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PROJECT EARTH – LANDKOM INTERNATIONAL PATHFINDER PROOF

DRAFT 12-OCTOBER-2007
TOTAL SIZE: 512 x 383mm
DOCUMENT SIZE: 436 x 303 mm
10mm spine, 3mm bleed

KP RENEWABLES PLC
to be renamed

ISLAND GAS RESOURCES PLC

Acquisition and Admission to trading on AIM

Libertas Capital
Nominated Adviser & Broker
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the
contents of this document, or the action you should take, you are recommended to seek your own ¢nancial advice immediately from your
stockbroker, solicitor, accountant or other independent ¢nancial adviser who is authorised for the purposes of the Financial Services and
Markets Act 2000 (as amended) (the ‘‘FSMA’’) and who specialises in advising on the acquisition of shares and other securities in the
United Kingdom.
This document, which comprises an admission document required by the AIM Rules for Companies, has been prepared in connection
with the proposed application for admission of the Enlarged Share Capital to trading on AIM, a market of London Stock Exchange plc.
This document is an admission document drawn up in accordance with the AIM Rules and does not constitute a prospectus for the
purposes of section 85(1) of the FSMA.
The Directors, whose names appear on page 3 of this document, accept responsibility for the information contained in this document
including collective and individual responsibility for the compliance with the AIM Rules for Companies. To the best of the knowledge of
the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in
accordance with the facts and contains no omission likely to a¡ect its import.
Application will be made for the Enlarged Share Capital to be admitted to trading on AIM. AIM is a market designed primarily for
emerging or smaller companies to which a higher investment risk tends to be attached than to larger or more established companies.
AIM securities are not admitted to the o⁄cial list of the Financial Services Authority (the ‘‘O⁄cial List’’). A prospective investor should
be aware of the risks of investing in such companies and should make the decision to invest only after careful consideration and, if
appropriate, consultation with an independent ¢nancial adviser. Each AIM company is required pursuant to the AIM Rules for
companies to have a nominated adviser. The nominated adviser is required to make a declaration to the London Stock Exchange on
admission in the form set out in Schedule Two to the AIM Rulers for Nominated Advisers. The London Stock Exchange has not itself
examined or approved the contents of this document. The Enlarged Share Capital is not traded on any other recognised investment
exchange and save for the application for admission to AIM, no such applications have been made or will be made. It is expected that
admission to AIM will become e¡ective and that dealings in the Enlarged Share Capital will commence on AIM on or around
31 December 2007.
The whole text of this document should be read and in particular YOUR ATTENTION IS DRAWN TO THE RISK FACTORS SET
OUT IN PART II OF THIS DOCUMENT.

KP Renewables plc
(Incorporated in England and Wales with Registered No.04981279)
Proposed acquisition of Island Gas Limited by means of a
scheme of arrangement under Section 425 of the Companies Act 1985
Admission to trading on AIM
Waiver under Rule 9 of The Takeover Code
Change of Name to Island Gas Resources Plc (‘‘IGas’’)
Share Consolidation
Notice of Extraordinary General Meeting

Libertas Capital Corporate Finance Limited


Nominated Adviser and Broker

Libertas Capital Corporate Finance Limited (‘‘Libertas Capital’’), which is regulated and authorised in the United Kingdom by the
Financial Services Authority, is acting exclusively for the Company as nominated adviser for the purposes of the AIM Rules for
Nominated Advisers and the AIM Rules for Companies. Libertas Capital is not acting for any other person and will not be responsible
to any person for providing the protections a¡orded to its customers or for advising any other person on the contents of any part of this
document. Libertas Capital is not making any representation or warranty, express or implied, as to the contents of this document. The
responsibilities of Libertas Capital, as the nominated adviser are owed solely to the London Stock Exchange and are not owed to the
Company or any Director or to any other person, in respect of any decision to acquire Ordinary Shares in reliance on any part of this
document or otherwise. Libertas Capital Securities Limited, which is regulated by the Financial Services Authority, is acting exclusively
for the Company as broker for the purposes of the AIM Rules for companies and is not acting for any other person and will not be
responsible to any person for providing the protections a¡orded to its customers or for advising any other person on the contents of any
parts of this document. The responsibilities of Libertas Capital Securities Limited, as the Company’s broker are owed solely to the
London Stock Exchange and not to the Company or to any Director or to any other person, in respect of any decision to acquire
Ordinary Shares in reliance on any part of this document or otherwise. Libertas Capital Securities Limited is not making any
representation or warranty, express or implied, as to the contents of this document.
This document does not constitute an o¡er to sell, or solicitation of an o¡er to buy, shares in any jurisdiction in which such an o¡er or
solicitation is unlawful and, in particular, is not for distribution into the United States, or issue into Australia, Canada, Japan, South
Africa or the Republic of Ireland. The New Ordinary Shares have not been, nor will be, registered in the United States under the United
States Securities Act of 1933, as amended, or under the securities laws of Australia, Canada, Japan, South Africa or the Republic of
Ireland. Accordingly, they may not be o¡ered or sold, directly or indirectly, within the United States, Australia, Canada, Japan, South
Africa or the Republic of Ireland or to, or for the account or bene¢t of, any person, in or any national, citizen or resident of, the United
States, Canada, Japan, South Africa or the Republic of Ireland. The distribution of this document outside the United Kingdom may be
restricted by law and therefore persons outside the United Kingdom into whose possession this document comes should inform
themselves about and observe any restrictions as to the Ordinary Shares and the distribution of this document.
There is set out at the end of this document Notice of an Extraordinary General Meeting of the Company to be held at the o⁄ces of
Morrison & Foerster MNP, CityPoint, One Ropemaker Street, London EC2Y 9AW at 12.00 midday on 27 December 2007. A Form of
Proxy for use at the Extraordinary General Meeting is enclosed. To be valid, Forms of Proxy should be completed and signed in
accordance with the instructions printed thereon and returned as soon as possible and, in any event, so as to be received by the
Company’s registrars, Computershare Investor Services PLC, by not later than 12.00 midday on 21 December 2007. Pursuant to
regulation 41 of the Uncerti¢ed Securities Regulations 2001, the time by which a person must be entered in the register of members in
order to have the right to attend and vote at the meeting is 48 hours prior to the time vote at the meeting. Completion and return of a
Form or Proxy will not preclude a member from attending and voting at the meeting should they so wish.
TABLE OF CONTENTS

Page

Directors, Secretary and Advisers 3

De¢nitions 4

Admission Statistics 8

Expected Timetable of Principal Events 8

Part I Letter from the Chairman 10

Part II Risk Factors 33

Part III Competent Person’s Report 39

Part IV Financial Information on IGL 81

Part V Financial Information on the Company 101

Part VI Pro Forma Financial Information on the Enlarged Group 123

Part VII Additional Information 128

Part VIII Notice of Extraordinary General Meeting 156

2
DIRECTORS, SECRETARY AND ADVISERS

Existing Directors John Bryant (Non-Executive Chairman)*


Peter Redmond (Non-Executive Director)
Richard James Armstrong (Non-Executive Director)
* Mr Bryant will stand down as Chairman on Admission but will
remain on the Board as Non-Executive Director

