Star Energy Regulatory News (STAR)

7 Feb 2007 07:01

Star Energy Group PLC07 February 2007 7 February 2007 THIS ANNOUNCEMENT, INCLUDING THE APPENDIX IS NOT FOR RELEASE, OR PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, IRELAND OR MALAYSIA Star Energy Group plc ("Star Energy" or the "Company") Placing of 13,636,364 new ordinary shares at 220 pence to raise GBP 30.0 million (gross) and debt refinancing Star Energy, the UK gas storage developer and oil and gas producer, todayannounces a Placing of 13,636,364 new Ordinary Shares at 220 pence per share toraise approximately £30.0 million before expenses. Hoare Govett Limited hasconditionally agreed to place 13,636,364 new Ordinary Shares at the PlacingPrice with institutional investors on a fully underwritten basis. This is asignificant equity fundraising for the Company and the Placing Shares representan increase of 17.2 per cent. in the issued share capital of the Company. ThePlacing is subject to Shareholder approval. In addition to the Placing, theCompany has also announced today that it has entered into Revised DebtFacilities of £65.0 million to replace the Existing Debt Facilities of £77.5million. The Refinancing will result in an increase of £16.3 million in available fundsand reduce debt repayments by in excess of £5.2 million in the year ending 31December 2007. Pursuant to the Refinancing, the Directors intend to use: • approximately £12.3 million to increase planning and permittingresources, drill gas storage appraisal wells and fund accelerated engineeringand commissioning work on the Group's multiple gas storage opportunitiessimultaneously, thus enabling the Company to react more quickly to the grantingof planning approvals; and • approximately £4.0 million to fund business development activities andfor general working capital purposes. The Directors believe this Refinancing will enable the Group to focus on itsstrategy of maximising shareholder value through • developing existing UK assets into a multi-site gas storage businesswith a target of 80 bcf of onshore storage and up to 50 bcf (gross) of possibleadditional offshore storage by 2010; • exploring the acquisition of additional UK and Western Europe gasassets as existing storage or with potential for storage; and • maximising sustainable cash generation from existing oil and gasproducing assets for reinvestment in gas storage. A letter from the Chairman of Star Energy together with a Notice convening anExtraordinary General Meeting of the Company to approve the Placing will beposted to Shareholders today. Roland Wessel, Chief Executive of Star Energy, said: "We are excited by the opportunities that will become available to us followingthe refinancing. It will give us the ability to move immediately upon thegranting of planning approvals to develop additional gas storage operations. Itwill also increase the funds available to pursue other business developmentactivities which will enable us to maximise shareholder value." - Ends - Enquiries: Star Energy, 020 7925 2121Roland Wessel, Chief Executive Hoare Govett, 020 7678 8000Andrew FosterJohn MacGowanStephen Bowler Financial Dynamics, 020 7831 3113Billy CleggBen Brewerton This summary should be read in conjunction with the full text of the followingannouncement. Appendix II contains the definitions of certain terms used in thisannouncement. Use of proceeds and reasons for the Refinancing The Refinancing will result in an increase of £16.3 million in available funds,being the net proceeds receivable under the Placing and Revised Debt Facilitiesof £28.6 million and £64.4 million, respectively, less the repayment of theExisting Debt Facilities. The Directors believe that there are significant opportunities for growth in gasstorage and intend to utilise the increased available funds of £16.3 millionpursuant to the Refinancing as follows: (i) approximately £12.3 million to increase planning andpermitting resources, drill gas storage appraisal wells and fund acceleratedengineering and commissioning work on the Group's multiple gas storageopportunities simultaneously, which should enable the Company to react morequickly to the granting of planning approvals; and (ii) approximately £4.0 million to fund business developmentactivities and for general working capital purposes. The Directors believe that a refinancing is necessary to give the Company theability to take advantage of these opportunities. The Company's existing debt structure, which includes onerous debt servicecovenants, was negotiated at the time of the Company's initial public offeringin 2004 and was subsequently amended for the Pentex acquisition in 2005. Thisstructure reflected the position of the Company at that time, prior to the fullcommissioning of Humbly Grove, and is a significant constraint on the Company'sability to exploit fully the opportunities for growth in its gas storagebusiness. Accordingly, the Directors believe that this capital structure is nowinappropriate for the current needs of the business and is constraining thedevelopment of value for Shareholders. The Company is making progress on the permitting of new storage facilities andremains hopeful that the new planning applications, to be submitted under the1965 Gas Act, will be successful. The Refinancing will provide additional fundswhich will enable the Company to undertake preparatory work for its potentialgas storage facilities. However, if planning approval is received it is likelythat the Company will need to raise additional debt and equity funds to developthe stores through to commercial operation. The Directors anticipate that anyrequirement for additional equity would be minimised by utilising debtfinancing. Current trading and prospects On 18 January 2007, the Company released the following trading statement: "Star Energy Group plc, the energy company with interests in gas storage andonshore UK oil and gas production, will announce its preliminary results for theyear ended 31 December 2006 on 2 April 2007. In advance of these results, StarEnergy is providing the following trading update. Gas Storage Star Energy remains committed to becoming a significant multi-site gas storageoperator, with the objective