Eqtec Regulatory News (EQT)

REACT Energy plc

("REACT" or the "Company")

Publication of Circular and Notice of Extraordinary General Meeting

Further to the announcement on 15 July 2015 in which it announced the Company's exit from examinership, REACT Energy plc (AIM:REAC), the energy infrastructure developer and operator which focuses on the production of clean energy in the UK and Ireland, announces that the circular relating to the Waiver of Rule 9 (the "Circular") is being sent to shareholders today, which sets out in more detail the background to the funding provided by the Concert Party and details of the Waiver of Rule 9 of the Takeover Rules. All capitalised terms in this announcement are as defined in the Circular.

The Circular contains a notice of the Extraordinary General Meeting (the "EGM") to approve the Whitewash Waiver. The General Meeting will be held at 11.00 a.m. on Friday 16 October 2015 at The Cork Airport Hotel, Cork, Ireland.

The Circular is available for inspection on the Company's website: www.reactenergyplc.com.

1. Background

The Company's shares were suspended from trading on AIM from 1 December 2014 at the Company's request pending a clarification of the Company's financial position.

On 13 May 2015 the Company announced that it had made a petition pursuant to the Act to the High Court in Ireland to appoint an Examiner to the Company. An Examiner was appointed by the Court on 20 May 2015.

The decision to seek examinership followed the suspension of funding discussions with a strategic investor which resulted from a dispute with the landlord on the Enfield site, related difficulties in financing the repowering of the Newry site and actions taken by certain creditors of REACT and related companies.

An Independent Accountants' Report from Grant Thornton on REACT and related companies concluded that it was possible for a sustainable and profitable business to emerge from the Examinership process based on a restructuring of REACT and related companies. Altair, an existing loan note holder supported REACT throughout the Examinership process, and together with a third party strategic investor indicated that they would be prepared to invest in REACT to facilitate a scheme of arrangement for the restructured business.

REACT also announced that as part of the Examinership process it had issued a loan note to Altair for up to EUR 500,000 ("Further Altair Loan Note"). The proceeds of the loan note were used to fund the Examinership process.

The High Court approved the Scheme of Arrangement on 14 July 2015 which was followed by the exit of the Company from the Examinership process on 25 July 2015, the Effective Date. The Company announced on the 15 July 2015 the issue of £1,000,000 (before expenses) of a Secured Loan Facility to fund on-going working capital requirements. 

Following the approval of the Scheme creditors were issued with 37,470,972 new Ordinary Shares in the Company at a price of £0.11 each (being the closing price of an Ordinary Share on the 1 December 2014, the date of suspension of the Company's Ordinary Shares from AIM), which after issue amounted to circa 55% of the enlarged issued share capital. This was as a result of the conversion of €5.7 million of debt into equity. The 37,470,972 new Ordinary Shares were issued to the relevant creditors and are held by a Trustee on their behalf. The Trustee has entered into a 'Lock-in' restriction on behalf of the creditors, whereby they are unable to dispose of the new Ordinary Shares that were received pursuant to the Scheme for a period of one year from the date of Admission. The new Ordinary Shares were admitted to trading on AIM on 31 July 2015.

2. Key Elements of the Funding Proposals

The Company had been actively engaged in discussions with potential providers of finance including with EcoFinance a group which sources finance for renewable energy projects. As announced on 8 June 2015, the Company signed a conditional facility letter for the Secured Loan Facility with EcoFinance the drawdown of which was subject to certain conditions precedent being met under the Loan Facility, the Scheme being approved by shareholders and creditors and ultimately the High Court.

Summary of the EcoFinance proposal

EcoFinance is a privately owned company registered in England. It was incorporated in May 2015 as a special purpose entity specifically for the purposes of entering into the proposed REACT transaction. It enjoys relationships with a number of co-investment partners both in the UK and globally.

The Secured Loan Facility comprises a five-year term loan of £1,000,000 at 15% per annum fixed rate of interest, payable monthly in arrears. The net proceeds of the Secured Loan Facility will be utilised for corporate development and general working capital purposes. The Secured Loan Facility is to be repaid by way of a bullet repayment of capital (and any accrued interest) on before the anniversary of 60 months from the date of drawdown of the Secured Loan Facility.

Equity Kicker: an exercisable right is attached to the Secured Loan Facility whereby 60 days from the drawdown under the Secured Loan Facility, EcoFinance has the right to an amount of fully paid new Ordinary Shares in the Company. The monetary value of the exercisable right will be determined by the following formula:

· 9 million x (Average Share Price minus 10p), where the Average Share Price is the arithmetic average of the Company's closing share price on each of the 60 days following re-commencement of trading in the Company's shares. The value of this right has a cap of £600,000 and a floor of £200,000. The maximum number of shares issuable under this mechanism is 3,529,412 new Ordinary Shares.

· 35,300,000 Warrants have been issued to Alchemy Capital, a company related to the EcoFinance on drawdown of the Secured Loan Facility, subject to any necessary shareholder and other regulatory requirements. These Warrants entitle the holders to subscribe for new Ordinary Shares at an exercise price of 10p per share. The Warrants are assignable and capable of being exercised for a period of seven years from the date on which the Secured Loan Facility is drawn down.

