REG - Velocys PLC - Proposed Placing, Retail Offer and Open Offer
18/05/2023 17:45
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RNS Number : 9516Z Velocys PLC 18 May 2023
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18 May 2023
Velocys plc
("Velocys", the "Company" or the "Group")
Proposed Placing, Retail Offer and Open Offer
Proposed conditional issue of Convertible Loan Notes led by strategic
investor, Carbon Direct Capital
Placing, Retail Offer and Open Offer to provide funds through expected key
value inflection points for the Company in relation to the Altalto Project and
Bayou Fuels Project
Additional capital raise to support significant scale-up and ambition to
become a leading provider of Sustainable Aviation Fuel solutions
Velocys plc (AIM: VLS) (the "Company"), the sustainable fuels technology
company, announces its intention to raise approximately £6 million in
aggregate before expenses by way of a conditional Placing (the "Placing") at
the price of 2.5 pence per Placing Share (the "Issue Price") together with a
retail offer to existing retail Shareholders on the BookBuild Platform at the
Issue Price (the "Retail Offer"). The Company is also announcing an open
offer of new Ordinary Shares at the Issue Price (the "Open Offer") and a
proposed conditional issue of convertible loan notes ("Convertible Loan
Notes") to Carbon Direct Capital, and potential further issuances of
Convertible Loan Notes and/or new Ordinary Shares to investors other than
Carbon Direct Capital (together with the Placing and Retail Offer the
"Fundraise").
The Placing will be effected through the issue of new Ordinary Shares (the
"Placing Shares") to new and existing investors.
The Retail Offer will be for up to 20,000,000 new Ordinary Shares at the Issue
Price on the BookBuild Platform (the "Retail Offer Shares") to raise up to
approximately £0.5 million (before expenses) to provide existing retail
Shareholders in the United Kingdom with an opportunity to participate in the
Fundraise. A separate announcement will be made in due course regarding the
Retail Offer and its terms. For the avoidance of doubt, the Retail Offer is
not part of the Placing.
In order to provide Shareholders who have not taken part in the Placing or the
Retail Offer with an opportunity to participate in the proposed Fundraise, the
Company is also offering Eligible Shareholders the opportunity to subscribe,
at the Issue Price, for an aggregate of up to 77,648,390 new Ordinary Shares
(the "Open Offer Shares"), to raise up to approximately £2 million via the
Open Offer.
Strategic investor, Carbon Direct Capital, has conditionally agreed to
subscribe for a minimum of $15 million (approximately £12 million) of the
Convertible Loan Notes subject to, inter alia, the Company raising or having
received legally binding commitments in respect of the Minimum Amount. Further
details on the terms of the Convertible Loan Notes are set out in paragraph 6
of Appendix I.
Carbon Direct Capital, which is based in New York, US, is a growth investment
firm focused on carbon management technologies. Carbon Direct Capital believes
that selective investing with a scientific approach maximises both climate
benefits and financial returns. Carbon Direct Capital has partnered with a
number of transformative carbon tech companies across two growth equity funds
and is the lead investor in the proposed conditional issue of the Convertible
Loan Notes. Carbon Direct Capital's subscription of a minimum of $15 million
of the Convertible Loan Notes will become unconditional provided that, among
other things, the Minimum Amount Condition is satisfied, by the CLN Long Stop
Date.
The Convertible Loan Notes are unsecured and have been structured to
incentivise a US Listing of the Company, in addition to its existing admission
to trading on AIM, within 21 months from the date of completion of the
issuance of Convertible Loan Notes to Carbon Direct Capital ("US Listing"). A
number of discussions are underway with additional potential Convertible Loan
Note investors.
Funds raised through the Placing, the Retail Offer and the Open Offer will be
used primarily to provide growth capital in preparation for significant
scale-up and working capital through expected key valuation inflection points
for the Altalto Project and the Bayou Fuels Project with additional funds
intended to be raised through the issue of the Convertible Loan Notes to
Carbon Direct Capital and potential further issuances of Convertible Loan
Notes and/or New Ordinary Shares to drive the Company's technology delivery
capability and to provide balance sheet strength whilst continuing to build a
revenue generating pipeline.
Placing, Retail Offer and Open Offer Highlights
· The Placing will be conducted by way of an accelerated bookbuild
process at the Issue Price (the "Bookbuild"), which will be launched
immediately following this announcement in accordance with the terms and
conditions set out in Appendix II.
· The Company is also launching a Retail Offer to eligible existing
retail Shareholders at the Issue Price and a separate announcement regarding
the Retail Offer will be made shortly.
· Subject to the successful closing of the Bookbuild, the Company
is also making an Open Offer, for up to 77,648,390 Open Offer Shares, to raise
up to approximately £2 million at the Issue Price, on the basis of 1 Open
Offer Share for every 18 Existing Ordinary Shares held by Eligible
Shareholders at the Record Date. Any entitlements to Open Offer Shares not
subscribed for by Eligible Shareholders will be available to Eligible
Shareholders under an excess application facility for the Open Offer.
· It is expected that certain Directors and senior management in
the Company will subscribe for New Ordinary Shares through the Placing for an
aggregate amount of approximately £75,000. Further details will be announced
as appropriate in due course.
Convertible Loan Notes Highlights
· Proposed conditional issue of Convertible Loan Notes of which, to
date, $15 million (approximately £12 million) have been conditionally
subscribed for by Carbon Direct Capital.
· Ongoing discussions with potential strategic co-investors in the
Convertible Loan Notes.
· Issue of the Convertible Loan Notes to Carbon Direct Capital is
conditional on, amongst other things, the Company having raised or having
received legally binding commitments in respect of the Minimum Amount from the
Fundraise.
· The Convertible Loan Notes have been structured to incentivise a
US Listing of the Company, in addition to its existing admission to trading on
AIM, within 21 months from completion of the issuance of Convertible Loan
Notes to Carbon Direct Capital.
· The Convertible Loan Notes convert into new Ordinary Shares upon
a US Listing, or earlier as may be elected by the CLN Investors, at a
conversion price equivalent to the Issue Price, which may be adjusted
downwards in the event that the Company undertakes a further equity raise at a
lower subscription price per share prior to Conversion.
· The Convertible Loan Notes are unsecured and have zero coupon for
the first 21 months from issue. If the Company achieves a US Listing within
this 21-month period or the Convertible Loan Notes are otherwise redeemed or
converted by such date, the Convertible Loan Notes will not bear interest. If
not, an annualised interest rate of 12.5 per cent. will apply from the date of
issuance of the Convertible Loan Notes which shall accrue in varying monthly
coupons.
Use of Proceeds
· The net proceeds of the Placing, the Retail Offer and the Open
Offer will be used primarily for:
o organisation costs including project delivery and business development;
o engineering scale-up with investment in engineering resource;
o initial commissioning of the Ohio manufacturing facility; and
o working capital requirements to invest in achieving supply chain
resilience and to cover timeline of grant receipts.
· In the event of the Minimum Amount being raised, the net proceeds
of the issuance of the Convertible Loan Notes to Carbon Direct Capital and the
issuance of further Convertible Loan Notes and/or Ordinary Shares to investors
other than Carbon Direct Capital will be used primarily for:
o scaling-up of the organisation and corporate costs including increasing
labour from approximately 40 full time employees to approximately 100 full
time employees gradually over the next 12 to 18 months in line with client and
project demand in order to accelerate the capability of the Company to deliver
its technology to its clients at scale;
o completion of capital investment in the Ohio reactor core manufacturing
facility including production start-up and catalysis upgrades;
o funding for US Listing costs or interest payments due on the Convertible
Loan Notes in the event no US Listing occurs during the 21-month period from
issue of the Convertible Loan Notes;
o supporting performance guarantees for the Company's proprietary
Fischer-Tropsch technology to be delivered to client projects; and
o working capital requirements, build-up of reactor inventory at the Ohio
manufacturing facility and to manage timing of payments and grant receipts.
Company Highlights
· Velocys is an international sustainable fuels technology company
with patented technology enabling scalable production of drop-in, net zero,
sustainable aviation fuel ("SAF").
· It delivers a competitive and commercially demonstrated
Fischer-Tropsch Synthesis solution using solid feedstocks or hydrogen from
renewable power and CO₂.
· Velocys' conversion pathway enables negative carbon intensity
fuels via CO(2) sequestration of between 30 per cent. and 40 per cent. of the
feedstock carbon used.
· Capital light, scalable licensing model with revenues from
technology licencing, engineering services, and Company reactor and catalyst
supply over the lifetime of refineries. The Company generates both upfront and
recurring fees.
· High growth market driven by decarbonisation mandates and
incentives with increasing policy support (UK, US, Europe, Canada).
· Accelerating its commercialisation strategy by advancing two
full-scale biorefinery Reference Projects (Altalto Project in the UK and the
Bayou Fuels Project in the US) to generate significant revenue for the Company
and accelerate technology adoption. The Reference Projects provide a blueprint
for future customers.
· Appointment of Bechtel, a leading worldwide provider of
engineering, construction and project management services, as SAF project
delivery partner to provide front end project engineering and other technical
services to Velocys' SAF project portfolio.
· Significant progress of the Bayou Fuels Project:
o highly favourable US climate legislation announced in the second half of
2022;
o appointment of a leading global investment bank to lead funding for
project development capital which is expected to close during the last quarter
of 2023;
o project economics significantly enhanced following improved carbon
intensity score through the provision of biomass boiler renewable power
solution with carbon capture integration; and
o 100 per cent. of expected project SAF output is subject to an offtake
agreement or memorandum of understanding for offtake.
· Significant progress of the Altalto Project:
o £27 million grant from the UK Department for Transport (DfT) awarded in
December 2022 under the Advanced Fuels Fund and consequential commencement of
Front End Engineering Design; and
o appointment of a leading global investment bank to lead the matched
funding capital raise required for the DfT grant. The project fundraise is
expected to close during the last quarter of 2023.
· The business development pipeline continues to grow, with a
number of feasibility studies underway with both biorefinery and advanced
power-to-liquid developers, as well as a significant increase in enquiries for
potential projects. The Company expects to move forward with a number of new
clients over the course of 2023.
· Engineering services contract with Toyo in Japan continues.
· Construction of the Company's new reactor core manufacturing
facility in Columbus, Ohio has been completed, with commissioning commencing
in the second half of 2023. This will significantly increase the Company's
capacity to deliver Fischer-Tropsch synthesis technology solutions to its
clients.
Henrik Wareborn, Chief Executive of Velocys, said:
"There is global recognition of the urgent need to replace fossil derived
fuels with sustainable equivalents in order to tackle climate change. Velocys
provides a unique technological pathway to the economic production of drop-in
sustainable aviation fuel, which can decarbonise the aviation industry without
the need for any aircraft engine modification. Put simply: we believe that we
have a ready-to-go solution to the challenge of making aviation
environmentally sustainable. The commitment from Carbon Direct Capital, which
has partnered with a number of transformative carbon tech companies, to
conditionally subscribe for a minimum of $15 million of convertible loan notes
provides further demonstration of the increasing global awareness and expert
validation of Velocys' proprietary technology.
"We have a highly scalable business model, partnerships with some of the
world's leading technology companies and airlines, and a growing business
development pipeline. We are well-positioned now to move on to the next stage
of our growth, and we are excited by what the future has in store.
"Our ambition is to become a leading provider of innovative SAF solutions to
enable the decarbonisation of the aviation industry."
Further details relating to the Fundraise
The Issue Price of 2.5 pence per New Ordinary Share represents a discount of
26.9 per cent. to the closing mid-market price of 3.42 pence per Existing
Ordinary Share as at 17 May 2023.
The Placing Shares are not being made available to the public. It is envisaged
that the Bookbuild will be closed no later than 11.00 a.m. GMT tomorrow, 19
May 2023 but may be closed earlier, or later, at the discretion of the Joint
Bookrunners. Details of the number of Placing Shares will be announced as soon
as practicable after the closing of the Bookbuild (on 19 May 2023). The
Placing, the Retail Offer and the Open Offer are not underwritten.
The Fundraise is conditional on, inter alia, the passing of the Resolutions by
the Shareholders at the General Meeting to be held at 10.30 a.m. on 8 June
2023 at Magdalen Centre, Robert Robinson Avenue, The Oxford Science Park,
Oxford OX4 4GA. The Placing, the Retail Offer and the Open Offer are not
conditional on the issue of the Convertible Loan Notes or on the Minimum
Amount being raised. The Retail Offer and the Open Offer are conditional upon
completion of the Placing. The Placing is not conditional upon any of the
Retail Offer, the Open Offer, the issue of the Convertible Loan Notes or any
future fundraise to raise the Minimum Amount. Subscription by Carbon Direct
Capital for Convertible Loan Notes is conditional on the Company having raised
or having received legally binding commitments in respect of the Minimum
Amount from the Fundraise. Should Shareholder approval for the Resolutions
relating to the Placing, the Retail Offer and the Open Offer not be obtained
at the General Meeting, none of the Placing, the Retail Offer or the Open
Offer will proceed. Should Shareholder approval for all Resolutions not be
obtained at the General Meeting, the proposed conditional issue of Convertible
Loan Notes to Carbon Direct Capital and/or other investors will not proceed.
The Placing, Retail Offer and Open Offer are not conditional on the passing of
the Resolutions relating to the Convertible Loan Notes.
Set out below in Appendix I is an adapted extract from the Circular that is
proposed to be sent to Shareholders after the closure of the Bookbuild and
which provides further information on the Company, the Placing, the Retail
Offer, the Open Offer and the proposed conditional issuance of the Convertible
Loan Notes. The final Circular, containing the terms and conditions of the
Open Offer and Notice of General Meeting will be sent to Shareholders and
published on the Company's website on or around 22 May 2023.
Terms and conditions of the Bookbuild are set out in Appendix II.
The capitalised terms not otherwise defined in the text of this announcement
are defined in Appendix III and the expected timetable of the principal events
is set out in Appendix IV.
This summary should be read in conjunction with the full text of the following
announcement.
Enquiries:
Velocys +44 1865 800821
Henrik Wareborn, CEO
Philip Sanderson, CFO
Panmure Gordon (UK) Limited (Nomad, Joint Bookrunner & Joint Broker) +44 20 7886 2500
Hugh Rich (Corporate Broking)
Emma Earl (Corporate Finance)
John Prior (Corporate Finance)
Mark Rogers (Corporate Finance)
Shore Capital Stockbrokers Limited (Joint Bookrunner & Joint Broker) +44 20 7408 4090
Henry Willcocks (Corporate Broking)
Toby Gibbs (Corporate Advisory)
James Thomas (Corporate Advisory)
Angus Murphy (Corporate Advisory)
Radnor Capital (Investor Relations) +44 20 3897 1830
Joshua Cryer
Iain Daly
Buchanan (Financial PR) +44 7872 604 453
Helen Tarbet +44 7979 497 324
Simon Compton velocys@buchanan.uk.com
Notes to Editors
About Velocys
Velocys is an AIM quoted, international sustainable fuels technology company,
providing customers with a technology solution to enable the production of
negative Carbon Intensity synthetic, drop-in fuels from a variety of waste
materials. Synthetic fuel is the only commercially available, permanent
alternative to fossil aviation fuels. The Velocys technology is IP-protected
in all major jurisdictions.
Two reference projects in the US and UK (Bayou Fuels and Altalto respectively)
are designed to accelerate the adoption and standardise the Velocys
proprietary Fischer Tropsch (FT) technology with an integrated end to end
solution, including renewable power and sequestration.
Velocys is enabling commercial scale synthetic fuel production in response to
the clean energy transition, with significant additional positive air quality
impacts.
www.velocys.com
(https://url.avanan.click/v2/___http:/www.velocys.com___.YXAxZTpzaG9yZWNhcDphOm86NDg2M2E1M2QyYjViZGEzZWY1NTFjY2YzYzAwNjM1ZDQ6NjozY2JlOjM5ZWMyZDAxNTIzNzJjNDIxMDNjOWUxZTE5NTc2NmVjNGVhMDRiZmUwM2E3MGNiMjg4YWMwZDgzOGQ1MTYzNWI6cDpG)
About Carbon Direct Capital
Carbon Direct Capital is a New York, US, based growth investment firm focused
on carbon management technologies. The firm believes that selective investing
with a science focused approach maximizes both climate impact and financial
returns. Carbon Direct Capital has partnered with a number of transformative
carbon tech companies across two growth equity funds. To learn more,
visit www.carbondirectcapital.com
(https://url.avanan.click/v2/___https:/c212.net/c/link/?t=0&l=en&o=3476733-1&h=3680831677&u=http%3A%2F%2Fwww.carbon-direct.com%2F&a=www.carbon-direct.com___.YXAxZTpzaG9yZWNhcDphOm86NDg2M2E1M2QyYjViZGEzZWY1NTFjY2YzYzAwNjM1ZDQ6Njo4ZWZiOjViMjNmYTA4YmZkZDlhNTIwOGEwMzFiNzMyYjM5MDY0ODhmNGUxMGRmMDFmMjQ1YmNjOWE3YWM4MzM3NDk1M2I6cDpG)
.
NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE DIRECTLY OR INDIRECTLY, IN WHOLE
OR IN PART IN OR INTO THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA, NEW
ZEALAND, THE REPUBLIC OF SOUTH AFRICA OR JAPAN OR IN ANY OTHER JURISDICTION IN
WHICH OFFERS OR SALES WOULD BE PROHIBITED BY APPLICABLE LAW.
IMPORTANT NOTICES
IMPORTANT NOTICE
The information contained in this announcement is for information purposes
only and does not purport to be full or complete. The information contained in
this announcement is given at the date of its publication (unless otherwise
marked) and is subject to updating, revision and amendment from time to time.
No reliance may be placed for any purpose on the information contained in this
announcement or its accuracy, fairness or completeness.
Neither this announcement, nor any copy of it, may be taken or transmitted,
published or distributed, directly or indirectly, in or into any jurisdiction
where to do so would constitute a violation of the relevant securities laws of
such jurisdiction. This announcement is for information purposes only and does
not constitute an offer to sell or issue, or the solicitation of an offer to
buy, acquire or subscribe for any shares in the Company in any state or
jurisdiction in which such offer or solicitation is not authorised or to any
person to whom it is unlawful to make such offer or solicitation. Any failure
to comply with these restrictions may constitute a violation of securities
laws of such jurisdictions.
