Eqtec Regulatory News (EQT)

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Prior to its publication, certain information in this announcement was deemed to constitute inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

17 July 2017

EQTEC PLC

("EQTEC", "Company" or the "Group")

Potential acquisition of EQTEC Iberia

Suspension of trading of Ordinary Shares on AIM

Extension of the Altair Convertible Loan Notes

Entry into convertible loan agreement

EQTEC PLC (AIM: EQT), the technology solution company for waste gasification to energy projects, is pleased to announce that it has entered into non-binding heads of terms ("Heads of Terms") with Inava Ingenieria de Analisis SL ("Inava") and the Company's majority shareholder EBIOSS Energy SE ("EBIOSS") (together the "Sellers"), pursuant to which EQTEC will acquire the entire issued share capital of EQTEC Iberia SRL ("EQTEC Iberia") (the "Proposed Transaction").

In addition, the Company also announces that it has reached agreement with Altair Group Investment Limited ("Altair") to extend the repayment of the £2.0 million, 7.5% Convertible Secured Loan Notes ("CSLNs") issued by the Company, from 14 July 2017 to the earlier of three business days following the completion of the Proposed Transaction ("Completion") or 31 October 2017.

The Company and an existing shareholder (the "Lender"), have also entered into an agreement pursuant to which the Lender has agreed to make an interest free unsecured loan of £300,000 to EQTEC (the "Convertible Loan"). Such loan will convert into new Ordinary Shares on the earlier of the date of Completion and 31 October 2017. The Company will also grant warrants over Ordinary Shares to the lender at the time of conversion of the Convertible Loan.

Overview

· EQTEC Iberia, which is the owner of EGT, a proprietary gasification technology, is a leading player in the gasification sector and the Proposed Transaction will provide the Company with a strong pipeline of waste gasification to energy projects in the UK

· The Proposed Transaction, will constitute a related party transaction and a reverse takeover ("RTO") under the AIM Rules for Companies (the "AIM Rules")

· In accordance with Rule 14 of the AIM Rules, trading in the Company's ordinary shares of €0.001 each ("Ordinary Shares") on AIM will be suspended from 7.30 a.m. today, 17 July 2017

· The Proposed Transaction, is conditional on, inter alia, completion of due diligence, entry into definitive documentation, the approval of the Company's shareholders and EQTEC raising sufficient funds to provide working capital for the enlarged group as well as to fund the enlarged group's pipeline of projects

· The EQTEC board on Completion is expected to include representatives from EQTEC, EBIOSS and EQTEC Iberia, together with additional independent Non-Executive Directors

· Pursuant to the Heads of Terms, the Sellers have provided the Company with a period of exclusivity until 4 October 2017

· Agreement has been reached with Altair to extend repayment of the CSLNs

· Agreement has been reached with the Lender for the provision of the Convertible Loan

o The Convertible Loan is unsecured and non-interest bearing and will automatically convert into new Ordinary Shares ("Conversion shares") on the earlier of the date of Completion and 31 October 2017

o Warrants over new Ordinary Shares to be granted to the Lender on conversion of the Convertible Loan

Further details on the Proposed Transaction

The Company and the Sellers have entered into the Heads of Terms, pursuant to which the Company will, subject to, inter alia, the completion of due diligence, the entry into definitive documentation and shareholder approval, acquire the entire issued share capital of EQTEC Iberia, through the issue of new Ordinary Shares to the Sellers ("Consideration Shares"). The number of Considerations Shares to be issued is still to be agreed but is expected to be a minimum of, in aggregate, 556 million new Ordinary Shares.

The Proposed Transaction, if completed, will therefore constitute a RTO under the AIM Rules and in accordance with Rule 14 of the AIM Rules, will require the publication of an AIM admission document setting out, inter alia, details of the Proposed Transaction ("Admission Document") and approval of shareholders of the Company in a general meeting to be convened by the Company. In addition, as EBIOSS is a substantial shareholder in the Company, the Proposed Transaction will also represent a related party transaction pursuant to Rule 13 of the AIM Rules.

In accordance with Rule 14 of the AIM Rules, trading in the Ordinary Shares on AIM will be suspended from 7.30 a.m. today (17 July 2017) until either the publication of the Admission Document or confirmation is given that the Proposed Transaction is no longer proceeding. Whilst the Company will seek to publish the Admission Document as soon as possible, the timing of this is still uncertain.

Pursuant to the Heads of Terms, the Sellers have provided the Company with a period of exclusivity until 4 October 2017 to complete negotiations with the Sellers, due diligence on EQTEC Iberia and documentation relating the Proposed Transaction. The Proposed Transaction is also expected to be conditional on, inter alia, EQTEC raising sufficient funds, which is expected to comprise a placing of new Ordinary Shares ("Placing"), to provide working capital for the enlarged group as well as fund the enlarged group's pipeline of projects.

Accordingly, shareholders are advised that there can be no certainty that the discussions between the parties will lead to any agreement concerning the Proposed Transaction or as to the timing or terms of any such transaction and there can be no assurance that, even if agreement is reached, the Proposed Transaction will be completed. Further updates will be provided to shareholders in due course.

Rationale for the Proposed Transaction

EQTEC Iberia is a Spanish technology and engineering company which is a subsidiary of EBIOSS, a Spanish waste elimination group quoted on Mercado Alternativo Bursátil ("MAB"), the alternative market of the Spanish Stock Exchanges. EBIOSS is also a 50.03% shareholder in the Company. "EGT" the proprietary gasification technology owned by EQTEC Iberia, is an advanced conversion technology which converts biomass and waste into a synthetic gas which can power a gas turbine to generate electricity.

