6 Sep 2010 07:00
Equatorial Palm Oil plc / Index: AIM / Epic: PAL / Sector: Food Producers
6 September 2010
Equatorial Palm Oil plc ('EPO' or 'the Company')
US$60 million development JV agreement
Equatorial Palm Oil plc, the AIM listed and Liberia focussed sustainable oil palm plantation developer, is pleased to announce that it has signed a Memorandum of Understanding ('MOU') with Biopalm Energy Ltd ('Biopalm Energy'), to form a US$60 million 50:50 Joint Venture company ('the JV') in order to accelerate the development of EPO's c.169,000 hectare land position and palm oil operations in Liberia. Biopalm Energy subscribed for £5 million of new equity in the Company in May of this year and is a wholly owned subsidiary of Siva Ventures Ltd, part of the Indian conglomerate Siva Group.
Under the terms of the MOU, which is legally non-binding, Biopalm Energy will invest an initial US$22.5 million in cash plus arrange and guarantee a US$30 million loan facility to the JV, while EPO will contribute US$7.5 million in cash to the JV which will, on completion, hold all of EPO's current land position in Liberia. The establishment of the JV will be subject to EPO shareholder and necessary regulatory approvals.
EPO has a strategic development plan to plant 50,000 hectares of oil palm plantation within 10 years, targeting crude palm oil ('CPO') production of 250,000 tpa (current palm oil price US$925 per tonne CIF Rotterdam), increasing to 100,000 hectares planted. Initial production of CPO is planned to commence in Q4 2010 with the Company's first palm oil processing mill already under construction. It is envisaged that the additional finance will enable all operations across the three plantation areas of Palm Bay, Butaw and River Cess, as well as the active out grower programme, to be fast tracked. Investment in associated and downstream infrastructure will also be accelerated.
Upon finalisation of a legally binding JV agreement, a circular will be published and sent to the Company's shareholders highlighting the key terms of the agreement, providing further information on the development objectives aimed at maximising the value of EPO's Liberian operations, and convening a general meeting of the Company to vote on the JV.
EPO Chairman Michael Frayne said, "This funding agreement with the Siva Group is fantastic news for the Company as it will significantly mitigate the financial risk attached to the project. Importantly it will allow us to focus on our strategic objectives in developing our 169,000 hectare land position which is located between leading oil palm plantation developers Sime Derby and Golden Agri, in what is emerging as a prime oil palm development region.
"The Siva Group has an excellent track record of working with investment partners to unlock value to the benefit of shareholders and this JV solidifies our relationship as we work together to achieve our longer term objectives.
"We have already made significant strides forward in our development plan with the establishment of nurseries and the construction of our first mill which is underway. We will now accelerate our activities as we build a West African focussed palm oil company."
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For further information please visit www.epoil.co.uk or contact:
| Michael Frayne | Equatorial Palm Oil plc | Tel: 020 7766 7555 |
| Peter Krens | Mirabaud Securities LLP | Tel: 020 7484 3510 |
| Pascal Keane | Shore Capital & Corporate Limited | Tel: 020 7408 4090 |
| Edward Mansfield | Shore Capital & Corporate Limited | Tel: 020 7408 4090 |
| Hugo de Salis | St Brides Media & Finance Ltd | Tel: 020 7236 1177 |
| Elisabeth Cowell | St Brides Media & Finance Ltd | Tel: 020 7236 1177 |
Notes to editors:
About Equatorial Palm Oil
EPO's objective is to become a producer of sustainable, low-cost CPO and to this end it has operations located near the coast in Liberia, West Africa. The Company's operational strategy is expected to be implemented through three core business activities: the rehabilitation of existing oil palm plantations; the development of new plantations; and the development of out-grower small holdings. The Company has secured Government ratified Investment Agreements in Liberia for the investment, rehabilitation and participation by the Group over a sizeable acreage of existing oil palm plantations. EPO's operations have already commenced at the Butaw Plantation and Palm Bay Plantation.
About The Siva Group
Founded in 1986 by Mr. C Sivasankaran, The Siva Group is a Chennai based US$3 billion Indian conglomerate, with over 3,000 employees and operations in Realty, Telecom, Project Engineering, Shipping, Renewable Energy, Agriculture and e-education/software. The Siva Group's diverse businesses are focussed on performance, competitiveness, value creation and customer-orientation. While simultaneously strengthening its traditional base, the Group is centred on identifying new business opportunities including agriculture. Given its global footprint, the Group is now aggressive in incorporating international expansion possibilities into its growth plans.