SIMEC Atlantis Energy Limited Acquisition of SIMEC Green Highland Renewables (3933I)

TIDMSAE

RNS Number : 3933I

SIMEC Atlantis Energy Limited

23 November 2018

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014 ("MAR").

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23 November 2018

SIMEC Atlantis Energy Limited

("Atlantis" or the "Company")

Proposed Acquisition of SIMEC Green Highland Renewables

Transaction Highlights

-- Atlantis has conditionally agreed to acquire SIMEC Green Highland Renewables ("SIMEC GHR") at an agreed enterprise value of GBP124.7 million from the SIMEC group, part of the GFG Alliance.

-- Agreed enterprise value of GBP124.7 million which reflects that SIMEC GHR will be acquired with up to GBP95 million of long-term project financing already in place on terms satisfactory to Atlantis. In addition, GHR will benefit from a c.GBP24 million capex facility to fund all planned future capex needs as well as a c. GBP2 million revolving credit facility.

-- Taking into account the long-term project financing of up to GBP95 million, it is expected that at Completion of the Acquisition a maximum amount of GBP29.7 million will be paid for SIMEC GHR comprising: (i) a cash amount of GBP14.85 million for the shares of SIMEC GHR and the partial repayment of existing SIMEC GHR debt; and (ii) in the event that such repayment is to be funded by an equity fundraising, Atlantis will issue such number of Ordinary Shares so that the SIMEC group will, following Completion of the Acquisition, continue to own approximately 49.99 per cent. of the Company's issued Ordinary Share capital (such equity value not to exceed GBP14.85 million), thus resulting in an agreed enterprise value of GBP124.7 million.

-- SIMEC GHR has developed a portfolio of operational, cash generating, hydro-electric assets benefitting from long-term renewable energy support. The portfolio has a total operational capacity of c.20MW, producing c.87GWh p.a. All projects within the portfolio benefit from 20 year fixed price feed-in-tariff ("FiT") payments from commercial operations date ("COD") which are indexed annually to the Retail Price Index.

-- In addition, there is one project under construction and one project in development (which will, together, increase capacity by c.8MW).

-- On Completion, the Acquisition is expected to be both immediately earnings and cash flow accretive to Atlantis with strong revenue growth expected between 2019 and 2021.

-- Completion of the Acquisition is subject to the fulfilment of a number of conditions precedent, including the completion by Atlantis of its due diligence on SIMEC GHR. The Board expects the Acquisition to complete in Q1 2019.

Atlantis is pleased to announce today that it has reached agreement to conditionally acquire SIMEC GHR. The Acquisition represents a further step towards the transformation of Atlantis into a diversified energy company of scale owning a broad spectrum of sustainable energy assets.

SIMEC GHR has developed an attractive portfolio of operational, cash generating, hydro-electric assets benefitting from long-term renewable energy support. The portfolio consists of 11 operational projects encompassing 15 schemes with a combined capacity of c.20MW (attributable to both SIMEC GHR and third party interests), one project under construction of c.2MW and one project at the development stage (comprising three schemes) of c.5.9MW. Of the total capacity, including the assets under construction and development, SIMEC GHR has an interest in c.24.9MW of capacity, with the balance being attributable to third party interests under joint ventures in relation to three projects.

The Company, through its wholly owned subsidiary, Atlantis Projects Pte. Ltd (the "Buyer") has signed a conditional Sale and Purchase Agreement to effect the Acquisition and pursuant to which it has conditionally agreed to acquire SIMEC GHR by way of the purchase of the entire issued share capital of SIMEC GHR Acquisitions MidCo Limited. The counterparty to the Sale and Purchase Agreement from which the Buyer is proposing to acquire SIMEC GHR is SIMEC GHR Acquisitions TopCo Limited (the "Seller"), a member of the GFG Alliance and an associate of the Company's largest Shareholder, SIMEC UK Energy Holdings Limited ("SIMEC"). The Acquisition follows the Company's acquisition of SIMEC Uskmouth Power Limited ("SUP") from SIMEC earlier this year and illustrates the benefits and inherent value to the Company of its access to the GFG Alliance's pipeline of renewable power assets.

The agreed enterprise value attributed to SIMEC GHR is GBP124.7 million which reflects that SIMEC GHR will be acquired with up to GBP95 million of long-term project financing in place on terms satisfactory to Atlantis, comprising (subject to the agreement of documentation) two new term loans. GHR is also expected to benefit from a c.GBP24 million capex facility as well as a c.GBP2 million revolving credit facility, neither of which will be drawn down at Completion of the Acquisition. Taking into account the long-term project financing of up to GBP95 million, it is expected that the Buyer will pay GBP29.7 million to the Seller for SIMEC GHR comprising: (i) a cash amount of GBP14.85 million for the shares of SIMEC GHR and the partial repayment of existing SIMEC GHR debt; and (ii) in the event that such repayment is funded by an equity fundraising, Atlantis will issue such number of Ordinary Shares so that SIMEC will (at the Seller's direction), following Completion of the Acquisition, continue to own approximately 49.99 per cent. of the Company's issued Ordinary Share capital (such equity value not to exceed GBP14.85 million), thus resulting in an agreed enterprise value of GBP124.7 million.

