Circ re Acquisition of Bluefield L&P Solar Limited
Bluefield Solar Income Fund Limited
Approval of related party transactions and issue of Consideration Shares, proposed disapplication of pre-emption rights in connection with the proposed fundraising by way of a Placing Programme in respect of up to 150 million New Ordinary Shares and/or C Shares, proposed amendment of Articles of Incorporation and Notice of Extraordinary General Meeting.
Introduction
The Board of Bluefield Solar Income Fund Limited (the "Company") announces that the Company's wholly-owned UK subsidiary, Bluefield SIF Investments Limited ("SIF"), has entered into a conditional contract to acquire the Target Portfolio through the acquisition of all of the issued shares in Bluefield L&P Solar Limited (the "Target Holdco") in consideration for the issue of new Ordinary Shares and cash.
The Company's investment adviser, Bluefield Partners LLP (the "Investment Adviser"), is also the investment manager to the Target Holdco and certain members of the Investment Adviser hold Ordinary and B Shares in the Target Holdco which are proposed to be sold to SIF pursuant to the Acquisition Agreement. Three of these members are directors of SIF, or its subsidiaries, and as such are related parties to the Group. Consequently, the Acquisition Agreement will be a related party transaction for the purposes of the Listing Rules and the Acquisition Agreement is therefore conditional on, inter alia, the approval of Shareholders at the EGM (the "Acquisition Approval").
In addition, the Board is announcing that, subject to Shareholder approval and the publication of a prospectus, it intends to put in place a placing programme to enable the Company to repay sums drawn down from time to time under the Acquisition Facility and to make further acquisitions. The Board is seeking Shareholders' consent for the disapplication of pre-emption rights in connection with the proposed issue in aggregate of up to 150 million New Ordinary Shares and/or C Shares pursuant to the Placing Programme (the "Disapplication Approval").
In connection with the proposed Placing Programme, the Board is seeking the approval of Shareholders to issues of New Ordinary Shares and/or C Shares to: (i) the L&P Sellers, who will be deemed to be related parties to the Company under the Listing Rules following the issue of the Consideration Shares pursuant to the Acquisition Agreement; and (ii) CCLA, which, by virtue of the size of its shareholding in the Company, is a related party to the Company.
The Board is also putting a resolution to Shareholders seeking approval of an amendment to the conversion rights attaching to the C Shares as set out in the Articles. The purpose of the proposed amendment is to provide greater flexibility to the Board to determine the most appropriate time for calculating the conversion ratio in respect of each class of C Shares with a view to achieving the objective that the conversion of the C Shares should not be earnings dilutive for the existing Ordinary Shares (the "Amendment Approval").
Consequently, the Board is convening an Extraordinary General Meeting in order to put the necessary resolutions to Shareholders.
The Acquisition
Background to and reasons for the Acquisition
The Target Portfolio consists of 12 operating solar assets totalling 6.212MWp. The assets were commissioned between July 2011 and September 2012. The largest asset in the Target Portfolio, Durrant's Farm, was built by REC Systems Ltd ("REC"), the specialist contracting arm of REC Group, the global solar manufacturer and installer. The remaining 11 assets were built by British Gas New Heating ("BG"), the specialist solar contracting arm of Centrica.
The Target Portfolio is held by the Target Holdco within two special purpose companies: (i) KS SPV5 Ltd (an indirect wholly-owned subsidiary of the Target Holdco), which owns Durrant's Farm; and (ii) Bluefield Goshawk Ltd, which owns the remaining 11 assets (comprising the Thames Water Assets and the Adnams Bio-energy Asset).
The total consideration payable by SIF for the Target Holdco will be £8,914,000, which will be satisfied through a combination of cash and the allotment of the Consideration Shares, as described in more detail under the heading "The Acquisition Agreement" below.
The total consideration payable for Durrants represents £4.27 million per MWp which reflects the fact that the acquisition benefits from a FIT rate of 34.1p for kWh, rising with RPI; Goshawk's portfolio is being acquired for a consideration of £1.55 million per MWp from assets that benefit from a FIT of 17.9p per kWh, rising with RPI. Both subsidy levels are higher than the current ROC regime under which the Company's existing portfolio operates and enables the Company to pay more for the Target HoldCo and still expect to match or exceed the Company's return target.
Based on the proposed consideration payable the Board expects that the cashflow derived from Target Holdco, over the life of the asset, will be accretive to Shareholder returns.