Proposed Directors Francis Robert Gugen (Executive Chairman)


Andrew Philip Austin (Chief Executive O⁄cer)
Brent Cheshire (Technical Director)
Registered O⁄ce 7th Floor
Aldermary House
10-15 Queen Street
London EC4N 1TX
Company Secretary Aldermary Secretaries Limited
Nominated Adviser Broker
Libertas Capital Corporate Finance Limited Libertas Capital Securities Limited
16 Berkeley Street 16 Berkeley Street
London WIJ 8DZ London WIJ 8DZ
Solicitors to the Company Solicitors to IGL
Morrison & Foerster MNP Hunton & Williams
7th Floor 30 St Mary Axe
CityPoint London EC3A 8EP
One Ropemaker Street
London EC2Y 9AW
Auditors to the Company Reporting Accountants
Moore Stephens LLP Mazars LLP
St Paul’s House 3 Sheldon Square
Warwick Lane London W2 6PS
London EC4M 7BP
Solicitors to the Nominated Adviser Auditors to IGL
Memery Crystal LLP Ernst & Young
44 Southampton Buildings 1 More London Place
London WC2A 1AP London SE1 2AF
Public Relations Competent Person
Gavin Anderson & Company Equipoise Solutions Ltd
85 Strand 3A Rathbone Square
London WC2R 0DW 28 Tan¢eld Road
Croydon CRO 1BT
Registrars
Computershare Investor Services PLC
PO Box 1075
The Pavillions
Bridgewater Road
Bristol BS99 3FA

3
DEFINITIONS

The following de¢nitions apply throughout this document, unless the context requires otherwise:
‘‘Acquisition’’ the proposed acquisition by the Company of the entire issued and to be
issued share capital of IGL pursuant to the Scheme
‘‘Acts’’ or ‘‘Companies Acts’’ the Companies Act 1985, as amended, and the Companies Act 2006
‘‘Admission’’ the admission of the New Ordinary Shares to trading on AIM
becoming e¡ective in accordance with the AIM Rules for Companies
‘‘AIM’’ a market of the London Stock Exchange
‘‘AIM Rules for Companies’’ the rules for AIM companies issued by the London Stock Exchange (as
amended from time to time)
‘‘AIM Rules for Nominated the rules for nominated advisers issued by the London Stock Exchange
Advisers’’ (as amended from to time)
‘‘Articles’’ the articles of association of the Company
‘‘bcf’’ billions of standard cubic feet of gas
‘‘Berr’’ The Department for Business, Enterprise and Regulatory Reform
‘‘Board’’ the board of directors of the Company from time to time, including a
duly constituted committee of such directors
‘‘CBM’’ Coal Bed Methane
‘‘Combined Code’’ the ‘‘Combined Code on Corporate Governance’’ published in July
2003 by the Financial Reporting Council as amended in June 2006
‘‘Company’’ or ‘‘KP KP Renewables plc, a company incorporated in England and Wales
Renewables’’ with company number 4981279
‘‘Concert Party’’ the IGL Shareholders
‘‘Conditions’’ the conditions to the Acquisition being (i) the Scheme being approved
by the Court, (ii) the EGM Resolutions being passed at the
Extraordinary General Meeting, and (iii) Admission
‘‘Consideration Shares’’ 55,555,365 New Ordinary Shares to be issued fully paid to the Scheme
Shareholders pursuant to the Scheme
‘‘Court’’ the High Court of Justice in England and Wales
‘‘Court Hearing’’ the hearing of the Court for the purposes of considering and
sanctioning the Scheme
‘‘Court Meeting’’ the meeting of the Scheme Shareholders to be convened pursuant to an
order of the Court pursuant to Section 425 of the Act for the purposes
of considering and, if thought ¢t, approving the Scheme (with or
without amendment), and any adjournment thereof
‘‘Court Order’’ the order of the Court sanctioning the Scheme under Section 425 of the
Act
‘‘CREST’’ the computerised settlement system (as de¢ned in the CREST
Regulations) in the UK operated by Euroclear which facilitates the
transfer of title to shares in uncerti¢cated form (as de¢ned in the
CREST Regulations)
‘‘CREST Regulations’’ the Uncerti¢cated Securities Regulations 2001 (SI 2001/3755)
‘‘CVA’’ the company voluntary agreement pursuant to Part I of the Insolvency
Act 1986 of the Company approved on 10 April 2007
‘‘Deferred Shares’’ the deferred shares of 0.95p each in the capital of the Company which
have no economic value

4
‘‘Directors’’ the Existing Directors and the Proposed Directors of the Company,
whose names are set out on page 3 of this document
‘‘Disclosure Period’’ the period commencing on 27 November 2006 and ending on
27 November 2007 (the latest practicable date prior to the date of this
document)
‘‘E¡ective’’ the Scheme having become e¡ective pursuant to its terms
‘‘E¡ective Date’’ the date on which the Scheme becomes E¡ective which is expected to be
17 December 2007
‘‘EGM Resolutions’’ the resolutions set out in the Notice of Extraordinary General Meeting
attached to this document
‘‘Enlarged Group’’ the Company and its subsidiary undertakings as at the date of
Admission which shall include IGL
‘‘Enlarged Share Capital’’ the New Ordinary Shares in issue immediately following Admission
‘‘Euroclear’’ Euroclear UK & Ireland Limited
‘‘Existing Directors’’ John Bryant, Peter Redmond and Richard Armstrong
‘‘Existing Ordinary Shares’’ the 84,661,610 Ordinary Shares in issue at the date of this document
‘‘Existing Projects’’ certain opportunities in the wind generation sector which were being
pursued by the Company prior to the date of the CVA
‘‘Extraordinary General the extraordinary general meeting of the Company to be held at 12.00
Meeting’’or ‘‘EGM’’ midday on 27 December 2007, notice of which is attached to this
document
‘‘Form of Proxy’’ the form of proxy which is enclosed with this document for use by
holders of Existing Ordinary Shares in connection with the
Extraordinary General Meeting
‘‘FSA’’ the Financial Services Authority
‘‘FSMA’’ the Financial Services and Markets Act 2000
‘‘GIIP’’ gas initially in place
‘‘IGL’’ Island Gas Limited, a company incorporated in England and Wales
with company number 4962079
‘‘IGL Extraordinary General the extraordinary general meeting of the IGL Shareholders convened in
Meeting’’ connection with the Acquisition (and any adjournment thereof) to be
held directly after the Court Meeting
‘‘IGL Shareholders’’ the holders of IGL Shares
‘‘IGL Shares’’ the outstanding A ordinary shares, B ordinary shares, C ordinary
shares and D ordinary shares, which will be cancelled upon the Scheme
becoming e¡ective, and the redeemable preference shares in the capital
of IGL which will be repurchased by IGL upon the Scheme becoming
e¡ective
‘‘Implementation Agreement’’ the implementation agreement dated 27 November 2007 between the
Company, IGL and others in relation to the Scheme and the
Acquisition
‘‘LDZ’’ local distribution zone
‘‘Libertas Capital’’ Libertas Capital Corporate Finance Limited and/or Libertas Capital
Securities Limited, as the context requires
‘‘Loan Notes’’ the »900,000 of outstanding ¢xed rate convertible unsecured loan notes
of the Company
‘‘London Stock Exchange’’ London Stock Exchange plc

