Environmental Clean Technologies Limited (ASX: ESI) (ECT or Company) is pleased to announce the signing of a term sheet for a R&D Rebate loan facility through to January 2020 in support of the Company’s India project.
- New York-based Innovation Structured Finance Co. LLC (Brevet) selected to provide new loan facility under market competitive and improved terms from last year’s facility
- Loan supports forward factoring of the anticipated AusIndustry R&D Tax Incentive rebate under the Company’s existing overseas ruling for the Coldry component of its India project (and shortly expected overseas ruling for Matmor)
- Anticipated drawdowns of AUD$7 million and AUD$9.5 million for FY17/18 and FY 18/19 respectively
- Loan repayments anticipated in January 2019 and 2020
- Maximum Facility limit is AUD$14 million over the full term
- This funding will be provided as non-dilutive, senior secured, debt
The new finance facility entailed a market-wide assessment of providers for this type of lending, and the Company is pleased to announce that ECT’s incumbent ‘R&D rebate’ lender, Brevet, has been selected.
Brevet’s value proposition was the most favourable of all respondents, which includes highly competitive pricing on commercial terms, very nuanced knowledge of the R&D Tax Incentive program, and a longstanding relationship with ECT and understanding of its business. The selection process involved assessment against multiple measures, including loan-life cash-flow, sensitivity modelling and risk scoring, along with standard measures like interest rates, fees, costs and loan features.
The Company previously announced (22 December 2016) the execution of a Term Sheet with Brevet for an AUD$10 million debt funding facility. That Term Sheet has expired and been superseded by this new AUD$14 million facility, on more favourable terms to the Company.
Of the key terms for the loan facility, the interest rate remains subject to confidentiality, however the Company confirms that the facility offered by Brevet was unanimously agreed by the Board and the executive committee of ECT as being the superior offer presented, for all the reasons stated above, and in the best interests of shareholders.
The rate that ECT pays for this facility will be the subject of mandatory disclosure and audit review during the regular statutory reporting cycles which will invariably reinforce the Board’s ingoing view that this transaction is a great deal and allows the Company to progress its India Project with strength and purpose.
Other key terms include:
Security – As per the previous facility with Brevet, the R&D rebate provided to the Company under the R&D Tax Incentive program serves as the primary security for the new facility. The currently registered charge held at the PPSR will remain in place.
Defaults & covenants – The defaults and covenants contained within the Term Sheet are typical of the general terms and conditions for a facility of this type and the Company will provide timely updates if any of these are materially breached.
This facility is an important element for the Company in meeting its obligations under the Master Project Agreement (MPA) for the proposed Coldry-Matmor integrated project in India (further project details below).
The transaction secures ECT’s anticipated contribution to the project, which is estimated to cost in total and is supported by an overseas ruling for its Coldry technology (see announcement 21 February 2017). The Company has previously advised (3 March 2017) it has submitted an application for an overseas ruling for the Matmor process component of the project and expects an outcome will be notified early in 2018.
Glenn Fozard, Chairman of ECT, commented, “This outcome is proof that loyalty holds a mutual benefit to both borrower and lender. The past few years of dedicated use of Brevet’s loan facility to support our Australian R&D activities is now being recognised in highly competitive borrowing rates when it counts the most for our company, as we pursue the scale-up of our technologies with our Indian partners.”
“With this finance facility in hand we’re able to focus our efforts on finalising the current project review process ahead of submission to India’s national planning committee, NITI Aayog; and are aiming to reach financial close for the project within the current financial year.”
Trading Halt & Voluntary Suspension
The Company requests that the ASX lift the Voluntary Suspension immediately.
The project initially focuses on the execution of a research and development (R&D) stage consisting of a Coldry demonstration plant integrated with a Matmor pilot plant.
With an estimated cost for the R&D stage of ~AUD30 million, the project is a first-of-a-kind collaboration between ECT, and two Indian government-owned enterprises; NLC India Limited (NLC) and NMDC Limited (NMDC).
ECT is the technology provider. India’s national lignite authority, NLC is the site host and coal supplier, and India’s national iron ore authority, NMDC is the iron ore supplier to the Matmor component of the project.
Funding of the R&D stage is split equally among the parties under the proposed MPA.
Following successful completion of the R&D stage, the MPA sets the framework for the transition of the project into a commercial phase, entailing a proposed 500,000 tonne per annum Matmor steel plant and commercial scale Coldry plant. The estimated capital cost for the commercial phase is AUD$300M+.
For further information, contact:
Ashley Moore – CMD of ECT India or Glenn Fozard – Chairman of ECT Ltd: email@example.com