The Target Portfolio
|
SPV |
Asset's Name |
Location |
Installed Capacity (MWp)(1)
|
Commissioned |
FIT (2) level p/KWh |
PPA Expiry |
PPA Counterparty |
|
KS SPV5 |
Durrants |
Isle of Wight |
4.997 |
July 2011 |
34.1 |
Sep 2014 |
Smartest
|
|
Bluefield Goshawk |
Thames Water Weybridge
|
Surrey |
0.050 |
July 2012 |
16.9 |
July 2037 |
Thames Water |
|
|
Thames Water Esher
|
Surrey |
0.050 |
July 2012 |
16.9 |
July 2037 |
Thames Water |
|
|
Thames Water Hockford
|
Surrey |
0.050 |
July 2012 |
16.9 |
July 2037 |
Thames Water |
|
|
Thames Water Holmwood
|
Surrey |
0.050 |
July 2012 |
16.9 |
July 2037 |
Thames Water |
|
|
Thames Water Woking
|
Surrey |
0.247 |
July 2012 |
13.66 |
July 2037 |
Thames Water |
|
|
Thames Water Ashvale
|
Surrey |
0.050 |
July 2012 |
16.9 |
July 2037 |
Thames Water |
|
|
Thames Water Ripley
|
Surrey |
0.249 |
July 2012 |
13.66 |
July 2037 |
Thames Water |
|
|
Thames Water Faringdon
|
Oxfordshire |
0.050 |
July 2012 |
16.9 |
July 2037 |
Thames Water |
|
|
Thames Water Sandhurst
|
Surrey |
0.099 |
Sep 2012 |
12.18 |
Sep 2037 |
Thames Water |
|
|
Thames Water East Hampstead
|
Surrey |
0.099 |
Aug 2012 |
12.18 |
Aug 2012 |
Thames Water |
|
|
Adnams Bio Energy Southwold
|
Suffolk |
0.226 |
July 2011 |
34.1 |
N/A |
N/A |
(1) All 0.050MW sites are in fact just under 0.050MW so they have been qualified for high FIT tariff.
(2) The FIT regime was implemented by way of the Feed in Tariffs Order 2010. It requires FIT Licensees to pay a fixed generation tariff, formally known as Feed in Tariff ("FIT"), and an export tariff to low carbon generators whose capacity does not exceed 5 MW. An eligible generator receives a fixed amount indexed with RPI for all electricity produced for a duration of 20 or 25 years depending on the year of installation. Annual FIT payments are made according to published tariffs by OFGEM. The export tariff can be opted out by contracting directly with an electricity supplier through a direct power purchase agreement ("PPA"). Therefore, in essence, export tariff offers a floor price for PPA.
● Solar plant on Durrant's Farm
Durrant's Farm is the largest single asset in the Target Portfolio and at 4.997MWp amounts to 80 per cent. of the Target Portfolio's total output capacity. It was constructed and grid-connected prior to the tariff reductions in August 2011 and qualified for 30.9 pence per kWh FIT with guaranteed minimum FIT export tariff of 3 pence per kWh for 25 years rising with RPI (with the 2014/2015 year's FIT being 34.1 pence per kWh). It is the only asset within the portfolio with project finance in place with a total outstanding balance on three facilities of £15,243,064 as at 2 September 2014. The project finance is provided by Bayerische Landesbank, London Branch and the fixed-rate loan is fully amortising over 18 years until its maturity in September 2028 at a weighted average rate of 5.22 per cent. The project finance is limited recourse to the assets of the borrower under the financing (KS SPV5 Ltd). Immediately following completion of the Acquisition, the Group's aggregate borrowings (consisting of the outstanding balances of these facilities and the amount outstanding under the Group's acquisition facility with RBS) will be £17,593,767.16, giving a gearing level of approximately 11.2 per cent. against the enlarged Group's NAV (calculated as the aggregate of the Group's last published NAV as at 30 June 2014 and the NAV of the Target Portfolio as at 30 June 2014).
● Solar plants on Thames Water Assets
The 10 Thames Water assets are small, ground based operational solar farms based on the sites of water and waste processing plants owned by Thames Water Utilities (Thames Water). They are all in the south east of England. The total energy capacity is just under 1MWp. All the sites qualified for 20-25 year FIT and have 25 year RPI linked PPAs with Thames Water. All the plants were built by and are currently operated by BG.
● Solar plant on Adnams Bio Energy Asset
The Adnams Bio Energy asset is a ground-based solar plant which supplies power directly to a biogas plant owned by Adnams Bio Energy. The solar plant was grid-connected prior to the drop in FIT in August 2011. The Adnams Bio Energy asset derives 100 per cent. of its net revenue for FIT which was qualified at 30.7p per kWh for 25 years rising with RPI (with the current year's FIT being 34.1 pence per kWh).
