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Proposed Open Offer

13 Nov 2015 07:00

RNS Number : 5976F
Rurelec PLC
13 November 2015
 

13 November 2015

Rurelec PLC

("Rurelec" or the "Company")

Proposals for an Open Offer of up to 353,518,086 Open Offer Shares, Proposed Capital Reorganisation and Amendments to the Articles of Association, Proposed Disapplication of Pre-emption Rights and Notice of General Meeting

The Board of Rurelec announces a proposed Open Offer of up to 353,518,086 Open Offer Shares at 1 pence each to raise up to £3,535,180 before expenses. Qualifying Shareholders will be entitled to subscribe for Open Offer Shares on the basis of 1 Open Offer Share for every 1.58800245 Ordinary Shares held on the Record Date. In addition, Qualifying Shareholders subscribing for their full entitlement under the Open Offer may also request additional New Ordinary Shares through the Excess Application Facility. The Open Offer is not underwritten, and is conditional upon shareholder approval and a minimum subscription of 247,462,660 Open Offer Shares.

 

The Issue Price of 1 pence per Open Offer Share represents a discount of approximately 9.09% to the closing middle market price of 1.1 pence for each Existing Ordinary Share in the Company on 12 November 2015.

 

Shareholders whose Existing Ordinary Shares are held by a nominee company should contact their custodian to ensure that they are given the opportunity to participate in the Open Offer. A Circular setting out details of and the terms relating to the Open Offer will be posted today to Shareholders and made available on the Company's website, http://www.rurelec.com . Other potential investors who are interested in subscribing for any shares remaining when applications (including under the Excess Application Facility) from Qualifying Shareholders have been satisfied in full, should contact the Company's Stockbrokers, WH Ireland Limited through a professional intermediary, or directly, in the case of institutional investors.

 

Notice of General Meeting of the Company is also being posted to shareholders today. The General Meeting will be held at the offices of WH Ireland at 24 Martin Lane, London, EC4R 0DR at 12 noon on 30 November 2015. Ordinary resolutions will be proposed to implement the Open Offer, to amend the Company's Articles of Association and to sub-divide each Existing Ordinary Share of 2 pence each into one New Ordinary Share of 0.1 pence each and one Deferred Share of 1.9 pence A special resolution will be proposed to approve a disapplication of pre-emption rights, which is intended to be used, inter alia, for a grant of options to Directors.

 

For further information please contact:

Rurelec PLC

W H Ireland

Mark Keegan, Chief Executive

Paul Shackleton and James Bavister

Tel: 020 7793 5610

Tel: 020 7220 1666

 

 

 

 

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

 

Record Date for entitlement to participate in the Open Offer

 

6.00 p.m. on 10 November 2015

Announcement of the Open Offer and dispatch of the Circular and, to certain Qualifying Non-CREST Shareholders, the Application Form

 

13 November 2015

 

Expected ex-entitlement date for the Open Offer

 

8.00 a.m. on 16 November 2015

Open Offer Entitlements credited to CREST stock accounts of Qualifying CREST Shareholders

 

as soon as practicable after 8.00 a.m. on 17 November 2015

 

Recommended latest time and date for requesting withdrawal of

Open Offer Entitlements from CREST

 

4.30 p.m. on 30 November 2015

Latest time for depositing Open Offer Entitlements into CREST

 

3.00 p.m. on 1 December 2015

Latest time and date for splitting Application Forms

(to satisfy bona fide market claims only)

 

3.00 p.m. on 2 December 2015

Latest time and date for receipt of completed Application Forms and payment in full under the Open Offer or settlement of relevant CREST instruction (as appropriate)

 

11.00 a.m. on 4 December 2015

Latest time and date for receipt of completed Forms of Proxy

 

12 noon on 27 November 2015

 

General Meeting

 

12 noon on 30 November 2015

Record date for Capital Reorganisation

 

6.00 p.m. on 30 November 2015

Open Offer closes

 

7 December 2015

Allotment of Open Offer Shares

 

9 December 2015

Admission of the Open Offer Shares to trading on AIM

 

7.00 a.m. on 9 December 2015

 

Open Offer Shares in uncertificated form expected to be credited to accounts in CREST (uncertificated holders only)

 

as soon as practicable after 8.00 a.m. on 9 December 2015

 

Open Offer Shares in certificated form (certificated holders only)

 

by 16 December 2015

 

 

 

 

OPEN OFFER STATISTICS

 

Issue Price per Open Offer Share

 

1 pence

Closing Price per Ordinary Share on the Latest Practicable Date

1.1 pence

 

Discount to Closing Price of an Ordinary Share on the

Latest Practicable Date

 

0.1 pence

Open Offer Entitlement of Qualifying Shareholders under the Open Offer

One Open Offer Share for every 1.58800245 New Ordinary Shares

 

Number of Ordinary Shares in issue currently

 

561,387,586

Maximum number of Open Offer Shares to be issued by the

Company pursuant to the Open Offer

 

353,518,086

Maximum number of New Ordinary Shares in issue following the completion of the Open Offer

 

914,905,672

 

Maximum gross proceeds of the Open Offer

£3,535,181

 

Open Offer Shares as a percentage of the Enlarged Share

Capital at maximum subscription

 

38.64 per cent.

