Rurelec Regulatory News (RUR)

10 June 2013 

Rurelec PLC

("Rurelec" or the "Company")

Related Party Transactions

Proposed Acquisition of Independent Power Corporation PLC

Proposed Purchase of Gas Turbines for Illapa Project from IPSA Group PLC

Placing of New Ordinary Shares

Rurelec PLC (AIM: RUR), the electricity utility company focused on the ownership and operation of power generation plants in Latin America, is pleased to announce that it has today entered into conditional agreements to acquire (1) The Independent Power Corporation PLC ("IPC") and (2) two TurboCare (ex FiatAvio) TG50D5 gas turbines and ancillary equipment (the "Turbines") from IPSA Group PLC ("IPSA"). In addition, the Company announces the terms of a placing, effected on behalf of the Company by Daniel Stewart & Company plc ("Daniel Stewart"), to raise approximately £525,000 (before expenses) and a direct allotment and issue by the Company of its shares to an investor for cash, to raise approximately £100,000.

In aggregate, the Company is proposing to issue 132,483,871 new ordinary shares of 2 pence each in the capital of the Company (the "New Ordinary Shares") which, based on a placing price of 12.5 pence per share (the "Placing Price") (representing a discount of approximately 1 per cent. to the closing mid-market price of an ordinary share on 7 June 2013) values such New Ordinary Shares at £16,560,483.87.

Once completed, the acquisition of IPC and the Turbines will accelerate Rurelec's organic growth and increase Rurelec's global footprint. The intention is for the Turbines to be installed in Rurelec's new 255 MW open cycle greenfield gas fired power plant to be developed in Mejillones, Chile (the "Illapa Project").

Background to the Transactions

1. Acquisition of IPC

 - In consideration for the acquisition of the entire issued share capital of IPC, 32,000,000 New Ordinary Shares are to be issued to Sterling Trust Limited ("Sterling Trust") and Technology Finance Limited (the sole shareholders of IPC) which, at the Placing Price, represents an implied value for IPC of £4 million. In addition to the 32,000,000 New Ordinary Shares, a portion of development fees for projects, to be paid to IPC on future dates, will also be paid to Sterling Trust and Technology Finance Limited as additional cash

- consideration, when such development fees are paid to IPC post acquisition.

- IPC is one of the United Kingdom's leading power developers and power plant operators. Since 1995 it has developed and operated thermal and hydro plants in North America, Latin America, South Africa, Asia and Europe. IPC's last audited group accounts, dated 29 June 2012, for the year ended 31 December 2011, reflected net assets of £3,791,425, a turnover of £310,977 and net profits of £12,246. IPC's latest unaudited management accounts, dated 30 April 2013, for the four months ended 30 April 2013, reflected net assets of £4,015,124, turnover of £1,319,152 and net profits of £940,777.

- The proposed acquisition of IPC will broaden the range of projects which Rurelec can manage in-house and will simplify the business relationships between the two companies. Rurelec and IPC have a long history of working together since 2004, when the original business of Rurelec was devolved from IPC.

- The proposed acquisition of IPC will also diversify Rurelec's projects away from its current focus on Latin America and will position Rurelec as a global power developer and project manager, in contrast with its pre-acquisition profile where it was focused on the ownership of power plants.

- Finally, the proposed acquisition of IPC will provide the enlarged Rurelec group with IPC's 17 year track record in international markets ranging from North America to the Middle East and Central Asia.

2. Advancing the Illapa Project through the purchase of the Turbines from IPSA

- Rurelec has agreed to purchase the Turbines from IPSA for a consideration of approximately £16.1 million, to be satisfied by Rurelec through:

(1) an initial payment of approximately £11.9 million, satisfied by (i) IPSA directing the issue of 78,978,843 New Ordinary Shares to certain creditors of IPSA, as consideration for the satisfaction and discharge of the debts owed to them by IPSA - such creditors include Sterling Trust, which will be accepting 66,914,221 New Ordinary Shares, and Peter Earl, Chief Executive Officer of Rurelec, who will be accepting 6,000,000 New Ordinary Shares; (ii) the proceeds of the issue of 8,000,000 New Ordinary Shares which have been placed on behalf of IPSA with Sterling Trust (the "Vendor Placed Shares"); and (iii) the issue of 8,505,208 New Ordinary Shares to IPSA (together, the "Initial Consideration"); and

(2) a deferred cash payment of approximately £4.2 million to be paid by Rurelec to IPSA within the next two years, at the earlier, inter alia, of the commencement of commercial operations of the Illapa Project or the receipt of settlement payments following the conclusion of Rurelec's arbitration against the Plurinational State of Bolivia.

- Full title transfer of the Turbines from IPSA to Rurelec is expected to take place in the coming months, subject to certain conditions being fulfilled by IPSA after the satisfaction of the Initial Consideration. The conditions include obtaining export clearance in Italy, where the Turbines are currently located, and the release of certain existing security interests over the Turbines. IPSA will grant an Italian law pledge over the Turbines in favour of Rurelec on or prior to the date of satisfaction of the Initial Consideration, which will be released on the date of full title transfer of the Turbines from IPSA to Rurelec. In the event that any of the conditions are not fulfiled, Rurelec will have the power to enforce the Italian law pledge and subsequently take possession of the Turbines. The Turbines will then be exported to Chile for use in Rurelec's proposed Illapa Project.

- Rurelec recently received full environmental approval from the Chilean authorities for the use of the Turbines in the Illapa Project. The purchase of the Turbines allows Rurelec to put in place the financing required for the construction of the Illapa Project.