Benefits of the Acquisition
The Directors believe that the Acquisition will have the following benefits for Shareholders and the Company:
● Diversification into FIT: Currently the Company's portfolio consists exclusively of ROC projects. The proposed acquisition of the Target Portfolio will give the Company access to assets benefitting from attractive FITs which are fully RPI indexed in line with the Company's investment objective. Durrant's Farm, the largest asset in the Target Portfolio, benefits from 23 years of FIT remaining and is one of few projects in the UK that gained access to the high pre-August 2011 FIT rate, currently at £34.1/kWp, which ceased to be available to new plants from 1 August 2011;
● Reduced exposure to power prices: The Durrant's Farm project derives only approximately 15 per cent. of its revenue from power prices, significantly below that of the current portfolio which derives approximately 40 per cent. of revenue from power sales. This will increase the linkage of the Company's portfolio to RPI. In addition, all the other assets in the Target Portfolio benefit from 100 per cent. revenue linkage to RPI, via a combination of FIT and 25 year PPAs with Thames Water at fixed RPI indexed prices; and
● Diversification of counterparties: brings increased diversity in EPC and O&M contractors and increases the number of operational assets within the Group.
Conditions to the Acquisition
The Acquisition is conditional on:
(a) Resolution 1 being passed at the EGM; and
(b) Admission of the Consideration Shares.
The Company has agreed to use its reasonable endeavours to procure (so far as it is able) that these conditions are satisfied as soon as practicable and in any event on or before 5.00 p.m. on 31 December 2014.
For the avoidance of doubt, Admission of the Consideration Shares will require the publication of a prospectus by the Company, which the Company expects to publish on 2 October 2014. The Company will announce the publication of the prospectus through a RIS.
The Acquisition Agreement
SIF has entered into a sale and purchase agreement with the L&P Sellers which in aggregate own 94 per cent. of the issued ordinary shares in the Target Holdco, the Bluefield Ordinary Share Sellers who in aggregate own the remaining 6 per cent. of the issued ordinary shares in Target Holdco and the B Share Sellers who own all of the issued B Shares in the Target Holdco.
Pursuant to the Acquisition Agreement, SIF will purchase:
(i) the full outstanding balances of the shareholder loans made by each of the L&P Sellers and the Bluefield Ordinary Share Sellers to the Target Holdco;
(ii) all of the issued ordinary shares in the Target Holdco; and
(iii) all of the issued B Shares in the Target Holdco.
The total consideration payable by SIF under the Acquisition Agreement will be £8,914,000, which will be satisfied through a combination of cash and the allotment of the Consideration Shares, as described in more detail below. The proposed purchase price for the Target Portfolio has been reviewed by BDO LLP, which has confirmed that, in its opinion, the proposed purchase price, as negotiated between the Company and the Sellers, falls within a range that is fair and reasonable. BDO LLP's valuation opinion is set out in Part II of the Circular.
The consideration payable to the L&P Sellers for the acquisition of the outstanding balances of their shareholder loans and the issued ordinary shares in the Target Holdco held by them, being £7,725,957.35 in aggregate, will be satisfied by the issue of new Ordinary Shares in the Company (the Consideration Shares) and for these purposes the issue price of each Consideration Share will be equal to the average mid-market price of the Ordinary Shares during the seven dealing days up to and including the third dealing day prior to completion of the Acquisition Agreement, provided that if the middle market price of the ordinary shares on any of those seven dealing days is on a cum-dividend basis, then those prices will be adjusted so as to provide the ex-dividend price before calculating such average middle market price. The Consideration Shares will rank pari passu with the Ordinary Shares then in issue (save that Consideration Shares will not rank for any dividends or other distributions declared, made or paid on the Ordinary Shares by reference to a record date prior to the issue of the Consideration Shares).
The consideration payable to the Bluefield Ordinary Share Sellers for the acquisition of the outstanding balances of their shareholder loans and the issued ordinary shares in the Target Holdco held by them, being £719,422.85 in aggregate, will be paid in cash.
The consideration payable to the B Share Sellers (including the Bluefield Related Parties) for the acquisition of the issued B Shares in the Target Holdco, being £468,619.80 in aggregate, will be paid in cash.
On completion of the Acquisition Agreement, the management deed pursuant to which Bluefield Partners LLP provides investment advisory services to the Target Holdco will be terminated with immediate effect with no amounts being payable to Bluefield Partners LLP save for advisory fees accrued up to the date of termination.
The Acquisition Agreement contains warranties customary for a transaction of this nature. While all the Sellers have given warranties on title, capacity and authority (Core Warranties), additional warranties in respect of the Target Holdco, the assets in the Target Portfolio and tax (Business Warranties) have been given only by the Advisor Sellers (being the Bluefield Related Parties (other than Giovanni Terranova) and two of the Bluefield Ordinary Share Sellers).
