TIDMAPR
RNS Number : 1700R
APR Energy PLC
23 October 2013
23 October 2013
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION DIRECTLY OR
INDIRECTLY IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN
OR ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF
THE RELEVANT LAWS OF SUCH JURISDICTION.
This announcement is for information purposes only and is not a
prospectus and does not constitute or form part of any offer for
sale, or a solicitation of an offer to acquire, securities in any
jurisdiction including in or into the United States, Canada,
Australia, or Japan.
APR Energy plc
APR Energy plc (the "Company" and together with its
subsidiaries, "APR Energy" or the "Group")
ACQUISITION OF GENERAL ELECTRIC COMPANY'S POWER RENTAL BUSINESS
(THE "ACQUISITION")
CREATES THE WORLD'S LEADING FAST-TRACK MOBILE TURBINE POWER
BUSINESS
APR Energy plc (LSE: APR) today announces that it has entered
into an agreement ("Acquisition Agreement") with General Electric
Company (NYSE: GE) ("GE") for the acquisition ("Acquisition") by
the Company of the power rental business (the "GE Business") of GE.
To coincide with this announcement, the Company has also brought
forward its Q3 IMS covering the period from 1 July 2013 through to
23 October 2013 and released a further RNS covering this trading
update.
GE Power & Water, part of GE, is a global leader in
manufacturing and servicing mobile gas turbine equipment. The GE
Business has its principal operations based in Houston and is a
provider of temporary power generation rental through the use of
mobile gas turbines of less than 50MW. The GE Business to be
transferred pursuant to the Acquisition Agreement has 520MW of
power generation capacity in its portfolio, which includes five
associated rental contracts with 20 temporary power generation
assets based in Bangladesh, Iraq, the U.S. Virgin Islands, Canada,
Australia and Dubai. The Acquisition advances APR Energy towards
its stated strategic goals, creating the world's leading fast-track
mobile turbine fleet of 1.2GW, significantly strengthening and
diversifying APR Energy's business, and creating a long-term
strategic alliance with GE.
Under the terms of the Acquisition Agreement, GE will receive a
total consideration of US$314 million, of which US$250 million will
be satisfied by way of the issue to GE of approximately 15.5
million of APR Energy plc ordinary shares ("Ordinary Shares") of
GBP0.10 ("Acquisition Shares") and with the remaining US$64 million
being in cash. Application will be made to the Financial Conduct
Authority and the London Stock Exchange for the Acquisition Shares
to be admitted to the Official List and to trading on the London
Stock Exchange. It is expected that dealings will commence on 28
October 2013.
The board of the Company believes that the Acquisition is in the
best interests of the Group and its shareholders, as well as its
broader stakeholders, because it:
-- Creates a long-term strategic alliance with GE, providing
dedicated supply for the fast-track, turnkey power segment, a
collaborative business development platform, and expanded access to
worldwide support services, subject to existing contractual
arrangements
-- Makes GE a key strategic investor in APR Energy
-- Significantly strengthens and diversifies APR Energy's global
footprint and contract revenue base, providing access to new
developed and developing countries
-- Enhances APR Energy's large scale, fast-track power business,
positioning APR Energy well to take advantage of expanding
opportunities with the fastest growing technology in the
industry
-- Greatly improves APR Energy's footprint in natural gas, a growing fuel source that is both cost-efficient and emissions friendly
-- Has a strong financial rationale and is expected to be earnings accretive for the Company
-- Delivers enhanced cash generation for the enlarged group (the "Enlarged Group")
Commenting on the announcement, APR Energy's Chief Executive
Officer, John Campion said:
"This is a transformational transaction for APR Energy, allowing
us to move forward rapidly towards delivering our stated
medium-term business objectives. By creating the world's leading
fast-track mobile turbine power business and a long-term
relationship with GE, we are well placed to deliver against an
underserved and rapidly growing opportunity with the preeminent
technology. The transaction diversifies our revenue base, gives us
exposure to new geographies and sectors, and enhances our natural
gas footprint. We are excited to be working closely with GE, whose
partnership and equity commitment is an endorsement of our
prospects and our ambition to be the leader in the large-scale,
fast-track power industry."