The proposed Acquisition is classified as a related party transaction under the AIM Rules for Companies since it involves a transaction with a related party of the Company, the Seller which is an associate of SIMEC, a substantial shareholder of the Company (the substantial shareholder being the Company's largest Shareholder (which, as at the date of this announcement, owns approximately 49.99 per cent. of the Company's issued Ordinary Share capital)). Accordingly, the Independent Directors of Atlantis (comprising John Neill (Non-Executive Chairman), Tim Cornelius (Chief Executive Officer), Andrew Dagley (Chief Financial Officer), John Woodley (Non-Executive Director) and Ian MacDonald (Non-Executive Director)), having consulted the Company's Nominated Adviser, Cantor Fitzgerald Europe, consider that the terms of the proposed Acquisition are fair and reasonable insofar as the Company's Shareholders are concerned.

Shareholders should be aware that, whilst a binding Share Purchase Agreement has been executed, the Acquisition is conditional and Completion of the Acquisition is subject to the fulfilment of a number of conditions precedent, including the completion by Atlantis of its due diligence. In addition, further transaction documentation in respect of the Acquisition is required to be agreed between the Buyer and the Seller and Completion of the Acquisition will be subject to, inter alia, the agreement and execution of those transaction documents. Accordingly, there can be no certainty that all of the terms of the transaction documents will be concluded to the satisfaction of the Buyer or the Seller, or that all of the conditions precedent will be fulfilled and that Completion will take place. If the Acquisition is not going to proceed for any reason or the Share Purchase Agreement is terminated, Atlantis will make an announcement through a Regulatory Information Service at the relevant time. The Company also intends to make further announcements in relation to the Acquisition through a Regulatory Information Service at appropriate times.

Tim Cornelius, CEO of SIMEC Atlantis Energy commented: "This proposed acquisition is one of the most exciting developments in the recent history of Atlantis. The management team at SIMEC GHR are world renowned for their mini-hydro development, construction, operations and maintenance capabilities. They have built a unique portfolio of operating assets in the UK that cannot be replicated due to recent changes in legislation. Not only will this acquisition have a positive cash flow positive impact on our group in the first year and deliver generation diversification, it validates the Atlantis relationship with our strategic shareholder, SIMEC, and it gives us access to one of the most accomplished and respected hydro development teams in the UK. Our combined goal is to now support the SIMEC GHR management to continue to replicate this success in other jurisdictions worldwide where we believe we can deliver superior risk-adjusted returns for our shareholders. This is yet another material step towards establishing Atlantis as a leading independent power generator in the UK."

Stephen Hutt, Managing Director of SIMEC Green Highland Renewables commented: "We are delighted that Atlantis has made the decision to acquire SIMEC GHR and we look forward to working with management to build on our previous success and to diversify our development pipeline into new geographical locations. The team at Atlantis has a long history of working on greenfield development projects in Scotland and we look forward to exploiting the many synergies that exist between our development and O&M teams and the wider Atlantis portfolio of projects. This is an exciting day for our team and we are delighted to be playing an important part in the Atlantis growth story."

Enquiries:

SIMEC Atlantis Energy Limited Via FTI Consulting

Tim Cornelius, Chief Executive Officer

Andrew Dagley, Chief Financial Officer

FTI Consulting [phone]

(PR Adviser to the Company)

Ben Brewerton

Alex Beagley

James Styles

Molly Stewart

Evercore Partners International LLP [phone]

(Financial Adviser to the Company)

Marcus Thompson

John Mason

Cantor Fitzgerald Europe [phone]

(Nominated Adviser and Broker to the Company)

Rick Thompson

Richard Salmond

David Porter

Notes to Editors

SIMEC Atlantis Energy

Atlantis is the global developer, owner and operator of sustainable energy projects with a diverse portfolio of more than 1,000MW in various stages of development. This includes a 77% stake in the world's largest tidal stream power project, MeyGen, and the conversion of the 220MW Uskmouth Power Station.

In 2017 Atlantis entered into a strategic partnership with SIMEC, a member of the GFG Alliance, to convert the Uskmouth Power Station to use an end-of-waste energy pellet as fuel. The plant is expected to enter commercial operations in 2020 and will sell its power to GFG Alliance companies under two 20-year power purchase agreements. A successful conversion will tackle the pressing issue of non-recyclable waste in the UK and will form the blue-print for other large-scale conversion projects across the globe.

This Acquisition follows the Company's entry into a strategic partnership with SIMEC and is a further step towards the transformation of Atlantis into a diversified energy company of scale, owning development and generating assets across the sustainable energy spectrum in Europe, Asia and Australia, complementing our existing UK pipeline.

https://www.simecatlantis.com/

Market Abuse Regulation

The information contained within this announcement is inside information as stipulated under MAR. Upon the publication of this announcement, this inside information is now considered to be in the public domain. The person responsible for arranging for the release of this announcement on behalf of SIMEC Atlantis Energy is Tim Cornelius, Chief Executive Officer of SIMEC Atlantis Energy.

Important Notice

This announcement, including the information contained herein, is restricted and is not for publication, distribution or release, directly or indirectly, in whole or in part, in or into or from the United States, (including its territories and possessions, any States of the United States and the District of Columbia) (collectively, the "United States"), Canada, Australia, Japan or the Republic of South Africa or in or into or from any other jurisdiction in which such publication, distribution or release would be prohibited by any applicable law.

