Publication of shareholder circular & notice of GM

RNS Number : 4824H

Infrastrata PLC

08 June 2017

 

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

8 June 2017                             

InfraStrata plc

("InfraStrata" or the "Company")

Publication of shareholder circular and notice of general meeting

Further to the announcement made on 19 May 2017, InfraStrata plc (AIM: INFA), the independent gas storage company, announces that the Company is today publishing a shareholder circular which includes a notice of a General Meeting in relation to resolutions to remove all the Existing Directors and to appoint Alternative Directors as proposed by two shareholders and to provide authority to the directors to issue shares (the "Circular").  The General Meeting will be held at 9.00 a.m. on 27 June 2017 at Michelmores LLP, 6 New Street Square, London EC4A 3BF.

The Board of InfraStrata UNANIMOUSLY recommends that
Shareholders VOTE AGAINST all the Requisitioners' Resolutions
at the General Meeting

YOUR VOTE IS IMPORTANT

On 19 May 2017, your Board announced that it had received a notice from two Shareholders (on behalf of the pension trustees of the self-invested personal pension plans of Adrian Richard Pocock and Peter Verdun Wale) requiring the Company to convene a general meeting to consider resolutions to remove the Existing Directors from the Board and to replace them with Adrian Richard Pocock and Peter Verdun Wale.

The Board unanimously and wholeheartedly recommends that you continue to back the Existing Directors, as passing the proposed Requisitioners' Resolutions could jeopardise prospects for further investment in the Company, delay or stall progress of the Islandmagee gas storage project (the Project) and be detrimental to Shareholder value.

WHY YOU SHOULD VOTE AGAINST THE REQUISITIONERS' PROPOSALS:

·    The Requisitioners have provided very little information and detail in relation to their strategy for the Company and the Project. Following a meeting with the proposed Alternative Directors, the Existing Directors have seen no evidence that the proposed Alternative Directors have a credible or materially different strategy or an in depth understanding of the Company, the Project and gas storage in general.

·     The Requisitioners' actions have caused unnecessary disruption and uncertainty for the Company's business and its discussions with potential investors at a critical time and have caused the Company to incur expense at a time of limited cash resources and when the Board needs to focus on securing new investment and progressing the Project.  Opportunities that were in discussion for new investment have been deterred and delayed by the Requisition.

·    Replacing all the Existing Directors at this important time is wholly unnecessary and there is no evidence that either of the candidates proposed by the Requisitioners would add any new value to, or would introduce significant enhancements or improvements to, the Board and governance structure of the Company as it currently stands, let alone progress the Project.

·    The Project is complex in nature. The Requisition process thus far has already caused concern among key stakeholders in the Project, the support of whom is vital to a successful outcome for the Project and for Shareholders.

·   In addition to having longstanding specific experience of managing the Project, the Existing Directors have:

a)   experience with other major infrastructure projects;

b)   relevant sector experience in asset development activities;

c)   chartered accounting experience; and

d)   geological experience. 

·    The Existing Directors believe that they have delivered good value for money for Shareholders to date and that the Project's progress has been delivered at a fraction of the cost of similar projects at this stage in their development.

·    The Existing Directors cannot provide any guarantees that the Requisitioners' Resolutions, if passed, will not pose a risk to the continued admission of the Company's Ordinary Shares to trading on AIM due to suitability of the Alternative Directors and new Board for the purposes of the AIM Rules.

Further details regarding the above points can be found in the Chairman's letter starting on page 8 of the Circular.

The Circular and a form of proxy for voting at the General Meeting are being posted to Shareholders today and will also be made available to view shortly on the Company's website, www.infrastrata.co.uk.

The above summary should be read in conjunction with the full text of this announcement below and the Circular. Extracts from the Circular are set out below. Defined terms used in this announcement have the meaning as set out at the end of this announcement and as set out in the Circular.

For further information, please contact:

InfraStrata plc Anita Gardiner, Joint Managing Director Stewart McGarrity, Joint Managing Director	[phone]
Allenby Capital Limited (Nominated Adviser & Broker) Jeremy Porter / Alex Brearley / Liz Kirchner	[phone]
Financial PR - Camarco Billy Clegg / Gordon Poole	[phone]

Extracts from the Circular

(References to pages or paragraphs and appendices below refer to the relevant pages, paragraphs or appendices of the Circular and references to 'this document' refer to the Circular).

Expected timetable of events

Event	Time and date
Latest time and date for receipt of Forms of Proxy from Shareholders	9.00 a.m. on 23 June 2017
Voting record time for the General Meeting	close of business on 23 June 2017
Time, date and location of the General Meeting	9.00 a.m. on 27 June 2017 at Michelmores LLP 6 New Street Square London EC4A 3BF

All references to time in this document (including the Notice of the General Meeting) and the accompanying Form of Proxy are to local time in London.

Letter from the Chairman of InfraStrata plc

INTRODUCTION

On 9 May 2017, your Board announced that it had received a notice from certain Shareholders purporting to require the Company to convene a general meeting to consider certain resolutions to remove all the Existing Directors from the Board and appoint each of Adrian Pocock and Peter Wale as directors of the Company. As announced on 11 May 2017, this purported requisition was invalid as the companies signing the purported requisition were not Shareholders in your Company.

