Proton Mtr Pwr Regulatory News (PPS)

1 May 2008 08:32

Proton Power Systems PLC01 May 2008 1 May 2008 Proton Power Systems plc ('Proton Power' or the 'Company') Proposed Placing to raise up to £3.0 million Notice of Extraordinary General Meeting The Board of Proton Power Systems plc (AIM: PPS), a leading designer, developerand producer of fuel cells and fuel cell electric hybrid systems for 'back tobase' markets, announces today that it is seeking to raise up to £3.0 million(before expenses) through a conditional placing of up to 30,000,000 new ordinaryshares of 5 pence each in the Company at 10 pence per Placing Share subject toapproval by shareholders at an EGM on the 23 May 2008. Attached to this announcement are extracts from the Circular which sets out thebackground to the proposals and further details on them. Copies of the Circular,including the Notice of EGM, were posted to shareholders on 30 April 2008 andare available from the Company's nominated adviser and broker, Noble & CompanyLimited, 120 Old Broad Street, London, EC2N 1AR, United Kingdom, free of charge,for a period of one month. - Ends - For further information: Proton Power Systems plc Tel: +49 (0) 89 1276265 0 Felix Heidelberg, CEO www.protonpowersystems.comf.heidelberg@proton-motor.de Noble & Company Limited Tel: +44 (0) 20 7763 2200Andy Yeo / Nick Athanas www.noblegp.com Media enquiries: Tel: +44 (0) 20 7398 7712Abchurch Communications Limited www.abchurch-group.comJustin Heath / Monique Tsangmonique.tsang@abchurch-group.com The following information is an extract from the Circular that was posted to shareholders on 30 April 2008: 1. Introduction On 10 April 2008 the Company announced, inter alia, its intention to raise up to£2.0 million (before expenses) by way of a proposed partially underwrittenplacing of up to 20,000,000 new Ordinary Shares in the Company at the PlacingPrice. In addition, as part of the proposed underwriting arrangements, it wasproposed that warrants would be issued to the underwriters. Subsequently, theCompany has had further discussions with interested parties and now proposes toraise up to £3.0 million (before expenses) pursuant to the Placing at thePlacing Price without any underwriting of such placing or the issue of warrants.Subscription Agreements are expected to be entered into shortly between theCompany and the proposed placees under the Placing. However, as at the date ofpublication of the Circular, no Subscription Agreements have been entered intoby the proposed placees and as such there is no certainty on the level of fundswhich will be raised under the Placing. In addition, the Group has put in place Short Term Loans totalling €375,000which have been advanced to PMFC with immediate effect. Further details are setout in paragraph 4 below. The Company's existing authority to allot shares is insufficient for thepurposes of the Placing and, therefore, the Placing is conditional (amongstother things) upon the passing of certain Resolutions by the Shareholders at anExtraordinary General Meeting of the Company convened for 11.00 a.m. on 23 May2008 at the offices of Dechert LLP, 160 Queen Victoria Street, London, EC4V 4QQ.A summary of the Resolutions is set out on page 8 of the Circular and the textof the Resolutions is set out in full in the Notice of Extraordinary GeneralMeeting at the end of the Circular. The Board expects that the net proceeds of the proposed Placing, assuming theamount of £2.0 million (after expenses) is raised (plus the amount equal to thetotal amount of principal outstanding under the Loan Facility with GeneralCapital referred to in paragraph 3 below, being approximately £0.73 million)will give the Company sufficient working capital for the next 12 months.Shareholders should be aware that, as at the date of publication of theCircular, none of the proposed placees has entered into Subscription Agreementswith the Company and as such there is no certainty on the level of funds whichwill be raised under the Placing. Notwithstanding the Placing being successful,the Company will not have sufficient funds to execute the Company'smanufacturing strategy and the Board will have to pursue further sources offunding. Alternative sources of funding, if they are available at all, arelikely to be expensive and onerous for the Company. The Directors believe that it is essential that further permanent capital beraised by the Company to enable it to continue to trade. If the Resolutions arenot approved at the Extraordinary General Meeting or the Company does not raisesufficient funds under the Placing, the Directors may have no alternative but toseek immediately the protection of a formal insolvency procedure (such asadministration or liquidation) under the Insolvency Act 1986. The Placing is also conditional on Admission of the Placing Shares to trading onAIM (the market on which the Company's existing issued Ordinary Shares arecurrently trading), occurring by no later than 8:00 a.m. on 13 June 2008. The Company has received irrevocable undertakings to vote in favour of theResolutions from Directors of the Company holding a total of 800,000 OrdinaryShares representing approximately 2.5 per cent of the existing issued ordinaryshare capital. The purpose of the Circular is to provide you with further information on thePlacing which, if the Resolutions are passed, will be carried out on a nonpre-emptive basis, and to explain why your Board considers the Placing to be inthe best interests of the Company and Shareholders as a whole. 