IGAS.L Regulatory News (IGAS)

28 Nov 2007 07:30

KP Renewables PLC28 November 2007 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO ORFROM CANADA, AUSTRALIA OR JAPAN KP Renewables plc (the "Company" or "KPR") Proposed acquisition of Island Gas Limited by means of a Scheme of Arrangement under section 425 of the Companies Act 1985 Admission to trading on AIM Waiver under Rule 9 of the Takeover Code Change of name to Island Gas Resources plc ("IGas") Share Consolidation Appointment of Directors and Notice of Extraordinary General Meeting The Board of KP Renewables is pleased to announce that we have reached agreementon the terms of a recommended proposal whereby the Company will acquire theentire issued and to be issued share capital of Island Gas Limited ("IGL"). IGLis a coal bed methane ("CBM") company seeking to produce and market methane gasfor industrial and domestic use from virgin coal seams within its onshore UKacreage. Further details about IGL are given below. In the Company's circular to Shareholders, on 16 March 2007, it was stated thatthe Board was giving consideration to a significant further fund raising tosupport investment in a sizeable project or to the acquisition of anotherbusiness. On 2 November 2007 the company announced that it had raised £900,000by the issue of loan notes (the "Loan Notes") in order to progress its statedstrategy. The Board view IGL as an attractive opportunity due to the scale,quality of its assets and its management. Pursuant to the terms of the Acquisition, IGL Shareholders will receiveConsideration Shares with an aggregate value of £50 million at the PurchasePrice. The Acquisition is to be implemented by means of a scheme of arrangement underSection 425 of the Act. Pursuant to the AIM Rules, the Acquisition willconstitute a reverse takeover. It is, therefore, subject to Shareholder approvalwhich will be sought at an Extraordinary General Meeting to be held at 12.00mid-day on 27th December at the offices of Morrison & Foerster MNP, 7th Floor,CityPoint, One Ropemaker Street, London EC2Y 9AW. The Acquisition is also a "qualifying event" for the purposes of triggering themandatory conversion of the Company's outstanding Loan Notes which will convertinto a total of 81,818,150 Existing Ordinary Shares (equivalent to 1,636,363 NewOrdinary Shares) subject to the completion of the Acquisition and the passing ofthe Resolutions. The proposed Acquisition constitutes a material change to the Company's existingoperations and will also result in the disposal of the Existing Projects toBlenheim Energy Limited, a third party purchaser. For this reason the Company isalso convening a meeting of the eligible creditors who are party to the CVA tovary and discharge the CVA arrangements and approve the disposal of the ExistingProjects. The creditors meeting will take place at 11.45 am on the same date andat the same place as the Extraordinary General Meeting. In view of the size of the transaction in relation to KPR, the Acquisitionconstitutes a reverse-takeover of IGL by KPR under Rule 14 of the AIM Rules andis therefore conditional on the consent of the KPR Shareholders being given atan extraordinary general meeting. The proposals are also conditional on theconsent of KPR Shareholders to the waiver of the obligation that would otherwisearise from the IGL Shareholders to make an offer for KPR under Rule 9 of theTakeover Code. Such consents will be sought at the EGM, notice of which will beincluded the AIM Admission Document. The directors of KPR, who have been so advised by Libertas Capital CorporateFinance Limited, consider the terms of the proposals to be fair and reasonable.In providing its advice, Libertas Capital Corporate Finance Limited has takeninto account the commercial assessment of the directors of KPR. The directors of KPR consider that the Resolutions to be proposed at the EGM arein the best interests of KPR and Shareholders as a whole. Accordingly, the KPRdirectors intend unanimously to recommend that Shareholders vote in favour ofthe Resolutions to be proposed at the EGM, as they have irrevocably undertakento do in respect of their own beneficial holdings amounting to, in aggregate,4,518,500 Existing Ordinary Shares (representing approximately 11.24 per cent.of the existing issued share capital of KPR). An AIM Admission Document relating to KPR and the Enlarged Group has beenpublished today and is available electronically on KPR's website atwww.kprplc.com. The AIM Admission Document has been sent to Shareholders. It isexpected that the suspension of trading of the Existing Ordinary Shares on AIMwill be lifted shortly. Board Changes It is proposed that Francis Gugen, Andrew Austin and Brent Cheshire (the"Proposed Directors") will join the Board of the Company; Peter Redmond andRichard Armstrong will remain on the board as Non-Executive Directors; and JohnBryant will step down as Non-Executive Chairman and be appointed asNon-Executive Director. David Lindley has tendered his resignation, which becameeffective on 27 November 2007. The Board would like to express its thanks to DrLindley for his contribution to the Company's turnaround. For further information contact KP Renewables Plc John Bryant, Chairman Tel +44 (0) 207 332 2200 Peter Redmond, Director Tel +44 (0) 207 332 2200 Libertas Capital Jakob Kinde, Stephen Pickup