This announcement is for information purposes only and is not and does not constitute, contain or form part of an offer to sell or issue or a solicitation to buy, subscribe for or otherwise acquire, any securities in the United States, Canada, Australia, Japan or the Republic of South Africa or any other jurisdiction in which any such offer or solicitation would be unlawful. The securities referred to in this announcement have not been and will not be registered under the US Securities Act of 1933, as amended (the "US Securities Act"), or under any applicable securities laws of any state or other jurisdiction of the United States, and may not be offered, sold, resold or transferred or delivered, directly or indirectly, in or into or from the United States absent registration under the US Securities Act or except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and, in each case, in compliance with any applicable securities laws of any state or other jurisdiction of the United States. Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdiction.

Certain statements in this announcement are forward-looking statements which are based on the Company's expectations, intentions and projections regarding its future performance, anticipated events or trends and other matters that are not historical facts. These forward-looking statements, which may use words such as "aim", "anticipate", "believe", "could", "intend", "estimate", "expect" and words of similar meaning, include all matters that are not historical facts. These forward-looking statements involve risks, assumptions and uncertainties that could cause the actual results of operations, financial condition, liquidity and dividend policy and the development of the industries in which the Group will operate to differ materially from the impression created by the forward-looking statements. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Given those risks and uncertainties, prospective investors are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of such statements and, except as required by the Financial Conduct Authority, the London Stock Exchange or applicable law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

No statement in this announcement is intended to be a profit forecast and no statement in this announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

Evercore Partners International LLP ("Evercore"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as financial adviser exclusively to the Company and no one else in connection with the matters described in this announcement. Evercore will not regard any person other than the Company (whether or not a recipient of this announcement) as its client in relation to the matters described in the announcement and will not be responsible to any person other than the Company for providing the protections afforded to its clients or for providing advice in respect of such matters to any person other than the Company. Neither Evercore nor its affiliates have authorised the contents of any part of this announcement and neither accept liability for the accuracy of any information or opinions contained in this announcement nor for the omission of any material information from this announcement for which the Company and the Directors are responsible. No representation or warranty, express or implied, is made by Evercore or its affiliates as to any of the contents of this announcement (without limiting the statutory rights of any person to whom this announcement is issued).

Cantor Fitzgerald Europe, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting solely as nominated adviser and broker exclusively to the Company and no one else in connection with the matters described in this announcement. Cantor Fitzgerald Europe will not regard any person other than the Company (whether or not a recipient of this announcement) as its client in relation to the matters described in this announcement and will not be responsible to any person other than the Company for providing the protections afforded to its clients or for providing advice in respect of such matters to any person other than the Company. Neither Cantor Fitzgerald Europe nor any of its affiliates or agents have authorised the contents of any part of this announcement. Apart from the responsibilities and liabilities, if any, which may be imposed on Cantor Fitzgerald Europe by FSMA or the regulatory regime established thereunder, Cantor Fitzgerald Europe and its affiliates and agents accept no responsibility whatsoever, and makes no representation or warranty, express or implied, as to the contents of this announcement including its accuracy, completeness or verification or for any other statement made or purported to be made by it, or on behalf of it, the Company or any other person, in connection with the Company and the contents of this announcement, whether as to the past or the future. Cantor Fitzgerald Europe and its affiliates and agents accordingly disclaim all and any liability whatsoever, whether arising in tort, contract or otherwise (save as referred to above), which it might otherwise have in respect of the contents of this announcement or any such statement.

Neither the content of the Company's website (or any other website) nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

Regulated Information Classification: Inside information

   1.         INTRODUCTION 

Atlantis is pleased to announce today that it has reached agreement to conditionally acquire SIMEC GHR. SIMEC GHR has developed an attractive portfolio of operational, cash generating, hydro-electric assets benefitting from long-term renewable energy support. The Acquisition represents a further step towards the transformation of Atlantis into a diversified energy company of scale owning a broad spectrum of sustainable energy assets.

The Company, through its wholly owned subsidiary, Atlantis Projects Pte. Ltd as the Buyer, has signed a conditional Sale and Purchase Agreement to effect the Acquisition and pursuant to which it has conditionally agreed to acquire SIMEC GHR by way of the purchase of the entire issued share capital of SIMEC GHR Acquisitions MidCo Limited. The counterparty to the Sale and Purchase Agreement from which the Buyer is proposing to acquire SIMEC GHR is SIMEC GHR Acquisitions TopCo Limited as the Seller, a member of the GFG Alliance and an associate of the Company's largest Shareholder, SIMEC.

Further details of the Sale and Purchase Agreement is set out below under the heading "Principal Terms of the Acquisition and Documentation" in this announcement.

The agreed enterprise value attributed to SIMEC GHR is GBP124.7 million which reflects that SIMEC GHR will be acquired with up to GBP95 million of long-term project financing in place on terms satisfactory to Atlantis, comprising (subject to the agreement of documentation) two new term loans. GHR is also expected to benefit from a GBP24 million capex facility as well as a GBP2 million revolving credit facility, neither of which will be drawn down at Completion. Taking into account the long-term project financing of up to GBP95 million, it is expected that the Buyer will pay GBP29.7 million to the Seller for SIMEC GHR comprising: (i) a cash amount of GBP14.85 million for the shares of SIMEC GHR and the partial repayment of existing SIMEC GHR debt; and (ii) in the event that such repayment is funded by an equity fundraising, Atlantis will issue such number of Ordinary Shares so that SIMEC will (at the Seller's direction), following Completion of the Acquisition, continue to own approximately 49.99 per cent. of the Company's issued Ordinary Share capital (such equity value not to exceed GBP14.85 million), thus resulting in an agreed enterprise value of GBP124.7 million.