This announcement is not for publication or distribution, directly or
indirectly, in or into the United States of America. This announcement is
not an offer of securities for sale into the United States. The securities
referred to herein have not been and will not be registered under the U.S.
Securities Act of 1933, as amended (the "US Securities Act"), and may not be
offered or sold in the United States, except pursuant to an applicable
exemption from registration. No public offering of securities is being made in
the United States.
The contents of this announcement have not been reviewed by any regulatory
authority in Hong Kong. You are advised to exercise caution in relation to the
Placing. If you are in any doubt about any of the contents of this
announcement, you should obtain independent professional advice. This is not
an offer to the public and the Placing Documents (as defined below) will not
be registered as a prospectus under the Companies (Winding Up and
Miscellaneous Provisions) Ordinance (Cap. 32 of the laws of Hong Kong) or any
other applicable ordinance in Hong Kong.
This announcement must not, therefore, be distributed, issued, circulated or
possessed for the purpose of distribution or issue or circulation, to persons
in Hong Kong other than (1) to professional investors within the meaning of
the Securities and Futures Ordinance (Cap. 571 of the laws of Hong Kong)
(including professional investors falling within the Securities and Futures
(Professional Investors) Rules (Cap. 571D of the laws of Hong Kong)) or (2) in
circumstances which would not constitute an offer to the public for the
purpose of the Companies (Winding Up and Miscellaneous Provisions) Ordinance
(Cap. 32 of the laws of Hong Kong) or the Securities and Futures Ordinance
(Cap. 571 of the laws of Hong Kong).
This announcement has been issued by, and is the sole responsibility of, the
Company. No undertaking, representation, warranty or other assurance, express
or implied, is made or given by or on behalf of the Company, Panmure Gordon
(UK) Limited ("Panmure Gordon") or Shore Capital Stockbrokers Limited ("Shore
Capital") or any of their respective directors, officers, partners, employees,
agents or advisers or any other person as to the accuracy or completeness of
the information or opinions contained in this announcement and no
responsibility or liability is accepted by any of them for any such
information or opinions or for any errors, omissions or misstatements,
negligence or otherwise in this announcement.
Panmure Gordon is authorised and regulated in the UK by the FCA and is acting
as nominated adviser and joint broker to the Company. Panmure Gordon is not
acting for, and will not be responsible to, any person other than the Company
for providing the protections afforded to its customers or for advising any
other person on the contents of this announcement or on any transaction or
arrangement referred to in this announcement. No representation or warranty,
express or implied, is made by Panmure Gordon as to, and no liability is
accepted by Panmure Gordon in respect of, any of the contents of this
announcement. The responsibilities of Panmure Gordon as the Company's
nominated adviser under the AIM Rules for Companies ("AIM Rules") and the AIM
Rules for Nominated Advisers are owed solely to London Stock Exchange plc 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.
Shore Capital is authorised and regulated in the UK by the FCA and is acting
as joint broker to the Company. Shore Capital is not acting for, and will not
be responsible to, any person other than the Company for providing the
protections afforded to its customers or for advising any other person on the
contents of this announcement or on any transaction or arrangement referred to
in this announcement. No representation or warranty, express or implied, is
made by Shore Capital as to, and no liability is accepted by Shore Capital in
respect of, any of the contents of this announcement.
The information in this announcement may not be forwarded or distributed to
any other person and may not be reproduced in any manner whatsoever. Any
forwarding, distribution, reproduction, or disclosure of this information in
whole or in part is unauthorised. Failure to comply with this directive may
result in a violation of applicable securities laws and regulations of other
jurisdictions.
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 and the Company's future financial condition and
performance. These statements, which sometimes use words such as "aim",
"anticipate", "believe", "may", "will", "should", "intend", "plan", "assume",
"estimate", "expect" (or the negative thereof) and words of similar meaning,
reflect the current beliefs and expectations of the directors of the Company
and/or the Joint Bookrunners and involve known and unknown risks,
uncertainties and assumptions, many of which are outside the Company's control
and difficult to predict, 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. The information contained in this
announcement speaks only as of the date of this announcement and is subject to
change without notice and the Company does not assume any responsibility or
obligation to, and does not intend to, update or revise publicly or review any
of the information contained to this announcement, whether as a result of new
information, future events or otherwise, except to the extent required by the
FCA, the London Stock Exchange or by applicable law.
Any information in this announcement in respect of past performance (including
without limitation past performance of the Company, its group, shares in the
Company and/or the Company's portfolio) cannot be relied upon as a guide to
future performance. The price of shares and the income from them may fluctuate
upwards or downwards and cannot be guaranteed.
This announcement contains inside information as defined in Regulation (EU)
No. 596/2014 on market abuse which is part of UK domestic law by virtue of the
European Union (Withdrawal) Act 2018 ("MAR") and is made in accordance with
the Company's obligations under article 17 of MAR. The person responsible for
arranging the release of this announcement on behalf of Velocys is David Bate,
General Counsel of Velocys.
APPENDIX I
The Fundraise
1. Introduction
The Company proposes to raise, subject to certain conditions:
(i) approximately £6 million (before expenses) in aggregate by way of a
conditional Placing of new Ordinary Shares at the Issue Price to certain
institutional and other investors and by way of a Retail Offer to eligible
retail Shareholders through the issue of up to 20,000,000 Retail Offer Shares
at the Issue Price on the BookBuild Platform (details of which will be
announced in a separate announcement in due course); and (ii) up to
approximately £2 million (before expenses) by way of an Open Offer made to
Eligible Shareholders of up to 77,648,390 Open Offer Shares at the Issue
Price. The Issue Price represents a discount of 26.9 per cent. to the closing
mid-market price of the Ordinary Shares as at 17 May 2023 of 3.42 pence per
Ordinary Share.
In addition, the Company intends to raise a minimum of $15 million
(approximately £12 million) through the proposed issue of Convertible Loan
Notes to Carbon Direct Capital and further amounts to satisfy the Minimum
Amount Condition through potential further issuances of Convertible Loan Notes
and/or new Ordinary Shares to investors other than Carbon Direct Capital. This
strategic investment in the Convertible Loan Notes is being led by Carbon
Direct Capital which has entered into the Commitment Letter for the proposed
subscription and issue by the Company, subject to the satisfaction of the
conditions set out therein, of Convertible Loan Notes with a subscription
value of $15 million (approximately £12 million). The maximum amount that may
be raised by the Company pursuant to the Fundraise is £50 million.
Carbon Direct Capital is a New York, US, based growth investment firm focused
on carbon management technologies. The firm believes that selective investing
with a scientific approach maximises both climate benefits and financial
returns. Carbon Direct Capital has partnered with a number of transformative
carbon tech companies across two growth equity funds.
The Convertible Loan Notes are structured to incentivise a US Listing of the
Company, in addition to its existing admission to trading on AIM. The
Convertible Loan Notes are unsecured and automatically convert into Ordinary
Shares at the Conversion Price upon US Listing. The Convertible Loan Notes
will not bear interest, provided that Velocys achieves a US Listing prior to
the 21-month anniversary of the issue of the Convertible Loan Notes. Further
details on the terms of the Convertible Loan Notes are set out in paragraph 6
of this Appendix I. Discussions are ongoing with additional potential
Convertible Loan Note investors.
The Directors have been considering the merits of a US Listing for some time,
given Velocys' Bayou Fuels Project and technical centre in the US, favourable
pro-sustainable fuels legislation, and the large number of US specialist
institutional investors. The Directors believe that a dual listing will
further enhance the Company's reputation and increase global awareness of the
Company's proprietary technology. This funding provides the impetus and
support for progressing these plans.
Funds raised through the Placing, the Retail Offer and the Open Offer will be
used primarily to provide growth capital in preparation for significant
scale-up and working capital through expected key valuation inflection points
for the Altalto Project and Bayou Fuels Project with additional funds intended
to be raised through the issue of the Convertible Loan Notes to Carbon Direct
Capital and potential further issuances of Convertible Loan Notes and/or new
Ordinary Shares to investors other than Carbon Direct Capital to drive the
Company's technology delivery capability and to provide balance sheet strength
whilst continuing to build a revenue generating pipeline. Further details on
the use of proceeds are set out in paragraph 5 of this Appendix I.
The Placing, the Retail Offer, the Open Offer and the issue of the Convertible
Loan Notes to Carbon Direct Capital, are each conditional upon, amongst other
things, the passing of certain Resolutions in order to ensure that the
Directors have the necessary authorities and powers to allot the New Ordinary
Shares and issue the Convertible Loan Notes. A General Meeting is therefore
being convened for the purpose of considering the Resolutions at 10.30 a.m. on
8 June 2023 at Magdalen Centre, Robert Robinson Avenue, The Oxford Science
Park, Oxford OX4 4GA. The Notice of General Meeting will be set out at the end
of the Circular. The Placing, the Retail Offer and the Open Offer are also
conditional on, inter alia, the Placing Agreement between the Company and the
Joint Bookrunners becoming unconditional and not being terminated in
accordance with its terms. The Placing, the Retail Offer and the Open Offer
are not underwritten. The Placing, the Retail Offer and the Open Offer are not
conditional on the issue of the Convertible Loan Notes. Subscription by Carbon
Direct Capital for the Convertible Loan Notes is conditional on the Company
having raised or having received legally binding commitments in respect of the
Minimum Amount from the Fundraise. The Minimum Amount Condition has not
currently been satisfied.
2. Information on the Company
(a) Overview of the Company
Velocys is an international sustainable fuels technology company, providing
clients with one of the most sustainable routes to the economic production of
drop-in SAF from a variety of waste materials. Velocys operates a capital
light and scalable licencing model offering a technology solution for the
development of synthetic sustainable fuels manufacturing via its proprietary
patented micro-channel Fischer-Tropsch reactors and comprehensive biorefinery
integrated technology package. The Company has offices in Oxford, UK as well
as Houston, US and reactor manufacturing facilities in Ohio, US.
Velocys has a number of third party clients to whom it supplies its
technology; in addition, Velocys is developing two full-scale biorefinery
Reference Projects:
a) the Bayou Fuels Project in Mississippi, US which will utilise woody
waste to produce sustainable fuels
b) and the Altalto Project in Immingham in the UK which will process
municipal and commercial solid waste into sustainable fuels.
The Reference Projects are being developed to accelerate adoption of the
Group's technology. Following the completion of third party construction
capital project financing and commencement of the detailed engineering stage
of these projects, the Reference Projects are expected to generate significant
technology licensing revenue for the Group. Further details of each of the
Reference projects is set out in sections e) and f) below. Velocys is building
a strategic and financial partner network to attract new investors to the
Reference Projects. As a consequence of new investors entering into the
projects, Velocys expects its equity in the projects to be significantly
diluted.
The Company's near-term ambitions are focused on creating sustainable
shareholder value by growing the customer pipeline, progressing its
biorefinery Reference Projects in the UK and US into FEED (Front End
Engineering Design) delivery and revenue generation. Fees will start being
generated as the Reference Projects enter into their FEED phase which will
generate revenues through the execution of technology licenses and engineering
services agreements. The Company is also focused on expansion of its
commercial and business development functions, and engineering and reactor
manufacturing to support the scale-up of its business.
The Company's aim is to become a leading provider of innovative SAF solutions
to enable the decarbonisation of the aviation industry. The Company is moving
towards achieving these ambitions whilst creating sustained shareholder value
through a diverse client pipeline delivering significant one-off and recurring
revenues.
The Group's technology has been commercially demonstrated through several
customer projects since 2015 following the manufacturing of commercial
reactors and catalysts: in 2017 a first commercial demonstration plant (the
ENVIA plant, located in Oklahoma, US) using two of the Group's full-scale
Fischer-Tropsch reactors and catalyst was completed and subsequently produced
a fuel output that qualified under the Renewable Fuels Standard and was sold
to commercial clients. Subsequently, construction of the NEDO I biomass
demonstration project in Japan was successfully completed in late 2020 using
the Group's proprietary Fischer-Tropsch technology. 3,000 litres of fuel from
NEDO I were used in a Japan Airlines scheduled commercial flight in June 2021
becoming the first such flight using SAF derived from woodchips feedstock at
any scale. Further details of these commercial demonstration plants are
provided below.
In November 2021, the Group signed a 15-year fixed price offtake agreement
with Southwest Airlines and a memorandum of understanding for a 10-year fixed
price offtake with IAG for in aggregate 100 per cent. of the SAF to be
produced and environmental credits generated from the Bayou Fuels Project. The
Directors believe that these offtake agreements further validate the demand
for the Group's technology and will significantly de-risk the Bayou Fuels
Project which should enable construction capital financing of the project.
Through the combination of biogenic feedstock, planned renewable power supply
and carbon capture and storage (both currently in the pre-FEED phase),
Velocys' micro-channel Fischer-Tropsch reactors and comprehensive biorefinery
integrated technology package will enable the commercial-scale production of
SAF at the Bayou Fuels Project with a deeply negative prospective Carbon
Intensity of -375g CO(2)e/MJ, which is expected to achieve a total of 1.3
million tonnes of avoided CO(2) per annum over the term of the contracts
equivalent of 1.1 million return economy trips from San Francisco to London
per year. Following the implementation of the highly beneficial Inflation
Reduction Act in the US in August 2022, Velocys has appointed a leading global
investment bank to raise FEED funding for the Bayou Project which is expected
during the last quarter of 2023.
The Altalto Project is currently being developed in conjunction with British
Airways who have an option over 50 per cent of the project. As announced on 12
December 2022, Altalto Limited has secured a grant from the UK Department for
Transport (DfT) under the Advanced Fuels Fund up to a maximum of £27 million
for the Altalto Project. The grant funding, which will be distributed over the
3-year grant period through to March 2025 and is conditional on private-sector
matched funding over the course of the grant period, will enable Altalto to
complete the critical FEED stage of the project. Altalto Limited has completed
the work necessary to claim the first tranche (£7 million) of the grant up to
31 March 2023. In addition, as planned, the project has obtained the first
tranche of private matched funding for the period from 1 April 2023 from its
existing private sector participants (including a contribution of £1 million
from Velocys). Velocys has appointed a leading global investment bank to
assist in obtaining the required remaining matched funding from private sector
investors to be in place in the last quarter of 2023 (pursuant to the terms of
the grant funding).
In addition, the Group secured a separate grant of £2.5 million, also from
the DfT's Advanced Fuels Fund, which offered a specific funding allocation for
the development of e-fuels projects (those whose energy input is derived not
from the carbon feedstock, which is carbon dioxide, but rather from renewable
electricity via hydrogen). This grant was awarded to Velocys to assemble the
technology package for an e-fuels project in the UK, the e-Alto power to
liquids project, in collaboration with partners.
In the first quarter of 2023, Velocys announced the execution of a master
relationship agreement ("MRA") with Bechtel Limited ("Bechtel"), a leading
worldwide provider of engineering, construction and project management
services, as SAF project delivery partner to develop a centre of excellence
model and provide project engineering and other technical services to Velocys'
SAF project portfolio, thereby accelerating its commercialisation strategy and
significantly de-risking project delivery by collaborating in development of a
viable EPC execution model for the Company's Reference Projects. Initially the
collaboration is focusing on Velocys' main Reference Projects - the Altalto
Project and the Bayou Fuels Project - together with the recently announced
e-Alto power-to-liquids project in the UK. The MRA also covers other
third-party projects that may be introduced by either Bechtel or Velocys
globally.
Under a separate continuing technical services agreement, Bechtel is providing
certain other technical services to support the development of Velocys' SAF
project portfolio. In particular, Bechtel has commenced work on delivery of
the Altalto Project FEED phase advancing the Company towards revenue
generation.
The Group is focused on accelerating delivery of Velocys' technology and
driving sustainable revenue opportunities.
Path to a dual listing
The Directors believe that a US Listing of the Company, in addition to its
existing admission to trading on AIM, will further enhance the Company's
reputation and increase global awareness of the Company's proprietary
technology. The Company already has a significant presence in the US with its
US office, manufacturing and catalysis facilities in Ohio, engineering office
in Houston as well as the Bayou Fuels Project itself planned in Natchez
Mississippi. A US Listing will provide access to a large pool of specialist
investors and provide the potential for broader equity research coverage and
increased liquidity.
Whilst it cannot be guaranteed, the Directors are confident that a US Listing
can be achieved within 21 months from the issue of Convertible Loan Notes to
Carbon Direct Capital. The Directors appreciate the significant sustained
support they have received from UK and other investors to date during a key
stage of the Company's growth and intend to maintain the Company's existing
admission of its Ordinary Shares to trading on the AIM market of the London
Stock Exchange for the foreseeable future alongside the intended US Listing.
(b) Technology overview
The Group's technology is an embodiment of the Fischer-Tropsch process which
converts pure carbon monoxide and hydrogen synthesis gas (syngas) via a
catalytic chemical reaction into hydrocarbons which are subsequently upgraded
into fuels. The technology enables an economic conversion of a wide range of
low or negative-cost, abundant sustainable feedstocks (including, but not
limited to, woody biomass residue or municipal solid waste that would
otherwise go to landfill or incineration) into high value sustainable fuels
such as SAF. These fuels qualify for decarbonisation credits in both the
United States (under the Renewable Fuels Standard) and in the United Kingdom
(under the Renewable Transport Fuels Obligation). These fuels have significant
air quality advantages and reduce the emission of particulates from aircraft
by up to 90 per cent. and lifecycle greenhouse gas emissions reductions by up
to 70 per cent., or over 150 per cent. when carbon capture and storage is
incorporated within the biorefinery.
The fuels are designed to be "drop-in", eliminating the need for engine
modification, and to be blended with conventional fossil fuels, fully
leveraging existing aircraft engines and logistics infrastructure. They are
approved by the American Society for Testing and Materials for blending with
Jet A-1 at up to 50 per cent., so no adaptation is required to airport
infrastructure or aeroplane engines.