 

Estimated net cash proceeds of the Open Offer at maximum

subscription

 

£3,361,573

Estimated net cash proceeds of the Open Offer at

Minimum Subscription

 

£2,301,019

 

ISIN Code for Open Offer Entitlements

GB00BYQP5238

 

ISIN Code for Open Offer Excess Offer Shares

GB00BYQP5345

 

 

 

Proposed Capital Reorganisation, amendment of the Articles of Association, disapplication of pre-emption rights and Proposal for an Open Offer of up to 353,518,086 Open Offer Shares at 1 pence per New Ordinary Share

Introduction

The Company announces that it is seeking to raise up to approximately £3,535,181 million (before fees and expenses) through an Open Offer by way of the issue of up to 353,518,086 Open Offer Shares at the Issue Price of 1 pence per share.

While the Directors believe that the Company's assets are sufficient to deliver a partial recovery of shareholder value in the medium term, Rurelec currently faces an acute shortage of cash. In the event that the Open Offer is not successful, and other forms of financing are unavailable, the Company will be unable to pay its creditors as they fall due and the future of the Company will be uncertain. The Directors will, in such circumstances, immediately have to seek emergency financing which may or may not be available. Failure to secure such funding would be damaging to the business and may impair the value of the Ordinary Shares. It is imperative, therefore, that Shareholders vote in favour of the Resolutions and, where appropriate, support the Open Offer which is not underwritten and subject to the Minimum Subscription. The Directors are seeking authority by way of the Resolutions at the General Meeting to enable them to allot and issue the Open Offer Shares.

The successful outcome of the Open Offer is dependent on the Shareholders voting in favour of the Resolutions and the Minimum Subscription being achieved, neither of which is certain. In light of this, the Directors will, as they have been doing for some considerable time, continue to attempt to source further financing for the Company. Any changes in the financial status of the Company will be notified to Shareholders by way of an announcement on a Regulatory Information Service as well as by way of a further shareholder circular if appropriate.

The Company is not able to issue Ordinary Shares at a discount to their nominal value of 2 pence each and will therefore have to effect the Capital Reorganisation in order to issue New Ordinary Shares. Further details of the Capital Reorganisation are included below.

A Resolution is also being put to Shareholders to allow the Company to place New Ordinary Shares for cash free from statutory pre-emption rights to enable finance to be raised in a timely and cost effective manner in the future in order to be able to meet the working capital requirements of the Company, this resolution will include New Ordinary Shares to be issued to the Directors pursuant to the proposed Directors' Option Grants, further details of which are provided below in the paragraph entitled "Directors' Option Grants".

Background

Rurelec PLC was established to own and operate power generation capacity in Latin America. It was incorporated in 2003 and was among the first independent power producers to obtain a quotation for its shares on AIM in 2004. Since the establishment of Rurelec, it has focused on gas fired power generation projects developing combined cycle extensions to its power plants in Argentina and also to its former power generation assets in Bolivia prior to establishing a small hydro development subsidiary in 2011 known as Cascade Hydro Limited.

Over recent years, under previous management, the assets of the Company have been severely depleted by:

· nationalisation of the Company's interest in Empresa Electrica Guaracachi S.A in Bolivia in 2010 followed by protracted and expensive arbitration which resulted in an extremely unfavourable compensation award of $31.534 million against an audited book value of £47 million;

 

· development activity and acquisitions which, particularly in light of the nationalisation of the Company's interest in Bolivia referred to above, the Company has not had the resources to secure; and

 

· heavy costs and overheads.

The loss by the Company of its Bolivian assets and the resulting arbitration in particular caused enormous damage to the Company. The arbitration process continued for a period of four years. During this period the Company borrowed heavily both to meet the costs of the arbitration and to provide essential working capital against the expectation that it would be awarded a settlement of at least the audited book value of the appropriated assets. When this did not occur, this resulted in a critical shortage of funding to complete the development of replacement assets and to meet the future working capital requirements of the Company.

The Company now has interests as follows:

· Argentina. A 50 per cent. interest in EdS, in Argentina held through Patagonia Energy Limited, a company incorporated in the British Virgin Islands. Eds owns a 138 MW combined cycle power plant known as Central Termica Patagonia, located in the coastal city of Comodoro Rivadavia, the largest city in Southern Argentina, and helps support the electricity supply to this significant commercial centre and to the wider region.

· Peru. Partially developed hydro assets in Peru which have been pursued through its wholly owned subsidiary Cascade Hydro Limited, a company incorporated in England, which owns a number of Peruvian project company subsidiaries.

· Chile. Partial development of two thermal power projects in Chile, where sites have been acquired and consents obtained to construct generating facilities at the Central Illapa project in Mejillones and the Termoelectrica del Norte S.A. project in Arica. The Company purchased a Frame 6B turbine for the project in Arica, which has been shipped to Arica and on 10th June 2013, the Company entered into a conditional agreement to buy two Siemens Westinghouse dual fuel turbines for consideration of £16.1 million. All the turbines are stored securely in readiness for commencement of construction of the projects.

Strategy of the New Management

Following the Annual General Meeting of the Company on 14 July 2015, a series of changes to the Board have occurred. The new executive team has been evaluating the Company's assets under development in Argentina, Chile and Peru and their prospects in order for the Board to set a strategy to deliver shareholder value. The Board has taken further steps to reduce the overheads of its London headquarters, following the disposal of its former subsidiary Independent Power Corporation PLC and a move of office premises. The Board has implemented a reduction in staff numbers and cost management initiatives which have resulted in business practices being tightened and discretionary expenditure minimised.

