News

17/07/09

Agreement with BP on D1-BP Fuel Crops

D1 Oils plc (“D1” or “the Company”) announces that it has reached a conditional agreement with BP International (“BP”) to acquire BP’s 50 per cent interest in D1-BP Fuel Crops Limited (“D1-BP Fuel Crops” or “the Joint Venture”), its joint venture with BP for the planting of Jatropha curcas, and thereby to take back into D1's sole ownership the global planting assets and interests of the Joint Venture. The agreement is conditional upon relevant resolutions in relation to the amended option agreement mentioned below being passed at a D1 shareholder meeting (resolutions for this purpose have been proposed at D1's forthcoming AGM on 23 July 2009).

The purchase price is at a significant discount to the Joint Venture’s net asset value and is structured to achieve a low cash outlay, whilst maintaining alignment between D1 and BP for the future. BP will retain an interest in D1’s planting activities through an extension and amendment of the existing option and relationship agreement (originally signed in 2007) between BP and D1 and the parties have agreed to maintain an ongoing dialogue in relation to the potential supply of crude Jatropha oil (CJO) to BP. Following completion of the agreement D1 will merge its plant science business with the then fully-owned planting operations and begin marketing its technology and services in Jatropha to third parties.

In return for an immediate cash payment to BP of £0.5m, D1 will take ownership of all of BP’s shares in D1-BP Fuel Crops, thereby assuming all of the Joint Venture’s assets & liabilities, as well as agreeing to take responsibility for any third-party claims against the BP group related to the business and operations of the Joint Venture. D1 has also agreed to pay BP, by way of deferred consideration, £30 for every tonne of the first 20,000 tonnes of CJO, up to maximum of £600,000, produced by the D1 group and sold to third parties. To the extent not already paid, the £600,000 deferred consideration is payable by D1 at the latest by 31 December 2014.

The existing option agreement between D1 and BP, which gives BP options over 16 per cent of the post-exercise issued share capital of D1 Oils plc, will remain in place. However, subject to completion of the acquisition of BP's shares in the Joint Venture, the option period will be extended to 10 years and the exercise prices will be reduced to 13p, 14p, 16p, and 18.5p for each 4 per cent tranche. Certain changes will also be made to ancillary provisions of the option agreement, to reflect BP's proposed exit from the Joint Venture.

As of 31 May 2009 D1-BP Fuel Crops had interests in approximately 220,000 hectares of Jatropha in Africa, India and South East Asia, which currently represent approximately 25 per cent of the estimated total global planting of Jatropha curcas. As of 30 June 2009, the Joint Venture had net assets with an unaudited book value of £7.6m, including cash totaling £6.1m. Restructuring following the merger of planting and plant science operations is likely to reduce the value of net assets. The unaudited Joint Venture operating loss attributable to each shareholder before impairment for the year ended 31 December 2008 was £7.1m. D1 is forecast to remain cash positive to the end of 2010 when the Company expects to be able to demonstrate value based upon improved operational performance.

Completion of the acquisition of BP's shares in the Joint Venture will also bring to an end the exclusive supply relationship between D1’s plant science business and the Joint Venture, thereby enabling D1 to market its plant science and planting technology and expertise to third-party operators of Jatropha projects. D1 believes that merging the planting and plant science businesses will strengthen its market offering in the supply of technology and services, and also enable the Company to achieve substantial cost savings by consolidating central and support activities and reducing overlap and interface costs in the field.

Commenting on the agreement, Ben Good, Chief Executive Officer of D1 Oils plc, said:

“This agreement enables us to bring all existing Jatropha planting assets and interests back under full D1 control while retaining an alignment of interest on Jatropha with BP. This has been achieved in exchange for a low cash outlay. Unified ownership and management will give us the ability to reduce cash burn, and be more flexible and responsive in developing the business. We are now moving forward rapidly with the restructuring of the business to achieve our three objectives: achieving value from existing planting, building technology and services revenues, and delivering a focused science and technology programme.”

Contacts

D1 Oils:
Graham Prince, Head of Corporate Communications
Tel: +44 (0) 20 7367 5600
Mobile: +44 (0) 7973 323840

Brunswick Group:
Camilla Gore / Kevin Byram
Tel: +44 (0) 20 7404 5959

Piper Jaffray:
Michael Covington / William Carnwath (Qualified Executive)
Tel: +44 (0) 20 3142 8700