On 19 May 2017, your Board announced that it had received a further notice from two different Shareholders (on behalf of the pension trustees of the self-invested personal pension plans of Adrian Richard Pocock and Peter Verdun Wale) (the Requisitioners), purporting to require the Company to convene a general meeting to consider certain resolutions to remove all the Existing Directors from the Board and appoint each of Adrian Pocock and Peter Wale as directors of the Company. Among other things, the Requisitioners' letter stated that the Requisitioners are the pension trustees of self-invested personal pension plans of Adrian Richard Pocock and Peter Verdun Wale and the registered holders of, in aggregate, a total of 17,664,055 Ordinary Shares, which at that point in time represented 5.05% of the voting rights in the Company. After consultation with its legal advisers, the Company determined that this second requisition appeared to be valid in that the nominee companies signing the requisition were on the Shareholder register for at least the number of Ordinary Shares claimed. Accordingly, I am now writing to Shareholders to convene the General Meeting to propose the Requisitioners' Resolutions (1 to 8) and in addition, and as explained further below, the New Share Capital Resolutions.

The purpose of this document is to explain why your Board unanimously recommends that you VOTE AGAINST the Requisitioners' Resolutions but VOTE FOR the New Share Capital Resolutions. 

This document contains the notice of the General Meeting, which is to be held at 9.00 a.m. on 27 June 2017 at Michelmores LLP, 6 New Street Square, London EC4A 3BF, at which the Requisitioners' Resolutions (1 to 8) and the additional New Share Capital Resolutions (9 and 10) will be considered.

This document should be read in full, including the Board's reasons for why you should vote against the Requisitioners' Resolutions set out on pages 8 to 10.

ISLANDMAGEE PROJECT BACKGROUND

For the benefit of Shareholders who would like to read in more depth about the background to the Project, we have included a summary in Appendix 1.

CURRENT SITUATION

The Requisition has been a significant distraction for the Board and, as well as incurring time and costs for the Company, has provided uncertainty at a critical time in discussions with potential investors and has been a deterrent to the pursuit of other funding options. Opportunities that were in discussion for new investment have been deterred and delayed by the Requisition.

Further, the announcement of the Requisition has caused concern among key stakeholders in the Project, the support of whom is vital to a successful outcome for the Project and for Shareholders, including the Front End Engineering and Design (FEED) contractors, the EU (both of which have provisionally committed funding for the FEED programme), the Government in Northern Ireland and the local community and landowners at Islandmagee.

The Existing Directors have sought to engage with the underlying shareholders who requisitioned this General Meeting to understand their plans and strategy for InfraStrata and reasons for the Requisition. At the time of posting of this document such engagement has not yielded the necessary details of how the proposed Alternative Directors intend to resource or finance the Company's operations and take the Project forward. The Existing Directors have seen no evidence that the proposed Alternative Directors have a credible or materially different strategy or an in depth understanding of the Company, the Project and gas storage in general. In addition, it is not clear from the Requisition which, if any, of the proposed Alternative Directors will undertake an executive function in the Company or if both of them will be non-executive and therefore how the Board composition will be suitable for an AIM-quoted public company. 

In order to comply with the AIM Rules, information has been requested from the Alternative Directors to enable the Company's nominated adviser to undertake customary due diligence and satisfy itself as to Board suitability, but information is still outstanding and the due diligence process is ongoing, with no guarantee that this will be completed by the time of the General Meeting. There is therefore a risk that the Ordinary Shares may not continue trading on AIM if all the Requisitioners' Resolutions are approved, as explained in item 8 on page 10 of this document.

Funding status

The estimated cost to the Company of complying with the Requisition, preparing this document to Shareholders and holding the General Meeting is over £30,000, at a time when the Company is attempting to conserve limited cash resources. Attempts to avoid this process and its associated costs through discussion with the proposed Alternative Directors were unfortunately ineffective. As required under the Companies Act 2006 to cover the cost of circulating the Requisitioners' Statement to Shareholders, the Requisitioners have offered to pay to the Company the cost of circulating their statement, which is set out in Appendix 2 of this document.

At the beginning of 2017, as part of completing the restructuring of InfraStrata and to minimise corporate overheads, the full-time executive was reduced from three to two with Anita Gardiner and Stewart McGarrity becoming Joint Managing Directors. Andrew Hindle, previously CEO, became a Non-Executive Director and continues to advise the Company in a technical capacity through the FEED and commercialisation programme. Other steps taken to reduce costs included the closure of the Company's permanent office in Richmond-upon-Thames and relocation to a virtual office in Belfast.

The cash available to the Company as announced on 22 May 2017 was, at that time, £175,000. This necessarily excludes €1.6m of funds held pursuant to the EU grant (EU Grant), which is subject to restrictions on its use, most notably the requirement that matched funding is obtained from other sources for the FEED and associated works and, until such time as it may be released for its specified purposes, remains the property of the EU. The Existing Directors are of the view that none of the EU funding received as a prepayment should be expended until the entire FEED and related commercialisation programme can be funded in full. The EU Grant will need to be returned to the EU if the programme does not complete, unless otherwise agreed by the EU.

Following a placing to raise £130,000 before expenses announced on 26 May 2017, the Company has limited working capital until early October 2017 after allowing for anticipated expenditure necessary to conduct the strategic options review and the costs associated with dealing with the Requisition and the General Meeting. The Board considered it necessary to complete this small placing at the time given the limited working capital available to the Company and the prevailing appetite of the investors.

Project management and administrative costs

As a result of further savings, the Company's annualised project management and administrative costs are approximately £650,000, including £260,000 for the full annual salaries of two executive directors. Other costs included are those associated with being an AIM listed public company, including Nominated Adviser fees, broker fees, AIM fees and share registrars. Also included are audit fees, tax filing fees and insurances.

The Board continues to keep costs under review at all times but now considers that the level of overhead has been reduced to the minimum reasonable for an AIM-quoted company of the nature of InfraStrata. In particular, the Existing Directors believe that the number and mix of experience of the Existing Directors is appropriate to both the particular challenges of managing the planned activities on the Project and to the governance of an AIM-quoted company of the nature of InfraStrata. 