Shareholders should be aware that, whilst a binding Share Purchase Agreement has been executed, the Acquisition is conditional and Completion of the Acquisition is subject to the fulfilment of a number of conditions precedent, including the completion by Atlantis of its due diligence. Further details of these conditions precedent are set out below under the heading "Principal Terms of the Acquisition and Documentation" in this announcement. In addition, further transaction documentation in respect of the Acquisition is required to be agreed between the Buyer and the Seller and Completion of the Acquisition will be subject to, inter alia, the agreement and execution of those transaction documents. Accordingly, there can be no certainty that all of the terms of the transaction documents will be concluded to the satisfaction of the Buyer or the Seller, or that all of the conditions precedent will be fulfilled and that Completion will take place. If the Acquisition is not going to proceed for any reason or the Share Purchase Agreement is terminated, Atlantis will make an announcement through a Regulatory Information Service at the relevant time.

The proposed Acquisition is classified as a related party transaction under the AIM Rules for Companies since it involves a transaction with a related party of the Company, the Seller which is an associate of SIMEC, a substantial shareholder of the Company (the substantial shareholder being the Company's largest Shareholder (which, as at the date of this announcement, owns approximately 49.99 per cent. of the Company's issued Ordinary Share capital)). Accordingly, the Independent Directors of Atlantis (comprising John Neill (Non-Executive Chairman), Tim Cornelius (Chief Executive Officer), Andrew Dagley (Chief Financial Officer), John Woodley (Non-Executive Director) and Ian MacDonald (Non-Executive Director)), having consulted the Company's Nominated Adviser, Cantor Fitzgerald Europe, consider that the terms of the proposed Acquisition are fair and reasonable insofar as the Company's Shareholders are concerned.

The Acquisition, as a related party transaction of the Company, is not subject to the approval of the Company's Shareholders and, as at the date of this announcement, Shareholder approval in respect of the Acquisition is not considered to be required. If as a result of the Company deciding to carry out an equity fundraising (or otherwise) Shareholder approval is subsequently determined as being required for the Acquisition, the Company will make a further announcement through a Regulatory Information Service at the relevant time. The Company also intends to make further announcements in relation to the Acquisition through a Regulatory Information Service at appropriate times.

   2.         BACKGROUND TO AND REASONS FOR THE ACQUISITION 

In June 2018, Atlantis completed the acquisition of SUP from SIMEC which was intended to be the first of a number of acquisitions to transform the Company into a diversified energy company of scale. In connection with the acquisition of SUP, the Company entered into a Relationship Agreement with SIMEC which, amongst other things, provided Atlantis with investment rights through a right of first offer to a pipeline of renewable power assets owned or subsequently acquired by the GFG Alliance of which both the Seller and SIMEC are members.

The Acquisition of SIMEC GHR would be the first acquisition by Atlantis which illustrates the benefits and inherent value to the Company of its access to the GFG Alliance's pipeline of renewable power assets as was envisaged by the Relationship Agreement. Specifically in the case of the Acquisition of SIMEC GHR, the Company's access to that pipeline of assets has facilitated the opportunity to acquire an attractive portfolio of operational, cash generating, hydro-electric assets benefitting from long-term renewable energy support.

The portfolio consists of 11 operational projects encompassing 15 schemes with a combined capacity of c.20MW (attributable to both SIMEC GHR and third party interests), one project under construction of c.2MW and one project at the development stage of c.5.9MW. Of the total capacity, including the assets under construction and development, SIMEC GHR has an interest in c.24.9MW of capacity, with the balance being attributable to third party interests under joint ventures in relation to three projects. All projects receive fixed RPI-linked FiT payments for generation for a period of 20 years from commissioning and, in addition, receive revenues for the export of the generated electricity. Hydropower assets of this type typically achieve a premium to the average baseload wholesale electricity prices primarily because generation from hydropower assets is highest in cold and wet conditions when electricity demand is higher. The Company is proposing to acquire the portfolio through its wholly owned subsidiary, Atlantis Projects Pte. Ltd as the Buyer, by way of the purchase of the entire issued share capital of SIMEC GHR Acquisitions MidCo Limited from the Seller, which as stated above is a member of the GFG Alliance and an associate of the Company's largest Shareholder, SIMEC.

The Board of Atlantis believes that, if completed, the Acquisition of SIMEC GHR will be an important milestone in the development of the Company and provides it with the following key benefits:

-- Immediate operating earnings and cash flow: SIMEC GHR is expected to provide an immediate contribution to the Company of earnings and cash flow generated by a sizeable operational hydro-electric portfolio of assets;

-- Earnings accretion: on Completion, the Acquisition is expected to be immediately earnings accretive to the Company;

-- Visible minimum contracted cash flows: SIMEC GHR provides long-term visibility on earnings and cash flow generation, with both being underpinned by attractive RPI-linked FiT payments for 20 years from the commissioning of each project;

-- Upside from wholesale power prices: SIMEC GHR has historically benefited from upside linked to wholesale electricity prices whilst also being protected by FiT payments which ensure a minimum level of contracted earnings and cash flow;

-- Efficient project capital structure: SIMEC GHR is proposed to be acquired with long-term project financing of up to GBP95 million in place, comprising (subject to the agreement of documentation) two new term loans. GHR is also expected to benefit from a GBP24 million capex facility as well as a GBP2 million revolving credit facility, neither of which will be drawn down at Completion;

