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Renewable Energy Gen (WIND)

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Thursday 14 May, 2015

Renewable Energy Gen

ZDP Shares Shareholder Circular & EGM Notice

RNS Number : 1181N
Renewable Energy Generation Ltd
14 May 2015
 

Renewable Energy Generation Limited

Indicative Terms of proposed Zero Dividend Preference Share Issue

and Publication of Shareholder Circular and EGM Notice

14 May 2015

Renewable Energy Generation Limited (the "Company") announced on 10 March 2015 that it was considering an issue of zero dividend preference shares ("ZDP Shares") as a financing option to augment its existing cash resources alongside  non-recourse project finance. The Board, having further considered the proposed ZDP Share issue, is today announcing key indicative terms of the proposed Issue and the publication of a Shareholder Circular and EGM notice.

Key Indicative Terms of Zero Dividend Preference Shares ("ZDP Shares") Issue

The Company is proposing the following key indicative terms in relation to the ZDP Shares:

ZDP Shares to be issued at 100 pence per ZDP Share to raise gross proceeds not exceeding £31 million;

Gross Redemption Yield of approximately 4.0 per cent;

ZDP Share life of approximately six years (to 30 June 2021);

The Company will make an application for the ZDP Shares to be admitted to a Standard Listing on the Official List and to trading on the London Stock Exchange.



Full details of the proposed indicative terms attaching to the proposed ZDP Shares are set out in the Shareholder Circular referred to below.

The Company will use the net proceeds of the Issue to support the procurement and construction phases of projects within its wind portfolio. The Board believes that obtaining additional finance through the issue of ZDP Shares, will allow the Company to accelerate the delivery of projects under the Renewables Obligation and Feed-in Tariff regimes and hence maximise value for shareholders.

Publication of Shareholder Circular and EGM Notice

The Company has today published a shareholder circular in connection with the proposed ZDP Share Issue.  The Company is required to seek certain shareholder consents, including shareholder approval of certain changes to the Company's articles of association in order to incorporate the rights which will be attached to the ZDP Shares.

The EGM will take place at Elizabeth House, 9 Castle Street, St Helier, Jersey, Channel Islands JE2 3RT at 11.30 am on 08 June 2015.

A copy of the Shareholder Circular and EGM Notice is available on the Company's website at www.renewableenergygeneration.co.uk 

Capitalised terms used but not defined in this announcement shall, unless the context requires otherwise, have the same meaning as in the Shareholder Circular.

 

Expected timetable




Latest time and date for receipt of Forms of Proxy

11.30 a.m. on 6 June 2015



Extraordinary General Meeting

11.30 a.m. on 8 June 2015



Publication of the Prospectus

9 June 2015



Offer for Subscription closes

11.00 a.m. on 17 June 2015



Placing closes

3.00 p.m. on 17 June 2015



Admission and dealings in the ZDP Shares commences

8.00 a.m. on 24 June 2015

 

 

Enquiries:

 

Renewable Energy Generation Limited                                                               +44 (0)1483 901 796

Andrew Whalley, Chief Executive Officer

David Crockford, Finance Director

Ian Lawrence, Communications Manager

 

Cenkos (Placing Agent and Financial Adviser)                                                  +44 (0)20 7397 8900

Sapna Shah

Phil Higgs

 

Smith & Williamson Corporate Finance Limited                                                +44 (0)117 376 2213

(Nominated Adviser)

Martyn Fraser

 

Broker Profile                                                                                                        +44 (0)20 7448 3244

Simon Courtenay

Harry Rippon

 

 

Notes to editors

Renewable Energy Generation Ltd (REG) is an AIM quoted renewable energy group. Its main business is the development, construction and operation of wind farms and generating power from refined used cooking oil.

REG Windpower: based in Truro, Bath and Guildford, UK, it currently operates 11 wind projects in Cambridgeshire, Cornwall, County Durham, Yorkshire, Lancashire, Cumbria and Gwynedd, with a total capacity of 34.7MW as well as 5 projects on behalf of BlackRock totalling 46MW. REG has around 200MW of projects in the planning system awaiting consent.

REG Bio-Power UK Ltd: based in Nottingham, UK: it operates 26MW of electricity generation plant powered by fuel recovered from used cooking oil.

Headquartered in Jersey, REG was admitted to trading on AIM, a market operated by the London Stock Exchange, in May 2005 (AIM: WIND).