In considering the level of salaries for the two executive directors, the Existing Directors have determined that the nature of the work being undertaken by InfraStrata necessarily involve a very hands-on and committed approach to managing the work-streams, including fundraising, management of external resources delivering the FEED and commercialisation programme and maintaining the crucial relationships with the Company's many stakeholders, including the EU. These roles are by their nature very committing and require a high level of experience and expertise which would otherwise require to be performed by external resources at a cost considerably in excess of the level of remuneration being paid.  The Company has no other staff. Nevertheless, a temporary reduction in management costs has been implemented, which will be kept under review.

The Existing Directors believe that their work on the Project has led to the delivery of very good value for money for the shareholders' funds invested in the Project to date. The Board has delivered full planning, permitting and land assembly for a gross Investment of £11 million of which only £7 million has been paid by InfraStrata from shareholders' funds (including attributable project management costs) over a number of years. The Existing Directors believe that there are other gas storage projects that have required multiples of the funding committed to the Project in order to obtain a broadly comparable stage of development. One example of this is the Halite Presall gas storage project, where it was confirmed in 2011 in a Compulsory Acquisition Funding Statement as part of its planning application that over £80 million had already been invested in this project.

The executive directors are engaged to deliver a service in managing the Company's activities and are fully committed to delivering value to Shareholders. Sacrifices in terms of compensation have already been made - both of the executive directors are being paid less than their original contracted terms and all pension contributions for directors were voluntarily suspended in October 2015. Further, for the year ended October 2016 the level of remuneration for executive directors was reduced by 32% in aggregate on the prior year.

In addition to having longstanding specific niche experience gained via developing and managing the Project, among other things the Existing Directors have:

a)   experience with other major infrastructure projects;

b)   relevant sector experience in asset development activities;

c)   chartered accounting experience;

d)   geological experience; and

e)   AIM company and corporate governance experience.

Key biographical details for all Existing Directors are available on the Company's website at www.infrastrata.co.uk.

REASONS FOR THE BOARD'S RECOMMENDATION TO VOTE AGAINST THE Requisitioners' RESOLUTIONS

Your Board unanimously recommends that you VOTE AGAINST the Requisitioners' Resolutions (Resolutions 1 to 8) for the reasons listed below.

The milestones which have been achieved in the development of the Project to date (as detailed in Appendix 1) are important for the consideration of the capabilities, experience and suitability of the Existing Directors to continue to progress the Project for the sole purpose of delivering value to Shareholders. In summary, the Existing Directors unanimously recommend that Shareholders VOTE AGAINST each of the resolutions proposed by the Requisitioners for the following reasons:

1          SIGNIFICANT DISTRACTION AND COST OF THE REQUISITION

The Requisition has been a significant distraction for the Board and as well as incurring time and costs for the Company, has provided uncertainty at a very critical time for the Project and discussions with potential investors and a deterrent to the pursuit of the strategic options review. It is worth noting that the announcement on 22 May 2017 to review strategic options was in line with previous announcements should the £2.2 million funding requirement not be forthcoming on completion of the Concept Evaluation phase.

2          LACK OF INFORMATION AND DETAILS FROM THE REQUISITIONERS

The Board has been unable to ascertain from the underlying shareholders who requisitioned this General Meeting details of their alternative strategy or how they would intend to resource and fund the Company's activities going forward.

3          UNNECESSARY BOARD CHANGES

Replacing all the Existing Directors at this important time is wholly unnecessary and there is no evidence that either of the candidates proposed by the Requisitioners would add any new value to, or would introduce significant enhancements or improvements to, the Board and governance structure of the Company as it currently stands, let alone progress the Project.  There is no indication from the Alternative Directors of who would fulfil the executive roles within the Company nor who would be appointed as non-executive directors to provide for proper corporate governance and a suitable Board composition for an AIM-quoted company.

4          PROJECT DELIVERY AND ON A REASONABLE BUDGET

The Board has delivered full planning, permitting and land assembly for a gross investment of £11 million of which only £7 million has been paid by InfraStrata from shareholders' funds (including attributable project management costs) over a number of years. The Existing Directors believe that there are other gas storage projects that have required multiples of the funding committed to the Project in order to obtain a broadly comparable stage of development. As such, the Existing Directors believe that their work on the Project has led to the delivery of very good value for money for the shareholders' funds invested in the Project to date.

5          PCI STATUS OBTAINED

The Board has secured and renewed the Project's valuable Project of Common Interest status with the EU which has provided access to grant funding for the 2015 data gathering well and for the forthcoming FEED programme (subject to match funding being secured by InfraStrata). An application for renewal of this status, which is a complex process where success cannot be assumed to be guaranteed, is underway (the EU requires reapplication every two years) to afford continued access to grants including the possibility of grants toward the construction of the Project. The Existing Directors have the experience and knowledge to progress this through the EU's processes for assessing the merits of energy infrastructure.

6          PROJECT KNOWLEDGE, EXPERIENCE AND RELATIONS

The Project is complex in nature. The Existing Directors have a detailed hands-on knowledge of all aspects of the Project's development over many years and maintain strong relationships with key stakeholders, including the Project partner, Mutual Energy Limited, the EU, the Government in Northern Ireland and other key government departments and agencies, the local community and landowners at Islandmagee and the FEED contractors. The Existing Directors actively maintain these relationships very effectively. Accordingly, the Existing Directors are concerned that it will prove to be very difficult to maintain these important relationships with the Board changes that are being proposed and the associated disruption. Further, the announcement of the Requisition caused concern among key stakeholders in the Project, the support of whom is vital to a successful outcome for the Project and for Shareholders.