of commissioning up to of 80 bcf of new onshorestorage capacity in the UK within the next five years. With the UK now a netimporter of gas, and with reliance on imported gas expected to increase toapproximately 50 per cent. of the UK's gas requirements by 2010/11, the case foradditional gas storage to manage variations in demand and provide security ofsupply continues to be strong. Having experienced what the Company believes are unreasonable delays to itsplanning applications, in October 2006 the Company announced its intention touse the 1965 Gas Act for all of its UK onshore gas storage applications. The Company believes that the use of the 1965 Gas Act will provide a morecertain timeline and cost for future gas storage planning applications, and tothis end the Company anticipates submitting planning applications under the Actin the first half of 2007 for Welton and Albury Phase 1, and for Gainsborough inthe second half of 2007. The Humbly Grove 10 bcf facility in Hampshire, commissioned in late 2005,continues to perform in line with expectations. The Company plans to installadditional compression equipment to enhance the performance of the gas store in2007. Oil and Gas Production Total daily production for the Star Energy Group averaged 4,600 boepd for theyear, boosted by a successful well drilled at Stockbridge. An appraisal well wasalso drilled at Avington, and it remains the Company's intention to drilladditional oil production wells in 2007. Financial Outturn 2006 For the year ended 31 December 2006, the Board expects, subject to audit,turnover to be approximately £56.5 million, including a one-off benefit of £8million relating to the sale of natural gas at Humbly Grove. Turnover fell belowexpectations by approximately £2.5 million due to lower than anticipated oilproduction in the last quarter of the year. This was caused by unscheduled welldown-time and the inability of one of the oil refineries to receiveapproximately 32,500 barrels of produced oil from the Company at the end of2006, which was delivered to the refinery earlier this month. As a result of thelower oil revenues, together with slightly higher operating costs, pre-taxprofit will be in the region of £14.5 million." Details of the Revised Debt Facilities The Existing Debt Facilities were amended on 7 February 2007. Under the RevisedDebt Facilities the Group shall prepay £11.7 million of the amounts currentlyoutstanding and the Existing Debt Facilities will be reduced to £65.0 million.The Revised Debt Facilities will be utilised for the purposes set out in theExisting Debt Facilities. One of the principal conditions precedent to theRevised Debt Facilities is receipt by the Company of the proceeds receivableunder the Placing upon Admission. The Revised Debt Facilities incorporate certain material changes to the terms ofthe Existing Debt Facilities which include: • the margin payable on amounts outstanding under the facilityagreement has been reduced from 2.00 per cent. above LIBOR to 1.40 per cent.above LIBOR; • the final repayment date has been brought forward to 31December 2011 from 31 December 2012; • the amortisation schedule has been amended to provide forsemi-annual repayment instalments of £2.5 million with a final repaymentinstalment of £42.5 million on 31 December 2011; and • the requirement to make a mandatory prepayment of 50 per cent.of excess cash on each repayment date has been removed and certain of thedistribution tests have been amended including the forecast debt service coverratio requirement reduced to 1.25:1 (previously 1.30:1) on each of the fourrepayment dates following the calculation date. Details of the Placing The Company is proposing to raise approximately £30.0 million before expenses bythe issue of the Placing Shares pursuant to the Placing at 220 pence per PlacingShare. Hoare Govett has agreed conditionally, pursuant to the Placing Agreement, toplace the Placing Shares with certain existing Shareholders and otherinstitutional investors at the Placing Price, failing which Hoare Govett hasconditionally agreed to subscribe as principal for those Placing Shares at thePlacing Price to the extent that they are not subscribed under the PlacingAgreement. The Placing Agreement is conditional, inter alia, on: (a) the passing of the Resolution at the EGM; and (b) Admission becoming effective. The Placing Agreement is also terminable by Hoare Govett in certaincircumstances up until the time of Admission, including, inter alia, for amaterial breach of the Company's obligations under the Placing Agreement or fora material breach of a warranty contained in the Placing Agreement or on theoccurrence of an event of force majeure or a material adverse change in thefinancial condition of the Company. The Placing Agreement contains certainwarranties given by the Company with respect to the business of the Group andcertain matters connected with the Placing. In addition, the Company has givenindemnities to Hoare Govett in connection with the Placing and the performanceby Hoare Govett of services in relation to the Placing. The Placing Price represents a discount of approximately 9.9 per cent. to theclosing price of 244.25 pence per Ordinary Share on 6 February 2007, being thelast dealing day prior to the publication of this announcement. The Placing Shares represent approximately 14.7 per cent. of the enlarged issuedshare capital of the Company following the Placing (assuming none of theCompany's outstanding options are exercised). The issue of the Placing Shares is conditional on the passing of the Resolutionset out in the Notice of Extraordinary General Meeting and on their Admission toAIM. Application has been made to the London Stock Exchange for the PlacingShares to be admitted to trading on AIM and it is anticipated that dealings inthe Placing Shares will commence on AIM on 5 March 2007. The Directors believe that raising new equity funds by way of the Placing is themost appropriate method of funding the Company at the present time. The Boardconsiders that a general offer to existing Shareholders by way of rights orother pre-emptive issue is not appropriate at this stage of the Company'sdevelopment due to the significant additional cost incurred and delay due to theproduction and approval of a prospectus. APPENDIX I: IMPORTANT INFORMATION ON THE PLACING FOR PLACEES ONLY Eligible Participants in the Bookbuilding Process MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. THISANNOUNCEMENT AND THIS APPENDIX AND THE TERMS AND CONDITIONS SET OUT HEREIN AREDIRECTED ONLY TO PERSONS WHO HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TOINVESTMENTS FALLING WITHIN ARTICLE 19(1) OF THE FINANCIAL SERVICES AND MARKETSACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE 'ORDER') OR ARE PERSONS FALLINGWITHIN ARTICLE 49(1) ('HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONSETC') OF THE ORDER OR TO WHOM IT MAY OTHERWISE LAWFULLY BE COMMUNICATED AND AREPERSONS WHO FALL WITHIN PARAGRAPH (7) OF SECTION 86 OF THE FINANCIAL SERVICESAND MARKETS ACT 2000 (THE 'FSMA') (ALL SUCH PERSONS TOGETHER BEING REFERRED TOAS 'RELEVANT PERSONS'). THIS ANNOUNCEMENT AND THIS APPENDIX AND THE TERMS ANDCONDITIONS SET OUT HEREIN MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARENOT RELEVANT PERSONS. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THISAPPENDIX AND THE TERMS AND CONDITIONS SET OUT HEREIN RELATES IS AVAILABLE ONLYTO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. PERSONSDISTRIBUTING THIS ANNOUNCEMENT AND THIS APPENDIX MUST SATISFY THEMSELVES THAT ITIS LAWFUL TO DO SO. THIS ANNOUNCEMENT AND THIS APPENDIX DOES NOT CONSTITUTE ANOFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN STAR ENERGY GROUP PLC (THE'COMPANY'). THE NEW ORDINARY SHARES THAT ARE THE SUBJECT OF THE PLACING (THE'PLACING SHARES') REFERRED TO HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTEREDUNDER THE US SECURITIES ACT OF 1933, AS AMENDED, (THE 'SECURITIES ACT') OR UNDERANY APPLICABLE STATE SECURITIES LAWS, AND ABSENT REGISTRATION MAY NOT BE OFFEREDOR SOLD IN THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM, OR AS A PARTOF A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIESACT AND THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITEDSTATES. Persons who are invited to and who choose to participate in the Placing('Placees') by making an oral offer to subscribe for Placing Shares, will bedeemed to have read and understood this Announcement (including this Appendix)in its entirety and to be making such offer on the terms and conditionscontained in this Appendix, and to be providing the representations, warranties,agreements, acknowledgements and undertakings, in each case as contained in thisAppendix. In particular, each Placee represents, warrants and acknowledges that it: 1. is a Relevant Person; and 2. is outside the United States and is acquiring the Placing Shares in an'offshore transaction' (within the meaning of Regulation S under the SecuritiesAct). This Announcement (including this Appendix) does not constitute an offer to sellor issue or the solicitation of an offer to buy or subscribe for Placing Sharesin the United States, Canada, Japan, Australia, Ireland or Malaysia or in anyother jurisdiction in which such offer or solicitation is or may be unlawful andthe information contained herein is not for publication or distribution topersons in the United States, Canada, Japan, Australia, Ireland or Malaysia orany jurisdiction in which such publication or distribution is unlawful. Anyfailure to comply with these restrictions may constitute a violation of US,Canadian, Australian, Japanese, Irish or Malaysian securities laws. Personsreceiving this Announcement (including, without limitation, custodians, nomineesand trustees) must not distribute, mail or send it in, into or from the UnitedStates, or use the United States mails, directly or indirectly, in connectionwith the Placing, and by so doing may invalidate any related purportedapplication for Placing Shares. The Placing Shares have not been and will not beregistered under the Securities Act or under the securities laws of any state orother jurisdiction of the United States, and, subject to certain exceptions fromthe appropriate requirements of such jurisdiction, may not be offered or sold,resold or delivered, directly or indirectly in or into the United States. Nopublic offering of the Placing Shares is being made in the United States. ThePlacing Shares are being offered and sold outside the United States in relianceon Regulation S. Until the expiration of 40 days after the closing of thePlacing, an offer or sale of the Placing Shares within the United States by adealer whether or not participating in the Placing may violate the registrationrequirements of the Securities Act if such offer or sale is made otherwise thanin accordance with Rule 144A of the Securities Act. The distribution of this Announcement (including this Appendix) and the Placingand/or issue of Ordinary Shares (as defined below) in certain otherjurisdictions may be restricted by law. No action has been taken by the Companyor Hoare Govett that would permit an offer of Ordinary Shares or possession ordistribution of this Announcement (including this Appendix) or any otheroffering or publicity material relating to such Ordinary Shares in anyjurisdiction where action for that purpose is required. Persons into whosepossession this Announcement (including this Appendix) comes are required by theCompany and Hoare Govett to inform themselves about and to observe any suchrestrictions. Details of the Placing Agreement and the Placing Shares Hoare Govett has entered into a placing agreement (the 'Placing Agreement') withthe Company whereby Hoare Govett has, on the terms and subject to the conditionsset out therein, agreed to use its reasonable endeavours as agent for and onbehalf of the Company to procure Placees for the Placing Shares at 220 pence pershare (the 'Placing Price') and, failing which, to subscribe itself for thePlacing Shares at the Placing Price. The Placing Shares will when issued be credited as fully paid and will rank paripassu in all respects with the existing issued ordinary shares of 10 pence eachof the Company (the 'Ordinary Shares'), including the right to receive alldividends and other distributions declared, made or paid in respect of suchOrdinary Shares after the date of issue of the