Ukraine Markets Daily (March 15, 2017)

Market news

  • AEG completes issuance of USD 14.1 mn Convertible Loan Note

Market comment

The UX index increased by 0.8% on Tuesday while the PFTS index was down by 0.1% (in UAH term). The WIG-Ukraine index decreased by 0.4%. On the interbank exchange market, the USD/UAH was down by 0.1% to UAH 26.88 (mid price), according to Thompson Reuters. The official exchange rate reported by the NBU was UAH 26.89.


AEG completes issuance of USD 14.1 mn Convertible Loan Note

Active Energy Group plc. ("Active Energy", "AEG" or the "Company") successfully completed the placement of Convertible Loan Note (CLN) in the volume of £11.57mn (c. USD 14.15 mn), according to a statement of the Company on the London Stock Exchange published on March 15, 2017. The Notes were issued to new investors represented by London institutions, as well as to existing investors, according to the announcement. The CLN carries an interest rate of 8% per annum, payable quarterly In arrears, and a 5-year maturity period to March 14, 2022. The notes can be converted into ordinary shares of the company at any time prior to the Maturity Date at a 30% premium to 2.535 p. (being the Company's 10 day VWAP immediately prior to the date of the announcement), according to the release. The CLN notes are redeemable after three years at the company’s convenience. The proceeds received from the placement will be used to finance the construction of the Company’s first commercial scale CoalSwitch biomass fuel production plant, and to repay certain short term loans in the amount of about USD 1.4 mn, the company emphasizes. "The completion of this capital raise supports our strategy to accelerate the production of CoalSwitch and to collaborate with forestry owners around the world to increase the commercial viability of their timberland assets”, Richard Spinks, Chief Executive Officer of Active Energy commented on the development. The company intends to capitalize on the interest manifested by utilities, major coal fired power stations, and feedstock owners from across the globe in order to commercially utilize the proven ‘drop in’ coal replacement biomass product, the AEG’s CEO stressed. The company has devised a strategic plan with a view towards expansion in North America (USA and Canada), Europe and Asia. A commercial plant is targeted for commissioning by Active Energy during 2017, while numerous utilities and major coal fired power stations across the world have requested delivery of commercial size batches to test their facilities. Research, development and testing have been undertaken over the past two years in conjunction with the University of Utah, AEG says.

Our view:

The news is highly POSITIVE, demonstrating investors’ support to AEG strategic vision. The current development marks the fruitful outcome of a two-year of innovative cooperation between AEG and the academic institution from Utah (USA), and resulting in the launch of a new competitive venture on the global energy market. We think the prospects from the new enterprise to be optimistic, considering the expectations of steady global coal consumption in the long-term period on background of the gradual implementation of the new Clean Power Plan Regulations in the USA, and the long-term Chinese plan of switching from coal. In the meantime, the innovation still has to fray its way against high competitive pressure from the traditional fossil fuel and coal producers, as well as from the alternate renewable sources of energy. Overall, we reiterate our target price of USD 0.234 per share (GBp 18.7), allowing a significant upside to the current market price.