Commenting on the announcement, CEO of GE's Power & Water
Distributed Power business, Lorraine Bolsinger said
"Our investment in APR Energy reinforces our strong belief in
the distributed power segment, as well as APR's strong capabilities
and prospects for success. We continue to see growing demand from
customers urgently needing our leading technology for bridging
solutions while more permanent solutions can be put in place. With
this alliance, customers can get fast power with our technology
from a premiere fast-track power provider, APR Energy, or they can
buy the equipment from us. For both kinds of customers, we are
determined to offer the most efficient products and have them
available for rapid deployment."
Enquiries:
APR Energy +44 (0) 203 427 3747
John Campion, Chief Executive Officer
Andrew Martinez, Chief Financial Officer
Brian Gallagher, Investor Relations
Capital MSL +44 (0) 20 7307 5330
Richard Campbell
Ian Brown
J.P. Morgan Cazenove +44 (0) 20 7742 4000
(Financial Adviser on the Acquisition, Joint Broker to APR
Energy)
Andrew Truscott
Richard Walsh
Numis +44 (0) 20 7260 1000
(Joint Broker to APR Energy)
Alex Ham
Stuart Skinner
Analyst Presentation:
There will be an analysts' presentation to discuss the
Acquisition at 9:30am today at Numis Securities Ltd, 10 Paternoster
Square, London, EC4M 7LT. The presentation will also be available
via webcast, full details of which can be found on APR Energy's
website.
Acquisition of the power rental business (the "GE Business") of
General Electric Company ("GE") for approximately 15.5 million of
APR Energy plc ordinary shares and for US$64 million in cash (the
"Acquisition")
1. Introduction
The board of APR Energy plc (LSE: APR) ("the Company" and
together with its subsidiaries, "APR Energy" or the "Group") is
pleased to announce that the Company and GE have entered into an
agreement ("Acquisition Agreement") for the acquisition by the
Company of the GE Business. Under the terms of the Acquisition
Agreement, GE will receive approximately 15.5 million of APR Energy
plc ordinary shares ("Ordinary Shares") of GBP0.10 ("Acquisition
Shares") and US$64 million in cash. As a consequence of the
Company's Standard Listing, no shareholder approval is required to
undertake the Acquisition. Further, no shareholder approval is
required for the issuance of the Acquisition Shares and as a
result, completion ("Completion") of the Acquisition will be on
admission of the Acquisition Shares to the Official List of the
Financial Conduct Authority and to trading on the London Stock
Exchange Plc's main market for listed securities ("Admission"),
expected to take place on 28 October 2013. A prospectus as required
under the Prospectus Rules in connection with the Admission is
expected to be filed with the UK Listing Authority shortly.
2. Summary information relating to the GE Business
GE Power & Water, part of GE, is a global leader in
manufacturing and servicing mobile gas turbine equipment. Its power
rental business, the GE Business, has its principal operations
based in Houston and provides temporary power generation rental
through the use of mobile gas turbines rated below 50 megawatts. As
of the date of the Acquisition Agreement, the GE Business to be
transferred has approximately 520MW of power generation capacity in
its portfolio, which includes five associated rental contracts with
20 temporary power generation assets based in Bangladesh, Iraq, the
U.S. Virgin Islands, Canada, Australia and Dubai.
3. Background to, and reasons for, the Acquisition
APR Energy has successfully delivered on its medium-term
objective of being the world's leading fast-track mobile turbine
power provider. The Company's board believes the Acquisition
supports this strategy, with a combined mobile turbine fleet
capacity of 1.2GW. In addition to creating the world's leading
fast-track mobile turbine power provider, the Acquisition creates a
long-term strategic alliance agreement between APR Energy and GE
covering areas such as future supply of turbine technology,
service, and branding. The Acquisition also enhances APR Energy's
capabilities in existing locations and provides access to new
geographies and sectors.
Rationale for the Acquisition
a) Technology and capacity create the world's leading fast-track mobile turbine fleet
The Acquisition significantly expands APR Energy's capacity in
mobile turbines to 1.2GW, creating the world's leading fleet of
fast-track mobile gas turbines. This will support APR Energy's
ability to address growing demand for large-scale, fast-track power
driven by a growing structural imbalance between supply and demand
for electricity. This imbalance is expected to grow to around 600GW
by 2015.
