Operational Update and Issue of Loan Note

RNS Number : 3171K

React Energy PLC

24 June 2014

 



24 June 2014

REACT Energy plc

("REACT" or the "Company")

Operational Update

Issue of £1.5 million secured loan note

REACT Energy plc (AIM:REAC), the energy infrastructure developer and operator which focuses on the production of clean energy in the UK and Ireland, today provides an update on the progress of its operating and development project portfolio. The Company is also pleased to announce the issue of £1.5 million (before expenses) of a secured loan note ("SLN").

Key Points:

·     Successful issue of £1.5 million secured loan note to fund ongoing development of the Company through organic and acquisitive growth;

·     Revised term sheet for Enfield Biomass Project expected to be signed in due course, with financial close expected up to 3 months thereafter;

·     Review of technology provider for Phase 2 of the Newry Biomass Project with, decision expected in the coming weeks;

·     Construction of the Old Buckenham Hall School biomass energy system, the third biomass heat generation project to be put into operation, has commenced, with renewable heat due to start being supplied within the next three months;

·     Planning process for the 12.5MW Altilow Windfarm project in County Donegal continues and has been referred to the Irish Planning Authority for a final decision; and

·     Planning approval received for the 500kw Tullagubbeensingle wind turbine project in County Kerry.

Commenting on today's update, Gerry Madden, CEO of REACT, said: "We have been working hard across the group's portfolio to progress our projects as quickly and efficiently as possible. We have encountered some time consuming hurdles which have delayed progress, particularly at our Enfield and Newry Biomass Projects. However, the due diligence and term sheet negotiation with regards to the Enfield Project and the review of the technology provider at the Newry Project are key to ensuring we are able to maximise potential return from these projects for shareholders.

We are also pleased with the decision of Enterprise Ireland to convert their preference shares into equity in REACT.

With the Old Buckenham Hall School project, the third of the biomass heat generation plants to be put into operation, progressing well and exciting developments at our windfarm and single turbine projects, the SLN will allow us to further accelerate the growth of REACT and I look forward to updating shareholders on our progress in due course".

Loan Notes

The Board of REACT announces that it has raised £1.5 million (before expenses) through the issue of an SLN. Private clients of Origen Capital subscribed for the SLN. The SLN is intended to fund the ongoing development of the enlarged group through organic and acquisitive growth. The SLN replaces the previous Loan Note issued by REACT, commitments for which were announced on 6 March 2014. This loan note has been cancelled and the initial subscriptions of £380,000 plus interest have been repaid.

The SLN is issued at a fixed rate of 9% per annum, the interest on which will be rolled up quarterly in arrears and included as principal to be repaid. The SLN is for a one-year term and together with rolled up interest will be repayable at the end of the term.  The SLN is secured by a first charge over the shares held by REACT in its project operating and development companies.

Enfield Biomass Project

As announced on 4 June 2013, the Company signed heads of terms with the Foresight Group ("Foresight") for the part financing of the Enfield Biomass Project ("Enfield"). Under the heads of terms, a number of co-investors were required to finance the project alongside Foresight.

Since March this year, the Company has been in detailed discussions with a number of co-investors which included due diligence and the negotiation of a term sheet. While this has delayed financial close, it was a necessary process to work through to ensure that the Company secured the necessary financing as well as maximising its potential return from the Enfield project.

The Company has sought to change the structure of the transaction, which is now expected to see REACT receiving a cash development fee on financial close as well as retaining a minority shareholding in Enfield. It is envisaged that the investors will provide 100% of the funding required for the construction and operation and on that basis REACT will not be required to invest any further funds.

The Company expects to sign a revised term sheet in due course.  Once signed, the Company and the investors expect it to take up to three months to reach financial close.

Newry Biomass Project

The Board of Newry Biomass Limited ("NBL"), a joint venture between REACT and its largest shareholder Farmers Business Developments plc ("Farmers"), has been evaluating the rollout of Phase 2 of the Newry Biomass Project ("Newry") since Ulster Bank provided approval for the financing of Phase 2 at the end of January 2014. The operation of Phase 1 of Newry is reliant on the completion of upgrades to the local electricity grid infrastructure, which are part of Phase 2 of the project hence its significance.

