(Frontera Energy, 10.Oct.2018) — Frontera Energy Corporation announced the International Finance Corporation (IFC) and related funds have provided notice to the Company that they have exercised their right under the Pacific Midstream Limited (PML) shareholders agreement to receive without further payment additional shares in PML, as a result of certain historical milestones on the Petroeléctrica de los Llanos transmission line not being met. Upon issuance of the additional PML shares to IFC, Frontera will be a 59.93% shareholder in PML (previously 63.64%), with the IFC holding the remaining 40.07% interest (previously 36.36%).
In addition, on September 11, 2018 the IFC provided a form of notice exercising PML’s Bicentenario Put Option which requires Frontera to purchase from PML its ownership interest in the Bicentenario pipeline. This option is exercisable by the IFC pursuant to the PML shareholders agreement solely in the event that the Bicentenario pipeline is non-operational for six consecutive months, and as a result, the Bicentenario ship or pay contracts with the Company’s affiliates are terminated. The notice from IFC refers to the actions Frontera took to terminate those ship or pay contracts in July. The purchase price is determined by a formula and is currently approximately US$85 million. Frontera is reviewing the form of notice and the transaction would be subject to documentation and prior approval of the Toronto Stock Exchange. If the transaction is completed it would increase Frontera’s aggregate indirect ownership interest in the Bicentenario Pipeline to 43.03% (currently 26.39%) at a net cash cost expected to be approximately US$34 million after the proceeds of the put transaction are distributed by PML to its shareholders (Frontera’s share of those proceeds is expected to be approximately US$51 million).
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