ISSUE OF LETTER OF INTENT AND NOTICE TO PROCEED

Oracle Power PLC

12 February 2018

ORACLE POWER PLC

("Oracle" or the "Company" or the "Group")

ISSUE OF LETTER OF INTENT AND NOTICE TO PROCEED 

Oracle Power PLC (AIM:ORCP), the UK energy developer of a combined lignite coal mine and mine mouth power plant located in Block VI of the Thar desert in the south-east of the Sindh Province of Pakistan (the "Project"), announced on 15 November 2017 that, together with its consortium partners, the two Chinese State-owned Enterprises, Sichuan Provincial Investment Group Co. Limited ("SCIG") and PowerChina International Group Limited ("PowerChina")(together the "Consortium"), it had made a submission to the Private Power and Infrastructure Board ("PPIB") for a proposal for the power plant.

The Company advises that the PPIB has approved the issue of Notice to Proceed ("NTP") and Letter of Intent ("LOI") to the Company's subsidiary Thar Electricity (Private) Limited ("TEPL"). The issue of the NTP and LOI is for the development of a 700MW coal based power plant at Thar Block-VI, as the first phase of a 1,400MW power plant. The power plant size, originally submitted as first phase 660MW (of a total plant size of 1,320MW), has been increased to 700MW (of a total plant size of 1,400MW) to comply with new requirements in Pakistan which the Board understands is to apply more efficient super critical technology The PPIB's approval is subject to this change in size, any resultant change in shareholding and the implementation of the Project in two phases being approved within the China Pakistan Economic Corridor ("CPEC").

The issuance of the LOI is the major step required of Oracle in the first stage of the Memorandum of Understanding ("MOU") signed with SCIG and PowerChina, as announced on 21 November 2017. SCIG and PowerChina are currently undertaking their legal and financial due diligence as their part of the first stage of the MOU. This will then lead into the second stage (expected in the second quarter 2018) in which SCIG and PowerChina will make their final development decision, and EPC contracts and definitive agreements will be entered into with the Chinese partners commence investing in the Project.

The next steps are expected to be as follows :

· PPIB will now formally issue the LOI and the NTP, following which the Company will be required to put in place a performance guarantee for an amount of US$700,000. The company is in advanced talks with non-equity financiers and an Insurance company to procure this guarantee. 

· The Consortium will then be required to submit its tariff application and its application for a generation licence to the National Electricity Pricing Regulatory Authority ("NEPRA") within three months of the issue of the LOI. 

· NEPRA will then issue a tariff determination and generation licence, following which the Consortium is required to put in place a performance guarantee for US$3.5 million against completion of the power plant. Oracle will contribute its equity share of 12.1% as agreed in the MOU, noting that Oracle still has the potential to increase further its interest before financial close.

· PPIB will then issue a Letter of Support ("LOS") as their final approval of the power plant. 

· With the LOS in place, Project agreements will then be finalised including:

o a 30 year Power Purchase Agreement ("PPA") between TEPL and Central Power Purchasing Authority, a Federal Government agency;

o the Coal Supply Agreement between TEPL and Sindh Carbon Energy Limited, Oracle's subsidiary which owns and operates the mine, and

o the Implementation Agreement ("IA"), between TEPL and the Federal Government of Pakistan. The IA includes a sovereign guarantee from the Government of Pakistan for payments to TEPL under the PPA.

Shahrukh Khan, CEO of Oracle, said :

"This is an important step in the regulatory process in Pakistan, confirming the reciprocal commitments of Oracle and its Consortium partners and the Government of Pakistan to this major energy project. Together with the inclusion of the Project in CPEC, it should assist fast-tracking of the Project to financial close."

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Notes for Editors:

About PowerChina:

PowerChina is a state-owned enterprise and is the owner of Sinohydro as well as the Hydrochina Corporation, China Renewable Energy Engineering Institute, Shandong Electric Power Company and numerous electric power design institutes and power construction companies. PowerChina provides planning, survey, design and engineering, finance, construction, installation, and operation and maintenance for power and infrastructure projects. In 2016, PowerChina had revenues of £36.8 billion, net assets of £62.2 billion and employed 187,000 staff. PowerChina has already successfully secured financial close on several CPEC (China-Pakistan Economic Corridor) listed projects and are proceeding with these power plant project constructions in Pakistan.

About SCIG:

SCIG is a Chinese state-owned investment company which invests in and manages projects in a range of sectors, including energy resources, transportation, communications, raw materials, electromechanical, agriculture and forestry. SCIG is China's fourth largest and Sichuan Province's largest local electrical power investment company, having a total install capacity of 36.04GW. In 2016, SCIG had revenues of £0.9 billion and net assets of £3.3 billion; it employs approximately 7,000 staff.