Placing Shares. Application for admission to trading Application has been made to the London Stock Exchange plc (the 'London StockExchange') for admission to trading of the Placing Shares on AIM, a market ofthe London Stock Exchange ('Admission'). It is expected that Admission will takeplace and dealings in such shares will commence on 5 March 2007. Bookbuilding Process Commencing today, Hoare Govett is conducting a bookbuilding process (the'Bookbuilding Process') to determine demand for participation in the Placing.This Appendix gives details of the terms and conditions of, and the mechanics ofparticipation in, the Placing. No commissions will be paid to Placees or byPlacees in respect of their agreement to subscribe for any Placing Shares. Hoare Govett will be entitled to effect the Placing by such alternative methodto the Bookbuilding Process as it may, in its sole discretion, determine. To thefullest extent permissible by law, neither Hoare Govett nor any holding companythereof, nor any subsidiary, branch or affiliate of Hoare Govett or any suchholding company (each an 'Affiliate') shall have any liability to Placees (or toany other person whether acting on behalf of a Placee or otherwise) inconnection with the Placing or the Bookbuilding Process or such alternativemethod of effecting the Placing. In particular, neither Hoare Govett nor anyAffiliate thereof shall have any liability in respect of its conduct of theBookbuilding Process or of such alternative method of effecting the Placing asHoare Govett may determine. Participation in, and principal terms of, the Bookbuilding Process By participating in the Bookbuilding Process and the Placing, Placees will bedeemed to have read and understood this Announcement (including this Appendix)in its entirety and to be participating and making an offer for Placing Sharesat the Placing Price on the terms and conditions, and to be providing therepresentations, warranties, acknowledgements and undertakings, contained inthis Appendix. Hoare Govett (whether through itself or its Affiliates) is arranging the Placingas an agent of the Company. Hoare Govett and its Affiliates are entitled to participate as principal in theBookbuilding Process. The Bookbuilding Process is expected to close no later than 6.00 p.m. Londontime today, 7 February 2007, but may be closed earlier at the sole discretion ofHoare Govett. Hoare Govett may, at its sole discretion, accept bids that arereceived after the Bookbuilding Process has closed. A bid in the Bookbuilding Process will be made on the terms and conditions inthis Appendix and will not be capable of variation or revocation after the closeof the Bookbuilding Process. A person who wishes to participate in the Bookbuilding Process shouldcommunicate its offer by telephone to its usual sales contact at ABN AMRO BankN.V. (London branch) or John MacGowan at Hoare Govett on +44 (0)20 7678 1084. Ifsuccessful, an allocation will be confirmed orally to such person following theclose of the Bookbuilding Process, and a contract note setting out settlementinstructions will be dispatched as soon as possible thereafter. Hoare Govett'soral confirmation will constitute a legally binding commitment upon such person(who will at that point become a Placee) to subscribe for the number of PlacingShares allocated to that Placee at the Placing Price set out in thisAnnouncement and otherwise on the terms and conditions set out in this Appendixand in accordance with the Company's memorandum and articles of association.Each Placee's obligations will be owed to the Company and to Hoare Govettthrough whom such Placee submitted its offer. Each Placee will also have animmediate, separate, irrevocable and binding obligation, owed to Hoare Govett,to pay to it (or as it may direct) in cleared funds an amount equal to theproduct of the Placing Price and the number of Placing Shares such Placee hasagreed to subscribe for. All obligations under the Placing will be subject to fulfilment of theconditions referred to below under 'Conditions of the Placing'. Conditions of the Placing The Placing is conditional on the Placing Agreement becoming unconditional inall respects and not having been terminated in accordance with its terms. Theobligations of Hoare Govett under the Placing Agreement are conditional, interalia, upon: (a) the resolution relating to the Placing to be proposed at the extraordinarygeneral meeting of the Company to be convened for this purpose for 2 March 2007having been passed thereat without material amendment; and (b) Admission taking place by no later than 8.00 a.m. on 5 March 2007. If (a) any of the conditions contained in the Placing Agreement are notfulfilled or waived by Hoare Govett by the respective time or date wherespecified (or such later time or date as Hoare Govett and the Company may agreebut not later than 8.00 a.m. on 16 March 2007) or (b) the Placing Agreement isterminated in the circumstances specified below, the Placing will lapse and thePlacees' rights and obligations hereunder shall cease and terminate at such timeand each Placee agrees that no claim can be made by or on behalf of the Placee(or any person on whose behalf the Placee is acting) in respect thereof. By participating in the Bookbuilding Process, each Placee agrees that its rightsand obligations cease and terminate only in the circumstances described aboveand will not be capable of rescission or termination by it. Hoare Govett may, at its discretion and upon such terms as it thinks fit, waivecompliance by the Company with, or extend the time and/or date for fulfilment bythe Company of, the whole or any part of any of the Company's obligations inrelation to the conditions in the Placing Agreement, save that conditions (a)and (b) above will not be waived. Any such extension or waiver will not affectPlacees' commitments as set out in this Announcement. Hoare Govett and the Company shall have no liability to any Placee (or to anyother person whether acting on behalf of a Placee or otherwise) in respect ofany decision Hoare Govett may make as to whether or not to waive or to extendthe time and/or date for the satisfaction of any condition to the Placing norfor any decision it may make as to the satisfaction of any condition or inrespect of the Placing generally. Right to terminate under the Placing Agreement Hoare Govett may, at any time before Admission, terminate the Placing Agreementin accordance with the terms of the Placing Agreement by giving notice to theCompany in certain circumstances, including the occurrence of a force majeureevent or a material adverse change in the financial condition of the Company. If the obligations of Hoare Govett under the Placing Agreement are terminated inaccordance with its terms, the rights and obligations of each Placee in respectof the Placing as described in this Announcement (including this Appendix) shallcease and terminate at such time and no claim can be made by any Placee inrespect thereof. By participating in the Placing each Placee agrees with Hoare Govett that theexercise by Hoare Govett of any right of termination or other discretion underthe Placing Agreement shall be within the absolute discretion of Hoare Govettand that Hoare Govett need not make any reference to any such Placee and thatHoare Govett shall have no liability whatsoever to any such Placee (or to anyother person whether acting on behalf of a Placee or otherwise) in connectionwith the exercise of such rights. No prospectus No prospectus, admission document or other offering document has been or will besubmitted to be approved by the FSA in relation to the Placing and the Placees'commitments will be made solely on the basis of the information contained inthis Announcement (including this Appendix), any information published by or onbehalf of the Company in accordance with the AIM Rules (being the rulespublished by the London Stock Exchange plc governing admission to AIM and theregulation of companies whose securities are admitted to trading on AIM), theannual report and accounts and interim financial statements of the Company whichcan be found in the "reports" section of the "Investor Relations" section in theCompany's website www.starenergy.co.uk (the 'website information'), and thecircular prepared in connection with the Company's extraordinary general meetingreferred to above (the "Circular"). Each Placee, by accepting a participationin the Placing, agrees and confirms that it has neither received nor relied onany other information, representation, warranty or statement made by or onbehalf of Hoare Govett or the Company and neither the Company nor Hoare Govettwill be liable for any Placee's decision to participate in the Placing based onany other information, representation, warranty or statement. Each Placeeacknowledges and agrees that it has relied on its own investigation of thebusiness, financial and trading position of the Company in accepting aparticipation in the Placing. Nothing in this paragraph shall exclude theliability of any person for fraudulent misrepresentation. Registration and settlement Settlement of transactions in the Placing Shares (ISIN: GB00B00W1F70) followingAdmission will take place within the CREST system, subject to certainexceptions. Hoare Govett reserves the right to require settlement for anddelivery of the Placing Shares to Placees by such other means that it deemsnecessary if delivery or settlement is not possible or practicable within theCREST system within the timetable set out in this Announcement (including thisAppendix) or would not be consistent with the regulatory requirements in anyPlacee's jurisdiction. Each Placee allocated Placing Shares in the Placing will be sent a contract note(the 'Contract Note') stating the number of Placing Shares allocated to it, thePlacing Price, the aggregate amount owed by such Placee to Hoare Govett andsettlement instructions. ABN AMRO Bank N.V. (London Branch) is acting as HoareGovett's settlement agent and Placees should settle against CREST ID: 521,account designation 'AGENT'. It is expected that such Contract Notes will bedespatched today, 7 February 2007 and that the trade date will be 7 February2007. Each Placee agrees that it will do all things necessary to ensure thatdelivery and payment is completed in accordance with the settlement instructionsset out in the Contract Note. It is expected that settlement will be on 5 March 2007 in accordance with theinstructions set out in the Contract Note. Interest is chargeable daily on payments not received from Placees on the duedate in accordance with the arrangements set out above and in the Contract Noteat the rate of 2 percentage points above the base rate of Barclays Bank Plc. Each Placee is deemed to agree that if it does not comply with theseobligations, Hoare Govett may sell any or all of the Placing Shares allocated tothat Placee on such Placee's behalf and retain from the proceeds, for HoareGovett's account and benefit, an amount equal to the aggregate amount owed bythe Placee plus any interest due. The relevant Placee will, however, remainliable for any shortfall below the aggregate amount owed by it and may berequired to bear any stamp duty or stamp duty reserve tax (together with anyinterest or penalties) which may arise upon the sale of such Placing Shares onsuch Placee's behalf. If Placing Shares are to be delivered to a custodian or settlement agent,Placees should ensure that the Contract Note is copied and delivered immediatelyto the relevant person within that organisation. Insofar as Placing Shares are registered in a Placee's name or that of itsnominee or in the name of any person for whom a Placee is contracting as agentor that of a nominee for such person, such Placing Shares should, subject asprovided below (and in particular subject to paragraph 15 below), be soregistered free from any liability to UK stamp duty or stamp duty reserve tax.No Placee (or any nominee or other agent acting on behalf of a Placee) will beentitled to receive any fee or commission in connection with the Placing. Representations and warranties By participating in the Bookbuilding Process, each Placee (and any person actingon such Placee's behalf): 1. represents and warrants that it has read this Announcement (including thisAppendix) in its entirety and acknowledges that its participation in the Placingwill be governed by the terms of this Appendix; 