TIDMRPL
RNS Number : 5292W
Renewable Power and Light Plc
30 July 2009
RENEWABLE POWER & LIGHT PLC
Proposed Disposal of Power Plants
Proposed Disposal of Biodiesel Facility
Approval of Investing Policy
30 July 2009
Renewable Power & Light plc (AIM: RPL) ("RPL" or "the Company"), announces that,
in conjunction with its previously announced strategy to divest its power plant
assets, it has signed a definitive agreement for the sale of the Elmwood Park
and Massena power plants to Morris Energy Group for cash consideration of US$8.5
million. The transaction is subject to various closing conditions including the
buyer obtaining committed funding, certain US regulatory approvals and RPL
shareholder approval, which is required for the purposes of compliance with AIM
Rule 15 and Rule 21.1 of the Takeover Code.
A circular convening the general meeting to seek the relevant approvals in
respect of the disposal of the Elmwood Park and Massena power plants, as well as
the proposed disposal of the Company's "mothballed" biodiesel facility (for the
purposes of compliance with Rule 21.1 of the Takeover Code) and the proposed
adoption of an investment policy will be sent to RPL shareholders in due course,
at which time a copy will be available on the Company's website: www.rplplc.com.
The text of the circular, excluding the notice convening a general meeting of
shareholders to held at 1.00pm on 19 August 2009 is set out below.
Dealing Disclosure Requirements
Under the provisions of Rule 8.3 of the City Code on Takeovers and Mergers (the
'Code'), if any person is, or becomes, 'interested' (directly or indirectly) in
1% or more of any class of 'relevant securities' of RPL, all 'dealings' in any
'relevant securities' of that company (including by means of an option in
respect of, or a derivative referenced to, any such 'relevant securities') must
be publicly disclosed by no later than 3.30pm (London time) on the London
business day following the date of the relevant transaction.
This requirement will continue until the date on which the offer becomes, or is
declared, unconditional as to acceptances, lapses or is otherwise withdrawn or
on which the 'offer period' otherwise ends. If two or more persons act together
pursuant to an agreement or understanding, whether formal or informal, to
acquire an 'interest' in 'relevant securities' of RPL, they will be deemed to be
a single person for the purpose of Rule 8.3. Under the provisions of Rules 8.1
of the Code, all 'dealings' in 'relevant securities' of RPL by a potential
offeror, or RPL, or by any of their respective 'associates', must be disclosed
by no later than 12.00 noon (London time) on the London business day following
the date of the relevant transaction.
A disclosure table, giving details of the companies in whose 'relevant
securities' 'dealings' should be disclosed, and the number of such securities in
issue, can be found on the Takeover Panel's website at
www.thetakeoverpanel.org.uk.
'Interests in securities' arise, in summary, when a person has long economic
exposure, whether conditional or absolute, to changes in the price of
securities. In particular, a person will be treated as having an 'interest' by
virtue of the ownership or control of securities, or by virtue of any option in
respect of, or derivative referenced to, securities.
Terms in quotation marks are defined in the Code, which can also be found on the
Panel's website. If you are in any doubt as to whether or not you are required
to disclose a 'dealing' under Rule 8, you should consult the Panel.
For further information, please contact:
Renewable Power & Light plcTim Hunstad Telephone: +1 952 746 0393
Grant Thornton UK LLP Gerald Beaney Telephone: +44 0207 383 5100
(Nominated Adviser)
The text of the Circular (excluding the notice convening the general meeting) is
set out below.
On 29 July 2009, the Company's subsidiaries RPL Holdings Inc. ("RPL Holdings")
and Power City Generating Inc. ("Power City"), as sellers, entered into a
Purchase and Sale Agreement (the "Agreement") with MEG Development Company, LLC
("MEG" or the "Buyer") in respect of the sale of the Massena and Elmwood Park
power plants (the "Plants") for cash consideration of US$8.5 million, subject to
certain conditions, including the approval of the Company's shareholders (the
"Plant Disposal"). The Plant Disposal is consistent with the Company's strategy
of realising value for shareholders, further to the announcement made on 19
December 2008, the circular to shareholders dated 6 January 2009 and the
Company's annual report dated 28 May 2009.
