React Energy PLC Statement re. Suspension (5399Y)
December 01 2014 - 11:28AM
UK Regulatory
TIDMREAC
RNS Number : 5399Y
React Energy PLC
01 December 2014
1 December 2014
REACT Energy plc
("REACT" or the "Company")
Suspension to trading on AIM
The Company's securities have been suspended on AIM pending a
notification to clarify REACT's financial position.
Background to and update on the Enfield Biomass project
On 5 December 2013 the Company signed a Collaboration Agreement
with the Foresight Group ("Foresight") for the part financing of
the 12MW Enfield Biomass Project ("Enfield"). Under the
Collaboration Agreement a number of co-investors were required to
finance the project alongside Foresight. The Company worked with
Foresight to acquire the site on which the project is to be located
(the "Enfield Site"). This transaction involved a fund managed by
Foresight acquiring the site from a third party. In conjunction
with this, Enfield Biomass Limited (a subsidiary of the Company)
signed a revised lease agreement for the site on the same day as
the Collaboration Agreement pursuant to which a rent of GBP54,000
per month (the "New Enfield Lease") was payable. The New Enfield
Lease agreement is subject to a parent company guarantee from REACT
until financial close of the project is achieved.
The Company announced on 24 June 2014 that it was in detailed
discussions with a number of potential co-investors regarding
Enfield. Over recent months the Company has continued these
discussions, signed non-binding heads of agreement and is in the
final stages of due diligence with a strategic investor involving
technology transfer and investment. This in turn has led to
negotiations with Foresight in relation to the terms of the New
Enfield Lease agreement. The Company has been unable, to date, to
reach a satisfactory conclusion to these negotiations with
Foresight. This has led to uncertainty in relation to the proposed
investment by the strategic investor with implications for the
on-going working capital requirements of the Company as it
continues to fund expenses (including professional advisory fees)
in relation to Enfield.
Foresight has now given the Company verbal notice purporting to
terminate the New Enfield Lease agreement in relation to the
Enfield Site. The Company, contests Foresights ability to terminate
the lease under the terms of the Collaboration Agreement. The
Company intends to continue its discussions with Foresight in
relation to Enfield and the Enfield Site with a view to concluding
a suitable way forward including the option to purchase outright
the land with the aid of existing and new investors in REACT.
Update on the Newry Biomass project
The Company announced on 12 September 2014 that it had, in
conjunction with its partner and major shareholder Farmer Business
Developments plc, commenced discussions with an alternative
technology provider in relation to the Newry Biomass project. The
technology provider in question is the same strategic investor that
the Company is currently in discussions with regarding a proposed
investment and technology transfer in Enfield Biomass Limited. The
discussions in relation to Newry Biomass also involve a proposed
investment into the Company and the project at a future date. The
uncertainty surrounding the proposed Enfield Biomass investment may
have an impact on the ability to secure the proposed Newry Biomass
investment. There is currently GBP5.2 million of bank loans
outstanding on the Newry Biomass project, which are guaranteed by
the Company and Farmer Business Developments plc on a joint and
several basis.
Plymouth
In August 2014 the Company, submitted a planning application for
approval to construct and operate a 12MW biomass conversion power
plant in Plymouth. The Company has decided to temporarily withdraw
the planning application to address concerns raised by the local
planning authority.
Clay Cross
In November 2014 the Company, in conjunction with Larkfleet
Energy, submitted a planning application for approval to construct
and operate a 12MW biomass conversion power plant in Clay Cross in
Derbyshire. A decision is expected in early 2015.
Londonderry
The Comapny has recently signed an option agreement with the
Londonderry Port and Harbour Commissioners for the development of a
12MW Biomass Conversion Plant in the Port area.
Biomass Heat Generation
The Company is the project developer and operator of three
existing cash generating Biomass Heat power plants in the UK, the
Culford School Biomass Heat plant and the Old Buckenham Hall School
in Suffolk and the Kimbolten School Biomass Heat plant in
Cambridgeshire. Equitix ESI Finance Limited ("Equitix") through a
special purpose company provides REACT with access of up to GBP5
million of committed project finance from the Green Investment Bank
and a number of institutional investors. The Company, sold the
Culford and Kimbolten projects into this special purpose company
owned by Equitix and the Company, for agreed consideration. The
Company owns 30% of this special purpose company and receives
development and on-going management fees from it.
Wind Electricity Generation
In Ireland the group is currently operating a cash generating
800kW wind turbine in County Cork. This plant was part financed by
AIB Bank plc and has a 15 year Power Purchase Agreement with
Viridian Energy Limited.
The group has also received planning permission to construct
seven additional single wind turbine projects in Ireland.
Planning for the 12.5MW Altilow Windfarm project in County
Donegal was refused by the Irish Planning Authority in October
2014.
Final Results to 30 June 2014
The Company has planned to issue its final results for the year
to 30 June 2014 at the end of November. Due to the uncertainty
surrounding its financial position the Board is unable to conclude
on the going concern position of the Company at this time. The full
year results will not be issued until clarity is achieved on the
financial position of the Company.
Funding and suspension
The Company announced on 24 June 2014 that it had raised GBP1.5
million by way of a secured loan note issued to existing and new
investors. The purpose of the loan note was to fund REACT's ongoing
development and working capital requirements. In the past, the
Company has been successful in obtaining the capital necessary to
meet its obligations; however, there can be no assurances that the
Company will be able to continue to raise the sufficient funds
needed for working capital until such time as the operations can
provide positive cash flow and discussions in relation to Enfield
have been positively concluded.
In the absence of new funds being raised from new investors, the
Company will be reliant on the financial support of its existing
shareholders and creditors to enable it to continue to trade.
Whilst the Company is continuing to explore funding options,
until a resolution can ultimately be reached which would allow
further funding to be secured for the current and future working
capital needs of the Company, trading on AIM in the ordinary shares
of REACT has been suspended. The Company will maintain a dialogue
with Foresight and will separately continue to explore all
financing and strategic options open to it. Trading in the shares
will remain suspended pending clarification of the working capital
position of the Company.
Further announcements will be made in due course.
- Ends -
For further information:
REACT Energy plc +353 (0)21 483 9104
Gerry Madden, CEO, Brendan Halpin, CFO
Shore Capital - Nomad & Broker +44 (0)20 7408 4090
Pascal Keane / Anita Ghanekar
+44 (0)7747 788
Yellow Jersey PR Limited - Public Relations 221
Dominic Barretto / Anna Legge
This information is provided by RNS
The company news service from the London Stock Exchange
END
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