MWG.L Regulatory News (MWG)

5 July 2018

Modern Water plc

("Modern Water", "the Company" or "the Group")

Chinese joint venture and equity issue

This announcement contains inside information for the purposes of Article 7 of Regulation 596/2014.

This announcement and the information contained herein is restricted and is not for release, publication or distribution, in whole or in part, directly or indirectly in, or into or from the United States, Australia, Canada, Japan, New Zealand or the Republic of South Africa or any other jurisdiction in which the same would be unlawful.

Further, this announcement is for information purposes only and shall not constitute an offer to sell or issue or the solicitation to buy, subscribe for or otherwise acquire any ordinary shares of the company in any jurisdiction in which any such offer or solicitation would be unlawful. This announcement should be read in its entirety.

Introduction

Modern Water plc (AIM:MWG), the owner of leading technologies for water and wastewater treatment and for the monitoring of water quality, is pleased to announce that (i) it has entered into a proposed joint venture with Chinese company Hangzhou Shangtuo Environmental Technology Co. Ltd. (trading as "Sunup") and (ii) Sunup has agreed conditionally to subscribe c.£550,000 for new ordinary shares in Modern Water plc.

Proposed joint venture

Sunup is an environmental technology company integrating water and wastewater solutions for industrial clients in the People's Republic of China ("China"), with its headquarters in Hangzhou and branches in Beijing, Hong Kong and Qingdao.

The joint venture, which has an initial term of 20 years, is conditional upon (i) completion of the subscription by Sunup referred to below, and (ii) the joint venture company, Encyclo Water Technology (Zhejiang) Co., Ltd ("Encyclo"), being granted an extendable business licence ("Business Licence") by the PRC State Administration for Industry & Commerce.

Encyclo will promote Modern Water's innovative and proprietary brine concentration technology, the AMBC, throughout China. Upon grant of the Business Licence, Encyclo will enter into a licence agreement with Modern Water whereby (i) Encyclo will exclusively utilise the AMBC technology in all projects in China requiring brine concentration, and (ii) subject to satisfactory performance by Encyclo, Encyclo will be the exclusive vehicle for AMBC projects for both Sunup and Modern Water in China.

Modern Water and Sunup will have respective equity interests of 49% and 51% in Encyclo, for which they will initially subscribe approximately US$80,000 each within 3 months of the grant of the Business Licence. Encyclo will have a registered share capital of US$5m.

Modern Water and Sunup will appoint to the board of directors of Encyclo two and three directors, respectively.

Equity issue

Modern Water is also pleased to announce that Sunup has committed to subscribe for 5,021,353 new ordinary shares ("Subscription") at 11 pence per share (total £552,348.83), conditional upon (i) confirmation of foreign investment by the local government of Hangzhou province in China, and (ii) admission of the new ordinary shares ("New Shares") to trading on AIM.

Upon completion of the Subscription, Sunup will be interested in 5% of the enlarged share capital of the Company. Sunup has agreed to lock-in restrictions for 12 months following the Subscription and orderly market restrictions for a period of 12 months after that. Finally, Sunup has been granted one non-transferrable warrant per New Share, exercisable within 12 months from completion of the Subscription, at 13 pence per new ordinary share.

The issue price of 11 pence for the Subscription represents a premium of 27% over the 90-day volume-weighted average and the share price of 13 pence for the warrants represents a premium of 50% over the 90-day volume-weighted average.

Equity issue to existing shareholders

Modern Water is finally pleased to announce that, subject to completion of the Subscription by Sunup, the Company intends to give existing shareholders the opportunity to subscribe new ordinary shares, on the basis of one share for every ten held, at the same price as Sunup. Details of the open offer will be announced as soon as practicable following completion of the Subscription by Sunup.

Any questions concerning the issue of new ordinary shares should be addressed to the corporate broker, whose details are set out below.

Simon Humphrey, Modern Water's CEO, said: "A partnership between Sunup and Modern Water will create value for both companies by combining Modern Water's innovative brine concentration technology with Sunup's knowledge of the market in China and its ability to execute projects effectively and to a high standard. This represents a landmark moment in the commercialisation of our brine concentration technology."

Commenting on the project, Noah Tan, Sunup's CEO said: "I am delighted to be able to announce this important strategic partnership which will bring innovative technology to the Chinese market where water conservation is highly prized. We are expressing our confidence in the technology by making a sizable investment in Modern Water plc."

--Ends--

For further information:

Notes to editors:

Modern Water owns, installs and operates advanced membrane systems using its world-leading membrane technologies; and develops and supplies advanced systems for water monitoring. Its shares trade on the Alternative Investment Market of the London Stock Exchange.

www.modernwater.com