Tel +44 (0) 207 569 9606 Website www.kprplc.com Island Gas Limited c/o Gavin Anderson Ken Cronin/Kate Hill Tel +44 (0) 207 554 1400 Notes to Editors Island Gas Resources Founded in 2003, Island Gas Limited (IGL) is one of the UK's leading onshore gascompanies. Island Gas Limited was set up to produce and market the methane gaswhich is found in seams of coal. The coal seam both generates and traps the gas,which can be extracted by drilling horizontally into the seam and collected foruse as fuel. Coal Bed Methane is exactly the same as other forms of natural gas,and is used to provide both industrial and domestic power and has the potentialto be an important new source of energy for the UK. The CBM industry in the UKis in its infancy, but with the continuing decline in natural gas from the NorthSea, it is likely to become an increasingly attractive alternative potentialsource of gas. CBM has become a significant source of gas both in North Americaand Australia over a relatively short period of time during which both have seenan almost exponential growth in CBM production Longer-term Island Gas Limited (IGL) was founded in 2003. IGL has ownership interests in theUK ranging from 20% to 50% in eight Petroleum and Exploration DevelopmentLicences (PEDLs), 100% ownership of two methane drainage licences (MDLs) and 50%ownership of three off shore blocks under one seaward petroleum productionlicence (SPPL) The Licences cover a gross area of approximately 1,000 sq km andaccording to experts, who have reviewed seven of the nine licences, the mid caseestimate of IGL's share of Gas Initially In Place (GIIP) is893billion cubic feet(bcf), or 140milllion barrels of oil equivalent. IGL's areas of operation areCheshire (around Warrington), Yorkshire (around Goole), Staffordshire (aroundNewcastle-under-Lyme) and the North Wales coast (towards Prestatyn). Background to IGL IGL is a coal bed methane ("CBM") company seeking to produce and market methanegas for industrial and domestic use from virgin coal seams within its onshore UKacreage. This requires acreage to be explored, appraised and developed and inconnection with which Island also provides technical and other related services. CBM is a natural gas found in seams of coal. However, whereas in a natural gasoffshore reservoir, such as sandstone, the gas is held in the void spaces withinthe rock, in onshore coal the gas is principally retained on the surface of thecoal within the micropore structure. The CBM industry in the UK is in its infancy, but with the continuing decline innatural gas from the North Sea, it is likely to become an increasinglyattractive alternative potential source of gas. CBM has become a significantsource of gas both in North America and Australia over a relatively short periodof time during which both have seen an almost exponential growth in CBMproduction. Through improvements in drilling and development techniques adoptedby a number of world renowned companies, CBM is now a competitive source of gas. IGL has ownership interests ranging from 20 per cent. to 50 per cent. in eightPetroleum and Exploration Development Licences ("PEDLs") and 50 per cent,ownership of three onshore blocks held under one seaward petroleum productionlicence ("SPPL") in the UK (the "Licences"). These Licences cover a gross areaof approximately 1,000 sq km and the risk weighted mid case estimate of IGL'sshare of Gas Initially in Place (GIIP) is 893 bcf, IGL's joint venture partnerthat holds the residual 50 per cent. to 80 per cent. ownership interests in theLicences is Nexen Exploration U.K. Limited, a subsidiary of Nexen Inc, a Torontoand New York Stock Exchange listed global energy company with a marketcapitalisation of approximately C$16bn ("Nexen"). When IGL became active in CBM, several factors began to change the potential forthe development of CBM in the UK: 1. Developments in Drilling Technology: The application of lateral drillingtechnology in coals, initially pioneered in the US, offers the opportunity forCBM developments to: • access more coal surface from the same mother bore well, thereby providing thepotential to access more coal at lower cost and to improve production andeconomics; and • with a much lower geographical footprint, address one of the hurdles todevelopment in the UK. Lateral wells of which many have been drilled in the US,offer the potential to reduce the number of surface locations by a factor of 10,when compared with vertical wells draining the same area. 2. Security of Supply concerns: The political outlook on oil, gas and coalprojects in the UK has recently changed to view such projects in a morefavourable light as a result of growing awareness of the UK's current relianceon energy from these sources in addition to the country's increasing dependencein imports of such energy. 