Helius Energy Plc Proposed Disposal of Helius CoRDe Limited (1036I)

TIDMHEGY

RNS Number : 1036I

Helius Energy Plc

20 March 2015

20th March 2015

Helius Energy plc

("Helius" or the "Company")

Proposed Disposal of Helius CoRDe Limited and Proposed Cancellation of Admission of Ordinary Shares to Trading on AIM

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION (DIRECTLY OR INDIRECTLY) IN WHOLE OR IN PART IN, INTO, WITHIN OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

-- Proposed disposal of CoRDe for GBP12.3m representing a c. 15x multiple of annualised profits for the plant (based on Q1 performance) and a value significantly in excess of Helius' initial investment of GBP7.85m

   --      Planning consent for the Avonmouth project to expire on 26 March 2015 

-- Proposal to cancel admission of Ordinary Shares to trading on AIM and return available cash to Shareholders as soon as practicable

Helius today announces that it has signed a conditional sale and purchase agreement regarding the disposal of its 50% plus one share interest in Helius CoRDe Limited to Leo Energy Limited, a company wholly owned by iCON Infrastructure Partners II, L.P. The price agreed for the acquisition is GBP12.3m payable in cash, which equates to a multiple of c.15 times annualised profits for the CoRDe Project plant based performance in the first quarter of the 2014/15 financial year (unaudited). This represents a value significantly in excess of the Company's initial investment of GBP7.85m and its market capitalisation of GBP4.15m, based on the closing share price for the Company of 2.12 pence per Ordinary Share as at 19th March 2015 (being the latest practicable date prior to the announcement of the proposed disposal).

Planning consent in respect of the Avonmouth Project will expire on 26 March 2015. Despite extensive efforts to secure finance over the past three years, the Company has been unable to obtain the required equity funding to meet the full construction costs of the project. Given that it has not been possible to obtain funding for the Avonmouth Project within the available timescales, the Board does not consider that the Company will be able to deliver the Southampton Project.

In light of this, and following the strategic review announced in September 2014 and the subsequent restructuring and cost-reduction programme announced in November 2014, the Board has resolved that the disposal of the Company's interest in Helius CoRDe Limited is the most appropriate route to securing value for shareholders and has recommended that the shareholders approve the sale.

The Directors are recommending the cancellation of admission of the Ordinary Shares to trading on AIM and the re-registration of the Company as a private limited company. This will reduce overheads and simplify the mechanism for returning cash to Shareholders.

The proposals are also subject to Shareholder approval. The Directors have received irrevocable undertakings from Directors who hold Ordinary Shares, together with other shareholders, in respect of their own beneficial shareholdings which amount to 99,434,436 Ordinary Shares, equivalent to, in aggregate, 50.91 per cent. Of the Company's current issued share capital. A circular will be distributed to all shareholders containing a notice of the General Meeting to be held on 7(th) April 2015.

John Seed, Chairman of Helius, said

"Helius has been focused on pursuing all possible options for the Avonmouth project's funding while also working to explore the best means to deliver maximum value for shareholders should funding not be possible. While it is satisfying to have achieved a very good return on our investment in the CoRDe plant, it is a matter of great regret that Helius has been unable to secure all of the equity funding for our Avonmouth project. This is despite the project having pre-qualified for a Treasury Guarantee, all necessary consents having been obtained, support of debt funders and agreement in principle of all necessary contractual agreements.

Having considered the trade-off between potential future returns and current value available for Shareholders we consider that the disposal of our interest in Helius CoRDe and the subsequent return of all available cash provides the best value for our shareholders as a whole. The Board expects to approve a return of cash as soon as reasonably practicable after the General Meeting to approve the sale to Leo Energy Limited."

For more information please contact:

Helius Energy plc

John Seed, Executive Chairman

Alan Lyons, Chief Financial Officer

William Ingram Hill, Chief Operating Officer

Numis Securities Ltd Tel: [phone]

Jamie Lillywhite (as Nominated Adviser)

James Black (as Corporate Broker)

Citigate Dewe Rogerson Tel: [phone]

Chris Gardner

Malcolm Robertson

Important information

Words and expressions defined in the circular sent to shareholders of the Company dated today's date have the same meanings when used in this announcement unless the context requires otherwise.

