Loan of up to $30.0m & Palm Oil Mill Update

RNS Number : 3727T

Equatorial Palm Oil plc

12 October 2017

 

12 October 2017

EQUATORIAL PALM OIL plc

("EPO" or the "Company") 

Loan of up to $30.0m Secured for Joint Venture Company

Palm Oil Mill Update

Equatorial Palm Oil plc (AIM: PAL), the AIM listed palm oil development and production company with operations in Liberia, West Africa announces today its 50 per cent. owned joint venture company, Liberian Palm Developments Limited ("LPD"), has entered into a loan agreement of up to $30.0m ("Loan Agreement") with KLK Agro Plantations Pte Ltd ("KLK Agro"), a wholly owned subsidiary of Kuala Lumpur Kepong Berhad ("KLK"), for the operations and funding for LPD.

The Loan will be used to continue to develop the operations of LPD and finalise the construction of the first stage of the new 60 metric tonne ("MT") palm oil mill being built on Palm Bay estate, as announced in April 2016.

The key terms of the loan are as follows:

·      Amount - up to $30.0m which is unsecured

·      Term - 5 years from the date of the Loan Agreement, being 11 October 2017

·      Interest - 3-months USD LIBOR + 5 per cent per annum

·      Repayment - Loan principal (together with all accrued Interest due) on expiry of the Term

The Loan is in addition to, and on predominantly the same terms as, the loans of US$20.5m and US$30.0m provided by KLK Agro, announced on 27 January 2015 and 5 September 2016 respectively (the "Existing Loans"), save for the date of maturity being 11 October 2022. The Existing Loans, which have now been fully drawn down and remain outstanding, fall due on 25 January 2020. The Loan can be drawn down by LPD in line with its operational funding requirements and subject to the consent of the KLK Agro.

Palm Oil Mill Update

The construction of the 60 metric tonnes per hour ("mt/hr") palm oil mill ("POM") at Palm Bay estate is progressing well. As announced in April 2016, the POM is being constructed in a modular fashion with two lines of 30mt/hr each, however, the ground preparation has been completed for a 60mt/hr POM.  The first 30mt/hr POM module is expected to be commissioned and commence full operation in Q3 2018.

Palm Bay estate is located 24km from the port of Buchanan where EPO has leased approximately 4.5 acres for a tank farm and export facility that is in close proximity to the wharf from which it is intended that vessels will load EPO's produce for onward shipment to its customers. Preliminary land infill work is due to start at the port and tenders are being received for the construction of the tank farm and export facility which will be completed before the commissioning of the POM.

Geoffrey Brown, Executive Director of EPO, commented:

"This funding from KLK Agro will drive our operations into production in the latter part of 2018. The commissioning of the palm oil mill, expected in Q3 2018, will be a very significant milestone not only for the Company but also for the communities amongst whom we operate and for the Liberian Government."

Related Party Transaction

KLK (through its wholly owned subsidiary KL-Kepong International Limited) currently holds ordinary shares in EPO representing approximately 62.86 per cent. of the issued share capital of the Company. In addition, KLK Agro also currently holds 50 per cent. of the issued share capital of LPD. Accordingly, the Loan Agreement is classified as related party transaction under the AIM Rules for Companies. Michael Frayne and Geoffrey Brown, being the non-related directors of EPO for the purposes of this transaction, consider, having consulted with the Company's nominated adviser, Strand Hanson Limited, that the terms of the Loan Agreement are fair and reasonable insofar as the Company's shareholders are concerned.

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For further information, please visit www.epoil.co.uk or contact:

Equatorial Palm Oil plc Geoffrey Brown (Executive Director)	[phone]
Strand Hanson Limited (Nominated Adviser) James Harris / James Bellman	[phone]
Mirabaud Securities LLP (Broker) Peter Krens	[phone]

Notes to editors:

Equatorial Palm Oil plc is an AIM listed crude palm oil developer and producer with palm oil estates in Liberia, West Africa.  The Company was founded in 2005 and is focused on becoming a global, sustainable producer of high quality palm oil to regional and international markets.

With a significant land position in Liberia through its operating subsidiary LPD, the Company is geographically well positioned to serve the international and regional markets and is committed to making a positive impact on the communities in which it operates through investment in local schools, health clinics, housing and infrastructure. 

The Company's largest shareholder and 50:50 joint venture partner in LPD is KLK. KLK is one of the largest palm oil producers in the world and the Company will greatly benefit from their many years of expertise in oil palm development.

 

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