2. represents and warrants that it has received this Announcement (includingthis Appendix) solely for its use and has not redistributed or duplicated it; 3. represents and warrants that it has not received a prospectus, admissiondocument or other offering document in connection with the Placing andacknowledges that no prospectus, admission document or other offering documenthas been prepared in connection with the Placing; 4. acknowledges that neither of Hoare Govett nor any of its Affiliates nor anyperson acting on behalf of Hoare Govett or its Affiliates nor the Company andits affiliates has provided, and will not provide it with any material regardingthe Placing Shares or the Company other than this Announcement (including thisAppendix); nor has it requested Hoare Govett, any of its Affiliates or anyperson acting on behalf of Hoare Govett or any of its Affiliates to provide itwith any such information; 5. acknowledges that the content of this Announcement (including this Appendix)is exclusively the responsibility of the Company and that neither Hoare Govett,nor any of its Affiliates nor any person acting on behalf of Hoare Govett or itsAffiliates has or shall have any liability for any information, representationor statement contained in this Announcement (including this Appendix) or anyinformation previously published by or on behalf of the Company and will not beliable for any Placee's decision to participate in the Placing based on anyinformation, representation or statement contained in this Announcement(including this Appendix) or otherwise. Each Placee represents, warrants andagrees that when making its investment decision to purchase the Placing Sharesit has relied only on information contained in this Announcement (including thisAppendix), any information published by or on behalf of the Company inaccordance with the AIM Rules, the website information and the Circular, suchinformation being all that it deems necessary to make an investment decision inrespect of the Placing Shares and that it has relied on its own investigationwith respect to the Placing Shares and the Company in connection with itsdecision to subscribe for the Placing Shares and acknowledges that it is notrelying on any investigation that Hoare Govett, any of its Affiliates or anyperson acting on behalf of Hoare Govett or its Affiliates may have conductedwith respect to the Placing Shares or the Company and none of such persons hasmade any representations to it, express or implied, with respect thereto; 6. acknowledges that it has not relied on any information relating to theCompany contained in any research reports prepared by Hoare Govett, any of itsAffiliates or any person acting on behalf of Hoare Govett or its Affiliates andunderstands that neither Hoare Govett, nor any of its Affiliates nor any personacting on behalf of Hoare Govett or its Affiliates: (i) has or shall have anyliability for public information or any representation; (ii) has or shall haveany liability for any additional information that has otherwise been madeavailable to such Placee, whether at the date of publication, the date of theannouncement or otherwise; and (iii) makes any representation or warranty,express or implied, as to the truth, accuracy or completeness of suchinformation, whether at the date of publication, the date of the announcement orotherwise; 7. represents and warrants that it, or the beneficial owner, as applicable, isentitled to subscribe for and/or purchase Placing Shares under the laws of allrelevant jurisdictions which apply to it, or the beneficial owner, asapplicable, and that it has fully observed such laws and obtained all suchgovernmental and other guarantees and other consents in either case which may berequired thereunder and complied with all necessary formalities (including anyapplicable foreign exchange rules); 8. represents and warrants that it has the power and authority to carry on theactivities in which it is engaged, to subscribe for the Placing Shares and toexecute and deliver all documents necessary for such subscription; 9. represents and warrants that it (or if acquiring the Placing Shares asfiduciary or agent for any investor account, such investor) will be thebeneficial owner of such Placing Shares and that the beneficial owner of suchPlacing Shares will not at the time the Placing Shares are acquired be aresident of Canada, Japan, Ireland or Australia; 10. acknowledges that the Placing Shares have not been and will not beregistered under the Securities Act or under the securities laws of any of theStates of the United States, or under the securities legislation of Canada,Australia, Japan, Ireland or Malaysia and, subject to certain exceptions, maynot be offered, sold, taken up, renounced or delivered or transferred, directlyor indirectly, within those jurisdictions; 11. represents and warrants that it is not a resident of or located in theUnited States or acting in a non-discretionary basis for a person in the UnitedStates and is purchasing the Placing Shares in an 'offshore transaction' inaccordance with Regulation S under the Securities Act; 12. acknowledges (and confirms that each beneficial owner of the Placing Shareshas been advised) that the Placing Shares have not been and will not beregistered under the Securities Act or under any applicable state securitieslaws, nor approved or disapproved by the US Securities and Exchange Commission,any state securities commission in the United States or any other United Statesregulatory authority; 13. acknowledges that the Placing Shares have not been, and will not be, offeredfor subscription, sold, directly or indirectly, nor will an invitation to offerto subscribe or sell, any Placing Shares be made, in Malaysia, and no approvalto do any of the foregoing has been sought or obtained from the MalaysianSecurities Commission; 14. represents and warrants that if it is a pension fund or investment company,its purchase of Placing Shares is in full compliance with applicable laws andregulations; 15. represents and warrants that the allocation, allotment, issue and deliveryto it, or the person specified by it for registration as holder, of PlacingShares will not give rise