Due to the value of the Plant Disposal, it constitutes a fundamental change of
business for the Company pursuant to the AIM Rules for Companies ("Fundamental
Change of Business"). As required by AIM Rule 15, a Fundamental Change of
Business must be approved by the Company's shareholders.
The effect of the Plant Disposal will be to divest the Company of substantially
all of its trading business. As a result, the Company will be treated as an
"Investing Company" under AIM Rule 15. This circular sets out an investing
policy (the "Investing Policy") for the Company going forward which must be
approved by shareholders.
The Company intends, subject to shareholder approval, to formally adopt a policy
to continue to position the Company to provide future distributions of capital
to shareholders as assets are sold and working capital needs diminish. Further
details of the Investing Policy are set out under the heading "Investing Policy"
below.
The Company also intends to sell its "mothballed" biodiesel production equipment
(the "Biodiesel Facility") as soon as practicable, which may be either before or
after completion of the Plant Disposal (the "Biodiesel Facility Disposal").
The purpose of the circular is to explain the background to and reasons for the
Plant Disposal and the Investing Policy, to seek shareholder approval for the
Plant Disposal for the purposes of AIM Rule 15 and (together with the Biodiesel
Facility Disposal) to comply with Rule 21.1 of the City Code on Takeovers and
Mergers ("Takeover Code") and also to seek shareholder approval for the
Investing Policy at a general meeting of shareholders ("GM") to be convened for
1.00pm. on 19 August 2009.
Preliminary Approach Update and Takeover Code Rule 21.1 Approval
In November 2008, the Company was approached by a third-party who was interested
in purchasing the outstanding shares of RPL. As a result of making the public
announcement a number of interested parties have since come forward and
expressed their interest in the Company. Although none of the parties has yet
declared a firm intention to make an offer, and there is no guarantee that these
discussions will result in an offer being made, the Company is nevertheless
deemed to be in an offer period for the purposes of the Takeover Code.
Rule 21.1 of the Takeover Code provides that during the course of an offer, or
even before the date of the offer, if the Board has reason to believe that a
bona fide offer might be imminent, the Board must not take any action without
shareholder approval which may result in any offer or bona fide possible offer
being frustrated or in shareholders being denied the opportunity to decide on
its merits, including among other things, the sale of assets of a material
amount. As it is possible that the Plant Disposal and/or the Biodiesel Facility
Disposal could potentially frustrate any potential offer or make it less likely
that a fully-financed proposal to acquire the Company would be received, the
Company is seeking shareholder approval at the GM of the Plant Disposal and of
the Biodiesel Facility Disposal for the purposes of compliance with Rule 21.1 of
the Takeover Code. As set out below, the Board unanimously recommends that
shareholders vote in favour of the Plant Disposal and of the Biodiesel Facility
Disposal.
The Board will continue to evaluate the merits of any potential offer for the
Company and the strategy outlined in this circular. Should the Board receive a
fully-financed proposal to acquire the Company, it would make a recommendation
to RPL shareholders in due course, in the light of the proposed Plant Disposal
and/or the Biodiesel Facility Disposal, taking account of the advice received
from the Company's independent financial adviser.
Background to and reasons for the Plant Disposal
The original business plan of the Company was to utilize a long-term fixed price
contract for renewable fuel feedstock, in this case palm oil, to manufacture
bio-diesel to be used in generating electricity to sell through long-term
contracts to utilities from Company-owned power plants at a negotiated margin.
In July 2007, a fuel feedstock supplier failed on its contractual obligation to
provide a long-term fixed priced supply of palm oil, leaving the Company with no
source of economic feedstock to move the business plan forward. The Company
continued through the summer of 2008 to look for long-term economic supplies of
bio-fuel without success.
