Subscription of 20,000,000 ne

RNS Number : 2598E

Proton Power Systems PLC

25 September 2008

 



Press release

25 September 2008

Proton Power Systems plc

('Proton' or 'the Company')

Subscription of 20,000,000 new Ordinary Shares at 10 pence per Ordinary Share

Proton (AIM: PPS), a designer, developer and producer of fuel cells and fuel cell electric hybrid systems, today announces its intention to raise £2 million by way of a conditional subscription.

Summary of the Subscription:

	A proposed subscription by Roundstone Properties of 10,000,000 new Ordinary Shares of 5p each in the Company at a price of 10p per share and, subject to approval by shareholders at a General Meeting to be held shortly, Roundstone Properties has indicated its intention to subscribe a further 10,000,000 new Ordinary Shares of 5p each at a price of 10p per share, to raise a total £2 million
	Interim results for the six months to 30 June 2008 announced today
	The net proceeds of the Subscription will be used to fund the move into the stationary UPS sector; the commencement of industrialised production and the anticipated connected working capital requirements

John Wall, Executive Chairman of Proton said:

'I am delighted that we are able to announce a proposed substantial financial commitment from Dr. Nahab's family investment company, Roundstone Properties, to support our strategy going forward. The financing will enable us to move into the Uninterruptible Power Supply market.  We are seeing an increased demand for stationary applications such as UPS and look forward to capitalising on the opportunities ahead'

For further information:

Proton Power Systems plc
John Wall, Chairman	Tel: [phone]
Ali Naini, Deputy Chairman	Tel: [phone]
Thomas Melczer, CEO	Tel: [phone]
	www.protonpowersystems.com
Arbuthnot Securities Limited
Tom Griffiths / Antonio Bossi	Tel: [phone]
	www.arbuthnotsecurities.co.uk
Abchurch Communications Limited
Heather Salmond / Justin Heath / Stephanie Cuthbert / Monique Tsang	Tel: [phone]
[e-mail]	www.abchurch-group.com

Arbuthnot Securities Limited, which is regulated by the Financial Services Authority, is acting as nominated adviser and broker to the Company in relation to the Subscription and will not be responsible to any person other than the Company for providing the protections afforded to its clients or for advising any other person on the contents of this announcement or any transaction or arrangement referred to herein.

This announcement does not constitute an offer to sell, or the solicitation of an offer to buy, shares in any jurisdiction in which such offer or solicitation is unlawful and, in particular, is not for distribution into the United States, Canada, Australia, the Republic of Ireland or Japan.

This announcement contains forward looking statements that involve unknown risks, uncertainties and other factors which may cause the actual results, financial condition, performance or achievement of Proton, or industry results to be materially different from any future results, performance, developments or achievements expressed or implied by such forward looking statements.

  Subscription of 20,000,000 new Ordinary Shares at 10 pence per Ordinary Share

1. Introduction

Proton announces that it is intended that 20,000,000 new Ordinary Shares at 10 pence each to raise £2 million will be conditionally subscribed; it is intended that the equity fundraising will be subscribed for by Roundstone Properties.

Pursuant to the authorities granted at the Company's annual general meeting held on 22 July 2008, it is intended that 10,000,000 Ordinary Shares will be allotted to Roundstone Properties at 10 pence each (the 'Initial Subscription Shares') on 1 October 2008. Application will be made for the Initial Subscription Shares to be admitted to trading on AIM which is expected to become effective on 2 October 2008.

In addition, Roundstone Properties has indicated its intention to subscribe for a further 10,000,000 Ordinary Shares at 10 pence each (the 'Second Subscription Shares'). However the Directors do not currently have the authorities necessary to issue the Second Subscription Shares which Roundstone Properties has indicated its intention to subscribe for. 

The Directors are also seeking shareholder approval for the authority to allot shares and to disapply statutory pre-emption rights for up to a maximum of 20,000,000 Ordinary Shares, in addition to the Initial Subscription Shares and the Second Subscription Shares. The Directors believe that it is important that they retain the flexibility to issue additional equity in the Company should it be appropriate to do so. This would also enable other Shareholders and investors to invest alongside Roundstone Properties. Shareholders should note that, notwithstanding the Subscription, it is likely that the Company will not have sufficient funds to fully execute its strategy and the Board will pursue further sources of funding in due course.

The Board expects that the net proceeds of the Subscription will be used to fund the move into the stationary UPS sector; the commencement of industrialised production and the anticipated connected working capital requirements.

A circular containing a notice of general meeting is due to be sent shortly to Shareholders seeking Shareholder approval, inter alia, to enable the Directors to allot the Second Subscription Shares and the 20,000,000 additional Ordinary Shares.

The proposed Second Subscription will require the Company to obtain approval from its Shareholders to increase its authorised share capital, to grant the Board authority to allot the Second Subscription Shares and to disapply statutory pre-emption rights which would otherwise apply to, inter alia, the allotment of the Second Subscription Shares.