7          ESTABLISHED AND READY

In addition to their knowledge of the Project, the Existing Directors established an Information Memorandum, a financial model, a data room and other material to support engagement with parties interested in the investment in or acquisition of the Project. As a result of many years of engagement with potential investors and partners in energy infrastructure, the Existing Directors have established a broad range of contacts regarding the potential to invest in or acquire the Company's interest in the Project at the appropriate time and thereby provide the means by which value may be secured for Shareholders.

8          RISK OF SUSPENSION AND CANCELLATION FROM THE AIM MARKET

Shareholders should be aware that the Requisitioners' Resolutions, if passed, could potentially pose a risk to the admission of the Ordinary Shares to trading on AIM. If the Requisitioners' Resolutions are passed, the Company's nominated adviser will need to consider the proposed Alternative Directors and Board composition in connection with the overall suitability of the Company to be a company with shares admitted to a public market in the UK. In order to comply with the AIM Rules, information has been requested from the Alternative Directors to enable the Company's nominated adviser to undertake customary due diligence and satisfy itself as to Board composition and suitability. Whilst certain information has been provided by one of the Alternative Directors, information is still outstanding and the due diligence process is ongoing. There is no guarantee that this will be completed by the time of the General Meeting. In the event that the Company's nominated adviser cannot reach a satisfactory conclusion in this respect and as to Board suitability for the purposes of the AIM Rules, then should all the Requisitioners' Resolutions be passed, the nominated adviser may be compelled by the AIM Rules and AIM Rules for Nominated Advisers to resign. Following the resignation of the Company's nominated adviser taking effect, in the absence of the appointment of a new nominated adviser, trading in the Company's Ordinary Shares on AIM will be suspended. If the Company cannot appoint a replacement nominated adviser within one month of such suspension, the admission of the Company's Ordinary Shares to trading on AIM will be cancelled. The Existing Directors are of the view that, in the circumstances, there can be no guarantee that a replacement nominated adviser can be appointed within the appropriate timescale.

THE BOARD HAS A CONVICTION THAT IT IS IMPERATIVE THAT THE SIGNIFICANT DISTRACTION OF THE REQUISITION MUST BE REMOVED SUCH THAT THE BOARD CAN RE-ENGAGE EFFECTIVELY WITH STAKEHOLDERS AND POTENTIAL INVESTORS WITHOUT DELAY THEREBY SECURING THE VALUE OF THE COMPANY'S ASSETS FOR ALL SHAREHOLDERS.

 

REQUISITIONERS' STATEMENT

A statement (the Requisitioners' Statement) accompanied the Requisitioners' letter of 18 May 2017, which the Requisitioners require the Company to circulate to those members receiving notice of the requisitioned General Meeting, in accordance with section 314 of the Companies Act 2006. The Requisitioners' Statement in its entirety is set out in Appendix 2 to this document.

The Existing Directors would emphasise that the Company is required by law to circulate to Shareholders the Requisitioners' Statement, as set out in Appendix 2 of this document, and the Existing Directors cannot therefore take any responsibility for the accuracy of the statement nor the claims made within the statement, including the biographies of the Alternative Directors. The Existing Directors cannot take any responsibility for whether any of the forward-looking statements within the Requisitioners' Statement can be successfully achieved or implemented.

The Existing Directors are of the view that the Requisitioners have provided very little information and detail in relation to their strategy for the Company. Following a meeting with the Alternative Directors, the Existing Directors have not seen sufficient evidence that the proposed Alternative Directors have a credible strategy or an in depth understanding of the Company, the Project and gas storage in general.

The Existing Directors note that the Requisitioners' Statement makes reference to the Company having a remaining cash balance of approximately £1 million (as at the time of the Requisition) although the Board are unclear as to how this figure was arrived at. The Company's cash position was clarified in its announcement on 22 May 2017 when it stood at £175,000. The €1.6m of funds held pursuant to the EU Grant are subject to restrictions on their use, most notably the requirement that matched funding is obtained from other sources for the FEED and associated works and, until such time as it may be released for its specified purposes, remains the property of the EU. The Existing Directors are of the view that none of the EU funding received as a prepayment should be expended until the entire FEED and related commercialisation programme can be funded in full. The EU Grant will need to be returned to the EU if the programme does not complete, unless otherwise agreed by the EU.

Given the above, and other potential concerns regarding the Requisitioners' Statement, the Existing Directors believe that Shareholders should consider exercising an appropriate level of caution when evaluating the Requisitioners' Statement in forming a view regarding voting decisions for the General Meeting.   In addition, the contents of this Chairman's Letter should be borne in mind.

NEW SHARE CAPITAL RESOLUTIONS

As stated in a number of recent announcements, in order to progress the FEED and commercialisation programme to take the Project to Final Investment Decision (FID), the Company has a funding requirement of £2.2 million. Resolutions 9 and 10 have been proposed in order to empower the directors of InfraStrata following the General Meeting (as they may be) to allot Ordinary Shares, which will be required if the Company is to satisfy this funding requirement via an equity fundraising.  The authorities provided via Resolutions 9 and 10 could also allow the directors of InfraStrata following the General Meeting to pursue other types of transaction that may involve the allotment of Ordinary Shares, including those of the type indicated in the Company's announcement of 22 May 2017 regarding the review of the Company's business plan, operational assets, development strategy, the market valuation of its gas storage asset and its capital structure. The Existing Directors note that the authority to allot Ordinary Shares, as proposed via Resolutions 9 and 10, would likely be required by the proposed Alternative Directors, should these directors be appointed and wish to pursue their own equity fundraising strategy.