-- Experienced management: the Acquisition will allow the Company to supplement its existing management expertise with the addition of SIMEC GHR's highly regarded and experienced management team;

-- In-house expertise: the Acquisition will enhance the existing skill base within the Company. The Directors believe that SIMEC GHR is a best-in-class operator of hydro-electric plants in the United Kingdom which allows it to generate ancillary income through the provision of operations and maintenance services to 30 third party sites, and is also a leading developer of hydroelectric schemes in the United Kingdom with its in-house team having successfully consented 60 projects since its formation in 2007;

-- Platform for further growth: establishment of a leading hydro-electric platform of scale providing opportunities for the Company to pursue both organic growth and complementary bolt-on acquisitions; and

-- Value of access to the GFG Alliance's pipeline of renewable power assets and the support of SIMEC: the Acquisition illustrates the benefits and inherent value to the Company of its access to the GFG Alliance's pipeline of renewable power assets as was envisaged by the Relationship Agreement. It also demonstrates the commitment of SIMEC as the Company's largest Shareholder to supporting Atlantis in its aim of establishing itself as a diversified energy company of scale.

The Board of Atlantis believes that the Acquisition of SIMEC GHR is fully aligned with the Company's strategy. It accelerates the development of Atlantis and its aim to become a diversified energy company of scale and, in the process, provides a clear demonstration of the continued support that it receives from SIMEC as its largest Shareholder.

   3.         BACKGROUND INFORMATION ON SIMEC GHR 

SIMEC GHR is the largest independent hydro developer in the United Kingdom. It has developed and operates a portfolio of hydro-electric generation assets with a total capacity of c.27.9MW. SIMEC GHR also provides asset management and operations and maintenance services to its own projects, its joint venture projects and hydro-electric projects owned by third parties.

Overview of the portfolio

The portfolio consists of 11 operating projects encompassing 15 schemes with a combined capacity of c.20MW (attributable to both SIMEC GHR and third party interests), one asset under construction of c.2MW and one asset at the development stage (comprising three schemes) of c.5.9MW. Of the total capacity, including the assets under construction and development, SIMEC GHR has an interest in c.24.9MW of capacity, with the balance being attributable to third party interests under joint ventures in relation to three projects. In addition, SIMEC GHR has an option to acquire the remaining 50.25 per cent. stake in the 1.5MW Allt Garbh project that it does not already own with such option being exercisable from 2 February 2019 until 1 October 2019. Exercise of this option would increase the combined net capacity of the portfolio attributable to SIMEC GHR's interest in the portfolio to 25.7MW.

The P50 weighted average load factor of the SIMEC GHR operating assets is c.50 per cent., based on gross annual electricity generation of c.87GWh, which consists of c.10GWh of P50 generation attributable to third party interests under joint venture projects, and net annual electricity generation attributable to SIMEC GHR's interest in the portfolio of c.77GWh. Once the two projects under construction or development are also operational, and assuming the remaining 50.25 per cent. stake in the Allt Garbh joint venture project which SIMEC GHR does not already own is acquired, the P50 weighted average load factor for the SIMEC GHR operating assets reduces to c.47 per cent., based on gross annual electricity generation of c.114GWh, which consists of c.8GWh of P50 generation attributable to third party interests under joint venture projects, and net annual electricity generation attributable to SIMEC GHR's interest in the portfolio of c.106GWh.

An overview of the portfolio is set out in Table 1 below. The assets are all located in the Scottish Highlands, in the Perth and Kinross council regions.

Table 1

 
                                                                                                 FiT (2018 p/kWh) 
-------------  -------------  -----------  -----------  ----------  ----------  -----------  ------------------------- 
                                                          Capacity                  Average 
                                    Gross    SIMEC GHR      net to   Gross P50         load 
               Commissioning     capacity    ownership   SIMEC GHR  generation       factor   Generation        Export 
Asset                   year         (MW)          (%)        (MW)       (MWh)          (%)       tariff        tariff 
-------------  -------------  -----------  -----------  ----------  ----------  -----------  -----------  ------------ 
 
Operating 
Keltneyburn             2010       2.0(1)       100.0%         2.0    8,193(1)          47%        14.07          5.24 
=============  =============  ===========  ===========  ==========  ==========  ===========  ===========  ============ 
Roroyere                2011          0.8       100.0%         0.8       1,922          28%        14.07          5.24 
=============  =============  ===========  ===========  ==========  ==========  ===========  ===========  ============ 
Achnacarry              2015          0.7                      0.4       2,198          34%        14.07          5.24 
                                      0.5                      0.2       2,286          52%        18.00          5.24 
                                      1.2        49.7%         0.6       5,391          50%        14.07          5.24 
=============  =============  ===========  ===========  ==========  ==========  ===========  ===========  ============ 
Ceannacroc              2016          0.5                      0.5       1,881          43%        15.39          5.24 
                        2016          1.3       100.0%         1.3       4,350          40%        12.02          5.24 
=============  =============  ===========  ===========  ==========  ==========  ===========  ===========  ============ 
Allt 
 Mullardoch             2016          0.5       100.0%         0.5       1,743          40%        15.39          5.24 
=============  =============  ===========  ===========  ==========  ==========  ===========  ===========  ============ 
Allt Garbh              2017          1.5        49.8%         0.7       4,608          35%        10.69          5.24 
=============  =============  ===========  ===========  ==========  ==========  ===========  ===========  ============ 
Loch Eilde 
 Mor #1                 2017          2.0       100.0%         2.0      17,222          98%        10.69          5.24 
Loch Eilde 
 Mor #2                 2018          3.0       100.0%         3.0      16,591          63%            -             - 
=============  =============  ===========  ===========  ==========  ==========  ===========  ===========  ============ 
Shenval                 2017          0.5       100.0%         0.5       1,963          45%        13.68          5.24 
=============  =============  ===========  ===========  ==========  ==========  ===========  ===========  ============ 
Gleann Nam 
 Fiadh                  2017          2.0       100.0%         2.0       7,474          43%        10.69          5.24 
=============  =============  ===========  ===========  ==========  ==========  ===========  ===========  ============ 
Coulags                 2017          1.5       100.0%         1.5       4,969          39%        10.69          5.24 
=============  =============  ===========  ===========  ==========  ==========  ===========  ===========  ============ 
Coiltie                 2017          2.0        50.0%         1.0       6,009          34%        10.69          5.24 
Total 
 operating(2)                        20.0                     17.0      86,800          50% 
 
Under 
construction 
Nathrach               2019e          2.0       100.0%         2.0       6,929          40%         6.48          5.24 
 
In 
development 
Glen Kinglass          2020e          5.9       100.0%         5.9      20,160          39%            -          5.24 
 
Total                                27.9                     24.9     113,889          47% 
 
 

(1) Includes impact of remedial work to allow scheme to operate at 2MW (currently 1.8MW) and with 300 MWh

(2) Totals may not equal the sum of the above values due to rounding

Portfolio development

Two of the SIMEC GHR assets (Roroyere and Keltneyburn) were purchased by SIMEC GHR once operational. Development and construction of all of the other assets was managed by SIMEC GHR's in-house development and construction management teams. The development team at SIMEC GHR has the in-house capability to take a project from initial feasibility through environmental appraisal, securing licences and financial modelling to final design, working closely with local communities and other stakeholders throughout the process. SIMEC GHR typically enters into fixed price contracts with third-party civil engineering contractors to build each project. SIMEC GHR has long-term and established relationships with a number of leading civil engineering and electrical contractors. The portfolio employs technology from four established turbine manufacturers: Kössler, Gilkes, Newmills and Canyon.

Each project comprises a water intake system, a pressure pipeline, a powerhouse with a turbine, generator and control equipment, a tailrace and an outfall pipe (to return water from the turbine to the watercourse), electrical and metering systems, access tracks and monitoring and communication systems.

The Company intends to continue to develop and construct the Nathrach and Glen Kinglass assets which are expected to be commissioned in Q2 2019 and Q4 2020 respectively, and to be connected to the grid for commercial operations in Q3 2019 and Q4 2021 respectively.

Offtake arrangements

The 11 operational SIMEC GHR projects are made up of 15 schemes, of which 14 are accredited under the UK Government's FiT subsidy regime which provides 20 years of subsidy support for each project and an RPI linked minimum power price. Under the FiT regime, accredited assets receive an individual, RPI-linked generation tariff for all electricity produced. The projects are also eligible to receive a 5.24p/kWh (real, 2018) RPI-linked export tariff for all electricity exported to the grid. The projects can, on an annual basis, elect either to receive the export tariff or to sell their electricity independently via a power purchase agreement and receive the prevailing wholesale power price, if higher. This means that the export tariff effectively provides a guaranteed minimum "floor" price to each project. All operating projects are currently selling power to the grid under fixed-price power purchase agreements. The Nathrach scheme, which is currently in construction, is pre-accredited for the FiT and the same pre-accreditation will be sought for the Glen Kinglass scheme once the necessary conditions, including award of planning permission, have been met.

The portfolio currently consists of 11 operational projects and has limited exposure to any single asset or location. Mainly due to the historical correlation between electricity generation across the portfolio and periods of high electricity demand in the United Kingdom (e.g. during periods of wetter and colder weather), the portfolio has in the past sold power at a premium of c.15 per cent. to the UK baseload power price.

Operations and maintenance capabilities

SIMEC GHR has an established operational team which undertakes all operations and maintenance activities across the portfolio, including scheduled maintenance, site maintenance, responding to faults, corrective maintenance, monitoring and reporting. The scope of the services is generally common to all schemes and includes routine inspections of various components, removing debris from the intake, greasing and maintenance works, abstraction monitoring and environmental reporting.

SIMEC GHR also provides asset management and operations and maintenance services to third-party projects. SIMEC GHR currently has contracts with 30 third-party sites representing 21MW of capacity. These contracts contributed revenue of c.GBP0.8 million in 2017. Given the potential for the operations and maintenance business to realise operating efficiencies by servicing more densely located projects, SIMEC GHR management sees the addition of further contracts as an attractive growth opportunity for SIMEC GHR. SIMEC GHR management is in active discussions with third-parties and is currently targeting the addition of a further 15 to 20 schemes over the medium term.

Further information about SIMEC GHR

SIMEC GHR is a Scottish company with its head office in Perth and an operations and management office in Dingwall. It has been developing hydro-electric schemes since 2007, from initial concept through to consent, construction, commissioning and generation. SIMEC GHR employs 21 people who provide in-house capabilities across planning, development, civil, mechanical and electrical engineering, as well as operations and maintenance. Since 2007, SIMEC GHR has consented 60 projects with total capacity of c.37MW.