Although Fischer-Tropsch technology has been in existence for decades, Velocys
has developed a highly reactive catalyst and a bespoke reactor to be used in
an innovative way to manufacture sustainable fuels. Velocys' proprietary
Fischer-Tropsch technology comprises microchannel Fischer-Tropsch reactor
cores, containing a highly active Fischer-Tropsch catalyst made by Velocys'
proprietary organic matrix combustion which are contained within a pressure
containment vessel/reactor. Velocys' technology provides the unique
combination of microchannel reactors and nanocatalyst technology that allows
an 8-10 fold increase in the speed of chemical reactions compared with
conventional Fischer-Tropsch technology, and therefore much smaller reactors
for any given volume of throughput. Velocys' conversion pathway enables
negative carbon intensity fuels via CO(2) sequestration of between 30 per
cent. and 40 per cent. of the feedstock carbon used, with a corresponding air
quality advantage via ultra-low Sulphur and a 2.5 particulate matter.
The technology is developed in-house by Velocys and is protected by a wide
range of patents and trademarks across multiple key jurisdictions. The
catalysts are manufactured at commercial scale by sub-contractors in the US
under strict Velocys supervision. The reactor cores have previously been
manufactured by subcontractors in the US using manufacturing equipment
designed and owned by Velocys, however the Company intends to use some of the
proceeds from the Fundraise to complete the capital investment in its Ohio
reactor core manufacturing facility which will improve the automation and the
capacity of this manufacturing by bringing final assembly, testing and quality
control in-house while using qualified external contractors for standard
components and sub-assemblies. The new facility will have capacity to produce
48 cores per annum, sufficient for 12 reactors (the typical requirement for a
single biorefinery) which will be adequate to meet projected production
capacity needs until 2028. The internal fit-out stage of the facility is now
complete and is expected to commence process validation in the last quarter of
2023 with live production of reactor cores commencing in 2024.
(c) Market overview
The market for SAF is growing rapidly as airlines and governments around the
world are seeking to reduce the carbon footprint of air travel. Commercial
aviation is responsible for approximately 13 per cent. of transportation
greenhouse gas ("GHG") emissions. With the advent of government mandates
requiring the use of SAF, the aviation industry seeks to reduce its GHG
emissions significantly, decoupling airline growth from carbon growth.
Purchasing fuel is the primary operating cost for airlines. SAF represents a
significant global opportunity, with the value of decarbonisation far
exceeding the value of the fuel where there is appropriate policy support for
SAF. The International Air Transport Association ("IATA") has committed to
net-zero carbon emissions by 2050, requiring 450 billion litres of SAF to meet
these net-zero commitments. According to a report by the International Energy
Agency, the demand for SAF is expected to grow from less than 0.1 per cent. of
total aviation fuel consumption in 2020 to around 10 per cent. by 2030. This
represents a significant opportunity for companies involved in the production,
distribution and sale of SAF as supply is extremely limited - current annual
production is approximately 100 million litres. Electric and hydrogen fuel
solutions are not considered current or short-to-medium term viable solutions
for long haul flights. SAF is a "drop-in" fuel that requires no modifications
to engines or infrastructure and can still meet international specifications
i.e., ASTM D7566 - a provision under D7566 which allows any fuel meeting the
specifications to be reidentified as a conventional fuel. With this inclusion,
any SAF can be seamlessly integrated into the fuel delivery infrastructure
without the need for separate tracking or regulatory approval, so providing
the most viable option to help achieve the net-zero commitments by 2050.
The Directors believe that the inevitable scale up in production of SAF and
the growing number of government mandates will make the use of SAF widespread.
The US has very competitive carbon incentives through its existing Federal
Renewable Fuel Standard ("RFS") and the Low Carbon Fuels Standard ("LCFS") in
California. The landmark Inflation Reduction Act of 2022 was passed by the US
Congress in relation to key legislation tackling climate change in August
2022, allocating approximately $369 billion to reducing GHG emissions and
incentivises expanded production and use of domestic clean energy. In the UK,
the Government set out its Net Zero Strategy in 2021 for an economy-wide plan
to achieve Net Zero by 2050. As part of this ambition, in order to decarbonise
the aviation sector, in 2022 the UK Government's DfT set out its Jet Zero
strategy setting out a framework for securing a more sustainable aviation
industry with a target of at least 10 per cent. SAF blended into the jet fuel
mix by 2030. To help deliver this, the Government has an ambition for a
minimum of five commercial-scale SAF plants to be in construction in the UK by
2025. This is being supported by the £165 million Advanced Fuels Fund, from
which Velocys is the largest recipient of grant funding. This builds
significantly on the previous 2021 Green Fuels Green Skies grant initiative
(of which Velocys was a recipient) which made available £15 million in grant
awards and demonstrates the increasing support of the DfT.
On the 30 March the UK Government published its consultation paper, Pathway to
net zero aviation: developing the UK sustainable aviation fuel mandate, which
contains a number of proposals aimed at supporting and financing the
development of the sustainable aviation fuel ("SAF") industry. The Government
has confirmed its desire to establish the UK as a global leader in the
development, production and use of SAF by creating secure and growing SAF
demand, kickstarting a domestic SAF industry and working in partnership with
industry and investors to build long term supply. The consultation comes amid
growing support for decarbonisation and further supports the UK Government's
ambition of reaching net zero by 2050 and its Jet Zero strategy. The proposed
SAF mandate offers a guaranteed level of demand and creates a long-term
requirement to supply SAF, provides incentives to SAF producers in the form of
tradeable certificates and signals the vital role SAF will play in the future
of UK aviation. The tradable certificates are intended to close the gap
between the cost of jetfuel and the cost of SAF, with additional certificates
awarded in proportion to avoided carbon dioxide emissions.
IATA's net-zero carbon emissions commitment, aligns with the Paris Agreement
for global warming to not exceed 1.5°c. The EU has proposed to set SAF
blending mandates via the ReFuelEU proposal published in July 2021. The
Directors believe that these would likely be set at 2 per cent. by 2025, 5 per
cent. by 2030 and 32 per cent. by 2040. The International Civil Aviation
Organisation has introduced Carbon Offsetting and Reduction Scheme for
International Aviation as a global mandate for decarbonisation of aviation and
the Japanese Government has backed ventures launched to progress commercial
scale SAF production.
The Directors believe that Velocys' conversion pathway offers a number of
specific advantages. The Fischer-Tropsch Synthesised Paraffinic Kerosene route
is the most established of the seven approved technical pathways under ASTM
D7566, which allows the flexible use of large-volume, low-cost sustainable
feedstocks (such as woody biomass residue and municipal solid waste) and
generates clean burning, low carbon sustainable fuels. Velocys' standardised
solution can ultimately also lead to a reduced cost of capital for clients
when eligible for non-recourse project finance and can lead to sustainable
local production and distribution of fuel, resulting in increased
self-sufficiency and reduced reliance on fuel imports for the host country.
Multiplate pilot demonstrations have been conducted in various global
locations by 2015, including Brazil, Austria (in 2010) and Japan.
Expected demand for SAF in Europe and the US, based on the EU's latest
proposals and current incentives in the US, is expected to reach 3.7 billion
litres per year by 2025, equivalent to 2 per cent. of global jet fuel demand
and the equivalent of the output from 28 reference plants. By 2030, demand for
SAF is expected to rise to 10.3 billion litres per year, equivalent to 5 per
cent. of global jet fuel supply and the equivalent of the output from 78
reference plants. By 2040, demand for SAF is expected to rise further to 77.6
billion litres per year, equivalent to 32 per cent. of global jet fuel supply
and the equivalent of the output from 586 reference plants.
Global SAF production was estimated to reach 0.3 to 0.45 billion litres in
2022, an increase on output of 0.1 billion litres in 2021. This has increased
continually since 2019 (0.025 billion litres), with SAF output having climbed
to 0.0625 billion litres in 2020. This mirrors an expected increase in global
jet fuel demand, which is anticipated to grow from 457 billion litres in 2025
to a peak of 540 billion litres by 2045 (increasing by a rate of approximately
8-20 billion litres every 5 years), before dropping to 492 billion litres by
2050. Over the same period, the mandate for SAF is expected to increase from 4
billion litres in 2025 to 166 billion litres by 2050. Predictions for 2030
place Europe and the US as accounting for 40 per cent. combined of global jet
fuel demand.
Velocys' ambition is to capture 5 to 7 per cent. of the long-term market share
of the demand this will create for proven SAF technology. The Group has an
active and growing pipeline of clients and projects. In 2025, the Directors
expect that one of the Group's clients will be in construction and three of
the Group's clients will be at the FEED phase. At this stage, the Group is
aiming to have a total design capacity of 230 million litres per year,
equivalent to 6 per cent. of the expected demand for SAF. By 2030, the
Directors reasonably anticipate that 6 plants will have been completed by the
Group's clients, delivering a capacity to meet 15 per cent. of the expected
demand for SAF. By 2040, the Directors currently forecast that up to 45 plants
will have been completed by the Group's clients with capacity to produce
between 3.5 and 5 billion litres, equivalent to between 5 per cent. and 7 per
cent. of the expected demand for SAF.
(d) Business model
The Group has a hybrid, capital-light business model, focusing on
delivering Fischer-Tropsch reactors and catalysts to global clients under
site-licence agreements and providing engineering services over the course of
the 25 year expected lifetime of the assets. Some of Velocys' clients require
the Fischer-Tropsch Technology Island only ("FTI"). However, Velocys' core
offering provides its clients with a full end-to-end solution for the
conversion of solid sustainable feedstocks to SAF via its so called
"Integrated Technology Package" ("ITP"). The Group's two biorefinery Reference
Projects are designed to accelerate the end-to-end technology adoption as well
as providing a source of future revenue to the Group. To date, the Group's
technology is already commercially referenced through its contracts with a
consortium including Toyo in Japan. The Group's FTI has been further
demonstrated at commercial scale by the ENVIA plant in Oklahoma during 2017
and 2018, with integrated commercial operations and pilot trial upgrade for
fuel and diesel product completed in 2019.
The Group's revenue from its ITP solution comprises a combination of upfront
fees and recurring fees as follows:
-
Integrated Technology Package (ITP) - Licence fees commence at FEED through completion
- Initial reactor and catalyst payments upon construction through
completion
- Engineering fees payable throughout construction and commissioning
Technology licence fees Commissioning and start-up Upfront fees
Reactor sales Optimisation fees
Engineering fees
Catalyst sales and replacement Recurring fees - Catalyst sales and service fees every two years over plant life
Decarbonisation royalties - Royalties based on avoided carbon from fuels production
In 2021, Velocys recognised revenue of £8.3 million following the delivery of
reactors and catalysts to prior years clients.
The Group is building a growing pipeline of international clients that are
developing biorefineries and has sufficient production capacity to meet
projected orders until 2028. This includes developing its existing
relationships including with Toyo in Japan and pursuing new project
opportunities. In 2021 Velocys signed a collaboration agreement with Toyo to
start development of their commercial scale biomass-to-jet fuel project
along with other renewable fuel opportunities. The Group is also undertaking
a number of pre-feasibility studies with potential plant owners to ascertain
the potential for projects to move into pre-detailed engineering and project
development.
Further information on the Group's existing projects is provided below.
Revenue opportunity
Velocys offers a de-risked solution having undertaken multiple demonstrations
in various global locations with the flexibility of various feedstocks from
woodchips, residual waste, hydrogen and biomethane. With the ability to enable
negative carbon intensity fuels via CO(2) sequestration of 30-40 per cent. of
the feedstock carbon, which also has the advantage of improved air quality
with ultra-low sulphur and 2.5 particulate matter, Velocys' standardised
solution accelerates the path to non-recourse project financing and
sustainable local production and distribution of synthetic fuels and provides
a significant opportunity for growth in a sustainable fuel market with
enormous unsatisfied demand particularly for SAF.
The business model is established to provide both upfront and recurring fees.
The upfront fees consist of licence fee revenues which commence at the FEED
stage of projects and are payable in instalments up to completion. Additional
upfront fees are generated through reactor sales and initial catalyst down
payments at start of project construction with final payments at completion
along with engineering services payable throughout construction and
commissioning of the plants and projects. The recurring revenues are derived
from catalyst sales and service fees which recur every two years over the
lifetime of the plant, in addition to royalties based on avoided carbon fuels
production earned where Velocys has delivered early-stage project development
as per the Reference Projects.
The Directors believe there is significant opportunity to expand its pipeline
and contracts aided by increased reactor production capacity from its new
reactor core manufacturing facility in Ohio. The below table provides
illustrative examples of potential revenues generated from varying types of
client projects:
Project Type Reactors 10 Year Net Cashflow(1) 10 Year NPV(2)
Small project and demonstration plant Up to 6 $12m - $19m $9 - $13m
Woody Biomass 12 - 20 $23m - $60m $16 - $39m
Municipal Solid Waste 9 - 12 $17m - $37m $12 - $25m
Reference Project 16 $97m $57m
(1)10-year net cashflow - net cashflow to Velocys from FEED (Year 1) to year 6
(Year 10) of commercial production
(2)WACC 9.7 per cent.
Growth strategy
Velocys' ambition is to become a leading provider of advanced SAF solutions to
enable the decarbonisation of the aviation industry by focusing on technology
innovation. The Company's strategy to achieving this is centred around
accelerating its two full scale biorefinery Reference Projects to generate
revenues, accelerate technology adoption and define a blueprint for future
clients.
By working with leading industry partners, the Company is advancing its
current Reference Projects towards commercialisation, demonstrated by the
Altalto Project entering its critical FEED phase supported by the UK
Governments' Advanced Fuels Fund grant and the broad engineering collaboration
with Bechtel. In the US, the Bayou Fuels Project is also moving towards the
FEED phase with funding for project development capital expected to close
during the last quarter of 2023 following the appointment of a leading global
investment bank to source funds for the development phases of both Reference
Projects.
The Directors believe the growth strategy for the Group is focused on
strengthening its commercial development pipeline concentrating on revenue
producing opportunities delivering valuable upfront services for clients and a
wider reach on pipeline opportunities from increased enquiries and paid
studies. In order to accelerate this capacity and pipeline, the new reactor
core manufacturing facility in Ohio is targeting production in 2024 with an
increased output capacity of 12 reactors per year. Additionally, the Company
is looking to develop and grow its pipeline through significant investment in
people, processes and systems. Velocys is looking to scale the organisation,
by undertaking a selective recruitment process to gradually increase headcount
from approximately 40 full time employees to approximately 100 full time
employees over the next 12 to 18 months in line with increased contracted
client demands, with a focus on engineering capacity in order to propel the
Company towards sustainable revenue generation.
Velocys' growth strategy can be summarised as being to:
· strengthen its business development function to grow its client
pipeline;
· invest in the scale-up of its reactor manufacturing capacity;
· capitalise on strategic alliances with its technology partners to
further enhance the Group's standardised integrated solution;
· accelerate its collaborations with technology partners and to
outsource standardised activities to remain capital light;
· target geographical markets where the regulatory environment
and/or pricing economies create the highest value opportunities for its
clients; and
· expand engineering and technical resources to support its
clients' needs from feasibility stage to detailed engineering.
The Directors believe this growth strategy will enable the Group to have 6
clients with completed plants by 2030 with capacity to reach up to 15 per
cent. of expected SAF demand with potential additional significant growth
projected beyond this - the Directors currently forecast that up to 45 plants
may be completed by the Group's clients by 2040 using Velocys' technology.
(e) Bayou Fuels Project in Mississippi, US: reference project
Overview
In October 2017, the Group signed a site option agreement with Adams County in
the State of Mississippi for a biorefinery facility to be located in Natchez,
Mississippi and secured total site incentives of approximately $60 million.
The Bayou Fuels Project is a planned cellulosic biofuels plant enabling the
production of carbon negative fuel through the use of biogenic feedstock,
renewable power, and carbon sequestration. The biorefinery, when it enters
production planned for 2028, will convert 3,000 tons/day of woody biomass
forestry residues into 36 million gallons/year (nameplate) of renewable
transportation fuels, predominantly SAF, with a negative carbon intensity
using renewable energy derived from sustainable biomass power.
In October 2022, the Group announced it had re-optimised its Bayou Fuels
facility for maximum decarbonisation to a negative carbon intensity of -375g
CO(2)e/MJ (previously -144g CO(2)e/MJ); abating the carbon emissions from the
equivalent of 1.1 million return economy trips from San Francisco to London
per year. This optimisation marks a significant improvement in the negative
carbon intensity score of the plant with the potential to increase future
revenue for the Bayou Fuels Project and enhance the attractiveness of the
project for third party project funding.
Critical legislative developments in the US have taken place recently
benefiting the Bayou Fuels Project, most significantly the US Inflation
Reduction Act of 2022, signed into law on 16 August 2022, which
allocates $369 billion to reducing greenhouse gas emissions and incentivises
expanded production and use of domestic clean energy. A variety of SAF tax
credits are an integral part of the Act, together with other incentives and
mechanisms to accelerate the deployment of advanced fuel technologies
generating non-fossil fuels with a significantly reduced carbon intensity. The
biofuels that will be produced will adhere to both the US RFS and the LCFS and
earn additional incentives through the associated Renewable Identification
Number and LCFS credits. On 19 November 2021 the US House of Representatives
passed a bill that provides a SAF Blenders Tax Credit, which is worth
$1.75/gallon for the SAF produced from the Bayou Fuels Project. The US
administration has recently announced additional policy incentives to
accelerate the production of SAF, with up to $5 per gallon by way of SAF
Producer Tax Credit indexed to carbon intensity, available from 2027, which
would replace the SAF Blenders Tax Credit.
Following a competitive RFP process, the Group has appointed a leading global
investment bank to assist in securing the necessary development capital from
strategic partners for the project. The Group expects one or more clients to
finance and own the construction of the Bayou Fuels Project with the terms of
the financing determining Velocys' interests in the project post-financing.
Potential scenarios include, inter alia, Velocys retaining a minority interest
in the project or converting its interest into a "decarbonisation royalty" or
receiving a development fee. Completion of this capital raise is expected in
the last quarter of 2023.
Offtake agreements
Multi-year offtake contracts have been agreed, covering 100 per cent. of the
SAF expected to be produced by the biorefinery plant, underwriting $3.1
billion in revenue and avoiding 18.7 million tons of CO(2).
