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Investor Linc Newsletter

June 2012 /21

CLEAN ENERGY

China GCL Deal Signed to Commercialise UCG to GTL in China

Linc Energy was pleased to announce that key commercial terms have been agreed with GCL Projects Limited (GCL), a subsidiary of Golden Concord Group Limited) to form a joint venture to commercialise UCG to GTL in China.  Construction will commence on the first multi-gasifier project within six months of completion of the suite of formal binding legal agreements.

Linc Energy’s Chief Executive Officer Peter Bond, said, “I am very pleased that we have reached agreement on the commercial terms with GCL. We have been working tirelessly on our options into China over many months, having long identified China as a key market for Linc Energy’s UCG expertise and our GTL operational excellence and know how. China’s insatiable appetite for liquid fuels and gas presents Linc Energy and GCL with a unique opportunity to capitalise on this world changing market.”

“It is also great to see GCL wishing to take an ownership stake in Linc Energy, and importantly this relationship significantly revalues Linc Energy's key UCG to GTL technology base. Linc Energy is committed to commercialising UCG to GTL on a significant scale, and this most recent deal with GCL in China is the first stepping stone of many commercial opportunities I believe you will see Linc Energy produce over the months ahead.”

Linc Energy’s President Clean Energy Adam Bond added, “The agreement with GCL is not only an exciting step forward to our goal of commercialisation but is also a strong validation of the significant investment and technology advances achieved through Linc Energy’s world leading Chinchilla Demonstration Facility.”

The GCL Group has interests in Power generation, Coal and Poly-silicon production and one Group member, GCL-Poly Energy Holdings Ltd, is a Hong Kong Stock Exchange listed company with a market cap of HKD33 billion with 17,000 employees.

The completion of the proposed joint venture arrangements and GCL’s participation in a private placement of Linc Energy stock is dependent upon Foreign Investment Review Board approval in Australia and the finalisation of customary legal documentation of a transaction of this size and nature.

A summary of the agreement:

Linc Energy and GCL have agreed to cooperate through a proposed incorporated joint venture in the utilisation of Linc Energy’s world leading UCG to GTL process.  

Linc Energy will hold 33% of the joint venture and GCL will hold 67%. GCL will provide USD15 million in working capital to the joint venture in three equal instalments over the first three years.

GCL also has an obligation to principally arrange CAPEX funding of the commercial projects the joint venture undertakes in China. Linc Energy will have minimal balance sheet exposure whilst maintaining ownership of 33% of the commercial projects.

GCL will provide the joint venture with USD5 million of working capital to commence site selection and engineering. Linc Energy will be completing the site selection and the majority of the engineering, commencing with a commercial UCG gas facility consisting of initially four commercial size UCG gasifiers working in parallel (GCL has an option to expand this to six gasifiers).

GCL has also agreed to subscribe AUD120 million for an approximately 5% interest in the issued capital of Linc Energy. GCL has agreed to subscribe to a first tranche AUD60 million placement on execution of the joint venture contract suite for 2.5% of Linc Energy's issued stock at an issue price of approximately AUD4.50 per share. GCL will subscribe for a further tranche AUD60 million placement upon the successful completion and commissioning of UCG operations at the first site in China. The subscription price per share for the second placement will be the higher of the subscription price per share of the first placement or 130% of the 30 day VWAP immediately preceding the second placement.

Linc Energy and GCL are working together to finalise the proposed suite of documents so the transaction can be complete by end of June 2012.