2. Background The Group is a European leader in the design, development and production of fuelcells and fuel cell electric hybrid systems for the ''back-to-base'' market andhas more than 13 years of experience in the fuel cell market. The Company'swholly owned subsidiary, Proton Motor Fuel Cell GmbH, has developed and produceda fuel cell module running on hydrogen and integrated this with an energystorage system to create a hybrid electric fuel cell system. The systemharnesses the excess power generated by the fuel cell during partial load (suchas stop-start operations) and uses the stored energy in peak demand times. Thesystem provides lower fuel consumption and more consistent levels of powerdelivery than conventional combustion engines or fuel cell-only systems, inaddition to producing zero harmful emissions. The Group's market focus lies in industrial applications where ''back-to-base''refuelling occurs at the end of each shift or work period, such as in thematerials handling and mass transportation sectors. In these markets, thecommercialisation of applications is possible at a very early stage, as they donot depend on the existence of an ubiquitous hydrogen infrastructure. Throughpartnerships with leading OEMs such as Skoda Electric and Bucher, PMFC'stechnology is being deployed in city buses and utility (street cleaning)vehicles. The Group is also targeting the growing market for marine transportationapplications and provided the hybrid fuel cell propulsion system for Europe'sfirst fuel-cell powered passenger/river boat ferry, which is expected to beoperational in Hamburg in 2008. 3. Position with General Capital On 17 October 2006, the Company entered into a loan and asset finance facilityagreement with General Capital whereby General Capital agreed to lend theCompany up to £2 million for working capital and asset finance facilities (the ''Loan Facility''). As outlined in the Company's AIM admission document dated 23October 2006, the Loan Facility was available for draw down for a period of 36months from the date of the agreement. Currently, the Company has drawn down £1 million of the Loan Facility andrecently sought to draw down the second £1 million tranche of the Loan Facility(which would have provided the Company with sufficient working capital untilSeptember 2008). However, following certain breaches by the Company of the loanagreement, General Capital has informed the Company that it is exercising itsrights under the terms of the loan agreement not to permit any further draw downof the Loan Facility. The Board of the Company has discussed these breaches withGeneral Capital which has confirmed that the balance of the Loan Facility willnot be capable of being drawn down. In light of these breaches, General Capital may demand immediate repayment ofall of the amounts outstanding under the Loan Facility. As at 30 April 2008, thetotal amount of principal outstanding under the Loan Facility amounted to £0.73million. If the Placing is successful, the Company is likely to have sufficientfunds to repay any amounts due to General Capital under the Loan Facility andwill set funds aside from the Placing to enable repayment in full of amountsowed to General Capital. 4. Short Term Loans The Group has put in place Short Term Loans totalling €375,000 which have beenadvanced to PMFC with immediate effect. The funds have been provided to PMFC bythe Lenders (being the Tundra Alternative Energy Fund (€125,000), FelixHeidelberg (€125,000) and Dr Goetz Heidelberg (€125,000)) and will be used tosatisfy PMFC's immediate working capital requirements. The Short Term Loans willprovide the Group with sufficient working capital until the end of May 2008. The funds are being provided by the Lenders on the basis of loans which will berepayable on the earlier of 14 calendar days following completion of the Placingand 31 July 2008. A fee of 5% will be paid to the Lenders for arranging theloans and will be added to the principal of the loans. No interest will bepayable on the Short Term Loans until the end of May 2008. Thereafter, interestwill be payable at the rate of 1 per cent. per full calendar month, which willbe payable on the last day of each calendar month. The Company is also in discussions with an additional lender to provide afurther loan of €125,000 to PMFC. Any such loan provided to PMFC would be on thesame terms as the Short Term Loans. 