(i) Offtake agreement with Southwest Airlines
On 10 November 2021, the Group entered into its first offtake agreement for
the SAF to be produced by the Bayou Fuels Project with Southwest Airlines,
America's largest domestic airline. The agreement covers the purchase by
Southwest Airlines of an expected 219 million gallons of SAF at a fixed price
and floor price for greenhouse gas credits, over a fifteen-year term from
2028, when the biorefinery is scheduled to begin commercial delivery of fuel.
After blending, this is expected to produce approximately 575 million gallons
of net zero SAF.
This offtake agreement covers two thirds of the project facility's planned
production and de-risks up to $2 billion revenues over the life of the
contract. Each gallon of SAF generated by the project is expected to generate
tradable greenhouse gas credits for which Southwest Airlines guarantees a
minimum price payable to the project (included in the fuel fixed price),
de-risking a significant proportion of the revenue stream to the project. The
project may additionally benefit from the value of greenhouse gas credits if
sold above the minimum price underwritten by Southwest Airlines.
Southwest Airlines and Velocys have also, as part of the offtake agreement,
agreed to a long-term strategic alliance for future US-based biorefineries in
which Velocys may be involved with the right for Southwest Airlines to
purchase significant volumes of SAF from such facilities.
The offtake agreement is subject to certain customary conditions precedent
including completion of satisfactory financing for the project's front-end
engineering and design phase and certain construction milestones, eligibility
for greenhouse gas credits as well as the enactment of the proposed SAFs tax
credit legislation.
(ii) Offtake memorandum of understanding with IAG
On 10 November 2021, the Group entered into a non-binding memorandum of
understanding for the offtake of SAF to be produced at the project with IAG.
This covers the purchase by IAG's constituent airlines, which includes British
Airways, Aer Lingus and Iberia amongst others, of an expected 73 million
gallons of SAF, in aggregate, at a fixed price. After blending, this is
expected to produce the equivalent of approximately 192 million gallons of net
zero SAF during the term of the agreement, which will last for ten years from
the expected commencement date of operation of the project in 2026. This
represents one third of the facility's planned annual output and complements
the binding offtake agreement for the remaining two thirds annual output
entered into on the same date with Southwest Airlines as described above.
The intention of the parties is to convert the memorandum of understanding,
which includes all material terms for the offtake, into a binding agreement as
the project progresses. The memorandum of understanding also includes an
option for IAG to invest in the Bayou Fuels Project development phases.
The fixed price fuel purchase agreement includes a price support mechanism by
IAG for the greenhouse gas credits associated with the SAF production. As a
result, the agreement is expected to generate revenues of over $800 million to
the project and achieve an estimated total of 2.2 million tonnes of avoided
CO(2) over the term of the offtake.
Future milestones
The Company is intending to raise development capital for the Bayou Fuels
Project closing in the third quarter of 2023 to advance from FEED to FID
stage. A leading global investment bank has been appointed as financial
advisor to the project. Initial engineering for the project has commenced,
with detailed engineering expected to commence in 2024. Design capacity for
the site is expected to be 108,000 tonnes per year of SAF generating over 1.3
million tonnes per year of CO(2) avoided with ultra-low negative carbon
intensity, with the aim to enter production in 2028 and increase this figure
to 1.8 million tonnes per year of avoided CO(2). Levee construction is
anticipated to be finalised in the last quarter of 2023, a critical milestone
for insurance and de-risking of the site. Signature of the final commercial
agreements for the project, FID and financial close is expected in 2025,
following which plant construction is expected to occur during 2025 and 2026.
Construction is targeted to be completed by 2027 followed by plant
commissioning and start up with full scale commercial operation targeted to
commence in 2028.
(f) Altalto Project in Immingham, UK: reference project
Overview
The Group's Altalto Project, which is administered through a joint development
agreement between the Company and British Airways, will take household and
commercial waste which, after recyclates have been removed, would be destined
for landfill or incineration, and instead converts that waste into
clean-burning SAF and naphtha.
The Group has completed feasibility work in relation to site engineering,
geotechnical survey and integration of carbon sequestration of biogenic
CO(2) in preparation for the connection of the Altalto plant, when built,
into a new Carbon Capture and Storage cluster, which is being developed by a
consortium.
In March 2022, Altalto Immingham Ltd (a subsidiary of the Group) sold its 100
per cent. interest in Rula Developments (Immingham) Limited ("RDIL"), which
owns the site for the Altalto Project, to Foresight Group LLP for £9.75
million, with a call option for Altalto to repurchase RDIL within three years.
Foresight has a proven track record and history of investing in energy
transition infrastructure and also has an option to invest up to £100 million
in the future project construction phase. Following the sale, the Project has
retained the right to access the land for maintenance and pre-development
activities associated with its existing planning permission.
As announced on 12 December 2022, the Group secured a grant from the DfT under
the Advanced Fuels Fund up to a maximum of £27 million for the Altalto
Project. The Advanced Fuels Fund prioritises first-of-a-kind commercial scale
SAF plants that require additional support to become ready for investment and
construction. The fund also aims to leverage private investment, both by
supporting projects to reach an "investor ready" status and by prioritising
projects that have secured matched funding. The grant funding, which will be
distributed over the grant period through to March 2025 will support Altalto
to deliver the FEED stage of the project, which will incorporate the
integrated technology packages of the licensors (including Velocys) and
develop the basis for the Engineering, Procurement and Construction ("EPC")
contract. The Group has obtained letters of intent from a number of existing
and new potential partners for the private-sector matched funding requirement
with the first tranche of funding due to be in place during the first half of
2023.
Velocys has previously received grants for the Altalto project of £1.7
million from the DfT's Green Fuels, Green Skies competition and a series of
grants totalling £934,000 from the Future Fuels for Flight and Freight
competition, the predecessor to Green Fuels, Green Skies.
Further to legislative developments in the US, the UK legislation has also
progressed, with the UK Government's Net Zero Strategy including developing a
SAF mandate to enable delivery of 10 per cent. SAF by 2030. The UK DfT also
announced its Jet Zero Strategy in July 2022, setting out the Government's
approach for achieving net zero aviation by 2050. This includes an ambition
for a minimum of five commercial-scale SAF plants to be under construction in
the UK by 2025 which is being supported by the £165 million Advanced Fuels
Fund. Nevertheless, the continued lack of finalised UK policy support also
poses challenges for the Altalto Project. The Company looks forward to the
conclusion of the UK Government's consultation process and finalised plans for
the policy support necessary to kick-start the UK based SAF industry.
The Group has agreed with British Airways to further extend the terms of both
the Altalto Project's joint development agreement and the option agreement
which allows British Airways to acquire 50 per cent. of Altalto Limited by one
year to 31 March 2024
Velocys' cash contribution to the Altalto Project over two years from April
2023 is not expected to exceed £8 million, with Velocys intending to achieve
a net zero contribution.
Future milestones
A leading global investment bank has been appointed raise the Altalto Project
matched funding (alongside the DfT grant). Completion of this development
capital raise is expected during the last quarter of 2023. The FEED phase is
underway, with construction expected to commence in the second half of 2025,
following which full scale commercial operation is anticipated in the second
half of 2028. Current expectations for the site include a design capacity of
60,000 tonnes per year, with 350,000 tonnes per year of CO(2) avoided via the
carbon capture system. The Directors believe that fuel produced from the
Altalto Project could be worth over £3 per litre if rewarded in proportion to
CO(2) reduction, plus any additional price support that may be provided.
(g) Other revenue generating clients and pipeline
The Company continues to provide services and support to Toyo Engineering
Corporation in Japan under the Collaboration Agreement signed in late 2021 as
progress continues on the NEDO projects to proceed towards the FEED phase in
2024. In addition, the business development pipeline continues to grow, with a
number of feasibility studies underway with both biorefinery and advanced
power-to-liquid developers, as well as a significant increase in enquiries for
potential projects. Velocys expects to move forward with a number of new
clients globally through 2023.
Separate to the Altalto Immingham Project grant, the Group has secured a grant
of £2.5 million, also from the DfT's Advanced Fuels Fund for the development
of an e-fuels projects (those where energy input is derived not from carbon
feedstock, which is carbon dioxide, but rather from renewable electricity via
hydrogen). This e-fuels grant has been awarded to Velocys to assemble the
technology package for an e-fuels project in the UK, in collaboration with a
number of new and existing partners.
3. Current Trading
Whilst Velocys continues to progress its Reference Projects with its partners
and develop its longer-term pipeline, the Company is focused on near term
revenue generation and delivering sustainable shareholder value. Velocys has
made substantial progress over the last year on both projects and has achieved
a number of key milestones and objectives which place the Company in a strong
position to progress its Reference Projects through to key valuation
inflection points and build its commercial pipeline.
The Company announced its preliminary unaudited results for the year ended 31
December 2022 today 18 May 2023. As of 31 December 2022, Velocys had a cash
balance of £13.4 million (2021: £25.5 million). Preliminary unaudited
revenues are approximately £0.2 million (2021: £8.3 million) and a net loss
of £13.2 million (2021: £8.4 million). As of 30 April 2023, the Company had
a cash balance of £8.1 million (including £0.6 million of restricted cash).
Annual revenues are expected to remain uneven in the short-term due to the
growing but concentrated number of SAF projects in development whilst the
market becomes more established. Revenue generated in 2021 was in respect of
engineering feasibility services provided during the year whereas the 2021
revenue was mainly the conclusion of a contract with our first major
commercial client, which commenced in 2017, for the supply of reactors and
catalyst, and associated licensing fees to operate the technology. The Company
satisfied the performance obligations within the contract in June 2021
following expiry of all contractual obligations and therefore recognised the
revenue and associated cost of goods in 2021.
4. IP Portfolio
Velocys has an extensive and actively managed intellectual property portfolio
of over 200 granted patents, 90 pending patents and various trademarks.
Substantive IP is important for SAF as a relatively new technology and the
development of new SAF feedstocks, production processes and applications
requires significant R&D investment. It is essential for creating a
competitive market for SAF and encourages continued innovation and provides a
measure of security and stability for investment. It also underpins Velocys'
licensing agreements, joint ventures and other commercial arrangements that
helps to expand the market for SAF and increase its adoption.
5. Use of Proceeds
The Group is focused on accelerating delivery of Velocys' technology and
driving revenue opportunities through the economic production of SAF with the
mission of facilitating decarbonisation of the aviation industry.
The Directors intend to use the net proceeds from the Placing, the Retail
Offer and the Open Offer as follows:
o £5 million - Organisation costs including project delivery and business
development;
o £1 million - engineering scale-up with investment in engineering
resource; and
o Balance - working capital requirements to invest in achieving supply chain
resilience and to cover timeline of grant receipts.
In the event of the Minimum Amount being raised, the net proceeds of the
issuance of the Convertible Loan Notes to Carbon Direct Capital and the
issuance of further Convertible Loan Notes and/or Ordinary Shares to investors
other than Carbon Direct Capital will be used primarily for:
o £12 million - scaling-up of the organisation and corporate costs
including increasing labour from approximately 40 full time employees to
approximately 100 full time employees gradually over the next 12 to 18 months
in line with client and project demand in order to accelerate the capability
of the Company to deliver its technology to its clients at scale;
o £7 million - completion of capital investment in the Ohio reactor core
manufacturing facility including production start-up and catalysis upgrades;
o £3 million - funding for US Listing costs or interest payments due on the
Convertible Loan Notes in the event no US Listing occurs during the 21-month
period from issue of the Convertible Loan Notes;
o £2 million - supporting performance guarantees for the Company's
proprietary Fischer-Tropsch technology to be delivered to client projects;
o £1 million - working capital requirements, build-up of reactor inventory
at the Ohio manufacturing facility and to manage timing of payments and grant
receipts; and
o additional funds raised up to the Maximum Amount, will be used to drive
further commercialisation and balance sheet strength ahead of a potential US
listing.
6. Principal terms of the Convertible Loan Notes.
In addition to the Placing, the Retail Offer and the Open Offer, the Company
proposes raising a minimum of $15 million (approximately £12 million), before
expenses, by way of the proposed, conditional, non-pre-emptive issue to Carbon
Direct Capital of Convertible Loan Notes, convertible into Ordinary Shares at
the Issue Price. The Company intends to issue further Convertible Loan Notes
and/or new Ordinary Shares to investors other than Carbon Direct Capital. The
terms of the Convertible Loan Notes are governed by the Convertible Loan Note
Instrument.
Pursuant to the Commitment Letter, the issue of Convertible Loan Notes to
Carbon Direct Capital is conditional, inter-alia, upon the passing of the
Resolutions at the General Meeting. If this condition is not satisfied, the
Convertible Loan Notes will not be issued to Carbon Direct Capital. In
addition to (i) the passing of the Resolutions, the issue of the Convertible
Loan Notes is also conditional upon (ii) the Company raising or having
received legally binding commitments to raise at least $40 million
(approximately £32 million) less the amount subscribed for by Carbon Direct
Capital in aggregate, before expenses, through the Fundraise from other
investors other than Carbon Direct Capital (the "Minimum Amount") by no later
than 30 September 2023 (the "CLN Long Stop Date") and (iii) there being no
material breach of certain of the representations and warranties of the
Company as given in the Commitment Letter between the date of the Commitment
Letter and the date of issuance of the Convertible Loan Notes to Carbon Direct
Capital. The Company and Carbon Direct Capital may agree to extend the CLN
Long Stop Date to no later than 31 December 2023.
The key terms of the Convertible Loan Note Instrument are:
· each of the CLN Investors has the right to convert all or part of
its Convertible Loan Notes into fully-paid Ordinary Shares at any time;
· unless earlier converted into Ordinary Shares or redeemed, the
Convertible Loan Notes shall be automatically converted into fully-paid
Ordinary Shares conditional on, and immediately prior to, the commencement of
trading on a US Listing;
· unless already converted into Ordinary Shares or redeemed, the
outstanding amounts under the Convertible Loan Notes (being the principal
amounts of the Convertible Loan Notes plus accrued interest) shall be redeemed
in cash by the Company or converted in full or in part at the election of the
relevant CLN Investor on the date that falls 36 months following their issue
(the "Final Maturity Date");
· if any of the Company or certain members of the Group suffers an
insolvency event, if a change of control transaction has occurred, or if the
admission to trading on AIM of the Ordinary Shares is cancelled (save in
connection with a US Listing or other listing of the Company's securities on
an investment exchange), the outstanding Convertible Loan Notes shall, at the
election of the relevant CLN Investor, be redeemed in cash by the Company at
1.5 times the outstanding amount or be converted into Ordinary Shares;
· if a lender to any member of the Group takes any step to enforce
any security granted to that lender by any member of the Group as a result of
an event of default by any member of the Group where the indebtedness is at
least £100,000 in the aggregate, the relevant CLN Investor shall have the
right to elect for its outstanding Convertible Loan Notes to be redeemed in
cash by the Company;
· notwithstanding any other provision in the Convertible Loan Note
Instrument, in the event that a conversion into Ordinary Shares would result
in a CLN Investor (together with any persons acting in concert with it)
holding 30 per cent. or more of the voting rights of the Company, the relevant
CLN Investor shall be entitled to convert such number of Convertible Loan
Notes as would cause it (together with any person acting in concert with it)
to hold up to 29.99 per cent. of the voting rights of the Company but shall
not in any circumstances be obliged to make a conversion in respect of those
Convertible Loan Notes that would result in it (together with any person
acting in concert with it) holding 30 per cent. or more of the voting rights
of the Company (the "Excess Notes"), and if not converted at the election of
the relevant CLN Investor, the Excess Notes will remain outstanding until the
date on which the Company obtains a Rule 9 waiver from the Panel on Takeovers
and Mergers, following which the Excess Notes shall be converted or redeemed
in cash by the Company if agreed;
· on conversion of the Convertible Loan Notes to Ordinary Shares,
such number of fully-paid Ordinary Shares shall be issued to the CLN Investors
that equals the outstanding principal amount of the notes plus any applicable
interest (converted into Sterling at the time of conversion) at a price of 2.5
pence per Ordinary Share or, if lower, the lowest price per Ordinary Share at
which the Company issues Ordinary Shares to a Shareholder or investor in
connection with an equity fundraising by way of the issue of new Ordinary
Shares in the Company, or the conversion or exercise price for any further
issue of convertible loan notes or issues of warrants, if any, which is
completed after the date of the issuance of the Convertible Loan Notes but
prior to the date of conversion of the Convertible Loan Notes;
· the Convertible Loan Notes will not bear interest if the US
Listing is completed within 21 months of the date of issuance of the
Convertible Loan Notes and the Convertible Loan Notes are converted into
fully-paid Ordinary Shares on such US Listing (to the extent not already
redeemed or converted). The Convertible Loan Notes bear interest at an
annualised interest rate of 12.5 per cent. from the date of issuance of the
Convertible Loan Notes until the Final Maturity Date or earlier conversion or
redemption which shall accrue in varying monthly coupons after the period of
21 months from the date of issue of the Convertible Loan Notes;
· while any Convertible Loan Notes remain outstanding, the Company
shall not pay any dividends or make any repurchases of its Ordinary Shares or
other class of shares; and
· the Convertible Loan Notes are not transferable, save to
affiliates.
The maximum number of Ordinary Shares that may be issued on conversion of the
Convertible Loan Notes that are proposed to be issued to Carbon Direct Capital
and to other investors (assuming the balance of the Maximum Amount, less funds
raised pursuant to the Placing,, is subscribed for in Convertible Loan Notes
and further assuming that all Convertible Loan Notes are converted on the
Final Maturity Date together with all accrued interest at a conversion price
of 2.5 pence and on the basis of a currency exchange rate of GBP/USD 1.2487,
being the Bloomberg rate on 17 May 2023 (the last practicable date prior to
the publication of this document) is 1,662,351,597 Ordinary Shares. The
Ordinary Shares issued on a conversion of the Convertible Loan Notes will,
when issued, rank pari passu in all respects with the other Ordinary Shares
then in issue, including all rights to all dividends and other distributions
declared, made or paid thereafter.
The Convertible Loan Notes will not be admitted to trading on AIM or any other
investment exchange.
The Commitment Letter contains warranties from the Company in favour of Carbon
Direct Capital in relation to (amongst other things) the Company and its
business and Carbon Direct Capital's commitment to acquire Convertible Loan
Notes is conditional on there having been no material breach of certain of the
warranties by the Company prior to issuance of the Convertible Loan Notes to
Carbon Direct Capital.
