Proposed Accelerated Bookbuild

RNS Number : 1496V

ITM Power PLC

26 January 2017

 

26 January 2017

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA, THE REPUBLIC OF IRELAND, NEW ZEALAND OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMENDATION, OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES IN ITM POWER PLC OR ANY OTHER ENTITY IN ANY JURISDICTION. NEITHER THIS ANNOUNCEMENT NOR THE FACT OF ITS DISTRIBUTION, SHALL FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH ANY INVESTMENT DECISION IN RESPECT OF ITM POWER PLC.

This announcement contains inside information

ITM Power plc

("ITM Power", "the Group" or the "Company")

Proposed Accelerated Bookbuild to raise a minimum of £5.5 million

ITM Power (AIM: ITM), the energy storage and clean fuel company, announces a proposed fundraising of a minimum of £5.5 million, by way of the conditional firm placing ("Firm Placing") of Firm Placed Shares at a price of 17 pence per share (the "Issue Price") with existing and new institutional investors.  If approved by Shareholders the Firm Placed Shares to be issued pursuant to the proposed Firm Placing is expected to represent approximately 13 per cent. of the Enlarged Issued Share Capital of the Company.  The Firm Placed Shares will rank pari passu in all other respects with the Company's Existing Ordinary Shares.

The Firm Placed Shares are being offered by way of an accelerated bookbuild ("Bookbuild"), which will be launched immediately following this announcement.  Zeus Capital will be acting as sole bookrunner in connection with the Bookbuild.

It is expected that the finalisation of the proposed Firm Placing will commence immediately following this announcement and a further announcement will be made to confirm its completion in due course.

The proposed Firm Placing will be subject to the passing of certain resolutions for which Shareholder approval will be sought at the General Meeting of the Company, which is expected to be convened shortly by the posting to Shareholders of a circular containing notice of the meeting.

The Directors intend to use the proceeds of the Firm Placing to:

·      generate working capital to support the project order book;

·      move toward achieving a positive cash flow position; and

·      strengthen the Company's balance sheet, to assist in meeting tender requirements, in particular with regards to obtaining upfront payment terms from customers.

The following Directors and major Shareholders intend to subscribe for an aggregate of 14,882,351 Firm Placed Shares as follows:

Dr. Graham Cooley	176,470
J.C.B. Research	11,764,705
Valebond Consultants Limited	2,941,176

Additional information on the Firm Placing is included below.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014 ("MAR"). In addition, market soundings (as defined in MAR) were taken in respect of the Placing with the result that certain persons became aware of inside information (as defined in MAR), as permitted by MAR.  This inside information is set out in this Announcement.  Therefore, those persons that received inside information in a market sounding are no longer in possession of such inside information relating to the Company and its securities.

For further information please visit www.itm-power.com or contact:

ITM Power plc Graham Cooley, CEO	[phone]
Zeus Capital Alex Davies / Hugh Kingsmill Moore Andrew Jones / Jonathan Sharp	[phone]
Tavistock Simon Hudson / James Collins	[phone]

About ITM Power plc:

ITM Power manufactures integrated hydrogen energy solutions which are rapid response and high pressure that meet the requirements for grid balancing and energy storage services, and for the production of clean fuel for transport, renewable heat and chemicals.  ITM Power was admitted to the AIM market of the London Stock Exchange in 2004 and is a founder member of the Social Stock Exchange. In 2016 the Group has continued its work on the Hyfive project, opening two refuelling stations in London, and signed fuel contracts with Arcola Energy, Commercial Group and Arval. The Group currently has £16.98m of projects under contract and a further £1.37m in the later stages of negotiation (£18.35m in total). www.itm-power.com.

Additional information on the Firm Placing

1.   Overview of ITM

ITM manufactures integrated hydrogen energy solutions which offer rapid response and high pressure

delivery designed to meet the requirements for grid balancing and energy storage services, and for the production of clean fuel for transport, renewable heat and chemicals. The Group operates through two principal divisions:

(a)  power to gas energy storage: the Group's 'Power-to-Gas' model is a commercial proposition which offers utility companies energy storage options. ITM provides grid balancing services, converting excess energy in the power network into hydrogen for injection into the gas network.

ITM delivered the world's first Proton Exchange Membrane Power-to-Gas plant in 2013 and supplied a second Power-to-Gas system to RWE in 2015. More recently, the Group received its first order for Power to Gas equipment from National Grid.

The Group considers it has a competitive advantage for Power to Gas systems because it can offer sub-one second response times ("rapid response") for full system turn on and turn off; and because this rapid response electrolysis can be offered at pressure up to 80 bar.