RECOMMENDATION OF THE BOARD

For the reasons set out above, the InfraStrata Board considers that the Requisitioners' Resolutions to:

·     remove the Existing Directors, being Anita Elizabeth Gardiner, Maurice Edward Hazzard, Andrew David Hindle, Stewart McGarrity and Kenneth Maurice Ratcliff; and

·      replace them with the Alternative Directors, being Adrian Richard Pocock and Peter Verdun Wale,

are, in each case, not in the best interests of the Company or Shareholders as a whole and the Board therefore unanimously recommends that all Shareholders VOTE AGAINST the Requisitioners' Resolutions, as all the Existing Directors have irrevocably undertaken to do in respect of their aggregate beneficial holdings of 10,960,951 Ordinary Shares (representing approximately 2.9 per cent. of the issued share capital of the Company).

For the reasons set out above, the InfraStrata Board considers that the New Share Capital Resolutions are, in each case, in the best interests of the Company and Shareholders as a whole and the Board therefore unanimously recommends that all Shareholders VOTE FOR the New Share Capital Resolutions, as all the Existing Directors have irrevocably undertaken to do in respect of their aggregate beneficial holdings.

ACTION TO BE TAKEN

You will find, set out at the end of this document, a Notice convening the General Meeting, to be held at 9.00 a.m. on 27 June 2017 at Michelmores LLP, 6 New Street Square, London EC4A 3BF, at which the Resolutions will be considered. The full text of the Resolutions is set out in the Notice. Voting at the General Meeting will be by poll and not on a show of hands and each Shareholder entitled to attend and who is present in person or by proxy will be entitled to one vote for each Ordinary Share held.

You will find enclosed with this document a Form of Proxy for use at the General Meeting or any adjournment thereof. Whether or not you intend to be present at the General Meeting, you are requested to complete, sign and return the Form of Proxy in accordance with the instructions printed on it so as to be received by the Company's registrars, Capita Asset Services at PXS1, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4ZF, as soon as possible, and in any event, no later than 9.00 a.m. on 23 June 2017 (or, in the case of an adjournment, not later than 48 hours (excluding non-working days) before the time fixed for the holding of the adjourned meeting).

Shareholders wishing to complete their paper Form of Proxy in line with the Board's recommendations should place an "X" in the boxes under the heading "Against" for the Requisitioners' Resolutions and an "X" in the boxes under the heading "For" for the New Share Capital Resolutions.

If you have any questions relating to this document, the General Meeting and/or the completion and return of the Form of Proxy, please contact Capita Asset Services on 0871 664 0300 if calling within the United Kingdom or [phone] if calling from outside the United Kingdom. Lines are open 8:30am - 5:30pm Mon-Fri. Calls to the helpline from within the United Kingdom cost 12 pence per minute (including VAT) from a BT landline. Other service providers' costs may vary. Call to the helpline from outside the United Kingdom will be charged at applicable international rates. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.

The completion and return of a Form of Proxy will not preclude you from attending and voting in person at the General Meeting (or any adjournment thereof) if you wish to do so and are so entitled.

The Board of InfraStrata UNANIMOUSLY recommends that Shareholders VOTE AGAINST the Requisitioners' Resolutions at the General Meeting

Definitions

The following definitions apply throughout this document unless the context otherwise requires:

AIM Rules:	the AIM Rules for Companies published by London Stock Exchange Group plc, which govern the admission and trading of a company's securities on AIM, a stock market operated by London Stock Exchange Group plc
Alternative Directors:	Adrian Richard Pocock and Peter Verdun Wale
Board:	the current board of directors of the Company, being the Existing Directors
Company or InfraStrata:	InfraStrata plc, registered in England and Wales with registered number 06409712
CREST:	the relevant system (as defined in the Regulations) in respect of which Euroclear UK & Ireland Limited is the operator (as defined in the Regulations)
EU:	European Union
Existing Directors:	Anita Elizabeth Gardiner, Maurice Edward Hazzard, Andrew David Hindle, Stewart McGarrity and Kenneth Maurice Ratcliff, the current directors of the Company
FEED:	Front End Engineering and Design
FID:	Final Investment Decision, being the point of financial investment in order to proceed with construction of the gas storage caverns and associated facilities and infrastructure of the Project for it to become operational
Form of Proxy:	the Form of Proxy enclosed with this document for use by Shareholders in connection with the General Meeting
General Meeting:	the general meeting of the Company to be held at 9.00 a.m. on 27 June 2017 (and any adjournment thereof) for the purposes of considering and, if thought fit, passing the Resolutions
Project:	the Islandmagee gas storage project and its associated assets in Northern Ireland owned by the Company
Ordinary Shares:	the ordinary shares of 0.01 pence each in the capital of the Company, having the rights set out in the Company's Articles of Association
New Share Capital Resolutions:	Resolutions 9 and 10 set out in the Notice
Notice:	the notice of the General Meeting set out on pages 20 to 24 (inclusive) of this document
Regulations:	the Uncertificated Securities Regulations 2001 of the United Kingdom
Resolutions:	the resolutions set out in the Notice
Requisition:	the notice received on 18 May 2017 from the Requisitioners to call a general meeting to propose Resolutions 1 to 8
Requisitioners:	the pension trustees of self-invested personal pension plans of Adrian Richard Pocock and Peter Verdun Wale
Requisitioners' Resolutions:	Resolutions 1 to 8 set out in the Notice
Requisitioners' Statement:	the statement of the Requisitioners set out in Appendix 2
Shareholders:	holders of Ordinary Shares
UK or United Kingdom:	the United Kingdom of Great Britain and Northern Ireland
pence, £ or p	the lawful currency of the United Kingdom

All times referred to are local time in London time.

All references to legislation in this document are to the legislation of England and Wales unless the contrary is indicated. Any reference to any provision of any legislation shall include any amendment, modification, re-enactment or extension thereof.

Words importing the singular shall include the plural and vice versa, and words importing the masculine gender shall include the feminine or neutral gender.