The Subscription is being made on a non pre-emptive basis as the time and costs associated with a pre-emptive offer resulting from the introduction of the EU Prospectus Rules (which came into force in July 2005) are considered by the Directors to be excessive. 

2. Background to and reasons for the Subscription

Operational background and recent developments

The Group is a developer and manufacturer of fuel cells and fuel cell hybrid systems for motive and stationary power supply. Proton specialises in high power systems in the 5kW to 150kW range which are capable of powering fork lifts, buses, street cleaning vehicles, small passenger ships and UPS systems whilst utilising a fraction of the space required by equivalent battery-only based systems.

Since Proton's admission to AIM in October 2006, the Group has continued to develop its fuel cell technology and has accessed a broad range of end user markets through partnerships with leading original equipment manufacturers such as Skoda Electric and Karmann.

The Company announced on 29 August 2008 the world's first fuel cell driven inland waterway passenger ship in the class up to 100 passengers for the city of Hamburg and announced on 15 September 2008 that its PM200 fuel cell module had received certification by TÜV SÜD, the German testing and inspection organisation, that will allow it to be produced through an automated process.

In the Company's interim results statement issued today, the Directors indicated that they had decided to refocus the Company's strategy on fuel cell based solutions for stationary power supplies. The Directors believe this to be a market with a high volume demand for solutions with long back up times which can be tapped by standardised products. The Directors believe that fuel cell based products can provide an optimised solution for such applications in the Information Technology and Telecom markets. It is intended that products for these markets will be based on the Company's existing modular fuel cell designs.

Following the receipt of the TÜV SÜD certification referred to above, the Group plans before the year end to initiate the industrialised production of fuel cells as well as complete systems, to be able to serve a growing demand. As a result, the Company intends to change its organisation structure and adjust its internal processes to allow a smooth start of a professional manufacturing line.

Funding requirement implications

In order to implement these two significant changes to its strategy and organisation which are expected to lead to an acceleration of the Company's business plan towards profitability and positive cash generation, the Directors believe that Proton needs additional funding.

The Board expects that the net proceeds of the Subscription will be used to:

• fund the move into the stationary UPS sector;

• commence industrialised production; and

• fund the anticipated working capital requirements of the Company.

3. Details of the Subscription

The Company proposes to raise £2 million through the issue of the Subscription Shares at the Subscription Price. The Subscription Price represents a premium of 33.3 per cent. to the closing middle market price of 7.5p on 24 September 2008, being the last dealing day prior to this announcement. The Subscription Shares (if both the Initial Subscription Shares and the Second Subscription Shares are subscribed for by Roundstone Properties) will represent approximately 24.6 per cent. of the Company's enlarged issued share capital immediately following Admission of the Second Subscription Shares and Roundstone Properties will hold approximately 46.7 per cent of such capital in aggregate.

Admission and dealings

Applications will be made to the London Stock Exchange for the Initial Subscription Shares and the Second Subscription Shares to be admitted to trading on AIM. The Initial Subscription Shares and the Second Subscription Shares will, when issued, rank pari passu in all respects with the existing issued Ordinary Shares, including the right to receive any dividends and other distributions declared following the relevant Admission. It is expected that Admission of the Initial Subscription Shares will become effective and that dealings in the Initial Subscription Shares will commence on 2 October 2008.

4. The City Code on Takeovers and Mergers

Proton is a public limited company registered in England; however, as the Company does not have its central place of management and control in the UK, the City Code on Takeovers and Mergers does not apply to the Company. 

5. Related party transaction

It is intended that the Subscription Shares will be subscribed for by Roundstone Properties at the Subscription Price. Roundstone Properties is a company connected with Dr Faiz Nahab, a non-executive director of the Company, who is also a substantial shareholder (as defined in the AIM Rules) of the Company. The issue of the Subscription Shares to Roundstone Properties is classified as a transaction with a related party for the purposes of the AIM Rules. In accordance, therefore, with the AIM Rules, the Independent Directors, having consulted with the Company's nominated adviser, Arbuthnot, consider that the terms of the proposed transaction (namely the intended subscription by Roundstone Properties, pursuant to the Subscription at the Subscription Price) are fair and reasonable insofar as the Company's Shareholders are concerned.

6. Other matters to be considered at the GM

The Directors also intend to use the opportunity of the General Meeting to update the Company's Articles of Association to bring them in line with the Companies Act 2006.

7. Recommendation

The Independent Directors consider the terms of the Subscription and the Resolutions to be proposed at the General Meeting to be in the best interests of the Company and the Shareholders as a whole. Consequently, the Independent Directors unanimously recommend that Shareholders vote in favour of all of the Resolutions to be proposed at the General Meeting as they intend to do or procure to be done in respect of their own beneficial holdings of Ordinary Shares, which in aggregate amount to 1,080,409 Ordinary Shares representing 1.8 per cent. of the Company's current issued share capital.

