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Press Releases: Issue of Equity

RNS Number:1498W
Tersus Energy Plc
23 December 2005

Not for release, publication or distribution in the United States

Tersus Energy plc
("Tersus Energy" or the "Company")
Issue of Equity

Tersus Energy today announces it has conditionally raised £4 million (before expenses) in a placing with institutional and other investors. Having established its three operating businesses since its AIM IPO in February 2005: Tersus Energy Controls, Tersus BioEnergy and Tersus Asian Renewables, Tersus Energy intends that the funds raised will be used to make up to seven investments across these business units. Whilst in certain cases term sheets have been signed, execution of all of the transactions is conditional upon board approval, finalisation of due diligence and negotiation of full form legal documentation. Further information on the status of the negotiations relating to these proposed investments are set out under "Intended Investments" below.

The Company has conditionally placed 11,111,112 new ordinary shares of 0.5p each ("Ordinary Shares") (the "Placing Shares") at 36 pence each to raise approximately £4 million (before expenses) for the Company (the "Placing"). KBC Peel Hunt Ltd is acting as Nominated adviser and broker.

The following is a summary of the proposed investee entities, which should be read in conjunction with the remainder of this announcement:

Tersus Energy Controls:

  • Company "A", a US-based developer of controllers for shunt and series DC motors. In the view of the Board of Tersus Energy, Company "A" offers potential product distribution and cost synergies with Navitas Technologies,
    the first acquisition within Tersus Energy Controls.
  • Thor, a US-based developer of brushless DC ("BLDC") motor and controller technology. The Board considers that Thor offers potential R&D collaboration with Navitas Technologies.
  • World Energy Labs, a US based developer of battery (electrochemical) diagnostics technology targeting 'mission-critical' users of batteries e.g. utilities, telecommunications, UPS users and hospitals.
  • Company "E", a US-based developer of energy and environmental information management software. Company "E" represents Tersus Energy's first proposed investment into stationary (as opposed to mobile) energy
    controls.

Tersus BioEnergy:

  • Enviro-Controls, a UK-based developer of proprietary thermophilic anaerobic digestion technologies and projects. The potential investment includes a joint project development agreement giving Tersus Energy developer project equity and the right to invest equity in projects and earn developer's equity.
  • West Lorne Cogeneration, DynaMotive Energy Systems' first commercial plant in West Lorne, Ontario, using DynaMotive's technology to convert wood waste to BioOil and Char and for the generation of clean electricity and steam.

Tersus Asian Renewables:

  • Options over Tang Wind Energy's limited partnership interests affording an exposure to HT Blade, one of China's largest domestic developers and manufacturers of wind blades.

Commenting on the transaction, Steven Levine, Chief Executive Officer said:

"This fundraising represents the next step in building upon the foundations laid by our IPO in February, and the establishment of our three operating businesses: Tersus Energy Controls, Tersus BioEnergy and, Tersus Asian Renewables. The acquisitions and investments we have selected should, if completed, enable us to grow our three business units."

Enquiries:

Tersus Energy plc
Steven Levine, Chief Executive Officer
David Wilson, Finance Director
Tel: 020 7408 5420

KBC Peel Hunt Ltd
Jonathan Marren
David Anderson
Tel: 020 7418 8900

M Communications
Patrick d'Ancona
Nick Fox
Tel: 020 7153 1540

Notes to Editors

About Tersus Energy plc

Tersus Energy, which floated on AIM in February 2005, is building three operating businesses:

  • Tersus Energy Controls. Formed to exploit the opportunity presented by the increasing focus on energy efficiency and management of electricity consumption. Tersus Energy is focusing on mobile applications (eg. electric vehicles, AGVs, fork lifts, fuel cells, hybrids) and stationary applications (eg. building controls, energy management information). Its first investment is Navitas Technologies. The aim of Tersus Energy Controls
    is to build an earnings based business of some scale.
  • Tersus BioEnergy. Formed to exploit the accelerating demand for alternative fuel based supply of energy. Tersus BioEnergy is focusing on biofuels (bioethanol and biodiesel) and electricity produced from forest, agricultural, municipal and industrial waste. It intends to develop, manage and invest into a stream of projects with our chosen Joint Venture partners, growing in scale over time. Its first strategic relationship is with Dynamotive Energy Systems Corporation. DynaMotive's technology economically converts biomass into a renewable, environmentally friendly fuel. DynaMotive has successfully demonstrated conversion of these residues into fuel known as BioOil, as well as char.
  • Tersus Asian Renewables. Formed to exploit the demand for renewable energy in Asia. Tersus Asian Renewables is focusing on wind, biomass and clean coal, principally in China and India. It intends to develop, manage and invest into the project streams of our chosen Joint Venture partners, growing in scale over time. Tersus Energy's first strategic relationships are with Tang Group and Synergy and it is actively pursuing other opportunities.