The liability of the Sellers is several and not joint and several and their liability in respect of the Core Warranties is capped at an amount equal to the consideration received by the relevant Seller pursuant to the Acquisition Agreement. The liability of Advisor Sellers in respect of the Business Warranties is capped at £1.00. However, SIF has taken out warranty insurance of an amount up to £4.5 million. Any claim brought by SIF under the Business Warranties must be brought within 18 months of the date of completion of the Acquisition Agreement, with the exception of claims brought in respect of the tax warranties which must be brought within seven years of the date of completion of the Acquisition Agreement. The financial caps and time limits on claims brought against the Sellers under any of the warranties will not apply in the event of fraud, dishonesty or wilful concealment on the part of the Sellers.
The Acquisition Agreement also contains customary tax warranties and covenants for a transaction of this nature.
Related party transaction
The Company's investment adviser, Bluefield Partners LLP, is also the investment adviser to the Target Holdco and certain members of the Investment Adviser hold B Shares in the Target Holdco. Three of the B Share Sellers, James Armstrong, Michael Rand and Giovanni Terranova (the Bluefield Related Parties), are directors of subsidiaries of the Company and are therefore related parties of the Company for the purposes of the Listing Rules. As each of them will be a party to the Acquisition Agreement (as a seller of B Shares), the Acquisition Agreement is a related party transaction under the Listing Rules and requires, inter alia, the approval of shareholders at the EGM.
Under the articles of association of the Target Holdco, the holders of the B Shares are entitled to a shareholder distribution of an amount equal to 20 per cent. of any profits generated by the sale of the Target Portfolio or the Target Holdco conditional upon all shareholders having received an aggregate return (on their loans and shares) not less than a hurdle return of 8 per cent. and subject to market standard 'catch up' provisions. For the avoidance of doubt, based upon the purchase price agreed between the Company and the Sellers, the B Shareholders will be entitled to a full 20 per cent. of the profits. Pursuant to the terms of the Acquisition Agreement, it is proposed that the B Shares will be acquired by SIF for a sum equal to the amount calculated as being payable on a sale of Target Holdco in accordance with its articles of association.
On the basis of the purchase price agreed between SIF and the L&P Sellers for the ordinary shares in the Target Holdco held by the L&P Sellers, the B Share Sellers (including the Bluefield Related Parties) are entitled to receive, in aggregate, £468,619.80 for the sale of the B Shares in the Target Holdco.
In addition to the Bluefield Related Parties' holding of B Shares, certain other members of Bluefield Partners LLP together own 6 per cent. of the issued ordinary shares in the capital of the Target Holdco and have outstanding shareholder loans to the Target HoldCo of £306,433.23 in aggregate. Pursuant to the terms of the Acquisition Agreement, it is proposed that: (i) the outstanding shareholder loans will be assigned to SIF for an amount equal to such outstanding shareholder loans; and (ii) the ordinary shares in the Target Holdco held by such members of Bluefield Partners LLP will be acquired for a price per ordinary share equal to that payable to the L&P Sellers for the ordinary shares in the Target Holdco held by them, all such amounts to be paid in cash on completion of the Acquisition Agreement. While the members of Bluefield Partners LLP holding ordinary shares in the Target Holdco are not related parties for the purposes of the Listing Rules, the Board believes it is appropriate to disclose their interest in the Acquisition.
As at the date of the Circular, the L&P Sellers held, in aggregate, 9,026,478 Ordinary Shares in the capital of the Company, representing 6.29 per cent. of the issued share capital.
The Board, having been so advised by Numis, considers that the proposed acquisition of the Target Portfolio on the terms of the Acquisition Agreement is fair and reasonable insofar as Shareholders are concerned. Shareholders are able to approve the acquisition through passing Resolution 1 which will be proposed as an ordinary resolution. The Bluefield Related Parties will not vote on Resolution 1 and have undertaken to take all reasonable steps to ensure that their respective associates will not vote on Resolution 1.
The Placing Programme
Background to and reasons for the Placing Programme
In July 2013 the Company raised gross proceeds of £130 million through an initial public offering. Over the subsequent months the Investment Adviser supported the deployment of those proceeds ahead of schedule and by February 2014 the initial proceeds were fully committed across eight distinct projects. A further £13 million was raised in February 2014 through the Tap Issue, enabling the Company to make its ninth investment. On 13 June 2014 the Company announced that it had entered into a debt facility with RBS for up to £50 million. This debt facility together with the proposed Placing Programme will allow the Company to pursue the growth strategy of building out the asset base through a combination of debt and further equity fund raisings as set out in the IPO prospectus. Since the closing of the debt facility, the Company has announced (on 18 June 2014 and 28 July 2014) a further three acquisitions for an aggregate consideration of £34 million.