8. Shareholder Circular

The circular due to be sent out to Shareholders shortly contains a notice convening the GM at which the Resolutions will be proposed for the purposes of implementing the Second Subscription and related matters referred to in paragraph 1 above and for the other business referred to in paragraph 6 above. 

Copies of the circular incorporating the notice convening the GM will be available for collection from the offices of Arbuthnot Securities Limited, Arbuthnot House, 20 Ropemaker Street, London EC2Y 9AR for a period of one month from the date of posting and will also be available at the Company's website, www.protonpowersystems.com.

SUBSCRIPTION STATISTICS
Subscription Price	10p
Number of existing issued Ordinary Shares	61,390,863
Number of Subscription Shares being issued by the Company	20,000,000
Estimated gross proceeds receivable by the Company	£2 million
Number of Ordinary Shares in issue following Admission of the Initial Subscription Shares and the Second Subscription Shares	81,390,863
Number of Subscription Shares as a percentage of the enlarged issued share capital of the Company	24.6 per cent.

  DEFINITIONS

The following definitions apply throughout this announcement, unless the context requires otherwise:

'Act'	the Companies Act 1985, as amended
'Admission'	the admission of Ordinary Shares to trading on AIM becoming effective
'AIM'	the AIM market of the London Stock Exchange
'AIM Rules'	the AIM Rules for Companies and the AIM Rules for Nominated Advisers published by the London Stock Exchange, as amended from time to time
'Arbuthnot'	Arbuthnot Securities Limited, the Company's nominated adviser and broker
'Board' or 'Directors'	the board of directors of Proton
'General Meeting' or 'GM'	the General Meeting of the Company to be convened shortly (or any adjournment thereof)
'Group'	Proton and its subsidiaries
'Independent Directors'	the Directors with the exclusion of Dr Faiz Nahab
'London Stock Exchange'	London Stock Exchange plc
'Ordinary Shares'	ordinary shares of 5 pence each in the capital of the Company
'Proton' or 'the Company'	Proton Power Systems plc, a company incorporated in England and Wales with registered number 05700614 and having its registered office at St Ann's Wharf, 112 Quayside, Newcastle upon Tyne, NE1 3DX
'Resolutions'	the resolutions to be proposed at the GM to be set out in the Notice of GM
'Roundstone Properties'	Roundstone Properties Limited
'Second Subscription'	the proposed subscription to be undertaken by the Subscriber of the Second Subscription Shares at the Subscription Price
'Shareholders'	the persons who are registered as the holders of Ordinary Shares from time to time
'Subscriber'	Roundstone Properties
'Subscription'	the proposed subscription to be undertaken by the Subscriber of the Subscription Shares at the Subscription Price
'Subscription Price'	10p per Subscription Share
'Subscription Shares'	together the Initial Subscription Shares and the Second Subscription Shares
'UK'	the United Kingdom of Great Britain and Northern Ireland
'UPS'	Uninterruptible Power Supply

Notes to Editors 

Proton Power Systems plc is a developer and manufacturer of fuel cells and fuel cell hybrid systems for motive and stationary power supply. Its sales-driven strategy focuses on identifying applications with the greatest market needs and supplying large volumes of cost-competitive systems to fulfil those needs. Proton is targeting a global opportunity, accessing a broad range of markets through partnerships with leading OEMs such as Skoda Electric and Karmann.

Motive applications include forklifts, city buses, municipal utility vehicles and ferries; 'back-to-base' markets which can readily utilise the modularity and scalability of the Company's hydrogen fuel cell systems, and which do not depend on the existence of a ubiquitous hydrogen infrastructure, thereby facilitating swift commercialisation.  

Stationary applications focus on the Uninterruptible Power Supply sector, where there is a large demand for mission-critical, grid-independent secure power supply in places such as telecommunications stations, data centres, hospitals, and power substations. Further market potential lies in industrial and chemical processing plants, where the otherwise wasted hydrogen by-product can be harnessed for producing local power. 

Through its wholly owned subsidiary, Proton Motor Fuel Cell GmbH ('Proton Motor'), the Group has developed and produced a fuel cell module that can be integrated with energy storage media to create a hybrid fuel cell system. A proprietary, intelligent energy management software balances the power output across the fuel cell storage unit(s) to maximise efficiency and improve power delivery. The system thus boasts lower fuel consumption and more consistent levels of power delivery than conventional diesel/combustion engine or fuel cell-only systems, in addition to producing zero harmful emissions. 

Proton Power Systems plc was admitted to trading on AIM on 31 October 2006 and is incorporated in the UK. Proton Motor has more than 15 years of experience in the fuel cell market and is located in Puchheim, near Munich, Germany, where its manufacturing facility is based. 

 

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