Tersus Energy's business model which aims to operate across a number of platforms in what it believes to be the most attractive areas of the market, should in the view of the Directors, achieve risk diversification not available to single platform companies.

Details of the Placing

Pursuant to the terms of a placing agreement between the Company and KBC Peel Hunt Ltd ("KBC Peel Hunt"), KBC Peel Hunt has, as agent for the Company, agreed conditionally to place 11,111,112 Placing Shares with institutional and other investors at 36 pence per share. As part of the Placing, the management will in aggregate be subscribing for 277,778 Placing Shares under the terms of the Placing.

Of this Placing with management, John Devaney, the Non-executive Chairman and David Wilson, the Finance Director, has each agreed to subscribe for 83,333 Placing Shares at the Placing Price representing 0.22 per cent. each of the issued share capital as enlarged by the Placing ("Enlarged Issued Share Capital").

Following completion of the Placing, John Devaney and David Wilson will own 133,333 Ordinary Shares and 134,771 Ordinary Shares respectively representing approximately 0.35 per cent. and 0.36 per cent. respectively of the Enlarged Issued Share Capital.

The Placing price of 36 pence per Ordinary Share represents a discount of approximately 11.1 per cent. to the closing mid-market price of 40.5 pence per Ordinary Share on 22 December 2005 being the last dealing day prior to this announcement.

The issue of the Placing Shares is conditional, inter alia, upon Admission to AIM of the Placing Shares. Application has been made to London Stock Exchange plc for the Placing Shares to be admitted to trading on AIM. The Placing Shares are expected to be admitted to AIM and to commence trading at 08:00 a.m. on 30 December 2005.

Intended investments

It is intended the funds raised will be used to make up to seven investments across the three business units. Whilst in certain cases term sheets have been signed, execution of all of the transactions is conditional upon board approval, finalisation of due diligence and negotiation of full form legal documentation.

The Company has been in active negotiations in relation to each of the proposed investee entities and the status of these negotiations is set out below. Whilst it is the current expectation of the Directors that the Company should be able to make the investments as anticipated, there can be no guarantee that this will occur nor that the investments will be made on the same or equivalent terms as described below.

The Company will make an announcement via a recognised information service once terms for each of the investments are finally agreed.

Tersus Energy Controls:

Company "A"
Company "A" is a US-based developer of controllers for shunt and series DC motors. There are a number of potential synergies between Company "A" and Navitas Technologies (a wholly-owned subsidiary of Tersus Energy) including complementary distribution channels and portfolio of products, combination of R&D and applications engineering expertise, manufacturing synergies and the possibility of leveraging marketing and sales staff. Tersus Energy has agreed in principle to invest US$1.0 million for a 30 per cent. stake in Company "A".

Thor
Thor is a US-based developer of brushless DC ("BLDC") motor and controller technology. The BLDC solution is considered by the Company to be more efficient than traditional AC motors, can deliver twice the power and is approximately half the size of such traditional motors. The initial target market is that of industrial tools where the BLDC advantages of weight, reliability and efficiency
can be leveraged. Subsequent markets include heating, ventilation and air conditioning (HVAC), refrigeration and industrial processes. The Company also believes that such technology could serve as a platform for the development of brushless motors and/or controllers for the vehicle market. Tersus Energy is negotiating an investment of US$100,000 for an expected 6 per cent. stake in Thor which is expected to be matched by the Ben Franklin Fund.

World Energy Labs
World Energy Labs is a US-based developer of advanced diagnostic technologies for evaluating certain parameters of energy storage and energy conversion devices (typically batteries) as well as electrochemical systems. The target markets are those users of batteries, such as telecommunications providers and hospitals, where the devices' integrity is critical. Tersus Energy has entered
into a term sheet which provides for the Company to acquire a 5 per cent. stake in World Energy Labs costing US$1.0 million. The deal also gives the Company two options over a further 5 and 10 per cent of the equity.

