects across India. The Group's goal is to reach 1,000 MW of operational capacity by the end of 2015. Further growth is subject to the continued availability of development funding.
Greenko was admitted to trading on the AIM market of the London Stock Exchange in November 2007 and was successful in raising equity capital on AIM until 2012, since which its focus has been to raise growth capital at a subsidiary level. Whilst the Group has broadly met its operational targets, the Directors believe that this performance has not been reflected in the Company's share price, which has been particularly weak since October 2014. Investor sentiment towards the strength of the Indian economy, including its currency, and its energy industry has been mixed in recent years. More specifically, the Company's shares have been largely illiquid and susceptible to sales by Shareholders, some of which have been forced by Shareholders' individual circumstances. The Company has previously raised development funding required to continue its growth from Cambourne and GEEMF via investments in Greenko Mauritius, which are currently exchangeable into shares in the Company at the prevailing share price. These funding arrangements provide certain minimum guaranteed protective returns to the funders, which have not been met and have had the effect of increasing significantly the number of shares in the Company to which Cambourne and GEEMF would be entitled upon exchange. Accordingly, at the current share price the exchange would be substantially more dilutive to value for existing Shareholders than was envisaged when these investments were originally made, and may lead to further share price weakness and liabilities.
It is for these reasons that the Board entered into discussions with GIC to find a solution at a subsidiary level which supports all stakeholders and the business, which ultimately led to GIC making a non-binding offer to purchase the Company's entire shareholding in Greenko Mauritius. The Board has, therefore, agreed terms with GEH to sell the Company's entire shareholding in Greenko Mauritius and all the other assets held by the Company at Completion to GEH, subject to certain conditions and for an aggregate cash consideration of approximately £162.8 million. The Independent Directors have concluded that the Disposal is in the best interests of Shareholders as a whole. Following Completion, on the basis of the Assumptions, the Company is expected to have the cash resources to make capital returns to Shareholders of up to approximately 100 pence per Ordinary Share in aggregate, with a planned initial capital return of 98 pence per Ordinary Share.
The Independent Directors consider that the Disposal has the following principal benefits:
the expected cash resources of the Company, following Completion and on the basis of the Assumptions, of up to approximately £159 million, equates to an approximate value per Ordinary Share of 100 pence. This represents a 123.5 per cent. premium to the Company's closing share price of
44.75 pence per Ordinary Share as at 22 June 2015 (being the day before the Company announced it was in discussions to find a solution at a subsidiary level which supports all stakeholders and the business) and a 21.2 per cent. premium to the Company's closing share price of 82.5 pence per
ordinary share as at 13 August 2015 (being the day before the announcement of the non-binding heads of terms with GIC);
the price of the Ordinary Shares reduced substantially in the nine months leading up to the 23 June 2015 announcement referred to above as concerns over Shareholder dilution arising from the Group's funding arrangements with Cambourne and GEEMF grew. There is a risk that, in the event that the Disposal is not effected, the share price will continue to be depressed and Shareholders will be unable to sell their Ordinary Shares at a price equivalent to the proposed capital returns resulting from the Disposal;
the Disposal provides the opportunity for Shareholders to realise a near-term cash consideration, reducing the timeframe and overall risk of receiving cash returns from the Company's asset portfolio;
should the Disposal not proceed the Company would continue to operate its existing portfolio of clean energy assets and complete the construction and commissioning of its projects currently under development for which it has already secured development funding; however, in light of its current capital structure and low share price, the Independent Directors consider that it would have limited access to further equity capital for development funding and that its potential for further growth would therefore be constrained; and
in addition, were Cambourne and/or GEEMF to elect to exchange their shares in Greenko Mauritius for shares in the Company at the current prevailing share price, which they have been contractually entitled to do since 1 July 2015, this would be highly dilutive for existing Shareholders.
The Independent Directors are mindful that the Disposal would not allow Shareholders to participate in Greenko's potential future growth beyond 1,000 MW of operational capacity for which funding is not currently available. Taking into account the above considerations, they believe that on balance the Disposal is in the best interests of Shareholders and through the realisation of certain cash proceeds will facilitate a return of capital that is attractive in the context of the recent depressed share price and the potential dilutive effect of a share exchange by Cambourne and/or GEEMF.