   4.         FINANCIAL INFORMATION ON SIMEC GHR 

Set out below is a summary of the consolidated financial results for the SIMEC GHR group including the nine months to 30 June 2018 and the two preceding financial years ended 30 September 2017 and 30 September 2016, respectively. The accounts for SIMEC GHR are prepared under UK GAAP. As SIMEC GHR has not historically prepared consolidated accounts, the 2017 and 2016 figures below are provided for the Seller, whose only investment is in SIMEC GHR.

 
                               9 months ended    Year ended 30 September 
                                      30 June 
                                         2018          2017          2016 
                                    SIMEC GHR        Seller        Seller 
                                  (unaudited)   (unaudited)   (unaudited) 
                                      GBP'000       GBP'000       GBP'000 
 Revenue                                6,609         5,744         4,821 
 Cost of sales                        (2,985)       (2,338)       (1,961) 
 
 Gross profit                           3,623         3,406         2,860 
                              ---------------  ------------  ------------ 
 
 Administrative expenses                (958)       (2,551)       (4,478) 
 Exceptional administrative 
  expenses                              (707)         (366)         (357) 
 Other operating income                    56            29            14 
 
 Operating profit/(loss)                2,013           518       (1,960) 
 
 Share of joint venture 
  profits                                  19          (96)         (316) 
 Finance costs                        (3,524)       (6,225)       (6,764) 
 Taxation                               (153)         (152)       (1,770) 
 
 Net profit/(loss) for 
  the period                          (1,645)       (5,955)      (10,811) 
                              ===============  ============  ============ 
 
 Total assets                          51,615        53,752        42,683 
                              ---------------  ------------  ------------ 
 
 Total liabilities                     80,760        77,604        53,244 
                              ---------------  ------------  ------------ 
 
   5.         PRINCIPAL TERMS OF THE ACQUISITION AND DOCUMENTATION 

Atlantis (through its wholly owned subsidiary, Atlantis Projects Pte. Ltd as the Buyer) and SIMEC GHR Acquisitions TopCo Limited as the Seller have signed a conditional Sale and Purchase Agreement to effect the Acquisition of SIMEC GHR. Details of the Sale and Purchase Agreement are set out below.

Pursuant to the Sale and Purchase Agreement, the Buyer has conditionally agreed to acquire SIMEC GHR by way of the purchase of the entire issued share capital of SIMEC GHR Acquisitions MidCo Limited from the Seller, a member of the GFG Alliance and an associate of the Company's largest Shareholder, SIMEC.

The agreed enterprise value attributed to SIMEC GHR is GBP124.7 million which reflects that SIMEC GHR will be acquired with up to GBP95 million of long-term project financing in place on terms satisfactory to Atlantis, comprising (subject to the agreement of documentation) two new term loans. GHR is also expected to benefit from a GBP24 million capex facility as well as a GBP2 million revolving credit facility, neither of which will be drawn down at Completion. Taking into account the long-term project financing of up to GBP95 million, it is expected that the Buyer will pay GBP29.7 million to the Seller for SIMEC GHR comprising: (i) a cash amount of GBP14.85 million for the shares of SIMEC GHR and the partial repayment of existing SIMEC GHR debt; and (ii) in the event that such repayment is funded by an equity fundraising, Atlantis will issue such number of Ordinary Shares so that SIMEC will (at the Seller's direction), following Completion of the Acquisition, continue to own approximately 49.99 per cent. of the Company's issued Ordinary Share capital (such equity value not to exceed GBP14.85 million), thus resulting in an agreed enterprise value of GBP124.7 million. The Sale and Purchase Agreement also includes certain adjustment mechanisms in respect of working capital and indebtedness.

Pending Completion, the Seller has given a number of undertakings to the Buyer to the effect that the business of SIMEC GHR will be run in the ordinary course. The Seller has also given the Buyer a number of warranties and indemnities that are broadly customary for a transaction such as the Acquisition, subject to certain customary limitations of liability. As a condition precedent (and as also further referred to below), each of the Buyer and the Seller have further agreed to negotiate with each other in good faith with a view to settling the terms of any transaction documentation required for the Acquisition.

The Sale and Purchase Agreement is conditional, inter alia, upon the fulfilment of a number of conditions precedent including, but not limited to, the following matters:

   --      completion of due diligence satisfactory to Atlantis in respect of SIMEC GHR; 

-- the agreement and execution of a number of transaction documents in a form satisfactory to the parties;

-- a Buyer funding condition and, if the Company decides to carry out an equity fundraising, the completion of such fundraising and admission of any new Ordinary Shares of the Company to trading on AIM; and

   --      SIMEC GHR project financing of up to GBP95 million, comprising (subject to the agreement of documentation) two new term loans, in addition to a GBP24 million capex facility as well as a GBP2 million revolving credit facility, being in place and each of which being in a form satisfactory to Atlantis. 

Completion shall take place on the date on which the last condition precedent is fulfilled.

The Sale and Purchase Agreement contains certain termination rights for each of the Parties.

SIMEC Group is also a party to the Sale and Purchase Agreement for the purpose of guaranteeing the Seller's obligations under the agreement and certain other transaction documents.

