TIDMREAC
RNS Number : 7320T
React Energy PLC
10 January 2017
10 January 2017
REACT Energy plc
("REACT", the "Company" and together with its subsidiaries,
"REACT Energy Group")
Significant Investment by EBIOSS Energy in REACT Energy Group
and Notice of EGM
HIGHLIGHTS
-- EBIOSS Energy has conditionally assigned the benefit of the
EUR5,150,226 debt due to EBIOSS Energy from REACT's 50.02 per cent.
subsidiary, Newry Biomass Limited ("NBL"), pursuant to the EQTEC
Agreement (the "NBL Debt"), to REACT pursuant to the Settlement
Deed
-- REACT has conditionally issued, subject to, inter alia,
Shareholder approval, 78,210,000 New Ordinary Shares to EBIOSS
Energy (the "New EBIOSS Shares") in lieu of cash settlement of the
NBL Debt pursuant to the Conversion Agreement, which will result in
EBIOSS Energy holding 51 per cent. of the Enlarged Share Capital of
REACT
-- The New EBIOSS Shares are being issued at a price of 5.53
pence (the "Conversion Price"), which represents a premium of 47.5
per cent. to the closing mid-market share price on 9 January 2017
of REACT of 3.75 pence
-- As the Conversion Price is below the nominal value of the
Existing Ordinary Shares of EUR0.10 each, the issue of the New
EBIOSS Shares is therefore conditional on, inter alia, Shareholder
approval of the Share Capital Reorganisation which will result in
each of the Existing Ordinary Shares being divided into and
reclassified as one New Ordinary Share of EUR0.001 and one 2017
Deferred Share of EUR0.099
-- As the issue of the New EBIOSS Shares will result in EBIOSS
Energy holding 51 per cent. of the Enlarged Share Capital of REACT,
their issue is conditional on, inter alia, Independent Shareholder
approval of the waiver of the requirements of Rule 9 of the Irish
Takeover Rules that would otherwise arise on EBIOSS Energy to make
a general offer to all Shareholders
-- At the EGM, the Company is also asking Shareholders to vote
on the change of its name to EQTEC PLC
-- The Proposals are subject, inter alia, to Shareholder
approval of the Resolutions, including the Whitewash Resolution, to
be sought at the EGM, convened for 11:30 a.m. on 6 February 2017. A
circular will be posted to Shareholders today convening the EGM
(the "Circular")
The above highlights should be read in conjunction with the full
text of the following announcement.
Strand Hanson Limited ("Strand Hanson"), which is authorised and
regulated by the Financial Conduct Authority, is acting exclusively
for the Company and no-one else (including the recipients of the
Circular) and will not be responsible to anyone other than the
Company for providing the protections afforded to its clients or
for advising any other person on the contents of this document or
any matter, transaction or arrangement referred to therein.
Unless otherwise stated, capitalised terms in this announcement
are as defined in Appendix 1 of this announcement.
For further information:
REACT Energy plc +353 (0)21
Gerry Madden / Brendan Halpin 2409 056
Strand Hanson Limited - Nomad & Broker
James Harris / Richard Tulloch / Ritchie +44 (0)20
Balmer 7409 3494
Share Capital Reorganisation
Assignment of the benefit of the NBL Debt due to EBIOSS Energy
to REACT
Debt-for-equity conversion of the NBL Debt due to EBIOSS Energy
for 78,210,000 New Ordinary Shares
Approval of the Whitewash Resolution under Rule 9 of the Irish
Takeover Rules
Change of Name to EQTEC PLC
and
Notice of Extraordinary General Meeting
1. Introduction
REACT, the renewable energy developer and operator focusing on
the production of clean energy in the UK and Ireland, today
announces that the Company and EBIOSS Energy have entered into the
Settlement Deed whereby, subject to, inter alia, Shareholder
approval of the Resolutions, including the Whitewash Resolution
(which is to be voted upon only by Independent Shareholders), the
NBL Debt, amounting to EUR5,150,226 which is currently due to
EBIOSS Energy from NBL pursuant to the EQTEC Agreement entered into
between NBL and EBIOSS Energy, will be assigned to REACT such that
REACT will become a debtor to EBIOSS Energy and a creditor of NBL
for an amount equal to the NBL Debt. The Company intends to settle
the NBL Debt through the issue of the 78,210,000 New Ordinary
Shares, being the New EBIOSS Shares, pursuant to the Conversion
Agreement.
Shareholders are being asked to vote on the Resolutions at the
EGM to, inter alia, approve the Whitewash Resolution (which is to
be voted upon only by Independent Shareholders), which is a
condition of the Settlement Deed and the Conversion Agreement and
therefore the issue of the New EBIOSS Shares. The Company is also
asking Shareholders to vote on a change of the Company's name to
EQTEC PLC.
As the Conversion Price, being 5.53 pence per New EBIOSS Share
is below the nominal value of the Existing Ordinary Shares (being
EUR0.10 per Existing Ordinary Share), in order to permit the
Company to issue the New EBIOSS Shares in compliance with the
Companies Act, the Company intends, subject to, inter alia,
Shareholder approval, to undertake the Share Capital Reorganisation
to enable the Proposals to proceed as, under the Companies Act, new
ordinary shares must be issued at a price greater than their
nominal value.
Under the Share Capital Reorganisation, each of the 75,140,494
Existing Ordinary Shares will be divided into and reclassified as
one New Ordinary Share of EUR0.001 and one 2017 Deferred Share of
EUR0.099. Each Shareholder's proportionate interest in the
Company's issued ordinary share capital will, and thus the
aggregate value of their holding should, remain unchanged as a
result of the Share Capital Reorganisation alone. It will, however,
be diluted by the issue of the New EBIOSS Shares pursuant to the
Conversion Agreement.
Approval of the Resolutions, including, inter alia, the
Whitewash Resolution and therefore the ability to issue and allot
the New EBIOSS Shares is being sought at the EGM, convened for
11:30 a.m. on 6 February 2017.
Section 1111 of the Companies Act 2014 requires the directors of
a company to convene an extraordinary general meeting of its
shareholders where its net assets are half or less of its called-up
share capital, as is the case with the Company. Accordingly, the
EGM will also address the requirements of Section 1111.
The purpose of this announcement is to provide information on
the background to the Company's current position, EBIOSS Energy and
the Proposals and to explain why the Board recommends that
Shareholders vote in favour of the Resolutions, including the
Whitewash Resolution (which is to be voted upon only by Independent
Shareholders), at the EGM, notice of which is set out at the end of
the Circular, which has today been posted to Shareholders.
2. Background to the relationship between the Company and EBIOSS Energy
On 31 December 2015, the Company announced that NBL, a 50.02%
subsidiary of the Company, which owns the Group's 4MW biomass
gasification project in Newry, Northern Ireland, had entered into
the EQTEC Agreement to purchase the EQTEC Plant to repower the
Newry biomass plant. NBL is effectively a 50/50 joint venture with
Farmers, the Company's current largest shareholder with an interest
of 23.2% in the Existing Ordinary Shares.
Pursuant to the EQTEC Agreement, the consideration for the
purchase of the EQTEC Plant was EUR4,963,993, and was to be fully
payable in cash. It was also agreed that the equipment purchased
would form part of an EPC contract to be signed between EQTEC (or a
company designated by EQTEC) and NBL. EBIOSS have subsequently
invoiced NBL EUR186,233 for shipping and delivery and other costs
of the EQTEC Plant, bringing the total amount outstanding under the
EQTEC Agreement to EUR5,150,226.
REACT has since granted EQTEC exclusivity to provide
gasification technology, as part of the EPC contract, for its
biomass gasification project pipeline in the UK.
On 8 January 2016, the Company announced that it had entered
into the EBIOSS Loan Facility with the proceeds to be used by the
Company for continued investment in the Newry biomass plant and the
Company's portfolio of other biomass gasification projects in the
UK. The key terms of the EBIOSS Loan Facility were as follows:
-- quantum of EUR750,000, which could be drawn down in three
equal monthly instalments of EUR250,000;
-- interest rate of 8% per annum on outstanding capital
balances, which would accrue and be repaid in full on repayment of
the EBIOSS Loan Facility;
-- drawdown of the EBIOSS Loan Facility to be subject to the
agreement of the Company and EBIOSS Energy; and
-- from 7 January 2017, EBIOSS Energy could, at any time, demand
that the Company repays the drawn down proportion of the EBIOSS
Loan Facility plus accrued interest. The Company could, at any
time, elect to repay the EBIOSS Loan Facility plus accrued
interest.
The first instalment of EUR250,000 was drawn down by the Company
on 8 January 2016.
As announced on 16 March 2016, the terms of the EBIOSS Loan
Facility were amended so that the proceeds from the second
instalment of EUR250,000 (the "Second Tranche") could be applied
for the working capital needs of the Company as well as for project
development costs, at the sole discretion of the Company. Between
then and 23 May 2016, the Company drew down the full EUR250,000
available under the Second Tranche.
As announced on 22 June 2016, the terms of the EBIOSS Loan
Facility were amended again such that the remaining EUR250,000
available under the facility (the "Third Tranche") could also be
utilised by the Company for working capital purposes as well as to
fund project development costs. Accordingly, the Company announced
that it had drawn down EUR75,000 of the Third Tranche for working
capital needs, with EUR175,000 available to be used by the Company
for project development costs.
On 12 December 2016, it was announced that the remaining balance
of the EBIOSS Loan Facility had been drawn down to be used for the
working capital needs of the Company, such that the balance
outstanding stood at EUR750,000. It was also announced that the
terms of the EBIOSS Loan Facility had been amended by the Amendment
and Restatement Deed between the parties such that the amount of
the EBIOSS Loan Facility was increased by EUR600,000 to
EUR1,350,000, with the increased amount to be used for the working
capital needs of the Company, and the repayment date of for the
facility was extended to 7 January 2018. All other terms of the
EBIOSS Loan Facility remain the same.
3. The Settlement Deed, the Conversion Agreement and the Warrant Purchase Agreement
Background to the Proposals
Whilst the Company continues to execute on its strategy, general
market conditions continue to impact investment sentiment. As a
result of this ongoing uncertainty, and to ensure that the Company
continues to have in place the necessary resources to meet this
dynamic business environment, the Board continuously reviews the
Company's strategy, cost base and financing structures to ensure it
is well positioned and appropriately capitalised to take advantage
of opportunities that are available to it.
Due in part to the delay in finding funding partners to finance
the repowering of Newry, the Group's current cash resources are not
sufficient to make the payments due to EBIOSS Energy under the
EQTEC Agreement, being the NBL Debt. With this background, the
Company has concluded discussions with EBIOSS Energy, such that as
a result of assigning the NBL Debt due to EBIOSS Energy from NBL
(pursuant to the EQTEC Agreement) to REACT, EBIOSS Energy will be
issued such number of New Ordinary Shares so that it has a
shareholding of 51 per cent. of the Enlarged Share Capital, thus
taking previous commercial transactions and general cooperation
between the companies a significant step further.
In order to facilitate this, the Company has entered into the
Settlement Deed and the Conversion Agreement to fully convert the
debt balances outstanding under the EQTEC Agreement (which amount
to EUR5,150,226) into New Ordinary Shares (known as the New EBIOSS
Shares) and thereby extinguish all amounts due to EBIOSS Energy
under the EQTEC Agreement. The Company has also earlier entered
into the Amendment and Restatement Agreement with EBIOSS Energy as
set out above and in paragraph 2 of Part 1 of the Circular to
provide additional working capital to the Group, which is expected
to be sufficient for the next six months for the Group to undertake
the necessary activities to repower NBL and advance its other
projects. Pursuant to the Settlement Deed, the Company will become
a creditor of NBL, and it is currently intended that the Company
will be repaid in full on the funding of the Newry Biomass
plant.
EBIOSS Energy is an industrial engineering group and is involved
in the engineering, construction, project development and operation
of waste-to-synthesis gas plants. It operates internationally in
the design and construction of waste gasification power plants with
power capacity from 500kW to 10MW. EBIOSS is a provider of a
proprietary technology, the EQTEC Gasifier Technology (known as
EQTEC Plant or EGT), by which different types of waste are
transformed into synthesis gas. This technology on waste
gasification has made possible the design construction and/or
operation of waste gasification plants in Spain, France, Germany,
India, Italy and Bulgaria among other countries, for third party
international energy groups and for use by EBIOSS Energy itself.
EBIOSS Energy is quoted on MAB, the alternative market of the
Spanish Stock Exchange.
Having taken into account current general market conditions
regarding investment sentiment and the Company's view on the
renewable energy and energy from waste markets as set out below and
in paragraph 4 of Part 1 of the Circular, the Board believes that
in order to avail of the opportunities presenting themselves,
particularly in the energy from waste market in the UK, a strategic
partnership with a larger group such as EBIOSS Energy with its own
proprietary technology is the best path forward. The Board believes
that the existing collaboration between the parties and the
existing cooperation in relation to project pipeline in the UK,
means that it makes strategic sense to have EBIOSS Energy as the
majority shareholder in REACT, both financially and operationally,
in the medium to long term rather than a one-off financing partner
at project or corporate level.
Settlement Deed
To facilitate the debt-for-equity conversion of the amounts due
under the EQTEC Agreement, subject to, inter alia, Shareholder
approval of the Resolutions, including the Whitewash Resolution
(which is to be voted upon only by Independent Shareholders) being
granted, REACT has agreed, pursuant to the Settlement Deed for the
NBL Debt to be assigned to it such that REACT will become a debtor
to EBIOSS Energy and a creditor of NBL for an amount equal to the
NBL Debt.
The intention of NBL and REACT is that on the completion of the
closing of the financing for the repowering of the Newry biomass
plant, NBL will pay an amount equal to the NBL Debt to REACT. As
further detailed below and in paragraph 4 of Part 1 of the
Circular, the Company announced on 11 October 2016 that it had
signed conditional heads of agreement with several parties to
potentially fund, through a combination of equity and debt, the
repowering of the Newry biomass plant. The balance of funding
required to repower the Newry biomass plant is estimated to be
approximately GBP11.2 million, which includes repayment of the
amount owed to REACT by NBL pursuant to the Settlement Deed.
As at the date of this announcement, these parties continue
their legal, financial and technical due diligence on the project
and it is hoped that a further announcement will be made early in
2017 in this regard, setting out a timeline to completion of the
repowering of the Newry biomass plant.
NBL applied and received confirmation from Ofgem that they have
granted an extension to 31 March 2018 for the ROCs registration of
the Newry biomass plant, at which point the plant will need to have
been repowered and commissioned. The Company is confident that the
plant will be able to again export electricity to the grid by the
revised deadline agreed with Ofgem.
There can, however, be no guarantee that definitive agreements
will be concluded on the terms currently envisaged, or at all, with
these parties in which case the Company, in partnership with EBIOSS
Energy and its subsidiary EQTEC, would seek to combine their
resources to commission the project to a basic level to ensure that
the ROCs are registered for the plant by 31 March 2018. In this
scenario, the plant having been commissioned to basic standards
would be refinanced with third party funders and completed in full.
This refinancing would be expected to include repayment of the
amount owed to REACT by NBL pursuant to the Settlement Deed.
However, there can be no guarantee that the parties will be able to
commission the project to a basic level and / or subsequently
refinance the project to raise sufficient capital in order to repay
the monies owing to REACT by NBL (or at all), which in turn would
be part used to repay the outstanding loans due to EcoFinance and
Altair amounting to EUR3,792,285 (face value as at 30 June 2016)
which are secured over, inter alia, NBL.
Conversion Agreement
The Company and EBIOSS Energy have agreed to undertake a
debt-for-equity conversion of amounts owing to EBIOSS Energy under
the EQTEC Agreement by NBL (to be assigned to the Company pursuant
to the Settlement Deed). The terms of such conversion are governed
by the Conversion Agreement.
The Conversion Agreement is conditional on, inter alia,
Shareholder approval of the Resolutions, including the Whitewash
Resolution (which is to be voted upon only by Independent
Shareholders).
Pursuant to the Conversion Agreement, 78,210,000 New Ordinary
Shares (the New EBIOSS Shares) will be issued to EBIOSS Energy in
complete and final settlement of the amount owing under the NBL
Debt (which was assigned to the Company pursuant to the Settlement
Deed) to EBIOSS Energy.
The Conversion Price has been agreed between the Company and
EBIOSS Energy at 5.53 pence per New Ordinary Share to be issued and
represents a premium of 47.5 per cent. to the closing mid-market
price of an Existing Ordinary Share on 9 January 2017, being the
last day prior to the announcement of the Proposals.
Warrant Purchase Agreement
EBIOSS has also disclosed to the Company that it has entered
into the Warrant Purchase Agreement with members of the Concert
Party, whereby it has received a conditional option to purchase all
outstanding Warrants issued to the Concert Party. The Warrant
Purchase Agreement is conditional on the approval of all of the
Resolutions being proposed at the EGM. The option, pursuant to the
Warrant Purchase Agreement, will expire on 31 December 2017 and is
to purchase all of the Warrants, being 38,450,000 Warrants, for a
price of EUR100,000. Further details on the Warrant Purchase
Agreement are set out below and in paragraph 7 of Part 1 of the
Circular.
Admission to Trading
Admission to trading of the New Ordinary Shares (following the
Share Capital Reorganisation of the Existing Ordinary Shares) and
the New EBIOSS Shares is expected to occur on 7 February 2017,
assuming the Resolutions are passed. Following Admission, the
Company will have 153,350,494 New Ordinary Shares in issue. The
Company holds no shares in treasury. Shareholders should use the
figure of 153,350,494 as the denominator for the calculations by
which they will determine if they are required to notify their
interest in or change to their interest in the Company, under the
FCA's Disclosure and Transparency Rules.
Following Admission, EBIOSS Energy will hold New Ordinary Shares
carrying voting rights over 51 per cent. of the Enlarged Share
Capital, as well as the option, pursuant to the Warrant Purchase
Agreement, over 38,450,000 Warrants. Farmers Business Developments
plc, the Company's current 23.2 per cent. shareholder, will hold
New Ordinary Shares carrying voting rights over 11.3 per cent. of
the Enlarged Share Capital following Admission.
4. Market and Portfolio Overview and Future Strategy
The Company is a clean energy project developer and operator.
The Company seeks to take projects from "Greenfield" (greenfield
land) to "Shovel Ready" stage (projects where planning and
development is advanced enough that, subject to 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 then sought to fund the construction phase in
return for a share of the project equity.
The Company develops and builds projects currently using wood
and waste wood as the sustainable fuel source. The core focus has
been on converting biomass or wood into clean electricity and heat.
This was based primarily on the technology available to convert the
fuel into power and the level of government subsides available
specifically for biomass fuel and the relevant conversion
technology.
In reporting its interim results for the six months to 31
December 2015, the Company stated that the political and regulatory
environment within the UK continued to be challenging, with a lack
of direction and continued changes to the long-term support
mechanisms available for renewable energy projects developed under
the Electricity Market Review (EMR), with the introduction of
Contracts for Difference (CfD) in place of the Renewables
Obligation (RO) regime. As part of its ongoing cooperation and
collaboration with EBIOSS Energy, the Company has reviewed its
strategy for developing and operating clean energy power plants in
the UK.
Overview of the UK Renewable Energy Market
The UK developed its renewable energy sector based on the
Renewables Obligation (RO), a quota scheme, that led to the only
publicly subsidised electricity investments in the UK after the
1989 privatisation era. In 2010, the UK government also introduced
the Feed in Tariff (FIT) scheme for supporting small scale
low-carbon installations up to a maximum capacity of 5MW.
Post 2014, the UK's electricity sector is now governed by the
Electricity Market Reform (EMR). Based on the EMR, all electricity
investments are publicly subsidised with the fossil-fuel sectors
receiving subsidies by way of the capacity market and the renewable
energy sector by way of the CfDs scheme. Having announced the
closing of the RO Scheme, the last projects, under the RO Scheme
which needed confirmation of a "grace period" from Ofgem, must be
completed before 31 March 2018. The UK Government published, in
November 2016, a draft of the Budget Notice ahead of the CfD
allocation round opening in April 2017. This set an overall budget
for total support payments for projects delivered in the two years
from the middle of 2021 to 2023 and also set out strike prices for
the various less well established technologies including advance
conversion technologies, such as advanced gasification.
Overview of the UK Energy from Waste Market
The UK has, over the past 10 years, seen a transformation in its
management of household waste. This has been most marked within
local authorities as they make the transition from landfill to
recycling / composting and energy recovery. The waste market is now
moving towards what is termed 'merchant' projects. These are
projects which utilise private, specialist fuel supply such as
refuse derived fuel (RDF), municipal solid waste (MSW), commercial
and industrial waste and waste wood. RDF or solid recovered fuel /
specified recovered fuel (SRF) is a fuel produced by shredding and
dehydrating municipal solid waste (MSW) with a waste converter
technology. In addition, these merchant projects tend to utilise
new advanced conversion technologies and include specialist sub
sectors, like advanced gasification.
Advanced gasification is a process that converts organic or
fossil based carbonaceous materials at elevated temperatures with
controlled amounts of oxygen into carbon monoxide, hydrogen, carbon
dioxide and methane into a gas, which is ultimately used for power
generation. It is a well-known technology, and its advanced use
with mixed waste feedstock is continually developing. By its nature
"energy from waste" bridges two sectors both of which are evolving.
It has its roots firmly in waste management but is becoming of
increasing importance to energy generation.
Waste management is changing to be much less about how society
gets rid of things it no longer wants and more about managing
discarded resources back into the economy. Likewise, energy
generation is evolving to make best use of renewables, novel fuels
and different energy outputs always with an eye to energy security.
The need to meet 2020 landfill diversion targets for biodegradable
waste has been a major driver for waste policy and infrastructure
development in the UK over the last 10 years. The landfill tax is a
key instrument to meeting the target along with other policies and
initiatives. There are wider societal and environmental benefits
associated with energy generation and use that will drive energy
policy and impact on energy from waste. Energy from waste in
particular has the potential to deliver low carbon energy in a
cost-effective way and as a non-intermittent source, helps provide
energy security.
The term 'energy from waste' (commonly abbreviated to EfW)
covers a range of different processes and technologies and
describes a number of treatment processes and technologies used to
generate a usable form of energy and which also reduce the solid
volume of residual waste. This energy can be in the form of
electricity, heating and/or cooling or a combination of these
forms. Conversion treatments are processes which convert residual
waste or RDF/SRF into a more useable form of energy such as heat or
electricity. These processes include gasification such as the
EGT.
By choosing the right location, the right technology and the
right processing, energy from waste can help to deliver much needed
long-term affordable, low carbon and secure energy.
The EGT can operate economically over a wider range of scales
and is therefore potentially more flexible and has the potential to
generate much greater efficiencies through a range of outputs.
The UK faces a potential energy gap, with the margin of supply
over demand expected to diminish to very-thin levels from 2015
onwards. The scheduled closure of old nuclear facilities has not
been matched by the construction of replacement new-build nuclear
sites and/or other power station facilities.
Local Authority managed waste going for combustion with energy
recovery rose 13 per cent. to 5.5 million tonnes in 2012/13 and has
more than doubled in the last 10 years. A 2010 survey found only 2
per cent. of commercial and industrial waste was combusted with
energy recovery in England. In 2012, 24 EfW plants operating in
England were treating almost 4 million tonnes of residual MSW and
SRF. In 2010, the combustion of the biodegradable component of MSW
provided 6.2 per cent. of the UK's total renewable electricity
generation and 4.7 per cent. of total combined renewable heat and
electricity generation. Waste derived renewable electricity from
thermal combustion in England is forecast to grow from the current
1.2TWh to between 3.1TWh and 3.6TWh by 2020.
Current project portfolio
Newry
As noted above, NBL entered into an agreement with EBIOSS Energy
to purchase its EGT, with a power output of 4MW, which NBL will use
in the repowering of the Newry biomass plant with wood as the fuel.
The equipment has been delivered and is currently on site in
Newry.
The Company is confident that the plant will be able to again
export electricity to the grid by the revised deadline of 31 March
2018 agreed with Ofgem.
Enfield, London
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
Company obtained an updated planning permission for converting
60,000 tonnes per annum of Grade C wood waste in January 2014. An
environmental permit was received April 2012.
As part of the Examinership process, the Company 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. The site has currently been put up for sale by the existing
landlord. The Company intends to open discussions with a new owner
in relation to the future of this site and further updates will be
made as and when appropriate.
Clay Cross
On 12 April 2016, the Company announced that the Regulatory
Planning Committee of Derbyshire County Council (the "Committee")
voted in favour to approve the construction and operation of an
energy recovery facility at Clay Cross facility in Derbyshire (the
"Clay Cross Facility") by Clay Cross Biomass Limited ("Clay Cross
Biomass"), a company in which REACT has a 90% interest, subject to
finalising an agreement under Section 106 of the Town and Country
Planning Act 1990 pursuant to the conditions set out in the report
to the Committee.
Clay Cross Biomass anticipates utilising the EGT, the same
technology that the Company is installing at Newry Biomass, to
power the plant as part of the EPC contract for the construction of
the Clay Cross Facility. Once commissioned, the Clay Cross Facility
is expected to convert approximately 80,000 tonnes per annum of
construction and demolition (C&D) waste wood, which is
currently sent to landfill, to generate up to 12MW of electrical
energy, sufficient to provide electricity for over 18,000 homes,
and up to 14MW of thermal energy per annum.
The Company is currently in preliminary discussions to secure
finance for the construction of the Clay Cross Facility and
estimates that it will take approximately 18 months from obtaining
finance to the final commissioning of the plant. The expected cost
to develop the Clay Cross Facility is approximately GBP50
million.
Biomass Heat
The Company owns 30% of a special purpose vehicle ("SPV") set up
with Equitix ESI Finance Limited ("Equitix") and receives
development and on-going management fees from it. The SPV currently
operates three biomass heat projects in the UK.
Renewable Heat Incentive (RHI) is the primary incentive scheme
in operation for these projects. The digression in RHI tariffs for
boilers below 200kW range is impeding progress on projects within
the pipeline and represents a continuing challenge to completion of
project financing.
Wind Electricity Generation
In Ireland, the Company is currently operating a cash generating
800kW Enercon wind turbine in Pluckanes, County Cork. This plant
was financed by company equity and bank debt provided by AIB Bank
plc and has a 15-year Power Purchase Agreement with Viridian Energy
Limited.
The Company is advancing the project pipeline with the intention
to finance a number of small-scale projects together via company
equity and bank financing, thereby creating a small-scale wind
portfolio. The return on capital employed for each project will be
assessed to ensure an adequate return. The Company is also working
on creating a master supply agreement with a turbine manufacturer
arising from wind measurement and site analysis.
Future strategy
The overall business strategy of the Group is to focus on taking
advantage of the significant opportunities in the EfW market,
including RDF, MSW and wood, in the UK. In order to achieve this
REACT and EBIOSS Energy have entered into mutually beneficial
business arrangements over the last year with the objective of
working closer together to avail of opportunities initially in the
UK EfW market, which has focused on the design of a business model
which aims to develop independent power plant projects (also known
as merchant projects or IPP projects) based on the use of MSW in
the UK.
The combined resources of REACT and EBIOSS Energy have
significant experience in the sector and possess significant
knowledge of energy markets, clean technologies, fuel sources,
project development, project finance and project delivery. REACT
intends to deploy the EGT in the UK in order to implement its
business strategy. The EGT is currently capable of gasifying urban
solid waste through the use of pre-treatment and pelletisation,
which involves a process of compressing or moulding the waste into
the shape of a pellet and wood.
In order to seek to take advantage of these opportunities, REACT
will seek to:
-- use EGT to implement a business model based on the
development of IPP projects using RDF in the UK. A pipeline of such
projects is already at advanced stages of discussions and
negotiation with both REACT and EBIOSS Energy;
-- complete the repowering of Newry as one of the last remaining RO projects in the UK; and
-- review options in relation to CfD auctions in the coming year
in relation to non-qualifying RO plants.
5. Information on EBIOSS Energy
EBIOSS Energy was incorporated in 2011 and is headquartered in
Sofia, Bulgaria. EBIOSS Energy is the holding company of the EBIOSS
Energy group companies, which specialise in waste to energy
projects and waste management solutions. EBIOSS Energy was admitted
to trading on the Mercado Alternativo Bursátil ("MAB") market of
the Bolsas y Mercados Españoles ("BME") on 5 July 2013.
The principal activities of EBIOSS Energy are:
(i) Engineer Procure and Construct ("EPC") & Operation and
Maintenance ("O&M") Services: engineering, construction and
development of gasification power plants that are either sold to
third parties or are retained for direct operation by EBIOSS
Energy. Such activity is carried out by the Spanish subsidiary of
EBIOSS Energy, EQTEC, and is based on its proprietary patented
technology, the EQTEC Plant. Further information on EQTEC is
disclosed below.
(ii) Waste Recovery: carrying-out certain "upstream" ancillary
and incidental activities to the above EPC and O&M Services,
including the management, supply, storage and pelletisation of
combustible materials for use in gasification power plants. Pellets
are produced in factories located in Bulgaria and are sold both
domestically and internationally.
EBIOSS Energy has been operating a major contract with the
largest straw providers in Bulgaria to produce pellets and is
currently working to secure additional contracts in other regions
of Europe for different types of fuels with the intention of
becoming a competitive provider of pellets to the wider European
market.
(iii) Advanced Waste Management Solutions: This activity is
carried out by EBIOSS Energy's Portuguese subsidiary, TNL SGPS
("TNL"). TNL is a technology and innovation company with a presence
in different countries and a strong market presence in Europe that
has been built up over the last 10 years. Its main focus is on
developing solutions for the efficient management of waste
containers in urban areas.
TNL was acquired in 2014 by EBIOSS Energy in order to provide
EBIOSS Energy with access to the first stage of the municipal solid
waste value cycle. Waste collection is a strategic part of the
valorisation cycle and ensures a supply of the necessary fuel for
the EBIOSS Energy power plants.
EQTEC and the EQTEC Plant
In late 2012, EBIOSS Energy acquired Spanish registered company,
EQTEC - an engineering company specialising in the design,
construction, operation and maintenance of cogeneration plants and
electricity power, gasification power plants and renewable energy.
EQTEC has developed the EQTEC Plant which REACT intends to install
in its Newry biomass plant, subject to completion of the
Proposals.
EQTEC has implemented over 60 power plant projects involving
electricity and/or heat generation, with capacities ranging from
60kW to 10 MW. EQTEC has developed and is currently involved with
projects in the UK, Spain, Portugal, India, France, Germany, Italy
and Bulgaria.
EBIOSS Energy and the Company believe that the notable
advantages of the EQTEC Plant include:
-- higher electric performance than alternative technologies;
-- higher global energy efficiency; and
-- permits modular generation and multi-fuel gasification plant.
Please see Part 3 of the Circular for further information on
EBIOSS Energy, in particular its shareholding structure.
6. The Relationship Agreement and wider intentions of EBIOSS Energy
As a result of the issue of the New EBIOSS Shares, EBIOSS Energy
will control shares carrying voting rights over 51 per cent. of the
Enlarged Share Capital on Admission. Accordingly, the Relationship
Agreement has been put in place between the Company, EBIOSS Energy
and Strand Hanson to provide certain safeguards to, inter alia,
ensure the Group is capable of carrying on its business
independently of EBIOSS Energy and that the Directors act in the
best interests of all Shareholders such that policy or decisions
are not focused on the interests or wishes of EBIOSS Energy at the
expense of the other Shareholders.
The Relationship Agreement provides that EBIOSS Energy has the
right to the following director appointments to the Board:
-- such number of directors so that EBIOSS Energy appointees
represent the majority of the Board, for so long as its holding
remains greater than 50 per cent. of the issued share capital of
REACT from time to time;
-- two directors, for so long as its holding is between 35 and
50 per cent. of the issued share capital of REACT from time to
time, one of whom may be the CEO of the Company; and
-- one director, for so long as its holding is between 20 and 35
per cent. of the issued share capital of REACT from time to
time.
All director appointments are subject to the satisfactory
completion of the nominated adviser's due diligence and its
satisfaction that the enlarged board structure post appointment(s)
is appropriate for a company admitted to trading on AIM.
The provisions of the Relationship Agreement will remain in
force for so long as EBIOSS Energy holds at least 20 per cent. of
the issued share capital of the Company from time to time and the
ordinary share capital of the Company remains admitted to trading
to AIM.
EBIOSS Energy has confirmed to the Company that it is not
proposing to seek a change in the general nature of the Company's
business.
EBIOSS Energy has also confirmed that it has no intention to
make any changes regarding the future of the Company's business
(other than generally in accordance with the Company stated
business strategy above), the locations of the Company's places of
business or the continued employment of its employees and
management (and those of its subsidiaries) nor does EBIOSS Energy
intend that there should be any redemption of the fixed assets of
the Company. Following the exercise of its right to nominate
directors to the Board pursuant to the Relationship Agreement,
EBIOSS Energy intends to consult with the Company's nominated
adviser and other advisers as it deems necessary regarding the
general composition, terms and conditions of the members of the
Board for a company of the size, stage of development and
operations of the Group at the relevant time. The current CEO of
the Company, Gerry Madden, will remain as an executive
director.
EBIOSS Energy intends that the Company should remain quoted on
AIM and may only vote their shareholding in favour of a
cancellation from admission to trading on AIM if the independent
directors of REACT (i.e. those directors that have not been
nominated by EBIOSS Energy as their representative(s)) recommend
such cancellation or if it is in connection with (a) an offer for
the entire issued share capital of the Company made by a person
other than EBIOSS Energy or its associates; or (b) the New Ordinary
Shares are already or will be admitted to trading on an EU
regulated market.
As stated above, the Company has a number of projects at various
stages of development, and the Directors believe that the
development of these projects can be best progressed by funding and
technology provided by EBIOSS Energy. The Directors believe that
the investment by EBIOSS Energy to be a confirmation of its belief
in both the opportunities in the renewable energy sector and also
in the prospects for the Company generally.
The intention is that REACT as a 51 per cent. subsidiary of
EBIOSS will also act as an investment vehicle for the EBIOSS Group
with the objective of investing in RDF gasification projects mainly
in UK but also other countries worldwide.
REACT will benefit from having opportunities to access to a
pipeline of gasification projects in UK that have undergone a
detailed process of due diligence and project structuring by the
engineers and project developers within the EBIOSS Group. The
current EBIOSS Energy project pipeline includes more than GBP330
million worth of potential projects in the UK alone and this
pipeline is constantly being reviewed and added to by the EBIOSS
team.
REACT will be able to offer international visibility to the
EBIOSS Group and specifically the EGT and act as a vehicle to
access the financial markets in order to raise capital for
investing with co- developers in appointed UK projects. In this
regard, EBIOSS Energy is already in discussions with one Chinese
based firm, Energy China, about becoming a co-developer of UK
projects with the EBIOSS Group, which on completion of the
Proposals is intended to include REACT.
EBIOSS Energy has confirmed that, subject to the completion of
the Conversion Agreement, it intends (but has no legal obligation)
to consider and use all reasonable efforts to provide opportunities
for the Company to participate in gasification projects which
EBIOSS Energy or its associates may wish to advance in the United
Kingdom. However, there is no legal obligation for EBIOSS Energy to
provide such opportunities to the Company and as a result, EBIOSS
Energy may develop gasification projects in the UK independently of
the Company.
7. Dispensation from Rule 9 of the Takeover Rules
Dispensation
The Proposals give rise to certain considerations under the
Takeover Rules. Brief details of the Takeover Panel, the Takeover
Rules and the protections they afford are described below.
Under Rule 9 of the Takeover Rules, where any person acquires,
whether by a series of transactions over a period of time or not, a
holding in shares which (taken together with shares already held by
that person or by persons acting in concert with him or her) carry
30 per cent. or more of the voting rights of a company which is
subject to the Takeover Rules, such as REACT, that person is
normally required to make a general offer to all the holders of any
class of equity share capital or other class of transferable
securities carrying voting rights in that company to acquire their
shares in the company.
Under the Takeover Rules, when the issue of new securities in
consideration for an acquisition or a cash subscription would
otherwise result in a person acquiring an obligation to make a
general offer under Rule 9 of the Takeover Rules, the Takeover
Panel will normally grant a waiver of that obligation if, inter
alia, the Independent Shareholders pass an ordinary resolution (the
Whitewash Resolution) on a poll at a general meeting approving the
increase is that persons shareholding without them becoming obliged
to make a general offer pursuant to Rule 9 of the Takeover
Rules.
On completion of the Proposals, REACT will allot and issue
78,210,000 New Ordinary Shares to EBIOSS Energy, equal to 51 per
cent. of the Enlarged Share Capital. As a result, EBIOSS Energy
will hold in excess of 30 per cent. of the voting rights in REACT
and would ordinarily be obliged to make a cash offer pursuant to
Rule 9 of the Takeover Rules for the remaining issued shares of
REACT, which EBIOSS Energy does not already own. Therefore, REACT
and EBIOSS Energy have sought a Rule 9 Waiver from the Takeover
Panel. The Takeover Panel has agreed to grant such a Rule 9 Waiver,
subject to, inter alia, the passing of the Whitewash Resolution by
the Independent Shareholders.
EBIOSS Energy currently has no shareholding in the Company and
no rights over Existing Ordinary Shares. EBIOSS Energy has
confirmed it will not purchase any Existing Ordinary Shares or
rights over Existing Ordinary Shares in between the date of the
Circular and the EGM.
EBIOSS Energy has also disclosed to the Company that it entered
into the Warrant Purchase Agreement with members of the Concert
Party, whereby it has received a conditional option to purchase all
outstanding Warrants issued to the Concert Party. The Warrant
Purchase Agreement is conditional on the approval of all of the
Resolutions being proposed at the EGM. The option, pursuant to the
Warrant Purchase Agreement, will expire on 31 December 2017 and is
to purchase all of the Warrants, being 38,450,000 Warrants, for a
price of EUR100,000.
It is EBIOSS Energy's intention that, in the event it exercises
the option to acquire the Warrants as set out under the Warrant
Purchase Agreement, it would only ever exercise such number of
Warrants to maintain its holding in REACT at 51 per cent. in the
event it was to be diluted by way of an issue of New Ordinary
Shares in the future. EBIOSS Energy does not intend to exercise the
Warrants to increase its interest in REACT above 51 per cent. and
any exercise would be in accordance with the Takeover Rules. In the
event that EBIOSS Energy did exercise all of the Warrants and,
assuming no further other increases in the share capital of REACT,
EBIOSS Energy would be interested in 60.8 per cent. of the then
enlarged share capital of REACT.
As a result of entering into this agreement, EBIOSS Energy and
the Concert Party are deemed under the Takeover Rules to be acting
in concert (the "Enlarged Concert Party"). The Enlarged Concert
Party, on Admission, will have a holding of, in aggregate, 55.7 per
cent. of the Enlarged Share Capital. In the event that EBIOSS
Energy did exercise all of the Warrants, and assuming no further
other increases in the share capital of REACT, the Enlarged Concert
Party would be interested in 64.6 per cent. of the then enlarged
share capital of REACT. In the event that the Concert Party
exercised all of the Warrants and its other conversion rights (see
below and paragraph 8 of Part 1 of the Circular), and assuming no
further other increases in the share capital of REACT, the Enlarged
Concert Party would be interested in 66.3 per cent. of the then
enlarged share capital of REACT.
The Waiver is conditional on:
(i) the passing of the Whitewash Resolution by Independent
Shareholders at the EGM. Voting on the Whitewash
Resolution will be put to a poll, as required by the Takeover
Rules; and
(ii) the approval by the Panel of a circular to Shareholders in
accordance with the whitewash guidance note of Rule 9
in the Takeover Rules. The Circular has been so approved in this
respect only.
The Whitewash Resolution is subject to the approval of a simple
majority of the Independent Shareholders on a poll and each
Independent Shareholder will be entitled to one vote for each
Existing Ordinary Share held.
Assuming the Resolutions are passed, as noted above, upon
Admission, EBIOSS Energy will control the voting rights of New
Ordinary Shares representing more than 50 per cent. of the Enlarged
Share Capital. Accordingly, following Admission and for so long as
EBIOSS Energy holds New Ordinary Shares carrying more than 50 per
cent. of the Company's voting share capital (for the purposes of
the Takeover Rules), it may increase its holding of New Ordinary
Shares in the Company without incurring an obligation under Rule 9
to make a general offer for the Company.
EBIOSS Energy will therefore be able, subject to the provisions
of the Relationship Agreement, to block a special resolution of the
Company and be able to pass or defeat an ordinary resolution of the
Company. Further, assuming all Shareholders vote, EBIOSS Energy
would require Shareholders with shares carrying voting rights of,
in aggregate, 24 per cent. of the Enlarged Share Capital to vote
with them to be able to pass a special resolution of the Company,
such as approving the cancellation of the Company's admission to
trading on AIM.
Shareholders should be aware that in the event the holding of
EBIOSS Energy is diluted below 50 per cent. of the issued share
capital of REACT from time to time but remains above 30 per cent.,
it will not be able to acquire further New Ordinary Shares
(including through the exercise of the Warrants referred to above)
without acquiring an obligation to make a general offer under Rule
9 of the Takeover Rules unless a further waiver from Rule 9 of the
Takeover Rules is granted.
Shareholders should also be aware that in the event the holding
of the Enlarged Concert Party is diluted below 50 per cent. of the
issued share capital of REACT from time to time but remains above
30 per cent., neither EBIOSS Energy nor the Concert Party will be
able to acquire New Ordinary Shares in REACT without acquiring an
obligation to make a general offer under Rule 9 of the Takeover
Rules unless a waiver from Rule 9 of the Takeover Rules is
granted.
Reverse takeover transaction
If approved, the Proposals will result in an increase by more
than 100 per cent. of the Company's existing issued share capital
that confers voting rights and therefore the transaction is
classified by the Takeover Panel as a "reverse takeover
transaction". Pursuant to Rule 3.2 of the Takeover Code, the Board
is therefore required to obtain competent independent advice that
the entering into the reverse takeover transaction is in the
interests of its Shareholders.
Your attention is drawn below and to paragraph 15 of Part 1 of
the Circular which provides a recommendation from the Directors in
relation to the Waiver/Whitewash Resolution and the reverse
takeover transaction.
8. The Concert Party
The Concert Party includes each of EcoFinance, Alchemy, Origen
Capital LLP, Altair (including, Mr. Gabriel Quintero), Ms. Ruby
Sayed, Mr. David Palumbo (including Origen Capital Partners
Limited), Mr. Thomas Quigley and Mr Richard Harrop.
On 24 July 2015, as part of the scheme of arrangement completed
by the Company, Origen Capital Partners Limited, a member of the
Concert Party and which is wholly-owned by David Palumbo, was
issued with 204,545 Existing Ordinary Shares as a creditor of the
Company. On 21 October 2015, the Company announced that the Concert
Party had been issued a further 7,000,000 Existing Ordinary Shares.
As such, the Concert Party currently holds 7,204,545 Existing
Ordinary Shares representing 9.6 per cent. of the Existing Ordinary
Shares. Assuming the Resolutions are passed, the Concert Party will
hold 7,204,545 New Ordinary Shares, which will represent 4.7 per
cent. of the Enlarged Share Capital.
As a result of a combination of Warrants and conversion rights,
and in the event EBIOSS Energy does not exercise its conditional
option to purchase all of the outstanding Warrants held by Concert
Party, the Concert Party could potentially hold up to 55,713,369
New Ordinary Shares, representing 27.6 per cent. of the then
enlarged share capital, as enlarged by the issue of New EBIOSS
Shares and the issue of the maximum number of New Ordinary Shares
to the Concert Party.
Further details on the members of the Concert Party and
shareholdings are set out in the Company's circular dated 22
September 2015 that was sent to Shareholders and is available on
the Company's website.
9. Share Capital Reorganisation
The Directors are seeking Shareholder authority to implement the
Share Capital Reorganisation to create a differential between the
nominal value of the ordinary shares in the capital of the Company
and their market price to facilitate the issue of the New EBIOSS
Shares.
To give effect to the Share Capital Reorganisation, the Articles
of Association will need to be amended to make changes to allow the
creation of the 2017 Deferred Shares. These amendments will also
require Shareholder approval at the EGM.
Mechanics of the Share Capital Reorganisation
As at 9 January 2017, being the latest practicable date prior to
the publication of this announcement, the total issued share
capital of the Company was EUR7,514,049.4 divided into 75,140,494
Existing Ordinary Shares.
It is proposed that in relation to the Company's share capital,
to effect the Share Capital Reorganisation, that each of the
75,140,494 Existing Ordinary Shares will be divided into and
reclassified as one New Ordinary Share of EUR0.001 each and one
2017 Deferred Share of EUR0.099 each.
As a consequence of, and immediately following, the Share
Capital Reorganisation becoming effective each Shareholder's
holding of New Ordinary Shares will remain the same as the number
of Existing Ordinary Shares held by them on the Share Capital
Reorganisation Record Date. Each Shareholder's proportionate
interest in the Company's issued ordinary share capital will, and
thus the aggregate value of their holding should, remain unchanged
as a result of the Share Capital Reorganisation alone. It will,
however, be diluted accordingly by the issue of the New EBIOSS
Shares.
The New Ordinary Shares (and the New EBIOSS Shares) will
continue to carry the same rights as attached to the Existing
Ordinary Shares. The 2017 Deferred Shares will carry the rights as
set out in the Amended Articles and as summarised below.
The last day of trading on AIM in the Existing Ordinary Shares
is expected to be 6 February 2017.
If approved, following the Share Capital Reorganisation becoming
effective, and assuming no shares other than the New EBIOSS Shares
are issued between 6 January 2017 (being the latest practicable
date prior to the publication of this announcement) and the date
the Share Capital Reorganisation becomes effective, the Enlarged
Share Capital will comprise 153,350,494 New Ordinary Shares.
If the Share Capital Reorganisation is approved, the New
Ordinary Shares along with the New EBIOSS Shares will be admitted
to trading on AIM on 7 February 2017.
No new share certificates representing the New Ordinary Shares
will be sent to Shareholders who hold Existing Ordinary Shares in
certificated form. Accordingly, share certificates for the Existing
Ordinary Shares will remain valid, and will only be replaced by
share certificates for New Ordinary Shares when the old share
certificates are surrendered for cancellation following the
transfer, transmission or other disposal of New Ordinary
Shares.
Shareholders who hold their Existing Ordinary Shares in
uncertificated form through CREST should expect to see the security
description updated for the existing ISIN number (IE00BH3XCL94), in
order to reflect their holding in New Ordinary Shares.
The 2017 Deferred Shares created will be effectively valueless
as they will not carry any rights to vote or dividend rights. In
addition, holders of 2017 Deferred Shares will not be entitled to a
payment on a return of capital or on a winding up of the Company.
The 2017 Deferred Shares will not be traded on AIM or listed and
will not be transferable other than as specified in the Amended
Articles. No share certificates will be issued in respect of the
2017 Deferred Shares, nor will CREST accounts of Shareholders be
credited in respect of any entitlement to 2017 Deferred Shares.
In connection with the Share Capital Reorganisation, the Company
also proposes to amend the Existing Articles to include the rights
and restrictions attaching to the 2017 Deferred Shares, as set out
above. The Resolution pertaining to the Share Capital
Reorganisation and associated amendment of the Existing Articles
will be proposed as a special resolution, numbered Resolution 2(b).
The rights of the 2008 Deferred Shares and the 2013 Deferred Shares
are not affected by the Share Capital Reorganisation.
As part of the Proposals, certain of the advisers are to be
issued 1,533,505 warrants which will have an exercise price of 5.53
pence and an expiry date of five years from the date of issue.
10. Change of name
The Board also proposes to change the name of the Company to
EQTEC PLC, subject to approval of Shareholders at the EGM.
The rationale behind the proposed change of name is to give the
Company business a clearer identity following the strengthening of
strategic and operational ties with EBIOSS Energy.
The Resolution relating to the Company's change of name is
numbered 3.
11. Extraordinary General Meeting and the Resolutions
A notice convening the Extraordinary General Meeting is set out
in the Appendix to the Circular, at which the Resolutions,
including, inter alia, the Whitewash Resolution, will be proposed.
The purpose of the meeting is to consider and, if thought fit, pass
Resolutions 1 to 3 (inclusive) as referred to below:
Ordinary Resolution
1. THAT, subject to and conditional on passing of this
Resolution, having regard to the provisions of the Takeover Rules
and to the conditions attached by the Takeover Panel to the grant
of the waiver under Rule 9 of the Takeover Rules, the acquisition
by EBIOSS Energy of a holding of 51 per cent. of the entire issued
share capital of the Company as a result of the allotment of
78,210,000 New Ordinary Shares to EBIOSS Energy pursuant to the
terms of the Conversion Agreement dated 9 January 2017 made between
EBIOSS Energy and the Company be and is hereby approved on the
basis that such acquisition will not result in EBIOSS Energy
becoming obliged to make an offer to the Company's shareholders
pursuant to Rule 9 of the Takeover Rules.
Special Resolutions
2. THAT, with effect from the date of passing of this Resolution
and conditional upon the passing on a poll of Resolution 1
above:
(a) each of the issued ordinary shares of EUR0.10 each in the
capital of the Company be and is hereby subdivided into and
reclassified as one ordinary share of EUR0.001 and one deferred B
ordinary share of EUR0.099 ("2017 Deferred Share"), the 2017
Deferred Shares having the rights attaching thereto set out in the
new memorandum and articles of association referred to in
Resolution 2(b) below and that each of the unissued ordinary shares
of EUR0.10 each in the capital of the Company be and hereby
sub-divided into ordinary shares of EUR0.001 each; and
(b) in order to give effect to the foregoing the draft
memorandum and articles of association produced to the meeting and
initialed by the Chairman of the meeting for the purposes of
identification be adopted as the memorandum and articles of
association of the Company.
3. subject to the approval of the Registrar of Companies that
the Company name be and is hereby changed to EQTEC PLC.
The Whitewash Resolution is being proposed as an ordinary
resolution and requires a simple majority of the votes cast to be
cast in favour on a poll in order for it to be passed. Resolutions
2(a), 2 (b) and 3 will be proposed as special resolutions and
therefore need at least 75 per cent. of the votes cast to be cast
in favour in order for them to be passed. Resolutions 2(a) and 2(b)
are conditional on Resolution 1 being passed.
The EGM will take place at 11:30 a.m. on 6 February 2017. It is
intended that the New EBIOSS Shares will be issued pursuant to the
authority requested by the Company from Shareholders to disapply
pre-emption rights over the Existing Ordinary Shares at the
Company's Annual General Meeting which has been convened for 31
January 2017. In the event the necessary resolutions are not
approved at the Company's Annual General Meeting to disapply such
pre-emption rights in order to permit the Proposals to proceed, the
EGM will be adjourned.
12. Summary of the amendments to the Existing Articles
For the Proposals to proceed, it is necessary for changes to be
made to the Existing Articles by special resolution of the
Shareholders. These changes are:
1. to subdivide into and reclassify each of the issued ordinary
shares of EUR0.10 each in the capital of the Company as one
ordinary share of EUR0.001 and one deferred B ordinary share of
EUR0.099 ("2017 Deferred Share") having the rights attaching
thereto set out in the Amended Articles;
2. each of the unissued ordinary shares at EUR0.10 each in the
capital of the Company will be sub-divided into ordinary shares of
EUR0.001 each; and
3. any reduction of capital involving the cancellation of the
2008 Deferred Shares, 2013 Deferred Shares and/or 2017 Deferred
Shares for no consideration shall not be deemed to be a variation
of the rights attaching to such deferred shares nor a modification
or abrogation of the rights or privileges attaching to the 2008
Deferred Shares, 2013 Deferred Shares and/or 2017 Deferred Shares.
Accordingly, the 2008 Deferred Shares, 2013 Deferred Shares and/or
2017 Deferred Shares may at any time be cancelled for no
consideration by a special resolution passed by the holders of the
ordinary shares without notice to or approval of the relevant
deferred shares.
13. Effect of not approving the Resolutions
Should Shareholders (and, where appropriate, Independent
Shareholders) not vote in favour of the Resolutions set out in the
Notice of EGM or the necessary resolutions at the Company's Annual
General Meeting to disapply pre-emption rights over the Existing
Ordinary Shares (as noted above and in paragraph 11 of Part 1 of
the Circular), the Board would not be able to proceed with the
Proposals and would likely need to seek alternative sources of
capital in the near term in order to satisfy the NBL Debt. There is
no guarantee that the Board would be successful in raising this
capital on terms acceptable to Shareholders or at all.
Shareholders should be aware that if the Board was unsuccessful
in raising this capital on terms acceptable to Shareholders or at
all, the Board considers that the REACT business could continue in
its current form in the near term. However, the Board believes that
without significant capital, it would not represent a viable
commercial business in the longer term. Accordingly, the Board
would likely seek to cancel the Company's admission to trading on
AIM and commence an orderly winding up of the Company
immediately.
If you are in any doubt about the contents of this announcement
or the Circular or as to the action you should take, you are
recommended immediately to seek your own personal financial advice
from your stockbroker, bank manager, solicitor, accountant, or
other independent financial adviser authorised pursuant to the
Financial Services and Markets Act 2000 ("FSMA"), or, in the case
of Shareholders in a territory outside Ireland and the United
Kingdom, from another appropriately authorised independent
financial adviser.
14. Action to be taken in respect of the Extraordinary General
Meeting
For Existing Shareholders who hold their shares in certificated
form, you will find enclosed with this document a Form of Proxy for
use by such Shareholders at the Extraordinary General Meeting.
Whether or not you wish to attend the Extraordinary General
Meeting, you are requested to complete and sign the Form of Proxy
and return it to the Company's Registrars, Capita Asset Services,
Shareholder solutions (Ireland), by post to P.O. Box 7117, Business
Reply, Dublin 2, Ireland or by hand to Capita Asset Services,
Shareholder solutions (Ireland), 2 Grand Canal Square, Dublin 2,
D02 A342, Ireland so as to arrive no later than 48 hours before the
time appointed for the Extraordinary General Meeting. The return of
the Form of Proxy will not prevent you from attending the
Extraordinary General Meeting and voting in person should you wish
to do so.
Alternatively, for those who hold Existing Ordinary Shares in
CREST, an Existing Shareholder may appoint a proxy by completing
and transmitting a CREST Proxy Instruction to Capita Registrars
(CREST participant ID 7RA08). In each case the proxy appointment
must be received by no later than 11:30 a.m. on 4 February 2017.
The completion and return of either an electronic proxy appointment
notification or a CREST Proxy Instruction (as the case may be) will
not prevent a Shareholder from attending and voting in person at
the Extraordinary General Meeting or any adjournment thereof,
should such Existing Shareholder wish to do so.
15. Additional Information
Your attention is drawn to Part 4 of the Circular which contains
certain additional information in respect of REACT. Shareholders
are advised to read the whole of the Circular and not rely solely
on the summary information set out in this letter.
16. Recommendation
The Directors consider that the Proposals are in the best
interest of the Company and the Shareholders as a whole.
The Directors, having been so advised by Strand Hanson, consider
the Waiver and the reverse takeover transaction, as defined by the
Takeover Rules, to be in the best interests of the Shareholders
(and, where appropriate, the Independent Shareholders) and the
Company as a whole. In providing advice to the Directors, Strand
Hanson has taken into account the commercial assessments of the
Directors.
The Directors unanimously recommend that all Shareholders (and,
where appropriate, Independent Shareholders) vote in favour of the
Resolutions to be proposed at the Extraordinary General Meeting, as
they intend to do in respect of their beneficial holdings which
amount to, in aggregate, 2,530,159 Existing Ordinary Shares,
representing 3.4 per cent. of the Company's issued share capital as
at the date of the announcement.
Yours sincerely,
DERMOT O'CONNELL
Chairman
APPIX 1: DEFINITIONS
In this announcement, the Circular and in the Form of Proxy the
following expressions have the following meanings.
"2008 Deferred 99,117,952 deferred convertible
Shares" A Ordinary Shares of EUR0.01 each
in the Company having the rights
set out in the Existing Articles
"2013 Deferred 22,370,042 deferred Ordinary Shares
Shares" of EUR0.40 each in the Company
having the rights set out in the
Existing Articles
"2017 Deferred 75,140,494 deferred B Ordinary
Shares" Shares of EUR0.099 each in the
Company arising from the Share
Capital Reorganisation and having
the rights set out in the Amended
Articles
"Act" or "Companies the Companies Act 2014 of Ireland
Act"
"Admission" the admission of the New Ordinary
Shares (following the Share Capital
Reorganisation of the Existing
Ordinary Shares) and the New EBIOSS
Shares to trading on AIM becoming
effective in accordance with the
AIM Rules, assuming the relevant
Resolutions are passed
"AIM" the AIM market of the London Stock
Exchange
"AIM Rules" the rules for AIM companies and
their nominated advisers issued
by the London Stock Exchange governing
the admission to and the operation
of AIM
"Alchemy Capital" Alchemy Capital Limited, a company
registered and incorporated in
the British Virgin Islands with
registered number 201546
"Altair" Altair Group Investment Limited,
a company registered and incorporated
in the British Virgin Islands
with registered number 1697665
"Amended Articles" the articles of association of
the Company as amended following
the passing of Resolution 2(b)
at the EGM to approve the Share
Capital Reorganisation, further
details on which are set out in
paragraph 9 of Part 1 of the Circular
"Amendment and the deed dated the 12 December
Restatement Deed" 2016 amending and restating the
EBIOSS Loan Facility and increasing
the amount to be advanced thereunder
to EUR1,350,000
"Articles of Association" the articles of association of
the Company
"Board" the board of Directors of the
Company
"Business Day" a day (other than Saturdays, Sundays,
public holidays or bank holidays)
on which banks are generally open
for normal business in Ireland;
"Capita" or "Registrars" Capita Asset Services, Shareholder
solutions (Ireland), the Company's
registrars, who have their registered
office at 2 Grand Canal Square
Dublin 2, DO2 A342, Ireland
"Circular" the circular dated 10 January
2017, containing information about
the Proposals, the Resolutions
and the Notice of Extraordinary
General Meeting, which will today
be posted to Shareholders
"Closing Price" the closing middle market quotation
of a share as derived from the
AIM Appendix to the Daily Official
List of the London Stock Exchange
"Company", "REACT" REACT Energy plc, a company incorporated
or "REACT Energy" in Ireland with registered number
462861
"Concert Party" EcoFinance, Alchemy, Origen Capital
LLP, Altair (including, Mr. Gabriel
Quintero), Ms. Ruby Sayed, Mr.
David Palumbo (including Origen
Capital Partners Limited), Mr.
Thomas Quigley and Mr Richard
Harrop
"Conversion Agreement" the conditional agreement entered
into on 9 January 2017 between
the Company and EBIOSS Energy
governing the debt-for-equity
conversion of the NBL Debt into
the New EBIOSS Shares
"Conversion Price" 5.53 pence per New EBIOSS Share
"CREST" the computer based settlement
system and procedures which enable
title to securities to be evidenced
and transferred without a written
instrument and which is operated
by Euroclear
"CREST Regulations" the Companies Act, 1990 (Uncertificated
Securities) Regulations 1996 (S.I.
68/1996) of Ireland (as amended)
"Directors" the directors of the Company,
whose names are set out on page
10 of the Circular
"EBIOSS Energy" EBIOSS Energy AD, a company incorporate
or "EBIOSS" in Bulgaria with registered office
address of 49 Bulgaria Blvd, Floor
11-12, Sofia 1404, Bulgaria
"EBIOSS Group" EBIOSS Energy and its subsidiary
undertakings
"EBIOSS Loan Facility" as announced by the Company on
8 January 2016, the EUR750,000
loan facility entered into between
the Company and EBIOSS Energy,
as amended by the Amendment and
Restatement Deed, further details
on which are disclosed in paragraph
2 of Part 1 of the Circular
"EcoFinance" EcoFinance (GLI) Limited, a company
incorporated in England with registered
number 09451570
"Enlarged Share the New Ordinary Shares and the
Capital" New EBIOSS Shares
"EQTEC" EQTEC Iberia SL, a subsidiary
of EBIOSS Energy
"EQTEC Agreement" the agreement entered into between
NBL and EBIOSS Energy on 30 December
2015 to purchase the EQTEC Plant
for the Group's 4 MW biomass gasification
project in Newry, Northern Ireland
"EQTEC Plant" or EQTEC Integrated Biomass Gasification
"EGT" Power Plant, which utilises EQTEC's
gasification technology
"EPC" engineer, procure and construct
"Examinership" a procedure or process under Irish
Law which was introduced to provide
a mechanism for the rescue and
return to health of ailing, but
potentially viable, companies.
Examinership allows a company
a period of protection from its
creditors, within which time the
company and the examiner endeavour
to find parties to put together
a survival plan usually entailing
fresh investment and the writing
down of creditors' claims.
