A reminder of previous funding agreements10 June 2008COUGAR...

A reminder of previous funding agreements


10 June 2008
COUGAR ENERGY ADVANCES LONG-TERM FINANCING
FOR UNDERGROUND COAL GASIFICATION PROJECT
Long-term funding plans announced today by Cougar Energy Ltd (ASX Code: CXY) could raise
around $280 million over the next 18 months for the Company’s proposed underground coal
gasification and power station project near Kingaroy in Queensland.
Cougar has entered into a Memorandum of Understanding (MOU) with Direct Invest Pte Limited
(DI) of Singapore for facilitation of two future capital raisings associated with the development of
the Project.
The MOU provides for DI to arrange two tranches of funding, the first of around $30m at the end of
2008 (First Financing), and the second of around $250m at the end of 2009 (Second Financing),
subject to achievement of agreed project milestones. The funding may come from a combination of
corporate and/or project equity and/or debt.
The parties will commence work immediately on the preparation of an agreed project financing plan
which is scheduled for completion in mid–September this year.
DI is the Australasian part of the Direct Invest AG Group, headquartered in Dusseldorf, Germany,
which is a Financial Services Institution in accordance with the German Banking Act. It provides
commercial banking, investment banking, asset management, financing, and financial advisory
services to companies and individuals. The Group has a wide range of international associations
and already holds significant investments in the energy sector in Australia, valued in excess of
$500m. It also participated in Cougar Energy’s recent $7m equity placement.
The funds to be raised by DI will be applied to bankable feasibility, design and construction of the
first stage of Cougar Energy’s Underground Coal Gasification (UCG) project, which is part of the
phased development of a 400MW power station using UCG gas as the fuel.
The UCG process enables deep coal deposits to be converted into a syngas suitable for use as a fuel
in power generation or the manufacture of a range of petro-chemical products.
DI has spent some years considering an investment in the UCG area, and has selected Cougar
Energy as its focus on the basis of the past experience of both its management and its technology
provider, Ergo Exergy Technologies Inc.
The MOU also provides for a success fee consisting of 2% of the funds raised, and a staged
incentive of up to 80m share options exerciseable up to 30 June 2011 at 25c, convertible on
completion of each stage of the funding. The options to be granted are:
(a) 10m options to be granted immediately under the 15% rule, exerciseable on success of the
First Financing. These options may be exercised early if CXY is in material breach of the
MOU, or if a change in effective control of the Company may occur by one of a number of
means;
(b) a further 20m options to be granted subject to shareholder approval at the next Annual
General Meeting of the Company, exerciseable on success of the First Financing; and
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(c) a further 50m options to be granted subject to shareholder approval at the next Annual
General Meeting of the Company, exerciseable on success of the Second Financing
Further details of the arrangement and the terms of the options will be included in the notice of
Annual General Meeting which will be forwarded to shareholders in October 2008.
Cougar Energy’s Managing Director, Dr Len Walker, said the signing of the MOU with DI marked
the achievement of one of Cougar Energy’s goals over the past 12 months – cementing a
relationship with an experienced financial partner with the desire to see the Company’s project
plans develop through the Pilot Burn phase to commercialisation.
“The international range and strength of the Direct Invest Group’s interests provides our
management with the confidence to accelerate the initiation of the Pilot Burn and the various
approvals required for the Power Project development,” Dr Walker said.
“The Company is now placing orders for the plant required for the Pilot Burn and associated pilot
gas clean-up equipment, and is also planning a new drilling campaign to extend the JORC resource
base. The funding for this work comes from the recent capital raising and the progressive exercise
of the December 2008 options.
“Project planning and financial evaluation for the first stage of the Power Project will also be
accelerated in anticipation of the finalisation of the agreed project financing plan.”
Dr. L.K.Walker
Managing Director
Cougar Energy Ltd