TIDMRUR
RNS Number : 1335U
Rurelec PLC
21 November 2019
21 November 2019
Rurelec PLC
("Rurelec" or the "Company")
Agreements with Basic Energy Limited and other parties, and note
on foreign exchange controls in Argentina
New Agreements
The Directors of Rurelec PLC (AIM: RUR) announce that on 20
November they have signed (1) an Amended And Restated Shareholders
Agreement ("SHA") with Basic Energy Limited ("Basic") and Patagonia
Energy Limited ("PEL"), and (2) an Umbrella Agreement ("UA") with
PEL, Basic, Rurelec Project Finance Limited ("RPFL"), Energia del
Sur SA ("EdS"), Electrica del Sur S.A. ("Electrica"), and Rurelec
PLC Sucursal Argentina.
-- The SHA amends the constitutional relationship between
Rurelec and Basic, who are both 50% Joint Venture ("JV") partners
in PEL.
-- The UA sets out a new schedule for the repayment of unsecured
debts owed by PEL to both Rurelec and Basic by way of the Amended
and Restated Loan Notes ("ARLNs"), the terms of which are set out
below.
-- By joining EdS and Electrica into the agreement, the UA also
regulates the cash distributions to be made by EdS and Electrica to
PEL.
-- Finally, by joining RPFL into the agreement (a wholly owned
subsidiary of Rurelec) the UA sets out the basis for the release of
the secured Facility Agreement between EdS and RPFL. This is the
same EdS Senior Debt acquired by Rurelec Project Finance Limited
from Standard Bank in March 2011 and repaid in full on 30 May
2019.
The objective in signing these Agreements has been to enhance
and maximise the flow of cash remittances from EdS (PEL's operating
subsidiary) to Rurelec via PEL by formalising arrangements
governing the flow of funds from Argentina and by more closely
aligning the interests of Rurelec and Basic.
Summary of Changes
The key constitutional changes to the SHA are:
-- Permitted share transfers;
o To allow part of Basic shareholding to be transferred within
Basic stakeholders without triggering the right of first
refusal;
o Payment to shareholders:
-- PEL group cash position to be reviewed on a monthly basis to
consider making repayments or distributions;
-- ARLNs to be repaid in accordance with their respective terms
and the UA;
-- Dividends will not be paid out until the ARLNs have been
repaid in accordance with their respective terms and the UA;
-- The first $5.7 million of dividend distributions by PEL will
be split in the ratio 72:28 (Rurelec:Basic);
-- After that, further dividend distributions to the JV partners
will be on a 50:50 basis.
The key provisions of the UA are:
-- Formal monthly obligations on EdS to review cashflow and to
remit all permissible surplus cash to PEL and in turn on PEL to
remit such funds to Rurelec and Basic in accordance with a
"waterfall" arrangement of the UA as follows:
o The first US $5.0 million of debt repayments by PEL will be
split in the ratio 80:20 (Rurelec:Basic); and The next US $18.9
million of debt repayments by PEL will be split in the ratio 72:28
(Rurelec:Basic).
-- Customary default provisions for both Rurelec and Basic having the right to default interest.
-- Rurelec and Basic agree to waive any claim to interest on
past monies loaned to PEL and for there to be a global release of
past debts, obligations and liabilities. The Board of Rurelec has
for many years provided in full for the uncertain interest on these
monies.
-- Debt capital to be defined by the establishment of new ARLNs.
-- If EdS/Electrica/PEL is unable to pay either of the JV
parties due to exchange controls in Argentina, it will set aside
the funds until it is able to pay both parties.
-- The release of the secured Facility Agreement referred to the
Company's announcement of 30 May 2019.
Whilst these new provisions determine how funds generated by PEL
will be distributed, the timing of these payments is not certain as
it is dependant inter alia on the potential future cash generation
ability of EdS and the potential future existence of exchange
controls that may restrict the ability of EdS to transmit funds to
PEL (see below).
The key provisions of the ARLNs (in accordance with the terms of
the SHA and the UA) are:
-- No interest accruing;
-- Events of Default and Default Interest of 14.32%;
-- Repayment by PEL of outstanding principal on the maturity date (31.12.2039); and
-- Prepayment of outstanding principal is permissible to both
lenders (Rurelec and Basic) without premium or penalty.
Exchange controls imposed by the Argentine Central Bank
The Directors note that exchange controls have been imposed in
the wake of the latest financial crisis in Argentina, where the
Company operates. Due to the exchange controls imposed on US
dollars by the Argentinean Central Bank ("BCRA"), any repayment of
debt between a subsidiary and its parent company needs the approval
of the BCRA. As a result, the local management team of EdS is
looking at alternative ways to purchase US dollars to fulfil their
obligations under the UA. The local management team is also
receiving legal and banking advice in Argentina. EdS management
expects to be able to transmit further debt repayments and
dividends to PEL (which is based outside of Argentina) but
Rurelec's Board notes there can be no guarantee that any route will
not also be blocked by further exchange controls measures
introduced by the new Argentine government. Accordingly, there can
be no guarantee that any cash can be remitted to PEL in the
foreseeable future, nor that any monies can, in turn, be remitted
to Rurelec. Whilst this is not a problem for the Company in the
short term, it could ultimately result in liquidity problems for
Rurelec if it was not resolved.
The Directors will continue to keep the situation under review
and further updates will be made as appropriate.
For further information please contact:
Rurelec PLC W H Ireland (Nomad & Broker)
Simon Morris, Director Katy Mitchell
Andy Coveney, Director Lydia Zychowska
Tel: 020 7549 2839/40 Tel: 020 7220 1666
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END
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