Appendix 1 Background to the Project

Strategic repositioning of InfraStrata in 2016

In November 2015 InfraStrata announced that it would divest its oil and gas exploration assets and focus on the development of the Project. The cessation and disposal of our oil and gas exploration activities resulted in cash inflows to the Company of over £0.8 million from late-2015 to mid-2016 which provided vital working capital to be applied to the Company's progression of the monetisation of the Project. Following the divestment, the Company also announced that the Board would be restructured and steps were being taken to minimise corporate overheads.

The Project was first identified in 2007 and initially 3D seismic data was acquired in the Larne Lough area. Over the period from 2008 through 2015 the Board secured all elements of the Project, including full planning permission, all key permits and licences to construct and operate the facility and full land assembly, either by way of land acquired, options to acquire land, wayleaves and agreements of lease with The Crown Estate for the formation of caverns under Larne Lough.

The Company successfully obtained Project of Common Interest (PCI) status with the European Union (EU) for the Project in November 2013. This provides a number of advantages, including the potential to access grant funding which the Existing Directors have also been successful in securing for the benefit of the Project. PCI status must be renewed every two years and this was successfully done in November 2015 and is due to be renewed in November 2017. An application for renewal of this status, which is a complex process where success cannot be assumed to be guaranteed is underway to afford continued access to grants including the possibility of grants toward the construction of the Project. The Existing Directors have the experience and knowledge to progress this through the EU's processes for assessing the merits of energy infrastructure.

During 2015, a data gathering well was successfully drilled to obtain salt core samples and subsequent test results updated to the preliminary design of the facility confirmed the feasibility of the development of an underground gas storage facility in salt caverns in this location. This £3.8 million programme of work was co-funded by a £1.9 million grant secured from the EU by virtue of the Project's status as a Project of Common Interest, meaning the net cost funded by Shareholders was £1.9 million. The overall results from the technical programme of work supported the feasibility of the development of an underground gas storage facility in salt caverns in this location.

Following completion of the feasibility studies, during 2016 we conducted an exercise with advisers VSA Capital Ltd and Centrus Advisors Ltd to examine a range of options to monetise the Company's interest in the Project, including direct investment in the Project or a disposal of the Company's interest in the Project. A large number of prospective investors were approached, targeting parties with an understanding and appetite for investment in energy infrastructure and with an understanding of the particular commercial and financing challenges associated with a gas storage project. The feedback at that time with respect to investment in gas infrastructure was that it would be preferable for the FEED to be completed and for the Project to have sufficient certainty with regards to revenues, including pre-contracted revenues where possible, in order to support the additional project finance that would be required and to reach a final investment decision (FID).

As a result of the feedback the Company determined that the best opportunity to secure value for Shareholders would be to undertake the FEED and concurrently, a commercialisation process to pursue pre-contracted revenues, both of which are subject to additional funding being secured (further details of which are below).  In preparation for this, the Company and our partner in the Project, Mutual Energy Limited, agreed a restructuring of interests such that InfraStrata's equity position in the Project increased from 65% to 90%. We also secured advance assurance from HM Revenue and Customs that the required new investment into InfraStrata would qualify for Venture Capital Trust Scheme and Enterprise Investment Scheme status and this assurance was received in January 2017.

In November 2016, we announced the last stage of the restructuring of InfraStrata to take the FEED and commercialisation programme forward whilst minimising corporate overheads. At the beginning of 2017 the full-time executive was reduced from three to two with Anita Gardiner and Stewart McGarrity becoming Joint Managing Directors. Andrew Hindle, previously CEO, became a Non-Executive Director and continues to advise the Company in a technical capacity through the FEED and commercialisation programme. Other steps taken to reduce costs included the closure of the Company's permanent office in Richmond-upon-Thames and relocation to a virtual office in Belfast.

Progress with the FEED and commercialisation programme

The FEED and commercialisation programme has an aggregate cost of £6 million of which the Company has already secured £2 million by way of a further grant of 50% of the cost of FEED from the EU and an undertaking from the selected FEED contractors to provide secured loans of up to £1.1 million. The EU grant and the contractors' loans are conditional on InfraStrata securing the balance of funding required to complete the FEED and commercialisation programme and the contractor loans will only become repayable when the Project reaches a final investment decision. The Company stated in its 4 November 2016 announcement that it was examining options with its advisers to secure the necessary balancing funds of approximately £3 million to complete the FEED and commercialisation programme. In January 2017, the Company announced it was in discussions with potential investors, however a successful outcome could not be guaranteed. Meanwhile, certain Shareholders and other investors supported the Company's strategy in a placing of new Ordinary Shares completed on 3 March 2017 to raise approximately £740,000 after fundraising expenses, to enable the Company to commence with the initial phase of FEED, repay short term debt funding and continue discussions with potential investors to secure the balance of funding required, which was reduced to £2.2 million including fundraising expenses following this placing. The Company also confirmed that it may consider other options for the Project, including a potential sale. 

The FEED contractors were selected following a competitive tendering process as announced in November 2016. These contractors have a very broad range of experience and expertise, specifically in the design, development and operation of salt cavern gas storage facilities in the UK and in Europe. The Company has also had discussions with the organisations which would provide the highly specialised technical and commercial support to the commercialisation process, but will not select or contract with any of these parties until the funding to carry out these activities has been secured.