 

 

Argentina

The Board intends to maintain its ownership of its principal asset in Argentina. The Directors note recent press speculation that the next year may see very important changes in currency and capital controls in Argentina, which could reverse the difficulties of the past few years during which the Company has been unable to repatriate sums in respect of repayments of interest and capital on approximately $40 million of loans which it extended to construct the combined cycle plant. Eds now produces annual gross revenues of approximately $27 million, although current exchange controls in Argentina place certain restrictions on transferring funds from Argentina back to Rurelec PLC.

Peru

The Board has determined that the small hydro portfolio in Peru will be particularly costly to develop and these assets have now been offered for sale.

Chile

The Board recognises the need to protect the Company's assets under development in Chile. Both projects have reached a stage where they are largely capable of being taken forward into construction if funding and suitable joint venture partners are identified. These projects can, therefore, either be fully developed and then held as valuable revenue generating assets, or sold in an orderly fashion maximising value for shareholders. No decision has been taken at the current time; the Directors will monitor the situation carefully and evaluate opportunities as they arise. Both scenarios, however, require the Company to be adequately funded.

In the event that the Minimum Subscription is reached and the medium term financial security of the Company is achieved, the Board will look to make further Director appointments as necessary to improve the Company's corporate governance and efficacy of the Board.

As part of an effort to reduce Company overheads, the Directors intend to relocate the Company's offices to a location more cost effective and appropriate. A further announcement is expected to be made in due course.

Directors' Option Grant

Shareholders should be aware that the Company is intending to grant the Directors (in such proportions as it may decide) options to subscribe for such number of New Ordinary Shares as are equal to up to 5 per cent. of the Enlarged Share Capital. No options have been granted to the current Executive Directors to date. Authority to allot such New Ordinary Shares is included in Resolution 4. It is expected that the share options issued will be subject to certain performance share price critera.

Current trading and outlook

Rurelec needs to raise capital to meet the costs of the business over the next twelve months. On 6 November 2015 the Company announced that it had secured and drawn down a £600,000 Loan Facility with Radix, further details of which are set out in paragraph 7 of the Circular. The Directors intend inter alia to repay the Loan from the proceeds of the Open Offer. The Open Offer is an important planned part of the Company's strategy which should enable the Directors to identify routes through which the loans extended by the Company to fund the Group's operations in Argentina can be repaid and the partially developed assets in Peru and Chile can be completed or sold.

The Company faces an acute shortage of cash and is managing its resources carefully on a day to day basis. The Directors are cautiously confident about the medium term prospects of the Chilean and Argentinian assets but shareholder value is contingent upon, inter alia, the successful outcome of the Open Offer or other financing.

The Open Offer, if successful, will allow the Board to pursue its objective of re-building and re-establishing Rurelec as a stable and sustainable business by focusing on the development of its core assets.

The Directors consider that additional funding may be raised, if appropriate, to develop the Company's partially developed assets in Chile. The Directors intend where possible to secure this funding by way of project funding, rather than equity placings. Once the business has been stabilised, the Directors consider that capital should be available on more favourable terms than are currently available.

Use of Proceeds

The Company is seeking to raise up to £3,361,573 after costs from the Open Offer. The Company intends to use the proceeds received from the Open Offer primarily for the following specific items:

· to provide essential working capital to safeguard existing assets where the Board believes these are core to shareholder value. It is anticipated, without limitation that this would involve expenditure on further development where necessary;

· To pay certain outstanding creditors including Ethos Energy and other trade creditors.

· to secure valuable assets including in particular turbines currently held in storage facilities for the projects in Chile;

· to meet the costs of a more streamlined London headquarters with a reduced but suitably qualified number of personnel;

· to progress the sale of all non-core assets including the Company's Peruvian hydro portfolio;

· to meet insurance costs for fixed assets;

· for employment and general administrative costs which are expected to be at considerably lower levels than in previous years; and

· Without limitation to the above to provide general working capital.

Short Term Finance

On 6 November 2015 the Company entered into a short term loan facility with Radix for a principal amount of £600,000. The Loan Facility is secured by a debenture creating a fixed and floating charge over all of the Company's assets. The Loan Facility is to be repaid on or before 31 December 2015. The Company shall pay interest on the unpaid principal amount of the Loan Facility drawn down and outstanding from time to time until the date of repayment at the rate of one per cent. per calendar month. Interest shall be paid on the date of repayment of the principal amount. The Loan Facility was drawn down in full by the Company on 6 November 2015.

Capital Reorganisation

As the price at which the Company's Ordinary Shares are traded on AIM has fallen below the nominal value of such Ordinary Shares, it will be necessary, in order to implement the Open Offer, first to reduce the nominal value of the Ordinary Shares.

The Company currently has in issue 561,387,586 Ordinary Shares of two pence each and, as at the Latest Practicable Date, the middle market price per Ordinary Share was 1.1 pence. The price at which the Company's Ordinary Shares are traded on AIM has fallen below the nominal value of such Ordinary Shares and the Company is prohibited by section 580 Companies Act 2006 from issuing ordinary shares at less than their nominal value. The Board considers, therefore, that it is in the best interests of Shareholders to effect the Capital Reorganisation in order to be able to facilitate the Open Offer to raise essential finance for the Company.

The proposed Capital Reorganisation will result in the reorganisation of the share capital of the Company by sub-dividing each Ordinary Share into one New Ordinary Share of 0.1 pence each and one Deferred Share of 1.9 pence each as is more particularly described in the Resolutions and in the adoption by the Company of the New Articles. The Resolutions, if passed, will then allow the Company to proceed with the Open Offer.

