Oracle Power Regulatory News (ORCP)

20 December 2018

Oracle Power PLC

("Oracle" or "the Company")

Update on Memorandum of Understanding and Consortium Agreement

Oracle Power PLC (AIM:ORCP), the UK energy developer of a proposed combined lignite coal mine and mine mouth power plant (the "Project") located in the south-eastern Sindh Province of Pakistan, Thar Block VI, announces a change to its partners to the Memorandum of Understanding signed in November 2017 ("2017 MOU"), details of which were announced on 21 November 2017. Beijing Jingneng Power Company Limited ("BJPC") has now replaced Sichuan Provincial Investment Group Co. Limited as a party to a Memorandum of Understanding of 19 December 2018 (the "MOU").

BJPC is a Chinese coal power producer and electricity supplier, listed on the Shanghai Stock Exchange with a market capitalisation of circa US$3 billion. At present the company holds controlling stakes in over 22 companies with installed capacity of 10.8GW and non-controlling stakes in a further 15 companies with installed capacity of 13.3GW.

It is proposed that BJPC will take-up an equity interest of 78% in the Project. BJPC may invite other parties to invest in the Project, although it is envisaged BJPC will maintain majority ownership. PowerChina International Group Limited ("PowerChina"), the other original partner under the 2017 MOU, has reconfirmed its ongoing support and is a party to the MOU. It is proposed that PowerChina will take-up an equity interest in the Project of 9.9%, as previously envisaged. Accordingly, Oracle will retain an equity interest of 12.1% in the Project, in line with previous disclosures. Oracle, BJPC and PowerChina (together the "Parties") have formalised the amendment through the signing of the MOU and a new Consortium Agreement ("CA"). The CA has been formally submitted to the relevant authorities in Pakistan.

It is proposed that BJCP will have a majority of the board positions at the Project company level in recognition of its majority equity interest. 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") contracts. It is proposed that PowerChina shall be EPC contractor for the Project as originally envisaged and that BJPC shall be the O&M contractor.

In all other respects, the terms of the MOU remain the same as those contained within the 2017 MOU, with the key terms as follows:

· The proposed equity ownership and responsibilities of the Parties remains subject to final agreement in relation to various definitive agreements including, inter alia, share subscription agreement, shareholders agreement, EPC contracts, O&M contracts and funding agreements (together the "Definitive Agreements").

· BJPC and PowerChina to be responsible for arranging all debt financing for the Project through Chinese banks. A debt equity ratio of 75:25 is anticipated.

· Oracle historical spend on the Project, to be capitalised as a contribution towards its equity interest.

· Oracle to remain responsible for arranging the necessary permissions and approvals within Pakistan, whilst PowerChina is responsible for obtaining political and financial support for the Project in relation to the Chinese Government and the China-Pakistan Economic Corridor. Oracle and PowerChina will also provide technical oversight for both the mine and the power plant.

· As previously announced, a total capital requirement for the Project is estimated to be approximately US$1.6 billion. The intention is this will be now firmed up in discussion with the Parties.

· As with the 2017 MOU, it is envisaged that work will be undertaken in two phases, the first phase being to conclude due diligence and the second phase to conclude the Definitive Agreements, and reach financial close. 

Key terms of the CA

The Parties are pleased to confirm that they have also signed an updated CA, which runs in parallel with MOU. The CA is a formal requirement of the Private Power and Infrastructure Board ("PPIB"), the regulator of the Pakistan power industry, and is part of the process that leads to the issue by PPIB of, firstly, the Letter of Intent ("LOI") and, subsequently, as PPIB's final approval, the Letter of Support ("LOS"). As with the MOU, it records the intention of the Parties to proceed to formal agreement to cooperate and collaborate in respect of investing in, and developing, the Project. The Parties have submitted an updated application to the PPIB for the issue by the PPIB of a LOI. Please see the Company's announcement of 12 February 2018 and its interims accounts for the six-month period to 30 June 2018 for further information on the LOI and LOS. The Company expects the LOI process to recommence as a result of the amended MOU.

As a requirement of the PPIB, the CA further records that BJPC must hold equity of at least 20% in the power plant company and all three parties must hold at least 51% of the equity for six years following the issue of the LOS.

Shahrukh Khan, CEO of Oracle, said:

"We have signed a new MOU and are pleased to bring BJPC on as a partner in the Project. We remain grateful to PowerChina for their continued support throughout this process and believe we have the group to take this Project through to conclusion. We are mindful that this transaction has taken longer than many envisaged to complete and would like to thank our shareholders for their patience. We are pleased that Oracle will be able to hold on to a significant stake in a project of international significance, evidenced by its inclusion on the Priority List of the China Pakistan Economic Corridor.

The inclusion of our historic expenditure, several multiples of our current market capitalisation, as part of Oracle's contribution to the Project should help minimise dilution to shareholders in the PLC whilst retaining a significant interest in this sizeable asset.

After a frustrating period of inactivity in terms of newsflow, we believe that the Company is firmly in a position to press forward with the Project and we look forward to updating shareholders in due course."

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 International Group Limited:

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 ("SEPCO") 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 proceeding with these power plant project constructions in Pakistan.

Further information can be found at the company's website:

http://en.powerchina.cn/

About BJPC

Beijing Jingneng Energy Co is a Chinese coal power producer and electricity supplier, listed on the Shanghai Stock Exchange with a market capitalisation of circa US$3 billion. At present the company holds controlling stakes in over 22 companies with installed capacity of 10.806GW and non-controlling stakes in a further 15 companies with installed capacity of 13.295GW. The total assets of the company stand at 51.57 billion yuan (circa US$7.5bn) and net assets of 24.04 billion yuan (circa US$3.5bn). The company generates approximately 40% of the total annual electricity consumption in Beijing through its operations.