Rurelec Regulatory News (RUR)

10 November 2014

Rurelec PLC

("Rurelec" or "the Company")

Proposed reduction of the Share Premium Account

Notice of General Meeting

The Directors of Rurelec PLC (AIM: RUR), the owner, operator and developer of power generation capacity internationally, are pleased to announce that the Company has applied to the High Court for approval to reduce its share premium account. The rationale for this proposal is to permit Rurelec to return as quickly as possible to paying dividends to shareholders. A circular will today be posted to shareholders outlining the reasons for the reduction and requesting approval at a General Meeting to be held on 25th November, 2014. The text of the circular has been posted on the Rurelec website and is attached as an Appendix to this announcement.

In the interim results released on 30 September 2014, the Company announced that it was exploring one or more major alliances in Latin America. This will allow the Company to accelerate its growth without further capital from existing shareholders and this is part of a wider strategy to return to paying dividends. The Company is pleased to report that it is close to agreement on a series of transactions which will cement its alliances and take Rurelec closer to its aim to resume dividend payments to shareholders from 2015.

As shareholders will have seen from both the annual report issued on 6 June 2014 as well as from the interim results, the Bolivian arbitration award and the resulting settlement eliminated the Group's distributable reserves leaving a deficit of over £22 million. It would take many years of profits from operations to remove that deficit and in the intervening period the Company would be unable to pay dividends.

To overcome this problem, the Company has applied to the High Court for permission to reduce the Company's Share Premium Account in order to eliminate the deficit and to create distributable reserves. If approved, this will permit a return to dividend payments as soon as the Company records a profit and only if the directors believe it prudent to propose to shareholders the payment of a dividend. There can be no guarantee of the timing of any dividend payment, if at all.

The partnership transactions now being finalised each assume the sell down of a share stake in one of the Group's regional holding companies. If the Company is successful in closing these transactions, we expect to record development profits on the portfolio of underlying projects. Since 2013, the Company's business has included the development of new power plants as well as the ownership and operation of existing power plants held for investment. Developers make money by selling share stakes in their developments. Any sale of a share stake at a premium will constitute a realisation of a profit from which dividends could be paid.

Commenting on the proposed reduction in the Share Premium Account, Peter Earl, CEO of Rurelec said:

"At a time when shareholders may have despaired at seeing daily the large discount to net assets at which the Company's shares are currently trading, the Board believes that the resumption of dividend payments will position the Company on the stock market as an income producing utility, in line with the Company's trading performance in its early days as the first utility company traded on the AIM Market. We believe that the opportunities offered to us and our current projects reflect our credibility in South America following many years of successful power development there. We are confident that we can turn this into shareholder value as we put the difficulties of the Bolivian settlement behind us. "

For further information please log onto our website at www.rurelec.com or contact:

Notes for Editors

10 November 2014

RURELEC PLC("Rurelec" or the "Company")

Notice of General Meeting

Proposed reduction of the Company's Share Premium Account

Rurelec PLC (AIM: RUR), the AIM listed owner, operator and developer of power generation capacity internationally, announces that it is today posting a circular containing details of the proposed reduction of its Share Premium Account, together with formal notice of the requisite general meeting.

Unless the context otherwise requires, defined terms used in this announcement shall have the meanings given to them in the Circular and Notice of General Meeting dated 10 November 2014.

Highlights:

Proposed reduction of the Company's Share Premium Account in the amount of £45,000,000, subject to the receipt of shareholders' approval at a duly convened General Meeting.

The proposal is also subject to the approval of the High Court and comprise:

the reduction of the Company's Share Premium Account; and

utilising the sums arising from the Capital Reduction to (i) eliminate the accumulated losses in the profit and loss reserve of the Company and (ii) create distributable reserves to allow the Company to pay dividends in due course.

The Capital Reduction does not affect the number of Shares in issue or the nominal value per Share and does not affect the voting or dividend rights of any Shareholder.

The General Meeting will be held at 10.30 a.m. on 25 November 2014 at the offices of Rurelec PLC, Millbank Tower, 21-24 Millbank, 17th Floor, London SW1P 4QP. The record date for Shareholders to be entitled to receive the Distribution is 6 p.m. on 21 November 2014.

The proposals are unanimously recommended by the Board of Rurelec and, subject to receiving the requisite shareholder and High Court approvals, it is currently anticipated that Capital Reduction will be effective on or around 19 December 2014.

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Introduction

The Company today announces details of its proposal to reduce the Company's capital by the reduction of the Share Premium Account of the Company (the "Capital Reduction"). The purpose of this announcement is to provide details of the Capital Reduction and the Resolution to be proposed to Shareholders at the forthcoming General Meeting. The Board considers that the Resolution to be proposed at the General Meeting is in the best interests of the Company and its Shareholders as a whole and unanimously recommends that Shareholders vote in favour of the Resolutions.

Background to the Capital Reduction

At the date of this announcement, the Company has accumulated losses on its profit and loss account of £7,371,683. The existence of these losses prevents the Company from paying dividends to its shareholders out of future profits until these losses have been eliminated. Given the size of the accumulated losses, there is in the opinion of the Board no reasonable prospect of the losses being eliminated in the short term. It is therefore proposed that the permanent loss should be recognised by eliminating the deficit on the profit and loss account. This would be achieved by the reduction in the balance on the Share Premium Account of the Company.