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Current Trading
On 30 September 2015, the Company announced its interim results for the six months ended 30 June 2015, which contained an update on current trading. A copy of the announcement is available on the Company's website at www.greenkogroup.com.
- Proposals for the future of the Company and return of capital
the aggregate consideration payable by GEH at Completion will amount to approximately
£162.8 million;
there are no claims made by GEH against the Company for breach of the Company's warranties, indemnities or undertakings under the Sale and Purchase Agreement;
transaction costs and the expected running costs of the Company in the period prior to completion of the return of capital amount to not more than £3.8 million in aggregate; and
there is no taxation liability resulting from the Disposal,
Shareholders voting in favour of the Resolutions at the forthcoming Extraordinary General Meeting;
the timing for satisfaction of all the conditions of the Sale and Purchase Agreement;
Shareholders approving the structure to enable a distribution (to be proposed in due course);
any claims made by GEH under the Company's warranties, indemnities or undertakings in the Sale and Purchase Agreement;
the amount of any taxation liability resulting from the Disposal or otherwise; and
any differences between actual costs and the estimated running expenses of the Company until the final distribution to Shareholders.
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Investing policy following the Disposal
If the Disposal is approved by Shareholders and the Company completes the disposal of Greenko Mauritius, the Company's only asset will be the cash resources resulting from the Disposal and the Company will be treated for the purposes of the AIM Rules as an investing company (as defined by the AIM Rules) and will be required on Completion to adopt an investing policy. Accordingly, a Resolution will be proposed at the Extraordinary General Meeting seeking Shareholder approval for the adoption of the following Investing Policy:
Investing Policy
'The Company's Investing Policy is to return capital to Shareholders following completion of the sale of Greenko Mauritius. The initial capital return, amounting to almost all of the expected net proceeds from the sale of Greenko Mauritius, is expected to be effected by way of a Shareholder distribution which will be subject to the formal approval by Shareholders of the Company at a future extraordinary general meeting. The notice for the future extraordinary general meeting will be sent to Shareholders as soon as practically possible following Completion. Thereafter, the Company will conduct its affairs to comply with post Completion obligations relating to the Disposal and at the end of such period any residual funds will be returned to Shareholders by way of a members' voluntary winding up or other restructuring, subject to approval by Shareholders.'
In accordance with paragraph 5.6 of the AIM Note for Investing Companies, which forms part of the AIM Rules, where a company quoted on AIM disposes of all, or substantially all, of its assets, it has a period of 12 months from the date of the disposal to implement its investing policy. If this is not fulfilled, the company's shares will be suspended from trading on AIM. Accordingly, if Greenko has not implemented the Investing Policy within 12 months of Completion, the Ordinary Shares will be suspended from trading on AIM.
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Related party transactions
Cambourne currently holds approximately 17.38 per cent. of the voting rights of Greenko Mauritius and is therefore a substantial shareholder of the Company as defined in the AIM Rules, and as GEH is an associate of Cambourne, the Disposal is classified as a related party transaction pursuant to AIM Rule 13. In addition, the arrangements referred to in paragraph 3 above and in paragraph 3 of Part II of this document for the termination of the existing contractual relationships between Cambourne and the Company and Greenko Mauritius are related party transactions pursuant to AIM Rule 13. Accordingly, the Independent Directors confirm, having consulted with Arden, the Company's Nominated Adviser, that the proposed terms of the Disposal, and the proposed terms of the termination arrangements with Cambourne, are fair and reasonable insofar as Shareholders are concerned.
Anil Kumar Chalamalasetty, the Chief Executive Officer & Managing Director of the Company and Mahesh Kolli, the President & Joint Managing Director of the Company, have agreed to enter into new service
7
agreements with the newly formed GEH Group pursuant to which they will continue to participate in the management of the GEH Group in accordance with the terms of their new service agreements respectively, and under the guidance and supervision of the GEH and GEPL boards. GVL, which is associated with ACMK (a current shareholder of the Company in which Anil Kumar Chalamalasetty and Mahesh Kolli have a controlling interest), will also invest in GEH and execute a shareholders' agreement on Completion. Accordingly, Anil Kumar Chalamalasetty and Mahesh Kolli have not participated in any Board vote regarding the Disposal due to the potential for a conflict of interest.