The rights attached to the New Ordinary Shares shall be identical in all respects with the rights attached to the Ordinary Shares. The Deferred Shares will not entitle holders to receive notice of or attend and vote at any general meeting of the Company or to receive a dividend or other distribution or to participate in any return of capital on a winding up (other than the nominal amount paid up on such shares following a distribution to the holders of the New Ordinary Shares). The Deferred Shares will not be admitted to trading on AIM. Accordingly, the Deferred Shares will, for all practical purposes, be valueless and it is the Board's intention that, at an appropriate time, the Company will repurchase the Deferred Shares or cancel or otherwise seek the surrender of the Deferred Shares using such process as the Directors shall determine is compliant with the provisions of the Companies Act 2006 and the New Articles.

The Capital Reorganisation will not change the number of Ordinary Shares in issue.

The Board is asking Shareholders to approve the adoption by the Company of the New Articles for the purposes of including the rights and restrictions attaching to the Deferred Shares as set out above.

Key changes proposed to the Company's Articles of Association

As a result of the Capital Reorganisation a new class of share, the deferred share, shall be created. The New Articles of Association, a copy of which is set out in Part V of the Circular, are proposed to be adopted at the General Meeting in order to set out the rights and restrictions that will apply to the New Ordinary Shares and the Deferred Shares. The New Ordinary Shares shall enjoy all the rights and restrictions currently enjoyed by the Existing Ordinary Shares.

In particular, the Deferred Shares:

· shall not have any voting rights;

· shall not entitle their holders to any dividend or right to participate in profits of the Company;

· shall entitle their holders to receive only the nominal amount paid up on each Deferred Share held on any return of capital or a winding up and provided the holders of the New Ordinary Shares have first received £100 million on each New Ordinary Share after the return of the amount paid up on each New Ordinary Share;

· may be sold by the Directors at any time for the aggregate consideration of £1;

· may be subject of a capital reorganisation involving the cancellation of the Deferred Shares without any repayment of capital; and

· may be the subject of a purchase by the Company of its own shares.

As such the Deferred Shares shall be valueless. The Deferred Shares shall not be admitted to trading on AIM.

Information on the Open Offer

The Directors have given careful consideration as to the structure of the proposed fundraising and have concluded that the Open Offer is the most suitable option available to the Company and its Shareholders at this time having regard to the importance of pre-emption rights to Shareholders, the composition of the Company's register of members, the Company's current share price and in particular, to meet the objective of achieving a cost effective and efficient fundraising.

Conditional upon the Resolutions being passed and subject to receipt of valid applications, it is proposed that up to 353,518,086 Open Offer Shares will be issued through the Open Offer at 1 pence per Open Offer Share to raise aggregate gross proceeds of up to £3,535,181.

The Board acknowledges the importance of the support of both private shareholders and its institutional investors. The Open Offer is intended to give all Shareholders the opportunity to participate in the fund raising. The Open Offer will enable all Shareholders to participate in the fundraising on a pro rata basis. In addition Shareholders will be offered the opportunity to apply for Excess Offer Shares in excess of their pro rata entitlement pursuant to the Excess Application Facility details of which are set out in paragraph 3 of Part II of the Circular. The Directors may allocate any Excess Offer Shares for which applications are received to Qualifying Shareholders who have applied for their Open Offer Entitlement in full in such proportions as they see fit in their sole and absolute discretion.

 

If applications under the Excess Application Facility are received for more than the total number of Excess Offer Shares available following take up of Open Offer Entitlements such applications may be allocated in such manner as the Directors may determine in their absolute discretion. No assurance can be given that applications by Qualifying Shareholders for Excess Offer Shares pursuant to the Excess Application Facility will be met in full or at all.

The Open Offer is not underwritten. There can, therefore, be no certainty as to the aggregate level of subscription for the Open Offer Shares. If the aggregate level of subscription is less than the Minimum Subscription for the Open Offer Shares, and other subscribers cannot be found, the Open Offer will not proceed and subscription monies will be returned to applicants without any interest.

 

Your attention is drawn to the paragraph below entitled "Working Capital".

 

 

Principal terms of the Open Offer

Conditional upon the Resolutions being passed to give effect to the Capital Reorganisation and to provide the Directors with authority to allot the Open Offer Shares (including any Excess Offer Shares), the Open Offer Shares will be offered to Qualifying Shareholders by way of the Open Offer in accordance with statutory pre-emption provisions set out in section 561 of the Act.

Qualifying Shareholders will, pursuant to the Open Offer, be offered the opportunity to subscribe for 1 Open Offer Share for every 1.58800245 New Ordinary Shares held on the Record Date at the Issue Price.

The Open Offer will provide an opportunity for all Qualifying Shareholders to participate in the fundraising pro rata to their current holdings of Existing Ordinary Shares (and of New Ordinary Shares following the Capital Reorganisation referred to above) with the option to subscribe for Excess Offer Shares pursuant to the Excess Application Facility (as referred to below). Any fractional entitlements to Open Offer Shares which are not taken up by Shareholders shall be aggregated and made available as part of the Excess Application Facility.

An Excess Application Facility will be made available as part of the Open Offer which will enable Shareholders, who so wish, to apply for Open Offer Shares in excess of their Open Offer Entitlement in the event that certain other Qualifying Shareholders do not wish to take up their Open Offer Entitlements and with respect to any fractional entitlements. If the Open Offer is not subscribed in full the Board may allot and issue any Excess Offer Shares which are not subscribed by Qualifying Shareholders under the Excess Application Facility to investors who express an interest in subscribing for the same.