Following the placing of Ordinary Shares completed in March 2017, the Company progressed the initial phase of the FEED, known as Concept Evaluation, during which the FEED contractors undertook a value enhancement exercise on the Project's current design basis to identify opportunities through which the current design and phasing could be optimised, to enhance overall Project value and in particular, to assess the potential for accelerating the delivery of capacity (or part thereof) to the gas markets. Initial findings have identified a phased approach for the development of the salt caverns to potentially improve the time to market of an initial tranche of capacity, which may enable the Project to generate revenues earlier than currently anticipated. Adopting this phased approach may result in some loss of economies of scale and an extended timeline for full build-out, but it would reduce the capital expenditure requirement in the earlier stages of development. Concept Evaluation also identified potential opportunities to reduce capital and operational costs, however, these will require full evaluation during the FEED itself and there is no certainty at this time that they will result in overall cost reductions. As part of the Concept Evaluation programme the detailed design parameters for the FEED study have also been developed.

Announcement of review of strategic options and Project update

On 22 May 2017, the Company announced a review of its strategic options for taking the Project forward and securing best value for Shareholders. The Company has been in discussions with interested parties to provide the remaining £2.2 million funding required to complete the entire FEED and commercialisation work programme and has explored many sources of potential finance in debt and equity, through its own sources and those of its advisers, seeking terms that are expedient and reasonable for the Company and its Shareholders. These discussions continued but the Company stated in announcements on 27 February 2017, 19 April 2017 and 4 May 2017 that there could be no guarantee that the Company would be successful in its discussions with potential investors and that it may need to consider using the remaining funds available to it to explore other options including a sale of the Project and/or its assets.

The UK gas storage market is in a state of significant change with the well documented problems at the largest facility, Rough. The Existing Directors believe these changes may increase the long-term strategic value of the Project and control of the asset may therefore be more attractive to market participants with balance sheet resources to take the development forward into construction.

Market conditions for the development of gas storage have been challenging since the 2008 financial crisis, which has been exacerbated by a fall in gas demand across Europe, low levels of volatility in the gas price and with many companies' capital expenditure budgets being constrained. The Company's opinion of the long-term market fundamentals is that more gas storage will be required in the UK to meet the expected need for more flexible gas and the Company commissioned a Competent Person's Report in 2016 which concurred with that view. 2016 saw an increase in gas demand (including within the important power sector where gas demand can be variable) and in gas price volatility which was at least in part caused by the technical problems at the UK's oldest and largest gas storage facility, Rough. As Rough's technical issues continue and no gas can be injected into the facility this summer for withdrawal in winter 2017, it may only be this upcoming winter in which the full impact of a UK gas market without Rough will be truly tested.

It is therefore the view of the Company that the importance of gas storage will increase and consequently the strategy of the Existing Directors is to continue to pursue the additional funding to complete the FEED and commercialisation programme while reviewing the wider strategic options which may include a subscription for the Company's securities by a third party or a farm down or disposal of the gas storage asset. The Company is now seeking any non-binding offers, which may be in the form of a £2.2 million investment in InfraStrata to complete the entire FEED and commercialisation work programme, a proposed acquisition of InfraStrata's 90% interest in the Project (via its wholly owned subsidiary InfraStrata UK Limited), a sale of the Project asset (owned by Islandmagee Storage Limited, a subsidiary of the Company) subject to the approval of Project partner, Mutual Energy Limited, or a corporate transaction involving any or all of InfraStrata's subsidiaries. The Board is also of the view that a potential outcome may be to secure sufficient working capital to enable the pursuit of these options to continue into the winter of 2017. At the General Meeting, the Company is seeking authority for directors of the Company to issue further shares in the Company through the New Share Capital Resolutions, which may be necessary to pursue these options.

Appendix 2 Requisitioners' Statement

"The Requisitioning Shareholders believe that the strategy of the proposed and revised board of directors of the Company for value realisation should be to:

-      Immediately cut or otherwise significantly reduce the Company's spending of cash on general and administrative expenses.

-      Align senior management, and thereby the decision-making power, of the Company with stakeholders by the appointment of directors who have meaningful stakes in the Company and will be driven by its future success, for the benefit of shareholders as a whole.

-      Engage with current and prospective new stakeholders with a view to maximising the potential returns of the Company.

-      Initiate an immediate strategic review tasked with assessing how to efficiently transform the Company so that it creates an alignment of all stakeholders and identifies the most expedient route to value maximisation of its assets.

-      Pursue funding initiatives to facilitate the Company being able to maximise a return on its current assets, thereby accelerating the monetisation of those assets.

-      Extract the hidden value from the Company's assets, which is not reflected in the current share price.

We would anticipate the Company's shares to appreciate significantly upon the adoption of this strategy as market price implied uncertainty over cash spending and monetisation of assets is removed over time.

The compelling need to change the board

The continued expenses and recent cash outflows at the Company, without any concurrent upturn in transactional activity and results, are alarming. We believe shareholders are exposed to material risk that the Company will spend its remaining cash balance of approximately £1 million, thereby destroying any remaining value.

We do not believe that the board in its current composition is suited to undertake the necessary strategic review which we believe is required. Further, we do not believe that the Company requires as may directors as it presently has, which simply serves as a significant cash constraint on the business and an ongoing liability. We believe conservation of capital is critical at this juncture of the Company's history. We urge shareholders to appoint a newly-constituted board to formulate and execute a strategy that is in the best interest of all shareholders.

Proposed board appointments

We are proposing the appointment of directors with sound reputations and a breadth of experience in whom all shareholders can trust to undertake the necessary strategic review which is required and who will provide the skills required for the Company's future. Specifically, these directors have amassed a wealth of experience as investors in small and mid-cap companies and fully appreciate the value drivers which such companies are required to seek and adopt to generate maximum potential returns.