to a liability under any of sections 67, 70, 93 or 96of the Finance Act 1986 (depositary receipts and clearance services) and thatthe Placing Shares are not being subscribed for by it in connection witharrangements to issue depositary receipts or to transfer Placing Shares into aclearance system; 16. represents and warrants that it has complied with its obligations inconnection with money laundering and terrorist financing under the Proceeds ofCrime Act 2002, the Terrorism Act 2003 and the Money Laundering Regulations 2003(the 'Regulations') and, if making payment on behalf of a third party, thatsatisfactory evidence has been obtained and recorded by it to verify theidentity of the third party as required by the Regulations; 17. represents and warrants that it and any person acting on its behalf is aperson falling within Article 19(1) and/or 49(1) of the Financial Services andMarkets Act 2000 (Financial Promotion) Order 2005, and is a person who fallswithin paragraph (7) of section 86 of the FSMA; 18. represents and warrants that it has not offered or sold and will not offeror sell any Placing Shares to persons in the United Kingdom prior to Admissionexcept in circumstances which have not resulted and which will not result in anoffer to the public in the United Kingdom within the meaning of the ProspectusRules made by the FSA pursuant to Part IV of the FSMA; 19. represents and warrants that it has only communicated or caused to becommunicated and will only communicate or cause to be communicated anyinvitation or inducement to engage in investment activity (within the meaning ofsection 21 of the FSMA) relating to the Placing Shares in circumstances in whichsection 21(1) of the FSMA does not require approval of the communication by anauthorised person; 20. represents and warrants that it has complied and will comply with allapplicable provisions of the FSMA with respect to anything done by it inrelation to the Placing Shares in, from or otherwise involving the UnitedKingdom; 21. represents and warrants that it and any person acting on its behalf isentitled to subscribe for the Placing Shares under the laws of all relevantjurisdictions and that it has all necessary capacity and has obtained allnecessary consents and authorities to enable it to commit to participating inthe Placing and to perform its obligations in relation thereto (including,without limitation, in the case of any person on whose behalf it is acting, allnecessary consents and authorities to agree to the terms set out or referred toin this Announcement (including this Appendix) and to make the foregoingrepresentations, acknowledgments, warranties and agreements) and will honoursuch obligations; 22. undertakes that it (and any person acting on its behalf) will make paymentfor the Placing Shares allocated to it in accordance with this Announcement(including this Appendix) and the Contract Note on the due time and date set outherein, failing which the relevant Placing Shares may be placed with othersubscribers or sold as Hoare Govett may in its sole discretion determine andwithout liability to such Placee; 23. acknowledges that neither Hoare Govett, nor any of its Affiliates nor anyperson acting on behalf of Hoare Govett or its Affiliates is making anyrecommendations to it, advising it regarding the suitability of any transactionsit may enter into in connection with the Placing nor providing advice inrelation to the Placing nor the exercise or performance of any of Hoare Govett'srights and obligations thereunder including any rights to waive or vary anyconditions or exercise any termination right; 24. undertakes that the person who it specifies for registration as holder ofthe Placing Shares will be (i) itself or (ii) its nominee, as the case may be.Neither Hoare Govett nor the Company will be responsible for any liability tostamp duty or stamp duty reserve tax resulting from a failure to observe thisrequirement. Placees acknowledge that the Placing Shares will be credited to theCREST stock account of ABN AMRO Bank N.V. (London branch) (CREST ID: 521,account designation 'AGENT') who will hold them as nominee for the subscribersof such shares until settlement in accordance with its standing settlementinstructions; 25. acknowledges that the Placing is conditional, inter alia, upon approval bythe Company's shareholders of the issue and allotment of the Placing Shares atan Extraordinary General Meeting of the Company to be held on 2 March 2007; 26. acknowledges that any agreements entered into by it pursuant to these termsand conditions shall be governed by and construed in all respects in accordancewith English law and it submits (on behalf of itself and on behalf of any personon whose behalf it is acting) to the exclusive jurisdiction of the courts ofEngland as regards any claim, dispute or matter arising out of any suchcontract, except that enforcement proceedings in respect of the obligation tomake payment for the Placing Shares (together with any interest chargeablethereon) may be taken by the Company or Hoare Govett in any jurisdiction inwhich the relevant Placee is incorporated or in which any of its securities havea quotation on a recognised stock exchange; 27. acknowledges that Hoare Govett may (at its absolute discretion) satisfy itsobligations to procure Placees by itself agreeing to become a Placee in respectof some or all of the Placing Shares or by nominating any connected orassociated person to do so; 28. agrees that the Company, Hoare Govett and others will rely upon the truthand accuracy of the foregoing representations, warranties, acknowledgements andundertakings which are given to Hoare Govett on its own behalf and on behalf ofthe Company and are irrevocable; and 29. agrees to indemnify and hold the Company and Hoare Govett harmless from anyand all costs, claims, liabilities and expenses (including legal fees andexpenses) arising out of or in connection with any breach by it (or any personon whose behalf it is acting) of the representations, warranties,acknowledgements, agreements and undertakings in this Appendix and furtheragrees that the provisions of this Appendix shall survive after completion ofthe Placing. No UK stamp duty or