JV Agreement, Funding & Board Appointment

RNS Number : 6363E

Equatorial Palm Oil plc

11 April 2014

 



11 April 2014

EQUATORIAL PALM OIL plc

("EPO" or the "Company")

Joint Venture Agreement, up to $35.5m Funding &

Board Appointment

Equatorial Palm Oil plc (AIM: PAL), the AIM listed palm oil development and production company with operations in Liberia, West Africa announces today that it has entered into a joint venture agreement ("JVA") with KLK Agro Plantations Pte Ltd ("KLK Agro"), a wholly owned subsidiary of Kuala Lumpur Kepong Berhad ("KLK"), in relation to the operations and funding for its 50 per cent. owned joint venture company Liberian Palm Developments Limited ("LPD").

Funding

Under the terms of the JVA, LPD will receive up to $35,500,000 in cash and funding commitments. The cash is the issue of new equity in LPD to KLK Agro and EPO (through its wholly owned subsidiary Equatorial Biofuels (Guernsey) Limited ("EBGL")) who will each subscribe for US$7,500,000 of new equity in LPD (the "Initial Funding").

In addition to the Initial Funding, KLK Agro has agreed to provide any further funding required by LPD up to a maximum of US$20,500,000 (the "KLK Funding Commitment") which may, at the discretion of KLK Agro, be provided by way of debt or preferential equity finance which will incur interest or preferential dividend (as appropriate) at USD LIBOR plus a maximum of 500 basis points. LPD also has the option to obtain financing from parties other than KLK irrespective of whether or not the KLK Funding Commitment has been fully invested in LPD and provided that the terms of such external financing are better than that of KLK's Funding Commitment.

The Initial Funding and the KLK Funding Commitment has been achieved with no further dilution for EPO shareholders.

Operations of LPD

LPD has entered into an agreement with Taiko Plantations Sdn. Bhd. ("Taiko"), a wholly owned subsidiary of KLK (the "Management Agreement"), under the terms of which Taiko has been appointed to manage and conduct LPD's operations. The Management Agreement can be terminated by either party giving three months' written notice to the other party.

Under the terms of the Taiko Management Agreement, Taiko shall be paid a management fee by LPD as follows:

i.    US$1,000,000 per annum for the first four years from the date of signing of the Management Agreement; and

ii.    thereafter, a fee equivalent to 2.0 per cent. of the gross sale proceeds of palm products achieved by LPD.

Under the JVA, it has been agreed that the board of directors of LPD shall have four directors, with two from each of KLK Agro and EBGL (the "EBGL Directors), and that KLK Agro shall be entitled to appoint the Chairman.

Under the terms of the JVA, it has also been agreed that certain matters can only be approved with the unanimous consent of the shareholders of LPD or directors of LPD (as appropriate). The JVA also sets out standard warranties and indemnities which EPO and EBGL have been required to give to KLK Agro in relation to LPD's business and assets.

EPO Board Changes

The Board of EPO is delighted to announce the appointment of Ms Yap Miow Kien as a Non-Executive Director with immediate effect. Ms Yap is the Company Secretary of KLK having joined in 2002. A short biography of Ms Yap is set out below.

The founding Executive Chairman of EPO, Mr Michael Frayne, will become the Non-Executive Chairman with Geoffrey Brown continuing as the Executive Director on the Board of EPO.

Geoffrey Brown, Executive Director of EPO, commented:

"We are very pleased to have now signed the new Joint Venture agreement with KLK Agro which has secured over $35m of funds for the development of our oil palm estates in Liberia. KLK, as one of the world's largest plantation companies, will bring their enormous and varied experience to our estates and help us achieve the great potential in order to drive value for all shareholders.

I would like to welcome Ms Yap Miow Kien to the Board who, given her extensive experience in corporate and commercial matters, will be of great benefit to the Company.

I would also like to acknowledge the enormous contribution made by Michael Frayne to the Company as he transitions from Executive to Non-Executive Chairman. It is a testament to the continued progress of the Company that he is now in a position to do this and we are very pleased he will continue on in the Chairman's role."

Ms Yap Miow Kien, aged 45

Ms Yap Miow Kien joined KLK in 2002 and is currently its Company Secretary and Senior General Manager (Legal and Secretariat). Prior to joining KLK, Ms Yap was a partner in a law firm. She is an Associate of the Malaysian Institute of Chartered Secretaries and Administrators. She was called to the bar at Middle Temple and completed a bachelor of law (Hons) at the University of Leeds. Her current and past directorships are as follows:

Current directorships	Past directorships within the last 5 years
Austerfield Corporation Sdn Bhd	Scope Energy Sdn Bhd
Brecon Holdings Sdn Bhd Betatechnic Sdn Bhd	KLK (Mauritius) International Ltd (Dissolved on 9 February 2011)
Bornion Estate Sdn Bhd Colville Holdings Sdn Bhd	The Kuala Pertang Syndicate Limited (Dissolved on 2 December 2013)
KL-Kepong Country Homes Sdn Bhd Bhd	The Shanghai Kelantan Rubber Estates (1925) Limited (Dissolved on 1 February 2013)
KLK Land Sdn Bhd (Formerly known as KL-Kepong	Verdant Plantations Ltd (Dissolved on 9 February 2011)
KL-Kepong Property Development Sdn
Property Holdings Sdn Bhd)
KL-Kepong Complex Sdn Bhd
KL-Kepong Property Management Sdn Bhd
KL-K Holiday Bungalows Sdn Bhd
Kompleks Tanjong Malim Sdn Bhd
Palermo Corporation Sdn Bhd
Selasih Ikhtisas Sdn Bhd

There is no further information required to be disclosed pursuant to Schedule 2(g) of the AIM Rules.

Related Party Transactions

KLK (through its wholly owned subsidiary KL-Kepong International Limited) currently holds ordinary shares in EPO representing approximately 63.2 per cent. of the issued share capital of the Company. In addition, KLK Agro also currently holds 50 per cent. of the issued share capital of LPD. Accordingly, the JVA and the Management Agreement are classified as related party transactions under the AIM Rules for Companies. Michael Frayne and Geoffrey Brown, being the non-related directors of EPO for the purposes of these transactions, consider, having consulted with the Company's nominated adviser, Strand Hanson Limited, that the terms of the JVA and the Management Agreement are fair and reasonable insofar as the Company's shareholders are concerned.

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For further information, please visit www.epoil.co.uk or contact:

Equatorial Palm Oil plc Geoffrey Brown (Executive Director)	[phone]
Strand Hanson Limited (Nominated Adviser) James Harris / Andrew Emmott / James Bellman	[phone]

Mirabaud Securities LLP (Broker) Peter Krens

[phone]

Notes to editors:

Equatorial Palm Oil plc is an AIM listed crude palm oil developer and producer with palm oil estates in Liberia, West Africa.  The Company was founded in 2005 and is focused on becoming a global, sustainable producer of high quality palm oil to regional and international markets.

With a significant land position in Liberia through its operating subsidiary Liberian Palm Developments Limited (LPD), the Company is geographically well positioned to serve the international and regional markets and is committed to making a positive impact on the communities in which it operates through investment in local schools, health clinics, housing and infrastructure. 

The Company's largest shareholder and 50:50 joint venture partner in LPD is Kuala Lumpur Kepong Berhad ("KLK"). KLK is one of the largest palm oil producers in the world and the Company will greatly benefit from their many years of expertise in oil palm development.

 

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