This announcement is an advertisement and does not constitute a prospectus relating to the Company and does not constitute, or form part of, any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares in the Company in any jurisdiction nor shall it, or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with or act as any inducement to enter into, any contract therefor. Investors should not purchase or subscribe for any transferable securities referred to in this announcement except on the basis of information contained in the prospectus (the "Prospectus") intended to be published by the Company in due course in connection with the proposed admission of its ZDP Shares to the standard listing segment of the Official List of the UK Listing Authority and to trading on the London Stock Exchange plc's main market for listed securities. Copies of the Prospectus, once published, will be available from the Company's registered office and on the Company's website.

The Chairman's letter in respect of the proposals, as contained in the Circular, is set out below.

"Dear Shareholder

Proposed issue of ZDP Shares, authority to make market purchases of ZDP Shares, increase to the authorised share capital of the Company and adoption of new articles of association

1                INTRODUCTION

The Board announced on 10 March 2015 that it was considering an issue of zero dividend redeemable preference shares to, inter alia, provide finance to expedite the construction of projects in the Company's wind energy portfolio.

The Board is proposing to raise up to £31 million (before expenses) by way of a placing and offer for subscription of ZDP Shares (the "Issue").

The purpose of this letter is to explain the Board's proposals which include: (i) granting the Directors authority to issue up to 31 million ZDP Shares; (ii) increasing the authorised share capital of the Company to provide for the ZDP Shares; (iii) granting the Directors authority to issue an additional 10 per cent. of the total issued ZDP Share capital following the Issue; (iv) adopting new articles of association incorporating the rights attaching to the ZDP Shares and certain other amendments; and (v) granting the Directors authority to make market purchases of up to 14.99 per cent. of the ZDP Shares in issue following conclusion of the Issue (together the "Proposals").

The Proposals are conditional on the approval of Shareholders at the Extraordinary General Meeting.

2                BACKGROUND TO THE PROPOSALS

The Company aims to provide its investors with a diversified exposure to the growth of renewable energy within the overall energy market. This is achieved through in-house development of new renewable projects, including small onshore wind energy projects. The purpose of the Issue will be to increase the capital available to the Company in order to expedite construction of projects within its wind portfolio so that they can be delivered under the Renewables Obligation regime (RO) before it closes in March 2017 or, in the case of certain smaller projects, the Feed-in Tariff regime (FIT) before the FIT payments are subject to further degression (see further below).

The RO is currently the main support mechanism for renewable electricity projects in the UK. The RO came into effect in 2002 in England, Wales and Scotland, followed by Northern Ireland in 2005. It places an obligation on suppliers to source a growing proportion of the electricity they supply from eligible renewable sources. Renewable Obligation Certificates (ROCs) are certificates issued to operators of accredited renewable generating stations, such as the Company, for the eligible renewable electricity they generate. ROCs are traded with UK electricity suppliers to allow them to demonstrate that they have met their obligations under the RO. Where suppliers do not present a sufficient number of ROCs to meet their obligation, they must pay a 'buy-out' price to a 'buy-out' fund.

The RO will close to accreditation for new projects on 31 March 2017 and will be replaced by a new support scheme based on contracts for difference feed-in-tariffs (CFD FITs) introduced under EMR. Existing renewable energy projects accredited under the RO on or before 31 March 2017 will continue to receive support under the RO (for 20 years from the date of accreditation).

The Board believes that there will be a significant benefit to Shareholders in ensuring as many of its renewable energy projects as possible benefit from the current RO regime as the Board currently anticipates that the RO regime should be of greater economic benefit to the Group than the new CFD FIT regime introduced under EMR. In addition, the Board believes that the certainty of support offered under the RO is beneficial to Shareholders when compared with the CFD FIT regime where wind and solar PV projects will have to compete for a CFD FIT in annual allocation rounds.

The FIT regime supports renewable energy generation sites with a capacity of less than 5MW and it requires certain licensed electricity suppliers to pay a generation and export tariff to eligible low carbon generators whose capacity does not exceed 5MW.  FIT payments are made according to published tariffs.  The tariff made available to generators is subject to degression.  That is, the tariff level available for new generators will decrease annually.  The price for individual renewable energy generating projects is fixed once the project becomes operational.  Accordingly, the Board believes that for certain of its smaller wind projects accelerating the construction of those projects will enable them to benefit from higher FIT payments, before further degression of the tariff. 

Use of proceeds

The Company will use the net proceeds of the Issue to support the procurement and construction phases of projects within its wind portfolio. At any one time, the Company will have a number of wind projects that have reached the procurement and/or the construction phase. The net proceeds of the Issue may be used for any one or more of these projects.