As a result of not having an economic, fixed price contract for the supply of
bio-fuel feedstock for its power plants, the Company ceased expenditure on the
construction of its biodiesel production project, renegotiated the lease for its
railcars and resolved ongoing obligations for the lease of storage tanks and
off/on loading facilities.
The Board has initiated numerous initiatives to reduce the operating costs of
the Company's Plants and to identify and obtain economic sources of feedstock.
Whilst the cost initiatives and operational changes are delivering results, the
Company has been unable to obtain feedstock that would allow it to continue to
execute on its original business plan. As a consequence, the Board devised in
the course of recent months a strategy based on the implementation of a return
of capital to shareholders of 10 pence per ordinary share pursuant to a share
premium reduction in February 2009, and initiating an asset sale program seeking
buyers for the Plants as well as the Biodiesel Facility with a view to realising
value for shareholders by enabling capital to be returned to shareholders.
In November 2008 the Company retained Fieldstone Private Capital Group, Inc.
("Fieldstone") to assist in the sale of RPL Holdings' Plants. After conducting
its internal due diligence, Fieldstone developed an Investment Opportunity
Summary which was distributed to over fifty potential interested parties. Over
25 interested parties executed confidentiality agreements. Fieldstone, with the
assistance of the Company, completed a Confidential Information Memorandum
("CIM") and distributed copies to 18 parties in January 2009.
Initial offers for the Plants were received from five potential buyers in early
February. The Board was disappointed with the results of the bidding process as
the indicative bids were well below expectations and the net book value of the
assets. As a result, Fieldstone and Company management prepared a supplement to
the CIM which laid out various initiatives to increase value for potential
buyers including: providing a potential contract for the Massena capacity
payments to "fix" the payments for several years, launching a reduction in fixed
costs at the Plants including the reduction in staff and developing a valuation
for the net operating losses tax carryover for RPL Holdings. This supplement was
distributed to the three top bidders and revised bids were received in March.
These bids were also disappointing but the Board, with the advice of Fieldstone,
decided that given the current market conditions, the most appropriate strategy
was to move forward with the highest potential acquirer, MEG.
MEG is a wholly-owned subsidiary of Morris Energy Group, LLC, an independent
power producer that owns and operates power generating facilities, aggregating
approximately 800 megawatts, throughout the northeastern United States.
Information on the Plants and their Financial Performance
As disclosed in the 2008 annual report of the Company, the Elmwood Park and
Massena Plants received US$8.2 million of revenue in 2008, an increase of US$1.1
million from 2007. The Plants produced a net loss for the year 2008 but were
approaching a cash positive operating level due to cost reduction initiatives.
As a result of the Plant sales process the facilities were deemed impaired at 31
December 2008 and written down as appropriate. The Massena facility was written
down by US$12 million and the Elmwood Park facility was written down by US$2.4
million. As a result of these impairment writedowns and the loss from
operations, the total loss of the operations of the Plants in 2008 was US$17.8
million.
Information on the Remaining Business
Following the Plant Disposal, the Company's objectives will principally consist
of seeking buyers for the Biodiesel Facility (to the extent the Biodiesel
Facility Disposal has not already occurred) and overseeing the winding down of
its obligations under its lease of 100 rail cars with UTLX Corporation, which is
due to terminate in October 2009. The Company has subleased the majority of the
rail cars until October 2009 but remains actively seeking sublease opportunities
for the remaining rail cars. The Company also intends to seek to monetise the
potential of the net operating tax loss carryforwards accumulated.
As at 30 June 2009, the net cash position of the Company was US$9.7 million
(equivalent to approximately 7 pence per Ordinary Share). This net cash position
does not take into account any proceeds received from the Plant Disposal and/or
the Biodiesel Facility Disposal.