5. Reasons for the Placing and use of proceeds The Company has over the past few months been in discussions with potentialfunders for a further equity and debt capital raising to provide the Companywith additional funding to implement its stated business plan. The funds raisedby the Company under such a further capital raising would be used to enable theCompany to establish a volume manufacturing facility to support the marketintroduction and commercialisation of the fuel cell and hybrid systems whichhave been developed by PMFC as well as to provide additional working capital forthe Group. However, these discussions have been protracted and at this stagethere can be no certainty that any of these long-term financing options will besuccessful. In parallel with this, the Company is also considering its strategicoptions including the possible sale of the business, the disposal of assets bythe Company or an investment in the Company. The Directors believe that, given the Company's requirements for additionalfinancing, the Placing is the most appropriate way at the present time for theCompany to raise additional funds. The Directors consider that the Placingprovides greater certainty than other available means of raising additionalfunds and minimises transactional costs. The Company intends to use the netproceeds of the Placing for general working capital purposes and to enable theShort Term Loans and the Loan Facility with General Capital to be repaid. The Directors are confident that the Company will, on the basis of the Companyraising £2.73 million (net of expenses), have sufficient working capital for thenext 12 months. However, it will not be sufficient to execute the Company'smanufacturing strategy. 6. Current trading and prospects Overall, the rate of order intake during the last 12 months has been in linewith the Board's expectations with, as reported during 2007, orders received forthe Group's hybrid drive systems for: • a passenger ferry which will operate on Hamburg's Alster river; • a utility (street cleaning) vehicle for Bucher/EMPA, Switzerland; and • a city bus for Skoda Electric which will operate in Prague. Key developments since the announcement of interim results on 19 September 2007are: • the commissioning of the first triple hybrid forklift demonstratortruck; • the framework contract with Austrian based AVL, one of the largestTier 1 & 2 engineering service providers, which enables the Group access to avariety of new applications; • the signing of a memorandum of understanding with Karmann, anengineering and production company to the car industry, which is expected toconvert into a joint product; • the appointment of Achim Loecher as Financial Director of theCompany; • the appointment of John Wall as Executive Chairman, BernardRobinson's move from Chairman to a Non-Executive Director role and hissubsequent retirement from the Board with effect from 31 January 2008; and • the hire of key staff in management, R&D and sales. PMFC's facility at Puchheim near Munich has the capability for modular expansionwith minimum disruption to ongoing production. This facility provides theplatform for the Group to increase the scale of its volume production and thetransition and transformation of the Group from a project based model (lowvolume/high cost) to a series-based model (high volume/low cost) in itsactivities as a designer, developer and manufacturer of fuel cell hybrid systemsfor the ''back-to-base'' applications market. The facility will enable the Group to invest upfront in automation and staff inorder to drive down unit costs and thereby deliver volume orders for customers.The Group's manufacturing plan is built around the development of a standardisedplatform and components. The systems developed by PMFC are built on a basicplatform which can be re-used across multiple applications. The Directorsbelieve that the manufacturing costs can be reduced substantially through volumeproduction. In particular, the cost for certain fuel cell components, such asmembranes and bi-polar plates, is anticipated to decrease significantly withincreasing production volumes. On this basis it is expected that automation willallow both capacity increase and cost reductions. Enquiries and expressions of interest in the Group's products are being receivedfrom a wide variety of potential customers with varying application requirementsand with the benefit of the Group's new manufacturing facilities and theadditional funds from the Placing the Directors believe they will be able toconvert certain of these enquiries into firm orders during the course of thenext few months. The memorandum of understanding with Karmann (referred toabove) and the joint presentation given at the Hanover Fair in April 2008 for ajoint product illustrate this. Up to February 2008, PMFC had €6.5 million of secured project development workunder contract (of which €4.6 million was still outstanding). The Company expects to release its results for the year ended 31 December 2007on 30 June 2008. 