REG - Mast Energy Dvlpmts. - MED Acquires two Projects and Secures Funding

LMS CapitalAnnouncement

05/10/2022 09:33

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RNS Number : 7891B  Mast Energy Developments PLC  05 October 2022

Mast Energy Developments PLC

(Incorporated in England and Wales)

(Registration Number: 12886458)

Share code on the LSE: MAST

ISIN: GB00BMBSCV12

("MED" or "the Company")

 

5 October 2022

Mast Energy Developments Plc ("MED" or "the Company")

 

MED Completes Acquisition of two further Reserve Power Projects and secures
associated Funding

 

Mast Energy Developments PLC, the UK-based multi-asset owner and operator in
the rapidly growing Reserve Power market, announces today that it has
exchanged final documentation and completed ("the Completion") the definitive
Sale and Purchase Agreements ("SPA's") to acquire the entire share capital of
ARL 018 Limited and ADV 001 Limited (the "SPV's"), two UK companies whose
principal assets are the Stather Road ("Stather") and Hindlip Lane ("Hindlip")
reserve power projects respectively (the "Projects"). The SPV's were acquired
from DKE Flexible Energy Limited (the "Seller"), a wholly owned subsidiary of
Dukemount Capital PLC (LON: DKE).

Highlights

·    The Projects each comprise a shovel-ready reserve power generation
plant with:

o  Current grid connection capacity of 11 kVA 2.4 MW at Stather and 11kVA 7.5
MW at Hindlip respectively;

o  Low emissions and carbon tax exempt;

o  Long-term leasehold properties;

o  a Grid Connection Offer;

o  a Gas Connection Offer; and

o  Planning and permitting already in-place.

·    The total purchase consideration for the acquisition of the SPV's and
its associated assets and property rights under the SPA's amounts
to £350,000 and will be funded by way of a loan arrangement with very
competitive commercial terms (see details below), inclusive of a cash payment
to the Seller in settlement of an outstanding shareholder loan account
amounting to £10,693.60.

·    Encora Energy Limited, MED's Owner's Engineer conducted a
comprehensive due diligence investigation on the Projects on behalf of the
Company and reported an overall positive finding.

·    Comprehensive economic and financial modelling performed by MED's
leading energy markets data consultant, EnAppSys, with a robust outcome (see
further details below).

·    Proven and significant market demand with MED's preferred investment
grade power purchase off-taker, Statkraft UK already secured, inclusive of
the implementation and execution of MED's desired trading and optimization
strategy.

·    The addition of the Projects will significantly boost MED's Reserve
Power portfolio by 54% taking total generation output capacity to 28.3 MW.

Funding Arrangement

The acquisition of the Projects is being funded by way of a loan arrangement
led by an institutional investor (the "Investor"), with the following
competitive commercial terms:

·    Fixed term of up to three years;

·    Interest free, with only the principal drawn repayable;

·    No warrants;

·    Principal loan advance of £350,000 on signing the agreement and used
by MED to fund the purchase of the SPVs;

·    The Investor may elect to convert some or all of loan amounts
outstanding to ordinary shares in the Company at a price per share equal to
the average of the five daily Volume Weighted Average Prices ("VWAPs")
preceding the drawdown date of the loan advance (the "Reference Price"); and

·    Additionally, the Investor may not undertake any conversion within 3
months from the First Tranche drawdown date and may not undertake any
Conversion during the first 12 months from the loan advance until the MED
share price has closed at 200% (i.e. 2x) of the Reference Price or greater.

Rationale for Projects' Acquisition

The acquisition of Stather and Hindlip marks another important step in MED's
ability to deliver on its strategy to build a 300 MW portfolio of Reserve
Power projects. The transaction also presented a value opportunity to add to
its existing 9 MW operating Pyebridge operation and its two development
projects Bordesley and Rochdale (c. 5 MW each), significantly boosting MED's
Reserve Power portfolio by 54% taking total generation output capacity to 28.3
MW. The signing of the SPA followed a detailed due diligence by the Company
and its technical advisors, Encora Energy Ltd, on a portfolio of projects
presented to it.

Based on independent financial modelling, prepared by MED's reputable and
appropriately accredited consulting firm, EnAppSys the projected valuation
metrics for the Projects are summarised as follows:

·    Unlevered Internal Rate of Return ("IRR") base case of c. 15%;

·    Projected base case average annual revenue of c. £2.7 million for
Hindlip and c. £928k for Stather;

·    Operating Profit Margin of 30%; and

·    Capital development costs in the region of £1.6 million for Stather
Road and £4.5 million for Hindlip Lane.

The Company is confident from the financial modelling to date that with
carefully negotiated off-take agreements and optimum use of capacity market
contracts, for which both projects can qualify, commercial returns can achieve
the upper end or exceed the financial metrics indicated above. It should
however be noted that while every care was taken in the Company's financial
modelling, figures quoted are preliminary estimates and may change
commensurate with risks normally associated with projects of this nature.

The Company will now expedite development of the sites which are currently at
shovel-ready status, with construction anticipated to commence before the end
of this year and commissioning during 2023.

Pieter Krügel, MED CEO, commented: "We are delighted with the latest
acquisitions that bolster MED's growing portfolio of projects and to keep
delivering on its main strategy to build a portfolio of 300 MW of Reserve
Power projects. The addition of these latest sites to the MED stable will
significantly increase its generation output capability to close to c. 30 MW.
The acquisitions follow a robust and rigorous assessment and due diligence
process to ensure that each project adheres to MED's strict technical and
investment criteria, to support the best possible outcome for shareholders.

With increasing supply/demand volatility and the current unprecedented energy
crisis globally and in the UK, the Reserve Power market is the fastest growing
energy sector in the UK and accordingly there is significant demand for
flexible power projects of this kind and at increasingly attractive economics.
We are continually seeking and assessing possible next acquisitions with a
current pipeline totalling a further c. 100 MW currently under assessment.

We look forward to updating the market with further developments in due
course, as we continue to rapidly gain momentum in executing the MED business
strategy."

ENDS

This announcement contains inside information for the purposes of the UK
version of the Market Abuse Regulation (EU No. 596/2014) as it forms part of
United Kingdom domestic law by virtue of the European Union (Withdrawal) Act
2018 ("UK MAR"). Upon the publication of this announcement, this inside
information is now considered to be in the public domain.

 

For further information please visit www.med.energy (http://www.med.energy) or
contact:

  Pieter Krügel                          info@med.energy                                                       Mast Energy Developments Plc  CEO
  Jonathan Critchley & Keith Swann       +44 (0)20 3869 6080                                                   Clear Capital Markets         Joint Broker
  Zainab Slemang van Rijmenant           zainab@lifacommunications.com (mailto:zainab@lifacommunications.com)  Lifa Communications           Investor and Media Relations Advisor

 

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