"Existing Articles" the articles of association of
the Company as at the date of
this announcement
"Existing Ordinary the 75,140,494 ordinary shares
Shares" of EUR0.10 each in the capital
of the Company in issue as at
the date of this announcement
(being the entire issued ordinary
share capital of the Company)
"Existing Shareholders" holders of the Existing Ordinary
Shares
"Extraordinary the extraordinary general meeting
General Meeting" of the Company convened for 6
or "EGM" February 2017 to approve the Resolutions
"EU" the European Union
"Euroclear" Euroclear UK & Ireland Limited,
a company incorporated under the
laws of England and Wales and
the operator of CREST
"Farmers" Farmers Business Developments
plc
"Form of Proxy" as included in this notice of
EGM
"GBP" the lawful currency of the United
Kingdom
"Group" or "REACT the Company and its subsidiary
Energy Group" undertakings
"Independent Shareholders" Shareholders, other than the Concert
Party
"Ireland" Ireland, excluding for the avoidance
of doubt, Northern Ireland
"kW" kilowatt
"Leva" the currency of Bulgaria
"London Stock Exchange" London Stock Exchange plc
"MW" megawatt
"NBL" Newry Biomass Limited, a 50.02%
subsidiary of the Company
"NBL Debt" the outstanding sum due by NBL
to EBIOSS of EUR5,150,226 pursuant
to the EQTEC Agreement, which
is to be assigned to the Company
pursuant the Settlement Deed
"New EBIOSS Shares" the 78,210,000 New Ordinary Shares
to be issued to EBIOSS Energy
pursuant to the Conversion Agreement
"New Ordinary Shares" immediately following completion
and as a result of the Share Capital
Reorganisation, the new ordinary
shares of EUR0.001 each in the
capital of the Company pursuant
to the Share Capital Reorganisation
"Notice" or "Notice the accompanying notice of the
of EGM" or "Notice extraordinary general meeting,
of Extraordinary as set out at the end of the Circular
General Meeting"
"Proposals" together, the Share Capital Reorganisation,
the assignment of the NBL Debt
due to EBIOSS Energy to REACT
pursuant to the Settlement Deed,
issue of the New EBIOSS Shares
pursuant to the Conversion Agreement,
the change of name and the Waiver
"Relationship Agreement" the relationship agreement entered
into between the Company, EBIOSS
Energy and Strand Hanson on 9
January 2017, further details
on which are set out in paragraph
6 of Part 1 of the Circular
"Resolutions" the shareholder resolutions to
be voted upon by Shareholders
at the EGM
"Restricted Jurisdiction" the United States, Australia,
Canada, Japan, New Zealand and
the Republic of South Africa and
any other jurisdiction in which
it would be unlawful to distribute
the document and would be required
to be approved by a regulatory
body
"RO" The Renewables Obligation, one
of the main support mechanisms
for large-scale renewable electricity
projects in the UK
"ROC" a Renewable Obligation Certificate,
which is granted by Ofgem to energy
generators for each MWh, under
the current scheme, of qualifying
renewable energy. ROC's are tradable
and are required by electricity
suppliers to demonstrate to Ofgem
that their individual obligations
for supply of renewable energy,
as a percentage of all electricity
supplied, have been met
"Scheme of Arrangement" the Scheme of Arrangement for
or "Scheme" the Company and related companies
approved by the High Court on
15 July 2015, which became effective
on 24 July 2015
"Settlement Deed" the conditional deed entered into
on 9 January 2017 between the
Company and EBIOSS Energy for
the assignment to the Company
of the amount due to EBIOSS Energy
under the EQTEC Agreement
"Share Capital the process by which each of the
Reorganisation" 75,140,494 Existing Ordinary Shares
will be divided into and reclassified
as one New Ordinary Share of EUR0.001
and one 2017 Deferred Share of
EUR0.099, further details on which
are set out in paragraph 9 of
Part 1 of the Circular
"Share Capital 5:00 p.m. on 6 February 2017 (or
Reorganisation such other time and date as the
Record Date" Directors may determine)
"Share Capital means Resolution 2(a)
Reorganisation
Resolution"
"Shareholders" holders of shares (of any class)
in the capital of the Company
"Strand Hanson" Strand Hanson Limited, the Company's
nominated adviser and broker,
26 Mount Row, London W1K 3SQ
"Takeover Rules" the Irish Takeover Panel Act 1997,
or the "Irish Takeover Takeover Rules 2013
Rules"
"Takeover Panel" the Irish Takeover Panel, established
pursuant to the Irish Takeover
Panel Act 1997
"TWh" terawatt hour
"UK" or "United the United Kingdom of Great Britain
Kingdom" and Northern Ireland
"UK Listing Authority" the Financial Conduct Authority
or "UKLA" acting in its capacity as the
competent authority for the purposes
of Part VI of the Financial Services
and Markets Act 2000
"Waiver" the waiver of the requirements
of Rule 9 of the Takeover Rules
as described in further detail
in paragraph 7 of Part 1 of the
Circular that would otherwise
arise on EBIOSS Energy to make
a general offer to all the Shareholders
pursuant to Rule 9 of the Takeover
Rules as a result of the issue
of New EBIOSS Shares
"Whitewash Resolution" the resolution set out in the
Notice to be proposed at the Extraordinary
General Meeting for approval of
the Waiver by the Independent
Shareholders on a poll
"Warrants" The existing outstanding warrants
to purchase Existing Ordinary
Shares, as detailed in Part 4
of the Circular
"Warrantholders" holders of Warrants
"Warrant Purchase the conditional agreement between
Agreement" EBIOSS Energy and members of the
Concert Party which grants EBIOSS
Energy the option to purchase
all outstanding Warrants issued
to the Concert Party
APPIX 2: EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Posting of the Circular and Form 10 January 2017
of Proxy
Latest time and date for receipt 11:30 a.m. on 4
of Forms of Proxy February 2017
Extraordinary General Meeting 11:30 a.m. on 6
February 2017
Announcement of the results of 6 February 2017
the Extraordinary General Meeting
Share Capital Reorganisation 5:00 p.m. on 6 February
Record Date 2017
Expected time and date for Admission 8:00 a.m. on 7 February
and commencement in dealings 2017
in the New Ordinary Shares (following
completion of the Share Capital
Reorganisation), and the New
EBIOSS Shares on AIM
Expected date for crediting of 7 February 2017
the New Ordinary Shares (following
completion of the Share Capital
Reorganisation), and the New
EBIOSS Shares, in uncertificated on or before 21
form to CREST accounts February 2017
Expected date of dispatch of
definitive share certificates
for the New EBIOSS Shares
Note
Unless otherwise stated, all references in this document are to
Dublin time. The dates given are based on the Directors'
expectations and may be subject to change. Any change to the
timetable will be notified to the London Stock Exchange and to the
market via a regulatory announcement.
APPIX 3: ILLUSTRATIVE STATISTICS FOR THE PROPOSALS
Nominal value per Existing Ordinary
Share (pre the Share Capital Reorganisation) EUR0.10
Nominal value per New Ordinary Share
(post the Share Capital Reorganisation) EUR0.001
Nominal value per 2017 Deferred Share
(created as part of the Share Capital
Reorganisation) EUR0.099
Market price per Existing Ordinary Share 3.75 pence
(1)
Anticipated market price per New Ordinary 3.75 pence
Share following completion of the Share
Capital Reorganisation(2)
Number of Existing Ordinary Shares in
issue (by reference to Existing Ordinary
Shares pre the Share Capital Reorganisation)(3) 75,140,494
Number of New Ordinary Shares in issue
(post the Share Capital Reorganisation) 75,140,494
Number of 2017 Deferred Shares in issue
(post the Share Capital Reorganisation) 75,140,494
Amount outstanding pursuant to the EQTEC
Agreement and to be assigned to REACT
pursuant to the Settlement Deed (4) EUR5,150,226
Issue price per New EBIOSS Share on 5.53 pence
a post Share Capital Reorganisation
basis
Number of New EBIOSS Shares to be issued
pursuant to the debt-for-equity conversion
of amounts outstanding under the EQTEC
Agreement to be assigned to REACT pursuant
to the Settlement Deed (5) 78,210,000
Number of New Ordinary Shares and New
EBIOSS Shares (the Enlarged Share Capital)
in issue on Admission 153,350,494
Percentage of the Enlarged Share Capital 51 per cent.
represented by New EBIOSS Shares on
Admission
Notes
(1) The mid-market closing price on 9 January 2017 derived from
the London Stock Exchange, being the last practicable Business Day
prior to announcement of the Proposals.
(2) Based on the market price per Existing Ordinary Share and
the Share Capital Reorganisation only and assuming no other market
movements
(3) As at the close of business on 9 January 2017, being the
last practicable Business Day prior to announcement of the
Proposals
(4) Anticipated amount outstanding at the time of conversion,
which is assumed to be at close of business on the day of the
EGM
Based on a GBP:EUR exchange rate of 1.19 being the prevailing
exchange rate during discussion of the Proposals.
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCLFFVILVIAIID
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January 10, 2017 02:45 ET (07:45 GMT)
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