Benefits of the Placing Programme
The Directors believe that the Placing Programme will have the following benefits:
● the market capitalisation of the Company will increase, and it is expected that secondary market liquidity of the Ordinary Shares will improve;
● the Placing Programme will provide the potential for greater diversification of the Company's assets;
● the Placing Programme, in combination with the Acquisition Facility, should enable the Company to acquire a select number of opportunities from the pipeline of deals it is negotiating;
● the Placing Programme will provide greater flexibility for the Company to continue to benefit from the market for primary acquisitions and the growing market of potential secondary acquisitions from its existing and new contractor relationships; and
● the Company's fixed running costs will be spread across a wider investor base therefore lowering the ongoing charges ratio.
Use of proceeds
The Board intends to use the net proceeds of the Placing Programme, firstly, to repay debt drawn down under the Acquisition Facility used to acquire assets in the Group's portfolio and, secondly, to finance further acquisitions of assets in accordance with the Group's investment objective and policy.
The structure of the Placing Programme
The Company is proposing the Placing Programme to enable the Company to raise additional capital in the period from 2 October 2014 to 1 October 2015 to pay down debt drawn under the Acquisition Facility from time to time and as and when it identifies acquisition opportunities that satisfy the Company's investment objective and policy. The exact start date and end date of the Placing Programme are dependent on the date on which the Company publishes the Prospectus. The combination of the Acquisition Facility and the Placing Programme should enable the Company to make opportunistic acquisitions whilst mitigating the risk of cash drag on existing Shareholders' funds and has been structured to provide the Directors with the flexibility to issue New Ordinary Shares and/or C Shares, which should enable the Directors to further mitigate the risk of cash drag.
Conditional on Resolutions 4 and 5 being passed at the EGM, the Directors will be authorised to issue up to 150 million New Ordinary Shares and/or C Shares pursuant to the Placing Programme without having to first offer those shares to existing Shareholders or holders of C Shares (as applicable). Assuming only New Ordinary Shares are issued pursuant to the Placing Programme and the Placing Programme is fully subscribed, the New Ordinary Shares issued under the Placing Programme would represent 104.6 per cent. of the issued share capital of the Company as at the date of the Circular. Whilst 104.6 per cent. is higher than the disapplication of pre-emption rights authority ordinarily recommended by corporate governance best practice, the Directors believe that taking a larger than normal authority is justified in the present circumstances to enable the Company flexibility to issue New Shares on an on-going basis in order to fund future acquisitions.
New Shares will only be issued to new and existing Shareholders at a premium to the prevailing NAV at the time of issue in order to take account of the costs of such issue and will therefore be accretive to the prevailing NAV for existing Shareholders. Whilst Shareholders' voting rights will be diluted, the Directors believe that this consideration is outweighed by the flexibility that a larger authority provides. It will also mean that the Company should save the costs associated with having to obtain repeated smaller authorities. The Directors intend to use this authority when they consider that it is in the best interests of Shareholders to do so and when the Investment Adviser has identified suitable properties for acquisition.
The Placing Programme is conditional, inter alia, on:
(a) Resolutions 4 and 5 being passed at the EGM;
(b) the publication of a prospectus by the Company in relation to offer of the New Ordinary Shares and the C Shares and the application for Admission of such shares;
(c) Admission of the New Ordinary Shares or C Shares issued pursuant to each Placing at such time and on such date as the Company and Numis may agree prior to the closing of that Placing, not being later than the date that is 12 months after the date of publication of the Prospectus;
(d) if a supplementary prospectus is required to be published in accordance with the FSMA, such supplementary prospectus being approved by the FCA and published by the Company in accordance with the Prospectus Rules; and
(e) the Placing Agreement becoming otherwise unconditional in respect of that Placing, and not being terminated in accordance with its terms before the relevant Admission becomes effective.
If these conditions are not satisfied in respect of any Placing under the Placing Programme, the relevant issue of the New Ordinary Shares or C Shares will not proceed.
All New Ordinary Shares issued pursuant to the Placing Programme will be issued at a premium to the Net Asset Value per Ordinary Share at least sufficient to cover the costs and expenses of the relevant Placing. The Issue Price of any New Ordinary Shares to be issued pursuant to a Placing will be announced through a RIS as soon as is practicable following the allotment of such New Ordinary Shares.
The Issue Price of any C Shares issued pursuant to the Placing Programme will be £1.00.
The net proceeds of the Placing Programme are dependent on the number of New Ordinary Shares and/or C Shares issued pursuant to the Placing Programme and the Issue Price of any New Ordinary Shares issued.
Assuming: (i) only New Ordinary Shares are issued pursuant to the Placing Programme at an Issue Price of 103.75 pence per New Ordinary Share (being the average mid-market price of the Ordinary Shares as at 5 September 2014); and (ii) the Company issues 150 million New Ordinary Shares (being the number of New Ordinary Shares in respect of which the Board is seeking Shareholders' consent to disapply the pre-emption rights at the EGM), the Company would raise £155,625,000 of gross proceeds from the Placing Programme.
