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Conditional Sale of Turbines and Settlement of Major Creditors
IPSA GROUP PLC
(Incorporated and registered in England and Wales)
(Registration Number 5496202)
AIM Share Code IPSA ISIN GB00BOCJ3F01
JSE Share Code IPS ISIN GB00BOCJ3F01
Conditional Sale of Turbines and Settlement of Major
Creditors
IPSA Group PLC (AIM:IPSA) (“IPSA”), the developer, owner
and operator of power generation capacity in southern
Africa, announces that it has agreed to the conditional
sale of its two remaining Siemens Westinghouse 701 DU
turbines (ex Fiat Avio TG50D5) (the “Turbines”) to
Rurelec PLC (“Rurelec”).
Rurelec, the AIM-quoted owner and operator of power
generation assets in Latin America, will pay a total
consideration of approximately GBP16.1 million (USD25
million), of which approximately GBP11.9 million will
comprise the initial consideration (the “Initial
Consideration”), and the balance of approximately GBP4.2
million will be deferred on terms set out further below.
Structure of the Consideration
The Initial Consideration of approximately GBP11.9
million is to be funded by the allotment and issuance of
95,483,871 Rurelec shares of 2 pence each (the “Rurelec
Shares”) at an issue price of 12.5 pence per Rurelec
Share (the “Issue Price”), as follows:
8,000,000 Rurelec Shares are to be placed with
Sterling Trust Limited (“Sterling Trust”), with the
GBP1m cash consideration payable within 30 days to
IPSA. The funds are to be used to pay down IPSA’s
existing outstanding trade creditors and used to fund
its immediate working capital.
78,978,843 Rurelec Shares are to be applied to
discharge the majority of IPSA’s key creditors
including, inter alia, Bluestone Securities Limited
(“Bluestone”), Independent Power Corporation plc
(“IPC”) and Sterling Trust. As a result, creditors,
holding approximately GBP9.9 million of outstanding
loans, have each agreed to accept Rurelec Shares and
cancel their loans to IPSA in full, subject to their
Rurelec Shares being duly admitted to trading on AIM.
Included in these creditors are amounts due to
Bluestone of approximately GBP6.3 million – Sterling
Trust has agreed with IPSA and Rurelec to receive
50,720,316 Rurelec Shares at the Issue Price, and has
separately undertaken to IPSA to discharge IPSA’s
total debt to Bluestone.
8,505,208 Rurelec Shares are to be issued to IPSA
directly, and will in due course be placed for cash
subject to orderly market arrangements with Rurelec’s
broker.
The balance of the consideration, amounting to
approximately GBP4.2 million will be paid in cash on the
earlier to occur of, amongst other things: (i)
commencement of commercial operation of the Central
Illapa 255 MW open cycle greenfield gas fired power plant
proposed to be constructed by Rurelec in Mejillones,
Chile; (ii) the elapse of 30 days following receipt by
Rurelec of funds in respect of its compensation claim
against the Government of Bolivia; and (iii) 10 June
2015.
Key Terms
The Turbines acquisition agreement is conditional upon
the Rurelec Shares being admitted to trading on the AIM
Market of the London Stock Exchange (“Admission”).
Admission is expected to take place on or before 14 June
2013. Once admitted to trading, the transaction will not
be capable of being rescinded but title to the Turbines
will not pass to Rurelec until after IPSA has delivered
the Turbines for shipment and following notification that
Rurelec is ready to receive them.
Pending transfer of title, Rurelec will be granted a
pledge under Italian law secured over the Turbines to
protect its interest up to the value of the Initial
Consideration and Rurelec will also reimburse IPSA for
the cost of insurance of the Turbines pending delivery to
Rurelec. Under the terms of the acquisition agreement,
IPSA undertakes to procure the release of any
encumbrance, which its remaining substantial creditor,
Turbocare, may have through the settlement of its
indebtedness to Turbocare, which is the subject of
ongoing negotiation.
