Mast Energy Developments PLC

(Incorporated in England and Wales)

(Registration Number: 12886458)

Share code on the LSE: MAST

ISIN: GB00BMBSCV12

("MED" or "the Company")

5 October 2022

Mast Energy Developments Plc ("MED" or "the Company")

MED Completes Acquisition of two further Reserve Power Projects and secures associated Funding

Mast Energy Developments PLC, the UK-based multi-asset owner and operator in the rapidly growing Reserve Power market, announces today that it has exchanged final documentation and completed ("the Completion") the definitive Sale and Purchase Agreements ("SPA's") to acquire the entire share capital of ARL 018 Limited and ADV 001 Limited (the "SPV's"), two UK companies whose principal assets are the Stather Road ("Stather") and Hindlip Lane ("Hindlip") reserve power projects respectively (the "Projects"). The SPV's were acquired from DKE Flexible Energy Limited (the "Seller"), a wholly owned subsidiary of Dukemount Capital PLC (LON: DKE).

Highlights

·    The Projects each comprise a shovel-ready reserve power generation plant with:

o  Current grid connection capacity of 11 kVA 2.4 MW at Stather and 11kVA 7.5 MW at Hindlip respectively;

o  Low emissions and carbon tax exempt;

o  Long-term leasehold properties;

o  a Grid Connection Offer;

o  a Gas Connection Offer; and

o  Planning and permitting already in-place.

·    The total purchase consideration for the acquisition of the SPV's and its associated assets and property rights under the SPA's amounts to £350,000 and will be funded by way of a loan arrangement with very competitive commercial terms (see details below), inclusive of a cash payment to the Seller in settlement of an outstanding shareholder loan account amounting to £10,693.60.

·    Encora Energy Limited, MED's Owner's Engineer conducted a comprehensive due diligence investigation on the Projects on behalf of the Company and reported an overall positive finding.

·    Comprehensive economic and financial modelling performed by MED's leading energy markets data consultant, EnAppSys, with a robust outcome (see further details below).

·    Proven and significant market demand with MED's preferred investment grade power purchase off-taker, Statkraft UK already secured, inclusive of the implementation and execution of MED's desired trading and optimization strategy.

·    The addition of the Projects will significantly boost MED's Reserve Power portfolio by 54% taking total generation output capacity to 28.3 MW.

Funding Arrangement

The acquisition of the Projects is being funded by way of a loan arrangement led by an institutional investor (the "Investor"), with the following competitive commercial terms:

·    Fixed term of up to three years;

·    Interest free, with only the principal drawn repayable;

·    No warrants;

·    Principal loan advance of £350,000 on signing the agreement and used by MED to fund the purchase of the SPVs;

·    The Investor may elect to convert some or all of loan amounts outstanding to ordinary shares in the Company at a price per share equal to the average of the five daily Volume Weighted Average Prices ("VWAPs") preceding the drawdown date of the loan advance (the "Reference Price"); and

·    Additionally, the Investor may not undertake any conversion within 3 months from the First Tranche drawdown date and may not undertake any Conversion during the first 12 months from the loan advance until the MED share price has closed at 200% (i.e. 2x) of the Reference Price or greater.

Rationale for Projects' Acquisition

The acquisition of Stather and Hindlip marks another important step in MED's ability to deliver on its strategy to build a 300 MW portfolio of Reserve Power projects. The transaction also presented a value opportunity to add to its existing 9 MW operating Pyebridge operation and its two development projects Bordesley and Rochdale (c. 5 MW each), significantly boosting MED's Reserve Power portfolio by 54% taking total generation output capacity to 28.3 MW. The signing of the SPA followed a detailed due diligence by the Company and its technical advisors, Encora Energy Ltd, on a portfolio of projects presented to it.

Based on independent financial modelling, prepared by MED's reputable and appropriately accredited consulting firm, EnAppSys the projected valuation metrics for the Projects are summarised as follows:

·    Unlevered Internal Rate of Return ("IRR") base case of c. 15%;

·    Projected base case average annual revenue of c. £2.7 million for Hindlip and c. £928k for Stather;

·    Operating Profit Margin of 30%; and

·    Capital development costs in the region of £1.6 million for Stather Road and £4.5 million for Hindlip Lane.

The Company is confident from the financial modelling to date that with carefully negotiated off-take agreements and optimum use of capacity market contracts, for which both projects can qualify, commercial returns can achieve the upper end or exceed the financial metrics indicated above. It should however be noted that while every care was taken in the Company's financial modelling, figures quoted are preliminary estimates and may change commensurate with risks normally associated with projects of this nature.

The Company will now expedite development of the sites which are currently at shovel-ready status, with construction anticipated to commence before the end of this year and commissioning during 2023.

Pieter Krügel, MED CEO, commented: "We are delighted with the latest acquisitions that bolster MED's growing portfolio of projects and to keep delivering on its main strategy to build a portfolio of 300 MW of Reserve Power projects. The addition of these latest sites to the MED stable will significantly increase its generation output capability to close to c. 30 MW. The acquisitions follow a robust and rigorous assessment and due diligence process to ensure that each project adheres to MED's strict technical and investment criteria, to support the best possible outcome for shareholders.

With increasing supply/demand volatility and the current unprecedented energy crisis globally and in the UK, the Reserve Power market is the fastest growing energy sector in the UK and accordingly there is significant demand for flexible power projects of this kind and at increasingly attractive economics. We are continually seeking and assessing possible next acquisitions with a current pipeline totalling a further c. 100 MW currently under assessment.

We look forward to updating the market with further developments in due course, as we continue to rapidly gain momentum in executing the MED business strategy."

ENDS

This announcement contains inside information for the purposes of the UK version of the Market Abuse Regulation (EU No. 596/2014) as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR"). Upon the publication of this announcement, this inside information is now considered to be in the public domain.

For further information please visit www.med.energy or contact: