Rurelec Regulatory News (RUR)

13 Dec 2005 09:51

Rurelec PLC13 December 2005 13 December 2005Rurelec PLC ("Rurelec" or the "Company") Placing of 46,938,775 Ordinary Shares at 42 pence per shareUSD 35 million Acquisition of a majority stake of Empresa Electrica Guaracachi,S.A.Re-Admission to trading on AIM Rurelec today announces that its wholly owned subsidiary Birdsong OverseasLimited has agreed the acquisition of Bolivia Integrated from SouthernIntegrated for a total consideration of up to USD 35 million. Bolivia Integratedindirectly owns a majority stake of 50.00125 per cent, of Empresa ElectricaGuaracachi, S.A. ("Guaracachi" or "EGSA") Bolivia's largest power generationcompany. Guaracachi was formed in 1995 as part of the privatisation of the Bolivianelectricity industry. Following an international public tender, a 50 per cent.stake in Guaracachi was transferred to a subsidiary of GPU Inc, the US utility,in return for a cash investment of USD 47 million into Guaracachi. The Bolivianstate's shares in Guaracachi were in turn transferred to two Bolivian pensionfunds with a small number of shares allocated to employees of the state powercompany, ENDE. In 1999, GPU was permitted to take Board control of Guaracachiand increase its stake to 50.00125 per cent. of the Company. On 29 June, 2005 the share capital of Guaracachi was listed on the Bolivianstock exchange. Guaracachi has three existing power plants with a total installed capacity of360 MW. They are located in Santa Cruz (292 MW), Sucre (39 MW) and Potosi (27MW). The latter plant's Olympus gas turbine is believed to be the highestoperational gas turbine of any power plant in the world. Guaracachi currently has two new power plant additions under construction forcommissioning in 2006. These two plant additions in Sucre and Santa Cruz willadd 79 MW of new nominal installed capacity, an increase of 22 per cent.compared with the current installed capacity. Longer term, in 2007 and beyond, Guaracachi expects to add 80 MW of combinedcycle capacity in Santa Cruz following the recent approval by the United NationsClean Development Methodology Committee of the CCGT conversion methodology forcalculating carbon emission reductions. Guaracachi also expects to finalise a 120 MW Yacuiba export project for the saleand export of electricity to Argentina. Preliminary power purchase and fuelsupply agreements for this project have already been reached respectively withCEMSA, the subsidiary of Endesa of Spain, and Chaco the Bolivian subsidiary ofBP, and a preliminary finance agreement has also been agreed with a group ofdomestic financial institutions for a privately placed bond issue in support ofthe export project. The governments of Bolivia and Argentina announced thisinitiative in August 2005. Both the CCGT conversion project and the Yacuiba export project are expected tobe commissioned during 2007 and to make full year contributions from 2008onwards. The consideration of USD 35 million comprises a cash payment of USD30 million oncompletion and a loan note of USD 5 million repayable upon the receipt ofcertain dividends or no later than 31 December 2010 The Company is proposing to raise approximately GBP18.5 million after expenses,through the issue of 46,938,775 Placing Shares, to institutional and otherinvestors, at a price of 42 pence per Placing Share to finance the Acquisition.The Placing Shares will represent approximately 68.7 per cent. of the EnlargedShare Capital. At the Placing Price, the Company's market capitalisation onAdmission will be £28,681,285. Owing to its size and the interests of certain Directors, the transactionconstitutes both a "reverse takeover" and a Related Party Transaction for thepurpose of the AIM Rules and is conditional on shareholder approval. A circularcomprising an Admission Document under the AIM rules will be sent toShareholders today. This will include a Notice of an Extraordinary GeneralMeeting of the Company to be held on 5 January 2006, together with a form ofProxy. Enquiries: Peter Earl 020 7793 7676Rurelec PLC Paul ShackletonDaniel Stewart & Co. plc 020 7776 6550 Christian DennisHichens Harrison & Co. plc 020 7588 5171 Daniel Stewart & Co. plc, which is regulated by the Financial ServicesAuthority, is acting as nominated adviser to the Company. It will not beresponsible to any person other than the Company for providing the protectionsafforded to its customers or for advising any other person on the contents ofany part this announcement. The responsibilities of Daniel Stewart & Co. plc asthe Company's nominated adviser under the AIM Rules are owed solely to theLondon Stock Exchange and are not owed to the Company or any Director orShareholder or to any other person, in respect of any decision to acquireOrdinary Shares in reliance on any part of this announcement or otherwise.Daniel Stewart & Co. plc is not making any representation or warranty, expressor implied, as to the contents of this announcement. Hichens, Harrison & Co. plc, which is regulated by the Financial ServicesAuthority, is acting as broker to the Company. It will not be responsible to anyperson other than the Company for providing the protections afforded to itscustomers or for advising any other person on the contents of any part of thisannouncement. The responsibilities of Hichens, Harrison & Co. plc as theCompany's broker under the AIM Rules are owed solely to the London StockExchange and are not owed to the Company or any Director or Shareholder or toany other person, in respect of any decision to acquire Ordinary Shares inreliance on any part of this announcement or otherwise. Hichens, Harrison & Co.plc is not making any representation or warranty, express or implied, as to thecontents of this announcement. IntroductionThe Board announced this morning that the Company's wholly owned subsidiaryBirdsong Overseas Limited has entered into an agreement to purchase for cash andloan notes the entire issued share capital of Bolivia Integrated from SouthernIntegrated. Bolivia Integrated indirectly owns 50.00125 per cent. of Guaracachiwhich operates three generating plants supplying electricity in Bolivia. TheAcquisition will be financed in part by a placing of up to 46,938,775 OrdinaryShares with institutional investors, Peter Earl and Technology Finance Limited,the latter two of whom both have an indirect interest in Southern Integrated.Owing to its size and the interests of certain Directors, the transactionconstitutes both a "reverse takeover" and a Related Party Transaction for thepurpose of the AIM Rules and is conditional on shareholder approval, which isbeing sought at an Extraordinary General Meeting of the Company to be held on 5January 2006. A circular, which comprises an Admission Document, setting out the background toand reasons for the Acquisition and Placing and containing a recommendation tovote in favour of the Resolutions by the Independent Directors will be sent toshareholders today Background information on Rurelec Rurelec was initially established specifically to develop rural electrificationprojects and isolated generation projects in Latin America and was admitted totrading on AIM on 18 August 2004. Acquisition of ESAFollowing flotation, Rurelec embarked on a programme of acquisitions of powerplant equipment, the first of which was through the purchase of ESA fromGuaracachi in October 2004. The consideration for the transaction was USD550,000in cash. ESA is the owner of two 3 MW Worthington dual fuel generation units. These aresmall machines which are suitable for rural generation. Acquisition of 9 JenbachersIn January 2005 Rurelec announced that it had acquired for cash nine Jenbacherengines, each with a gross generation capacity of 2 MW, for a total of £1million. Simultaneously, the Company sold six of these engines for the sum of £1million. The remaining three Jenbachers are to be installed in Yacuiba, SouthernBolivia, where gas supplies are available and shortages of power exist. Acquisition of Patagonia EnergyIn July 2005 Rurelec announced that it had acquired 50 per cent. of the issuedshare capital of Patagonia Energy for an initial consideration of USD4.5 millionin cash and further payments of USD 1.5 million, with the dates of paymentdetermined by the future profit of EDS. Patagonia Energy is 50 per cent. ownedby Basic Energy Limited, a company organised and existing under the laws of theBahamas. Patagonia Energy wholly owns directly (and indirectly throughElectrica) EDS, which owns and operates a generating plant supplying electricityin the isolated electricity system of Southern Patagonia, Argentina. The generating plant comprises two General Electric MS6001B gas turbines in opencycle, with a generating capacity of 77MW. The acquisition of Patagonia Energy was a reverse takeover which was approved byShareholders on 29 July 2005 and is described in an Admission Document issued bythe Company dated 6 July 2005. Background information on Bolivia Integrated and the Acquisition The AcquisitionSubject to the passing of the proposed Resolutions, Rurelec will indirectlyacquire Bolivia Integrated which through a holding company owns 50.00125 percent. of the issued share capital of Guaracachi, an electricity generatingcompany. The consideration will be for an amount up to USD 35 million. On completion ofthe Acquisition USD 20 million will be satisfied in cash. In addition, subjectto Peter Earl and Technology Finance Limited subscribing for in aggregate13,605,442 Ordinary Shares in the capital of Rurelec at the Placing Price notlater than five business days after Admission (which Peter Earl is contractuallyobliged to do and procure) a further USD 10 million will be satisfied not laterthan seven business days after Admission. In addition the Loan Note in theamount of USD 5,000,000 shall be issued to Southern Integrated and shall beredeemed in any number of payments as follows: - between 30 April 2006 and 30 December 2007, in an amount equal to theaggregate amount of dividends paid after Admission by Guaracachi and distributedup to Birdsong Overseas Limited (net of costs and taxes) ("Received Dividends")subject to a maximum aggregate amount of USD 3,000,000; the first payment beingdue within 10 business days after 30 April 2006 and subsequent payments becomingdue within 10 business days after receipt of further Received Dividends. - from 31 December 2007, in an amount equal to the aggregate amount of ReceivedDividends (less any amounts already paid under the Loan Note) subject to anoverall aggregate maximum principal amount payable under the Loan Note of USD5,000,000; such amounts becoming due within 10 business days after receipt offurther Received Dividends. - to the extent not previously redeemed the Loan Note shall be redeemed in fullby Birdsong Overseas Limited on 31 December 2010. Interest at LIBOR plus 5 percent. per annum shall accrue on the Loan Note to the extent of any outstandingunredeemed capital, which shall be payable after all principal amounts have beenpaid. The Acquisition Agreement includes warranties and a tax indemnity given by IPCand Southern Integrated, the scope of which is fairly standard for transactionssimilar in nature to the Acquisition. The time limit for non-tax warranty claimsis 2 years from Admission and the time limit for tax warranty claims and claimsunder the tax indemnity is 7 years from Admission. No warranty or tax indemnityclaim may be made under the Acquisition Agreement unless the aggregate amount ofsuch claims exceeds USD 250,000. IPC and Southern Integrated are jointly and severally liable under thewarranties and the tax indemnity in an amount up to USD 35 million, the maximumconsideration payable. However, the ability to recover against IPC and SouthernIntegrated may be limited if IPC or Southern Integrated distributes or otherwisepays out to its shareholders or third parties the consideration monies. This isbecause Southern Integrated has no significant net assets and IPC had, as at 31December 2004 prior to the acquisition of Southern Integrated, net assets ofapproximately £183,000. Moreover, there can be no guarantee that IPC's net assetvalue will not further reduce prior to the making of a warranty claim or claimunder the tax indemnity. To partially redress this situation, warranty claims and claims under the taxindemnity (and certain other claims under the Acquisition Agreement) may be setoff against amounts unpaid under the Loan Note. USD 5 million of the Loan Notewill remain unpaid prior to 30 April 2006 and a minimum of USD 2 million of theLoan Note will remain unpaid prior to 31 December 2007. These amounts representthe principal security that Rurelec has in relation to warranty and taxindemnity claims under the Acquisition Agreement. The Independent Directorsnote, therefore, that the effective amount of cover in relation to thewarranties and tax indemnity may be limited. Summaries of the Acquisition Agreement and the terms of the Loan Note are setout in the Admission Document. The vendor, Southern Integrated, is wholly owned by IPC. IPC is an independentpower developer with international experience in building, owning and operatingapproximately 4,000 MW of power generation plants. IPC wishes to sell BoliviaIntegrated in order to concentrate on new projects outside Latin America and ondeveloping its power plant operations and maintenance activities. Peter Earl is the controlling shareholder in IPC and is the chairman ofGuaracachi. Peter Earl and Elizabeth Shaw are directors of IPC and Michael Eyreis managing director of IPC's wholly owned subsidiary IPOL. James West is also anon-executive director of IPC. Guaracachi is a Bolivian company that was set up in July 1995 as part of theprivatisation of the Bolivian electricity industry. Following an internationalpublic tender, 50 per cent. of the share capital of Guaracachi was transferredto GAI, a subsidiary of the US utility GPU Inc., for a cash investment of USD 47million into Guaracachi. The Bolivian state's shares in Guaracachi were in turntransferred to two Bolivian pension funds with a small number of sharesallocated to employees of the state power company, ENDE. In 1999 GAI waspermitted to increase its shareholding to 50.00125 per cent. of Guaracachi andto assume Board control of the Company. On 29 June 2005, the share capital ofGuaracachi was listed on the Bolivian stock exchange. Guaracachi is a capitalised company which requires it to take decisions such asprofit distribution of more than 30 per cent. of the annual profits by a vote of75 per cent. of the shares represented at an extraordinary general meeting ofthe shareholders. As such GAI will need the support of one of the pension fundsin order to declare a dividend of more than 30 per cent. of the profits in anyone year. GuaracachiGuaracachi's generating plants are connected to the NIS. It currently has threeplants, located near Santa Cruz, Sucre and Potosi, with a total nominalinstalled capacity of 360 MW. These are: • Guaracachi plant- 292 MW of installed capacity on two General Electric 6FA high technology gasturbines and six Frame 5 gas turbines • Aranjuez plant- 39 MW of installed capacity on one Frame 5 gas turbine and 5 dual fuel naturalgas and diesel generating units • Karachipampa plant- 27 MW of installed capacity on one Rolls Royce Olympus gas turbine Guaracachi sells its entire output at the spot price to distribution companiesand in addition to the electrical energy generated, it receives payments forhaving capacity available. Gas is supplied to the Guaracachi and Aranjuez plants under a contract withChaco expiring on 31 July 2007 and to the Karachipampa plant under a contractwith Andina expiring on 30 September 2007. Management and the supervision of technical maintenance are undertaken by IPOLunder a five year Management Agreement expiring on 12 December 2008 payable inUS dollars. Such technical and management services include: - the selection and assistance in negotiation for technology and services toGuaracachi;- ongoing monitoring, maintaining and upgrading of Guaracachi's generatingassets; and- advice and assistance in financing, risk management, optimisation of assets,procurement andimprovement in operating and management services. Further details of the Management Agreement are set out in the AdmissionDocument. The table below summarises the trading record of Guaracachi for the three yearsto 31 December 2004 and the six months to 30 June 2005 and is restated accordingto International Financial Reporting Standards. Year ended Year ended Year ended 6 months to 31-Dec-02 31-Dec-03 31-Dec-04 30-Jun-05 USD '000 USD '000 USD '000 USD '000Revenue 27,35 4 27,688 25,632 14,594Profit/(Loss)Before Tax 4,131 (1,754) 2,842 5,277Net Assets 89,648 86,407 87,246 87,240 Assets owned on AdmissionOn Admission Rurelec will own:- ESA, which in turn owns two Worthington dual fuel generating units, with 6 MWaggregate capacity;- three Jenbachers with 6 MW aggregate capacity;- a 50 per cent. indirect interest in Central Termica Patagonia, a 77 MWgas-fired power plant in Patagonia; and- a 50.00125 per cent. indirect interest in Guaracachi, which owns 3 generatingplants in Bolivia with 360 MW (nominal) aggregate capacity described above. Investment StrategyThe Directors' strategy is to continue to acquire, or invest in, companies withestablished electricity generating operations or generating assets suitable forredeployment in the regional power markets of the Southern Cone of Latin Americaas well as in the isolated generation sector in Latin America. The investmentstrategy of the Company, while originally focused on rural electrificationprojects, has been extended to suitable opportunities to acquire or invest ingenerating assets operating on interconnected systems within those LatinAmerican countries which have implemented structural reform programmes.Furthermore, the Directors have identified opportunities to manage theimplementation phase of rural electrification projects as well as investing inthe generation assets that are required to satisfy the increased demandassociated with that expansion. Any generating capacity deployed by the Company will, wherever possible, besupported by Power Purchase Agreements expected to incorporate payments for bothcapacity and energy production or by transparent wholesale markets for powerwith independent regulation and credit-worthy counter-parties. The Directors are keen to promote sustainable projects based on locally-producedfuel supplies and will, where practicable, promote the use of renewable sourcesfor electricity generation. They are also eager to give priority to thedevelopment of combined cycle gas turbine (CCGT) capacity based on theconversion of existing plants to achieve greater fuel efficiency operationcapturing waste heat for the generation of additional electricity with noadditional fuel cost. Such conversion projects may be eligible for UnitedNations approved carbon emission reduction certificates issued under the KyotoProtocol. Current trading and prospectsGuaracachi exceeded its budget for the first three quarters of 2005. While thelast quarter does not usually produce the highest revenues and net income (sincethis is a rainy period in Bolivia when hydro generators receive dispatchpriority), the Directors expect Guaracachi to continue to be ahead of budget forthe full year. Guaracachi currently has two new power plant additions under construction forcommissioning in 2006. These two plant additions in Sucre and Santa Cruz willadd 79 MW of new nominal installed capacity, an increase of 22 per cent.compared with the current installed capacity of 360 MW. Accordingly, theDirectors expect Guaracachi to benefit from increased capacity payments oncethese projects complete. Demand growth in the NIS is expected by CNDC to rise bymore than 8 per cent. in 2006. Prospects for 2006 therefore appear to be good.Longer term, in 2007 and beyond, Guaracachi expects to add 80 MW of combinedcycle capacity in Santa Cruz following the recent approval by the United NationsClean Development Methodology Committee of the CCGT conversion methodology forcalculating carbon emission reductions. Guaracachi also expects to finalise a120 MW Yacuiba export project for the sale and export of electricity toArgentina. Preliminary power purchase and fuel supply agreements for thisproject have already been reached respectively with CEMSA, the subsidiary ofEndesa of Spain, and Chaco the Bolivian subsidiary of BP, and a preliminaryfinance agreement has also been agreed with a group of domestic financialinstitutions for a privately placed bond issue in support of the export project.The governments of Bolivia and Argentina announced this initiative in August2005. Both the CCGT conversion project and the Yacuiba export project are expected tobe commissioned during 2007 and to make full year contributions from 2008onwards. Communities in Riberalta and Guayamerin on the Amazon Basin have requestedRurelec's local power subsidiary, ESA, to install new capacity in these isolatedareas. Negotiations have begun for new power purchase agreements in each city.The Company is also considering new isolated generation and ruralelectrification projects in Northern Argentina. At the same time the Company intends to continue to take advantage of suitableopportunities to trade in portfolios of power generation equipment where themanagement's knowledge of the second hand equipment market can help source goodvalue motors and turbines for Rurelec projects while at the same time produce atrading profit from the onward sale of surplus machines. The Directors are confident that the demand in Latin America which has led toRurelec's strong start as a generation company will be matched by a steady flowof new power projects. The Directors intend to change the accounting year to 31 December with effectfrom 31 December 2005. Relationship with IPC and Related Party TransactionPeter Earl is the controlling shareholder in IPC and is the chairman ofGuaracachi. Peter Earl and Elizabeth Shaw are directors of IPC and Michael Eyreis managing director of IPC's wholly owned subsidiary IPOL. James West is also anon-executive director of IPC. IPOL provides operations and supervision oftechnical maintenance services to Guaracachi under the long term ManagementAgreement (described in the Admission Document). Peter Earl has committed toprocure that he and Technology Finance Limited, both of whom have an indirectinterest in Southern Integrated, subscribe for 13,605,442 Ordinary Shares (the"Subscription Shares") at the Placing Price and that such subscription shalloccur not less than 5 business days after Admission (the "Subscription"). The Acquisition is classified as a related party transaction under Rule 13 ofthe AIM Rules. Accordingly, only the Independent Directors have made therecommendation to Shareholders in the Admission Document. Under the Acquisition Agreement IPC has agreed not to compete in relation to theoperation of power plants in Bolivia and Argentina for the period of three yearsfrom completion of the Acquisition. IPC has also given a separate confirmationto Rurelec that IPC will only have the right to develop or invest in powergeneration projects in Latin America if Rurelec has declined the opportunity. Details of the PlacingThe Company is proposing to raise an aggregate of approximately £19,714,000,before expenses, through the issue of an aggregate of 46,938,775 Placing Shares,to institutional investors and to Peter Earl and Technology Finance Limitedpursuant to the Subscription, all at a price of 42 pence per Ordinary Share. Thenet proceeds will be used to part finance the cash consideration for theAcquisition (including if so determined by the Company the redemption of part ofthe Loan Note). The Placing Shares (including the Subscription Shares) will representapproximately 68.74 per cent. of the Enlarged Share Capital. At the PlacingPrice, the Company's market capitalisation on Admission will be £28,681,285.50. Following Admission, and assuming the completion of the Subscription by PeterEarl and Technology Finance Limited referred to above, the Directors (andcompanies connected and/or associated with them) will hold, in aggregate,approximately 16.04 per cent. of the Enlarged Share Capital. The Placing Shares will rank pari passu in all respects with the ExistingOrdinary Shares. Dealings in the Placing Shares (other than the SubscriptionShares to be subscribed by Peter Earl and Technology Finance Limited, dealingsin which are expected to commence not later than 6 business days later) areexpected to commence on 6 January 2006. It is anticipated that CREST accountswill be credited on the day of Admission and that certificates will bedespatched by first class post by 16 January 2006. DirectorsBiographical details of the Directors are as follows:James West, Chairman and Non-Executive Director, aged 58. Following a successfulcareer as Managing Director of Globe Investment Trust plc, Jimmy West became theChief Executive of Lazard Asset Management and a Managing Director of LazardBrothers & Co. Ltd, where he held full responsibility for the bank's investmentoperations. He is now Chairman of Gartmore Fledgling Trust plc and JupiterSecond Enhanced Income Trust plc and is a non-executive Director of a number ofdiverse companies including Candover Investments plc, British Assets Trust plcand Global Natural Energy plc. Peter Earl, Managing Director, aged 50, began his career at the BostonConsulting Group advising state owned companies. He has advised ministries offinance and central banks in Abu Dhabi, Albania, Kuwait and Saudi Arabia. He isthe author of the standard European textbook on cross-border takeovers publishedby Euromoney. Formerly Chief Executive of Tranwood plc and The CarterOrganization Inc., in New York, he acted on secondment to the World Bank and theUnited Nations Development Programme, advising on privatisations in LatinAmerica and Eastern Europe, where he has served as Deputy Chairman for theUnited Nations Economic Commission for Europe infrastructure finance group. Hewas a director of Fieldstone Private Capital Group Limited ("Fieldstone") inLondon. In the mid-1990's, he advised on USD 6 billion of cross-border powersector acquisitions and bids, involving 5,000 MW of installed capacity and morethan 2 million distribution customers. In 1995, he founded IPC which has owned,developed and operated 4,000 MW of power projects around the world including inKazakhstan, USA, Argentina and Bolivia. He is an Oxford University graduate andwas a Kennedy Scholar at Harvard University. John Michael Eyre, Director of Engineering, aged 51, is both a Chartered andEuropean Engineer and has extensive experience in project management anddevelopment in the power sector. As a Central Electricity Generating Boardengineer, he spent part of his early career on secondment to Eskom of SouthAfrica with responsibility for maintenance of a portfolio of 26 power plants. Hesubsequently became Head of Engineering Quality with National Power plc, wherehe developed and implemented policy for risk management of their UK assets aswell as leading the technical due diligence for significant internationalacquisitions such as Hub, a 1,200 MW oil-fired plant in Pakistan, and Marmara, a500 MW combined cycle power plant in Turkey. Recently, he led businessdevelopment at Lloyds' Register power division (subsequently Ingenco) andadvised developers on renewable energy projects. At IPC, he is responsible foroperations and maintenance activities and supervising technical due diligencefor proposed acquisitions and greenfield development in Latin America andCentral Asia. Elizabeth Shaw, Director of Finance, aged 45, has been involved in theelectricity sector since 1994. Between 1994 and 2000, as a director of Fieldstone, she advised on a number ofmergers, acquisitions and disposals in the electricity industry, both in the UKand in developing markets. In Bolivia, she advised on the spin-off of theElectropaz distribution business of Compania Boliviana de Energia Electrica S.A.to Iberdrola S.A. of Spain and on the sale by ENDE of its electricitydistribution interests in Cochabamba. Prior to joining Fieldstone, Elizabeth wasextensively involved in the financing of small-to-medium sized companies in theUK, including raising equity for both listed and unlisted companies. Currentlyshe is responsible for business development and finance at IPC. She is agraduate of Exeter University. Francis Mattos, Non-Executive Director, aged 72, has over 40 years' broad-basedpower sector engineering and management experience, initially as a seniormanager with the Central Electricity Generating Board. In 1984 he was secondedto British Electricity International (BEI), where he was responsible foroverseas business and project development. On privatisation of the U.K.electricity sector, BEI became National Power International with a focus oninternational utility acquisitions and power plant construction projects. Theseprojects included the acquisition in 1993 of the Pego power station in Portugal,then the largest, privatised, power project in Europe where he was a director.Recently he was an adviser to Sithe Energies, Inc. and is a registeredconsultant to the World Bank and other funding agencies. He has written andpresented papers on power system economics and control, tariffs, substationswitching, planning and operations reliability standards. He is both a CharteredEngineer and a Chartered Manager. On 19 July 2004 the Company passed aresolution at an extraordinary general meeting to approve his appointment as aDirector notwithstanding that he has attained the age of 70, in accordance withsection 293(5) of the Act. Sir Robin Christopher KBE CMG, Non-Executive Director, aged 61, retired from theForeign and Commonwealth Office in 2004. Since 1994, Sir Robin has been Britishambassador to Ethiopia, Indonesia and Argentina. Sir Robin first lived in LatinAmerica forty years ago. He knows Bolivia well. He is a trustee for The BrookeHospital, Prospect Burma and St. Matthew's Children Fund (Ethiopia), all ofwhich are charitable trusts. He is also an Hon. Fellow of the Institute for theStudy of the Americas (ISA) at London University. He is a graduate from OxfordUniversity. Lock-ins and orderly market arrangementsFollowing Admission and the Subscription by Peter Earl and Technology FinanceLimited, the Directors (and companies connected and/or associated with them) andcertain senior management will be interested, in aggregate, in 10,952,721Ordinary Shares representing approximately 16.04 per cent. of the Enlarged ShareCapital. Under the terms of the Lock-in Agreement each of the Directors andtheir connected persons including IPC, save in certain limited circumstances,will not dispose of any interest in any Ordinary Shares held by them for aperiod of twelve months from Admission other than with prior written consent ofboth the Broker and Nominated Adviser and for a further twelve months, onlyhaving consulted the Broker and Nominated Adviser, or the Company's then brokerand nominated adviser, so as to ensure the maintenance of an orderly market inthe Ordinary Shares. Under the terms of the Orderly Market Agreement, Technology Finance Limited willnot dispose of any interest in any Ordinary Shares held by them for a period of12 months, without consulting the Broker and Nominated Adviser, or the Company'sthen broker and nominated adviser, so as to ensure the maintenance of an orderlymarket in the Ordinary Shares. Share option schemeThe Directors believe that the Company's success is highly dependent on thequality of its employees. To assist in the recruitment, retention and motivationof employees, an important part of the future remuneration strategy will be theability to award equity incentives and in particular share options to employees.The Directors intend to adopt a share option scheme pursuant to which optionsmay be granted to Directors and employees of the Group, at a subscription priceequal to the greater of the nominal value per Ordinary Share and