3. Cash Placings

- Daniel Stewart has conditionally placed 4,200,000 New Ordinary Shares at the Placing Price with investors and Rurelec has conditionally agreed to allot and issue a further 800,000 New Ordinary Shares with an investor who has agreed to subscribe for and accept such shares with cash, at the Placing Price, to raise gross proceeds of £625,000, which will be used to fund Rurelec's expansion plans in Chile and for general corporate purposes. The placings are not underwritten and are conditional on, inter alia, admission of the New Ordinary Shares (other than the Vendor Placed Shares) to trading on AIM.

Related Party Transactions under Rule 13 of the AIM Rules for Companies

The proposed acquisition of IPC is a related party transaction because (i) Sterling Trust is a vendor of IPC and a Substantial Shareholder (for the purposes of the AIM Rules) of Rurelec, and (ii) Peter Earl and Elizabeth Shaw are each directors of both Rurelec and IPC.

The acceptance of the placement of 6,000,000 New Ordinary Shares at the Placing Price by Peter Earl in repayment of a loan to IPC, that is set off against an existing loan from IPC to IPSA, is also a related party transaction.

The proposed acquisition of the Turbines constitutes a related party transaction because (i) Sterling Trust is a Substantial Shareholder (for the purposes of the AIM Rules) in both Rurelec and IPSA, and (ii) Peter Earl and Elizabeth Shaw are each directors of both Rurelec and IPSA.

The independent directors of Rurelec (being Marcelo Blanco, Larry Coben and Andrew Morris), having consulted with the Company's Nominated Adviser, Daniel Stewart, consider that the terms of the proposed acquisitions of IPC and the Turbines, and the acceptance of the placement of 6,000,000 New Ordinary Shares at the Placing Price by Peter Earl, are fair and reasonable insofar as Rurelec's shareholders are concerned.

Admission of the New Ordinary Shares to trading on AIM

- Applications have been made to the London Stock Exchange for 124,483,871 and 8,000,000 New Ordinary Shares, to be admitted to trading on AIM, with Admission of such New Ordinary Shares expected to take place on 13 June 2013 (the "First Admission") and 12 July 2013 (the "Second Admission"), respectively.

- Following First Admission and the Second Admission, the Company's enlarged issued share capital will consist of 553,155,376 ordinary shares , with each ordinary share carrying one vote per ordinary share. The total number of voting rights in respect of these ordinary shares is 553,155,376, each ordinary share having one vote. The Company does not hold any ordinary shares in treasury.

- The New Ordinary Shares to be issued to the creditors of IPSA, IPSA and Sterling Trust, as Initial Consideration for the Turbines, as well as the New Ordinary Shares to be issued to Sterling Trust and Technology Finance Limited as consideration for the sale of IPC, are subject to certain orderly market selling restrictions for a period of six months.

- Sterling Trust is subscribing for and accepting the placement of a total of 90,914,221 New Ordinary Shares, of which (a) 16,000,000 New Ordinary Shares are being received by Sterling Trust in its capacity as a selling shareholder of IPC as part of Rurelec's acquisition of IPC, (b) 8,000,000 New Ordinary Shares are being received by Sterling Trust in its capacity as placee in relation to the Vendor Placed Shares as part of Rurelec's acquisition of the Turbines from IPSA, and (c) 66,914,221 New Ordinary Shares are being received by Sterling Trust in its capacity as a creditor of IPSA as part of Rurelec's acquisition of the Turbines from IPSA. Upon completion of these transactions, Sterling Trust will be directly interested in 302,525,402 ordinary shares, representing 54.69% of the enlarged issued share capital of Rurelec.

- One of the creditors to whom IPSA owes in aggregate just under £0.2 million and who has confirmed that they intend to accept 1,574,334 New Ordinary Shares in consideration for the discharge of their debt as part of Rurelec's acquisition of the Turbines from IPSA, are not expected to be able to sign their creditor letters until later today. If they have not signed their letters by the date of Admission of the Rurelec Shares, Sterling Trust has undertaken to discharge IPSA's debt due to them and Rurelec, IPSA and Sterling Trust have agreed that Sterling Trust will receive the same number of New Ordinary Shares at the Issue Price. In such circumstances, upon completion of these transactions, Sterling Trust would be directly interested in 304,099,736 ordinary shares, representing 54.98% of the enlarged issued share capital of Rurelec.

- Peter Earl, Chief Executive Officer of Rurelec, is accepting the placement of a total of 6,000,000 New Ordinary Shares as part of Rurelec's acquisition of the Turbines from IPSA. This is in repayment of a loan to IPC, that is set off against an existing loan from IPC to IPSA. Upon completion of these transactions, Peter Earl will be interested in 6,650,000 ordinary shares, representing 1.2% of the enlarged issued share capital of Rurelec.

Commenting on the fundraising, Peter Earl, Chief Executive Officer of Rurelec, said:

"These two transactions are intended to transform Rurelec and accelerate its growth in Chile with what will soon be 295 MW of power plants under construction in the north of the country close to the mining company centres of high demand for power prior to the year end. The acquisition of IPC will allow us to bid and operate in countries outside Latin America, making us a truly global player in the power sector.

We have taken the opportunity to press ahead with the expansion pending completion of the arbitration process with the Plurinational State of Bolivia. The final hearing concluded in April and an announcement of the compensation due to be awarded to Rurelec is due to be announced in the coming months with payment expected to be made later this year."

- End -

 For further information please contact: