23 July 2004

RESTRUCTURE

On 17 May 2004 Advanced Engine Components Limited (“AEC” or “the Company”) announced the cancellation of the Shareholders Meeting to be held on 20 May 2004. The meeting had been called to seek shareholder approval to the proposed restructure and recapitalisation of the Company. The meeting was subsequently cancelled so that the Board could reconsider the terms of restructure.

The revised restructure and recapitalisation will involve:

• a consolidation of existing shares on a 1 for 10 basis;
• a placement of 10 million shares at 10 cents per share to raise $1 million in Mezzanine Funding;
• a conversion of $2.15 million existing debt to equity at 10 cents per share;
• a conversion of $3.3 million existing debt to equity at 20 cents per share; and
• a subsequent public prospectus offer, including a priority right to existing
  shareholders, of 17.5 million shares at 20 cents per share.

The Company’s parent company 698 Capital International Limited and its affiliate, as well as converting $1.5 million of existing debt to equity at the price of 10 cents and a further conversion of $3.3 million of existing debt to equity at the public issue price of 20 cents, will underwrite any shortfall of 5 million shares or less in the public offer, at 20 cents per share.

The full terms of the restructure and recapitalisation will be set out in the Notice of Meeting and Explanatory Memorandum to be sent to shareholders in the near future.

AEC is continuing the advancement of its world leading Natural Gas Vehicle System (“NGVS”) for use on Natural Gas heavy duty vehicle engines. As well as existing contracts in Europe and Australia, the second phase of the First Auto Works (“FAW”) co-operation agreement to develop a certified NGVS engine for China is progressing well. FAW is one of China’s largest vehicle manufacturers. AEC have installed a FAW engine on the Company’s dynamometer in the Perth design laboratory. In addition, a further two FAW engines have been delivered to AEC’s laboratory in Perth for further development.

In July 2004, one of the three largest heavy duty diesel engine manufacturers in China, visited AEC’s clients in Europe and Australia and AEC’s design laboratory in Perth. The visits are the final stages of their commercial and technical due diligence of the AEC NGVS prior to completing negotiations for a Natural Gas and Liquefied Petroleum Gas (LPG) development program for their engines in China.

AEC is currently finalising the June 2004 financial statements. It is forecast the loss for the 2004 financial year will be less than $2 million which is a significant improvement on the $6.4 million and $5.1 million lost in the 2002 and 2003 financial years. This improvement reflects the improved financial management and concentration on the core NGVS business.

Completion of the restructure, together with the ongoing commercial development and improved financial position, will enable the Company to seek reinstatement to the official list of the Australian Stock Exchange.

For further information contact Tony Middleton on 61 8 9209 6900.

Yours sincerely

NERIDA SCHMIDT
COMPANY SECRETARY

Back to Top