The high efficiency, dual-fuel turbines offer quick installation
and extended maintenance intervals providing maximum operating
flexibility. Turbine technology provides greater reliability,
requires much less maintenance, has higher power density, and
produces significantly less emissions than its reciprocating diesel
counterparts. The fuel flexibility of the turbines, combined with
the ability to operate at both 50 and 60Hz, makes them useful for a
broad range of applications throughout the world. The ability of
turbines to run on natural gas enables customers to take advantage
of this lower cost, cleaner burning fuel.
Mobile gas turbines offer a clear advantage where emissions
control is a priority. Emissions criteria are now a regular
consideration in tenders. Operating on either gas or diesel, the
turbines produce a fraction of the levels of nitrous oxide produced
by diesel reciprocating engines.
b) Establishes a long-term strategic alliance with GE
GE serves the energy sector by developing and deploying
technology that helps make efficient use of natural resources. With
approximately 41,000 employees and 2012 revenues of US$28,299
million, GE Power & Water, the division of GE of which the GE
Business currently forms part, is one of the world's leading
suppliers of power generation, energy delivery, and water process
technologies. GE Power & Water works in all areas of the energy
industry including renewable resources such as wind and solar,
biogas and alternative fuels, and coal, oil, natural gas, and
nuclear energy.
As a result of the Acquisition, GE will become a strategic
shareholder in the Company with approximately 16.5% of the share
capital and will be entitled to appoint a board observer to attend
and observe board meetings of the Company. This shareholding is a
positive sign of GE's intent to assist in value creation and APR
Energy expects to benefit greatly from association with the GE
brand. Additionally, it ensures on-going technical support if
required and grants access to GE's sales and commercial
network.
c) Expands and diversifies contract revenue base across developing and developed geographies
The Acquisition significantly expands APR Energy's footprint in
both developing and developed countries, strengthening its presence
in key geographies and providing immediate access to new countries.
In addition to its pre-existing portfolio, APR Energy will have a
new focus in Canada, Iraq, Australia, the U.S. Virgin Islands, and
Bangladesh.
The Acquisition also diversifies and de-risks APR Energy's
customer base. For example, Libya will now constitute 21% of
fleetweight, down from 28% previously.
d) Enhances APR Energy's natural gas footprint
The Acquisition enhances APR Energy's natural gas footprint with
the majority of the turbine contracts being acquired running on
natural gas. Natural gas is the preferred, longer-term fuel source
for dual-fuel turbines, offering greater efficiencies, lower cost,
and lower emissions.
e) Increases APR Energy's order book and supports APR Energy's
strong visible turbine technology pipeline
Capacity and order book in respect of the GE Business as at 31
December 2012 was 400MW and 6,120MW-months respectively.
Capacity and order book anticipated at Completion in respect of
the GE Business is 520MW and 6,000 MW-months, respectively. The
enlarged order book will be 18,223 MW-months. On Completion, 415MW
of the 520MW will be on rent under five short-term contracts. These
contracts will transfer from GE to APR Energy, and will remain in
place until their current contract maturity ranging from 1 to 24
months.
f) Enhanced cash generation and commitment to future de-leveraging of the Enlarged Group
It is expected that the combined business will have an enhanced
cash generation profile helping to contribute to the future
de-leveraging of the Enlarged Group balance sheet. APR Energy's
management remains extremely focussed on cash management and
optimizing its capital structure.
4. Financial impact of the Acquisition
The APR Energy plc board expects the Acquisition to be earnings
accretive for the Company and the post-tax return on capital
associated with the Acquisition is expected to be above the
Company's internal capital return hurdle.
5. Principal terms of the acquisition
Acquisition Agreement
The Acquisition Agreement was entered into on 22 October 2013
between the Company and GE, pursuant to which the Company agreed to
acquire the GE Business from GE.
The purchase price payable by the Company to GE in connection
with the Acquisition is US$314 million, to be satisfied by:
-- payment on Completion of US$64 million in cash (the "Cash Consideration"); and
-- the issue to GE of the Acquisition Shares.