This announcement contains (or may contain) certain forward-looking statements with respect to certain of the Company's current expectations and projections about future events. These statements, which sometimes use words such as "anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning, reflect the directors' beliefs and expectations and involve a number of risks, uncertainties and assumptions that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement. Statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The information contained in this announcement is subject to change without notice and neither Numis Securities Limited nor, except as required by applicable law, the Company assumes any responsibility or obligation to update publicly or review any of forward-looking statements contained herein. You should not place undue reliance on forward-looking statements, which speak only as of the date of this announcement.

Numis Securities Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as nominated adviser, financial adviser and broker to the Company in relation to the Proposals and is not acting for any other persons in relation to the Proposals. Numis Securities Limited is acting exclusively for the Company and for no one else in relation to the matters described in this announcement and is not advising any other person and accordingly will not be responsible to anyone other than the Company for providing the protections afforded to clients of Numis Securities Limited, or for providing advice in relation to the contents of this announcement or any matter referred to in it. The responsibilities of Numis Securities Limited as the Company's nominated adviser and broker under the AIM Rules for Companies and the AIM Rules for Nominated Advisers are owed solely to the London Stock Exchange and are not owed to the Company or to any director or shareholder of the Company or any other person, in respect of his decision to acquire shares in the capital of the Company in reliance on any part of this announcement, or otherwise.

No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by Numis Securities Limited or by any of its affiliates or agents as to, or in relation to, the accuracy or completeness of this announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed.

Defined terms in this announcement have the same meaning as in the circular dated 20 March 2015.

Expected timetable of principal events

 
 Posting of this circular and Form of                20 March 2015 
  Proxy to Shareholders 
 Latest time and date for receipt of    11.00 a.m. on 1 April 2015 
  Forms of Proxy 
 General Meeting                        11.00 a.m. on 7 April 2015 
 Last day for trading Ordinary Shares                20 April 2015 
  on AIM 
 Expected cancellation of trading of    with effect from 7.00 a.m. 
  Ordinary Shares on AIM                          on 22 April 2015 
 

Notes:

(1) Each of the times and dates set out in the above timetable and mentioned in this announcement is subject to change by the Company (with the agreement of Numis Securities), in which event details of the new times and dates will be notified to the London Stock Exchange and the Company will make an appropriate announcement to a Regulatory Information Service.

(2) References to times are to London times unless otherwise stated.

(3) Assumes that all Resolutions that are set out in the Notice of General Meeting are passed.

Proposed Disposal of Helius CoRDe Limited and Proposed Cancellation of Admission of Ordinary Shares to Trading on AIM

Introduction

This announcement sets out the rationale behind the Proposals, why the Directors unanimously consider the Proposals to be in the best interests of the Company and its Shareholders as a whole, and are therefore seeking Shareholder approval for the steps necessary to facilitate the proposed disposal of the Company's entire interest in the issued share capital of Helius CoRDe Limited, the proposed cancellation of admission of the Ordinary Shares to trading on AIM, the proposed re-registration of the Company as a private limited company and the proposed adoption of new articles of association.

The planning consent for the Avonmouth Project issued under section 36 of the Electricity Act 1989 will expire on 26 March 2015. Despite extensive efforts to secure equity funding for the project over the past three years and confirmation that the project was pre-qualified for a guarantee from HM Treasury, the Company has been unable to secure the total equity funding required to ensure that the project will be constructed and commissioned in time to be eligible for a subsidy under the Renewables Obligation. This has been due, in part, to uncertainty about the impact of policy and regulation on the electricity market, including the Government's Electricity Market Reform ("EMR") programme. That uncertainty was among the reasons cited by prospective investors when they withdrew from negotiations with the Company.

The Board's plan to date has been for the Southampton Project to apply for a contract for difference under the EMR regime. However, given that it has not been possible to obtain funding for the Avonmouth Project within the available timescales, the Board does not consider that the Company will be able to deliver the Southampton Project.

