Partial Debt Repayment and Trading Update

6 March 2020

Rurelec PLC

("Rurelec" or the "Company")

Partial Debt repayment and Trading Update

Further to the announcement of 28 November 2019 (the "Announcement"), the Directors of Rurelec PLC (AIM: RUR) note that Rurelec have received a further US $1.44 million by way of partial repayment by Patagonia Energy Limited ("PEL") of the Amended and Restated Loan Note, the majority of this sum was received earlier this week.

The balance outstanding on the loan notes is approximately US $21.27million with the first US $5 million of repayment shared 80/20 between Rurelec and Basic Energy Limited, the ultimate shareholders of PEL, and then the balance paid 72:28 thereafter (Rurelec: Basic Energy Limited). The total amount owing to Rurelec is now US $15.48 million.

However, whilst the agreements referred to in that Announcement determine how funds generated by PEL will be distributed, the timing of future payments is not certain as it is dependant inter alia on:

i) the potential future cash generation ability of Energia del Sur, S.A. ("EdS"), which operates the Argentina power project; and

ii) the duration of exchange controls that firstly restrict the ability of EdS to transmit funds to PEL and secondly increase the money conversion cost of achieving those transfers; and

iii) delays being experienced by electricity generators in Argentina in receiving payments of revenue from CAMMESA (the Wholesale Electricity Market Regulator and Administrator).

Accordingly, there can be no guarantee as to when any further loan repayments will be made.

The Directors also note the increased foreign exchange risk for the Group resulting from the recent policy change announcement by the Argentinian Government that revenue deriving from the electricity generated by EdS from its gas turbines and sold on the energy spot market will no longer be linked to the US Dollar but to the Argentinean Peso retroactively to February 2020 and will be updated monthly from March 2020. Revenue deriving from the 43.7 MW of electricity generated under EdS's Resolution 220/2007 Power Purchase Agreement ("PPA") (which sets the tariff for the output from EdS's combined-cycle steam turbine), will however still be linked to the US Dollar.

The Directors also note that this PPA expires on 9 September 2020 and will be superseded by a new tariff or, at worst case, be sold on the energy spot market. The remuneration level of that tariff/PPA is the subject of ongoing discussions with CAMMESA, the outcome of which is currently uncertain. There is no guarantee that those terms will be favourable to EdS or that, as a consequence of these changes, EdS will remain economic although the Directors remain optimistic as to a sensible resolution. Further updates will be provided in due course.

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