The Company has built up a substantial Share Premium Account through the issue of shares for cash at values in excess of the nominal value of those shares. At the date of this announcement, the balance standing to the credit of the share premium account is £67,835,921. It is proposed that the Share Premium Account be reduced in an amount of £45,000,000 to £22,835,921.

If approved by Shareholders and subsequently confirmed by the High Court in the terms proposed by your Board, the effect of the Capital Reduction will be to release part of the amount standing to the credit of the Share Premium Account of the Company so that £45,000,000 (i) may be used by the Company to eliminate the deficit on the profit and loss account and (ii) the balance credited to the distributable reserves of the Company to allow the Company to pay dividends in due course.

The implementation of the Capital Reduction is subject to a number of criteria and legal processes which are explained further below.

Capital Reduction - Share Premium Account

Share premium is treated as part of the capital of the Company and arises on the issue by the Company of shares at a premium to their nominal value. The premium element is credited to the Share Premium Account. The Company is generally precluded from the payment of any dividends or other distributions or the redemption or buy back of its issued shares in the absence of sufficient distributable reserves, and the Share Premium Account can be applied by the Company only for limited purposes.

In particular, the Share Premium Account is a non-distributable capital reserve and the Company's ability to use any amount credited to that reserve is limited by the Companies Act. However, with the approval of its shareholders by way of a special resolution and subsequent confirmation by the High Court, a company may reduce or cancel its share premium account and in certain circumstances either return all or part of the sum arising to shareholders as a return of capital, or credit some or all of such sum arising to its profit and loss account.

To the extent that the release of such a sum from the Share Premium Account creates or increases a credit on the profit and loss account, that sum represents distributable reserves of the Company.

Capital Reduction - Procedure

In order to effect the Capital Reduction, the Company firstly requires the authority of its Shareholders by the passing of a special resolution at the General Meeting to approve and effect the reduction of the Share Premium Account.

Secondly, the Capital Reduction must be confirmed by the High Court, to which the Company will make an application if the special resolution is passed.

The Capital Reduction will take effect when the Order of the High Court confirming it and a statement of capital approved by the High Court have been registered with the Registrar of Companies. The Effective Date of the Capital Reduction is currently expected to be 19 December 2014. That date is likely to be within a few working days after the hearing at which the Capital Reduction is confirmed by the High Court, which is currently expected to be on or around 17 December 2014.

In order to approve the Capital Reduction, the High Court will need to be satisfied that the interests of the Company's creditors will not be prejudiced by the Capital Reduction. The Company is not required to seek written consent to the Capital Reduction from its creditors. However, for the benefit of those of its creditors from whom consent is not required, the Company may be obliged to provide security in a form acceptable to the High Court. This is in order that the Capital Reduction can be confirmed by the High Court on terms that will permit any part of the sum released by the Capital Reduction either to be returned to Shareholders as a capital payment or credited to the profit and loss account of the Company so as to create distributable reserves.

If the Company is unable in the timetable proposed to obtain consent from, or is unable or unwilling to provide security (where security is required) for all such creditors, then the amount released by the Capital Reduction, when the Capital Reduction is confirmed by the High Court, will remain undistributable for the time being until any such outstanding consents have been obtained, security (where security is required) has been put in place, or the relevant obligations have been discharged, and the Company may be required to give an undertaking to that effect to the High Court.

The Board reserves the right (where necessary by application to the High Court) to abandon, discontinue or adjourn any application to the High Court for confirmation of the Capital Reduction, and hence the Capital Reduction itself, if the Board believes that the terms required to obtain confirmation are unsatisfactory to the Company or if as the result of a material unforeseen event the Board considers that to continue with the Capital Reduction is inappropriate or inadvisable.

The Resolutions

An explanation of the Resolution which is to be proposed as special business at the General Meeting is set out below:

Capital Reduction - Reduction of the Share Premium Account

The resolution reduces the amount standing to the credit of the share premium account of the Company by £45,000,000.

The Capital Reduction does not affect the number of Shares in issue, the nominal value per Share or the voting or dividend rights of any Shareholder.

General Meeting

A Circular containing a formal notice of a General Meeting to be held at the offices of Rurelec PLC, Millbank Tower, 21-24 Millbank, 17th Floor, London SW1P 4QP at 10.30 a.m. on 25 November 2014 is today being posted, together with a form of proxy, to those shareholders who have elected to receive hard copy shareholder communications from the Company and will shortly be made available to download from the Company's website at http://www.rurelec.com/investors/circulars.

Expected Timetable of Principal Events

Notes:

(1) All references in this announcement to time are to London time.

(2) If any of the above times or dates should change, the revised times and/or dates will be notified to Shareholders via an appropriate announcement on a Regulatory Information Service.

(3) All events in the above timetable following the holding of the General Meeting are conditional upon: (i) the passing of the Resolution; (ii) approval of the Capital Reduction by the High Court; and (iii) registration of the High Court Order confirming the Capital Reduction with the UK Registrar of Companies.

**ENDS**