The Board is therefore taking the decision to include an impairment, in aggregate, of GBP13.55m in respect of the Avonmouth Project and the Southampton Project in the Company's forthcoming financial statements. The Company will seek to recover value from those projects where it can, although in the absence of a planning consent or freehold over the land, the Board no longer assigns any value to either project.

The Company currently has access to funding to meet its liabilities until April 2015.

The Company's task is to deliver value to its Shareholders and the Board holds this goal in mind in all its deliberations. The Board has analysed the most appropriate ways of achieving value for Shareholders. The continuing failure to secure funding for the Avonmouth Project led the Board to conduct a strategic review in late 2014 and a major restructuring plan was implemented in order to significantly reduce costs and reposition the Company's business on a more appropriate footing.

The Board has considered the trade-off between potential future returns and current value available for Shareholders and the opportunities for maximising value for Shareholders and now considers that this can be best achieved from the disposal of its interest in Helius CoRDe and the subsequent return of available cash to its Shareholders, such return of cash the Board expects to approve as soon as reasonably practicable after the General Meeting.

The Company has therefore signed a conditional sale and purchase agreement regarding the disposal of its interest in Helius CoRDe to Leo Energy Limited ("Leo"), an acquisition vehicle which is a wholly owned subsidiary of iCON Infrastructure Partners II, L.P. The price agreed with Leo for the acquisition of the Company's interest in the share capital of Helius CoRDe is GBP12.3m, which equates to a multiple of c.15 times Helius' share of the CoRDe Project's annualised profits before tax based on the first quarter of the 2014/15 financial year (unaudited). This represents a value significantly in excess of the Company's market capitalisation of GBP4.15m, based on the closing share price for the Company of 2.12 pence per Ordinary Share as at 19 March 2015 and a total issued share capital as at the latest practicable date prior to the date of this announcement of 195,300,468 Ordinary Shares. The Company will not issue any new ordinary shares in the capital of the Company before returning cash to Shareholders save pursuant to any employee and/or director entitlement as set out in the annual report for the year ending 30 September 2013.

Completion of the SPA is conditional on:

-- an ordinary resolution of Shareholders being obtained because the sale of the Company's interest in Helius CoRDe will represent a fundamental change in business for the purposes of the AIM Rules for Companies; and

-- relevant bank waivers and consents being obtained. The Company will make an appropriate announcement when the relevant bank waivers and consents have been obtained and the relevant condition in the SPA has been satisfied.

The SPA will terminate if completion of the SPA has not occurred by the Longstop Date.

Following completion of the SPA the Board will explore the best way to return cash to Shareholders and will endeavour to return as much cash to Shareholders as possible through that process. The Board is currently aware of the following factors which will need to be taken into account when determining the amount of cash to be returned to Shareholders at that time:

   --              retention amount under the terms of the SPA: GBP1.23m; 
   --              professional fees relating to the Disposal: GBP0.3m; 

-- existing creditors of the Company and expected operational costs to the end of the retention period: GBP0.7m; and

   --              contingency: GBP0.1m. 

If the Shareholders approve the sale to Leo, the Directors expect to be in a position to return cash to Shareholders in the short term. In order to maximise this return of cash, the Directors are further recommending the cancellation of admission of the Ordinary Shares to trading on AIM, the re-registration of the Company as a private limited company and the adoption of the New Articles in connection with such matters. This will both reduce the Company's corporate overheads and simplify the mechanism for returning cash to Shareholders.

The notice of General Meeting, which is being convened in connection with the Proposals and will be held at the offices of Burges Salmon LLP, 6 New Street Square, London EC4A 3BF at 11.00 a.m. on 7 April 2015, is given in the circular sent to shareholders on 20 March 2015.

The Directors who hold Ordinary Shares, together with former Directors and current consultants to the Company, Adrian Bowles and Christopher Corner, have irrevocably undertaken to vote in favour of the Resolutions in respect of their aggregate holding of 99,434,436 Ordinary Shares, representing, in aggregate, approximately 50.91 per cent. of the Company's current issued share capital.

