STOB.L Regulatory News (STOB)

21 November 2014

Stobart Group Limited

("Stobart" or the "Group")

Financial Close and Long Term Supply Agreement on 20.2MW CHP biomass plant

The Board of Stobart Group Limited, the Support Services and Infrastructure group, is pleased to announce financial close on a project to construct a £110m, 20.2MWe/ 7.8MWth combined heat and power biomass plant ("CHP Plant") at the Group's site in Widnes. In conjunction with the project the Group has signed a 16 year index-linked fuel supply agreement.

The project will be the largest waste wood renewable energy plant in the North West.

Highlights

The CHP plant is scheduled to commence operations in December 2016 and will generate returns for the Group's complementary Energy, Infrastructure and Rail (Civil Engineering) divisions.

· Stobart Energy will supply 146,000 tonnes p.a. of recycled waste wood to the CHP Plant over 16 years (initial revenue of £5.7m p.a., index linked over the life of the agreement, equating to an estimated £108m)

· Stobart Energy will operate an adjacent wood drying facility using the heat from the CHP Plant. This facility will dry 140,000 tonnes p.a. of virgin wood material and produce an output of 90,000 tonnes p.a. for sale into the small scale market (expected revenue of over £200m during the life of the agreement)

· These volumes represent 24% of the increase required to achieve Stobart Energy's fuel supply target of 2m tonnes p.a. by 2017/18

· Stobart Infrastructure is investing £7.5m for a 40% interest in the plant's holding company and will realise £2m from the sale of the 4 acre site on which the CHP Plant and the wood drying facility will be built

· Stobart Rail (Civil Engineering) expects to generate around £15m of civil engineering revenue from the project

Overview

Stobart Infrastructure is making an equity investment of £7.5m for a 40% interest in the CHP Plant's holding company, Mersey Bioenergy Ltd ("MBL"). The Green Investment Bank will provide 49% of the equity (via its Foresight-managed fund) and Burmeister & Wain Scandinavian Contractor A/S ("BWSC"), the project's engineering, procurement and construction contractor, will take an 11% stake

Stobart and BWSC have been working together on the development of the CHP Plant for a period of almost two years. BWSC will manage the facility under a long-term operation and maintenance contract. BWSC is a Danish company with an impressive track record of delivering biomass plant projects around the world.

Investec Bank plc and Eksport Kredit Fonden are providing a Senior Debt Facility of £42.5m to MBL for the development of the plant. Mezzanine finance of £41.9m will be provided to MBL by GIB and Gravis Capital Partners.

Stobart Energy

Stobart Energy will supply the CHP Plant with 146,000 tonnes of waste wood material p.a. over a 16-year contractual period, with initial revenue of £5.7m p.a., index-linked, equating to a revenue stream of £108m over the life of the contract.

The plant will also produce 7.8MWth of heat, which Stobart Energy has contracted to use in an adjacent wood drying facility. This facility will be constructed by Stobart Rail at a cost of £5m, and will receive 140,000 tonnes p.a. of virgin wood material and dry this material to produce an output of 90,000 tonnes p.a. Stobart Energy intends to sell this material into the rapidly-expanding small scale wood chip and pellet market. The expected revenue from drying facility operation will be over £200m over the life of the agreement.

Stobart Infrastructure

Stobart Infrastructure will own the Group's investment in MBL. The plant will be built on 4 acres of Stobart Infrastructure's 90-acre logistics hub in Widnes. The 4-acre site will be sold by Stobart Infrastructure to MBL for £2m.

Stobart Rail (Civil Engineering)

Stobart Rail, which has a proven track record in construction and engineering, will construct the dryer facility, procure the equipment and install it. Stobart Rail also expects to generate revenue as a civil works sub-contractor to BWSC for the construction of the CHP Plant. The value of these two civil construction contracts will be approximately £15m.

Richard Butcher, CEO Stobart Energy & Infrastructure commented,

"This agreement secures an attractive energy investment for the Group and will contribute 24% of the growth we need to achieve our target of supplying 2m tonnes of fuel per annum into the UK biomass market by 2017/18 from 1m tonnes per annum at present . It also demonstrates the strength of our integrated infrastructure, energy and engineering capabilities.

This CHP Plant will generate a strong return on investment in the plant's equity as well as providing the Group with a 16 year biomass fuel supply contract, a long-term wood drying income stream and valuable engineering revenue on the development.

Increasingly, we are seen as being a very reliable fuel supplier and so the partner of choice, which is why we are already the leading UK supplier of biomass, a position which we anticipate strengthening further"

A call for analysts with Stobart Group will be hosted at 9.30am on Friday 21 November 2014. For dial in details contact Stobart@redleafpr.com.

Enquiries:

Notes to Editors

· Focus on Energy and Aviation: Stobart Group is an Infrastructure and Support Services business deriving income from Energy, Aviation, Civil Engineering and Investments.  Its strategy is to drive growth and profitability in Energy and Aviation.

· Growing volumes: Stobart sources, processes and delivers fuel to power plants for third parties under long-term contracts. Revenue growth comes from the ongoing increase in tonnages supplied, which exceeded 900,000 tonnes in the year to February 2014.

· Growing passenger numbers: Capital expenditure to develop London Southend Airport is largely complete with the extension of the terminal increasing capacity from one to five million passengers. Growing passenger numbers from a broadly fixed cost base will drive profitability.

· Realising value: Stobart will continue to maximise value from its property Investments to support maintained dividends.

· Value creation: The Group realised a 51% interest in its Transport & Distribution business and used the proceeds to reduce its debt significantly, invest in its Infrastructure and Energy divisions and return funds to shareholders.

· Investing for growth: Stobart plans to invest in minority stakes in sustainable CHP and anaerobic digestion plants over the next two years.

· Strengthened board:Stobart has significantly strengthened its board with the appointment of former Tate & Lyle CEO Iain Ferguson CBE as its new chairman and three new Non-Executive Directors.