7. Principal terms of the Placing
The Company is conducting a conditional, non-pre-emptive placing and retail
offer to raise approximately £6 million at the Issue Price. The Placing
Shares a will be placed by Panmure Gordon and Shore Capital as agents for the
Company and pursuant to the Placing Agreement, with institutional and other
professional investors.
The Issue Price represents a discount of 26.9 per cent. to the closing
mid-market price of the Ordinary Shares as at 17 May 2023 of 3.42 pence per
Ordinary Share. The Placing Shares will, when issued, be credited as fully
paid and will rank pari passu in all respects with the other Ordinary Shares
then in issue, including all rights to all dividends and other distributions
declared, made or paid following Admission.
The Placing is conditional upon (amongst other things):
(a) the passing of the Resolutions relating to the Placing, the
Retail Offer and the Open Offer at the General Meeting;
(b) the Company allotting, subject only to Admission, the
Placing Shares in accordance with the Placing Agreement;
(c) none of the warranties given by the Company in the Placing
Agreement being untrue, inaccurate or misleading to an extent which would be
material as at the date of the Placing Agreement or at any time between the
date of the Placing Agreement and Admission;
(d) Admission having occurred by no later than 8.00 a.m. on 9
June 2023 or such later date as the Company and the Joint Bookrunners may
agree, but in any event not later than the Placing Long Stop Date; and
(e) the Company having complied with its obligations under the
Placing Agreement.
The Placing Agreement contains warranties from the Company in favour of
Panmure Gordon and Shore Capital in relation to (amongst other things) the
Company and its business. In addition, the Company has agreed to indemnify
Panmure Gordon and Shore Capital in relation to certain liabilities it may
incur in undertaking the Placing. Panmure Gordon and Shore Capital have the
right to terminate the Placing Agreement in certain circumstances prior to
Admission, in particular, it may terminate in the event that there has been a
material breach of any of the warranties or for force majeure.
Application will be made for the Placing Shares to be admitted to trading on
AIM. It is expected that trading in Placing Shares will commence at 8.00 a.m.
on or around 9 June 2023.
It is expected that certain Directors and senior management in the Company will subscribe for New Ordinary Shares through the Placing for an aggregate amount of approximately £75,000. Further details will be announced as appropriate in due course.
8. Principal terms of the Open Offer
The Company considers it important that, where reasonably practicable,
Eligible Shareholders have an opportunity to participate in its equity
fundraisings. Accordingly, the Company intends to raise up to approximately
£2 million (before expenses) by way of the Open Offer.
The Open Offer has been structured such that the Maximum Amount that can be
raised by the Company under the Retail Offer and the Open Offer will not
exceed the sterling equivalent of €8 million. The limit of approximately £2
million for the Retail Offer and the Open Offer has been set to allow existing
Eligible Shareholders to participate in the Fundraise, taking into account the
dilution of Eligible Shareholders not able to participate in respect of the
Placing and the capital needs of the Company. The maximum aggregate limit of
the Retail Offer and the Open Offer also ensures that the Company is not
required to produce an approved prospectus pursuant to section 85 of FSMA. The
issue of a prospectus would considerably increase the costs of the Fundraise
and it would take much longer to complete, as any such prospectus would
require the prior approval of the FCA.
On and subject to the terms and conditions of the Open Offer, the Company
invites Eligible Shareholders, being only those Shareholders who are resident
in the United Kingdom and who are not Sanctioned Shareholders on the
Ex-Entitlement Date, to apply for their Basic Entitlement of Open Offer Shares
at the Issue Price. Each Eligible Shareholder's Basic Entitlement has been
calculated on the basis of 1 Open Offer Share for every 18 Existing Ordinary
Shares held at the Record Date.
Eligible Shareholders are also invited to apply for additional Open Offer
Shares in accordance with the Excess Entitlement. Any Open Offer Shares not
issued to an Eligible Shareholder pursuant to their Basic Entitlement will be
apportioned between those Eligible Shareholders who have applied for the
Excess Entitlement at the sole discretion of the Board, provided that no
Eligible Shareholder shall be required to subscribe for more Open Offer Shares
than they have specified on the Application Form or through CREST.
The Open Offer is conditional upon (amongst other things):
(a) the passing of the Resolutions relating to the Placing, the Retail
Offer and the Open Offer at the General Meeting;
(b) the Placing Agreement becoming unconditional and the Placing
Agreement not having been terminated in accordance with its terms; and
(c) Admission occurring on or before 9 June 2023 (or such later date
as Panmure Gordon, Shore Capital and the Company may agree, not being later
than 23 June 2023).
The Open Offer Shares have not been and are not intended to be registered or
qualified for sale in any jurisdiction other than the United Kingdom.
Accordingly, unless otherwise determined by the Company and effected by the
Company in a lawful manner, the Application Form will not be sent to existing
Shareholders with registered addresses in any jurisdiction other than the
United Kingdom since to do so would require compliance with the relevant
securities laws of that jurisdiction. The Application Form will not be sent to
any Sanctioned Shareholders. Applications from any such person will be deemed
to be invalid. If an Application Form is received by any Sanctioned
Shareholder or any Shareholder whose registered address is elsewhere but who
is in fact a resident or domiciled in a territory other than the United
Kingdom, it should not seek to take up its allocation.
The Circular contains the full terms and conditions of the Open Offer.
9. Recommendation
The Directors consider that the Fundraise and the Resolutions are in the best
interests of the Company and its Shareholders as a whole. The Company is
reliant on the net proceeds of the Placing, the Retail Offer and the Open
Offer to meet its ongoing liquidity requirements and to continue to implement
its strategy. Funds raised through the Placing, the Retail Offer and the Open
Offer will be used primarily to provide growth capital in preparation for
significant scale-up and working capital through expected key valuation
inflection points. The Company intends to use any further funds raised in
connection with the Fundraise (other than through the Placing, the Retail
Offer and the Open Offer) for the purposes of driving the Company's technology
delivery capability and to provide balance sheet strength whilst continuing to
build a revenue generating pipeline. If the Resolutions are not passed by
Shareholders, the Fundraise will not proceed. In these circumstances, the
Directors will need to reconsider the Company's strategy and the Company may
need to seek alternative funding, which may not be available on terms which
are acceptable to the Company or at all. Accordingly, the Directors
unanimously recommend that Shareholders vote in favour of the Resolutions, as
they intend to do in respect of their own legal and/or beneficial
shareholdings, amounting, in aggregate, to 4,654,896 Ordinary Shares
(representing approximately 0.3 per cent. of the Ordinary Shares in the issue
as at the date of this announcement).
APPENDIX II
TERMS AND CONDITIONS OF THE PLACING
INTRODUCTION
IMPORTANT INFORMATION FOR PLACEES ONLY REGARDING THE PLACING.
THIS ANNOUNCEMENT, INCLUDING THIS APPENDIX, AND THE INFORMATION IN IT, IS
RESTRICTED, AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR
INDIRECTLY, IN WHOLE OR IN PART IN OR INTO THE UNITED STATES, CANADA,
AUSTRALIA, NEW ZEALAND, THE REPUBLIC OF SOUTH AFRICA OR JAPAN ("THE EXCLUDED
TERRITORIES") OR ANY OTHER JURISDICTION IN WHICH SUCH PUBLICATION OR
DISTRIBUTION WOULD BE UNLAWFUL.
IMPORTANT INFORMATION ON THE PLACING FOR INVITED PLACEES ONLY.
THE PLACING SHARES THAT ARE THE SUBJECT OF THE PLACING ARE NOT BEING OFFERED
OR SOLD TO ANY PERSON IN THE EUROPEAN UNION OR THE UK, OTHER THAN TO QUALIFIED
INVESTORS, WHICH INCLUDES LEGAL ENTITIES WHICH ARE REGULATED BY THE FCA OR
ENTITIES WHICH ARE NOT SO REGULATED WHOSE CORPORATE PURPOSE IS SOLELY TO
INVEST IN SECURITIES.
MEMBERS OF THE PUBLIC IN THE UK OR ELSEWHERE ARE NOT ELIGIBLE TO TAKE PART IN
THE PLACING. THIS ANNOUNCEMENT (INCLUDING THIS APPENDIX) AND THE TERMS AND
CONDITIONS SET OUT HEREIN ARE FOR INFORMATION PURPOSES ONLY AND ARE DIRECTED
ONLY AT: (A) PERSONS IN A MEMBER STATE OF THE EUROPEAN ECONOMIC AREA WHO ARE
QUALIFIED INVESTORS (WITHIN THE MEANING OF THE PROSPECTUS REGULATION (EU)
2017/1129) ("PROSPECTUS REGULATION"); (B) PERSONS IN THE UNITED KINGDOM WHO
ARE QUALIFIED INVESTORS WITHIN THE MEANING OF THE UK VERSION OF THE PROSPECTUS
REGULATION WHICH IS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION
(WITHDRAWAL) ACT 2018 AS AMENDED AND SUPPLEMENTED (INCLUDING BY THE UK
PROSPECTUS AMENDMENT REGULATIONS 2019 AND THE FINANCIAL SERVICES AND MARKETS
ACT 2000 (PROSPECTUS) REGULATIONS 2019) WHO ALSO (I) HAVE PROFESSIONAL
EXPERIENCE IN MATTERS RELATING TO INVESTMENTS FALLING WITHIN ARTICLE 19(5) OF
THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005
("ORDER") (INVESTMENT PROFESSIONALS) OR (II) FALL WITHIN ARTICLE 49(2)(A) TO
(D) OF THE ORDER (HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS ETC.)
AND (C) THOSE PERSONS TO WHOM IT MAY OTHERWISE BE LAWFULLY COMMUNICATED (EACH
SUCH PERSONS REFERRED TO ABOVE BEING A "RELEVANT PERSON"). THIS ANNOUNCEMENT
(INCLUDING THIS APPENDIX) AND THE TERMS AND CONDITIONS SET OUT HEREIN MUST NOT
BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. ANY
INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS ANNOUNCEMENT (INCLUDING THIS
APPENDIX) AND THE TERMS AND CONDITIONS SET OUT HEREIN RELATES IS AVAILABLE
ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS.
THIS APPENDIX, AND THE ANNOUNCEMENT OF WHICH IT FORMS PART, IS FOR INFORMATION
PURPOSES ONLY IS NOT INTENDED TO FORM THE BASIS OF ANY INVESTMENT ACTIVITY OR
DECISION, AND SHOULD NOT BE CONSIDERED AS A RECOMMENDATION BY THE COMPANY THAT
ANY RECIPIENT SHOULD ACQUIRE ANY INTEREST IN THE SHARE CAPITAL OR ANY OTHER
INTEREST IN THE COMPANY. IT DOES NOT ITSELF CONSTITUTE AN OFFER FOR SALE OR
SUBSCRIPTION OF ANY SECURITIES IN THE COMPANY. IF YOU ARE IN ANY DOUBT AS TO
WHETHER YOU ARE A RELEVANT PERSON YOU SHOULD CONSULT A PROFESSIONAL ADVISER
FOR ADVICE.
THIS ANNOUNCEMENT IS NOT AN OFFER FOR SALE OR SUBSCRIPTION IN ANY JURISDICTION
IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL UNDER THE
SECURITIES LAWS OF ANY SUCH JURISDICTION. THIS ANNOUNCEMENT IS NOT AN OFFER OF
OR SOLICITATION TO PURCHASE OR SUBSCRIBE FOR SECURITIES IN THE UNITED STATES.
THE SECURITIES REFERRED TO HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES EXCEPT PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE
PLACING SHARES ARE BEING OFFERED AND SOLD ONLY (I) OUTSIDE OF THE UNITED
STATES IN "OFFSHORE TRANSACTIONS" AS DEFINED IN AND IN ACCORDANCE WITH
REGULATION S UNDER THE SECURITIES ACT ("REGULATION S") AND OTHERWISE IN
ACCORDANCE WITH APPLICABLE LAWS AND; (II) IN THE UNITED STATES TO A LIMITED
NUMBER OF "QUALIFIED INSTITUTIONAL BUYERS" ("QIB") AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THERE WILL BE NO PUBLIC OFFER OF THE
SECURITIES MENTIONED HEREIN IN THE UNITED STATES.
EACH PLACEE SHOULD CONSULT WITH ITS OWN ADVISERS AS TO LEGAL, TAX, BUSINESS
AND RELATED ASPECTS OF AN INVESTMENT IN PLACING SHARES. THE PRICE OF THE
PLACING SHARES IN THE COMPANY AND THE INCOME FROM THEM (IF ANY) MAY GO DOWN AS
WELL AS UP AND INVESTORS MAY NOT GET BACK THE FULL AMOUNT INVESTED ON DISPOSAL
OF THE PLACING SHARES.
Placees will be deemed to have read and understood this announcement and these
terms and conditions in their entirety and to be making such offer on the
terms and conditions and to be providing the representations, warranties,
acknowledgements, and undertakings contained in this Appendix. In particular,
each such Placee represents warrants and acknowledges that:
1. it is a Relevant Person and undertakes that it will acquire, hold, manage
or dispose of any Placing Shares that are allocated to it for the purposes of
its business;
2. in the case of any Placing Shares acquired by it as a financial
intermediary, as that term is used in Article 5(1) of the Prospectus
Regulation, (i) the Placing Shares acquired by it have not been acquired on
behalf of, nor have they been acquired with a view to their offer or resale
to, persons in any Member State of the EEA or the UK other than Qualified
Investors or in circumstances in which the prior consent of the Joint
Bookrunners has been given to the offer or resale; or (ii) where Placing
Shares have been acquired by it on behalf of persons in any Member State of
the EEA or the UK other than Qualified Investors, the offer of those Placing
Shares to it is not treated under the Prospectus Regulation as having been
made to such persons; and/or
3. except as otherwise permitted by the Company and subject to any available
exemptions from applicable securities laws, it (and any person on whose
account it is acting) is (a) located outside the United States and is
acquiring the Placing Shares in an "offshore transaction" as defined in, and
in accordance with, Regulation S ; or (b) if within the United States, is a
QIB.
The Company and the Joint Bookrunners will rely upon the truth and accuracy of
the foregoing representations, acknowledgements and agreements. Neither of the
Joint Bookrunners makes any representation to any Placee regarding an
investment in the Placing Shares referred to in this announcement (including
this Appendix).
This announcement (including this Appendix) does not constitute an offer and
may not be used in connection with an offer, to sell or issue or the
solicitation of an offer to buy or subscribe for Placing Shares in any
jurisdiction in which such offer or solicitation is or may be unlawful. This
announcement (including this Appendix) and the information contained herein is
not for publication or distribution, directly or indirectly, to persons in the
United States, the Excluded Territories or in any jurisdiction in which such
publication or distribution is unlawful. Persons who come into possession of
this announcement are required by the Company to inform themselves about and
to observe any restrictions of transfer of this announcement. No public offer
of securities of the Company under the Placing is being made in the United
Kingdom, the EEA, the United States, Hong Kong or any Excluded Territory.
In particular, the Placing Shares referred to in this announcement have not
been and will not be registered under the Securities Act or under any laws of,
or with any securities regulatory authority of, any state or other
jurisdiction of the United States, and may not be offered, sold, resold,
transferred or delivered, directly or indirectly, in the United States except
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and in compliance with any
applicable securities laws of any state or other jurisdiction in the United
States. The Placing Shares are only being offered and sold only (i) outside
the United States in offshore transactions as defined in and in accordance
with Regulation S; and (ii) in the United States to a limited number of QIBs
pursuant to an exemption from the registration requirements of the Securities
Act.
The relevant clearances have not been, nor will they be, obtained from the
securities commission of any province or territory of Canada; no prospectus
has been lodged with or registered by the Australian Securities and
Investments Commission or the Japanese Ministry of Finance; and the Placing
Shares have not been, nor will they be, registered under or offered in
compliance with the securities laws of any state, province or territory of any
of the Excluded Territories. Accordingly, the Placing Shares may not (unless
an exemption under the relevant securities laws is applicable) be offered,
sold, resold or delivered, directly or indirectly, in or into the Excluded
Territories or any other jurisdiction where it would be unlawful to do so.
Persons (including, without limitation, nominees and trustees) who have a
contractual or other legal obligation to forward a copy of this Appendix or
the announcement of which it forms part should seek appropriate advice before
taking any action.
TIMETABLE FOR THE PLACING
Following the release of this announcement, the Joint Bookrunners will today
commence the Bookbuild to determine demand for participation in the Placing by
Placees. This Appendix gives details of the terms and conditions of, and the
mechanics of participation in, the Placing. No commissions will be paid to
Placees or by Placees in respect of any Placing Shares.
The Joint Bookrunners and the Company shall be entitled to effect the Placing
by such alternative method to the Bookbuild as they may, in their sole
discretion, determine.
The number of the Placing Shares will be established in the Bookbuild and
announced by the Company through a Regulatory Information Service following
the completion of the Bookbuild and the entry into the Placing Shares
Agreement by the Company and the Joint Bookrunners.
Various dates referred to in this announcement are stated on the basis of the
expected timetable for the Placing. It is possible that some of these dates
may be changed. The Placing Shares will be allotted on 8 June 2023,
conditional upon Admission becoming effective on 9 June 2023.
DETAILS OF THE PLACING
The Joint Bookrunners have entered into the Placing Agreement with the Company
under which the Joint Bookrunners have (severally, and not jointly or jointly
and severally), on the terms and subject to the conditions set out therein,
undertaken to use their respective reasonable endeavours to procure, as agents
for the Company, subscribers for the Placing Shares at the Issue Price.
The Placing Agreement contains customary warranties and indemnities given by
the Company to the Joint Bookrunners as to matters relating to the Company and
its business in respect of liabilities arising out of, or in connection with,
the Placing.
The Bookbuild is expected to close at 11.00 a.m. GMT tomorrow, 19 May 2023,
but may be closed earlier, or later, at the discretion of the Joint
Bookrunners. The Joint Bookrunners may, in agreement with the Company, accept
bids received after the Bookbuild has closed.