7. Terms of the Placing The Company proposes to raise up to £3.0 million (before expenses) through theissue of up to 30,000,000 new Ordinary Shares at the Placing Price pursuant tothe Placing. The Placing Shares will, assuming maximum subscription, represent48.87 per cent. of the Enlarged Share Capital. The Placing is conditional, inter alia, on: • proposed placees entering into Subscription Agreements on or before 19 May 2008; • the passing of the Resolutions at the Extraordinary General Meeting; and • Admission taking place on or before 13 June 2008. Application will be made to the London Stock Exchange for the Placing Shares tobe admitted to trading on AIM. It is expected that dealings in the new OrdinaryShares will commence on or around 27 May 2008. The Placing Shares will rank paripassu with the existing Ordinary Shares in the Company. The Placing is beingmade on a non pre-emptive basis as the time and costs associated with apre-emptive offer are considered by the Directors to be excessive. The making ofa pre-emptive offer to Shareholders would require the production of aprospectus, which would have to comply with the Prospectus Directive and bevetted and approved by the FSA. Following completion of the Placing, the Board will consider the appointment ofadditional non-executive directors to the Board taking into account, whereappropriate, the views of the placees. Further announcements will be made asappropriate. 8. Related party transactions Dr Goetz Heidelberg has today provided a short-term loan of €125,000 to theCompany and intends to subscribe for a maximum of 3,500,000 Placing Sharespursuant to the Placing. Dr Goetz Heidelberg is a substantial shareholder of theCompany and therefore a related party for the purposes of the AIM Rules. Theprovision of the loan and proposed subscription for Placing Shares by Dr GoetzHeidelberg constitutes, when aggregated, a related party transaction for thepurposes of the AIM Rules. The Company's directors consider, having consulted with Noble, the Company'snominated adviser, that the terms of the transactions being entered into by theCompany with Dr Goetz Heidelberg are fair and reasonable insofar as itsshareholders are concerned. In discussing the provision of the loan and theproposed subscription for Placing Shares by Dr Goetz Heidelberg with theCompany's directors, Noble has taken into account the Directors' commercialassessments, the Company's current funding requirement and the absence of anyalternative funding currently available to the Company. 9. Extraordinary General Meeting On pages 12 to 14 of the Circular is a notice convening the ExtraordinaryGeneral Meeting to be held at the offices of Dechert LLP, 160 Queen VictoriaStreet, London, EC4V 4QQ on 23 May 2008 at 11.00 a.m, at which the Resolutionsset out in such notice will be proposed. The Resolutions propose: 1. to increase the Company's authorised share capital by the creation ofan additional 15,000,000 ordinary shares of 5p each; 2. to grant the Directors generally pursuant to Section 80 of the Actauthority to allot relevant securities of up to £930,456.85 in nominal amount; 3. to grant the Directors generally pursuant to Section 80 of the Actauthority to allot additional relevant securities of up to £1,500,000 in nominalamount (being the nominal value of the Placing Shares); 4. to authorise the Directors to allot equity securities for cash withoutregard to Shareholders' statutory pre-emption provisions under the Act of up to£153,477 in nominal amount or pursuant to a rights issue or other pre-emptiveoffer; and 5. to authorise the Directors to allot additional equity securities forcash without regard to Shareholders' statutory pre-emption provisions under theAct of up to £1,500,000 in nominal amount (being the nominal value of thePlacing Shares). Following completion of the Placing (and assuming the allotment of 30,000,000Placing Shares) there will remain, authorised but unissued, 18,609,137 OrdinaryShares (representing approximately 30.31 per cent. of the Enlarged ShareCapital). If the Resolutions are passed and the Placing is completed in fullthen the Directors would have authority to allot 3,069,540 Ordinary Sharesotherwise than on a pre-emptive basis, representing approximately 5 per cent. ofthe Enlarged Share Capital. Shareholders should be aware that if all the Resolutions are not approved byShareholders at the Extraordinary General Meeting, the Directors may have noalternative but to seek immediately the protection of a formal insolvencyprocedure (such as administration or liquidation) under the Insolvency Act 1986. The Board expects that the net proceeds of the proposed Placing, assuming £2.73million (net of expenses) is raised, will give the Company sufficient workingcapital for the next 12 months. Shareholders should be aware that, as at thedate of publication of the Circular, none of the proposed placees has enteredinto Subscription Agreements with the Company and as such there is no certaintyon the level of funds which will be raised under the Placing. Notwithstanding the Placing being successful, the Company will not havesufficient funds to execute the Company's manufacturing strategy and the Boardwill have to pursue further sources of funding. Alternative sources of funding,if they are available at all, are likely to be expensive and onerous for theCompany. 