Working Capital
Currently, IPSA has significant indebtedness and is
reliant on the continuing co-operation of its creditors.
In particular the Bluestone loans totalling approximately
GBP6.3 million need to be repaid on or before 27 June
2013.
As a result of this sale, and following Admission, IPSA’s
indebtedness will be significantly reduced by
approximately GBP10.9 million (including the Bluestone
indebtedness).
However, IPSA’s working capital will remain dependent on
the continuing support of its key remaining creditors, in
particular Turbocare and IPSA’s salary creditors. IPSA
is in constructive discussions with Turbocare to ensure a
smooth transfer of the Turbines and to reduce its overall
indebtedness. IPSA’s salary creditors, being its
directors and company secretary, are owed approximately
GBP1.8m in aggregate. Of this total, a small amount will
be payable to them immediately. However, the majority of
these unpaid salaries will not be become payable until
the earlier of the date that IPSA has sufficient funds or
31 May 2014.
IPSA will for the time being retain a quantity of other
equipment ancillary to the Turbines, which it intends to
sell by separate negotiation to realise additional
commercial benefit. IPSA also owns the Newcogen plant
which, although operating below full capacity, continues
to run at good levels of performance and has improved its
profitability and cash generation through short term
steam contracts.
Related Party Transactions
The involvement of Sterling Trust as a substantial
shareholder in both IPSA and Rurelec, owning 29.57 per
cent. of IPSA and 50.01 per cent. of Rurelec, renders
this sale a related party transaction for the purposes of
Rule 13 of the AIM Rules for Companies. As mentioned
above, Sterling Trust has also entered into an agreement
with IPSA to discharge IPSA’s total debt of approximately
GBP6.3 million to Bluestone in consideration for the
receipt of 50,720,316 Rurelec Shares at the Issue Price.
Sterling Trust will also receive a further 16,193,905
Rurelec Shares at the Issue Price in consideration for
discharging IPSA’s debt of approximately GBP2 million to
Sterling Trust and IPC. One of the creditors to whom IPSA
owes in aggregate just under GBP0.2 million has confirmed
that they intend to accept 1,574,334 Rurelec Shares at
the Issue Price in consideration for the discharge of
their debt. However, they are not expected to be able to
sign their creditor letters until later today. If they
have not signed their letters by the date of Admission of
the Rurelec Shares, Sterling Trust has undertaken to
discharge IPSA's debt due to them and Rurelec, IPSA and
Sterling Trust have agreed that Sterling Trust will
receive the same number of Rurelec Shares at the Issue
Price. Finally, in consideration for the discharge of
GBP750,000 of debt due from IPSA to IPC (offset against a
debt due from IPC to Peter Earl), Peter Earl will receive
6 million Rurelec Shares at the Issue Price.
Peter Earl and Elizabeth Shaw are directors of both IPSA
and Rurelec and, having duly declared their interests in
the transaction, did not count towards the quorum or vote
in respect of the resolutions of the IPSA board of
directors to approve these transactions. The Independent
Directors of IPSA, having consulted with IPSA's nominated
adviser, consider that the terms of the transactions are
fair and reasonable insofar as its shareholders are
concerned.
IPSA’s Chairman, Richard Linnell, commented: “Reaching an
agreement to sell the Turbines allows IPSA to progress
its business in southern Africa once released from its
significant burden of debt. It is a major step forward
for IPSA, although working capital will remain tight for
the foreseeable future.”
London
10 June 2013
For further information contact:
Phil Metcalf, CEO +44 (0)20 7793 5615
IPSA Group PLC
John Llewellyn-Lloyd / Harry +44 (0)20 7456 9191
Stockdale
Execution Noble & IPSA Ltd
Harry Ansell / James Joyce +44 (0)20 7220 1666
W H Ireland Ltd
Riaan van Heerden, +27 (0)21 887 9602
PSG Capital (Pty) Ltd
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