Applications will be made to the Financial Conduct Authority and the London Stock Exchange for all the New Ordinary Shares to be issued pursuant to the Placing Programme to be admitted to the premium segment of the Official List and to trading on the London Stock Exchange's main market for listed securities. Applications will be made to the Financial Conduct Authority and the London Stock Exchange for all the C Shares to be issued pursuant to the Placing Programme to be admitted to the standard segment of the Official List and to trading on the London Stock Exchange's main market for listed securities. It is expected that such admissions will become effective, and that dealings in the New Ordinary Shares and/or C Shares will commence, during the period from October 2014 to October 2015.
The Company's share capital as at the date of the Circular is denominated in Sterling and consists of Ordinary Shares of no par value. The New Ordinary Shares issued pursuant to the Placing Programme will rank pari passu with the Ordinary Shares then in issue (save that New Ordinary Shares will not rank for any dividends or other distributions declared, made or paid on the Ordinary Shares by reference to a record date prior to the issue of such New Ordinary Shares).
The C Shares will not be entitled to any dividends payable in respect of the Ordinary Shares but on their conversion into New Ordinary Shares they will rank pari passu with the Ordinary Shares then in issue (save that such New Ordinary Shares will not rank for any dividends or other distributions declared, made or paid on the Ordinary Shares by reference to a record date prior to conversion of the C Shares).
L&P and CCLA related party transactions
As at the date of the Circular:
(a) the L&P Sellers hold, in aggregate, 9,026,478 Ordinary Shares in the capital of the Company, representing 6.29 per cent. of the issued share capital. Assuming an issue price of 103.75 pence per Consideration Share (being the average mid-market price of the Ordinary Shares as at 5 September 2014), the L&P Sellers will receive 7,446,705 Consideration Shares on completion of the Acquisition and will hold, in aggregate 16,473,183 Ordinary Shares in the capital of the Company, representing 10.9 per cent. of the issued share capital (assuming the L&P Sellers do not acquire any further Ordinary Shares or dispose of any Ordinary Shares between the date of this document and the issue of the Consideration Shares). Consequently, following the issue of the Consideration Shares, the L&P Sellers will, together, be considered to be related parties of the Company by virtue of the size of their aggregate shareholding in the Company; and
(b) CCLA holds 25,000,000 Ordinary Shares in the capital of the Company, representing 17.43 per cent. of the issued share capital. Consequently, CCLA is considered to be a related party of the Company by virtue of the size of its shareholding in the Company,
(together, the "Related Parties" and each, a "Related Party").
Under the Listing Rules, unless a relevant exemption applies, when a company issues shares to a related party, there is a requirement to obtain shareholders' approval for that transaction.
If further Ordinary Shares or C Shares are placed with either of the Related Parties pursuant to the Placing Programme (at any time during the period in which the Placing Programme is open), the Company may be required to seek Shareholder approval. The Company, in consultation with Numis, has agreed that it would be desirable to have the ability to place Ordinary Shares and/or C Shares with each of the Related Parties under the Placing Programme without requiring a Shareholder vote on each such occasion. Accordingly, the Directors are proposing Resolutions 2 and 3 at the EGM, the effect of which is to permit the Company to place Ordinary Shares and/or C Shares pursuant to the Placing Programme with each of the Related Parties. The L&P Sellers have undertaken not to vote the Ordinary Shares in which they are interested in respect of Resolution 2 and CCLA has undertaken not to vote the Ordinary Shares in which it is interested in respect of Resolution 3 and each of the Related Parties will take all reasonable steps to ensure that their respective associates will also abstain from voting on such resolutions. The Board, having been so advised by Numis, considers that both the L&P Related Party Approval and the CCLA Related Party Approval is fair and reasonable insofar as Shareholders are concerned.
Although it is theoretically possible that all of the New Ordinary Shares and/or C Shares available for issue under the Placing Programme could be placed with the L&P Sellers or CCLA, the Board will not place New Ordinary Shares and/or C Shares with either of the Related Parties if such placing would trigger the requirement of the relevant Related Party to make a mandatory bid for the Company under Rule 9 of the UK Code on Takeovers and Mergers.
For illustrative purposes, if 150 million New Ordinary Shares are issued pursuant to the Placing Programme (and assuming that 7,446,705 Consideration Shares are issued to the L&P Sellers on the basis of the average mid-market price of the Ordinary Shares of 103.75 pence as at 5 September 2014):
● the expected maximum potential holding of the L&P Sellers would be approximately 90,231,929 (representing 29.99 per cent. of the then issued share capital of the Company), including the 8,176,478 Ordinary Shares held by the L&P Sellers as at the date of the Circular and the assumed 7,446,705 Consideration Shares to be issued pursuant to the Acquisition Agreement); and
● the maximum potential holding of CCLA would be approximately 90,231,929 (representing 29.99 per cent. of the then issued share capital of the Company), including the 25,000,000 Ordinary Shares held at the date of the Circular.