5
‘‘New Ordinary Shares’’ ordinary shares of 50p each in the capital of the Company following the
consolidation of the Existing Ordinary Shares pursuant to Resolutions,
the Consideration Shares and (for the avoidance of doubt) the New
Ordinary Shares arising from the conversion of the Loan Notes
‘‘Ordinary Shares’’ ordinary shares of 1 pence each in the capital of the Company
‘‘New Articles’’ the new articles of association of the Company proposed to be adopted
by special resolution at the EGM
‘‘Nominated Adviser and Broker the agreement between Libertas Capital and the Company, conditional
Agreement’’ upon Admission, pursuant to which Libertas Capital agrees to act as
nominated adviser and broker to the Company, details of which are set
out in paragraph 11.2 of Part VII
‘‘Proposals’’ the Acquisition
‘‘Proposed Directors’’ the proposed executive directors of the Company being together
Francis Gugen, Andrew Austin and Brent Cheshire
‘‘Prospectus Rules’’ the prospectus rules produced and implemented by the Financial
Services Authority
‘‘Purchase Price’’ 90p per Consideration Share being the implied price per New Ordinary
Share at which the Consideration Shares will be issued and which
results from the agreement made between the Company and IGL as
regards their respective values
‘‘Reorganisation Record Time’’ the time and date on which the Court Order is delivered to the
Registrar of Companies for registration
‘‘Resolutions’’ the Resolutions to be proposed at the EGM
‘‘Rule 9 Waiver’’ the waiver agreed by the Takeover Panel and to be approved by
Shareholders of the obligations that would otherwise fall upon the
members of the Concert Party and Francis Gugen individually
pursuant to Rule 9 of the Takeover Code as a result of the issue to them
of Consideration Shares pursuant to Scheme
‘‘Scheme’’ the scheme of arrangement for the implementation of the Acquisition
under Section 425 of the Act between IGL and its shareholders, with or
subject to any modi¢cation thereof or any addition thereto or condition
approved or imposed by the Court and agreed by IGL and the
Company
‘‘Scheme Document’’ the circular addressed to shareholders of IGL proposing the Scheme
which was posted by IGL on 13 November 2007, as amended on
22 November 2007
‘‘Scheme Share’’ IGL Shares:
(i) in issue at the date of the Scheme Document;
(ii) issued after the date of the Scheme Document but before the
Voting Record Time; and
(iii) issued at or after the Voting Record Time and before the
Reorganisation Record Time on terms that the original or any
subsequent holders shall be, or shall have agreed in writing by
such time to be, bound by the Scheme
‘‘Scheme Shareholder’’ a holder of a Scheme Share
‘‘Shareholders’’ the holders of Ordinary Shares of the Company
‘‘Sterling’’ or ‘‘»’’ the legal currency of the UK
‘‘Suspension Price’’ 1.6p per Existing Ordinary Share (equivalent to 80p per New Ordinary
Share) being the mid-market price immediately prior to the suspension

6
of trading of the Existing Ordinary Shares on Monday 19 November
2007
‘‘Takeover Code’’ the City Code on Takeovers and Mergers
‘‘Takeover Panel’’ the Panel on Takeovers and Mergers
‘‘tcf’’ trillions of standard cubic feet of gas
‘‘UK’’ the United Kingdom of Great Britain and Northern Ireland
‘‘UKCS’’ UK Continental Shelf
‘‘US’’ or ‘‘United States’’ the United States of America, its territories and possessions, any state
of the United States of America and the District of Columbia
‘‘Voting Record Time’’ the time ¢xed by the Court and IGL for determining the entitlement to
vote, respectively, at the Court Meeting and the IGL Extraordinary
General Meeting as set out in the notices thereof
‘‘Warrants’’ a total of 440,000 warrants proposed to be issued to John Bryant,
Richard Armstrong, David Lindley and Peter Redmond, to subscribe
for New Ordinary Shares, further details of which appear in
paragraph 4 of Part VII

7
ADMISSION STATISTICS

Number of Existing Ordinary Shares in issue prior to the Acquisition (pre-consolidation)


and conversion of Loan Notes 84,661,610
Number of Loan Notes outstanding 900,000
Number of New Ordinary Shares in issue following the Acquisition and conversion
of the Loan Notes 59,107,182
Consideration Shares as a percentage of the Enlarged Share Capital 94 per cent.
Market capitalisation (approximate) of the Company following
completion of the Acquisition (at the Suspension Price) »47.3 million
Market capitalisation (approximate) of the Company following
completion of the Acquisition (at the Purchase Price) »53.2 million

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Latest time and date for receipt of Forms of Proxy for the EGM 12.00 midday on 21 December 2007
Creditor Meeting 11.45 a.m. on 27 December 2007
Extraordinary General Meeting 12.00 midday on 27 December 2007
E¡ective Date of the Scheme 28 December 2007
Issue of Consideration Shares and New Ordinary
Shares pursuant to conversion of the Loan Notes 28 December 2007
Admission e¡ective and dealings recommence in the Existing
Ordinary Shares on AIM and dealings commence in the Consideration
Shares and New Ordinary Shares pursuant to conversion
of the Loan Notes on AIM 31 December 2007
CREST accounts credited by 31 December 2007
Despatch of de¢nitive certi¢cates by 31 December 2007
All future dates referred to in this document are subject to change at the discretion of the Company, Libertas
Capital Corporate Finance Limited and Libertas Capital Securities Limited.