In the year ended 31 December 2016, EQTEC Iberia had revenues of €2.8 million and a loss before tax of €1.4 million and as at 31 December 2016 had total assets of €4.1 million and net assets of €1.1 million.

Accordingly, the directors of EQTEC (the "Directors") believe that combining EQTEC and EQTEC Iberia will create a leading company with proprietary advanced gasification technology which is used in industrial size power plants to convert waste into synthetic gas to generate electricity. Together, the enlarged business will have a highly experienced senior management team with knowledge of energy markets, waste supply and fuel sources, project development engineering and clean technologies with a pipeline of projects as set out below.

The Directors believe that the enlarged group will have one of the most advanced modular gasification technologies available on the market which offers higher efficiency compared to most other power generation technologies. As a result, the Directors believe that this increased efficiency will enable EQTEC to offer more attractive gate fees than its competitors, thereby providing it with a competitive advantage.

The EQTEC board on Completion is yet to be agreed, but is expected to include representatives from EQTEC, EBIOSS and EQTEC Iberia, together with additional independent Non-Executive Directors.

On 10 January 2017, the Company stated "in order to avail of the opportunities presenting themselves, particularly in the energy from waste market in the UK, a strategic partnership with a larger group such as EBIOSS Energy with its own proprietary technology is the best path forward. The Board believes that the existing collaboration between the parties and the existing cooperation in relation to project pipeline in the UK, means that it makes strategic sense to have EBIOSS Energy as the majority shareholder in REACT (now EQTEC), both financially and operationally". The Directors maintain that this is still the position and the announcement today is the logical next step in the process commenced earlier in the year.

The Directors are also very encouraged to receive the support of Altair for the Proposed Transaction through their agreement to the extension of the repayment date of the CSLNs as detailed below.

Pipeline of Projects

The enlarged group is expected to have a substantial combined pipeline of projects in the UK and Croatia. EQTEC Iberia has recently announced progress with several gasification projects in the UK and it is the intention that as part of the Proposed Transaction, the contracts of these projects will be transferred to, and implemented by, EQTEC.

These projects include:

· Reliable Melton Hull and Reliable Seal Sands projects in which EQTEC Iberia will supply its patented gasification technology, EGT, as well as supervise the assembly and commissioning of the plant; and

· Zebec Energy project located in municipality of Usk, Wales in which EQTEC Iberia will provide a turnkey solution including, designing and supplying gasification technology and commissioning the plant.

EQTEC Iberia's pipeline also includes the Catfoss Newcastle and Renewables Hull projects in the UK and the agreement with the Croatian energy services company SENSE ESCO Ltd. for the supply of three gasification plants for the conversion of waste to be installed in Croatia as announced by EBIOSS, as a substantial shareholder of EQTEC Iberia, on MAB the Spanish Alternative Equity Market.

Extension of the Altair Loan Notes

The Company has also reached agreement with Altair to extend the repayment date of the CSLNs, which were due for repayment with accrued interest on 14 July 2017. The Company and Altair have entered into a standstill agreement whereby Altair has consented, inter alia, to extend the repayment date of the CSLNs from 14 July 2017 to the earlier of three business days following Completion and 31 October 2017 and has accordingly consented to the amendment of the loan note instrument .

During the period prior to the revised repayment date, the Company and Altair will seek to agree further changes to the terms of the CSLNs. In the event that Completion does not occur by 31 October 2017, all sums due under the CSLNs, including accrued interest, will be payable immediately, unless Altair and the Company have agreed new terms.

Convertible Loan

The Company and the Lender, who is an existing shareholder of the Company, have entered into an agreement pursuant to which the Lender has agreed to make a £300,000 loan to the Company on 20 July 2017. The Convertible Loan is unsecured and non-interest bearing. The Convertible Loan will convert into Conversion Shares on the earlier of the date of Completion and 31 October 2017 (the "Longstop Date"). Where the Convertible Loan converts on the date of Completion, the Conversion Shares shall be issued at a 10% discount to the price at which any such shares are issued to investors pursuant to the Placing (the "Placing Price"). Where the Convertible Loan converts on the Longstop Date, the Conversion Shares shall be issued at a 10% discount to the mid-market closing price of an Ordinary Share on the trading day immediately prior to the Longstop Date (the "Market Price").

On the date of conversion of the Convertible Loan the lender will also be granted warrants to subscribe for such number of new Ordinary Shares ("Warrants") as is equal to the number of Conversion Shares issued. The Warrants will be exercisable for a period of two years from the date of grant at a price of either 150% of the Placing Price or 150% of the Market Price, depending on the applicable conversion event.

Gerry Madden, Chief Executive Officer of EQTEC, said: "We are delighted to be taking this important step in the next stage of development of the business. It is a logical step to take after partnering with EBIOSS at the start of the year. A lack of domestic incineration and gasification capacity is forcing the UK to pay European incinerators to take our waste. Now, by using our best-in-class technology, we have an opportunity, once the transaction is concluded, to redirect this waste to our pipeline of UK projects, thereby becoming a leading player in creating electricity by converting waste into synthetic gas.

"We also greatly appreciate the support of Altair, our loan note holder, as we now look to the future with a common goal of realising the significant value that has been identified from combining with EQTEC Iberia." 

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