Company "E"
Company "E" is a US-based developer of energy and environmental information software. Its software has been rolled out to over 100 utilities and large commercial, industrial, government and institutional clients. Tersus Energy is negotiating terms in principle in which it is proposed that it would acquire Company "E" for US$2.0 million, of which it is proposed that US$1.7 million of the consideration would be met with cash and the remaining US$0.3 million in Ordinary Shares.

Tersus BioEnergy:

Enviro-Controls
Enviro-Controls is a UK-based developer of proprietary thermophilic anaerobic digestion technologies and projects used to convert organic waste into environmentally useful materials, including high-quality organic fertiliser, and
methane gas. The company currently has two successful pilot plants, one in the UK and one in US. Enviro-Controls has a pipeline of ten-plus projects in the UK, US and Asia. Tersus Energy is in negotiations with view to agreeing a three part arrangement: (i) US$350,000 to be invested, (ii) an arrangement to secure the pipeline of projects and (iii) a joint development agreement which would give the Company the right to invest equity in projects.

West Lorne BioOil Cogeneration
Through the Company's investment in the NASDAQ-OTC traded DynaMotive Energy Systems, Inc., which is considered by the Board to be a market leader in the
biomass to energy market, Tersus Energy has proposed an investment of US$1.0 million for a 20 per cent. stake in its first plant subject to operating due diligence and final terms. The first commercial plant is at the Erie Flooring production facility (steam and electricity taker) in West Lorne, Ontario. The West Lorne plant is understood to have the capacity to convert 100 tonnes per day of wood residue into approximately 70 tonnes of BioOil and 20 tonnes of char fuel making it, in the view of the Board, one of the world's largest pyrolysis plant and the first BioOil-fuelled cogeneration facility. The plant, as at the time of this announcement, is physically complete and in the late stages of commissioning. Contractual arrangements between West Lorne and off-takers are
currently in negotiation.

The proposed terms of investment in West Lorne would, in the view of the Board, if implemented provide a 20 per cent. internal rate of return (IRR) to the Company. This IRR is based upon a number of assumptions and there can be no guarantee that such return will in fact be generated by such investment should it be made.

Tersus Asian Renewables:

Tang Wind Energy
Tersus Energy has obtained options over 25 per cent. of the total limited partnership interests in Tang Wind Energy LP thus affording exposure to Tang Wind Energy's 25 per cent. interest in HT Blade. HT Blade is one of China's largest domestic developers and manufacturers of wind blades. HT Blade was incorporated in China in 2001 as a China/US co-operative joint venture and primarily serves China. However, the Directors consider, that HT Blade has the potential to expand its sales to other selected Asian markets. The option is in three tranches. The first tranche exercise price is $2 million. The remaining tranches have been determined by reference to a higher valuation and the aggregate exercise price amounts to $4 million. HT Blade's majority Chinese shareholder has indicated that there is an intention to float HT Blade on a public market at some point in the future.

Update on Navitas Technologies

Navitas Technologies Ltd ("Navitas Technologies") became wholly owned by the Company in May 2005 and is focused on the development and manufacture of high performance microprocessor-based electronic controls systems for a wide variety of electric vehicles, with applications in hybrid car and fuel cell technologies.Since its acquisition, Tersus Energy has been able to implement a number of improvements throughout the Navitas Technologies business that have resulted in the company turning from being loss making to profitable.The Board estimates that Navitas Technologies has a value of $5-6 million assuming a multiple of 10 (which the Board considers to be reasonable) being applied to 2006 expected earnings before interest and taxation. It should be noted that this is the Board's own estimate and has not been independently
verified and that it is not intended to comprise a profit forecast or any assurance that such earnings and valuation will be achieved.

Update on other holdings
The Company remains of the view that the enterprise value of its other portfolio holdings is at or in excess of the value upon its listing on AIM in February 2005.

The information contained herein is not for publication or distribution into the United States. The material herein is for information purposes only and is not intended, and should not be construed, as an offer of securities for sale into the United States. The securities of the Company described herein have not been and will not be registered under the US Securities Act of 1933, as amended (the
"Securities Act"), or the laws of any state, and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state laws. There is no intention to register any portion of the offering in the United States or conduct a public offering of securities in the United States.

END

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