25 Jul 2007 07:00
European Utilities Trust PLC Reconstruction and Change of Investment Mandate
Since the Company's launch in 1994 the Company's investment policy has been to invest in European utility companies. The sector has, over the period, generally proved to be a profitable area in which to invest but has also experienced considerable change, including significant consolidation with a resultant contraction of the Company's investable universe. The Board and Premier Fund Managers Limited ("Manager" or "Premier") believe that a significant refocusing of the investment policy will both enhance the potential for future investment returns and appeal to a broader investor universe.
Change of Investment Policy
Having considered the matter carefully with Premier, the Board has determined that the Company's new investment policy should be to invest principally in companies that produce energy from renewable sources and/or will be the beneficiaries of the expected growth of the sector. Premier has already identified a stock universe of over 260 companies in this sector and anticipates that, with increasing political focus on climate change together with the finite supply of fossil fuels, investment opportunities in the sector will expand rapidly. As part of this new investment policy, the Company will be able to invest up to 30% of its gross assets into unquoted investments although initially a lesser exposure is anticipated.
By changing the Company's investment policy to permit greater exposure to the renewable energy sector, the Company will be able to benefit from Premier's considerable expertise in the sector, gained through the management of Renewable Energy Generation Limited, one of the largest independent renewable companies in the UK. The Board considers that Premier are well positioned to produce superior investment returns in the area as a consequence of the knowledge derived from the operation of a renewable energy company and from a thorough understanding of the economics of renewable energy projects. Additionally because through the management of REG, Premier are the beneficiaries of a significant number of potential renewable energy investments
Reconstruction
Given the change in the Company's investment policy the Board believes that it is also appropriate to review the Company's corporate structure. Accordingly the board proposes that the Company should undertake a reconstruction under S. 110 Insolvency Act 1985 under which Ordinary Shareholders will exchange their shares for shares in a New Guernsey incorporated company ("Newco") and Zero Coupon Preference Shareholders for shares in a subsidiary of Newco (ZCPCO).
The Board expects that some Ordinary and ZCP Shareholders will not, with the change of investment policy; wish to continue with their investment in the Company. The Board therefore proposes that:
(a). ZCP Shareholders will be able to elect to receive cash for all of their shares at a price which on the calculation date for implementing the reorganisation, would represent a gross redemption yield equivalent to a premium of 50 bp over the Treasury 4.25% 2011 gilt. As of 19 July 2007 this would represent a gross redemption yield of 5.27 %.
(b). Ordinary Shareholders will be able to elect to receive cash for 35% of their shares. The amount that the Ordinary Shareholders will receive will be determined by calculating the net asset value of the Ordinary Shares, (valuing stocks held in the portfolio on a bid basis and otherwise calculated in accordance with the Company's normal accounting policies) and then adjusting this amount to reflect the value of the premium payable on the ZCP Share in excess of their accrued entitlement. If this adjustment results in a reduction in the net asset value by more than 2.5% then the amount payable will be the adjusted net asset value. If the adjusted results in a reduction in the net asset value of less than 2.5% then the amount payable to Ordinary Shareholders will be a discount of 2.5% to that net asset value.
The reconstruction will be subject to approval from both Ordinary and ZCP Shareholders in class and general meetings.
Fundraising
Newco will at the same time look to raise money through a placing of up to ‚£65m new ordinary shares.
Timetable
The Company currently expects to publish documents in relation to the transaction in September 2007 and to complete the transaction around November 2007.
The Company has appointed Fairfax I.S. PLC to advise on the reconstruction.
Enquiries:Andrew Whalley 01483 400425 Premier Fund Managers Ltd Nigel Sidebottom 01483 400465 Premier Fund Managers Ltd Paul Richards 020 7598 5368 Fairfax I.S. PLC 25 July 2007
EUROPEAN UTILITIES TRUST PLC