The number of Acquisition Shares has been calculated as having a
value equal to the sterling equivalent of US$250 million using the
following criteria:
-- the dollar sterling exchange rate (being the spot exchange
rate displayed on Bloomberg (Bloomberg reference code "BPUS
BGNLCURNCY") as at 5.00pm (London Time) on the business day
immediately prior to the date of signing of the Acquisition
Agreement; and
-- the volume weighted average price of an Ordinary Share for
the 60 trading days immediately prior to the date of the
Acquisition Agreement.
The Cash Consideration is subject to certain adjustments for
changes in the working capital balance of the GE Business at
Completion, as well as losses above a certain threshold incurred in
connection with the dissolution of the Company's Cayman
subsidiary.
Completion of the Acquisition Agreement is conditional only upon
Admission becoming effective and no material adverse change having
taken place in respect of the Company.
GE Relationship Agreement
In accordance with the terms of the Acquisition Agreement, the
Company and GE have agreed to enter in the GE Relationship
Agreement on Completion with the intention of ensuring that the
Company is capable of carrying on its business independently and
that transactions and relationships between the Company and GE are
at arm's length and on a normal commercial basis.
Supply and Services Agreement
In conjunction with the Acquisition Agreement, the Company and
GE will enter into a supply and services agreement ("Supply and
Services Agreement") for the supply by GE to APR Energy of turbines
and associated packages (the "Products") and also the supply of
related parts and services, as long as they can be reasonably and
timely provided by GE and meet market competitive performance
characteristics and pricing. GE has further agreed to provide
certain services to APR Energy in connection with the Products,
including on-going technical support and training. GE also has the
right to offer and respond to APR Energy requirements for balance
of plant.
The Supply and Services Agreement is for an initial term of ten
years from the date of the Supply and Services Agreement and will
be automatically renewed thereafter for further terms of five
years, unless terminated by either party in accordance with the
terms of the Supply and Services Agreement.
Cross-Marketing Agreement and Licensing Arrangements
In connection with the Supply and Services Agreement, APR Energy
and GE have agreed to enter into a cross marketing agreement and
licensing arrangements, pursuant to which certain rights to use GE
trademarks would be granted to APR Energy in connection with
equipment supplied under the Supply and Services Agreement.
6. Financing of the Enlarged Group
Alongside the announcement today, the Group is pleased to
announce a US$100 million loan expansion of its credit facilities
from US$550 million to US$650 million. This expansion was arranged
with its existing consortium of relationship banks and underpins
the growth ambitions of the Group into the medium term. APR
Energy's management team places a strong focus on cash management
and balance sheet efficiency and remains focused on optimizing its
capital structure.
7. Current trading, trends and prospects
APR Energy
The Company has also separately announced today its Interim
Management Statement for the period 1 July 2013 to 23 October 2013,
the full version of which is available on the Group's website and a
summary of which is presented below.
The Group has performed well in the period, in-line with
expectations, generating adjusted revenues of US$84 million during
the third quarter of the year.
As at 30 September 2013, total fleet capacity was 1,607MW
(December 2012: 1,311MW) with an order book (backlog of business)
of over 13,425 MW-months an increase of 60% from 8,372 in the same
period in 2012.
New contracts of 147MW were won during the quarter, including
Mozambique (40MW), Indonesia (75MW), and Senegal (32MW). These,
together with the 593MW of new contracts announced up to 28 August
2013, bring total new contract wins announced this year to 740MW
(compared to 369W in the same period of 2012). The Group has also
signed extensions year to date of 116MW.
The Group's balance sheet had gross debt of US$475 million
(excluding capitalised finance costs) at the end of Q3 2013. Cash
on the balance sheet as of 30 September 2013 was US$25 million
resulting in net debt of US$450 million.
The GE Business
The GE Business continues to perform in line with management and
industry growth expectations with high utilisation rates.
8. Dividend Policy
Following completion of the Acquisition, it is the intention of
the APR Energy Directors to continue to maintain a regular review
of its dividend policy and re-iterates its intention to pay a
dividend.