As at the date of this letter, the Group has a portfolio of around 42 MW in procurement or construction to be generated by 20 turbines across 6 sites for which planning consent has been received.

As at the date of this letter, the following projects are in the procurement and construction phases of the Group's wind program:

Site

Location

Anticipated No. of turbines

Anticipated
MW

Anticipated Commercial Operations Date

Rodbaston

Staffordshire

2

4.0

July 2016

Brackagh Quarry

County Londonderry

3

6.0

July 2016

French Farm

Cambridgeshire

2

4.0

July 2016

Barlborough

Yorkshire

1

0.8

January 2016

Mynydd Portref

Rhonnda Cynon Taf

 

6

12.0 - 18.0

To be determined

Hallburn

Cumbria

 

6

12.0

To be determined

 

Rationale for the creation and issue of the ZDP Shares

A ZDP Share is not an equity share and does not entitle the holder to any dividends, but is redeemable on a fixed redemption date at a higher price than the initial subscription price, giving the holder a fixed return. The amount due to holders of ZDP Shares, which accrues over time, is accounted for as a liability rather than as share capital. The ZDP Shares are expected to have a life of approximately 6 years to the ZDP Repayment Date of 30 June 2021.

The effect of the issue of the ZDP Shares on the Company's financial statements will be to show a long term liability in respect of the amounts due to holders of ZDP Shares, which will increase over the life of the ZDP Shares.

Historically, the Company's funding strategy has been to achieve the growth of its diversified portfolio using a mixture of equity, long-term bank finance and the proceeds of asset sales. The Board believes that obtaining additional finance through the issue of ZDP Shares, will allow the Company to accelerate projects into the RO and hence the rate at which the Company can grow its recurring cash flows and earnings.

Lenders charge interest and fees until debt is repaid, whereas no cash is due to investors in ZDP Shares until the final redemption date of the ZDP Shares, enhancing cash available to the Group during this increased level of construction activity. The ZDP Shares will not be redeemable for approximately 6 years although the Board is seeking a general authority at the EGM to repurchase ZDP Shares in the market from time to time.

3                AUTHORITY TO ISSUE ZDP SHARES

The Board is proposing to issue up to 31 million ZDP Shares at the Issue Price to raise gross proceeds of up to £31 million (£30.1 million net of expenses of the Issue).

In accordance with the Articles, the issue of the ZDP Shares requires the approval of Shareholders in general meeting. At the EGM, Resolution 3 will be proposed to give the Directors authority to issue up to 31 million ZDP Shares under the Issue.

The pre-emption rights afforded to Ordinary Shareholders in the Articles do not apply to the proposed Issue as the ZDP Shares only have a right to participate in a capital distribution up to a specified amount. Accordingly, the Board is not seeking disapplication of the pre-emption rights at the EGM.

4                INCREASE TO THE AUTHORISED SHARE CAPITAL OF THE COMPANY

The authorised share capital of the Company at the date of this letter is £30,000,000 divided into 300,000,000 Ordinary Shares of 10 pence each. In connection with the proposed ZDP Share issue, the Directors are seeking Shareholder approval (Resolution 1 in the notice of EGM) for an increase in the authorised share capital of the Company to £60,000,000 divided into 300,000,000 Ordinary Shares of 10 pence each and 300,000,000 ZDP Shares of 10 pence each. The proposed increase in the authorised share capital requires a consequential amendment to be made to the Memorandum.

5                FURTHER ISSUES OF ZDP SHARES

The Board is seeking additional authority to issue up to 3.1 million ZDP Shares, or, if lower, such number of ZDP Shares as is equal to 10 per cent. of the issued ZDP Share capital immediately following conclusion of the Issue.  This authority will expire at the annual general meeting of the Company to be held in 2016. As noted at paragraph 3 above, the pre-emption rights afforded to Ordinary Shareholders in the Articles do not apply to an issue of ZDP Shares as the ZDP Shares only have a right to participate in a capital distribution up to a fixed amount.

The Board is seeking this additional authority to provide flexibility to issue ZDP Shares to provide additional capital to the Company when required, subject to market demand.

No further ZDP shares may be issued unless the Cover Test is met.  In addition, the Board has determined that no ZDP Shares will be issued at a price less than the Accrued Capital Entitlement per ZDP Share to avoid any reduction in the Cover of the existing ZDP Shares.

In accordance with the Articles, the issue of the ZDP Shares requires the approval of Shareholders in general meeting. At the EGM, Resolution 4 will be proposed to give the Directors authority to issue up to an additional 3.1 million ZDP Shares following completion of the Issue, or, if lower, such number of ZDP Shares as is equal to 10 per cent. of the issued ZDP Share capital immediately following conclusion of the Issue.