Financial information and trading update

The draft income statement for the year ended 30 September 2014 (which is set out in the following table) are unaudited, in draft form and do not constitute statutory accounts. The key financial information below is shown by comparison to the corresponding financial information for the financial year ended 30 September 2013. The final audited financial statements for the year ended 30 September 2014 will be published by 31 March 2015. The final audited results may differ from the information in this announcement due to revision of accounting estimates, accounting treatment or the audit process.

Key financial highlights

 
 Income statement (unaudited)                        2014      2013 
                                                  GBP'000   GBP'000 
---------------------------------------------  ----------  -------- 
 Revenue (management service agreements)              226       277 
 Cost of sales                                      (223)     (246) 
 Administrative costs including share based 
  payments                                        (1,564)   (1,349) 
  Project impairment                             (13,554)         - 
 Operating loss                                  (15,115)   (1,318) 
 Net finance (expense)/ income                          -      (14) 
  Share of post tax profit/(loss) from joint 
   venture                                            344     (105) 
---------------------------------------------  ----------  -------- 
 Loss for the period                             (14,771)   (1,437) 
---------------------------------------------  ----------  -------- 
 

Background to and reasons for the Proposals

Following the Company's failure to secure funding for the Avonmouth Project and given its severely constrained financial resources, the Directors initiated a strategic review, the result of which is the Proposals.

The CoRDe Project, which is owned by Helius CoRDe, is fully operational and exporting electricity to the grid. In the 2013/14 financial year Helius CoRDe generated revenues in excess of GBP13m and continues to generate revenues in excess of GBP1m per month.

For the three month period to December 2014 Helius CoRDe generated revenues of c.GBP3.65m and profit before tax of c.GBP0.41m (unaudited). On an annualised basis these results would deliver a profit before tax of GBP1.6m for the year for the whole project.

The Company originally invested c.GBP7.85m in the CoRDe Project on financial close in April 2011 and continues to hold 50% plus one share of the total issued share capital of Helius CoRDe. The Leo transaction values this interest at GBP12.3m, an uplift of 56% against the original investment, and a multiple of c.15 times Helius' share of the CoRDe Project annualised profits before tax in the first quarter of the 2014/15 financial year (unaudited). The SPA includes warranties given by the Company in respect of title, capacity and operational matters, which the Directors believe are typical for a transaction of this nature together with limited indemnities in respect of specific matters, which are secured by a one-year retention as quantified in paragraph 1 above (the "Retention").

The Retention will be paid to the Company at the end of the one year period, subject to the withholding or deduction of any sums owing in respect of claims that are properly notified to the Company during such period. It is intended that these proceeds will then be distributed to Shareholders (subject to the Company complying with its legal obligations).

The Directors consider that the Disposal amounts to a fundamental change of business pursuant to AIM Rule 15. It must therefore be approved by the Shareholders. Accordingly, an ordinary resolution (requiring a simple majority of the votes cast) will be proposed at the General Meeting to approve the disposal of the Company's entire interest in the issued share capital of Helius CoRDe in line with the Company's strategy.

The Ordinary Shares have been admitted to trading on AIM since 31 January 2007 and, in light of the foregoing, the Directors no longer consider that maintaining the Company's admission to trading on AIM is appropriate for the Company. In reaching their decision the Directors have also taken into account the following factors:

-- the strategy that the Company will follow to return value to Shareholders is likely to be more cost efficient and expedient as a private company;

-- the level of administrative burden and costs, which the Board estimates to be in the region of GBP80k per annum, associated with maintaining an admission to AIM; and

-- the legal and regulatory burden associated with maintaining the Company's admission to AIM is now considered by the Board to be disproportionate to the benefits.

In the light of the foregoing, and following careful consideration, the Directors consider that it is no longer appropriate for the Company to remain as a quoted company and, as a result, are seeking approval of its Shareholders to dispose of its shareholding in Helius CoRDe, to cancel admission of the Ordinary Shares to trading on AIM, to re-register the Company as a private limited company and to adopt the New Articles.