Discussions with the current technology provider have been ongoing for a number of months, these have proved to be both time consuming and challenging. It could prove difficult to reach agreement on commercial terms with the current technology provider for the rollout of Phase 2.

Against this backdrop, NBL has commenced discussions with a number of alternative technology providers and these are ongoing. It is expected that an Engineer Procure and Construct ("EPC") contract will be signed with a new technology provider and on this basis the role of Kedco Fabrication Limited, as the current EPC provider, will be re-evaluated. The Company expects NBL to make a decision on the technology for Phase 2 in the coming weeks at which stage an update to shareholders will be provided.

Whilst the slow progress has been frustrating and challenging for the project, the key parties to the project remain supportive and committed to completing the rollout of the full 4MW capacity on the site.

Old Buckenham Hall School

As announced on the 25 March 2014, GG Eco Solutions Limited ("GGES"), a business acquired by REACT, signed a 20-year Heat Supply Agreement ("HSA") with Old Buckenham Hall School in Suffolk in November 2013. The Old Buckenham Hall School project ("Old Buckenham Hall project") will have a total capacity of 398kw consisting of two boilers, which will provide heating and hot water to the school's various buildings and swimming pool, replacing around 100,000 litres of fossil fuel oil in the process.

Construction of the biomass energy system has already commenced, with renewable heat due to start being supplied within the next three months. Together with The Culford School Heating Plant and the Kimbolten School Heating Plant this will become the third biomass heat generation plant to become operational.

The Old Buckenham Hall project is being 100% funded through the Equitix financing facility, which GGES secured in July 2013; details of which are set out in the announcement dated 6 March 2014. REACT will retain a 30% shareholding in the Old Buckenham Hall project and have already received a development fee on commencement of construction.

12.5MW Altilow Windfarm

The planning process for the 12.5MW Altilow Windfarm project in County Donegal continues and it has been referred to An Bord Pleanala (the Irish Planning Authority) for a final decision. REACT has already secured planning permission for a single wind turbine on the same site as the proposed windfarm and therefore anticipates planning approval being granted before the year end.

Single Wind Turbine project

The Company continues to make progress in converting its portfolio of development sites into live projects. Planning approval has been received for the 500kw Tullagubbeen single wind turbine project located in County Kerry. An application for connection to the national grid will now be made.

The Company now has eight sites with planning permission, in addition to the operational 800kw Pluckanes Windfarm project, County Cork. The Company expects to start construction on a number of these sites during the current year.

Enterprise Ireland

Enterprise Ireland ("EI"), the government organisation responsible for the development and growth of Irish enterprises in world markets, is the holder of €500,000 of preference shares in Kedco Power Limited, a subsidiary of REACT. Details of the investment were announced on 18 January 2010. The preference shares are convertible into shares in REACT. EI has indicated their intention to convert their preference shares into REACT shares and a conversion price of 38p per share has been agreed with EI.  This will result in the issuance of 1,052,105 of REACT shares to EI amounting to 3.43% of the issued share capital.

Application has been made for the admission of 1,052,105 new ordinary shares of €0.10 each in REACT to trading on AIM. The new ordinary shares, which will be issued, fully paid, will rank pari passu in all respects with the existing ordinary shares of REACT. Admission of the new ordinary shares to trading on AIM is expected to occur on 27 June 2014.

REACT's total issued and voting share capital will comprise 30,669,522 ordinary shares. Shareholders should use this figure as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in REACT, under the FCA's Disclosure and Transparency Rules.

- Ends -

For further information:

REACT Energy plc	[phone]
Gerry Madden, CEO
Shore Capital - Nomad & Broker	[phone]
Pascal Keane / Anita Ghanekar
Yellow Jersey PR Limited - Public Relations	[phone]
Dominic Barretto / Anna Legge

About REACT

REACT Energy plc is committed to operating clean electricity and heat generation plants in the UK and Ireland.

The Company identifies, builds owns and operates plants and possesses significant knowledge of energy markets, clean technologies, fuel sources, project development, project finance and project delivery.

REACT currently has four operational clean energy plants generating revenue from the sale of electricity and heat.

The generation of clean electricity and heat from sustainable sources has the potential to address the key energy challenges of energy security and carbon commitment and provide strong returns on capital employed.

The company is listed on AIM and trades as REAC.www.reactenergyplc.com

 

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