The Joint Bookrunners (after consultation with the Company and on the basis of
allocations agreed between the Company and the Joint Bookrunners) reserve the
right to scale back the number of Placing Shares to be subscribed by any
Placee in the event of applications in excess of the target amount under the
Placing. The Company and the Joint Bookrunners also reserve the right not to
accept offers to subscribe for Placing Shares or to accept such offer in part
rather than in whole. The Joint Bookrunners shall be entitled to effect the
Placing by such method as they shall in their sole discretion determine. To
the fullest extent permissible by law, neither of the Joint Bookrunners nor
any holding company of a Joint Bookrunner nor any subsidiary branch or
affiliate of a Joint Bookrunner (each an affiliate) nor any person acting on
behalf of any of the foregoing shall have any liability to the Placees (or to
any other person whether acting on behalf of a Placee or otherwise). In
particular, neither of the Joint Bookrunners, nor any affiliate thereof nor
any person acting on their respective behalves shall have any liability to
Placees in respect of their conduct of the Bookbuild or the Placing.
Each Placee's obligations will be owed to the Company and to the Joint
Bookrunners. Following the confirmation referred to below in the paragraph
entitled "Participation in, and principal terms of, the Placing", each Placee
will also have an immediate, separate, irrevocable and binding obligation,
owed to the Joint Bookrunners, to pay to Panmure Gordon or Shore Capital (as
the case maybe) (or as they shall each respectively direct) in cleared funds
an amount equal to the product of the Issue Price and the number of Placing
Shares which such Placees has agreed to acquire.
Each Placee and any person acting on behalf of such Placee agrees to indemnify
on demand and hold each of the Joint Bookrunners and the Company, and their
respective affiliates harmless from any costs, claims, liabilities and
expenses (including legal fees and expenses) arising out of or in connection
with any breach of the acknowledgments, undertakings, representations,
warranties and agreements set forth in these terms and conditions and any
contract note.
The Placing is also conditional upon the Placing Agreement becoming
unconditional and the Placing Agreement not being terminated in accordance
with its terms. Further details of conditions in relation to the Placing are
set out below in the paragraph entitled "Conditions of the Placing". All
obligations under the Placing will be subject to the fulfilment of the
conditions referred to below in the paragraph entitled "Conditions of the
Placing".
To the fullest extent permitted by law, each Placee acknowledges and agrees
that it will not be entitled to exercise any remedy of rescission at any time.
This does not affect any other rights the Placee may have.
APPLICATION FOR ADMISSION TO TRADING
Application will be made to the London Stock Exchange for the Admission of the
Placing Shares and Admission is expected to become effective at 8.00 a.m. on
or around 9 June 2023 and dealings in the Placing Shares will commence at that
time.
Settlement of transactions in the Placing Shares following Admission will take
place within the system administered by CREST, subject to certain exceptions.
The Company reserves the right to require settlement for and delivery of the
Placing Shares to Placees in certificated form if either of the Joint
Bookrunners or the Company in its absolute discretion considers this to be
necessary or desirable.
PAYMENT FOR SHARES
Each Placee has a separate, irrevocable and binding obligation to pay the
Issue Price in cleared funds for the number of Placing Shares duly allocated
to the Placee under the Placing in the manner and by the time directed by the
Joint Bookrunners. If any Placee fails to pay as so directed and/or by the
time directed, the relevant Placee's application for Placing Shares shall at
the Joint Bookrunners' discretion either be rejected or accepted in which case
the paragraph below entitled "Registration and Settlement" shall apply to such
application.
PARTICIPATION IN, AND PRINCIPAL TERMS OF, THE PLACING
Each Joint Bookrunner (whether through itself or any of its affiliates) is
arranging the Placing as placing agent of the Company and using its reasonable
endeavours to procure Placees at the Issue Price for the Placing Shares.
Participation in the Placing will only be available to persons who may
lawfully be, and are, invited to participate by the Joint Bookrunners. The
Joint Bookrunners and its affiliates may participate in the Placing as
principal.
By participating in the Placing, Placees will be deemed to have read and
understood this announcement, including this Appendix, in its entirety and to
be participating and making an offer for Placing Shares on the terms and
conditions, and to be providing the representations, warranties,
acknowledgements, agreements and undertakings contained in this Appendix.
This Appendix gives details of the terms and conditions of, and the mechanics
of participation in, the Placing. No commissions will be paid to Placees or by
Placees in respect of any Placing Shares.
The number of Placing Shares to be issued, and the extent of each Placee's
participation in the Placing (which will not necessarily be the same for each
Placee), will be agreed between the Joint Bookrunners and the Company
following completion of the bookbuilding process in respect of the Placing
(the "Bookbuild"). No element of the Placing will be underwritten. The
aggregate number of Placing Shares will be announced on a Regulatory
Information Service following completion of the Bookbuild.
A Placee's commitment to acquire a fixed number of Placing Shares under the
Placing will be agreed orally or by email with a Joint Bookrunner as agent of
the Company. Each Placee's allocation will be confirmed to Placees orally or
by email by the relevant Joint Bookrunner, and a form of confirmation will be
dispatched as soon as possible thereafter. The oral or email confirmation to
such Placee will constitute an irrevocable legally binding commitment upon
such person (who will at that point become a Placee) in favour of the Joint
Bookrunners and the Company, under which it agrees to acquire the number of
Placing Shares allocated to it at the Issue Price on the terms and conditions
set out in this Appendix and in accordance with the articles of incorporation
of the Company.
Except as required by law or regulation, no press release or other
announcement will be made by the Joint Bookrunners or the Company using the
name of any Placee (or its agent), in its capacity as Placee (or agent), other
than with such Placee's prior written consent.
Irrespective of the time at which a Placee's allocation pursuant to the
Placing is confirmed, settlement for all Placing Shares to be acquired
pursuant to the Placing will be required to be made on the basis explained
below under the paragraph entitled "Registration and Settlement".
All obligations under the Placing will be subject to fulfilment or (where
applicable) waiver of, amongst other things, the conditions referred to below
and to the Placing not being terminated on the basis referred to below.
By participating in the Placing, each Placee will agree that its rights and
obligations in respect of the Placing will terminate only in the circumstances
described below and will not be capable of rescission or termination by the
Placee.
To the fullest extent permissible by law, none of the Company, the Joint
Bookrunners or any of their respective affiliates shall have any liability to
Placees (or to any other person whether acting on behalf of a Placee or
otherwise under these terms and conditions). In particular, none of the
Company, the Joint Bookrunners or any of its respective affiliates shall have
any liability (including to the fullest extent permissible by law, any
fiduciary duties) in respect of the Joint Bookrunners' conduct of the Placing.
Each Placee acknowledges and agrees that the Company is responsible for the
issue of the Placing Shares to the Placees and the Joint Bookrunners shall
have no liability to the Placees for the failure of the Company to fulfil
those obligations.
CONDITIONS OF THE PLACING
The Placing is conditional upon the Placing Agreement becoming unconditional
and not having been terminated in accordance with its terms.
The Joint Bookrunners' obligations under the Placing Agreement (which are
several and not joint, or joint and several) in respect of the Placing Shares
are conditional on, inter alia:
1. the passing of the Resolutions relating to the Placing, the Retail
Offer and the Open Offer at the General Meeting;
2. the Company allotting, subject only to Admission, the Placing Shares
in accordance with the Placing Agreement;
3. none of the warranties given by the Company in the Placing Agreement
being untrue, inaccurate or misleading to an extent which would be material as
at the date of the Placing Agreement or at any time between the date of the
Placing Agreement and Admission;
4. Admission having occurred by no later than 8.00 a.m. on or around 9
June 2023 or such later date as the Company and the Joint Bookrunners may
agree, but in any event not later than the Placing Long Stop Date; and
5. the Company having complied with its obligations under the Placing
Agreement.
For the avoidance of doubt the Placing is not conditional on any of the Retail
Offer, the Open Offer, the issuance of the Convertible Loan Notes or the
Minimum Amount being raised by the Fundraise.
If (a) any of the conditions contained in the Placing Agreement in relation to
the Placing Shares are not fulfilled or waived by the Joint Bookrunners by the
respective time or date where specified (or such later time or date as the
Company and the Joint Bookrunners may agree not being later than 8.00 a.m. on
23 June 2023 (the "Placing Long Stop Date"); or (b) the Placing Agreement is
terminated as described below, the Placing in relation to the Placing Shares
will lapse and the Placee's rights and obligations hereunder in relation to
the Placing Shares shall cease and terminate at such time and each Placee
agrees that no claim can be made by the Placee in respect thereof.
Subject to certain exceptions, the Joint Bookrunners may, at their absolute
discretion and upon such terms as they think fit, waive, or extend the period
(up to the Placing Long Stop Date) for, compliance by the Company with the
whole or any part of any of the Company's obligations in relation to the
conditions in the Placing Agreement. Any such extension or waiver will not
affect Placees' commitments as set out in this announcement.
Neither of the Joint Bookrunners nor the Company shall have any liability to
any Placee (or to any other person whether acting on behalf of a Placee or
otherwise) in respect of any decision they may make as to whether or not to
waive or to extend the time and/or date for the satisfaction of any condition
to the Placing nor for any decision they may make as to the satisfaction of
any condition or in respect of the Placing generally and by participating in
the Placing each Placee agrees that any such decision is within the absolute
discretion of the Joint Bookrunners.
RIGHT TO TERMINATE UNDER THE PLACING AGREEMENT
Either Joint Bookrunners is entitled, at any time before Admission, to
terminate the Placing Agreement by giving notice to the Company in certain
circumstances, including, inter alia:
1. the Company is in breach of any of its material obligations under
the Placing Agreement or cannot comply with such material obligation; or
2. any of the warranties given by the Company to the Joint Bookrunners
under the Placing Agreement is, or if repeated at any time up to Admission
would cause it to be, untrue, inaccurate or misleading in any material
respect; or
3. a matter having arisen prior to Admission in respect of which a
claim for indemnification under the Placing Agreement may be sought;
4. if, amongst other things, there is a substantial change in any
national or international political, military, diplomatic, economic, financial
or market conditions which in the Joint Bookrunner's opinion (acting in good
faith and after such consultation with the Company or the other Joint
Bookrunner as shall be practicable in the circumstances) would have or be
likely to have a material and adverse effect on the Placing, the Retail Offer
or Open Offer, or dealings in New Ordinary Shares in the secondary market or
is of such magnitude to render the Fundraise, or the creation of a market in
the New Ordinary Shares temporarily or permanently impracticable or
inadvisable; or
5. if it comes to the notice of the Joint Bookrunner that any
statement contained in any Placing Document become untrue, inaccurate or
misleading in any material respect or matters have arisen which would, if the
Circular was issued at that time, constitute a material omission therefrom.
Following Admission, the Placing Agreement is not capable of termination to
the extent it relates to the Placing of any of the Placing Shares.
The rights and obligations of the Placees shall terminate only in the
circumstances described in these terms and conditions and in the Placing
Agreement and will not be subject to termination by the Placee or any
prospective Placee at any time or in any circumstances. By participating in
the Placing, Placees agree that the exercise by a Joint Bookrunner of any
right of termination or other discretion under the Placing Agreement shall be
within the absolute discretion of such Joint Bookrunner and that it need not
make any reference to Placees and that it shall have no liability to Placees
whatsoever in connection with any such exercise or decision not to exercise.
Placees will have no rights against the Joint Bookrunners, the Company or any
of their respective directors or employees under the Placing Agreement
pursuant to the Contracts (Rights of Third Parties) Act 1999 (as amended).
NO PROSPECTUS
The Placing Shares are being offered to Relevant Persons only and will not be
offered in such a way as to require a prospectus in the United Kingdom or
elsewhere under the Prospectus Regulation Rules Sourcebook published by the
FCA. No offering document or prospectus has been or will be submitted to be
approved by the FCA or any other party in relation to the Placing and Placees'
commitments will be made solely on the basis of the information contained in
this announcement (including this Appendix) and certain business and financial
information the Company is required to publish in accordance with the
Companies Act 2006, the AIM Rules and the rules and practices of the FCA
(collectively "Exchange Information"), save that in the case of Exchange
Information a Placee's right to rely on that information is limited to the
right that such Placee would have as a matter of law in the absence of this
paragraph.
Each Placee, by accepting a participation in the Placing, agrees that the
content of this announcement, including this Appendix, is exclusively the
responsibility of the Company and confirms that it has not relied on any other
information (other than the Exchange Information), representation, warranty,
or statement made by or on behalf of the Company or the Joint Bookrunners or
any other person and neither of the Joint Bookrunners nor the Company nor any
other person will be liable for any Placee's decision to participate in the
Placing based on any other information, representation, warranty or statement
which the Placees may have obtained or received. Each Placee acknowledges and
agrees that it has relied on its own investigation of the business, financial
or other position of the Company in accepting a participation in the Placing.
Nothing in this paragraph shall exclude the liability of any person for
fraudulent misrepresentation.
REGISTRATION AND SETTLEMENT
Settlement of transactions in the Placing Shares (ISIN: GB00B11SZ269)
following Admission will take place within the relevant system administered by
Euroclear, being CREST provided that, subject to certain exceptions, the Joint
Bookrunners reserve the right to require settlement for, and delivery of, the
Placing Shares (or a portion thereof) to Placees by such other means that they
deem necessary if delivery or settlement is not possible or practicable within
CREST within the timetable set out in this announcement or would not be
consistent with the regulatory requirements in any Placee's jurisdiction. The
Company reserves the right to require settlement for and delivery of the
Placing Shares to Placees in certificated form if any of the Joint Bookrunners
or the Company in its absolute discretion considers this to be necessary or
desirable.
Following the close of the Bookbuild, each Placee allocated Placing Shares in
the Placing will be sent a form of confirmation stating the number of Placing
Shares allocated to it at the Issue Price, the aggregate amount owed by such
Placee to the relevant Joint Bookrunner (as agent for the Company) and
settlement instructions (including the trade date which will be 19 May 2023).
Each Placee agrees that it will do all things necessary to ensure that
delivery and payment is completed in accordance with either the CREST or
certificated settlement instructions that it has in place with the relevant
Joint Bookrunner. Each Placee will also be sent a trade confirmation on the
trade date (referred to above) confirming the details of the trade (being the
acquisition of the relevant number of Placing Shares).
Admission and settlement may occur at an earlier date. Settlement will be on a
delivery versus payment basis. However, in the event of any difficulties or
delays in the admission of the Placing Shares to CREST or the use of CREST in
relation to the Placing, the Company and the Joint Bookrunners may agree that
the Placing Shares should be issued in certificated form. The Joint
Bookrunners and the Company reserves the right to require settlement for the
Placing Shares, and to deliver the Placing Shares to Placees, by such other
means as they deem necessary if delivery or settlement to Placees is not
practicable within the CREST system or would not be consistent with regulatory
requirements in a Placee's jurisdiction.
Interest is chargeable daily on payments not received from Placees on the due
date in accordance with the arrangements set out above at the rate of two
percentage points above LIBOR as determined by the relevant the Joint
Bookrunner.
Each Placee is deemed to agree that, if it does not comply with these
obligations, the Joint Bookrunners (or either of them) may sell any or all of
the Placing Shares allocated to that Placee on such Placee's behalf and retain
from the proceeds, for the relevant the Joint Bookrunners' account and benefit
(as agent for the Company), an amount equal to the aggregate amount owed by
the Placee plus any interest due. Any excess proceeds will pass to the
relevant Placee at its risk. The relevant Placee will, however, remain liable
and shall indemnify the Joint Bookrunners on demand for any shortfall below
the aggregate amount owed by it and may be required to bear any stamp duty or
stamp duty reserve tax or securities transfer tax (together with any interest
or penalties) which may arise upon the sale of such Placing Shares on such
Placee's behalf. By communicating a bid for Placing Shares, each Placee
confers on the Joint Bookrunners all such authorities and powers necessary to
carry out any such sale and agrees to ratify and confirm all actions which the
Joint Bookrunners lawfully takes in pursuance of such sale.
If Placing Shares are to be delivered to a custodian or settlement agent,
Placees should ensure that the form of confirmation is copied and delivered
immediately to the relevant person within that organisation.
Insofar as Placing Shares are registered in a Placee's name or that of its
nominee or in the name of any person for whom a Placee is contracting as agent
or that of a nominee for such person, such Placing Shares should, subject as
provided below, be so registered free from any liability to UK stamp duty or
stamp duty reserve tax or securities transfer tax. Placees will not be
entitled to receive any fee or commission in connection with the Placing.
REPRESENTATIONS, WARRANTIES AND FURTHER TERMS
By submitting a bid and/or participating in the Placing, each Placee (and any
person acting on such Placee's behalf) makes the following representations,
warranties, acknowledgements, agreements and undertakings (as the case may be)
to the Company and the Joint Bookrunners, namely that, each Placee (and any
person acting on such Placee's behalf):
1. represents and warrants that it has read and understood this
announcement, including this Appendix, in its entirety and that its
subscription for and purchase of the Placing Shares is subject to, and based
upon, all the terms, conditions, representations, warranties,
acknowledgements, agreements and undertakings and other information contained
herein and undertakes not to redistribute or duplicate this announcement
(including this Appendix);
2. acknowledges that no offering document or prospectus has been
prepared in connection with the placing of the Placing Shares and represents
and warrants that it has not received and will not receive a prospectus,
admission document or other offering document in connection therewith;
3. acknowledges that the Ordinary Shares are admitted to trading on
AIM, and the Company is therefore required to publish Exchange Information,
which includes a description of the nature of the Company's business and the
Company's most recent balance sheet and profit and loss account and that the
Placee is able to obtain or access such information without undue difficulty,
and is able to obtain access to such information or comparable information
concerning any other publicly traded company, without undue difficulty;
4. acknowledges that the content of this announcement (including this
Appendix) is exclusively the responsibility of the Company, and that neither
Joint Bookrunner, their respective affiliates or any person acting on their
behalf has or shall have any liability for any information, representation or
statement contained in this announcement (including this Appendix) or any
information previously or concurrently published by or on behalf of the
Company (including any Exchange Information), and will not be liable for any
Placee's decision to participate in the Placing based on any information,
representation or statement contained in this announcement (including this
Appendix) or otherwise. Each Placee further represents, warrants and agrees
that the only information on which it is entitled to rely and on which such
Placee has relied in committing itself to acquire the Placing Shares is
contained in this announcement (including this Appendix) and any Exchange
Information (save that in the case of Exchange Information, a Placee's right
to rely on that information is limited to the right that such Placee would
have as a matter of law in the absence of this paragraph), such information
being all that it deems necessary to make an investment decision in respect of
the Placing Shares and that it has neither received nor relied on any other
information given or representations, warranties or statements made by the
Joint Bookrunners or the Company or any of their respective directors,
officers or employees or any person acting on behalf of any of them (including
with respect to the Company, the Placing, the Placing Shares or the accuracy,
completeness or adequacy of any publicly available information), or, if
received, it has not relied upon any such information, representations,
warranties or statements, and neither of the Joint Bookrunners nor the Company
will be liable for any Placee's decision to accept an invitation to
participate in the Placing based on any other information, representation,
warranty or statement. Each Placee further acknowledges and agrees that it may
not place the same degree of reliance on this announcement as it may otherwise
place on a prospectus or admission document. Each Placee further acknowledges
and agrees that it has relied solely on its own investigation of the business,
financial or other position of the Company and the terms of the Placing in
deciding to participate in the Placing and it will not rely on any
investigation that the Joint Bookrunners, their affiliates or any other person
acting on their behalf has or may have conducted;
5. represents and warrants that it has neither received nor relied on
any confidential price sensitive information concerning the Company in
accepting this invitation to participate in the Placing;
6. time is of the essence as regards its obligations under this
announcement;
7. acknowledges that the Joint Bookrunners do not have any duties or
responsibilities to it, or its clients, similar or comparable to the duties of
"best execution" and "suitability" imposed by the Conduct of Business
Sourcebook in the FCA's Handbook of Rules and Guidance and that neither
Panmure Gordon nor Shore Capital is acting for it or its clients and that the
Joint Bookrunners will not be responsible for providing protections to their
respective clients;
8. acknowledges that neither of the Joint Bookrunners, any of their
affiliates or any persons acting on behalf of them has or shall have any
liability for any publicly available or filed information (including any
Exchange Information) or any representation relating to the Company, provided
that nothing in this paragraph excludes the liability of any person for
fraudulent misrepresentation made by that person;
9. that, save in the event of fraud on the part of the relevant Joint
Bookrunners (and to the extent permitted by the FCA), neither of the Joint
Bookrunners, their respective ultimate holding companies nor any direct or
indirect subsidiary undertakings of such holding companies, nor any of their
respective directors and employees shall be liable to Placees for any matter
arising out of either Joint Bookrunners' role as placing agent or otherwise in
connection with the Placing and that where any such liability nevertheless
arises as a matter of law, Placees will immediately waive any claim against
any of such persons which it may have in respect thereof;
10. represents and warrants that it is not a person located in the United
States and is eligible to participate in an "offshore transaction" as defined
in and in accordance with Regulation S and the Placing Shares were not offered
to it by means of "directed selling efforts" as defined in Regulation S;
11. unless otherwise specifically agreed in writing with the Joint
Bookrunners, represents and warrants that neither it nor the beneficial owner
of such Placing Shares will be a resident of an Excluded Territory;
12. acknowledges that the Placing Shares have not been and will not be
registered under the securities legislation of Excluded Territories and,
subject to certain exceptions, may not be offered, sold, taken up, renounced
or delivered or transferred, directly or indirectly, within those
jurisdictions;
13. that, in relation to any Placee located in Hong Kong, it is a
professional investor as defined under the Securities and Futures Ordinance
(Cap. 571);
14. represents and warrants that the issue to it, or the person specified by
it for registration as holder, of Placing Shares will not give rise to a
liability under any of sections 67, 70, 93 or 96 of the Finance Act 1986
(depositary receipts and clearance services) and that the Placing Shares are
not being acquired in connection with arrangements to issue depositary
receipts or to transfer Placing Shares into a clearance system;
15. represents and warrants that: (i) it has complied with and will continue
to comply with its obligations under the Market Abuse Regulation (EU) No.
596/2014 (or the Market Abuse Regulation (EU) No. 596/2014 as retained in UK
law), Criminal Justice Act 1993 and Part VIII of the Financial Services and
Markets Act 2000, as amended ("FSMA") and other applicable law; (ii) in
connection with money laundering and terrorist financing, it has complied with
its obligations under the Proceeds of Crime Act 2002 (as amended), the
Terrorism Act 2000 (as amended), the Terrorism Act 2006, the Money Laundering,
Terrorist Financing and Transfer of Funds (Information on the Payer) 2017
Regulations, and any other applicable law (where all such legislation listed
under this (ii) shall together be referred to as the "AML Legislation"); and
(iii) it is not a person: (1) with whom transactions are prohibited under the
Foreign Corrupt Practices Act of 1977 or any economic sanction programmes
administered by, or regulations promulgated by, the Office of Foreign Assets
Control of the U.S. Department of the Treasury; (2) named on the Consolidated
List of Financial Sanctions Targets maintained by HM Treasury of the United
Kingdom; or (3) subject to financial sanctions imposed pursuant to a
regulation of the EU or a regulation adopted by the United Nations (together,
the "Regulations"); and, if making payment on behalf of a third party, that
satisfactory evidence has been obtained and recorded by it to verify the
identity of the third party as required by the Regulations and pursuant to AML
Legislation and has obtained all governmental and other consents (if any)
which may be required for the purpose of, or as a consequence of, such
purchase, and it will provide promptly to the Joint Bookrunners or the Company
such evidence, if any, as to the identity or location or legal status of any
person (including in relation to the beneficial ownership of any underlying
investor) which the Joint Bookrunners or the Company may request from it in
connection with the Placing (for the purpose of complying with such
Regulations or ascertaining the nationality of any person or the
jurisdiction(s) to which any person is subject or otherwise or any other
information as may be required to comply with legal or regulatory requirements
(including in particular under the AML Legislation)) in the form and manner
requested by the Joint Bookrunners or the Company on the basis that any
failure by it to do so may result in the number of Placing Shares that are to
be purchased by it or at its direction pursuant to the Placing being reduced
to such number, or to nil, as the Joint Bookrunners and the Company may decide
at their sole discretion;
16. if a financial intermediary, as that term is used in Article 5(1) of the
UK Prospectus Regulation, represents and warrants that the Placing Shares
purchased by it in the Placing will not be acquired on a non-discretionary
basis on behalf of, nor will they be acquired with a view to their offer or
resale to, persons in a Member State of the EEA or the UK other than EU
Qualified Investors or UK Qualified Investors respectively, or in
circumstances in which the prior consent of the Joint Bookrunners has been
given to the offer or resale;
17. represents and warrants that it has not offered or sold and will not
offer or sell any Placing Shares to persons in the EEA or the UK prior to
Admission except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their business or otherwise in circumstances which
have not resulted in and which will not result in an offer to the public in
any Member State of the EEA or the UK within the meaning of the EU Prospectus
Regulation or UK Prospectus Regulation respectively;
18. represents and warrants that it has only communicated or caused to be
communicated and will only communicate or cause to be communicated any
invitation or inducement to engage in investment activity (within the meaning
of section 21 of the FSMA) relating to the Placing Shares in circumstances in
which section 21(1) of the FSMA does not require approval of the communication
by an authorised person;
19. represents and warrants that it has complied and will comply with all
applicable provisions of the FSMA and the Financial Services Act 2012 with
respect to anything done by it in relation to the Placing Shares in, from or
otherwise involving, the United Kingdom;
20. if in the United Kingdom, represents and warrants that it is a UK
Qualified Investor who: (i) falls with Articles 49(2)(A) to (D) or 19(5) of
the Financial Promotion Order or (ii) it is a person to whom the Placing
Shares may otherwise be lawfully offered under the Financial Promotion Order
or, if it is receiving the offer in circumstances under which the laws or
regulations of a jurisdiction other than the United Kingdom would apply, it is
a person to whom the Placing Shares may be lawfully offered under that other
jurisdiction's laws and regulations; and (iii) is a "professional client" or
an "eligible counterparty" within the meaning of Chapter 3 of the FCA's
Conduct of Business Sourcebook;
21. represents and warrants that it and any person acting on its behalf is
entitled to acquire the Placing Shares under the laws of all relevant
jurisdictions and that it has all necessary capacity and has obtained all
necessary consents and authorities and taken any other necessary actions to
enable it to commit to this participation in the Placing and to perform its
obligations in relation thereto (including, without limitation, in the case of
any person on whose behalf it is acting, all necessary consents and
authorities to agree to the terms set out or referred to in this announcement
(including this Appendix)) and will honour such obligations;
22. represents and warrants that it is not, and it is not acting on behalf
of, a Sanctioned Shareholder;
23. where it is acquiring Placing Shares for one or more managed accounts,
represents and warrants that it is authorised in writing by each managed
account: (i) to acquire the Placing Shares for each managed account; (ii) to
make on its behalf the representations, warranties, acknowledgements,
undertakings and agreements in this Appendix and the announcement of which it
forms part; and (iii) to receive on its behalf any investment letter relating
to the Placing in the form provided to it by a Joint Bookrunner;
24. undertakes that it (and any person acting on its behalf) will make
payment for the Placing Shares allocated to it in accordance with this
announcement (including this Appendix) on the due time and date set out
herein, failing which the relevant Placing Shares may be placed with other
subscribers or sold as the Joint Bookrunners may in their sole discretion
determine and without liability to such Placee and it will remain liable and
will indemnify the Joint Bookrunners on demand for any shortfall below the net
proceeds of such sale and the placing proceeds of such Placing Shares and may
be required to bear the liability for any stamp duty or stamp duty reserve tax
or security transfer tax (together with any interest or penalties due pursuant
to or referred to in these terms and conditions) which may arise upon the
placing or sale of such Placee's Placing Shares on its behalf;
25. acknowledges that neither of the Joint Bookrunners, nor any of their
respective affiliates, or any person acting on behalf of any of them, is
making any recommendations to it, advising it regarding the suitability of any
transactions it may enter into in connection with the Placing and that
participation in the Placing is on the basis that it is not and will not be
treated for these purposes as a client of either Joint Bookrunner and that
either of the Joint Bookrunners does not have any duties or responsibilities
to it for providing the protections afforded to their respective clients or
customers or for providing advice in relation to the Placing nor in respect of
any representations, warranties, undertakings or indemnities contained in the
Placing Agreement nor for the exercise or performance of any of their rights
and obligations thereunder, including any rights to waive or vary any
conditions or exercise any termination right;
26. undertakes that the person whom it specifies for registration as holder
of the Placing Shares will be (i) itself; or (ii) its nominee, as the case may
be. Neither of the Joint Bookrunners nor the Company will be responsible for
any liability to stamp duty or stamp duty reserve tax resulting from a failure
to observe this requirement. Each Placee and any person acting on behalf of
such Placee agrees to participate in the Placing and it agrees to indemnify
the Company and the Joint Bookrunners in respect of the same on the basis that
the Placing Shares will be issued to the CREST stock account of a Joint
Bookrunner who will hold them as nominee on behalf of such Placee until
settlement in accordance with its standing settlement instructions;
27. acknowledges that these terms and conditions and any agreements entered
into by it pursuant to these terms and conditions and any non-contractual
obligations arising out of or in connection with such agreement shall be
governed by and construed in accordance with the laws of England and it
submits (on behalf of itself and on behalf of any person on whose behalf it is
acting) to the exclusive jurisdiction of the English courts as regards any
claim, dispute or matter (including non-contractual matters) arising out of
any such contract, except that enforcement proceedings in respect of the
obligation to make payment for the Placing Shares (together with any interest
chargeable thereon) may be taken by the Company or a Joint Bookrunner in any
jurisdiction in which the relevant Placee is incorporated or in which any of
its securities have a quotation on a recognised stock exchange;
28. agrees that the Company, the Joint Bookrunners and their respective
affiliates and others will rely upon the truth and accuracy of the foregoing
representations, warranties, acknowledgements and undertakings which are given
to each of the Joint Bookrunners on its own behalf and on behalf of the
Company and are irrevocable and are irrevocably authorised to produce this
announcement or a copy thereof to any interested party in any administrative
or legal proceeding or official inquiry with respect to the matters covered
hereby;
29. agrees to indemnify on an after-tax basis and hold the Company, the
Joint Bookrunners and their respective affiliates harmless from any and all
costs, claims, liabilities and expenses (including legal fees and expenses)
arising out of or in connection with any breach of the representations,
warranties, acknowledgements, agreements and undertakings in this Appendix and
that the provisions of this Appendix shall survive after completion of the
Placing and, further agrees if any of the foregoing is or becomes no longer
true or accurate, the Placee shall promptly notify the Company and the Joint
Bookrunners;
30. acknowledges that no action has been or will be taken by any of the
Company, the Joint Bookrunners or any person acting on behalf of the Company
or the Joint Bookrunners that would, or is intended to, permit a public offer
of the Placing Shares in any country or jurisdiction where any such action for
that purpose is required;
31. acknowledges that it is an institution that has knowledge and experience
in financial, business and international investment matters as is required to
evaluate the merits and risks of subscribing for the Placing Shares. It
further acknowledges that it is experienced in investing in securities of this
nature and in this sector and is aware that it may be required to bear, and
it, and any accounts for which it may be acting, are able to bear, the
economic risk of, and is able to sustain, a complete loss in connection with
the Placing. It has relied upon its own examination and due diligence of the
Company and its associates taken as a whole, and the terms of the Placing,
including the merits and risks involved;
32. acknowledges that its commitment to subscribe for Placing Shares on the
terms set out herein will continue, notwithstanding any amendment that may in
the future be made to the terms of the Placing and that Placees will have no
right to be consulted or require that their consent be obtained with respect
to the Company's conduct of the Placing;
33. acknowledges that a Joint Bookrunner or any of its affiliates acting as
an investor for its own account may take up shares in the Company and in that
capacity may retain, purchase or sell for its own account such shares and may
offer or sell such shares other than in connection with the Placing;
34. represents and warrants that, if it is a pension fund or investment
company, its purchase of Placing Shares is in full compliance with all
applicable laws and regulation; and
35. to the fullest extent permitted by law, it acknowledges and agrees to
the disclaimers contained in the announcement, including this Appendix.
The representations, warranties, acknowledgments and undertakings contained in
this Appendix are given to the Joint Bookrunners and the Company and are
irrevocable and shall not be capable of termination in any circumstances.
The agreement to settle a Placee's subscription (and/or the subscription of a
person for whom such Placee is contracting as agent) free of stamp duty and
stamp duty reserve tax depends on the settlement relating only to a
subscription by it and/or such person direct from the Company for the Placing
Shares in question. Such agreement assumes that the Placing Shares are not
being subscribed for in connection with arrangements to issue depositary
receipts or to transfer the Placing Shares into a clearance service. If there
are any such arrangements, or the settlement relates to any other subsequent
dealing in the Placing Shares, stamp duty or stamp duty reserve tax may be
payable, for which neither the Company nor the Joint Bookrunners will be
responsible, and the Placee to whom (or on behalf of whom, or in respect of
the person for whom it is participating in the Placing as an agent or nominee)
the allocation, issue or delivery of Placing Shares has given rise to such UK
stamp duty or stamp duty reserve tax undertakes to pay such UK stamp duty or
stamp duty reserve tax forthwith and to indemnify on an after-tax basis and to
hold harmless the Company and the Joint Bookrunners in the event that any of
the Company and/or the Joint Bookrunners has incurred any such liability to UK
stamp duty or stamp duty reserve tax. If this is the case, each Placee should
seek its own advice and notify the Joint Bookrunners accordingly.
In addition, Placees should note that they will be liable for any stamp duty
and all other stamp, issue, securities, transfer, registration, documentary or
other duties or taxes (including any interest, fines or penalties relating
thereto) payable outside the UK by them or any other person on the
subscription by them of any Placing Shares or the agreement by them to
subscribe for any Placing Shares.
Each Placee, and any person acting on behalf of the Placee, acknowledges that
the Joint Bookrunners does not owe any fiduciary or other duties to any Placee
in respect of any representations, warranties, undertakings or indemnities in
the Placing Agreement.
Each Placee and any person acting on behalf of the Placee acknowledges and
agrees that the Joint Bookrunners or any of their affiliates may, at their
absolute discretion, agree to become a Placee in respect of some or all of the
Placing Shares.
When a Placee or person acting on behalf of the Placee is dealing with a Joint
Bookrunner any money held in an account with such Joint Bookrunner on behalf
of the Placee and/or any person acting on behalf of the Placee will not be
treated as client money within the meaning of the rules and regulations of the
FCA made under the FSMA. The Placee acknowledges that the money will not be
subject to the protections conferred by the client money rules; as a
consequence, this money will not be segregated from the relevant Joint
Bookrunners' money in accordance with the client money rules and will be used
by that Joint Bookrunner in the course of its own business and the Placee will
rank only as a general creditor of that Joint Bookrunner.
All times and dates in this announcement (including this Appendix) may be
subject to amendment, and Placees' commitments, representations and warranties
are not conditional on any of the expected times and dates in this
announcement (including this Appendix) being achieved. The Joint Bookrunners
shall notify the Placees and any person acting on behalf of the Placees of any
changes.
Past performance is no guide to future performance and persons needing advice
should consult an appropriately qualified independent financial adviser.
A Joint Bookrunner is entitled, at its discretion and out of its own
resources, at any time to rebate to some or all of its investors, or to other
parties, part or all of its fees relating to the Placing.
MISCELLANEOUS
Solely for the purposes of the product governance requirements contained
within: (a) EU Directive 2014/65/EU on markets in financial instruments, as
amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive
(EU) 2017/593 supplementing MiFID II; and (c) local implementing measures,
each as they form part of the law of England and Wales by virtue of EUWA
(together, the "Product Governance Requirements"), and disclaiming all and any
liability, whether arising in tort, contract or otherwise, which any
"manufacturer" (for the purposes of the Product Governance Requirements) may
otherwise have with respect thereto, the Placing Shares have been subject to a
product approval process, which has determined that the Placing Shares are:
(i) compatible with an end target market of retail investors and investors who
meet the criteria of professional clients and eligible counterparties, each as
defined in MiFID II; and (ii) eligible for distribution through all
distribution channels as are permitted by MiFID II (the "Target Market
Assessment"). Notwithstanding the Target Market Assessment, Placees should
note that: the price of the Placing Shares may decline and investors could
lose all or part of their investment; the Placing Shares offer no guaranteed
income and no capital protection; and an investment in the Placing Shares is
compatible only with investors who do not need a guaranteed income or capital
protection, who (either alone or in conjunction with an appropriate financial
or other adviser) are capable of evaluating the merits and risks of such an
investment and who have sufficient resources to be able to bear any losses
that may result therefrom. The Target Market Assessment is without prejudice
to the requirements of any contractual, legal or regulatory selling
restrictions in relation to the Placing. Furthermore, it is noted that,
notwithstanding the Target Market Assessment, the Joint Bookrunners will only
procure investors who meet the criteria of professional clients and eligible
counterparties. For the avoidance of doubt, the Target Market Assessment does
not constitute: (a) an assessment of suitability or appropriateness for the
purposes of MiFID II; or (b) a recommendation to any investor or Company of
investors to invest in, or purchase, or take any other action whatsoever with
respect to the Placing Shares.