3. Entrance of E&P Multi-national corporations to UK CBM: During this period,several large multinational E&P companies have formed partnerships with existingUK CBM players as IGL has done with Nexen. IGL's immediate objectives are to: • commence initial gas sales from CBM production from at least one property by the end of 2008; • secure routes to market with a focus on electricity generation and access to the gas network; • continue gathering data and production experience to allow a proportion of GIIP to be classified as "recoverable resource"; • fulfil well obligations on licences as necessary to secure ownership into upcoming second terms; and • apply for acreage, together with Nexen, in the recently announced 13th licensing round. Biographical information of the Proposed Directors is provided below. Mr Francis Gugen, Proposed Executive Chairman, aged 58 Francis Gugen is the found, majority owner and Executive Chairman of IGL.Francis has over thirty years oil and gas industry experience. Between 1982 and2000 he helped grow Amerada Hess in North West Europe, ultimately becoming CEO.He is a member of the CBI's Energy Policy and Economic affairs Committees. He iscurrently a Non-Executive Director, Vice Chairman of the Board and Chairman ofthe audit committee of Petroleum Geophysical Services ASA and a Non-ExecutiveDirector and member of the audit committee of the Britannia Building Society. MrGugen is also the non executive chair of Chrysaor Limited a new company focusedon developing North Sea oil and gas fields with equity investors Barcap andNatural Gas Partners IX, LP) and of Fraudscreen Limited a new financial servicesbusiness. Mr Andrew Austin, Proposed Chief Executive Officer, aged 42 Andrew Austin is the Chief Executive Officer of IGL. Mr Austin specialises inenergy projects in the gas, electricity and renewables sector. He has beeninvolved in ventures as principal and has also raised substantial funds ofprivate and public equity for clients during the course of his career to date.Mr Austin spent 17 years working in investment banking in the City of Londonwith Merrill Lynch, Nomura, Citibank and Barclays Capital. Latterly he wasGeneral Manager of Creditanstalt Investment Bank in London. He also has sixyears of management and consultancy experience with clean tech companiesincluding Generics Group and Whitfield Solar. Mr Austin has been an executive director of IGL since 2004 and has beenresponsible for day to day operations and business development throughout thatperiod. Mr Brent Cheshire, Proposed Executive Technical Director, aged 52 Brent Cheshire is the Technical Director of IGL. After 14 years at Shell, MrCheshire joined Amerada Hess in 1991, where he had a range of roles culminatingin Senior VP E&P Worldwide Technology and CEO Scandinavia. Mr Cheshire hassignificant experience in geology, drilling technology and project managementand is managing director of DONG E&P (UK) Limited. Further information on the Proposed Directors as required by the AIM Rules isset out in the Appendix. Libertas Capital Corporate Finance Limited, which is regulated in the UnitedKingdom by the FSA, is acting for KPR and no one else in connection with thearrangements described in this announcement and will not be responsible toanyone other than KPR for providing the protections afforded to clients ofLibertas, nor for providing advice in relation to the proposal, any acquisitionof shares or securities in KPR or any other matter referred to in thisannouncement. The distribution of this announcement in jurisdictions other than the UnitedKingdom may be restricted by law and therefore persons into whose possessionthis announcement comes should inform themselves about, and observe, suchrestrictions. Any failure to comply with the restrictions may constitute aviolation of the securities laws of any such jurisdiction. This announcement hasbeen prepared for the purposes of complying with English law and the AIM Rulesand the information disclosed may not be the same as that which would have beendisclosed if this announcement has been prepared in accordance with the laws andregulations of any jurisdiction outside the United Kingdom. This announcementdoes not constitute an offer to purchase, sell or exchange or the solicitationof an offer to purchase, sell or exchange any securities or the solicitation ofany vote or approval in any jurisdiction pursuant to the proposal or otherwise,nor shall there be any purchase, sale or exchange of securities or suchsolicitation in any jurisdiction in which such offer, solicitation or sale orexchange would be unlawful under the laws of such jurisdiction. Thisannouncement does not constitute a prospectus, a prospectus equivalent documentor an AIM admission document. Investors and prospective investors in IGL and/orKPR are advised to read carefully the formal documentation in relation to theproposal once it has been despatched. Neither the content of any website of KPR or IGL (or any other website) nor thecontent of any website accessible from hyperlinks on any such website (or anyother website) is incorporated into, or forms part of, this announcement. APPENDIX The following information on the Proposed Directors is given in accordance withthe AIM Rules. Other than the information contained in this announcement, thereare no other details to be disclosed in accordance with paragraph (g) ofSchedule Two of the AIM Rules. None of the Proposed Directors are, nor have been within the five years prior tothe publication of this document, partners in any partnerships. The ProposedDirectors have held the following directorships within the five years prior tothe publication of this document.Director Current Directorships Past DirectorshipsFrancis Gugen Britannia Building CH4 Energy Limited Society CH4 Limited Chrysaor Holdings Limited CH4 Pipelines Limited Gugen Consulting Limited Permagas