6                REPURCHASES OF ZDP SHARES

The Company is also seeking authority (Resolution 5 to be proposed at the EGM) to make market acquisitions of up to 14.99 per cent. of the ZDP Shares in issue following the conclusion of the Issue in order to seek to address any imbalance for the supply and demand for ZDP Shares in the market.

The minimum price payable by the Company for each ZDP Share shall be £0.10 and the maximum price payable by the Company for each ZDP Share shall be the then Accrued Capital Entitlement per ZDP Share to avoid any reduction in the Cover of the ZDP Shares. This authority will expire (unless renewed) at the annual general meeting in 2016.

ZDP Shares purchased by the Company may be cancelled or held in treasury. Investors should note that the purchase of ZDP Shares is entirely at the discretion of the Board and no expectation or reliance should be placed on such discretion being exercised on any one or more occasions or as to the proportion of ZDP Shares that may be purchased.

7                ADOPTION OF NEW ARTICLES

Resolution 2 to be proposed at the EGM seeks approval to adopt new articles of association incorporating the rights attaching to the ZDP Shares and certain other amendments detailed below.

The ZDP Shares are expected to provide holders of ZDP Shares with a Gross Redemption Yield of approximately 4.0 per cent. The ZDP Shares will entitle the holders to a fixed capital return at the end of the approximately 6 year life of the ZDP Shares (the "ZDP Repayment Date"). In order to pay the holders of ZDP Shares the fixed capital return, the ZDP Shares will be redeemed on the ZDP Repayment Date.

The ZDP Shares will, in general, carry no right to vote at general meetings of the Company.  However, if the Proposals are approved and the ZDP Shares are issued, then certain actions of the Company will be subject to prior approval by the holders of ZDP Shares at a separate class meeting. These actions include, without limitation:

the issue of further shares where such shares rank as to capital in priority to or pari passu with the ZDP Shares, save where the Cover Test is met;



the redemption or repurchase any Ordinary Shares unless the Directors shall have calculated that the Cover Test will be met;



passing a resolution for the voluntary winding-up of the Company, such winding-up to take effect prior to the ZDP Repayment Date;



making any distribution of capital or income, provided that any such distribution will be permitted where the Directors determine that the Cover Test would be met; and



incurring additional third party borrowings that would rank in priority or pari passu to the entitlement of the ZDP Shares to be paid their Final Capital Entitlement on the ZDP Repayment Date if its aggregate third party borrowings that rank in priority or pari passu to the entitlement of the ZDP Shares to be paid their Final Capital Entitlement on the ZDP Repayment Date (including, for the avoidance of doubt, the ZDP Shares at their then Accrued Capital Entitlement) would thereby exceed 70 per cent. of the total assets of the Group.



Full details of the rights attaching to the ZDP Shares, and further detail on the Cover Test, are set out in the Shareholder Circular.

In addition, it is proposed that the New Articles reflect recent amendments to the Companies (Jersey) Law 1991, as amended, to include:

provision that, in calculating when proxies must be delivered no later than "48 hours" before a meeting, non-working days can be ignored; and



clarification that multiple corporate representatives can be appointed to attend general meetings by a shareholder who is a body corporate.



8                REGULATORY REQUIREMENTS IN RESPECT OF THE ISSUE

The Company is required to publish a prospectus under the Prospectus Rules in order to enable it to issue the ZDP Shares. It is expected that the prospectus will, subject to Shareholder approval of the Proposals and relevant Jersey regulatory approval, be published shortly following the EGM.

Application will be made to the UK Listing Authority for admission of the ZDP Shares issued pursuant to the Issue to the Official List (a standard listing). Application will also be made to the London Stock Exchange for the ZDP Shares issued pursuant to the Issue to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will become effective and that unconditional dealings in the ZDP Shares will commence on or around 24 June 2015.

The Company's Ordinary Shares will continue to be admitted to trading on AIM.

9                BENEFITS OF THE PROPOSALS

The Board believes that the Proposals have the following principal benefits for Shareholders:

Financing the procurement and construction phases of consented wind projects through the ZDP Share issue is expected to enhance the ability of the Company to deliver wind projects under the existing Renewables Obligation regime, which closes on 31 March 2017 or, in the case of certain smaller projects, the Feed-In-Tariff regime, before FIT payments are subject to further degression.



The completion of the new investments referred to in this letter is expected to generate increased Net Asset Value and provide an opportunity for earnings uplift for Ordinary Shareholders in the longer term.



