Oracle Power Regulatory News (ORCP)

Oracle Power PLC

21 November 2017

ORACLE POWER PLC

("Oracle" or the "Company" or the "Group")

SIGNING OF MEMORANDUM OF UNDERSTANDING ON PROJECT FUNDING

· MOU signed with two major Chinese SOEs

· Gross project cost c.US$ 1.6 billion, as previously announced

· Proposed debt : equity ratio of 75 : 25

· Oracle's historic development costs to be recognised as part of the Company's equity holding in the Project

· Chinese SOEs exclusively responsible for arranging project debt

Oracle Power PLC (AIM:ORCP), the UK energy developer of a combined lignite coal mine and mine mouth power plant located in Block VI of the Thar desert in the south-eastern Sindh Province of Pakistan, is pleased to announce that, further to the announcements of 27 September 2017 and 1 November 2017, it has now signed a Memorandum of Understanding ("MOU") with Sichuan Provincial Investment Group Co. Limited ("SCIG") and PowerChina International Group Limited ("PowerChina"), two Chinese State-owned Enterprises (together with Oracle, the "Parties"), which records the intention of the Parties to proceed to formal agreement to cooperate and collaborate in respect of investing in, setting up, constructing, owning and operating the Company's flagship Thar project (the "Project"). The Parties intend to work together to enter into definitive agreements in order to reach financial close as soon as possible.

Key terms of the MOU

The MOU specifies that the Project will be funded in cash by the Parties, directly into the Company's Pakistani subsidiaries and that it is proposed that SCIG, PowerChina and Oracle will have equity holdings in the Project of 78 per cent., 9.9 per cent. and 12.1 per cent. respectively. SCIG may consider, as appropriate, at any time to invite other co-sponsors/co-investors to the investment of the Project and SCIG will maintain the position of majority shareholder in each subsidiary of Oracle.

The Parties intend to develop the Project in a two-stage approach. The first phase will include further legal and financial due diligence, led by SCIG.

The second phase is expected to involve SCIG endeavouring to secure the approval for the investment in, and the development of, the Project from the Chinese government within three months of the completion of the first phase, after which a final development decision will be made, which is expected to take the Project to financial close. It is anticipated that the Parties will then provide the equity funding to the Project companies, proportionate to their proposed eventual equity holding in the Project. Equity funding during the second phase is also expected to be contributed by the Parties in proportion to their proposed eventual equity holdings in the Project. A further adjustment to the equity holdings of the Parties is expected, to reflect costs already incurred by Oracle in developing the Project up to the date of the MOU. It is anticipated that the financing of the Project will be by way of both debt and equity, in the ratio of 75:25. SCIG and PowerChina shall be solely responsible for arranging the debt, exclusively from Chinese banks. SCIG and PowerChina are expected to provide all security and guarantees that may be required as part of the bank debt.

The MOU specifies that SCIG is to have a majority of board positions at the Project company level. Certain matters shall be reserved for unanimous agreement, including, inter alia, dividend policy and terms and costs of key contracts, such as Engineering Procurement and Construction ("EPC") and Operations and Maintenance ("O&M"). PowerChina shall be EPC contractor for the Project. The O&M contracts shall be decided by SCIG.

Oracle will retain responsibility for applying for and obtaining all licences, approvals, permissions as may be required by the Pakistani Government authorities. SCIG and PowerChina shall be responsible for all liaison and approvals required through the Chinese authorities, including in relation to the China Pakistan Economic Corridor.

 Shahrukh Khan, CEO of Oracle, said:

"I am delighted to confirm the formal signing of the MOU. This development is a transformational step for Oracle and the culmination of months of work between the various Parties. We are very pleased to have formalised our relationship with both PowerChina and SCIG and look forward to working with them to develop this significant project.

As previously announced, the total funding requirement for the Project is expected to be around US$1.6 billion, with funding being provided at the Pakistani Project company level. The Parties shall continue to optimise and reduce costs where applicable. The Board understands this to be one of the largest private sector investments in Pakistan, anticipated to be soundly funded by substantial Chinese SOEs, and supported by being on the priority list of the China Pakistan Economic Corridor.

"As evidenced with the recently announced power plant proposal to the Pakistani power industry regulator, further steps required to achieve financial close are firmly moving forward and the Company hopes to reach financial close in the first half of 2018. I look forward to updating shareholders on subsequent developments as they arise."

For further information please contact:

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Notes for Editors:

About PowerChina:

PowerChina is a state-owned enterprise and is the owner of Sinohydro as well as the Hydrochina Corporation, China Renewable Energy Engineering Institute, Shandong Electric Power Company and numerous electric power design institutes and power construction companies. PowerChina provides planning, survey, design and engineering, finance, construction, installation, and operation and maintenance for power and infrastructure projects. In 2016, PowerChina had revenues of £36.8 billion, net assets of £62.2 billion and employed 187,000 staff. PowerChina has already successfully secured financial close on several CPEC (China-Pakistan Economic Corridor) listed projects and are proceeding with these power plant project constructions in Pakistan.

About SCIG:

SCIG is a Chinese state-owned investment company which invests in and manages projects in a range of sectors, including energy resources, transportation, communications, raw materials, electromechanical, agriculture and forestry. SCIG is China's fourth largest and Sichuan Province's largest local electrical power investment company, having a total install capacity of 36.04GW. In 2016, SCIG had revenues of £0.9 billion and net assets of £3.3 billion; it employs approximately 7,000 staff.