RVA Renova

    RNS Number : 5271G
  Renova Energy plc
  23 October 2008
   

    For immediate release
        

    Renova Energy plc

    Financing Update and Trading Statement

    Renova Energy plc (RVA: AIM) ("the Company"), the ethanol production, distribution and marketing company, today provides an update on
its financial position and current trading performance.

    Chapter 11 Plan of Reorganization

    As previously announced on 20 June 2008, the Company's US subsidiaries voluntarily filed for Chapter 11 Bankruptcy Protection in order
to restructure the Group's bank debt and other liabilities associated with the Group's part-completed ethanol plant in Heyburn, Idaho.

    To date, the Company has been unsuccessful in either raising additional equity or debt or renegotiating and rescheduling its existing
bank facilities, the latter being due in part to differing commercial objectives of the various lenders. In the meantime, the Company's
lenders have agreed a Plan of Reorganization ("the Plan") with AE Biofuels Inc ("AEB"), a biofuels development company, which has been filed
with the US Bankruptcy Court in Wyoming ("the Court") and which, if completed, would effectively result in the sale of a controlling
interest in the US business to AEB.

    Under the terms of the proposed Plan, two of the Group's lenders, Caterpillar Financial Services Corporation and Nordkap Bank AG, have
conditionally agreed to reschedule their outstanding debt, amounting to $18.1 million in aggregate, over a six year term. The third lender,
Standard Bank Plc, has conditionally agreed to a full settlement of its outstanding debt, amounting to approximately $14.0 million in
aggregate, for a total consideration of $10 million.  Under the Plan, AEB is proposing to raise up to $20 million of debt to replace the
Standard Bank debt and to provide additional working capital. AEB will receive 72.5% of the equity in Renova's existing ethanol production
and distribution business, with the remaining 27.5% of the equity being held by Caterpillar Financial Services and Nordkap Bank pro rata to
their outstanding debt.

    The Plan is subject inter alia to (i) AEB securing funding to make the payment to Standard Bank and (ii) approval of the Plan by the
Court. All the creditors of Renova's US entities are entitled to vote to approve or reject the Plan prior to the Court Hearing to consider
the Plan. The US subsidiary company directors' fiduciary duty is to act in the best interests of the creditors of these companies and the
Plan is the best proposal that has been tabled to date having regard to these interests. However, under the Plan, the Company would receive
no consideration for its current 100% equity ownership of the US subsidiaries or any distribution on the approximate $23 million of
unsecured loans it has made to its US subsidiaries. The Plan documents filed with the Court acknowledge that the Company does not support
the Plan and will not vote in favour of it. However, the Court could still approve the Plan despite the Company not voting for it.



    In the event that AEB is unsuccessful in raising the funds to complete the acquisition, the Plan proposes that the lenders will convert
some of their debt into 100% of the equity in Renova's US operating business and the balance of the outstanding debt would be rescheduled.
Approval of the Plan falls exclusively under the jurisdiction of the Court, so the Plan will not be subject to the Company's shareholders
approval. The Company believes that the earliest date that the Plan Confirmation Hearing could be scheduled in Court is January 2009.  

    Under Renova Energy (ID) LLC's separate Plan of Reorganization that has also been filed with the Court, it is proposed that ownership of
the part-constructed ethanol facility in Heyburn, Idaho, will be transferred to the other secured project creditors in full settlement of
their approximate $17 million of claims against Renova Energy Inc and Renova Energy (ID) LLC, the Heyburn project company.  At the time the
project was suspended in December 2007, $45 million had been invested in this facility and the costs to complete were estimated at a further
$20 million.  This Plan is also subject to Court approval.

    As previously announced on 29 September 2008, the Company intends to appoint an Administrator prior to 31 October 2008.

    Trading update

    Despite the very difficult circumstances that the Group has been operating under since December 2007, the trading performance has been
exceptionally strong over the six months to 30 September 2008 with sales volumes 45% higher than the previous six month period to 31 March
2008 at 11.9 million gallons and 98% higher than the same period to 30 September 2007. Turnover in the six month period to 30 September 2008
increased 90% over the previous six months and by 147% compared to the corresponding period last year to $38.0 million. Operating EBITDA of
the US entities (excluding restructuring costs) was 200% higher than for the two previous six month periods at $6.9 million:

                      6 months ended      6 months ended 31     6 months ended
                   30 September 2008                  March  30 September 2007
                                                       2008
                           $ million              $ million          $ million

 Turnover                       38.0                   20.0               15.4

 Operating EBITDA                6.9                    2.3                2.3

                           M gallons              M gallons          M gallons

 Sales volume                   11.9                    8.2                6.0


 Source: unaudited management accounts



      Commenting on this, Chris Thomas, Chairman, said:

    "It is very disappointing that we have been unable to raise any additional capital or to reach a favourable agreement with our lenders
in order to preserve shareholder value. Obviously the state of the global financial markets, which have deteriorated continually over the
last nine months, has had a significant impact both on our wide-reaching efforts to refinance the business and also on the appetite of our
lenders to renegotiate the bank debt.  This disappointment is coupled with great frustration because our strong trading performance has
illustrated the robustness of the business model during what continues to be a difficult period for the US bio-ethanol industry with highly
volatile product prices and all-time high feedstock costs squeezing production margins.  The Plan of Reorganization will not, if approved by
the creditors and the US Bankruptcy Court, return any value to the Company from the sale of the business. In the meantime the Company is,
therefore, continuing to investigate and pursue other sources of finance or strategic alternatives in an attempt to develop an alternative Plan that is acceptable to the Company's lenders and
other creditors and which would preserve or realise some value for the Company's interests."

    Notes

    Copies of the Plan of Reorganization can be downloaded from https://ecf.wyb.uscourts.gov. Please note, however, that this is a
subscription service. Copies are also available on request from chris.thomas@renovaenergy.com or raf.alam@renovaenergy.com.   

    For further information please contact

 Renova Energy
 Chris Thomas, Chairman                 0207 299 4444
 Fanton Chuck, Chief Executive Officer  0207 299 4444
 Raf Alam, Finance Director             0207 299 4444




This information is provided by RNS
The company news service from the London Stock Exchange
 
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