About APR Energy
APR Energy specialises in the sale of reliable and efficient
electricity through the rapid global deployment and installation of
scalable turnkey power solutions. APR Energy's solutions, coupled
with comprehensive operation and maintenance services and flexible
commercial terms, have established it as a leader in its industry.
Serving both utility and industrial segments, APR Energy provides
power generation solutions to customers and communities around the
world, with an emphasis on Africa, Latin America, the Middle East,
and Asia. APR Energy also implements philanthropic projects at each
plant location through its Community Development Programme, which
aims to build and maintain close relationships with its neighbours
through projects focused on health, education, and infrastructure.
For more information, visit the company's website at
www.aprenergy.com.
DISCLAIMERS
Exchange rates taken at GBP1= US$1.61480, being the spot
exchange rate displayed on Bloomberg (Bloomberg reference code
"BPUS BGNLCURNCY") as at 5.00pm (London Time) on 21 October
2013.
This announcement has been issued by and is the sole
responsibility of the Company. No representation or warranty
express or implied is, or will be made as to, or in relation to,
and no responsibility or liability is or will be accepted by J.P.
Morgan Limited (which conducts its UK investment banking activities
as J.P. Morgan Cazenove) ("J.P. Morgan Cazenove") or by any of its
affiliates or agents as to or in relation to, the accuracy or
completeness of this announcement or any other written or oral
information made available to or publicly available to any
interested party or its advisers, and any liability therefore is
expressly disclaimed.
J.P. Morgan Cazenove, which is authorised and regulated by the
Financial Conduct Authority, is acting for the Company in
connection with the Acquisition and no one else and will not be
responsible to anyone other than the Company for providing the
protections afforded to clients of J.P. Morgan Cazenove.
This announcement does not constitute or form part of any offer
or invitation to purchase, otherwise acquire, issue, subscribe for,
sell or otherwise dispose of any securities, nor any solicitation
of any offer to purchase, otherwise acquire, issue, subscribe for,
sell, or otherwise dispose of any securities.
The securities of the Company 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 unless they are registered with the U.S.
Securities and Exchange Commission or an exemption from the
registration requirements of the Securities Act is available.
The release, publication or distribution of this announcement in
certain jurisdictions may be restricted by law and therefore
persons in such jurisdictions into which this announcement is
released, published or distributed should inform themselves about
and observe such restrictions.
Certain statements in this announcement are forward-looking
statements which are based on the Company's expectations,
intentions and projections regarding its future performance,
anticipated events or trends and other matters that are not
historical facts. These statements are not guarantees of future
performance and are subject to known and unknown risks,
uncertainties and other factors that could cause actual results to
differ materially from those expressed or implied by such
forward-looking statements. Given these risks and uncertainties,
prospective investors are cautioned not to place undue reliance on
forward-looking statements. Forward-looking statements speak only
as of the date of such statements and, except as required by
applicable law, the Company undertakes no obligation to update or
revise publicly any forward-looking statements, whether as a result
of new information, future events or otherwise.
Without limitation to the foregoing, no statement in this
announcement is intended as a profit forecast and no statement in
this announcement should be interpreted to mean that earnings per
Ordinary Share for the current or future financial years would
necessarily match or exceed any historical published earnings per
Ordinary Share.
The contents of this announcement are not to be construed as
legal, financial or tax advice.
This announcement has been issued by and is the sole
responsibility of the Company. No representation or warranty
express or implied is, or will be made as to, or in relation to,
and no responsibility or liability is or will be accepted by Numis
Securities Limited or by any of its affiliates or agents as to or
in relation to, the accuracy or completeness of this announcement
or any other written or oral information made available to or
publicly available to any interested party or its advisers, and any
liability therefore is expressly disclaimed.
Numis Securities Limited, which is authorised and regulated by
the Financial Conduct Authority, is acting for the Company in
connection with the Acquisition and no one else and will not be
responsible to anyone other than the Company for providing the
protections afforded to clients of Numis Securities Limited.
This information is provided by RNS
The company news service from the London Stock Exchange
END
This information is provided by RNS
The company news service from the London Stock Exchange
END
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