Principal Terms of the Plant Disposal
Pursuant to the terms of the Agreement, RPL Holdings and Power City (together,
the "Sellers") have agreed to sell to MEG, subject to approval of the Company's
shareholders and other conditions set out in the Agreement:
* 100% of the membership interests in Elmwood Park Power LLC ("Elmwood"); and
* 100% of the limited partnership interest in Power City Partners LP and 100% of
the general partnership interest in Power City which is currently held by Power
City Generating, Inc., a 100% owned subsidiary of RPL Holdings ("Massena").
The consideration for the Plant Disposal will be US$8,500,000 in aggregate,
consisting of US$6,300,000 (in the case of Elmwood) and US$2,200,000 (in the
case of Massena).
The consideration will be adjusted for any working capital movements (positive
or negative) calculated from the balance sheets of Elmwood and Massena at the
Closing Date (as defined in the Agreement) minus a per diem adjustment (being
US$4,200 (in the case of Elmwood) and US$1,200 (in the case of Massena) times
the number of days occurring after 15 July 2009 and before the Closing Date). If
the parties do not agree on the adjustment, the preliminary consideration shall
be calculated by using the mean of RPL Holdings' and the Buyer's respective good
faith estimates thereof. Any dispute will be settled by an independent
arbitrator. The Board believes that any adjustments made to the purchase price
will not be material.
There are a number of conditions to closing, including the following:
* the Buyer shall have received a binding commitment of a lender to fund the
purchase price for the Plants;
* no material adverse effect shall have occurred at Elmwood or Massena after the
date of the Agreement in the condition of the Plants;
* obtaining the consent of the shareholders of the Company for the Plant Disposal
at the general meeting convened by the notice accompanying this circular;
* obtaining an order by the US Federal Energy Regulatory Commission authorising a
Disposition of Jurisdictional Facilities under the United States Federal Power
Act;
* a 'no further action' determination under the New Jersey Industrial Site
Recovery Act having been obtained from the New Jersey Department of
Environmental Protection in connection with Elmwood; and
* all permits required by the New York Public Service Commission having been
obtained in connection with Massena.
Assuming that shareholder approval of the Plant Disposal is obtained at the GM,
it is anticipated that the remaining conditions will be satisfied, and closing
is anticipated to occur, by the end of August 2009 (in the case of Elmwood) and
by the end of September 2009 (in the case of Massena).
The Sellers have provided customary representations and warranties as to,
amongst other things, financial position, financial indebtedness and related
encumbrances, assets, real property, material contract, employees, insurance,
environmental laws and tax compliance. The Sellers' aggregate liability under
the warranties (other than certain specific warranties relating to the Sellers'
capacity, authority and ownership of the Plants) is limited to US$4,250,000 and
is limited in time to one year following the later of the Elmwood closing and
the Massena closing.
The Sellers have also agreed to conduct operations in Elmwood and Massena in the
ordinary course and in accordance with customary restrictions in the period
between signing of the Agreement and closing to avoid any loss of value in
Elmwood or Massena.
The Agreement is governed by the laws of the State of New York.
Background to and reasons for the Biodiesel Facility Disposal
During 2008, the Biodiesel Facility was inventoried and placed into storage as a
result of not having an economic, fixed price contract for the supply of
bio-fuel feedstock. As a result of the continuing excess capacity in the
biodiesel manufacturing industry, the value of the equipment was written down by
US$9.9 million. Also, due to the cessation of the plan to construct a biodiesel
plant, the storage tank lease was terminated and the associated leasehold
improvements written-off in respect of US$3.0 million.
The Board resolved at that time to seek buyers for the Biodiesel Facility. These
efforts were complicated in 2008 when Greenline Industries brought an
arbitration claim for alleged damages under its contract with the Company, but
these claims have now been settled.