stamp duty reserve tax should be payable to the extent thatthe Placing Shares are issued into CREST to, or to the nominee of, a Placee whoholds those shares beneficially (and not as agent or nominee for any otherperson) within the CREST system and registered in the name of such Placee orsuch Placee's nominee provided that the Placing Shares are not issued to aperson whose business is or includes issuing depositary receipts or theprovision of clearance services or to an agent or nominee for any such person. Any arrangements to issue or transfer the Placing Shares into a depositaryreceipts system or a clearance service or to hold the Placing Shares as agent ornominee of a person to whom a depositary receipt may be issued or who will holdthe Placing Shares in a clearance service, or any arrangements subsequently totransfer the Placing Shares, may give rise to UK stamp duty and/or stamp dutyreserve tax, for which neither the Company nor Hoare Govett will be responsibleand the Placee to whom (or on behalf of whom, or in respect of the person forwhom it is participating in the Placing as an agent or nominee) the allocation,allotment, issue or delivery of Placing Shares has given rise to such UK stampduty or stamp duty reserve tax undertakes to pay such UK stamp duty or stampduty reserve tax forthwith and to indemnify on an after-tax basis and to holdharmless the Company and Hoare Govett in the event that any of the Company and/or Hoare Govett has incurred any such liability to UK stamp duty or stamp dutyreserve tax. In addition, Placees should note that they will be liable to pay any capitalduty, stamp duty and all other stamp, issue, securities, transfer, registration,documentary or other duties or taxes (including any interest, fines or penaltiesrelating thereto) payable outside the UK by them or any other person on thesubscription by them for any Placing Shares or the agreement by them tosubscribe for any Placing Shares. All times and dates in this Announcement (including this Appendix) may besubject to amendment. Hoare Govett shall notify the Placees and any personacting on behalf of the Placees of any changes. This Announcement (includingthis Appendix) has been issued by the Company and is the sole responsibility ofthe Company. Hoare Govett, which is authorised and regulated by the Financial ServicesAuthority, is acting exclusively for the Company and for no one else solely inconnection with the Placing and will not be responsible to anyone other than theCompany for providing the protections afforded to the customers of Hoare Govettor for providing advice in relation to the Placing. When a Placee or person acting on behalf of the Placee is dealing with HoareGovett, any money held in an account with Hoare Govett on behalf of the Placeeand/or any person acting on behalf of the Placee will not be treated as clientmoney within the meaning of the rules and regulations of the Financial ServicesAuthority made under the FSMA. The Placee acknowledges that the money will notbe subject to the protections conferred by the client money rules; as aconsequence, this money will not be segregated from Hoare Govett's money inaccordance with the client money rules and will be used by Hoare Govett in thecourse of its own business; and the Placee will rank only as a general creditorof Hoare Govett. Past performance is no guide to future performance and persons needing adviceshould consult an independent financial adviser. Appendix II: Definitions The following definitions apply throughout this document unless the contextrequires otherwise. "Admission" admission of the Placing Shares to trading on AIM becoming effective in accordance with the AIM Rules;"AIM" AIM, a market of the London Stock Exchange;"AIM Rules" the rules for AIM companies and their nominated advisers issued by the London Stock Exchange;"bcf" billion cubic feet of gas;"boepd" barrels of oil equivalent per day, assuming six mcf of gas equivalent to one barrel of oil; "CREST" the electronic settlement system operated by CRESTCo Limited, which facilitates the transfer of the title to securities in uncertificated form; "Directors" or "Board" the directors of the Company, being Stephen Gutteridge, Roland Wessel, Colin Judd, Adrian Fernando, Melvyn Horgan, Roger Pearson, Stephen East, Charles Carter and David Wertheim;"Existing Debt Facilities" the existing debt facilities amounting to, in aggregate, £77.5 million;"Extraordinary General Meeting" the extraordinary general meeting of the Company to be held at 12.00 p.m. on 2or "EGM" March 2007, notice of which is set out at the end of the Circular;"1965 Gas Act" the Gas Act 1965;"Group" the Company and its subsidiaries;"Hoare Govett" Hoare Govett Limited;"London Stock Exchange" London Stock Exchange plc;"Ordinary Shares" the ordinary shares of 10 pence each in the capital of the Company;"Pentex" Pentex Management Limited;"Placing" the proposed conditional placing of the Placing Shares pursuant to the Placing Agreement;"Placing Agreement" the conditional agreement dated 7 February 2007 between the Company and Hoare Govett in connection with the Placing of the Placing Shares;"Placing Price" 220 pence per Placing Share;"Placing Shares" the 13,636,364 new Ordinary Shares to be issued by the Company for cash at the Placing Price pursuant to the Placing Agreement;"Pounds" or "£" the lawful currency of the United Kingdom;"Refinancing" together the Placing and the Revised Debt Facilities;"Revised Debt Facilities" the revised debt facilities of the Group, further details of which are set out in the letter from the Chairman of Star Energy;"Resolution" the resolution set out in the notice of EGM;"Shareholders" holders of Ordinary Shares;"Star Energy" or "Company" Star Energy Group plc, registered company number 5054503;"UK" the United Kingdom of Great Britain and Northern Ireland;"United States" or "US" the United States of America, its territories and possessions, any State of the United States and the District of Columbia; and"Western Europe" Austria, France, Germany, The Netherlands, Italy, Spain, Switzerland, Belgium, UK, Ireland, Denmark, Portugal, Norway, Iceland and Sweden. 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