IPSA Group PLC Sale of Blazeway Engineering Limited (3454N)

TIDMIPSA

RNS Number : 3454N

IPSA Group PLC

28 January 2016

28 January 2016

IPSA Group PLC

("IPSA" or the "Company")

Sale of Blazeway Engineering Limited and Settlement of Certain Major Creditors

IPSA Group PLC (AIM:IPSA), the developer, owner and operator of power generation capacity in South Africa, announces that it has agreed to sell Blazeway Engineering Limited ("Blazeway") to Sloane Corporation Limited ("SCL") subject to the satisfaction of conditions precedent including the approval of the transaction by the Company's shareholders. Blazeway is the UK holding company, which owns Newcastle Cogeneration Proprietary Limited ("NewCogen"), the Company's operating subsidiary in South Africa.

Under the terms of the conditional sale and purchase agreement, SCL will provide total consideration of GBP1,866,000 in the form of cash of GBP50,000 and non-cash consideration which includes the assumption by SCL of the liability to discharge certain of the Company's creditors subject to the consent of those creditors. The GBP50,000 is payable on execution of the sale and purchase agreement.

In addition to this GBP50,000 cash payment, SCL has paid GBP50,000 in satisfaction of certain of NewCogen's outstanding liabilities and has agreed to set aside the sum of GBP280,000 to be drawn down and used to settle creditors and obligations of NewCogen up to this amount both prior to and following completion of the Disposal. Drawn down amounts will be converted to a loan to NewCogen in the event that the sale is not completed.

SCL is wholly owned and operated by Peter Earl, a former director of the Company. As Peter Earl left the IPSA board in July 2015, the transaction will be treated as a related party transaction under the AIM Rules.

The directors consider, having consulted with WH Ireland, IPSA's nominated adviser, that the terms of the transaction are fair and reasonable insofar as the shareholders are concerned.

The transaction will also constitute a fundamental disposal under the AIM Rules and consequently the transaction will be subject to shareholder approval at a general meeting and a circular to shareholders will be issued shortly. Following the disposal of NewCogen, IPSA would be regarded as an AIM Rule 15 cash shell, and would be required to make an acquisition or acquisitions constituting a reverse takeover under the AIM Rules within 6 months.

A circular convening the general meeting of shareholders in the Company and with further details of the disposal will be sent to shareholders and notified by RNS in due course.

In the year ended 31 March 2014 the audited loss before tax of Blazeway was GBP2,011,155 and net assets were negative GBP2,411.115. In the year ended 31 March 2015, the unaudited loss before tax of Blazeway was GBP227,529 and net assets were negative GBP2,638,644.

The GBP50,000 cash proceeds paid to IPSA from the transaction will be used for working capital whilst IPSA seeks to realise its remaining assets that consist primarily of the balance of plant associated with the previously sold 701DU turbines and a receivable from Rurelec PLC.

The Company previously announced that its working capital was extremely tight and it has been reliant on the forbearance of its creditors with the possibility that the Company may be put into administration. As a result of the mechanical failure of one of NewCogen's gas turbines in November 2015, the working capital and creditor pressure has deteriorated further. In the absence of other funding solutions in the available timeframe, the Company has concluded that the sale of Blazeway is the only way to avoid having to place NewCogen into business rescue, which in turn would have resulted in a likely administration for IPSA. Whilst the financial position of IPSA will remain critical following the proposed sale as a result of the amount owed to Ethos Energy of approx. GBP3.2 million the Company will focus its attention in the near term of seeking to satisfying its remaining creditors from the sale of the balance of plant and collection of the receivable from Rurelec PLC

The Company's shares are currently suspended pending the release of its financial accounts for the year ended 31 March 2015 and for the interim period to 30 September 2015.

Chairman Richard Linnell commented: "The transaction, if completed, will release IPSA from a significant portion of its outstanding liabilities. This will in turn place the Company in a stronger position to meet all of its remaining obligations to creditors - most notably Ethos Energy Italia - out of other asset disposals with any residual balance for shareholders as IPSA turns itself into a cash shell that will seek a reverse takeover."

For further information contact:

 
 Mark Otto, Acting CEO 
  IPSA Group PLC                  [phone] 
 
  James Joyce / James Bavister      [phone] 
   W H Ireland Ltd                  1666 
 
   Riaan van Heerden, 
   PSG Capital (Pty) Ltd.           [phone] 
 

This information is provided by RNS

The company news service from the London Stock Exchange

END

MSCBPMITMBATBBF

(END) Dow Jones Newswires

January 28, 2016 10:00 ET (15:00 GMT)