Update on Chilean Solar Projects

Rame Energy / Index: AIM / Epic: RAME / ISIN: JE00BBD8GG53 / Sector: Energy

19 December 2014

Rame Energy Plc ("Rame" or "the Company")Update on Chilean Solar Projects 


Rame Energy plc, the independent power producer ("IPP"), is pleased to provide an update on its solar power activities in Chile, including its first multi megawatt, on-grid ground mounted solar project and the signing of its first solar power purchase agreement ("PPA"). This update is in line with the Company's strategy to become a leading independent wind and solar power producer in Chile.

Highlights

Rame's first multi megawatt scale, on-grid ground mounted solar project in Chile ("the Project") to be developed as an IPP

· Project expected to yield in excess of 1,650 kWh/kWp/year, approximately double the average output of a UK solar plant

· Fast track development, phase 1targeting 2.5MW, power out expected by Q4 2015 subject to financing

· Negotiations in progress with an existing customer regarding a 15 year PPA

· Indicative term sheet to provide non-recourse debt in place

· Total capital expenditure, including land fees, development costs and finance charges of approximately USD6.4M

· Potential additional 17.5MW project which would connect direct to the sub-transmission substation

· Full connection studies and permitting to commence Q1 2015 to be ready for construction by Q4 2015

Rame's first Off-Grid Solar PPA signed in Chile

· PPA signed with Santiago School 'Colegio Suizo de Santiago' ('CSS'), follows MOU announced on 2 October 2014

· Rame to install, own and operate a 25kW rooftop mounted solar power plant - electricity produced will be sold to CSS under a 15 year PPA

· Installation and commissioning due to complete in February 2015

· Represents Phase 1 of a total roof top development of approximately 300kW which will be Rame's first 100% owned operational solar power project

· Project 100% funded by the Company from existing resources and internal rate of return projected to be 16%

Solar Project Pipeline

· In addition to the on-grid solar development potential described above, Rame is currently in discussions regarding a number of off-grid solar projects as part of its diesel displacement portfolio with a combined potential capacity of up to 5.5MW

Rame CEO Tim Adams said:

"The strong progress of our solar business is highly significant; it is a positive development since our IPO and evidences the real benefit of our acquisition of Beco and our ability to effectively apply that expertise into Chile as an integrated IPP.

"In the first instance, we are pleased to be reporting progress to date on our first multi-megawatt on-grid solar project which builds on our off-grid solar work. Northern Chile is the ideal location for solar projects and, along with our first six wind projects in Chile totaling 133 MW which are now at various stages of development, this project will play an important part in establishing a mixed portfolio of 300MW within the next three years.

"In addition, the signing of the 15 year PPA with CCS cements our presence in the newly emerging domestic Chilean solar market and we are proud to be one of the first companies to obtain a 'behind the meter' grid connection. We have long recognised the increasing importance of solar power across all our markets and this project demonstrates the realisation of our ambition to apply Beco Solar's installation capabilities in Chile as well as providing an attractive internal rate of return in the region of 16%. I am delighted that construction will shortly commence and look forward to providing positive updates regarding commissioning in the New Year."

Development of first multi megawatt scale on-grid solar project

The Company has made significant progress on its first multi megawatt, on-grid ground mounted solar project in Chile. This is an important development which builds on its first 100% owned operational off-grid solar power project (with Santiago School 'Colegio Suizo de Santiago') to strengthen its presence in the Chilean solar market.

Located 300km north of Santiago, Rame has been measuring solar radiation levels at the on-grid project since May 2013. Results suggest that the project will be high yielding with a specific production in excess of 1,650 kWh/kWp/year. This is approximately double the average output of a UK solar plant.

Phase 1 will develop 2.5MW with a potential additional 17.5MW to be developed in phase 2. Total capital expenditure for phase 1, including land fees, development costs and finance charges is approximately USD6.4M.