Limited Echo Petroleum Limited Stratagas CBM Limited Fraudscreen Limited Stratagas Plc Petroleum Geo-Services ASA Raft Trustees LimitedAndrew Austin Austin and Austin Limited Recombinagen Limited Trafalgar Marine Limited Trafalgar International Marine Limited M.A. Keeping Limited Whitfield Solar LimitedBrent Cheshire Cheshire Energy Resources Amerada Hess Energy Aps Limited Amerada Hess Nominees Dong E&P (UK) Limited Limited Amerada Hess Limited Amerada Hess NWE Holdings Amerada Hess International LLC Amerada Hess Aps Amerada Hess Scandinavia Aps Amerada Hess Norge A/S United Kingdom Offshore Operators Association Limited None of the Proposed Directors has: (a) any unspent convictions in relation to indictable offences; (b) had a bankruptcy order made against him or entered into any individualvoluntary arrangement; (c) been a director of a company which has been placed in receivership,compulsory liquidation, creditors' voluntary liquidation or administration orentered into a company voluntary arrangement or any composition or arrangementwith its creditors generally or any class of its creditors whilst he was adirector of that company at the time of, or within the twelve months preceding,such events; (d) been a partner of a firm which has been placed in compulsory liquidation oradministration or which has entered into a partnership voluntary arrangementwhilst he was a partner of that firm at the time of, or within twelve monthspreceding, such events; (e) had any asset belonging to him placed in receivership or been a partner of apartnership whose assets have been placed in receivership whilst he was apartner at the time of, or within twelve months preceding, such receivership; or (f) been publicly criticised by any statutory or regulatory authority (includingany recognised professional body) or ever been disqualified by a court fromacting as a director of a company or from acting in the management or conduct ofthe affairs of any company. The following defined terms have the following meanings in this Announcement: DEFINITIONS The following definitions apply throughout this document, unless the contextrequires otherwise:"Acquisition" the proposed acquisition by the Company of the entire issued and to be issued share capital of IGL pursuant to the Scheme"Act" or "Companies the Companies Act 1985, as amended, and the CompaniesActs" Act 2006"AIM" a market of the London Stock Exchange"AIM Rules" the rules for AIM companies issued by the London Stock Exchange (as amended from time to time)"Board" the board of directors of the Company from time to time, including a duly constituted committee of such directors"CBM" Coal Bed Methane"Consideration 55,555,365 New Ordinary Shares to be issued fully paidShares" to the IGL Shareholders pursuant to the Scheme"Court" the High Court of Justice in England and Wales"CVA" the company voluntary agreement pursuant to Part I of the Insolvency Act 1986 of the Company approved on 10 April 2007"Enlarged Group" the Company and its subsidiary undertakings as at the date of Admission which shall include IGL"Existing Ordinary the 84,661,610 Ordinary Shares in issue at the date ofShares" this Announcement"Existing Projects" certain opportunities in the wind generation sector which were being pursued by the Company prior to the date of the CVA"Extraordinary the extraordinary general meeting of the Company to beGeneral Meeting" or held at 12.00 midday on 27 December 2007"EGM""IGL Shareholders" the holders of IGL Shares being Andrew Austin, Brent Cheshire, Leigh Dyson, Francis Gugen, Edward Lasseter, Andrew Purcell, Michael Smith and Roger Smith"IGL Shares" the outstanding A ordinary shares, B ordinary shares, C ordinary shares and D ordinary shares, which will be cancelled upon the Scheme becoming effective, and the redeemable preference shares in the capital of IGL which will be repurchased by IGL upon the Scheme becoming effective"Loan Notes" the £900,000 of outstanding fixed rate convertible unsecured loan notes of the Company"New Ordinary Shares" ordinary shares of 50p each in the capital of the Company following the consolidation of the Existing Ordinary Shares pursuant to Resolutions, the Consideration Shares and (for the avoidance of doubt) the New Ordinary Shares arising from the conversion of the Loan Notes"Ordinary Shares" ordinary shares of 1 pence each in the capital of the Company"Proposed Directors" the proposed executive directors of the Company being together Francis Gugen, Andrew Austin and Brent Cheshire"Purchase Price" 90p per Consideration Share being the implied price per New Ordinary Share at which the Consideration Shares will be issued and which results from the agreement made between the Company and IGL as regards their respective values"Resolutions" the Resolutions to be proposed at the EGM"Scheme" the scheme of arrangement for the implementation of the Acquisition under Section 425 of the Act between IGL and its shareholders, with or subject to any modification thereof or any addition thereto or condition approved or imposed by the Court and agreed by IGL and the Company"Shareholders" the holders of Ordinary Shares of the Company"Takeover Code" the City Code on Takeovers and Mergers"Takeover Panel" the Panel on Takeovers and Mergers This information is provided by RNS The company news service from the London Stock Exchange