8
Key Information on Island Gas Limited
IGL is a coal bed methane (‘‘CBM’’) company seeking to produce and market methane gas for industrial and
domestic use from virgin coal seams within its onshore UK acreage. This requires acreage to be explored,
appraised and developed and in connection with which Island also provides technical and other related
services.
IGL has ownership interests ranging from 20 per cent. to 50 per cent. in eight Petroleum and Exploration
Development Licences (‘‘PEDLs’’) and 50 per cent. ownership of three o¡shore blocks held under one
seaward petroleum production licence (‘‘SPPL’’) in the UK (the ‘‘Licences’’). These Licences cover a gross
area of approximately 1,000 sq km and the risk weighted mid case estimate of IGL’s share of GIIP is 893 bcf,
with low and high estimates of 395 bcf and 3,436 bcf respectively. IGL’s joint venture partner that holds the
residual 50 per cent. to 80 per cent. ownership interests in certain of the Licences is Nexen Exploration U.K.
Limited, a subsidiary of Nexen Inc, a Toronto and New York Stock Exchange listed global energy company
with a market capitalisation of approximately C$16bn (‘‘Nexen’’).
When IGL became active in CBM, several factors began to change the potential for the development of
CBM in the UK.
1. Developments in Drilling Technology: The application of lateral drilling technology in coals, initially
pioneered in the US, o¡ers the opportunity for CBM developments to:
. access more coal surface from the same mother bore well, thereby providing the potential to
access more coal at lower cost and to improve production and economics; and
. with a much lower geographical footprint, address one of the hurdles to development in the UK.
A higher population density and the intensity of land use make space concerns a bigger issue than
in the US; which can manifest themselves in planning constraints. Lateral wells of which many
have been drilled in the US, o¡er the potential to reduce the number of surface locations by a
factor of 10, when compared with vertical wells draining the same area.
2. Security of Supply concerns: As discussed elsewhere in this admission the political outlook on oil, gas
and coal projects in the UK has recently changed to view such projects in a more favourable light as a
result of growing awareness of the UK’s current reliance on energy from these sources in addition to
the country’s increasing dependence in imports of such energy.
3. Entrance of E&P Multi-national corporations to UK CBM: During this period, several large
multinational E&P companies have formed partnerships with existing UK CBM players.
Under certain agreements which IGL has in place with Nexen (the ‘‘Nexen Carry Agreements’’), Nexen will
provide 100 per cent. of the funding required for work programs up to a gross spend of »26.5 million. In
addition, it is expected to pay IGL a minimum of »500,000 per year in each of 2008 and 2009 for IGL’s
consultancy services in relation to the joint operations. IGL earns further revenue from Nexen by providing
personnel and other services.
IGL’s immediate objectives are to:
(1) commence initial gas sales from CBM production from at least one property by the end of 2008;
(2) secure routes to market with a focus on electricity generation and access to the gas network;
(3) continue gathering data and production experience to allow a proportion of GIIP to be classi¢ed as
‘‘recoverable resource’’;
(4) ful¢l well obligations on licences as necessary to secure ownership into upcoming second terms; and
(5) apply for acreage, together with Nexen, in the recently announced 13th licensing round.

9
PART I

LETTER FROM THE CHAIRMAN

KP Renewables plc
(Incorporated in England and Wales with Registered No.04981279)
Directors: Registered O⁄ce:
John Bryant (Non-Executive Chairman)* 7th Floor, Aldermary House
Peter Redmond (Non-Executive Director) 10-15 Queen Street
Richard Armstrong (Non-Executive Director) London EC4N 1TX
Proposed Directors:
Francis Gugen (Executive Chairman)
Andrew Austin (Chief Executive O⁄cer)
Brent Cheshire (Technical Director)
* John Bryant will stand down as chairman on Admission and will remain on the Board as a Non-Executive Director

27 November 2007

To the holders of Existing Ordinary Shares and for information only to holders of options and warrants

Dear Shareholder,

Proposed acquisition of Island Gas Limited by means of a scheme of arrangement under


Section 425 of the Companies Act 1985
Admission to trading on AIM
Waiver under Rule 9 of The Takeovers Code
Change of name to Island Gas Resources Plc
Share Consolidation
Notice of Extraordinary General Meeting

1. Introduction
On 19 November 2007 the Company’s Existing Ordinary Shares were suspended from trading as a result of
press speculation concerning a potential transaction that would constitute a reverse takeover for the
purposes of the AIM Rules. Today the Company announced that it had reached agreement on the terms of a
recommended proposal whereby the Company will acquire the entire issued and to be issued share capital of
IGL. Pursuant to the terms of the Acquisition, IGL Shareholders will receive Consideration Shares with an
aggregate value of approximately »50 million at the Purchase Price.
The Acquisition is to be implemented by means of a scheme of arrangement under Section 425 of the Act.
Pursuant to the AIM Rules for Companies, the Acquisition will constitute a reverse takeover. It is, therefore,
subject to Shareholder approval which will be sought at an Extraordinary General Meeting to be held at
12.00 midday on 27 December 2007 at the o⁄ces of Morrison & Foerster MNP, 7th Floor, CityPoint, One
Ropemaker Street, London EC2Y 9AW. The Board unanimously considers that the Resolutions are in the
best interests of the Company and Shareholders as a whole and recommends that Shareholders vote in
favour of the Resolutions.
The Acquisition is also a ‘‘qualifying event’’ for the purposes of triggering the mandatory conversion of the
Company’s outstanding Loan Notes which will convert into a total of 81,818,150 Existing Ordinary Shares
(equivalent to 1,636,363 New Ordinary Shares) subject to the completion of the Acquisition and the passing
of the Resolutions.
The proposed Acquisition constitutes a material change to the Company’s existing operations and will also
result in the disposal of the Existing Projects. For this reason the Company is also convening a meeting of the
eligible creditors who are party to the CVA to vary and discharge the CVA arrangements.
This document, which comprises an admission document, sets out the background to and reasons for the
Acquisition and explains why the Existing Directors consider that the Acquisition is in the best interests of
the Company and recommend that Shareholders vote in favour of the Resolutions.