GVL is expected to invest a sum equal to the proceeds received by ACMK on completion of the Disposal in subscribing for new shares in GEH and, on Completion, GVL's holding in GEH shall be approximately 12 per cent. plus approximately an additional 4 per cent. in the form of non-voting performance shares. In addition, GVL has an option which GVL needs to exercise within a period of three months from Completion to purchase additional ordinary shares in GEH from Cambourne at a price per share to be determined, but which is not less than the price per share paid by GEH for the Greenko Mauritius shares plus associated interest and transaction costs, to take its total potential holding in GEH up to approximately 38 per cent. Further details of the arrangements between GVL, Anil Kumar Chalamalasetty and Mahesh Kolli and GEH are included in Part III of this document.
Anil Kumar Chalamalasetty, Mahesh Kolli and ACMK are providing certain warranties to GEH and committing to certain undertakings in relation to the Disposal.
ACMK, currently holds options to acquire 3,100,000 Ordinary Shares at an exercise price of €0.005 per Ordinary Share as announced in September 2014. The Remuneration Committee has resolved, conditionally on the Disposal taking effect on the terms envisaged in this document, that all of those options shall become exerciseable.
As a consequence of these arrangements and as Anil Kumar Chalamalasetty and Mahesh Kolli are Directors of the Company, the Disposal is classified as a related party transaction pursuant to AIM Rule 13. Accordingly, the Independent Directors confirm, having consulted with Arden, the Company's Nominated Adviser, that the proposed terms of the Disposal are fair and reasonable insofar as Shareholders are concerned.
GEEMF currently holds approximately 14.09 per cent. of the voting rights of Greenko Mauritius and is therefore also a substantial shareholder (as defined in the AIM Rules); GE is also a substantial shareholder (as defined in the AIM Rules) by virtue of its current holdings of the entire issued share capital of each of Wind Power Projects (Mauritius) Limited and Wind Power Generations (Mauritius) Limited which in turn hold approximately 24.1 per cent. of the issued shares of Greenko Wind Projects Private Limited. The arrangements referred to in paragraph 3 above and in paragraph 3 of Part II of this document for the termination and/or novation of each of their existing contractual arrangements with the Company and Greenko Mauritius are related party transactions pursuant to AIM Rule 13. Accordingly, the Independent Directors further confirm, having consulted with Arden, the Company's Nominated Adviser, that the proposed terms of the termination and/or novation arrangements with each of GEEMF and GE are fair and reasonable insofar as Shareholders are concerned.
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Extraordinary General Meeting
Shareholders will find at the end of this document a notice convening an Extraordinary General Meeting of the Company, to be held at Merchants House, 24 North Quay, Douglas, Isle of Man IM1 4LE at 12.00 noon on 9 November 2015.
At the Extraordinary General Meeting, the Resolutions will be proposed to approve (a) the sale of the Company's shareholding in Greenko Mauritius and all other assets held by the Company at Completion (including the Cash) to GEH and (b) the Company's Investing Policy conditional on Completion.
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Action to be taken
Shareholders will find enclosed with this document a Form of Proxy for use at the Extraordinary General Meeting.
Whether or not you intend to be present at the EGM, you are requested to complete and return the Form of Proxy so as to reach the Company's Company Secretary at Merchants House, 24 North Quay, Douglas,
Isle of Man IM1 4LE, either by personal delivery, post, facsimile transmission (+44 (0)1624 619 989) or email (mail@iqe.im), as soon as possible and, in any event, not later than 12.00 noon on 7 November 2015, being not less than 48 hours before the time appointed for the EGM.
Completion and return of the Form of Proxy will not, however, prevent you from attending the Extraordinary General Meeting and voting in person if you should wish to do so.
- Recommendation
The consideration for the Disposal is approximately £162.8 million payable in cash on Completion less the Company's adviser's estimate of the withholding tax (if any) that GEH may be obliged to withhold from the consideration and account to the Indian tax authorities in respect of the Company's liability to Indian taxation on any gain arising from the Disposal.
Completion of the Disposal is conditional upon:
the passing at a general meeting of the Company of resolutions in the agreed form approving the Disposal; and
an irrevocable waiver from the Bondholders in respect of the change of control of Greenko Mauritius resulting from the completion of the Disposal being granted and receipt of consents from the Bondholders to certain other amendments to the indenture relating to the Bonds.
On completion of the Disposal, among other things, the shareholders' agreements and other contractual arrangements between the Company and/or Greenko Mauritius and each of Cambourne and GEEMF relating to their respective investments in Greenko Mauritius and for the exchange of their respective shareholdings in Greenko Mauritius for shares in the Company are to be terminated; the contractual arrangements between the Company and GE in respect of the sale of GE's shares in Wind Power Project (Mauritius) Limited and Wind Power Generations (Mauritius) Limited to the Company are to be novated to Greenko Mauritius; the Company is to be released from all liabilities and obligations in respect of its guarantee of the indebtedness of Greenko Mauritius to EIG and the warrants to subscribe for shares in the Company issued to EIG are to be cancelled; waivers and/or releases are to be provided from Cambourne, GEEMF, EIG, GE, PTC and Investec in relation to respective contractual rights arising as a result of the Disposal; and consents to the change of control arising as a result of the Disposal are to be provided from IDBI Trusteeship Services Limited, Wind Power Generations (Mauritius) Limited, Wind Power Projects (Mauritius) Limited, EIG and PTC. The documentation in respect of the aforementioned contractual arrangements (save for those relating to PTC which are expected to be entered into prior to completion of the Disposal) was entered into on or prior to the date of execution of the Sale and Purchase Agreement and will become effective immediately on completion of the Disposal.
The Sale and Purchase Agreement provides that, to the extent that the delivery of certain of the above listed items is subject to conditions, fees, penalties and/or amendments to or in respect of the relevant documentation not already contained in the agreed form documents at the date of the Sale and Purchase Agreement, such conditions, fees, penalties or amendments shall require the prior written approval of GEH, which GEH may give or withhold in its entire discretion.
If the conditions have not been satisfied in full or waived in accordance with the terms of the Sale and Purchase Agreement, or items to be delivered in accordance with the terms of the Sale and Purchase Agreement have not been delivered, by 30 November 2015, the Sale and Purchase Agreement will automatically lapse.
The Company, Anil Kumar Chalamalasetty, Mahesh Kolli and ACMK have severally given certain warranties with regard to the operation of the businesses of Greenko Mauritius and its subsidiaries since 1 May 2013 (and, in some cases, since 1 September 2010) and, in the case of the Company, also in relation to the Company's title to its shares in Greenko Mauritius, its capacity and authority to enter into the Sale and Purchase Agreement and to complete the Disposal and insolvency. The time limit for claims for breaches of the Company's warranties in the Sale and Purchase Agreement is six months from the date of Completion, and the Company's liability for such claims is capped at 1 per cent. of the consideration payable to the Company under the Sale and Purchase Agreement. The Company has waived any claims or recourse it may have against Anil Kumar Chalamalasetty and Mahesh Kolli in respect of any claim for a breach of warranty in the Sale and Purchase Agreement against the Company. To the extent the Company has any liability under a claim for breach of the
warranties given in the Sale and Purchase Agreement, it is agreed that the Company's liability would be limited to 88 per cent. of such liability.
Included within the aggregate £162.8 million payable as the consideration for the Disposal is the amount of £4.25 million payable in cash on Completion for the acquisition of the Share Application Monies.
The Company has also given an indemnity to GEH, Cambourne and Greenko Mauritius and its subsidiaries against any CGT Liability to the extent it exceeds the Withholding Tax Amount. The time limit for claims under the indemnity is the earlier of two years and the date on which the shareholders of the Company resolve to wind-up the Company. The Company's liability for such claims is capped at £330,000.
