Trading Update

22 Nov 2007 09:09

Rurelec PLC22 November 2007 22nd November 2007 Rurelec PLC ("Rurelec" or "the Company") Empresa Guaracachi Finalises Combined Cycle Expansion Project Rurelec plc (AIM:RUR) announces today that its Bolivian subsidiary, EmpresaGuaracachi SA ("Guaracachi") has finalised its 96 MW combined cycle gas turbine("CCGT") expansion project in Santa Cruz de la Sierra. Guaracachi's CCGT project is the largest single power unit ever to beconstructed in Bolivia. At 96 MW of electric output, it will represent more than10 per cent. of the country's peak demand when completed in early 2009 and itwill help alleviate power shortages which have been forecast during the nexteighteen months. Guaracachi has signed contracts to acquire a steam turbine from Steag of Germanywhich is now being reconditioned by Sulzer Hickham before delivery to Bolivia.At the same time the Board of Guaracachi has approved the selection of IST ofCanada as preferred supplier for two heat recovery steam generators ("HRSGs")which comprise the heart of the conversion project. Contract signature isexpected by the end of November. Under the combined cycle conversion, the waste heat from two existing GeneralElectric 6FA gas turbines will be channelled through two new HRSGs to beconstructed on site, instead of being vented directly into the atmosphere. Thiscapture of heat from the existing power plant allows electricity to be producedfrom the same natural gas as is currently used simply to fire the open cycle gasturbines themselves, since the waste heat is converted to steam which in turnpowers a steam turbine synchronised to the two original gas turbines. Compared with the current production in open cycle Guaracachi will generateapproximately 40 per cent. more electricity in combined cycle without anyincrease in gas usage. This significant reduction in gas consumption in turnreduces the new CCGT unit's emissions of CO2 for every hour of electricitygenerated. For this reason, the project qualifies for certified emissionsreductions certificates, also known as "carbon credits", under the KyotoProtocol of the United Nations Framework Agreement on Climate Change. Financing Initiatives At the same time as finalising the mechanics of the project, Guaracachi haslaunched a series of important financing initiatives. Today, Guaracachi has received confirmation that its planned domestic bondplacement programme of up to US$40 million has been authorised by theSuperintendencia de Pensiones, Valores y Seguros, the Bolivian financial marketregulator. The bonds, rated A+(Bol) by Fitch, will be placed with Bolivianfinancial institutions by Credibolsa, the brokerage arm of Banco de Credito dePeru. Placement of the first tranche of the bonds in an amount of US$20 millionis expected to be completed shortly. This first placement, which has beenauthorised by the shareholders of the company, will have a maturity of 10 yearswith principal payments of 33.33% in year 8, 33.33% in year 9 and 33.33% in year10. The annual fixed interest rate will be 8.55%, which will be paidsemi-annually. In parallel with the bond programme, Guaracachi has agreed outline terms withCorporacion Andina de Fomento ("CAF") for a project loan of US$20 million forthe combined cycle conversion. This loan has received support from KfW, theGerman development bank, which is providing a subsidised tranche of lending inrecognition of the importance of the CCGT project for the infrastructureexpansion of Bolivia. This is the first CCGT plant in Bolivia and it representsa major development in the Bolivian interconnected system, introducing highefficiency, complex thermal power generation into the system. Signature of theproposed CAF and KfW loan is expected at a formal ceremony at the end ofNovember. Guaracachi is also working closely with Rurelec to create a carbon financingprogramme which will provide further project funding. This will utilise thefuture revenues from the forward sale of carbon credits which will be generatedby the CCGT plant when it comes on line in the second quarter of 2009. Peter Earl, Managing Director of Rurelec commented: "Rurelec is continuing tomake substantial progress in Bolivia, and the completion of the CCGT expansionis testament to this. The basic cost of the CCGT project is circa US$40 million,or US$416,000 per MW of incremental capacity. This is a capital costconsiderably below industry standards and Rurelec is delighted at theco-operation this represents between English and Bolivian power engineering andfinance teams. The final funding requirement will also include Bolivian VAT andimport duties as well as interest during construction. Taken together, theseitems add a further US$10 million to the capital budget for the conversion andtake the total funding requirement of the CCGT project to US$50 million." For further information please contact: 020 7793 5610 Peter Earl, CEO, Rurelec PLCPaul Shackleton, Daniel Stewart 020 7776 6550Simon Robinson, Park Green Communications 0207 851 7480 This information is provided by RNS The company news service from the London Stock Exchange