the marketvalue of an Ordinary Share at the time of grant, over an aggregate maximum of 10per cent. of the Company's issued share capital from time to time. Dividend policyOn 5 November 2005 the Company announced its preliminary results for the year to30 June 2005 in which the Directors have recommended a dividend of 0.5 pence pershare which was approved by Shareholders at the AGM of the Company held on 12December 2005. The Directors intend to continue to pay dividends in the futurewhen it is prudent to do so, having regard to the availability of the Company'sdistributable profits and the retention of funds required to finance futuregrowth. In the medium term the Directors intend that dividend income will be asignificant source of shareholder value. Extraordinary General MeetingA circular comprising an Admission Document under the AIM rules, which includes,inter alia, a section on Risk Factors will be sent to Shareholders today. Thiswill include a Notice of an Extraordinary General Meeting of the Company to beheld on at 10.00 a.m. on 5 January 2006, together with a form of Proxy. The Resolutions will provide as follows: (a) to approve the Acquisition;(b) to increase the authorised share capital of the Company from £850,000 to£2,400,000 by the creation of a further 77,500,000 Ordinary Shares;(c) to authorise the Directors to allot (i) new Ordinary Shares pursuant to thePlacing; (ii) new Ordinary Shares pursuant to the Warrants; and (iii) otherwiseup to a maximum nominal amount of £409,732.65 (representing approximately 30 percent. of the Enlarged Share capital of the Company);(d) to authorise the Directors to allot equity securities for cash as if thestatutory pre-emption rights set out in section 89 of the Act did not apply toenable the Directors to allot the new Ordinary Shares pursuant to the Placing;pursuant to rights or other offers and otherwise up to a maximum nominalamount of £68,288.78 (representing approximately 5 per cent. of the EnlargedShare Capital of the Company). Enquiries: Peter Earl 020 7793 7676Rurelec PLC Paul ShackletonDaniel Stewart & Co PLC 020 7374 6789 Christian DennisHichens Harrison & Co. plc 020 7588 5171 DEFINITIONSThe following definitions apply throughout this announcement, unless the contextrequires otherwise: "Acquisition"the proposed acquisition of Bolivia Integrated pursuant to the AcquisitionAgreement "Acquisition Agreement"the conditional agreement between inter alia Southern Integrated and BirdsongOverseas Limited for the acquisition by Birdsong Overseas Limited from SouthernIntegrated of the entire issued share capital of Bolivia Integrated. "Act" or "Companies Act"the Companies Act 1985, as amended "Admission"the re-Admission of the Existing Ordinary Shares and Investor Warrants totrading on AIM and the Admission of the Placing Shares to trading on AIMbecoming effective in accordance with the AIM Rules "AIM"the market known as "AIM" operated by the London Stock Exchange "AIM Rules"the rules for AIM companies in force at the date of this announcement issued bythe London Stock Exchange"Andina"Empresa Petrolera Andina, a company registered in Bolivia "Articles"the articles of association of the Company "Basic Acquisition Agreement"the agreement between Basic Energy Limited and Rurelec for the acquisition byRurelec from Basic Energy Limited of fifty per cent. of the issued share capitalof Patagonia Energy. "Birdsong Overseas Limited"a wholly owned subsidiary of the Company, registered in the British VirginIslands under registration number 688032 whose registered office is at NerineChambers, 5 Columbus Centre, Road Town,Tortola, British Virgin Islands "Board" the board of directors of the Company, including a duly constitutedcommittee of such directors "Bolivia Integrated"Bolivia Integrated Energy Limited, a company registered in the British VirginIslands under registration number 510247, whose registered office is at NerineChambers, 5 Columbus Centre, Road Town, Tortola, British Virgin Islands "Broker" or "Hichens Harrison"Hichens, Harrison & Co. plc "Broker Warrants" 75,000 warrants issued to Hichens Harrison on 18 August 2004to subscribe for 75,000 Ordinary Shares at a price of 40 pence per Share "Capime"Capime Ingenieria S.A. a company registered in Argentina whose principal officeis at Talcahuano 736-7mo, Piso, Buenos Aires, Argentina "Chaco"Empresa Petrolera Chaco S.A., a company registered in Bolivia "Combined Code"the "Combined Code on Corporate Governance" published in July 2003 by theFinancial Reporting Council "CREST"the computerised settlement system (as defined in the CREST Regulations)operated by CRESTCo which facilitates the transfer of title to shares inuncertificated form (as defined in the CREST Regulations) "CRESTCo"CRESTCo Limited "CREST Regulations"the Uncertificated Securities Regulations 2001 (SI 2001/3755) "Daniel Stewart"Daniel Stewart & Co plc, the Company's nominated adviser "Directors"the directors of the Company "Enlarged Share Capital"the Ordinary Shares in issue immediately following Admission and completion ofthe Placing (excluding any Ordinary Shares that may be issued pursuant to theexercise of any Warrants prior to Admission) "ESA" Energia para Sistemas Aislados ENERGAIS S.A., a company registered inBolivia under registration number 107752 whose principal office is at Av.Brasil, Esquina 3_ Anillo, Santa