The Company has agreed with GEH to procure, so far as it is legally able to do so, that Greenko Mauritius and its subsidiaries continue to carry on business in the ordinary and usual course, and to comply with certain customary conduct of business obligations, pending Completion.
The Company has also agreed with GEH that, pending Completion, it will not dispose of, or grant or create any rights or encumbrances over, its shares in Greenko Mauritius or enter into, or continue, any discussions or negotiations with third parties with regard to the sale of its shares in Greenko Mauritius or any part of the business of Greenko Mauritius or its subsidiaries.
The Company has agreed to sell to ACMK for £1 on the day before Completion takes place, any assets held by the Company on such day (other than its shares in Greenko Mauritius, the Cash and the Share Application Monies and the inter-company loans released by the Company as referred to in paragraph 11 below).
The Company has given certain undertakings to GEH to protect the goodwill of the business of Greenko Mauritius and its subsidiaries, including:
for a period of two years after Completion not to have any interest in any competing business in India;
at any time after Completion to carry on any form of business other than actions to the extent required to return capital to the Company's shareholders and ultimately to wind up the Company; and
at the end of the period of 12 months following Completion to change its name to one that does not incorporate the name 'Greenko' or any name that is substantially or confusingly similar.
Greenko Mauritius has agreed with effect from the date of the Sale and Purchase Agreement to assume and discharge, and GEH has agreed with effect from Completion to procure that Greenko Mauritius discharges, the Company's obligation to pay unpaid bonuses and salary due to the executive Directors of the Company. The Company has agreed with effect from immediately before Completion to release Greenko Mauritius and its subsidiaries from all inter-company loans from the Company to any of them.
GEH is entitled to terminate the Sale and Purchase Agreement if:
there is a breach of some of the Company's warranties in the Sale and Purchase Agreement (principally, as to title to its shares in Greenko Mauritius, its capacity and authority to enter into the Sale and Purchase Agreement and complete the Disposal, and insolvency);
there is breach of the undertakings referred to in paragraphs 7 and 8 above; and
such breach or breaches would individually or in the aggregate have, or be reasonably expected to have, a material adverse effect.
In addition, the parties to the Sale and Purchase Agreement have agreed to deliver on Completion certain documents including, inter alia, executed agreed form termination agreements in respect of the Company's
existing shareholder arrangements with Cambourne and GEEMF, executed agreed form service agreements and shareholder arrangements (directly or indirectly) with Anil Kumar Chalamalasetty and Mahesh Kolli and various executed agreed form termination, novation and amendment agreements with EIG, GE, PTC and Investec.
The Sale and Purchase Agreement provides that, to the extent that the delivery of certain of the above listed items is subject to conditions, fees, penalties and/or amendments to or in respect of the relevant documentation not already contained in the agreed form documents at the date of the Sale and Purchase Agreement, such conditions, fees, penalties or amendments shall require the prior written approval of GEH, which GEH may give or withhold in its entire discretion.
As stated above, whilst the timeframe for the satisfaction of the conditions is difficult to estimate, it is currently expected that Completion will occur in November 2015.
Further details of the Sale and Purchase Agreement are included in Part II of this document.
The Company is seeking advice on the most appropriate method to return the net cash resources of the Company resulting from the Disposal to Shareholders in a tax efficient manner. It is currently expected that the planned initial capital return to Shareholders of 98 pence per Ordinary Share will be within a period of three months from Completion. Further details will be provided to Shareholders in due course.
The Board has received preliminary tax advice that the sale of Greenko Mauritius is not expected to give rise in India to any CGT Liability, subject to prevailing foreign exchange rates on Completion. Accordingly, it is not expected that there will be any Withholding Tax Amount. The Board has assumed that no CGT Liability arises in Mauritius or the Isle of Man. It has however been agreed that the Company will give an indemnity to, inter alia, GEH in respect of any CGT liability of up to £330,000, further details of which are set out in paragraph 6 of Part II of this document.