Definitions and glossary

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

 
 "Acquisition"                       the proposed acquisition by the Company, 
                                      through its wholly owned subsidiary, 
                                      Atlantis Projects Pte. Ltd as the 
                                      Buyer, of the entire issued share 
                                      capital of SIMEC GHR from the Seller 
                                      on the terms of the Sale and Purchase 
                                      Agreement 
 "AIM"                               AIM, a market of the London Stock 
                                      Exchange 
 "AIM Rules"                         the AIM Rules for Companies and the 
                                      AIM Rules for Nominated Advisers, 
                                      as applicable 
 "AIM Rules for Companies"           the rules for AIM companies published 
                                      by the London Stock Exchange, as amended 
                                      or re-issued from time to time 
 "AIM Rules for Nominated            the rules for nominated advisers to 
  Advisers"                           AIM companies published by the London 
                                      Stock Exchange, as amended or re-issued 
                                      from time to time 
 "Board"                             the board of directors of the Company 
                                      as constituted from time to time 
 "Buyer"                             Atlantis Projects Pte. Ltd, a company 
                                      incorporated in the Republic of Singapore 
                                      with registration number 200608802H 
 "Cantor Fitzgerald Europe"          Cantor Fitzgerald Europe, acting as 
                                      nominated adviser and broker to the 
                                      Company 
 "Company" or "Atlantis"             SIMEC Atlantis Energy Limited, a company 
  or "SIMEC Atlantis Energy"          incorporated in the Republic of Singapore 
                                      with registration number 200517551R 
 "Completion"                        completion of the Acquisition on the 
                                      terms of the Sale and Purchase Agreement 
 "Directors"                         the current directors of the Company 
                                      including the Independent Directors 
                                      and the SIMEC Nominated Directors 
 "Evercore"                          Evercore Partners International LLP, 
                                      acting as financial adviser to the 
                                      Company 
 "Financial Conduct Authority"       the Financial Conduct Authority of 
  or "FCA"                            the United Kingdom 
 "FSMA"                              the UK Financial Services and Markets 
                                      Act 2000 (as amended) including any 
                                      regulations made pursuant thereto 
 "GFG Alliance"                      the alliance between Parduman Gupta 
                                      and Sanjeev Gupta and each of their 
                                      associated companies 
 "SIMEC Green Highland Renewables"   SIMEC GHR Acquisitions MidCo Limited, 
  or "SIMEC GHR"                      a company incorporated in the United 
                                      Kingdom with company number 09454127 
 "Group"                             the Company, its subsidiary undertakings 
                                      from time to time and all of them 
                                      and each of them as the context admits 
 "Independent Directors"             the current directors of the Company 
                                      other than the SIMEC Nominated Directors, 
                                      such Independent Directors of the 
                                      Company comprising John Neill (Non-Executive 
                                      Chairman), Tim Cornelius (Chief Executive 
                                      Officer), Andrew Dagley (Chief Financial 
                                      Officer), John Woodley (Non-Executive 
                                      Director) and Ian MacDonald (Non-Executive 
                                      Director) 
 "London Stock Exchange"             London Stock Exchange plc 
 "Ordinary Shares"                   the ordinary shares of no par value 
                                      in the capital of the Company 
 "Regulatory Information             a regulatory information service authorised 
  Service"                            by the London Stock Exchange to receive, 
                                      process and disseminate information 
                                      in respect of AIM quoted companies 
 "Relationship Agreement"            the relationship agreement between 
                                      the Company and SIMEC dated 21 May 
                                      2018 in respect of the Company 
 "Sale and Purchase Agreement"       the conditional agreement between 
                                      the Buyer, the Seller and SIMEC Group 
                                      dated 23 November 2018 in relation 
                                      to the Acquisition 
 "Seller"                            SIMEC GHR Acquisitions TopCo Limited, 
                                      a company incorporated in the United 
                                      Kingdom with company number 09454126 
 "Shareholders"                      holders of Ordinary Shares from time 
                                      to time 
 "SIMEC"                             SIMEC UK Energy Holdings Limited, 
                                      a company incorporated in the British 
                                      Virgin Islands with company number 
                                      1801240 
 "SIMEC Group"                       SIMEC Group Limited, a company incorporated 
                                      in Hong Kong with company number 1651874 
 "SIMEC Nominated Directors"         the current directors of the Company 
                                      nominated by SIMEC, such SIMEC Nominated 
                                      Directors comprising Mark Elborne 
                                      (Non-Executive Director and SIMEC 
                                      nominee) and Jay Hambro (Non-Executive 
                                      Director and SIMEC nominee) 
 "SUP"                               SIMEC Uskmouth Power Limited, a company 
                                      incorporated in the United Kingdom 
                                      with company number 05104786 
 "United Kingdom" or "UK"            the United Kingdom of Great Britain 
                                      and Northern Ireland 
 "United States", "United            the United States of America, its 
  States of America" or "US"          territories and possessions, any states 
                                      of the United States of America and 
                                      the District of Columbia and all other 
                                      areas subject to its jurisdiction 
 "US Securities Act"                 the United States Securities Acts 
                                      of 1933, as amended, and the rules 
                                      and regulations promulgated thereunder 
 

The following technical terms apply throughout this announcement unless the context requires otherwise:

 
 "COD"   commercial operations date 
 "FiT"   feed in tariff 
 "GWh"   gigawatt hour 
 "MW"    megawatts 
 "MWh"   megawatt hour 
 "P50"   50 per cent. probability of output 
          exceeding estimate 
 "RPI"   retail price index 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

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(END) Dow Jones Newswires

November 23, 2018 11:36 ET (16:36 GMT)