10
2. Background information on KP Renewables
The Company was incorporated on 1 December 2003 and was admitted to AIM on 29 July 2005. Its stated
strategy, at that time, was to establish a leading position in the United Kingdom renewable energy sector by
developing, building or acquiring a portfolio of renewable energy projects. During the period to May 2006,
the Company made good progress in identifying suitable opportunities for development and investment, and
entered into a number of signi¢cant development agreements. However, subsequently, the development
programme was restricted as a result of a shortage of funds; the shortage being attributed in part to the
illness and subsequent untimely death of the Company’s founder and Chief Executive O⁄cer, Dr James
Richard Watkins, who had led the Company’s fund raising e¡orts.
The then directors of the Company had been hopeful that they would be able to generate value from its
existing portfolio of projects but, in view of the ¢nancial position of the Company, there were insu⁄cient
resources to devote to those projects to bring them to fruition. The ¢nancial position of the Company was
such that, on 21 September 2006, the Board requested that the Ordinary Shares be suspended from trading
on AIM pending a decision on re¢nancing.
Following the suspension, the Board continued to seek to realise value for creditors of the Company and
Shareholders. The then directors continued to seek new equity capital throughout the Autumn of 2006 but
were unsuccessful in doing so. These attempts culminated in the approval of certain proposals by creditors
and by Shareholders at an extraordinary general meeting of the Company held on 10 April 2007.
The proposals are summarised below:
(1) the Company entered into a Company Voluntary Arrangement pursuant to the provisions of the
Insolvency Act 1986, whereby creditors agreed to a material compromise in the sums owed to them;
(2) the Company reorganised and increased its share capital to enable it to raise additional funds; and
(3) the Company raised »750,000 of new equity capital to enable it to meet its remaining obligations to
creditors and to progress its original business plan, albeit on a much reduced scale.
Following the implementation of the proposals, Peter Redmond and Richard Armstrong joined the Board,
which has since begun to resuscitate the Company’s existing business and has reviewed new projects in wind,
biomass and other related areas. On 2 November 2007 the Company announced that it had raised »900,000
by the issue of Loan Notes in order to progress its stated strategy. The Loan Notes are convertible on a
mandatory basis in the event of the Company completing a transaction that would be classi¢ed as a reverse
takeover for the purposes of the AIM Rules for Companies. The Loan Notes convert into Existing Ordinary
Shares at a price of 1.1p per share (equivalent to 55p per New Ordinary Share).
In the Company’s circular to shareholders dated 16 March 2007, it stated that the Board was giving
consideration to a signi¢cant further fundraising to support investment in a sizable project or to the
acquisition of another business and, in the latter event, this would almost certainly be considered a reverse
takeover under the AIM Rules. The Board views IGL as an attractive acquisition opportunity due to the
scale, the quality of its assets and its management.
With regard to the Existing Projects, the Board recognises the need to focus and intends, subject to the
approval of the Acquisition at general meeting, to dispose of the Existing Projects to allow the Proposed
Directors (see paragraph 10 below) to concentrate their e¡orts on the business of IGL. The Company has
generated some income from the Existing Projects and creditors are entitled to 60 per cent. of the net
proceeds until such time as they have been discharged in full. Accordingly, the Board has resolved, subject to
Shareholder and creditor approval, to transfer the Existing Projects to a new wholly owned subsidiary, KP
Wind and Biomass Limited. KP Wind and Biomass Limited will then be sold to Blenheim Energy Limited.
The latter will e¡ectively take over the Existing Projects and will also take over, and manage the delivery of
value, where possible, to creditors who elected through the CVA to continue to participate in any revenues
derived from the Existing Projects. KP Wind and Biomass Limited and Blenheim Energy Limited will
indemnify the Company against any further liabilities under the CVA.
A meeting of creditors who are party to the CVA has been convened for 11.45 a.m. on 27 December 2007 to
approve modi¢cations to the CVA as follows:
(1) to approve the disposal of the Existing Projects to KP Wind and Biomass Limited and to approve the
disposal of KP Wind and Biomass Limited to Blenheim Energy Limited;
(2) to approve the Acquisition as a material changes to the Company’s business; and
(3) to bring the CVA to an end ahead of its originally proposed termination date.

11
The supervisor of the CVA has examined the proposed amendments to the CVA and has recommended that
creditors vote in favour of them on the grounds that they are in the best interests of creditors. Shareholders
will ¢nd a copy of the detailed proposed amendments to CVA enclosed with this document and which should
be read in conjunction with it.
Subject to the requisite approvals from Shareholders and creditors, the CVA will come to an end, the
Company will cease to be bound by any restrictions on the operation of its business contained in the original
CVA and all liability to creditors under the CVA will pass to KP Wind and Biomass Limited and Blenheim
Energy Limited.

3. Background information on IGL


3.1 Introduction
IGL is a coal bed methane (‘‘CBM’’) company seeking to produce and market methane gas for industrial and
domestic use from virgin coal seams within its onshore UK acreage. This requires acreage to be explored,
appraised and developed and in connection with which IGL also provides technical and other related
services. As at the date of this Document the Proposed Directors collectively own over 90 per cent. of IGL.
IGL has ownership interests ranging from 20 per cent. to 50 per cent. in eight Petroleum and Exploration
Development Licences (‘‘PEDLs’’), 100 per cent. ownership of two methane drainage licences (‘‘MDLs’’)
and 50 per cent. ownership of three o¡shore blocks held under one seaward petroleum production licence
(‘‘SPPL’’) in the UK (the ‘‘Licences’’). These Licences cover a gross area of approximately 1,000 sq km and,
according to the Competent Person, the risk weighted mid case estimate of IGL’s share of GIIP is 893 bcf,
with low and high estimates of 395 bcf and 3,436 bcf respectively. IGL’s joint venture partner Nexen
Exploration U.K. Limited holds the residual 50 per cent. to 80 per cent. ownership interests in certain of the
Licences, Nexen Exploration U.K. Limited is a subsidiary of Nexen Inc, a Toronto and New York Stock
Exchange listed global energy company (‘‘Nexen’’) with a market capitalisation approximately C$16bn.
Under certain agreements which IGL has in place with Nexen (the ‘‘Nexen Carry Agreements’’), Nexen will
provide 100 per cent. of the funding required for work programs aggregating to up to »26.5 million. In
addition, it is expected to pay IGL a minimum of »500,000 per year for each of 2008 and 2009 for IGL’s
consultancy services in relation to the joint operations. IGL earns further revenue from Nexen by providing
personnel and other services.
Planning permission has so far been granted, and access to land so far has been obtained, for six wells:
. Doe Green, within PEDL 145, planning permission for two wells (land lease secured);
. Fiddlers Ferry, within PEDL145, planning permission for two wells (land lease not in place);
. Mill Farm, within PEDL 92, planning permission for one well (land lease secured); and
. Mostyn Quay, within PEDL 107, planning permission for one well (land lease secured).
Wells have been drilled at Doe Green and Mill Farm. One well at Doe Green is currently on production test.
Coring and logging has been carried out at both Doe Green and Mill Farm.
IGL’s immediate objectives are to:
(1) commence initial gas sales from CBM production from at least one property by the end of 2008;
(2) secure routes to market with a focus on electricity generation and access to the gas network;
(3) continue gathering data and production experience to allow a proportion of GIIP to be classi¢ed as
‘‘recoverable resource’’;
(4) ful¢l all well obligations on licences as necessary to secure ownership into up and coming second terms;
and
(5) apply for acreage, together with Nexen, in the recently announced 13th licensing round.
Financial information on IGL is set out in Part IV of this document.

3.2 Introduction to Coalbed Methane


CBM is a natural gas found in seams of coal. However, whereas in a natural gas o¡shore reservoir, such as
sandstone, the gas is held in the void spaces within the rock, in onshore coal the gas is principally retained on
the surface of the coal within the micropore structure.