Each distributor is responsible for undertaking its own target market
assessment in respect of the Placing Shares and determining appropriate
distribution channels.
The content of this announcement has been issued by, and is the sole
responsibility of, Velocys plc.
The information contained in this announcement is given at the date of its
publication (unless otherwise marked) and is subject to updating, revision and
amendment from time to time. Neither the content of the Company's website nor
any website accessible by hyperlinks to the Company's website is incorporated
in, or forms part of, this announcement.
Panmure Gordon (UK) Limited, which is authorised and regulated in the United
Kingdom by the FCA, is acting as nominated adviser, joint bookrunner and joint
broker to the Company in connection with the Placing and Admission and to
no-one else and will not be responsible to anyone other than the Company for
providing the protections afforded to its clients, nor for providing advice in
relation to the Placing or Admission or any other matter referred to in this
announcement. Panmure Gordon's responsibilities as the Company's nominated
adviser under the AIM Rules for Nominated Advisers are owed solely to London
Stock Exchange plc and are not owed to the Company or to any director of the
Company or to any other person in respect of any decision to acquire shares in
the Company in reliance on any part of this announcement.
Shore Capital Group Limited, which is authorised and regulated in the United
Kingdom by the FCA, is acting as joint bookrunner and joint broker to the
Company in connection with the Placing and Admission and to no-one else and
will not be responsible to anyone other than the Company for providing the
protections afforded to its clients, nor for providing advice in relation to
the Placing or Admission or any other matter referred to in this announcement.
Neither of the Joint Bookrunners or any of their directors, officers,
employees, advisers, affiliates or agents, accepts any responsibility or
liability whatsoever for or makes any representation or warranty, express or
implied, as to this announcement, including the truth, accuracy or
completeness of the information in this announcement (or whether any
information has been omitted from the announcement) or for any loss howsoever
arising from any use of the announcement or its contents. The Joint
Bookrunners and their respective directors, officers, employees, advisers,
affiliates or agents, accordingly disclaim all and any liability whether
arising in tort, contract or otherwise which they might otherwise have in
respect of this announcement or its contents or otherwise arising in
connection therewith.
Data Protection
The processing of a Placee's personal data by the Company will be carried out
in compliance with the applicable data protection legislation and with its
Privacy Notice, a copy of which can be found on the Company's website
https://www.velocys.com/privacy-policy/
(https://url.avanan.click/v2/___https:/www.velocys.com/privacy-policy/___.YXAxZTpzaG9yZWNhcDphOm86NDg2M2E1M2QyYjViZGEzZWY1NTFjY2YzYzAwNjM1ZDQ6Njo0ZDM5OmQyNjRiMDI4MTMyY2MyYjg1OGUwNDgyYzdhZGUxNzBlOTYwZWJjNzYyZWViNTdlYTU4MGQ2ZjZlOTk5YzE3YzQ6cDpG)
.
Each Placee acknowledges that it has read and understood the processing
activities carried out by the Company as informed in the referred Privacy
Notice.
APPENDIX III
DEFINITIONS AND GLOSSARY
DEFINITIONS
The following definitions apply throughout this announcement unless the
context otherwise requires:
"Act" the UK Companies Act 2006, as amended
"Admission" Admission of the Placing Shares, the Retail Offer Shares and the Open Offer
Shares to trading on AIM becoming effective in accordance with Rule 6 of the
AIM Rules
"AIM" the market of that name operated by the London Stock Exchange
"AIM Rules" the AIM Rules for Companies, which set out the rules and responsibilities for
companies listed on AIM, as amended from time to time
"Altalto Project" a waste to sustainable fuels biorefinery project, located in Immingham, North
East Lincolnshire, UK, in development by the Group in conjunction with
commercial partners
"Application Form" the non-CREST application form relating to the Open Offer and enclosed with
the Circular for use by Eligible Non-CREST Shareholders
"Articles" the articles of association of the Company (as amended from time to time)
"Basic Entitlement" Entitlement to subscribe for Open Offer Shares, allocated to an Eligible
Shareholder pursuant to the Open Offer on the Record Date as described in Part
III (Terms and Conditions of the Open Offer) of the Circular
"Bayou Fuels Project" the Company's reference biorefinery project in Natchez Mississippi, US
"Bechtel" Bechtel Limited
"Board" or "Directors" the board of directors of the Company, whose names are listed in the Circular
"Bookbuild" the accelerated bookbuild process in relation to the Placing, on the terms
described in the Placing Agreement and the other documents relating to the
Placing, which will establish the number of Placing Shares to be issued and
allotted pursuant to the Placing
"British Airways" British Airways plc
"Carbon Direct Capital" Carbon Direct Fund II LP and Carbon Direct Fund II-A LP
"Circular" the Circular to be published by the Company on or about 22 May 2023 setting
out details of the Fundraise and containing the Notice of the General Meeting
"CLN Investors" the investors subscribing for the Convertible Loan Notes being Carbon Direct
Capital and any other investor who elects to subscribe for Convertible Loan
Notes or, if the Convertible Loan Notes are transferred pursuant to the terms
set out in the Convertible Loan Note Instrument, the registered holder(s) of
the Convertible Loan Notes from time to time
"CLN Long Stop Date" 30 September 2023 (which may be extended to 31 December 2023 with the
agreement of the Company and Carbon Direct Capital)
"Commitment Letter" the conditional commitment letter dated 18 May 2023 between the Company and
Carbon Direct Capital pursuant to which Carbon Direct Capital conditionally
agrees to subscribe for a minimum of $15 million of Convertible Loan Notes
"Company" or "Velocys" Velocys plc, a public limited company incorporated in England & Wales
under registered number 05712187 and having its registered office at Magdalen
Centre, Robert Robinson Avenue, The Oxford Science Park, Oxford, England, OX4
4GA
"Conversion" the conversion of the Convertible Loan Notes into fully paid Ordinary Shares
in accordance with the provisions of the Convertible Loan Note Instrument
"Conversion Price" a price per Ordinary Share equal to the Issue Price of 2.5 pence or, if lower,
the lowest price per Ordinary Share at which the Company issues Ordinary
Shares to a Shareholder or investor in connection with an equity fundraising
by way of the issue of new Ordinary Shares in the Company, or the conversion
or exercise price for any further issue of convertible loan notes or issue of
warrants, if any, which is completed after the date of the Convertible Lon
Note Instrument but prior to Conversion
"Convertible Loan Note Instrument" the convertible loan note instrument constituted by the Company on 18 May 2023
in respect of the Convertible Loan Notes
"Convertible Loan Notes" convertible loan notes to be issued at a price of $1 per loan note to the CLN
Investors pursuant to the Convertible Loan Note Instrument
"CREST" the relevant system (as defined in the Regulations) which enables title to
units of relevant securities (as defined in the Regulations) to be evidenced
and transferred without a written instrument and in respect of which Euroclear
UK & International Limited is the Operator (as defined in the Regulations)
"Disclosure Guidance and Transparency Rules" the Disclosure Guidance and Transparency Rules issued by the FCA
"Eligible CREST Shareholders" Eligible Shareholders whose Existing Ordinary Shares are held in
uncertificated form in a CREST account
"Eligible Non-CREST Shareholders" Eligible Shareholders whose Existing Ordinary Shares are held in certificated
form
"Eligible Shareholders" Shareholders on the Ex-Entitlement Date that are not resident in a
jurisdiction outside of the UK and that are not a Sanctioned Shareholder
"ENVIA" ENVIA Energy, LLC, a former joint venture between Waste Management, Inc., NRG,
Ventech Projects Investments, LLC and the Group which was liquidated in 2020
"Excess Entitlement" Open Offer Shares in excess of the Basic Entitlement, but not in excess of the
total number of Open Offer Shares, allocated to an Eligible Shareholder
pursuant to the Open Offer as described in Part III (Terms and Conditions of
the Open Offer) of the Circular
"Ex-Entitlement Date" the date on which the Ordinary Shares are marked 'ex' for entitlement by the
London Stock Exchange under the Open Offer, being 23 May 2023
"Existing Ordinary Shares" the 1,397,671,031 Ordinary Shares in issue as at the date of the Circular
being the entire issued share capital of the Company prior to the Placing, the
Retail Offer and the Open Offer
"FCA" Financial Conduct Authority
"Final Maturity Date" the final maturity date of the Convertible Loan Notes, being 36 months
following the issue of the relevant Convertible Loan Notes
"Form of Proxy" the accompanying form of proxy for use by Shareholders in relation to the
General Meeting
"FSMA" the Financial Services and Markets Act 2000 (as amended)
"Fundraise" the Placing, the Retail Offer, the Open Offer and the proposed, conditional
issue of the Convertible Loan Notes to Carbon Direct Capital and the potential
further issuances of Convertible Loan Notes and/or new Ordinary Shares to
investors other than Carbon Direct Capital
"General Meeting" the general meeting of the Company to be held at 10.30 a.m. on 8 June 2023,
notice of which is set out at the end of the Circular, and any adjournment
thereof
"Group" Velocys plc and its subsidiaries
"Intermediary" an individual, company or other entity that manages and executes the buying
and selling of securities on behalf of Retail Investors
"Issue Price" 2.5 pence per New Ordinary Share
"Joint Bookrunners" Panmure Gordon and Shore Capital
"Link Group" a trading name of Link Market Services Limited, a company incorporated in
England and Wales, with registered number 02605568, whose registered office is
at Central Square, 10(th) Floor, 29 Wellington Street, Leeds, England, LS1 4DL
"London Stock Exchange" London Stock Exchange plc
"Maximum Amount" £50 million
"Minimum Amount" $40,000,000 less the amount subscribed for by Carbon Direct Capital pursuant
to the Fundraise
"Minimum Amount Condition" the condition to the issuance of Convertible Loan Notes to Carbon Direct
Capital that the Minimum Amount must be raised by the Company or the Company
must have received legally binding commitments in respect of the Minimum
Amount from investors other than Carbon Direct Capital by the CLN Long Stop
Date
"NEDO" the New Energy and Industrial Technology Development Organization of Japan
"New Ordinary Shares" the Placing Shares, the Retail Offer Shares and the Open Offer Shares to the
extent subscribed for under the Retail Offer and the Open Offer as applicable
"Notice of General Meeting" the notice of General Meeting set out at the end of the Circular
"Open Offer" the offer to Eligible Shareholders, constituting an invitation to apply for
the Open Offer Shares at the Issue Price on the terms and subject to the
conditions set out in the Circular and, in the case of Eligible Non-CREST
Shareholders, in the Application Form
"Open Offer Entitlements" entitlements to subscribe for Open Offer Shares pursuant to the Basic
Entitlement and Excess Entitlement
"Open Offer Shares" up to 77,648,390 new Ordinary Shares to be issued to Eligible Shareholders
pursuant to the Open Offer
"Ordinary Shares" ordinary shares of 1 pence each in the capital of the Company
"Panmure Gordon" Panmure Gordon (UK) Limited, a private limited company incorporated in England
& Wales under registered number 04915201 and having its registered office
at 40 Gracechurch Street, London EC3V 0BT acting as Nominated Adviser, Joint
Bookrunner & Joint Broker
"Placing" the conditional placing of the Placing Shares to placees
"Placing Agreement" the conditional agreement dated 18 May 2023 relating to the Placing, the Open
Offer and the Retail Offer, between the Company, Panmure Gordon and Shore
Capital
"Placing Documents" the marketing presentation used by the Company in connection with the Placing,
the Circular, this announcement (including the appendices) and the
announcement of the results of the Placing to be published by the Company
following completion of the Bookbuild
"Placing Long Stop Date" 8.00 a.m. on 23 June 2023
"Placing Shares" the New Ordinary Shares to be issued, conditional on Admission, in connection
with the Placing
"Prospectus Regulation Rules" the Prospectus Regulation Rules made in accordance with the Prospectus
Regulation Rules Instrument 2019 (FCA: 2019/80)
"Receiving Agent" Link Group, Corporate Actions
"Record Date" 5.00 p.m. on 18 May 2023, being the record date for the Open Offer
"Reference Projects" the Bayou Fuels Project and the Altalto Project, the purpose of which are to
accelerate adoption of the Group's technology and to provide a source of
income to the Group
"Registrar" Link Group
"Regulations" the UK Uncertificated Securities Regulations 2001 (SI 2001 No. 3755), as
amended
"Resolutions" the resolutions to be proposed at the General Meeting as set out in the Notice
of General Meeting
"Retail Investors" investors in the usual type of an Intermediary's client base, which may
include individuals aged 18 years or over, companies and other bodies
corporate, partnerships, trusts, associations and other unincorporated
organisations
"Retail Offer" the offer of the Retail Offer Shares, through Intermediaries, to Retail
Investors in the United Kingdom who are Eligible Shareholders in the Company
(anticipated to be announced in due course following the release of this
announcement)
"Retail Offer Shares" any Ordinary Shares to be issued by the Company under the terms of the Retail
Offer
"Sanctioned Shareholder" any Shareholder that is that is designated under any asset freeze or blocking
sanctions imposed by the United States, United Kingdom, European Union or any
Member State thereof, or is 50 per cent. or more owned, or otherwise
controlled, by one or more such designated persons
"Shareholders" the holders of Ordinary Shares from time to time, each individually being a
"Shareholder"
"Shore Capital" Shore Capital Stockbrokers Limited, Joint Bookrunner & Joint Broker
"Toyo" Toyo Engineering Corporation
"UK" or "United Kingdom" the United Kingdom of Great Britain and Northern Ireland
"US" or "United States" the United States of America, its territories and possessions, any state of
the United States and the District of Colombia
"US Listing" a listing of the Ordinary Shares or American Depositary Shares ("ADSs") on the
New York Stock Exchange or NASDAQ
"€" the single currency of the participating member states of the European Union
"$" the lawful currency of the United States
"£" the lawful currency of the United Kingdom
GLOSSARY
The terms set out below have the following meanings throughout this
announcement, unless the context requires otherwise.
"drop-in" fuel which can be placed into existing engines and infrastructure without the
need for modification to them to use the fuel.
"EPC" engineering, procurement and construction
"feedstock" raw material processed ingested in the fuel-generation process
"FID" final investment decision
"Fischer-Tropsch process" a process for producing liquid and gaseous hydrocarbon fuels through chemical
reactions that converts a mixture of carbon monoxide and hydrogen, known as
syngas, into liquid hydrocarbons
"FTI" the Fischer-Tropsch (FT) section of a plant, the design of which is licensed
by Velocys to its customers, comprising multiple FT reactors and ancillary
equipment
"ITP" integrated technology package
"naphtha" a flammable liquid distillate of petroleum
"recyclates" materials capable of being recycled
"Renewable Fuel Standard" the US renewable fuel standard program created under the Energy Policy Act
2005 and amended by the Energy Independence and Security Act 2007
"Renewable Identification Number" or "RIN" a renewable identification number assigned to a batch of biofuel to track its
production use and trading as required by the Renewable Fuel Standard
"Renewable Transport Fuel Certificates" certificates awarded under the Renewable Transport Fuels Obligation
"Renewable Transport Fuels Obligation" the UK Renewable Transport Fuel Obligation Order published 5 November 2012
"SAF" sustainable aviation fuel
APPENDIX IV
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Record Date for the Open Offer 4.30 p.m. on 18 May 2023
Announcement of the Fundraise 18 May 2023
Announcement of the results of the Placing and the Retail Offer 19 May 2023
Dispatch of the Circular, Application Form and Proxy Form 22 May 2023
Ex-Entitlement Date 8.00 a.m. on 23 May 2023
Basic Entitlements and Excess Entitlements credited to stock accounts in CREST as soon as possible after 8.00 a.m. on 24 May 2023
for Eligible CREST Shareholders
Latest recommended time and date for requested withdrawal of Basic 4.30 p.m. on 1 June 2023
Entitlements and Excess Entitlements from CREST
Latest time and date for depositing Basic Entitlements and Excess Entitlements 3.00 p.m. on 2 June 2023
into CREST
Latest time for splitting Application Forms (to satisfy bona fide market 3.00 p.m. on 5 June 2023
claims only)
Last time and date for receipt of Form of 10.30 a.m. on 6 June 2023
Proxy
Latest time and date for receipt of Application Form and payment in full under 11.00 a.m. on 7 June 2023
the Open Offer or settlement of relevant CREST instructions (as appropriate)
General Meeting 10.30 a.m. on 8 June 2023
Announcement of results of the General Meeting and Open Offer 8 June 2023
Admission and dealings in the Placing Shares, the Retail Offer Shares and the 8.00 a.m. on 9 June 2023
Open Offer Shares to commence on AIM
CREST accounts credited with the Placing Shares, the Retail Offer Shares and 9 June 2023
the Open Offer Shares
Definitive share certificates for the New Ordinary Shares to be dispatched (if w/c 12 June 2023
required)
Issue of Convertible Loan Notes to Carbon Direct Capital((4)) By 30 September 2023((5))
(1) References to are to London time (unless otherwise
stated).
(2) The dates and timing of the events in the above
timetable and in the Circular are indicative only and may be subject to
change.
(3) If any of the above times or dates should change,
the revised times and/or dates will be notified by an announcement through a
Regulatory Information Service.
(4) This is subject to satisfaction of the conditions
in the Commitment Letter
(5) This date can be extended to 31 December 2023 with
the agreement of the Company and Carbon Direct Capital
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