(b)  clean fuel: the Group's refuelling model incorporates the work of national hydrogen infrastructure initiatives to support the growth of hydrogen as a transport fuel, for use in cars and buses initially, with further transport applications in the future. ITM has existing commercial fuel contracts with a number of companies, and in 2016 opened two refueling stations in London as part of the HyFive programme, a programme funded by the Fuel Cell and Hydrogen Joint Undertaking. ITM Power has also delivered its first refueling station to a Shell forecourt which is intended to open to the public in quarter one of 2017.

The Group has won contracts to supply on-site hydrogen generation equipment for refuelling in both the UK and California, building or to build nine stations in the UK and two in the US.

In March 2015 the Company received a strategic investment of £4.9 million from JCB, to fund working

capital and projects under contract. In February 2016 JCB invested a further £1.2 million into the Company through the open offer announced in January 2016. JCB is the world's third largest construction equipment manufacturer by volume.

2.   Background to and reasons for the Firm Placing and use of proceeds

As at 24 January 2017 ITM had £16.98 million of projects under contract and a further £1.37 million in the later stages of negotiation (£18.35 million in total). A number of these projects are commercial agreements requiring upfront expenditure from the Company, with the corresponding income typically received towards the end of the contract, providing a working capital shortfall during the earlier stages of the agreement. The Directors intend to use the proceeds of the Firm Placing to:

·      generate working capital to support the project order book;

·      move toward achieving a positive cash flow position; and

·      strengthen the Company's balance sheet, to assist in meeting tender requirements, in particular with regards to obtaining upfront payment terms from customers.

Cash flow remains a key consideration for the Board, and the presiding financial objective for ITM is the achievement of a positive cash flow in the medium term. To manage working capital demands and mitigate the impact of existing projects with cash receipts towards the end of the contractual agreement, the Company is seeking a move towards quoting for potential sales with upfront payment terms, thus reducing the initial working capital outlay of such commercial projects. On certain projects, working capital is also enhanced through working with, and receiving support from, partners on the development of technology.

Continued Product Development

The Directors' immediate objective in terms of product development is to focus on the scale up of proven electrolysis equipment, allowing penetration of larger markets. The Directors believe this approach to be a direct response to market demand from sales enquiries, trade fairs and marketing events. Product development, and in particular upscaling of product offering, is expected to be achieved through securing and utilising project funding. The Company intends to launch designs for potential 100MW systems for applications in the chemical and large utility industry at the Hannover Messe in April 2017, utilising scale up of existing ITM technologies.

3.   Intentions of the Directors and certain major Shareholders in relation to the firm Placing

The following Directors and major Shareholders intend to subscribe for an aggregate of 14,882,351 Firm Placed Shares as follows:

Dr. Graham Cooley	176,470
J.C.B. Research	11,764,705
Valebond Consultants Limited	2,941,176

4.   Current trading and outlook

On 26 January the Company announced its interim results for the six month period to 31 October 2016. The Group has recognised total revenue and grant funding of £2.97 million in the period and currently has £16.98 million of projects under contract with a further £1.37 million of contracts in the later stages of negotiation, making a total pipeline of £18.35 million. In the 2016 calendar year, orders have totalled £15.68 million, representing an increase of 100 per cent. year on year. Given the current contracted order book, the Directors remain confident of delivering full year results in line with market expectations.

A copy of the interim results is available on the Company's website at www.itm-power.com.

5.   Details of the Firm Placing

Structure

The Directors have given careful consideration as to the structure of the proposed fundraising and have concluded that the Firm Placing is the most suitable option available to the Company and its Shareholders at this time.

 Firm Placed Shares will be issued through the Firm Placing at 17 pence per Firm Placed Share to raise gross proceeds of approximately £5.5 million.

The Board considered undertaking an open offer of new Ordinary Shares to holders of Existing Ordinary Shares in conjunction with the Firm Placing. However, due to constraints placed upon the Company under the Prospectus Rules and FSMA the Company would be unable to undertake an open offer at this time without incurring the additional expense of preparing and publishing a prospectus. Accordingly the Board believes it is in the best interests of the Company and its shareholders at this time for the Company to proceed with the Firm Placing alone.

Principal terms of the Firm Placing

The Company is proposing to issue Firm Placed Shares pursuant to the Firm Placing. In accordance with the terms of the Firm Placing Agreement, Zeus Capital has, as agent for the Company, conditionally placed, with institutional and other investors, the Firm Placed Shares at the Issue Price to raise approximately £5.5million.

The Firm Placing is not being underwritten.

Under the Firm Placing Agreement, the Company has agreed to pay to Zeus Capital a fixed sum together with a commission based on the aggregate value of certain of the Firm Placed Shares placed at the Issue Price and the costs and expenses of the Firm Placing together with any applicable VAT.