If there is a material change to the terms of the Placing Programme contemplated in the Circular, the Company will, save as stated below, seek new Shareholder approval for any further issue of New Ordinary Shares and/or C Shares to either of the Related Parties.
Shareholders should be aware that under the Listing Rules, if the transaction with a related party is sufficiently small in size, it is not necessary to obtain the approval of shareholders as referred to above in respect of it (a Small Related Party Transaction). Accordingly, in the event that Resolutions 2 and/or 3 are not passed, it would still be open to the Company to issue further Ordinary Shares to the relevant Related Party up to such limits as would ensure that the issue, together with any issue in the last 12 months from the date of that issue, still constituted a Small Related Party Transaction.
The tests for whether a related party transaction is small are set out in the Listing Rules. In summary, if the relevant percentage ratios of the tests are less than 5 per cent. the requirement to obtain Shareholder approval will not apply.
Amendment of the Articles
The rights attaching to the C Shares as set out in the Articles currently provide that the calculation of the conversion ratio in connection with the conversion of any class of C Shares will take place on the earliest of:
● the close of business on the last business day prior to the day on which Force Majeure Circumstances (as defined in the Articles) have arisen or the Directors resolve that they are in contemplation;
● the close of business on such date as the Directors may decide is necessary to enable the Company to comply with its obligations in respect of conversion of the relevant class of C Shares;
● the close of business on the business day falling six months after admission of the relevant class of C Shares; and
● the close of business on such date as the Directors may determine, in the event that the Directors, in their discretion, resolve that at least 80 per cent. of the assets attributable to the relevant class of C Shares (or such other percentage as the Directors may decide as part of the terms of issue of the relevant class of C Share, as determined by the Directors) have been invested in accordance with the Company's investment policy.
The Directors believe that it is in the interests of Shareholders that the Directors have greater discretion as to the date on which the conversion ratio should be calculated with a view to achieving the objective that the conversion of the C Shares should not be earnings dilutive as far as the existing Ordinary Shares is concerned.
Accordingly it is proposed that the definition of "Calculation Time" as set out in the Articles shall be amended to remove the requirement that at least 80 per cent. (or such other percentage) of the assets attributable to the relevant C Shares must have been invested in accordance with the investment policy and instead that the Directors will be given absolute discretion to determine the Calculation Time with a view to achieving the objective that the conversion of the C Shares should not be earnings dilutive as far as the existing Ordinary Shares is concerned, provided however that the Calculation Time cannot fall later than a longstop date falling six months after admission of the relevant class of C Shares.
Giving the Directors the discretion described above will require an amendment to the existing Articles and Shareholders are therefore being asked to approve an amendment of the Articles to permit this by the passing of a special resolution which will be put to Shareholders at the Extraordinary General Meeting.
The proposed new definition of "Calculation Time" is set out in full in Resolution 5, as contained in the Notice of the Extraordinary General Meeting.
A copy of the Articles, as proposed to be amended by Resolution 5 is available for inspection: (i) from the date of this Circular to the conclusion of the Extraordinary General Meeting, at the offices of Norton Rose Fulbright LLP, 3 More London Riverside, London SE1 2AQ; and (ii) at the place of the Extraordinary General Meeting for at least 15 minutes before and during the meeting.
Extraordinary General Meeting
The Proposals are conditional on the approval by Shareholders of the Resolutions to be put to Shareholders at the Extraordinary General Meeting, which has been convened for 10.00 a.m. on 1 October 2014. The Notice convening the Extraordinary General Meeting is set out in Part IV of the Circular.
The Resolutions that will be put to Shareholders at the Extraordinary General Meeting are to:
● approve the Acquisition which, as explained above, is a related party transaction for the purposes of the Listing Rules (Resolution 1);
● approve the issue of New Ordinary Shares and/or C Shares pursuant to the Placing Programme to the L&P Sellers (as related parties to the Company) on the basis described in the Circular (Resolution 2);
● approve the issue of New Ordinary Shares and/or C Shares pursuant to the Placing Programme to CCLA (as a related party to the Company) on the basis described in the Circular (Resolution 3);
● disapply the pre-emption rights under the Articles for up to 150 million New Ordinary Shares and/or C Shares available for issue pursuant to the Placing Programme (Resolution 4); and
● amend the conversion rights attaching to the C Shares as set out in the Company's Articles (Resolution 5).
Resolutions 1 to 3 are being proposed as an ordinary resolution requiring the approval of a simple majority of the votes cast. As noted above, the Bluefield Related Parties will not vote on Resolution 1 and have undertaken to take all reasonable steps to ensure that their respective associates will not vote on Resolution 1, the L&P Sellers will not vote on Resolution 2 and have undertaken to take all reasonable steps to ensure that their respective associates will not vote on Resolution 2 and CCLA will not vote on Resolution 3 and has undertaken to take all reasonable steps to ensure that its respective associates will not vote on Resolution 3. Resolution 2 is conditional on the passing of Resolution 1, because if the Acquisition is not approved and the Consideration Shares are not issued to the L&P Sellers they will not become related parties to the Company.
Resolutions 4 and 5 are being proposed as special resolutions requiring the approval of 75 per cent. or more of the votes cast. Resolutions 4 and 5 are conditional on each other and if either resolution is not passed the Placing Programme will not proceed.
All Shareholders are entitled to attend, speak and vote at the Extraordinary General Meeting and to appoint a proxy or corporate representative to exercise that right.
Recommendation
The Board, which has been so advised by Numis, considers each of the Acquisition, the L&P Related Party Approval and the CCLA Related Party Approval to be fair and reasonable insofar as Shareholders are concerned. In providing its advice, Numis has taken into account the commercial assessment of the Board.
The Board considers that the Proposals and the Resolutions are in the best interests of the Company and Shareholders as a whole. Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolutions, as all of the Directors intend to do in respect of their own beneficial holdings of Ordinary Shares which amount in aggregate to 517,940 Ordinary Shares (representing approximately 0.36 per cent. of the existing issued ordinary share capital of the Company).
Expected timetable
|
Latest time and date for receipt of Forms of Proxy
|
10.00 a.m. on 29 September 2014 |
|
Extraordinary General Meeting
|
10.00 a.m. on 1 October 2014 |
|
Expected date of publication of Prospectus
|
2 October 2014* |
|
Expected date on which the Placing Programme will open
|
2 October 2014* |
|
Expected date of Admission of Consideration Shares issued in relation to the Acquisition |
3 October 2014* |
|
|
|
|
Expected date on which the Placing Programme will close
|
1 October 2015* |
* The exact date of the publication of the prospectus, and the therefore Admission of the Consideration Shares and the start and end date of the Placing Programme, is not known as at the date of this document but is expected to be 2 October 2014.
Notes:
1. These times and dates are indicative only. If any of the above times and/or dates change, the revised times and/or dates will be notified to Shareholders by announcement through a Regulatory Information Service.
2. All references to times in this document are to times in London, England, unless otherwise stated.
Capitalised terms used but not defined in this announcement will have the same meaning as set out in the Circular to shareholders dated 9 September 2014.
A copy of the Circular has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM. The Circular will also shortly be available on the Company's website at www.bluefieldsif.com where further information on the Company can also be found.
Enquiries:
James Armstrong / Mike Rand / Giovanni Terranova
Bluefield Partners LLP - Company Investment Adviser
Tel: +44 (0)20 7078 0020
Tod Davis / David Benda
Numis Securities Limited - Company Broker
Tel: +44 (0)20 7260 1000
Kevin Smith
Heritage International Fund Managers Limited - Company Secretary & Administrator
Tel: +44 (0)1481716000
Note to editors:
About Bluefield Solar Income Fund Limited (the "Company" or "BSIF")
BSIF is a Guernsey-registered investment company focusing on large scale agricultural and industrial solar assets. The Company raised gross proceeds of GBP130m in July 2013 through an initial public offering ("IPO") of shares on the main market of the London Stock Exchange. It raised a further GBP13m capital via a tap issue in February 2014.
The Company seeks to provide shareholders with an attractive return, principally in the form of semi-annual income distributions, by investing in a diversified portfolio of solar energy assets, each located within the UK, with a focus on utility scale assets and portfolios on greenfield, industrial and/or commercial sites. The Company delivered on its target dividend of 4 pence per share in relation to the first financial year ending 30 June 2014. It is seeking to deliver 7 pence per share in respect of the Company's second financial year, rising with RPI thereafter.
About Bluefield Partners LLP ("Bluefield")
Bluefield was established in 2009 and is an investment adviser to companies and funds investing in solar energy infrastructure. The Investment Adviser's team has a proven record in the selection, acquisition and supervision of large scale energy and infrastructure assets in the UK and Europe. The team has been involved in over GBP500m of solar photovoltaic ("PV") funds and/or transactions in both the UK and Europe since 2008, including over GBP235m in the UK since December 2011.
Bluefield has led the acquisitions, and currently advises on over 50 UK based solar assets that are agriculturally, commercially or industrially situated. Based in its London office, Bluefield's partners are supported by a dedicated and highly experienced team of investment, legal and portfolio executives. Bluefield was appointed Investment Adviser to the Company in June 2013.
This information is provided by RNS
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