Raising finance through an issue of ZDP Shares is expected to provide greater flexibility for the future growth of the Company and for acquiring further investments in line with the Company's stated strategy.



10              FURTHER CONSIDERATIONS ASSOCIATED WITH THE PROPOSALS

Shareholders should have regard to the following considerations when considering the Proposals:

On a return of capital on liquidation, the final capital entitlement of the holders of ZDP Shares will rank in priority to the capital entitlement of Ordinary Shareholders and Ordinary Shareholders may receive reduced capital as compared to the present arrangements.



The Company's capital structure is such that the underlying value of any assets attributable to the Ordinary Shares will be geared by the performance of the Company's assets relative to the rising capital entitlement of the ZDP Shares. Accordingly, Ordinary Shareholders are likely, to a disproportionate extent, to suffer from any underperformance of the Company's assets compared to the finance cost of the ZDP Shares, but conversely will benefit from any performance above such cost.



There can be no guarantee that the Company will successfully implement the build out of the consented wind projects referred to in this letter or that earnings will be increased for Ordinary Shareholders in the longer term as a result of the Proposals. Past performance is not necessarily a guide to future performance.



If the Proposals are approved and the ZDP Shares are issued, then certain actions of the Company will be subject to prior approval by the holders of ZDP Shares at a separate meeting. These actions are outlined at paragraph 7 above and in further detail in the Shareholder Circular. The requirement for the Company to obtain the consent of holders of ZDP Shares in certain circumstances may result in the Company being prevented from taking certain actions which would otherwise be in the interests of Ordinary Shareholders.



The total costs of the Proposals are estimated to be £900,000 and shall be paid from the total gross proceeds of the Issue.



11              EXTRAORDINARY GENERAL MEETING

An Extraordinary General Meeting of the Company is being convened for 11.30 a.m. on 8 June 2015 to be held at the Company's registered office at Elizabeth House, 9 Castle Street, St Helier, Jersey JE2 3RT at which the following Resolutions will be proposed:

Resolution 1: to increase the authorised share capital of the Company to £60,000,000 divided into 300,000,000 Ordinary Shares of 10 pence each and 300,000,000 ZDP Shares of 10 pence each and to amend the Memorandum to reflect the increase to the authorised share capital;



Resolution 2: to adopt the New Articles. Resolution 2 is conditional on the passing of Resolution 1;



Resolution 3: to grant the Directors authority to issue up to 31 million ZDP Shares. Resolution 3 is conditional on the passing of Resolutions 1 and 2;



Resolution 4: to grant the Directors authority to issue up to an additional 3.1 million ZDP Shares or, if lower, such number of ZDP Shares as is equal to 10 per cent. of the ZDP Share capital in issue following conclusion of the Issue. Resolution 4 is conditional on the passing of Resolution 3; and



Resolution 5: to grant the Directors authority to make market purchases of ZDP Shares. Resolution 5 is conditional on the passing of Resolution 3.



Under the Articles, two persons entitled to attend and vote on the business to be transacted, each being a member or a proxy for a member or a duly authorised representative of a corporation which is a member, shall be a quorum. On a show of hands, each Shareholder shall have one vote and, on a poll, each Shareholder shall have one vote for every Ordinary Share held by him.

Resolutions 1, 2 and 5 will be proposed as special resolutions and Resolutions 3 and 4 will be proposed as ordinary resolutions. A special resolution requires a majority of two-thirds of the votes cast to be cast in favour for it to be passed.  An ordinary resolution requires a simple majority of the votes cast to be cast in favour for it to be passed. 

The notice convening the Extraordinary General Meeting is set out in the Shareholder Circular.

12              ACTION TO BE TAKEN BY SHAREHOLDERS

A Form of Proxy is enclosed with the Shareholder Circular for use at the Extraordinary General Meeting.  If you are a Shareholder, whether or not you intend to attend the Extraordinary General Meeting, you are requested to complete the Form of Proxy in accordance with the instructions printed on it and return it to the Registrar, Capita Asset Services, PXS1, 34 Beckenham Road, Beckenham, Kent BR3 4ZF so as to arrive as soon as possible and, in any event, not later than 11.30 a.m. on 6 June 2015.

13              RECOMMENDATION

The Board considers the Proposals to be 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 to be proposed at the EGM as they intend to do in respect of their own beneficial holdings of Ordinary Shares representing approximately 0.51 per cent. of the Company's issued Ordinary Shares.

Yours sincerely

 

Mike Liston

Non-Executive Chairman"

 


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