12
CBM is an unconventional resource because coal is the source, reservoir, trap and seal. Gas is generated
from organic matter in swamps during the coali¢cation process that converts peat into coal. Gas is absorbed
onto the internal surfaces of the coal in a layer one molecule thick. Hydrostatic pressure of the water trapped
within the coal holds the gas in place. In a CBM well, often large volumes of water are initially produced until
the reservoir pressure is reduced su⁄ciently to allow the gas to desorb from the coal. Consequently, the gas
rate increases through time until a peak rate is reached.
Coals are good reservoirs because they can store more gas, for any given volume of reservoir, than can
conventional sandstone reservoirs, at relatively low pressures and shallow depths. Most coal basins have
already been mapped, and older wells that have penetrated the coals provide data on depth, thickness and
continuity of the coal seams. Because of the shallow depths, CBM wells are relatively inexpensive to drill and
can provide very good economics. Modelling of CBM reservoirs suggests that productive lives may be as
long as 40 years.
CBM is produced by drilling into a coal seam, lowering the local pressure and collecting the gas that is
released through naturally occurring fractures (cleats) or mechanically induced fracturing. The gas
extraction process does not detrimentally a¡ect the physical properties of the coal or prejudice it being
worked at some later date by conventional mining methods. The drilling techniques applicable to CBM
extraction (including horizontal in-seam drilling) are similar to those used in conventional gas extraction
although the precise techniques applied vary depending upon the particular attributes of the CBM ¢eld.
Coal is a very complex mixture of organic and inorganic compounds and di¡ers from other sedimentary
reservoirs as the gas is absorbed within the matrix of the rock rather than compressed in pore spaces. A
typical one-foot thickness of coal six hundred feet deep is capable of containing as much gas as a typical
sandstone reservoir ¢ve thousand feet deep. Another unique characteristic of coalbed production is its
production behaviour. In most cases, initial production of gas is quite low while water production may be
high. As the water is withdrawn, and the bottom-hole pressure decreases in the reservoir near the well bore,
gas production gradually increases. During the ¢rst few producing weeks, months or years the water-
production rate will continue to decrease accompanied by an increase in the gas production rate, until a
pseudo-steady sate occurs for both phases.
The two necessary ingredients for commercial gas production from a coalbed are a su⁄cient quantity of gas
in the reservoir, and adequate permeability within the coal to accommodate commercial gas deliverability.
Coal is a dual-porosity reservoir- gas is retained in both the fractures and the matrix. Since coal is reluctant
to give up any gas until the associated water is removed or the pressure is lowered below a certain critical
level, the initial gas production rates are usually much lower than the peak rate which will occur weeks or
years later. This low gas production rate is usually associated with a high initial water production rate. As the
well is produced, the water rate gradually diminishes and the gas rate increases, until a pseudo-steady rate is
achieved, after which the gas production rate eventually declines. The pattern is in contrast to a conventional
petroleum or gas reservoir that will typically exhibit its maximum productivity initially and establish
immediate decline.
The CBM industry in the UK is in its infancy, but with the continuing decline in natural gas from the North
Sea, it is likely to become an increasingly attractive alternative potential source of gas. CBM has become a
signi¢cant source of gas both in North America and Australia over a relatively short period of time during
which both have seen an almost exponential growth in CBM production. Through improvements in drilling
and development techniques adopted by a number of world renowned companies, CBM is now a competitive
source of gas.
In the US, CBM accounted for 9.9 per cent. of the total gas production in 2005 and witnessed over 40 asset
and corporate transactions since the beginning of 2000 valued at over US$5.7 billion. In 2007, approximately
5 per cent. of Canadian gas production is expected to come from CBM. In Queensland and New South Wales
in Australia, CBM accounted for 25 per cent. and 3 per cent. of the respective gas production in each area

CBM production
CBM production potential is a product of several factors that vary from basin to basin ç fracture
permeability, coal development, gas migration, coal maturation, coal distribution, geological structure,
CBM completion options, hydrostatic pressure and produced water management. In most areas, naturally
developed fracture networks are the most sought after areas for CBM development. Areas where geological
structures and localised faulting have occurred tend to induce natural fracturing, which increases the
production pathways within the coal seam. This natural fracturing reduces the cost of bringing the producing
wells on line.

13
Most coals contain methane, but it cannot be economically produced without open fractures present to
provide the pathways for the desorbed gas to migrate to the well. As long as the pressure exerted by the water
table is greater than that of the gas in the coal, the methane remains trapped in the coal bed matrix. Coal
cleats and fractures are usually saturated with water, and therefore the hydrostatic pressure in the coal seam
must be lowered before the gas will migrate.
Lowering the hydrostatic pressure in the coal seam accelerates the desorption process. CBM wells initially
produce water primarily; gas production eventually increases, and as it does water production declines. Some
wells do not produce any water and begin producing gas immediately, depending on the nature of the
fracture system. Once the gas is released, it is usually free of any impurities; is of su⁄cient quality, and can be
easily prepared for pipeline delivery.
CBM wells are completed in several ways, depending upon the type of coal in the basin and £uid content.
Each type of coal (sub-bituminous to bituminous) o¡ers production options that are di¡erent due to the
inherent natural fracturing and competency of the coal seams.
Coals in the UK are potentially analogous to those formed in eastern areas of the US. Many of these eastern
US coals do not require signi¢cant amounts of water to be removed to initiate methane production. These
coals are often exploited by way of horizontal drain-holes from a single bore-hole. Each individual well may
have up to 3,500-feet of lateral extent within a single coal seam. Several laterals can be drilled from a single
wellbore to exploit several seams or to take advantage of several cleat (fracture) trends. Each leg would not
necessarily be horizontal but would closely follow the dip of the individual seam. Many of the coal seams are
often less than ¢ve-feet thick, requiring the drilling contractor to exercise great care in steering the drill bit.
See the diagram below:

Operators in Alabama, Arkansas, and Oklahoma have made use of horizontal laterals to enhance CBM
production. The production of CBM from eastern US coals is similar to the western US coals except for the
use of horizontal well bores and the extensive use of fracturing to enhance production. With the coals being
of higher rank, the methane content per ton of coal is typically higher, but requires in many areas additional
enhancement to the natural fracture content to maximize production. Production rates of CBM depend upon
local gas content of the coal, local permeability of the coals, hydrostatic pressure in the coal seam aquifer,
completion techniques, and production techniques.

Comparison of CBM and conventional gas exploration and production


Coal bed methane can be seen as a non-conventional hydrocarbon resource. In conventional oil and gas
reservoirs, hydrocarbons are generated from the thermal and pressure maturation of a suitable organic
source rock, including coals. These hydrocarbons are reservoired within the pore spaces of a suitably porous
and permeable rock. As hydrocarbons are more buoyant than the surrounding formation water, some form
of structural or stratigraphic trap is required to prevent the hydrocarbons from leaking to surface. As a
result, such traps generally form a fractional subset of the areal distribution of the prospective reservoir
interval.
Within coals, the associated methane is chemically bound within the strata themselves, via a process known
as adsorbtion. It is important to note that as a result, geological structures play no role in the accumulation

14
of coal bed methane. Thus, CBM potential is governed by the extent, thickness and depth of the coal seams
themselves, rather than by the areal extent of potential traps. Coals can be regionally extensive, but are
generally thin relative to conventional oil and gas reservoirs. For instance, almost all the coals reviewed in
the Competent Person’s Report are less than a few metres in thickness. Coals are often vertically stacked,
although this will depend on the basin geometry at the time of deposition. The amount of organic material
within individual coal seams, where well lithi¢ed (as with most UK Carboniferous coals), is generally quite
high. However, ultimate gas contents per coal seam depend on the burial history of the coals.
Absorbed gas escapes from coals as they de-stress, for instance during the drilling or mining process. As
coals are of low permeability relative to most conventional oil and gas reservoirs, a well developed fracture
(cleat) network is essential for the extraction of gas at appreciable rates during de-stressing. This network can
be natural, or generated/enhanced by arti¢cial stimulation. Production rates from CBM wells are commonly
lower than those from conventional oil and gas reservoirs.

CBM exploration and development globally and in the UK


CBM development is most advanced in the USA where growth in the industry during the last decade,
originally encouraged by substantial tax relief, has soared (the tax relief applied only to wells drilled and
completed by end 1993). According to a report from the U.S. Energy Information Agency, 10 per cent. of
U.S. gas production is supplied from CBM sources. With similar large CBM resources in Australia and
numerous companies currently developing and evaluating commercial projects, CBM is making a signi¢cant
contribution to Australia’s east coast energy requirements. Other coal-rich countries where CBM is likely to
have a major impact include China, India, Ukraine, Romania and Russia.
See the graphs below:
Australian and US Historic and Forecast Production Eastern Australia gas production (PJ per annum)

Source: Wood Mackenzie


*Coal Seam Gas (CSG) is a term synonymous with CBM, commonly used in Australia.

15
In Britain, coal from indigenous mines was the chief source of energy used in the UK until the 1970s.
Although its use in electricity production continued to rise after that decade, its overall consumption
declined. Around the time of coal industry privatisation in 1994 about three-quarters of electricity was
generated from coal. However, following privatisation, the electricity supply industry was no longer a
captive market for indigenous coal. In addition the use of coal in electricity generation rapidly declined as it
was replaced by natural gas and, to a lesser extent, by nuclear power.

Source: dti

Pre-2004
The era before 2004 was characterised by a number of smaller organisations looking to secure prospective
CBM acreage but often more directed at Coal Mine Methane operations (gas produced at disused coal
mines).
Evergreen Resources was the ¢rst company to drill a dedicated CBM appraisal well in the UK at Sealand,
Chester in 1992 and was the most experienced CBM operator as their parent company Evergreen Resources
Inc. of Denver, Colorado was a major CBM developer in the Raton Basin in the US. Evergreen continued to

16
drill a series of appraisal wells in the UK until Pioneer Natural Resources acquired the parent organisation in
2004, at which point Evergreen Resources’ activity in the UK ended. Evergreen Resources’ activities did not
bene¢t from drilling technology that is available today and no laterals were drilled.
Another company that sought to actively pursue CMB in the UK at this time was StrataGas plc, which was
an Ofex listed company that then owned a number of IGL’s Licences and of which Francis Gugen was the
non executive chairman. StrataGas plc was not able to commence operations because it failed to secure
planning permission, after a public enquiry; in part due to special circumstances at the time that led to
heightened concerns, such as plans for a nearby underground coal gasi¢cation project, and in circumstances
that were di¡erent from today as explained under the heading 2004 to date below. The time and expense
incurred in pursuing this planning permission largely exhausted StrataGas plc’s funds, which ceased any
material operations in early 2004 and so the company completed a members’ voluntary liquidation in 2005,
with the approval of over 99 per cent. of those shareholders voting. In 2004 IGL entered into an agreement
whereby it took over not only those of the Licences that StrataGas plc held but also a number of its
obligations and provided other consideration of cash and shares in IGL giving it a 24 per cent. holding.
StrataGas plc’s 24 per cent. holding in IGL was diluted to some 4 per cent. when it chose, after
communicating with its shareholders, not to take up a share o¡ering made by IGL to fund its proposed
licence application for PEDL 145. IGL’s directors bought out the remaining shares that StrataGas plc held in
IGL from the liquidator in 2005.

2004 to date
Around the period that IGL became active in CBM, several factors began to change the potential for the
development of CBM in the UK.
1. Developments in Drilling Technology: The application of lateral drilling technology in coals, initially
pioneered in the US, o¡ers the opportunity for CBM developments to:
. access more coal surface from the same mother bore well, thereby providing the potential to
access more coal at lower cost and to improve production and economics; and
. with a much lower geographical footprint, address one of the hurdles to development in the UK.
A higher population density and the intensity of land use make space concerns a bigger issue than
in the US; which can manifest themselves in planning constraints. Lateral wells of which many
have been drilled in the US, o¡er the potential to reduce the number of surface locations by a
factor of 10, when compared with vertical wells draining the same area.
2. Security of Supply concerns: As discussed elsewhere in this document, the political outlook on oil, gas
and coal projects in the UK has recently changed to view such projects in a more favourable light as a
result of growing awareness of the UK’s current reliance on energy from these sources in addition to
the country’s increasing dependence on imports of such energy.
3. Entrance of E&P multi-national corporations to UK CBM: During this period, several large multi-
national E&P companies, have formed partnerships with existing UK CBM players. This o¡ers an
opportunity for CBM expertise from other parts of the world to be applied in the UK, along with long-
term development and operational experience and commitment.

UK Coal Resources
Natural gas from the North Sea and other ¢elds provides a clean and, until recently, cheap and readily
available fuel. However, o¡shore gas production is rapidly declining and the UK became a net importer of
gas in 2004. According to Berr’s statistics there is now twice as much gas resource potential remaining
onshore in the UK, at 90 tcf, as there is o¡shore UKCS.
The Department of Trade and Industry (‘‘dti’’) has sponsored a report ‘‘UK Coal Resource for new
Exploration Technologies’’. In this report areas of high mean gas content (7m3/tonne) were identi¢ed. IGL
has acreage in 4 of the top 10 areas identi¢ed in England and Wales and in all barring one area in England.
IGL has not focused on many of the areas in Wales, which are mostly in South Wales, because of concerns
about the productability of anthracite coals, which characterise many of the South Wales coals.

3.3 Government energy policy


The political outlook for oil, gas and coal projects in the UK has recently changed whereby such projects are
now viewed in a more favourable light as a result of growing awareness of the UK’s current reliance on
energy from these sources in addition to the country’s increasing dependence in imports of such energy. In
the UK government’s Energy White Paper for 2007 it recognises that around 90 per cent. of the UK’s energy

17
needs are met by oil, gas and coal. As can be seen from the chart below, gas is expected to constitute the
highest consumed fuel in the UK at 40 per cent. of total energy consumption in 2020.

Primary Energy Demand by Fuels (2020)

Source: DTI, 2007

The White Paper states an intention to reduce dependence on imported fossil fuels by ensuring that economic
recovery of the oil and gas from the UK Continental Shelf is maximised. In this context, it asserts the need to
maintain a supportive regulatory environment that attracts a wide range of companies to exploit existing and
prospective ¢elds. Particular emphasis has been put on rationalising the UK planning regime for nationally
signi¢cant gas supply infrastructure projects in England to bring all decision making under the proposed
independent infrastructure planning commission and to streamline onshore gas consents regimes.