Conditionality

The Firm Placing is conditional, inter alia, upon the following:

·      the passing, without amendment, of resolutions 1 and 3 of the Resolutions at the General Meeting;

·      Admission occurring by no later than 8.00 a.m. on 17 February 2017 (or such later times and/or dates as may be agreed between the Company and Zeus Capital, being no later than 5.00 p.m. on 31 March 2017); and

·      the Firm Placing Agreement becoming unconditional in all respects (save for the condition relating to Admission) and not having been terminated in accordance with its terms.

If the conditions set out above are not satisfied or waived (where capable of waiver), the Firm Placing will lapse and the Firm Placed Shares will not be issued and all monies received from investors in respect of the Firm Placed Shares will be returned to them (at the investors' risk and without interest) as soon as possible thereafter.

Application for Admission

Application will be made to the London Stock Exchange for the Firm Placed Shares to be admitted to trading on AIM. Admission of the Firm Placed Shares is expected to take place, and dealings on AIM are expected to commence, at 8.00 a.m. on 17 February 2017 (or such later time and/or dates as may be agreed between the Company and Zeus Capital). No temporary document of title will be issued.

The Firm Placed Shares will, following Admission, rank pari passu in all respects with the Existing Ordinary Shares in issue at the date of this document and will carry the right to receive all dividends and distributions declared, made or paid on or in respect of the Ordinary Shares after Admission.

6.   Effect of the Firm Placing

Upon completion of the Firm Placing the Firm Placed Shares will represent approximately 13 per cent. of the Enlarged Share Capital.

7.   The Firm Placing Agreement

Pursuant to the terms of the Firm Placing Agreement, Zeus Capital, as agent for the Company, has agreed to use its reasonable endeavours to procure subscribers for the Firm Placed Shares at the Issue Price. The Firm Placing Agreement is conditional upon, among other things, the conditions set out above  and none of the warranties or undertakings given to Zeus Capital prior to Admission being or becoming untrue, inaccurate or misleading in any material respect.

The Firm Placing Agreement contains customary warranties given by the Company in favour of Zeus Capital in relation to, inter alia, the accuracy of the information in this document and other matters relating to the Group and its business. In addition, the Company has agreed to indemnify Zeus Capital (and its affiliates) in relation to certain liabilities which they may incur in respect of the Firm Placing.

Zeus Capital has the right to terminate the Firm Placing Agreement in certain circumstances prior to

Admission. In particular, in the event of a material breach of the warranties or a material adverse change or if the Firm Placing Agreement does not become unconditional.

8.    General Meeting

For the purposes of effecting the Firm Placing, the Resolutions will be proposed at the General Meeting.

The full text of the Resolutions will be set out in the Notice of General Meeting that will be posted shortly after the result of the accelerated bookbuild is announced.

Forward-looking statements

This announcement contains statements about ITM Power that are or may be deemed to be "forward-looking statements".

 All statements, other than statements of historical facts, included in this announcement may be forward-looking statements. Without limitation, any statements preceded or followed by, or that include, the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "should", "anticipates", "estimates", "projects", "would", "could", "continue" or words or terms of similar substance or the negative thereof, are forward-looking statements. Forward-looking statements include, without limitation, statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects and (ii) business and management strategies and the expansion and growth of the operations of ITM Power.

 These forward-looking statements are not guarantees of future performance. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of any such person, or industry results, to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on numerous assumptions regarding the present and future business strategies of such persons and the environment in which each will operate in the future. Investors should not place undue reliance on such forward-looking statements and, save as is required by law or regulation (including to meet the requirements of the AIM Rules, the Prospectus Rules and/or the FSMA), ITM Power does not undertake any obligation to update publicly or revise any forward-looking statements (including to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based). All subsequent oral or written forward-looking statements attributed to ITM Power or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statement above. All forward-looking statements contained in this announcement are based on information available to the Directors of ITM Power at the date of this announcement, unless some other time is specified in relation to them, and the posting or receipt of this announcement shall not give rise to any implication that there has been no change in the facts set forth herein since such date.

