Sale of Rail Assets

17 April 2015

PME African Infrastructure Opportunities plc

("PME", the "Company" and together with its subsidiaries the "Group")

(AIM: PMEA.L)

Disposal of Rail Assets

PME African Infrastructure Opportunities plc, an investment company established to invest in sub-Saharan African infrastructure and infrastructure related industries, announces that it has entered into an agreement to sell the majority of the Group's rail assets for an aggregate cash consideration of US$11.5 million and has also entered into an option agreement in respect of the Company's remaining rail assets.

Sale of 100% of PME RSACO (Mauritius) Limited and seven C30 Locomotives

PME has agreed the terms of the sale of 100% of the equity of PME's wholly owned subsidiary, PME RSACO (Mauritius) Limited ("RSACO"), the Group entity which holds the Group's 50% interest in Sheltam Holdings (Pty) Ltd ("Sheltam"), together with certain intercompany loans, and the disposal of seven C30 locomotives (the "Sale Locomotives") currently owned by PME Locomotives (Mauritius) Limited ("PME Locomotives"), for an aggregate cash consideration of US$11.5 million (the "Disposal").

The acquiror of RSACO is PCF Investments (BVI) Limited ("PCF" or the "Purchaser"), a wholly owned subsidiary of Principle Capital Investments Limited and a member of the same group of companies as PUG Investments Limited ("PUG") - the Company's 10.83% shareholder.

The agreements governing the Disposal include certain warranties and indemnities given in favour of the Purchaser and RSACO respectively.

The Disposal is subject to certain conditions including the approval of South African competition authorities.

Following completion of the sale of RSACO to PCF, RSACO will be the acquiror of the Sale Locomotives, with PUG acting as guarantor.

Put Option

Following the Disposal, the Group will continue to own three C30 locomotives (the "Excluded Locomotives"). For the payment of US$1, RSACO has granted to PME Locomotives a put option (the "Option") requiring RSACO to purchase all or any one or more of the Excluded Locomotives that it then legally and beneficially owns for US$1,416,666 per locomotive at any point during a 90 day period commencing 18 months following the completion of the Disposal (the "Option Period").

During the period from completion of the Disposal until the expiry of the Option Period, RSACO shall use its reasonable endeavours to secure for PME Locomotives third party buyers, on a non-exclusive basis, for all or any one or more of the Excluded Locomotives. In consideration for this, PME Locomotives will pay to RSACO a sum equal to 50% of the amount by which any cash purchase price exceeds a hurdle of US$1,500,000 per locomotive (the "Sales Incentive Fee").

If PME Locomotives wishes to sell all or any of the Excluded Locomotives to a third party at any time during the Option Period, PME Locomotives must first offer any such Excluded Locomotive(s) to RSACO on terms no less favourable to those of the proposed third party offer. If RSACO purchases the locomotives for itself, there will be no Sales Incentive Fee payable.

During the term of the Option, RSACO may request to lease the Excluded Locomotives from PME Locomotives (a "Lease") on agreed terms. Any Lease entered into can be terminated by either party with 45 business days' notice, save that the Lease shall terminate immediately upon delivery of any Excluded Locomotive to RSACO on exercise of the Option.

As the context requires, the Disposal and the Option are together referred to hereafter as the "Transaction".

If the Option is exercised by PME Locomotives in respect of all of the Excluded Locomotives, the aggregate consideration payable to PME and PME Locomotives under the Transaction will be approximately US$15.75 million.

Cancellation of Finance Lease and assignment of intercompany loans

PME Locomotives has agreed, simultaneously with the sale of the Sale Locomotives, to transfer to RSACO the benefit of the existing finance lease ("Finance Lease"), under which Sheltam and its operating subsidiary (Sheltam (Pty) Ltd) currently leases all ten C30 locomotives currently owned by PME Locomotives, in respect of the Sale Locomotives and to terminate the Finance Lease in respect of the Excluded Locomotives and also to assign amounts remaining owed to PME Locomotives under the Finance Lease to RSACO. In addition, net receivables remaining due to PME from Sheltam amounting to approximately US$6.1 million, prior to anticipated pre-transaction impairments, have been assigned to RSACO as part of the Transaction.

Together with anticipated pre-transaction impairments and expected transaction costs, the Transaction is expected to result in a net reduction in the Company's unaudited net asset value of approximately US$17 million to approximately US$18 million.

In line with PME's investing policy, the Company intends to return the net proceeds of the Transaction to shareholders, after maintenance of amounts for working capital and for the repayment of outstanding loans. Further announcements will be made in this regard in due course, as appropriate.

Related Party Transaction

PCF is a 100% owned subsidiary of Principle Capital Investments Limited and PUG Investments Limited ("PUG") is also a wholly owned subsidiary of Principle Capital Investments Limited. PUG is interested in 10.83% of PME's issued ordinary share capital. Under the AIM Rules for Companies (the "AIM Rules"), PCF and PUG are, therefore, deemed to be related parties of the Company and the Transaction is a related party transaction pursuant to Rule 13 of the AIM Rules.

The directors of PME, Paul Macdonald and Lawrence Kearns, consider, having consulted with Smith & Williamson Corporate Finance Limited in its capacity as the Company's nominated adviser, that the terms of the Transaction are fair and reasonable insofar as the shareholders of PME are concerned.

Paul Macdonald, Chairman of PME, commented: 

"With the Company's shareholders having re-affirmed their desire for the Company's remaining assets to be realised, and the net proceeds returned to shareholders, at the extraordinary general meeting of the Company held on 11 August 2014, which was convened for the purpose of considering an alternative set of proposals, the board is pleased to announce the disposal of the majority of the most significant of the Company's remaining assets.

This has been a complicated and difficult transaction to execute and the board are delighted to receive cash consideration which represents a significant premium to the Company's current market capitalisation.

The board remain focused on obtaining maximum value for its few remaining assets, being the Excluded Locomotives and the Dar-es-Salaam property, whilst also running the Company in as efficient a manner as possible. The Company is subject to certain warranties and indemnities in connection with the Transaction for a period of 6 months following completion of the Transaction and will therefore need to carefully review the extent and timing of its future return of cash to shareholders. We look forward to updating shareholders in due course."

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