Phase 2 of the project would connect direct to the sub-transmission substation located 300m from the site. Rame intends to commence the environmental studies for this phase early in 2015, as soon as the electrical feasibility studies confirm the available capacity in the substation.

For phase 1, Rame has now completed the first two steps of the grid connection process, confirming the current connection capacity of 2.5MW, as well as the location of the grid connection point to a 13.2kV distribution line adjacent to the site.

The Company is now undertaking the grid stability and protection studies necessary to complete the grid connection application process. The project will fall under the "PMGD framework" to connect energy projects under 9MW to the distribution system in Chile. Under this framework, distribution companies must provide a grid connection to qualifying renewable energy projects within a set timeline and on the basis of prescribed studies and submission documents, making the process relatively quick and well defined.

In addition, Chilean law states that energy projects of less than 3MW do not require environmental studies and permits. Instead, a modification letter is required to inform the authorities of the intended power plant. This is a straightforward process with minimal associated administrative costs.

In parallel, Rame is negotiating terms for a potential power purchase agreement with an existing customer and has executed an indicative term sheet to provide non-recourse debt with an international bank. Having completed its initial credit review, the bank will now proceed with the due diligence which will focus on technical, legal and commercial aspects of the project, with the aim to conclude the process and reach financial close in Q2 2015.

Rame aims to have first power out in Q4 2015 subject to financing.

PPA signed to provide power to Santiago School

Rame has signed a PPA with CSS to supply power to the school. The PPA follows the signing of a Memorandum of Understanding with CSS which was announced on 2 October 2014, and establishes Rame's presence in the domestic Chilean solar market.

As previously announced, under the terms of the PPA, Rame will install, own and operate a 25kW rooftop mounted solar power plant. The electricity produced will be sold to CSS under a 15 year PPA with any excess to be 'sold' back to the grid by the school.

This is the first phase of a roof top development of approximately 300kW which will be delivered in the second half of 2015 and will play a key role in supporting the schools ambition to become carbon neutral under its Green School Initiative which recently won an Innovation Award from the British Chilean Chamber of Commerce.

This will be Rame's first 100% owned operational solar power project and its wholly owned subsidiary Beco Solar Ltd will be undertaking full engineering, procurement and construction (EPC) using local Rame resources where appropriate and has been awarded one of Chile's first "behind the meter" grid connections.

The project is being fully financed by the Company from existing resources.

Orders will be placed in the second half of December for construction to commence on schedule in early 2015. Installation and commissioning is due to complete in February 2015.

New legislation allows "Residential Generators" in Chile to connect renewable energy systems, such as solar, to the distribution system and receive payments for the surplus electricity they generate. This is one of the first projects in Santiago to benefit and establishes Rame as an early mover in this new market.

Solar Project Pipeline

In addition to the multi megawatt on-grid project outlined above, Rame is currently in discussions about a number of off-grid solar projects in the tourist and mining industries with a combined potential capacity of up to 5.5MW. Rame has now demonstrated it has strong enough capabilities in solar power projects to complement its established abilities in wind energy thus enabling it to provide robust energy solutions in either technology to both on and off grid customers.

**ENDS**

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Notes:

Rame Energy is an experienced Independent Power Producer, providing on-grid and off-grid power solutions to industry by generating renewable energy: primarily wind and solar.

Blue chip clients include Akzo Nobel, Anglo American, Barrick Gold and Codelco.

The Company has executed its first joint venture agreement with Santander Investment Chile Limitada to co-finance its first two wind projects totalling 15 MW, in which Rame has a20% equity participation.

The debt package for the two projects is being provided by Chilean bank, Banco BICE.

Rame is targeting an operational portfolio of 300MW in Latin America within three years.

The Company plans to build on its proven track record of delivering power in South America.To date, in Chile, Rame has been involved the evaluation and design of over 1GW of potential wind generation capacity, successfully permitted over 230MW and constructed over 50MW.