It should be noted that the Open Offer is not a rights issue. The Application Form pursuant to which Qualifying Non-CREST Shareholders can apply for Open Offer Shares is not a document of title and cannot be traded.

The Open Offer is limited to a maximum aggregate amount of not more than €5 million which avoids the need for the Company to publish a prospectus pursuant to Prospectus Directive 2003/71/EC thereby saving the Company from incurring the cost and time delay associated with preparing and publishing a prospectus.

If a Qualifying Shareholder does not take up any of his or their Open Offer Entitlement, his or their proportionate ownership and voting rights in the Company will be diluted by up to 38.64 per cent. by the issue of the Open Offer Shares.

The Open Offer is not underwritten. There can be no certainty as to the aggregate level of subscription for Open Offer Shares. If, though the aggregate level of subscription is less than the Minimum Subscription, the Open Offer will not proceed and subscription monies will be returned to applicants.

The latest date and time for acceptance and payment in full under the Open Offer is 11.00 a.m. on 4 December 2015. Full details of the terms and conditions of the Open Offer and how to apply are set out in Part II of the Circular.

Assuming that the Resolutions are passed and all others conditions are satisfied, the Open Offer will, if fully subscribed, raise gross proceeds of up to £3,535,181.

 

The Issue Price represents a 9.09 per cent. discount to the Closing Price of 1.1 pence per Ordinary Share on the Latest Practicable Date.

The Open Offer Shares will when issued be credited as fully paid and will rank equally in all respects with the New Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid in respect of the New Ordinary Shares.

Open Offer Entitlement

Qualifying Shareholders are invited, on and subject to the terms and conditions of the Open Offer, to apply for any number of Open Offer Shares at the Issue Price up to their Open Offer Entitlement.

Qualifying Shareholders have an Open Offer Entitlement of:

1 Open Offer Share for every 1.58800245 New Ordinary Share registered in the name of therelevant Qualifying Shareholder on the Record Date.

Open Offer Entitlements under the Open Offer will be rounded down to the nearest whole number and any fractional entitlements to Open Offer Shares will be disregarded in calculating Open Offer Entitlements.

The aggregate number of Open Offer Shares available for subscription pursuant to the Open Offer will not exceed 353,518,086 Open Offer Shares.

Excess Application Facility

Any Qualifying Shareholder may apply for any number of Excess Offer Shares in excess of his, her or their total Open Offer Entitlement provided they have subscribed for their Open Offer Entitlement in full. If applications under the Excess Application Facility are received for more than the total number of Excess Offer Shares available following take up of Open Offer Entitlements such applications may be allocated in such manner as the Directors may determine in their absolute discretion. No assurance can be given that applications by Qualifying Shareholders for Excess Offer Shares pursuant to the Excess Application Facility will be met in full or at all. To the extent that any Excess Offer Shares available for subscription are not subscribed for by Qualifying Shareholders, the Company shall seek to place such Excess Shares with investors who have expressed an interest in subscribing for the same by completing and returning an Application Form to the Registrars together with payment.

Application procedure under the Open Offer

The procedure for application and payment is set out in the Circular and, where relevant, on the Application Form which will be dispatched to Qualifying Shareholders today.

Application for Admission

Application will be made to the London Stock Exchange for the Open Offer Shares to be admitted to trading on AIM. It is expected that Admission will occur and trading in the Open Offer Shares will commence at 8.00 a.m. on 9 December 2015. No temporary documents of title will be issued.

The Open Offer Shares will, following Admission, rank pari passu in all respects with the New Ordinary Shares in issue following the Capital Reorganisation and will carry the right to receive all dividends and distributions declared, made or paid on or in respect of the New Ordinary Shares after Admission.

Important Notice

Qualifying Shareholders should note that the Open Offer is not a rights issue. Unlike with a rights issue, any Open Offer Shares not applied for by Qualifying Shareholders under their Open Offer Entitlements will not be sold in the market on behalf of, or otherwise placed for the benefit of those Qualifying Shareholders who did not apply for their Open Offer Entitlements but will be made available to Shareholders as part of the Excess Application Facility.

In issuing the Circular and structuring the Open Offer, the Company is relying on the exemption pursuant to Paragraph 9 of Schedule 11a FSMA from the requirement in Section 85 (1) FSMA to publish a prospectus.

Any Qualifying Shareholder who has sold or transferred all or part of his registered holding(s) of Existing Ordinary Shares prior to the date on which the Ordinary Shares are marked 'ex-entitlement' is advised to consult his stockbroker, bank or other agent through or to whom the sale or transfer was effected as soon as possible since the invitation to apply for Open Offer Shares under the Open Offer may be a benefit which may be claimed from him by the purchasers under the rules of the London Stock Exchange.

Effect of the Open Offer

Upon completion of the Open Offer, the Open Offer Shares will represent approximately 38.64 per cent. of the Enlarged Share Capital on the basis that the Open Offer will be subscribed in full.

Overseas Shareholders

The attention of Qualifying Shareholders who have registered addresses outside the United Kingdom, or who are citizens or residents of countries other than the United Kingdom, or who are holding Ordinary Shares for the benefit of such persons (including, without limitation, subject to certain exceptions, custodians, nominees, trustees and agents), or who have a contractual or other legal obligation to forward the Circular or (if applicable) an Application Form to such persons, is drawn to the information which appears in paragraph 6 of Part II of the Circular.