10. Noble & Company Limited On 29 April 2008 Noble provided the Board with notice of its intention to stepdown as nominated adviser and broker to the Company, which will become effectiveat a date to be agreed between Noble and the Company. 11. Recommendation The Directors consider the terms of the Placing and the Resolutions to be in thebest interests of the Company and its Shareholders as a whole and unanimouslyrecommend that you vote in favour of the Resolutions, as your Directors intendto do or procure to be done in respect of their beneficial holdings of OrdinaryShares, which amount, in aggregate, to 800,000 Ordinary Shares, representingapproximately 2.5 per cent. of the current issued share capital of the Company. Definitions The following definitions apply throughout the Circular unless the context requires otherwise: ''Act'' the Companies Act 1985, as amended ''Admission'' the admission of the Placing Shares to trading on AIM becoming effective in accordance with the AIM Rules ''AIM'' AIM, a market operated by the London Stock Exchange ''AIM Rules'' the rules for AIM companies and their nominated advisers published by the London Stock Exchange governing admission to and the operation of AIM, as amended from time to time ''Board'' or ''Directors'' the Directors of the Company at the date of the Circular whose names are set out on page 4 of the Circular ''Company'' or ''PPS'' Proton Power Systems plc, a company incorporated in England and Wales with registered number 05700614 and having its registered office at St Ann's Wharf, 112 Quayside, Newcastle upon Tyne, NE99 1SB ''Enlarged Share Capital'' the issued share capital of the Company immediately following Admission and the Placing ''Extraordinary General Meeting'' the extraordinary general meeting of the Company to be held at the offices of Dechert LLP, 160 Queen Victoria Street, London, EC4V 4QQ at 11.00 a.m. on 23 May 2008, notice of which is set out at the end of the Circular ''Form of Proxy'' the form of proxy for use in connection with the Extraordinary General Meeting ''General Capital'' General Capital Venture Finance Limited, a company incorporated in and registered in England No 02505924 and having its registered office at The Oaks, Kirby Road, Trowse, Norwich, Norfolk, NR14 8RS ''Group'' the Company and its subsidiaries ''Lenders'' the Tundra Alternative Energy Fund, Felix Heidelberg (Chief Executive Officer) and Dr Goetz Heidelberg, all of whom are providing the Company with the Short Term Loans ''Loan Facility'' a loan and asset finance facility between the Company and General Capital dated 17 October 2006 pursuant to which General Capital agreed to lend the Company up to £2 million for working capital and asset finance facilities ''London Stock Exchange'' London Stock Exchange plc ''Noble'' Noble & Company Limited, the Company's nominated adviser and broker, which is authorised and regulated by the Financial Services Authority and has its registered address at 76 George Street, Edinburgh, EH2 3BU ''Notice of Extraordinary General Meeting'' the notice of Extraordinary General Meeting set out at the end of the Circular ''Ordinary Shares'' ordinary shares of 5 pence each in the capital of the Company ''Placees'' the persons who subscribe for Placing Shares ''Placing'' the proposed placing of the Placing Shares at the Placing Price ''Placing Price'' 10 pence per Placing Share ''Placing Shares'' up to 30,000,000 new Ordinary Shares to be allotted and issued to certain institutions and other investors pursuant to the Placing ''PMFC'' Proton Motor Fuel Cell GmbH, a subsidiary of the Company ''R&D'' research and development ''Resolutions'' the resolutions to be proposed at the Extraordinary General Meeting set out in the notice of Extraordinary General Meeting on pages 12 to 14 of the Circular ''Shareholders'' the persons who are registered as holders of Ordinary Shares from time to time ''Short Term Loans'' the loans totalling €375,000 being provided to PMFC by the Lenders ''Subscription Agreements'' the conditional agreements to be entered into between the Company and certain of its Shareholders and other subscribers relating to the Placing at the Placing Price ''UK'' the United Kingdom of Great Britain and Northern Ireland This information is provided by RNS The company news service from the London Stock Exchange