On the basis of the following assumptions (the 'Assumptions'):
the Company is expected to have sufficient cash resources to make a distribution to Shareholders of up to approximately £159 million in aggregate, equivalent to up to approximately 100 pence per Ordinary Share on a Fully Diluted Basis, with a planned initial capital return of 98 pence per Ordinary Share.
The ability of the Company to make the estimated aggregate level of distribution and the timing of such return is not currently known with certainty and will be subject to factors which may include but not be limited to:
Yours faithfully
Keith Henry
Non-Executive Chairman
PART IIThe principal terms of the Sale and Purchase Agreement are set out below.
If GEH elects to terminate the Sale and Purchase Agreement (as set out above), the Company has agreed to reimburse GEH's reasonably incurred costs in connection with the Disposal up to a maximum of £1 million.
PART IIIA shareholders' agreement is proposed to be entered into between (1) Cambourne (2) GEH (3) GVL (4) Anil Kumar Chalamalasetty ('AC') and (5) Mahesh Kolli ('MK') (the 'Shareholders' Agreement').
The principal terms of the Shareholders' Agreement are set out below:
Shares in GEH ('GEH Shares') will be allocated at completion of the Shareholders' Agreement ('SHA Completion') such that Cambourne shall hold A Shares comprising 84 per cent. of the GEH Shares. GVL shall hold A Shares comprising approximately 12 per cent. of the GEH Shares. GVL has an option to purchase A Shares comprising approximately an additional 22 per cent. of the GEH Shares from Cambourne which needs to be exercised during a three month option period following SHA Completion, at a price per share to be determined, but which is not less than the price per share paid by GEH for the Greenko Mauritius shares plus associated interest and transaction costs, to take its potential holding of A Shares in GEH up to approximately 34 per cent. GVL shall also hold non-voting B Shares comprising approximately 4 per cent. of the GEH Shares (the 'Performance Shares') for the performance by GVL of certain management services. The Performance Shares may be converted into A Shares upon satisfaction of certain financial or operational hurdles (linked to achievement of additional 1,000 MW generational capacity increasing total capacity to in excess of 2,000 MW and/or a corresponding increase in run rate EBITDA on the basis of 25 per cent. of the Performance Shares converting for each additional 250 MW of capacity) applicable in the 42 months following SHA Completion (the 'Performance Period'). Conversely, where such financial or operational hurdles are not satisfied (or not satisfied in full) during the Performance Period, or upon the occurrence of certain other conditions, all or some of the B Shares held by GVL shall become transferable to Cambourne, and subsequently converted into A Shares. Further issues of GEH Shares are to be made on a pre-emptive/non-dilutive basis in the first instance.
There is a lock-in period of two years (the 'Lock-in') preventing GVL from transferring any GEH Shares, and a separate three year restriction preventing GVL from transferring GEH Shares if as a result of such transfer GVL would hold less than the higher of eight per cent. of the total A Shares in issue or 50 per cent. of the highest total amount of A Shares held by GVL during that three year period. The Shareholders' Agreement contains customary right of first offer, tag-along and drag-along provisions.
AC and MK (the 'Managers' and each a 'Manager') will be appointed as non-executive directors on the GEH board. Cambourne shall have a right to appoint the majority of the directors on the GEH board for so long as Cambourne holds a majority shareholding in GEH. Any director appointments made by GVL shall, where such directors are not AC or MK, be subject to prior consultation with Cambourne (for so long as Cambourne is the single largest holder of GEH Shares).
The Managers will be appointed as executive directors in GEPL, GEH's indirect Indian subsidiary after Completion, and will enter into new service agreements (see below). The Managers are exclusively responsible for the day-to-day operations of the GEH group companies and are responsible for ensuring all compliance by the GEH group companies with statutory obligations subject to certain limited exceptions. All other directors are specifically protected from any of the statutory obligations.
GVL agrees to guarantee the obligations of the Managers under the Shareholders' Agreement for so long as they remain the executive directors of the GEH group companies.
An executive service agreement is proposed to be entered into between GEPL and each of the Managers, respectively (the 'Service Agreements'). The Service Agreements are on similar terms as to salary and bonus to the existing service agreements between the Managers and the Company.
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