In particular, Qualifying Shareholders who have registered addresses in or who are resident in, or who are citizens of, countries other than the UK (including, without limitation, the United States or any other Restricted Jurisdiction) should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their Open Offer Entitlements and to apply for Excess Offer Shares under the Excess Facility Application.

Resolutions

Set out at the end of the Circular is the Notice of General Meeting to convene a general meeting of the Company to be held at the offices of WH Ireland, 24 Martin Lane, London, EC4R 0DR, at 12 noon on 30 November 2015 at which the following resolutions will be proposed:

· Resolution 1: as an ordinary resolution to approve the Capital Reorganisation and subdivide each of the Company's Ordinary Shares of two pence (£0.02) each in the capital of the Company into:

- one New Ordinary Share with a nominal value of 0.1 pence (£0.001); and

- one Deferred Share with a nominal value of 1.9 pence (£0.019);

· Resolution 2: as an ordinary resolution to authorise the Directors to allot (i) the Open Offer Shares to Qualifying Shareholders who subscribe for Open Offer Shares pursuant to the Open Offer and for any Excess Shares not taken up by Qualifying Shareholders to be issued to investors; (ii) New Ordinary Shares pursuant to the exercise of any options granted to Directors to subscribe for New Ordinary Shares as described in paragraph 4 above; (iii) New Ordinary Shares for cash up to a value of £91,490;

· Resolution 3: as a special resolution to approve the changes to the Existing Articles to give effect to the Capital Reorganisation and to adopt the New Articles as the articles of association of the Company, conditional upon the Resolution to approve the Capital Reorganisation being passed; and

· Resolution 4: as a special resolution to disapply statutory shareholder pre-emption rights in relation to the issue of (i) New Ordinary Shares pursuant to the exercise of any options granted to Directors to subscribe for New Ordinary Shares as described in paragraph 4 above; (ii) New Ordinary Shares for cash up to a value of £91,490. This Resolution is conditional upon Resolution 2 being passed.

The Resolutions to give effect to the Capital Reorganisation are necessary because the price at which the Company's Ordinary Shares are traded on AIM has fallen below the nominal value of such Ordinary Shares. Due to the restrictions in the Companies Act, the Company is not able to issue new Ordinary Shares for a price which is less than their nominal value. The Company will not be able to proceed with the Open Offer unless it sub-divides the Existing Ordinary Shares in the manner proposed by the Resolutions and adopts the New Articles.

The proposed share split into New Ordinary Shares and Deferred Shares will not affect the share price of the Ordinary Shares as the full value of the Ordinary Shares will attach to the New Ordinary Shares and the Deferred Shares will effectively be valueless. The Deferred Shares will carry no right to vote and no right to a dividend.

€5 million exemption and possible need to scale back subscriptions

In making the Open Offer the Company is relying on the exemption pursuant to section 85(5) FSMA and paragraph 9 of Schedule 11A FSMA from the requirement in section 85(1) FSMA to publish a prospectus where an offer of transferable securities is being made to the public under section 102B FSMA. This exemption requires the total proceeds received under the Open Offer to be less than €5 million in aggregate.

Subject to the Resolutions being passed and the Open Offer proceeding, the Issue Price of the Open Offer Shares will represent an approximate 9.09 per cent. discount to the Closing Price of 1.1 pence per Ordinary Share on the Latest Practicable Date.

Application will be made to the London Stock Exchange for the Open Offer Shares to be admitted to trading on AIM. Subject to receiving applications to subscribe for at least the Minimum Subscription of £2,474,627 it is expected that Admission of the Open Offer Shares to trading on AIM will occur on 9 December 2015.

 

Taxation

Shareholders who are in any doubt as to their tax position, or who are subject to tax in a jurisdiction other than the UK should consult an appropriate professional adviser immediately.

Working Capital

Assuming full subscription under the Open Offer is achieved the Company will not require additional external funding subject to the completion of certain intended sales. In the event that these sales do not complete, or there is a material delay in completion, further working capital will be required by the Company by the second quarter of 2016. The Directors would expect to cover any such working capital shortfall by a draw-down of cash reserves from EdS.

If the Minimum Subscription is achieved (rather than the Open Offer being subscribed above this level) additional working capital will be required by the second quarter of 2016. The Directors would expect to cover any such working capital shortfall by a draw-down of cash reserves from EdS.

The Open Offer is conditional upon the Resolutions being passed and is subject to a Minimum Subscription of £2,474,627 being obtained and is not underwritten. Accordingly the outcome cannot be guaranteed. In the event that the Resolutions are not passed or the Minimum Subscription is not met, Admission will not occur and subscription monies will be returned to applicants. Should this occur, the Company will be unable to pay its creditors as they fall due and the future of the Company will be uncertain. The Directors will, in such circumstances, immediately have to seek emergency financing which may or may not be available. Failure to secure such funding would be damaging to the business and may impair the value of the Ordinary Shares.

The successful outcome of the Open Offer is dependent on the Shareholders voting in favour of the Resolutions and the Minimum Subscription being achieved, neither of which is certain. In light of this, the Directors will, as they have been doing for some considerable time, continue to attempt to source further financing for the Company. Any changes in the financial status of the Company will be notified to Shareholders by way of an announcement on a Regulatory Information Service as well as by way of a further shareholder circular if appropriate.

Risk Factors

Shareholders should consider fully and carefully the risks associated with the Open Offer. Your attention is drawn to the risk factors set out in Part III of the Circular (Risk Factors) which are in the opinion of the Directors the principal risks and uncertainties likely to affect the business. It is though emphasised these risk factors are not exclusive.