The Company continues to seek a third party buyer for the Biodiesel Facility. If
a buyer is identified and terms of any such transaction are approved by the
Board, it is proposed that the Company would, subject to shareholder approval
having been obtained at the GM, execute the Biodiesel Facility Disposal, which
may or may not be prior to the completion of the Plant Disposal.
Investing Policy
Following the Plant Disposal, the Company will be classified under the AIM Rules
as an Investing Company. Accordingly, the Investing Policy, details of which are
set out below, is also subject to the approval of shareholders at the GM.
In December 2008, the details of the Board's strategy to maximise and realise
value for shareholders was announced. The strategy had three key elements:
* Return of an initial 10 pence per Ordinary Share to shareholders via a capital
distribution;
* Execution of the ongoing asset sale processes; and
* An orderly realisation of the net value of the remaining business for
shareholders, considering the remaining assets and liabilities of the Company
and the ongoing working capital requirements.
With the initial return of 10 pence per Ordinary Share completed in February
2009 and assuming completion of the Plant Disposal, the remaining business of
the Company will be to dispose of the Biodiesel Facility (if the Biodiesel
Facility Disposal has not already taken place) and complete RPL Holdings'
obligations under the rail car lease which expires in October 2009 and
potentially to consummate a transaction for the Company's net operating loss tax
carryforwards.
As soon as practicable after completion of the Plant Disposal, the Board will
determine the appropriate level and timing of a further capital distribution to
shareholders, taking into consideration the timing of the Plant Disposal of the
Biodiesel Facility Disposal and the other working capital requirements of the
Company. It is intended that the proceeds of the Plant Disposal (and of the
Biodiesel Facility Disposal, as and when it takes place) will form part of this
proposed capital distribution to shareholders.
In addition, the Company intends to take steps to reduce overheads and preserve
cash (including staffing levels, board composition, and other appropriate
measures). This evaluation of working capital requirements will include the need
to fund termination/severance liabilities as well as any ongoing contingencies
as a result of the Plant Disposal.
The Company considers the October termination of the rail car lease as the date
when steps will be taken to commence the winding up approval process which may
take up to 12 months to complete depending on the working capital requirements
of the Company.
It is likely that there will be an interim capital distribution and a final
capital distribution. The timing of the distributions has not been determined
but it is currently anticipated that, assuming closing of the Plant Disposal has
occurred, the interim distribution will be made as early as October 2009 to
release the funds from the Plant Disposal.
The Company will seek the approval of shareholders prior to making any capital
distribution and/or winding up of the Company, including for the purposes of
complying with Rule 21.1 of the Takeover Code if required (in the event the
Company is in an "offer period" as defined in the Takeover Code).
Following approval of the Investment Policy by the shareholders at the GM,
pursuant to AIM Rule 15, the Company must implement the Investing Policy within
12 months of such approval, otherwise trading in the Company's Ordinary Shares
on AIM will be suspended in accordance with AIM Rule 40. If following suspension
of the Ordinary Shares in accordance with AIM Rule 40, the Ordinary Shares have
not been re-admitted to trading on AIM within six months, the admission of the
Ordinary Shares to trading on AIM will be cancelled.
Notes:
1. This document contains certain forward-looking statements. These
statements relate to future events or future performance and reflect the Board's
expectations regarding the Company's growth, results of operations, performance
and business prospects and opportunities. Such forward-looking statements
reflect the Board's current beliefs, are based on information currently
available to the Board and are based on reasonable assumptions as of this date.
No assurance, however, can be given that the expectations will be achieved. A
number of factors could cause actual results to differ materially from the
projections, anticipated results or other expectations expressed in this
release. While the Board makes these forward-looking statements in good faith,
neither the Company, nor its Board, can guarantee that the anticipated future
results will be achieved.
2. Value per share calculations are based on 88,764,646 Ordinary Shares being
currently in issue by the Company and a US$ to GBP exchange rate on 30 June 2009
of 1.647 (Source: Financial Times).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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