Cruz, Bolivia "EDS"Energia del Sur S.A., a corporation duly incorporated and existing under thelaws of the Republic of Argentina, domiciled at Alicia Moreau de Justo 2050, 3rdfloor, office 307, City of Buenos Aires, Republic of Argentina "EGM" or "Extraordinary General Meeting"the extraordinary general meeting of the Company convened for 10.00 a.m. on 5January 2006, notice of which is set out at the end of the Admission Document "Electrica" Electrica del Sur, S.A., a corporation duly incorporated andexisting under the laws of the Republic of Argentina, domiciled at Alicia Moreaude Justo 2050, 3rd floor, office 307, City of Buenos Aires, Republic ofArgentina "Enlarged Group"the Company together with its subsidiaries following completion of theAcquisition "Executive Directors"Peter Earl, Michael Eyre and Elizabeth Shaw "Existing Ordinary Shares"the 21,350,000 Ordinary Shares in the capital of the Company in issue at thedate of this announcement "FSMA"the Financial Services and Markets Act 2000 "GAI" or "Guaracachi America Inc."Guaracachi America Inc., a company registered in the state of Delaware underregistration number 2524312 whose principal office is at 32 Loockerman Square,Suite L-100, City of Dover, County of Kent, State of Delaware "Grant Thornton"Grant Thornton UK LLP of Grant Thornton House, Melton Street, Euston Square,London NW1 2EP "Group"the Company and its subsidiary undertakings as at the date of this announcement "Guaracachi" or "EGSA" Empresa Electrica Guaracachi, S.A., a company registeredin Bolivia under registration number 08-035910-03 whose principal office is atAv. Brasil, Esquina 3 Anillo, Santa Cruz, Bolivia "Independent Directors"Francis Mattos and Sir Robin Christopher KBE CMG, neither of whom are deemed tobe a Related Party "Investor Warrants"1,000,000 warrants issued by the Company, on 18 August 2004 to subscribe for1,000,000 Ordinary Shares "IPC"Independent Power Corporation PLC a company registered in England underregistration number 3097552, whose principal office is at 5th Floor, PrinceConsort House, 27-29 Albert Embankment,London SE1 7TJ "IPOL"Independent Power Operations Limited, a company registered in England underregistration number 4288901, whose registered office is at 5th Floor, PrinceConsort House, 27-29 Albert Embankment, London SE1 7TJ "Loan Note"the loan note issued pursuant to the note instrument constituting unsecured loannotes up to USD 5 million redeemable not later than 31 December 2010 "Lock-In Agreements"the conditional agreements governing the disposal of Ordinary Shares by theDirectors and others., "London Stock Exchange"London Stock Exchange plc "Management Agreement"the long term management agreement 13 December 2003 between IPOL and EGSA, "Non-Executive Directors"James West, Francis Mattos and Sir Robin Christopher "Official List"the Official List of the UKLA "Orderly Market Agreement"the conditional agreement governing the disposal of Ordinary Shares byTechnology Finance Limited. "Ordinary Shares"ordinary shares of 2 pence each in the capital of the Company "Patagonia Energy"Patagonia Energy Limited a company registered in the British Virgin Islandsunder registration number 620522, whose registered office is at the offices ofWalker (BVI) Limited, Walker Chambers, P.O. Box 92, Road Town, Tortola, BritishVirgin Islands "Patagonia Group"Patagonia Energy and its subsidiary undertakings as at the date of thisannouncement "Patagonia Shareholders' Agreement"the agreement between Basic, Rurelec and Patagonia Energy relating to certainrights and obligations in respect of the shares in the capital of PatagoniaEnergy, "Placees"the subscribers of Placing Shares pursuant to the Placing "Placing"the conditional placing by Hichens Harrison on behalf of the Company of thePlacing Shares pursuant to the Placing Agreement and including for thesepurposes the subscription by Peter Earl and Technology Finance Limited ofPlacing Shares "Placing Agreement"the conditional placing agreement dated 13 December 2005 between the Company,the Directors, Daniel Stewart and Hichens Harrison "Placing Price"42 pence per Placing Share "Placing Shares"the 46,938,775 new Ordinary Shares which are the subject of thePlacing "Prospectus Rules"the Prospectus Rules of the UKLA "Related Party"a party who is so defined in the AIM Rules "Related Party Transaction"a transaction as defined in rule 13 of the AIM Rules "Resolutions"the resolutions set out in the Notice of the EGM "Rurelec" or the "Company"Rurelec PLC "Services Agreement"the shared services agreement dated 23 July 2004 between the Company and IPC "Shareholders"holders of Ordinary Shares "Southern Integrated"Southern Integrated Energy Limited a company registered in the British VirginIslands under registration number 491283, whose registered office is at NerineChambers, 5 Columbus Centre, RoadTown, Tortola, British Virgin Islands "UKLA"the Financial Services Authority, acting through the United Kingdom ListingAuthority, in its capacity as the competent authority for the purposes of PartVI of FSMA "USA" or "United States"the United States of America, its territories and possessions, any State of theUnited States of America and the District of Columbia "Warrants"the Broker Warrants and the Investor Warrants This information is provided by RNS The company news service from the London Stock Exchange