Intention of the Directors in relation to the Open Offer

The Directors intend to take up their respective Open Offer Entitlements in full and subscribe for an aggregate of 283,375 Open Offer Shares as set out below:

Open Offer Directors Number of Ordinary Shares

Brian Rowbotham 283,375

The Directors, in aggregate together with their immediate families or persons connected with them (within the meaning of Section 252 to 254 of the Act) hold 450,000 Existing Ordinary Shares (and will following the passing of the Resolutions hold an equivalent number of New Ordinary Shares), representing approximately 0.08 per cent. of the Ordinary Shares in issue at the Latest Practicable Date.

 

An announcement will be released to the market in due course notifying the market of the acceptance by Directors and their families or connected persons of any Open Offer and the effect on their subsequent shareholdings in the Company.

Dilution

On completion of the Open Offer (and on the basis that it is fully subscribed) the issued ordinary share capital of the Company will be increased by approximately 62.97 per cent., resulting in an immediate dilution of approximately 38.64 per cent. in aggregate for holders of ordinary shares in the Company, save to the extent that they subscribe for their Open Offer Entitlement in full.

Share Capital

On Admission, on the basis that the Open Offer is fully subscribed, the Company will have 914,905,672 Ordinary Shares in issue. The Open Offer Shares will represent a maximum of approximately 38.64 per cent. of the Enlarged Share Capital.

Recommendation

The Board of Directors of the Company has resolved that the Capital Reorganisation, the Resolutions being proposed at the General Meeting and the Open Offer are in the best interest of Shareholders as a whole. Shareholders should note that unless the Resolutions are passed at the General Meeting the Capital Reorganisation and ultimately the Open Offer cannot be implemented with the result that the Open Offer Shares will not be allotted and issued and the Company will not receive the Open Offer proceeds. If this were to be the case, the Company is unlikely to have sufficient working capital and it is likely that the Directors would need (in order to fulfil their duties to the Company's creditors) to seek alternative sources of finance which may not be available. Accordingly the Directors recommend that Shareholders vote in favour of the Resolutions as they intend to in respect of their own holdings amounting in aggregate to 450,000 Ordinary Shares.

The Directors are not making a recommendation to Qualifying Shareholders as to whether they should take up their entitlement under the Open Offer. Such decision will depend on each Qualifying Shareholder's individual circumstance. Accordingly, the Board of Directors of the Company strongly recommends that Qualifying Shareholders take their own independent financial advice before making a decision as to whether or not to take up their entitlement under the Open Offer and to apply for any Excess Offer Shares pursuant to the Excess Application Facility.

 

 

 

DEFINITIONS

The following definitions apply throughout the Circular and the Application Form unless the context requires otherwise:

 

"Act"

the Companies Act 2006;

 

"Admission"

the admission of the Open Offer Shares to trading on AIM and such

admission becoming effective in accordance with the AIM Rules;

 

"AIM"

the AIM market operated by the London Stock Exchange;

 

"AIM Rules"

the AIM Rules for Companies published by the London Stock

Exchange;

 

"Application Form"

the application form accompanying the Circular to be used by

Qualifying Non-CREST Shareholders in connection with the Open Offer;

 

"Business Day"

any day on which banks are generally open in England and Wales

for the transaction of business, other than a Saturday, Sunday or public holiday;

 

"Capital Reorganisation"

the proposed sub-division and reclassification of the Ordinary

Shares into New Ordinary Shares and Deferred Shares, further details of which are set out in paragraph 8 of the Chief Executive's letter in the Circular;

 

"certificated" or "in certificated form"

the description of a share or other security which is not in uncertificated form (that is not in CREST);

"Closing Price"

the closing middle market quotation of an Ordinary Share or New

Ordinary Share following the Capital Reorganisation as derived from the AIM Appendix to the Daily Official list of the London Stock Exchange;

 

"Company" or "Rurelec"

Rurelec PLC, a company registered in England and Wales with

registration number 04812855, with registered office at 7th Floor, North Tower, 55 Baker Street, London W1U 8EW, United Kingdom;

 

"CREST"

the relevant system (as defined in the CREST Regulations) in

respect of which Euroclear is the Operator (as defined in the CREST Regulations);

 

"CREST member"

a person who has been admitted by Euroclear as a system

member(as defined in the CREST Regulations);

 

"CREST participant"

a person who is, in relation to CREST, a system participant (as

defined in the CREST Regulations);

 

"CREST Regulations"

the Uncertificated Securities Regulations 2001 (SI 2001/3755), as

amended from time to time;

 

"CREST sponsor"

a CREST participant admitted to CREST as a CREST sponsor;

"CREST sponsored member" a CREST member admitted to CREST as a sponsored member;

 

"Deferred Shares"

the deferred shares of 1.9 pence each in the capital of the Company to be created pursuant to the Capital Reorganisation as set out in the Resolutions;

 

"Directors" or "Board"

the existing directors of the Company whose names are set out on

page 7 of the Circular;

 

"Directors' Option Grants"

the proposed grant of options to the Directors equal to 5 per cent.

of the Enlarged Share Capital;

 

"EdS"

Energia del Sur, S.A. a company registered in Argentina, owned by Patagonia Energy Limited;

 

"Enlarged Share Capital"

the 914,905,672 New Ordinary Shares in issue immediately

following Admission (on the basis that the maximum number of Open Offer Shares are allotted) but assuming no New Ordinary Shares are issued between the date of the Circular and Admission;

 

"Excess Application Facility"

the terms and conditions of the Open Offer pursuant to which

Qualifying Shareholders may apply for additional Offer Shares in excess of their Open Offer Entitlement in accordance with the terms and conditions of the Open Offer;

 

"Excess Offer Shares"

Open Offer Shares applied for by Qualifying Shareholders under the Excess Application Facility;

 

"Excluded Overseas Shareholders"

other than as agreed by the Company and WH Ireland or as permitted by applicable law, Shareholders who are located or have registered addresses in a Restricted Jurisdiction or any other jurisdiction where to subscribe for Open Offer Shares pursuant to the Open Offer might constitute a violation of local securities laws or regulations;

 

"Existing Articles"

the articles of association of the Company as at the date of the Circular;

 

"Existing Ordinary Shares"

the 561,387,586 Ordinary Shares in issue at the date of the Circular;

 

"FSMA"

The Financial Services and Markets Act 2000, an Act to make

provision about the regulation of the financial services and markets in the UK;

 

"Form of Proxy"

the form of proxy accompanying the Circular for use at the

General Meeting;

 

"General Meeting"

the general meeting of the Company convened by the Notice of

General Meeting;

 

"Group"

the Company and its subsidiaries and subsidiary undertakings;

 

"Issue Price"

1 pence per Open Offer Share;

"Latest Practicable Date"

means 12 November 2015 being the last practicable date prior to

the publication of the Circular;

 

"Loan Facility"

the short term loan facility of £600,000 entered into between Radix

and the Company;

 

"London Stock Exchange"

London Stock Exchange plc;

 

"Minimum Subscription"

£2,474,627;

"New Articles"

the new articles of association proposed to be adopted by the

Company pursuant to the Resolutions;

 

"New Ordinary Shares"

the new ordinary shares of 0.1 pence each in the capital of the

Company to be created following the sub division of the Ordinary Shares pursuant to the Capital Reorganisation as set out in the Resolutions;

 

"Notice of General Meeting"

the notice of general meeting attached to the Circular and

convening a general meeting of the Company on 30 November 2015 at the offices of WH Ireland, 24 Martin Lane, London EC4R 0DR;

 

"Open Offer"

the conditional invitation by the Company to Qualifying Shareholders

to apply to subscribe for Open Offer Shares at the Issue Price on the terms and subject to the conditions set out in the Circular and in the case of the Qualifying Non-CREST Shareholders only, the Application Form;

 

"Open Offer Entitlement"

the Open Offer Shares which a Qualifying Shareholder is entitled to

subscribe for under the Open Offer calculated on the basis of 1 Open Offer Share for every 1.58800245 Ordinary Shares held by that Qualifying Shareholder as at the Record Date;

 

"Open Offer Shares"

the 353,518,086 New Ordinary Shares to be offered to Qualifying

Shareholders under the Open Offer;

 

"Ordinary Shares"

ordinary shares of (1) two pence (£0.02) each in the share capital of

the Company; or (2) following the Capital Reorganisation, of one tenth of a pence (£0.001) each in the share capital of the Company, as the case may require;

 

"Overseas Shareholders"

Shareholders with registered addresses outside the UK or who are

citizens of, incorporated in, registered in or otherwise resident in, countries outside the UK;

 

"Prospectus Directive"

Directive 2001/34 of the European Parliament on the prospectus to

be published when securities are offered to the public or admitted to trading and as amended by Directive 2003/71/EC and 2010/73/EU;

 

"Qualifying CREST Shareholders"

Qualifying Shareholders whose Existing Ordinary Shares on the register of members of the Company on the Record Date are held in certificated form;

 

"Qualifying Non-CREST Shareholders"

Qualifying Shareholders whose Existing Ordinary Shares on the register of members of the Company on the Record Date are held in certificated form;

 

"Qualifying Shareholders"

holders of Existing Ordinary Shares on the register of members of

the Company at the Record Date with the exception (subject to certain exceptions) of Excluded Overseas Shareholders;

 

"Radix"

Radix Investment UK Limited;

 

"Record Date"

6.00 p.m. on 10 November 2015;

 

"Registrars" or "Receiving Agent"

Capita Asset Services;

 

"Regulatory Information Service"

the regulatory information services approved by the London Stock Exchange for the distribution of AIM announcements;

 

"Resolutions"

those resolutions set out in the Notice of General meeting on page

100 of the Circular;

 

"Restricted Jurisdictions"

each of Australia, New Zealand, Canada, Japan, the Republic of

Ireland, the Republic of South Africa and the United States and any jurisdiction other than the UK in which the availability of the Open Offer or the Circular (and any other transaction contemplated thereby) would breach any applicable securities law in such jurisdiction;

 

"Shareholders"

the holders of Ordinary Shares or New Ordinary Shares, as the case

may be, from time to time;

 

"uncertificated"

recorded on a register of securities maintained by Euroclear in

accordance with the CREST Regulations as being in uncertificated form in CREST and title to which, by virtue of the CREST Regulations, may be transferred by means of CREST;

 

"United Kingdom" or "UK"

the United Kingdom of Great Britain and Northern Ireland;

 

"United States of America" or "US"

the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia and all areas subject to its jurisdiction;

 

"WH Ireland"

W H Ireland Limited;

"£" or "Sterling" or "pence"

the lawful currency of the United Kingdom;

 

"$" or "Dollar"

the lawful currency of the United States of America; and

 

"" or "Euro"

the lawful currency of the 18 member states of the European Union

who have entered into an Economic and Monetary Union.

 

 

This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
MSCBJBBTMBIBMLA
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