Accordingly, the Board has notified the London Stock Exchange pursuant to Rule 41 of the AIM Rules of its intention to cancel admission of the Ordinary Shares to trading on AIM. Each of the Proposals is subject to Shareholders' approval at the General Meeting. Each Resolution will be subject to 75 per cent. of the votes cast being in favour of the Resolution, save for the Resolution to approve the Disposal which will be subject to a simple majority of the votes cast in favour of the Resolution.

If the proposed Resolution for the cancellation of the admission of the Company's Ordinary Shares to trading on AIM is not approved then the Company will remain subject to the requirements of AIM Rule 15 and will be treated as an investing company once the Disposal has been completed. Under the requirements of AIM Rule 15, the Company would, at that time, seek Shareholder approval of the Company's investment policy to be followed going forward and the Company would then have to implement the investment policy to the satisfaction of the London Stock Exchange within 12 months of becoming an investing company.

Return of cash to Shareholders

The Board will explore the most appropriate way to maximise the value to Shareholders as quickly as possible following completion of the Disposal subject to it complying with legal requirements, maintaining the Retention pursuant to the terms of the SPA and appropriate amounts to meet the Company's short term operating costs before a strategy to return value is implemented.

The Board will take appropriate advice to identify the preferred mechanism to action the return of value, based on legal and tax advice.

The Board considers that whilst the above can be achieved if the Company's shares remain admitted to trading on AIM, whichever strategy is chosen to return value to Shareholders, the process will be more cost efficient and will be expedited if the Company's admission of Ordinary Shares to trading on AIM is cancelled and the Company is re-registered as a private limited company.

Principal risks and uncertainties

Shareholders should be aware that:

-- there is a risk that the conditions contained in the SPA, other than Shareholder approval, are not satisfied so that completion of the SPA occurs on or before the Longstop Date and the Disposal does not complete as a result;

-- the Directors, or an appropriate insolvency practitioner appointed to oversee the liquidation of the Company in due course, may form the view that capital cannot be distributed to Shareholders in the short term as a result of unforeseen liabilities;

-- there may be latent liabilities or claims against the Group of which the Directors are not currently aware. The winding down process itself may bring any such liabilities to light;

-- confirming all the assets and liabilities of the Company, including latent and contingent liabilities of the Company to the degree of certainty required for the Directors to be able to recommend that Shareholders vote in favour of a members' voluntary liquidation of the Company (if appropriate) may take longer than expected;

-- the timing and extent of actions to reduce administration expenses will depend, inter alia, on the exploration of any alternatives to liquidation; and

-- there is a risk of Leo bringing a warranty or indemnity claim during the limitation period of one year from the date of completion of the SPA. This may affect the ability of the Board to return the GBP1.23m sum held in the Retention to Shareholders at the end of the warranty period.

Governance and the structure of the Board following the AIM Cancellation

At present the Board comprises two executive directors: William Ingram Hill (Chief Operating Officer) and Alan Lyons (Chief Financial Officer) together with me as Executive Chairman (collectively the "Helius Management Team") and three non-executive directors, Angus MacDonald, OBE, Alastair Salvesen, CBE and William Rickett, CB (collectively the "Non-Executive Directors").

Subject to and following completion of the sale of the Company's interest in Helius CoRDe to Leo, William Ingram Hill and Alan Lyons have agreed in principle to their directorships and employment being terminated on terms agreed with the Company on 1 May 2015. The Board has agreed that the Helius Management Team will continue the on-going management of the Company in the short term and the winding down of the Group's affairs in preparation for the ultimate liquidation of the Company.

