Eqtec Regulatory News (EQT)

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 £54,000 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 £5.2 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 £5 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 £1.5 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 -

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