14 May 2008 07:00
| Press Release | 14 May 2008 |
VPhase plc
('VPhase' or 'the Company')
Placing to raise £3.5 million of new money for the Company
Placing of £1.6 million on behalf of existing shareholders
Introduction
VPhase plc (AIM: VPHA.L), a leading developer of energy saving devices for the home and small commercial applications based upon voltage reduction and stabilisation is pleased to announce it has raised £3.5 million (before expenses) by way of a placing of 70,000,000 new ordinary shares of 0.25p each ("Placing Shares'), comprising 10.1% of the enlarged issued share capital, at a price of 5p per share (the 'Placing Price').
In addition to the placing, Novum Securities Limited has arranged for 31,720,000 ordinary shares to be placed at the Placing Price on behalf of a number of existing shareholders to raise a total of £1.6 million for their benefit.
The Placing is subject to the terms of the Placing Agreement between Novum Securities and the Company which contains, inter alia, warranties and indemnities in favour of Novum Securities in relation to the Group. The placing of both the Placing Shares and the existing Ordinary Shares is conditional and is not being underwritten. All of the Placing Shares and the existing ordinary shares have been placed with institutional investors.
Novum Securities Limited ("Novum Securities") is sole broker to the Placing.
VPhase Technology
The VPhase technology is a low cost voltage reduction and regulation technology that automatically stabilises domestic voltage to a lower level (usually 220V for UK and EU markets) regardless of how high above the set point the incoming supply voltage varies within statutory limits.
European statutory limits on domestic voltage allow electricity supply to rise as high as 253V. Most electrical devices in a home in the United Kingdom are designed to operate in the range of 216V to 253V and VPhase test results demonstrate that any higher level of volts above 216V does not necessarily give additional performance. High voltage levels often cause surplus energy to be wasted in the form of heat. For example a fridge does not get colder with a higher voltage supply.
VPhase test results have shown that light bulbs operating with higher voltage burn out sooner than those operating with lower voltage. The Directors believe that for the majority of appliances high voltage both wastes energy and can shorten the operating life of the product. Therefore an additional benefit, not costed into any of the economics of the product, is that reducing voltage going into a device could actually extend the life of the device as well.
VPhase workshop testing has shown significant energy saving for domestic appliances. Based upon these results the Directors expect that VPhase technology will provide a typical saving of 10% of electricity bills for the average UK household.
Product development
The initial product that the Company intends to launch this year has been developed as a stand alone device suitable for application to the majority of UK and European domestic properties. In order to gain the requisite CE approval, the Company has selected a specialist subcontractor with relevant design and manufacturing experience to provide engineering services to assist VPhase with the design for manufacture activities and the compilation of the necessary technical data for the CE marking tests together with initial low volume manufacturing and assembly.
Routes to market
VPhase is focusing on selling its initial products through consumer unit (fuse box) manufacturers and partnering with utilities. The Company is in active discussions with a number of consumer unit manufacturers that have a global presence and that the Directors estimate account for approximately 75% of the UK consumer unit market. At the same time the Company is in discussions with a number of utilities to carry out independent testing of the product, with the intention of determining the suitability of VPhase product for the UK Carbon Emissions Reduction Target (CERT) scheme. The CERT scheme is a Government initiative and is intended to stimulate about £2.8 billion of investment by energy suppliers in promoting carbon reduction measures, usually by subsidising them, in the period from 2008-2011.
The Directors believe that the product will be CE marked towards the end of 2008, although it is expected that the consumer unit manufacturers will take VPhase units for their own independent laboratory testing ahead of that date.
Potential Market Size
Following discussions with consumer unit manufacturers, the Directors estimate that approximately 1.4 million consumer units are sold annually in the United Kingdom. Based on there being approximately 24 million households in the United Kingdom and 200,000 new builds per annum, this equates to a replacement cycle of every 20 years. Using these ratios, the Directors estimate that the consumer unit market in the 15 European Union countries (excluding the United Kingdom) equates to approximately an additional 7 million units per annum. The Directors believe that there could be good correlation between market size for consumer units and that for voltage reduction products.
Product economics
The Directors anticipate that, in volume and based on the average domestic UK electricity usage and a 10% reduction in electricity bills, the product may deliver a payback of approximately 3 years for the average UK home.
Extending the market reach
The immediate focus is on the UK market and other areas in the same voltage band. The initial product is being designed to meet EU standards and will be CE marked and therefore available for sale throughout Europe.
The USA operates at a lower voltage than the UK and Europe with a nominal supply voltage of 120V. Accordingly the relative percentage saving from a VPhase product in the USA would be lower However, as the average US house uses considerably more electricity than the average UK or European home the Directors believe that the potential monetary savings from VPhase technology in a USA application could be at least equal if not higher than UK or EU application. In order to validate this market opportunity, the development of a USA compatible device is being accelerated with the aim of testing the unit in the current year.
Reasons for the Placing
VPhase, a subsidiary of Energetix Group plc (AIM: EGX.L), was admitted to AIM on 27 September 2007. At the time of Admission, VPhase had sufficient capital to develop its European prototype. The response from both the utilities and the consumer board manufacturers has underlined the potential for the product and the proceeds of the Placing will be used to accelerate the time and routes to market and explore and finance additional opportunities, both domestic and international.
Settlement and dealings
Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM ('Admission'). It is expected that Admission will occur, and dealings will begin at 8.00am on 19th May 2008.
Following the admission of the Placing Shares to trading on AIM the enlarged issued share capital will be 696,368,303 Ordinary Shares and the number of AIM securities in public hands will be increased to 15.7%.
The new Ordinary Shares will, when issued, rank pari passu in all respects with the existing Ordinary Shares in issue, including the right to receive any dividends and other distributions declared following Admission.
Commenting on the developments and placing, Adrian Hutchings, Executive Chairman of VPhase said:
"I am delighted with the progress VPhase has made in the short time from its admission to AIM in September last year, and in particular the identification of additional potential major market opportunities. This Placing should enable the company to further accelerate towards delivering product to a wider range of markets than previously anticipated, and the potential for a North American product is particularly exciting."
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For further information:
| VPhase plc | |
| Dr Lee Juby, Chief Executive Officer | +44 (0)151 339 8799 |
| Richard Smith, Chief Financial Officer | Tel: +44 (0) 151 348 2116 |
| www.vphase.com |
| Novum Securities Limited | +44 (0)20 7562 4700 |
| Michael Brennan | +44 (0)20 7562 4712 |
| Henry Turcan | +44 (0)20 7562 4713 |
| www.novumsecurities.com |
| Zimmerman Adams | +44 (0)207 060 1760 |
| Graeme Thom | |
| Charity Walmsley | www.zimmint.com |
Media enquiries:
| Abchurch Communications Limited | 020 7398 7700 |
| Justin Heath | +44 (0)20 7398 7712 |
| Monique Tsang | +44 (0)20 7398 7781 |
| monique.tsang@abchurch-group.com | www.abchurch-group.com |