Summary of Altair financing

Altair provided funding to REACT by way of a loan agreement to finance the Examinership process, which was announced on 13 May 2015. The existing secured debt held by Altair, comprising the 9% Secured Loan Note of £1.5 million issued in 2014 and the Examinership financing facility of €500,000, was refinanced by way of a new 7.5% £2 million Convertible Secured Loan Note ("CSLN") and is secured by the same security package granted in favour of EcoFinance. This is governed by an inter creditor deed under which the SLF security plus interest and costs shall rank in priority to the CSLN security plus interest and costs. Under the terms of the CSLN, Altair has the right to convert up to £1 million into new Ordinary Shares at £0.10p. Altair has also been granted an exercisable right in the form of an equity kicker of up to 3,529,412 new Ordinary Shares on the same basis as EcoFinance as set out above.

The Company has also issued 3,150,000 Warrants to Origen Capital Partners LLP, an entity related to Altair, on drawdown of the SLF. These Warrants entitle the holders to subscribe for new Ordinary Shares at an exercise price of £0.10 per share. These warrants are assignable and capable of being exercised for a period of seven years from the date on which the SLF is drawn down.

EcoFinance and Altair have entered into a separate agreement in relation to financing provided to the Company whereby EcoFinance has granted to Altair an option to acquire the benefit and security of the £1,000,000 SLF. This is a one-year option and the price of the option is a 5% premium on the capital amount.

3. Use of Proceeds

The net proceeds from the Fundraising will be used to fund general working capital across the Group. The Directors believe that the Fundraising will provide the Company with adequate resources to develop a plan to enhance the value of its principal assets. Development of, and revenue generation from, the principal assets of the Company will require additional financing which is expected to be sourced in due course.

4. Current and Potential Shareholding of the Concert Party

The Concert Party currently holds 204,545 Ordinary Shares representing 0.3 per cent. of the Ordinary Shares currently in issue. As described above, as a result of the Refinancing Documents, it is expected that the Concert Party, could potentially hold up to 55,713,369 new Ordinary Shares in the Company, representing 45.06 per cent. of the Enlarged Share Capital (as enlarged pursuant to the Refinancing Documents).

(1) Farmers conversion of £1.2m at 11 pence per share

5. Dispensation from Rule 9 of the Takeover Rules

Rule 9

Under Rule 9 of the Takeover Rules, if any person, or persons acting in concert, acquire securities representing 30% or more of the voting share capital of a relevant company, then such person, or, in the case of persons acting in concert, such one or more persons as the Panel may direct, will be obliged to make an offer to the holders of each class of equity share capital of the company and to the holders of each other class of transferrable voting securities of the company in accordance with Rule 9, unless that obligation has been waived by the Panel.

Dispensation

As a result of the Concert Party entering into the arrangements pursuant to the Refinancing Documents (which could result in the Concert Party holding more than 30 per cent of the Company's enlarged issued share capital), the Takeover Panel has granted a conditional waiver that will, if the condition is satisfied, release the Concert Party from an obligation to make a general offer in accordance with Rule 9 of the Takeover Rules and will allow the members of the Concert Party to increase their aggregate shareholdings to a maximum of 45.06 per cent. of the Company's issued share capital (as enlarged pursuant to the Refinancing Documents) without having to make such an offer.

The Waiver is conditional on:

(i) the passing of the Whitewash Resolution by Independent Shareholders at the Extraordinary General Meeting. Voting on the Whitewash Resolution will be put to a poll, as required by the Takeover Rules; and

(ii) the approval by the Panel of a circular to shareholders in accordance with the whitewash guidance note of Rule 9 in the Takeover Rules. This Circular has been so approved in this respect only.

The Whitewash Resolution is subject to the approval of a simple majority of the Independent Shareholders on a poll and each Independent Shareholder will be entitled to one vote for each Ordinary Share held. Each member of the Concert Party has undertaken that it will not vote on the Whitewash Resolution in respect of its existing Ordinary Shares.

The Concert Party pursuant to the Refinancing Documents could hold Ordinary Shares in the Company which carry more than 30 per cent. but not more than 50 per cent. of the Company's voting share capital and, in such circumstances, any increase within any 12 month period of more than 0.05% in the number of Ordinary Shares held by the Concert Party will be subject to the provisions of Rule 9.

6. Effect of not approving the resolution

Should Independent Shareholders not vote in favour of the Resolutions set out in the Appendix to this Circular, the Directors believe that the future sustainability and viability of the business is at serious risk in that EcoFinance and/or Altair have the right to call in their respective loans. In light of the recent history and financial challenges faced by the business the support of EcoFinance and Altair are crucial to the progress of the business enterprise.

Warrants with a maximum subscription value of £4.7 million have been issued to the Concert Party and the exercise of these warrants is dependent on the approval of the Whitewash Resolution by Independent Shareholders. The Warrants will entitle the holders to subscribe for new Ordinary Shares at an exercise price of 10p per share. The Warrants are assignable and capable of being exercised for a period of seven years from the date on which the Secured Loan Facility was drawn down (being 25 July 2015). Exercise of the Warrants will depend on the Company's share price being above the warrant exercise price during the exercise period. There are no guarantees that Warrantholders will choose to exercise their rights and subscribe for new Ordinary Shares.

The subscription proceeds from the Warrants (if exercised) would be for the Company's benefit and are intended to fund the medium term development of the Company and the Group.

- Ends -

For further information:

About REACT

REACT Energy plc is committed to operating clean electricity and heat generation plants in the UK and Ireland.

The Company identifies, builds owns and operates plants and possesses significant knowledge of energy markets, clean technologies, fuel sources, project development, project finance and project delivery.

REACT currently has four operational clean energy plants generating revenue from the sale of electricity and heat.

The generation of clean electricity and heat from sustainable sources has the potential to address the key energy challenges of energy security and carbon commitment and provide strong returns on capital employed.

The company is listed on AIM and trades as REAC.www.reactenergyplc.com