Adrian Richard Pocock (58)

Adrian Pocock spend many years practicing as a Chartered Surveyor (FRICS 1994), working for some of the largest companies and partnerships at director level. He holds an MBA from Strathclyde Business School and studied Master's Level Contract and Construction Law at the Glasgow School of Law. Adrian has extensive assets management experience, having led and been a member of a diverse range of project support teams, ranging from small companies to companies with property portfolios valued in excess of £3 billion. He has worked with some of the largest organisations in the UK, including the NHS, the Bank of England and British Land. He ran a successful commercial property development company for 10 years, and has been an active investor in small and mid-cap companies for 30 years.

Peter Verdun Wale (47)

Peter Wale holds a BA in Business Economics & Accounting from the University of Reading and has over 20 years of diverse investing experience across developed and emerging markets. He has worked in equities trading for both Japanese and American investment firms, including Fidelity Investments, where he was a Pan-European small and mid-cap equities trader. He was most recently a partner and senior equities trader at a global hedge fund. Peter has been an active investor in the small and mid-cap space for the past 25 years and has established an extensive network of investor contacts in this time. He is a non-executive director of Strategic Minerals plc (AIM: SML) and a director of Cornwall Resources Limited."

-ends-

NOTICE OF GENERAL MEETING

NOTICE IS HEREBY GIVEN that a general meeting of the shareholders of InfraStrata plc (the Company) (the General Meeting) will be held at 9.00 a.m. on 27 June 2017 at Michelmores LLP, 6 New Street Square, London EC4A 3BF, for the purpose of considering and, if thought fit, passing the following resolutions, resolutions 1 to 9 of which shall be proposed as ordinary resolutions and resolution 10 to be proposed as a special resolution:

REQUISITIONERS' RESOLUTIONS

ORDINARY RESOLUTION

1          THAT Adrian Richard Pocock be and is hereby appointed as a director of the Company (with such appointment taking immediate and simultaneous effect).

2          THAT Peter Verdun Wale be and is hereby appointed as a director of the Company (with such appointment taking immediate and simultaneous effect).

3          THAT Anita Elizabeth Gardiner be and is hereby removed as a director of the Company.

4          THAT Maurice Edward Hazzard be and is hereby removed as a director of the Company.

5          THAT Andrew David Hindle be and is hereby removed as a director of the Company.

6          THAT Stewart McGarrity be and is hereby removed as a director of the Company.

7          THAT Kenneth Maurice Ratcliff be and is hereby removed as a director of the Company.

8          THAT any person appointed as a director of the Company since the date of the requisition of the Requisitioned General Meeting at which this resolution is proposed, and who is not one of the persons referred to in the resolutions numbered 1 to 7 (inclusive) above, be and is hereby removed as a director of the Company.

 

NEW SHARE CAPITAL RESOLUTIONS

ORDINARY RESOLUTION

9       THAT, in accordance with section 551 of the Companies Act 2006 (CA 2006), the directors of the Company (Directors) be generally and unconditionally authorised to allot shares in the Company or grant rights to subscribe for or to convert any security into shares in the Company (Rights) up to an aggregate nominal amount of £56,406.24 provided that this authority shall, unless renewed, varied or revoked by the Company, expire at the earlier of the conclusion of the next annual general meeting of the Company or the date 12 months from the date this resolution comes into effect save that the Company may, before such expiry, make an offer or agreement which would or might require shares to be allotted or Rights to be granted and the Directors may allot shares or grant Rights in pursuance of such offer or agreement notwithstanding that the authority conferred by this resolution has expired. This authority revokes and replaces all unexercised authorities previously granted to the Directors but without prejudice to any allotment of shares or grant of Rights already made or offered or agreed to be made pursuant to such authorities.

SPECIAL RESOLUTION

10       THAT, subject to the passing of resolution 9 and in accordance with section 570 of the CA 2006, the Directors be generally empowered to allot equity securities (as defined in section 560 of the CA 2006) pursuant to the authority conferred by resolution 9, as if section 561(1) of the CA 2006 did not apply to any such allotment, provided that this power shall:

10.1     be limited to the allotment of equity securities up to an aggregate nominal amount of £56,406.24; and

10.2     expire at the earlier of the conclusion of the next annual general meeting of the Company or the date 12 months from the date this resolution comes into effect (unless renewed, varied or revoked by the Company prior to or on that date), save that the Company may, before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of any such offer or agreement notwithstanding that the power conferred by this resolution has expired.

-ENDS-

The Front End Engineering & Design (FEED) and Insitu Downhole Testing programme for the Islandmagee gas storage project is co-financed by the European Union's Connecting Europe Facility.

Disclaimer releasing the European Union from any liability in terms of the content of the dissemination materials:

"The sole responsibility of this publication lies with the author. The European Union is not responsible for any use that may be made of the information contained therein."

Notes:

Background on InfraStrata plc

InfraStrata is an independent gas storage company focused on the UK and Ireland.

Further information is available on the Company's website: www.infrastrata.co.uk.

Background on the Islandmagee Storage Project

The Islandmagee gas storage project company, Islandmagee Storage Limited ("IMSL"), is owned 90% by a wholly owned subsidiary of InfraStrata plc and 10% by a wholly owned subsidiary of Mutual Energy Limited. The project is a proposed salt cavern gas storage facility located on Islandmagee in County Antrim, Northern Ireland. Work commenced in 2007 with the acquisition of 3D seismic data to image the Permian salt in the Larne Lough area. During 2012, planning permission was granted for the project and a gas storage licence was issued by the Utility Regulator. In October 2013, the gas storage project was granted a 'Project of Common Interest' ("PCI") status by the European Commission. In 2015 a well was drilled to core the salt and confirm the technical feasibility of the project, supported in part by the Commission. The final stage before a Final Investment Decision will be the Front-End Engineering Design and Commercialisation of the project. To date approximately £11m has been invested in the project.

Further information is available on the project company's website: www.islandmageestorage.com.

 

END

 

 

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