EXPECTED TIMETBALE OF PRINCIPAL EVENTS

Announcement of the Firm Placing	26 January 2017
Despatch of the Circular and the Form of Proxy	27 January 2017
Latest time and date for receipt of Forms of Proxy for the General Meeting	11.00 a.m. on 14 February 2017
General Meeting	11.00 a.m. on 16 February 2017
Admission of the Firm Placed Shares to trading on AIM	8.00 a.m. on 17 February 2017

DEFINITIONS

Admission	admission of the Firm Placed Shares to trading on AIM and such admission becoming effective in accordance with the AIM Rules;
AIM	the AIM market operated by the London Stock Exchange;
AIM Rules	the AIM Rules for Companies and/or the AIM Rules for Nominated Advisers (as the context may require);
AIM Rules for Companies	the rules of AIM as set out in the publication entitled 'AIM Rules for Companies' published by the London Stock Exchange from time to time;
AIM Rules for Nominated Advisers	the rules of AIM as set out in the publication entitled 'AIM Rules for Nominated Advisers' published by the London Stock Exchange from time to time;
Board or Directors	the board of directors of the Company for the time being;
Business Day	any day (excluding Saturdays and Sundays) on which banks are open in London for normal banking business and the London Stock Exchange is open for trading;
Capita Asset Services	a trading name of Capita Registrars Limited, a company incorporated in England and Wales with registered number 02605568 and having its registered office at The Registry, Beckenham, Kent BR3 4TU;
certificated or in certificated form	the description of a share or other security which is not in uncertificated form (that is not in CREST);
Circular or this document	this document dated 27 January 2017;
Closing Price	the closing middle market quotation of an Ordinary Share as derived from the AIM Appendix to the Daily Official List of the London Stock Exchange;
Company or ITM Power plc	ITM Power plc, a company incorporated in England and Wales with registered number 05059407 and having its registered office at 22 Atlas Way, Sheffield, South Yorkshire S4 7QQ;
CREST	the relevant system (as defined in the CREST Regulations) in respect of which Euroclear is the Operator (as defined in the CREST Regulations);
Enlarged Share Capital	the issued share capital of the Company immediately following Admission;
EU	the European Union;
Euroclear	Euroclear UK & Ireland Limited;
Existing Issued Share Capital	the issued share capital of the Company as at the Latest Practicable Date;
Existing Ordinary Shares	the 216,892,973 Ordinary Shares in issue as at the Record Date;
FCA	the UK Financial Conduct Authority;
Firm Placees	the persons who have agreed to subscribe for the Firm Placed Shares;
Firm Placed Shares	the new Ordinary Shares to be issued by the Company under the Firm Placing;
Firm Placing	the placing of the Firm Placed Shares with the Firm Placees pursuant to the Firm Placing Agreement;
Firm Placing Agreement	the agreement dated 26 January 2017 between the Company and Zeus Capital Limited relating to the Firm Placing, details of which are set out in paragraph 7 of Part I of this document;
Form of Proxy	the form of proxy accompanying this document relating to the General Meeting;
FSMA	the UK Financial Services and Markets Act 2000, as amended;
General Meeting or GM	the general meeting of the Company, notice of which is set out at the end of this document, and including any adjournment(s) thereof;
Group or ITM	the Company and/or its subsidiary undertakings at the date of this document (as defined in sections 1159 and 1160 of the Act);
Issue Price	17 pence per Firm Placed Share;
JCB	Valebond Consultants Limited (a company wholly owned by Jon Bamford) together with J.C.B. Research
Latest Practicable Date	means 5.00 p.m. on 25 January 2017, being the latest practicable date prior to the announcement by the Company of its intention to undertake the Firm Placing;
London Stock Exchange	London Stock Exchange plc;
Notice of General Meeting	the notice of General Meeting, set out in Part II of this document;
Options	options granted by the Company over unissued Ordinary Shares pursuant to employee share option schemes and rights to subscribe for shares pursuant to employee and non executive long term incentive plans put in place by the Company;
Option Holders	the employees of the Company (including Directors) who hold Options;
Ordinary Shares	ordinary shares of 5 pence each in the capital of the Company;
Prospectus Rules	the Prospectus Rules published by the FCA;
Record Date	5.00 p.m. on 25 January 2017;
Registrars	Capita Asset Services, a trading name of Capita Registrars Limited;
Regulatory Information Service or       RNS	has the meaning given in the AIM Rules for Companies;
Resolutions	the resolutions to be proposed at the General Meeting which are set out in full in the Notice of General Meeting;
Shareholders	holders of Existing Ordinary Shares;
uncertificated	recorded on a register of securities maintained by Euroclear in accordance with the CREST Regulations as being in uncertificated form in CREST and title to which, by virtue of the CREST Regulations, may be transferred by means of CREST;
UK or United Kingdom	the United Kingdom of England, Scotland, Wales and Northern Ireland;
US or United States	the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia;
US Securities Act	the US Securities Act of 1933, as amended;
Zeus Capital or Zeus Capital Limited	Zeus Capital Limited, a company incorporated in England and Wales with registered number 04417845 and having its registered office at 82 King Street, Manchester M2 4WQ; and
£ or sterling	pounds sterling, the legal currency of the United Kingdom.

 

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