Effect of the AIM Cancellation on Shareholders

The principal effects of the AIM Cancellation would be:

-- Shareholders will no longer be able to buy and sell shares in the Company through AIM or any other public stock market and therefore liquidity and marketability of the Ordinary Shares may be reduced;

-- it is not currently intended that there will be any market facility for dealing in the Ordinary Shares and no price will be publicly quoted for the Ordinary Shares;

-- the Board will consider whether to cancel the Company's CREST facility so that the Ordinary Shares may only be held in certificated form. If the CREST facility is cancelled those Shareholders currently holding Ordinary Shares in CREST will, following the AIM Cancellation, be sent a share certificate for those Ordinary Shares which were previously held in uncertificated form;

-- the Company will endeavour to facilitate trading in the Ordinary Shares among Shareholders in due course, but cannot make any assurances that a purchaser will be available or as to the price which may be agreed;

-- the Company will no longer be subject to the AIM Rules and, accordingly, it will not be required to retain a nominated adviser or to comply with the requirements of AIM in relation to annual accounts, half-yearly reports or the disclosure of price sensitive information;

-- the Company will no longer be required to comply with any of the corporate governance requirements for quoted companies; and

   --              the Company will remain subject to the Code for 10 years. 

The above considerations are not exhaustive and Shareholders should seek their own independent advice when assessing the likely impact of the AIM Cancellation on them.

Effect of re-registering the Company as a private company

If the AIM Cancellation is approved, the Ordinary Shares will no longer be admitted to trading on AIM. In this event, the Board proposes that the Company be re-registered as a private limited company as this will reduce both the costs and complexities of operating the Company and, in particular, will facilitate future returns of capital to Shareholders, without the need to apply to the Court for approval.

The principal effects that the Re-registration will have on the Company are as follows:

-- as a private company, the Company will be prohibited from offering its securities to the public;

-- following Re-registration, the Company will be able to use the solvency statement procedure for a reduction of capital (and will not be required to obtain Court approval as would be the case if the Company remained a public limited company);

-- the Company has a single class of shares. Private companies with a single class of shares may authorise their directors to allot shares, with no restriction on the number of shares which may be issued. This authority is currently given to the Board (subject to certain caps) through the resolutions proposed at the annual general meeting of the Company each year. Under the terms of the New Articles, following the Re-registration, the Company will no longer be required to seek authority from Shareholders to allot or grant rights to subscribe for or convert Ordinary Shares. However the Directors have no current intention to allot any new Ordinary Shares;

-- as a private company, the Company will be able to use the statutory written resolution procedure and will not be required to hold an annual general meeting; and

-- the provisions of the Code will cease to apply to the Company following the tenth anniversary of the AIM Cancellation (please see further details above).

Notwithstanding the Re-registration and the changes that will be made by the adoption of the New Articles, the Company will remain subject to the requirements of United Kingdom company law, which contains various provisions for the protection of minority shareholders, including pre-emption rights, and the Company will, as stated above, continue to communicate information about the Company to the Shareholders in accordance with the requirements of the Companies Act.

Before giving your consent to the re-registration of the Company as a private limited company, you may want to take independent professional advice from an appropriate independent financial adviser.

Proposed adoption of New Articles

A copy of the proposed New Articles will be available for inspection at the Company's registered office, Europarc Innovation Centre, Innovation Way, Grimsby, South Humberside DN37 9TT, during usual business hours on the business days until the close of the General Meeting.

By way of brief summary, the principal changes proposed to be made to the Existing Articles are as follows:

Future allotment of shares

The New Articles contain pre-emption rights in favour of Shareholders on any future allotment of shares by the Company.

Provisions relating to general meetings of the Company and written resolutions

Private companies are not required to hold annual general meetings and may pass shareholder resolutions as written resolutions in accordance with the terms of the Companies Act. The New Articles will remove the requirement to hold annual general meetings and the references to the standard business required to be conducted at the Company's annual general meetings, including the routine retirement of directors by rotation and the laying of accounts before Shareholders. Following adoption of the New Articles, the Company will be able to continue to hold annual general meetings, but will no longer be obliged to do so. The notice period to call a general meeting pursuant to the New Articles will be the minimum required by law (currently 14 clear days).

Other miscellaneous amendments

The New Articles contain a number of other consequential miscellaneous amendments as a result of the AIM Cancellation and the Re-registration.

Conditional upon the AIM Cancellation taking effect, Resolution 3 in the notice of General Meeting seeks Shareholder approval for the Re-registration and the adoption of the New Articles. It is anticipated that the effective date of Re-registration will be on or before 4 May 2015.

This information is provided by RNS

The company news service from the London Stock Exchange

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