Planning and regulatory framework related to CBM exploitation


The Government’s current policy on planning control of land-based exploration, appraisal, development and
extraction of oil and gas (including gas from coal) resources in England can be found in Annex 4 of Mineral
Policy Statement 1 (the ‘‘Policy Statement’’). Each council is required to draw up a minerals exploitation
plan to ensure a co-ordinated approach to minerals development within the area. According to the Policy
Statement, oil and gas exploration and extraction operations are regulated by a licensing system operated by
the Secretary of State for Trade and Industry (SSTI), now Berr. Once a licence has been granted, giving the
licensee exclusive rights to search bore for and get petroleum from the licensed area, the licence owner must
¢rst obtain planning permission from the relevant local authority and then obtain consent from the SSTI to
either drill a well or develop a CBM project.
Applications and permissions for CBM developments should re£ect the fact that CBM developments do not
have the same discrete phases of exploration, appraisal and production as conventional oil and gas
developments. Exploration and appraisal is a single process. The same wells that have been used for
exploration/appraisal will often be used, as soon as possible, for production, though there may be a
necessary delay for dewatering.
The main environmental impacts associated with CBM development are similar to those for conventional oil
and gas. However, particular attention should also be given to the abstraction of any groundwater and its
impacts, as well as the disposal of water produced during well stimulation and production of gas. The
Environment Agency must be consulted and the relevant permission(s) obtained before any disposal or
abstraction takes place.
To date IGL has now sought and obtained planning permissions to drill wells from three out of the ¢ve
county councils in which its acreage is situated and with regard to the remaining two county councils, an

18
application has been submitted to one council and the other council has jurisdiction over the relatively small
PEDL 116.

Fiscal environment
The pro¢ts of the Company and IGL are subject to UK Corporation Tax at rates of up to 30 per cent. IGL is
an on-shore gas company and it will also be subject to a supplementary charge to tax (SCT), currently 20 per
cent., in respect of UK upstream gas pro¢ts as and when these are generated. IGL is also subject to business
rates.

3.4 Summary of IGL’s assets


IGL holds onshore and o¡shore CBM interests in the UK, as listed in paragraph 3.4.2 below. These include a
20 per cent. non-operated interest in PEDL 40-1, 56-1 (collectively ‘Swallowcroft’), 92-1 (‘Drax’), 145 (‘Four
Oaks’) and 78-1, 115-1 (‘Greater Swallowcroft’). IGL also have a 50 per cent. non-operated interest in PEDL
107, and o¡shore Licences 110/18 (part), 110/19 (part) and 110/23 (part) ç collectively ‘Point of Ayr’.
Additionally, IGL has a 20 per cent. non-operated interest in PEDL 115-2 and PEDL 116, which have yet to
be independently evaluated for GIIP. All the licences are Operated by Nexen.
All licences have been acquired for the purposes of exploration for CBM gas resources within coals of the
Westphalian A and B Groups, which are Carboniferous in Age. Carboniferous coals form the bulk of the
mined coal strata in the UK. Thus, signi¢cant coal resource exploration has occurred in areas within or
adjacent to the licences which have been historically mined for this coal resource. A large database of drilling
results has resulted from this activity.

3.4.1 Map of IGL’s Licence Acreage


The map below identi¢es the areas over which PEDLs have been granted, which, as explained above, include
some of the most prospective areas for CBM in the UK.

Swallowcrofts comprises: PEDLs 40-1 and 56-1 (collectively ‘‘Swallowcroft’’), PEDL’s 78-1 and 115-1
(collectively ‘Greater Swallowcroft’) and PEDL 115-2 (which has yet to be evaluated for GIIP).

19
3.4.2 Schedule of Licences
Details of the Licences under IGL’s ownership and its interest in each licence is summarised in the table
below:

Onshore blocks
Area Initial Outstanding
Licence/Block (km2) Expiry Date Ownership Operator Obligations
PEDL 040-1 45 March 2009 Nexen ^ 80% Nexen None
IGL ^ 20%
PEDL 056-1 18 March 2009 Nexen ^ 80% Nexen None
IGL ^ 20%
PEDL 78-1 100 Sept 2008 Nexen ^ 80% Nexen 1 Drill or
IGL ^ 20% Drop Well
PEDL 92-1 200 Sept 2008 Nexen ^ 80% Nexen None
IGL ^ 20%
PEDL 107 21 Jan 2008* Nexen ^ 50% Nexen 1 Drill or
IGL ^ 50% Drop Well*
PEDL 115 300 Jan 2008** Nexen ^ 80% Nexen 1 Drill or
IGL ^ 20% Drop Well
plus lateral
PEDL 116 28 Jan 2008** Nexen ^ 80% Nexen 1 Drill or
IGL ^ 20% Drop Well
PEDL 145 74 Sep 2010 Nexen ^ 80% Nexen None
IGL ^ 20%
MDL 036 n/a Apr 2020 IGL ^ 100% n/a None
MDL 038 n/a Jun 2011 IGL ^ 100% n/a None

* Well planned to be spudded in December 2007


** Licence extensions under discussion with Berr
The MDLs are of no economic value to IGL, since they cover much of the same area as do certain of IGL’s
PEDLs and are a legacy of the past.
As regards the e¡ect of the Initial Expiry Date, under the terms of the PEDLs at this date IGL may extend its
holding into a second term of 5 years, except in the case of PEDLs 40-1 and 56-1 which are already in their
second term and PEDLs 78-1 and 92-1 where the period is reduced to 3 years because the ¢rst period was
extended by 2 years. Thereafter PEDLs may be extended for 20 years, and for a further period beyond that if
¢elds are still in production, provided the licensee has a ¢eld development plan to exploit the acreage. At the
end of the ¢rst term licensees are normally required to relinquish some 50 per cent. of the originally held
acreage. IGL’s obligations in this regard have all been satis¢ed, except as regards PEDL 92-1 ç as to
between 29 km2 and 61 km2 (depending on the interpretation of the rules), PEDL 116 ç 4 km2 and PEDL
145 ç 40 km2. However, it is Berr’s general policy not to require relinquishments of acreage that contain
petroleum that is part of/contiguous with any prospect or ¢eld under active investigation or development.

O¡shore blocks
Area Initial Outstanding
Licence/Block (km2) Expiry Date Ownership Operator Obligations
SPPL 1481 190 Mar 2011 Nexen ^ 50% Nexen 1 Contingent
IGL ^ 50% well

As regards the Initial Expiry Date, under the terms of SPPLs at this date IGL may extend its holding into a
second term of four years, provided the obligations have been satis¢ed. Thereafter licences may be extended
into a third term of 18 years and for a further period beyond that if ¢elds are still in production, provided the
licensee has a ¢eld development plan to exploit the acreage. At the end of the ¢rst term, licensees are
normally required to relinquish some 50 per cent. of the originally held acreage. However, it is Berr’s general

20
policy not to require relinquishments of acreage that contain petroleum that is part of/contiguous with any
prospect or ¢eld under active investigation or development.

3.4.3 Summary of Resources


An independent estimation of GIIP for certain CBM interests held by IGL was carried out by Equipoise
Solutions Limited, full details of which can be seen in the Competent Person’s Report in Part III of this
document. A summary of the blocks covered by the report and its results can be seen below. According to the
Competent Person the net total mid case GIIP, after applying the risk factors to the relevant blocks, is 893 bcf.
Risk
Weighted
Risk Net Mid
(all ¢gures in bcf) Gross Net Factor* Case
Area Low Mid High Low Mid High
PEDL 40-1 & 56-1 563 854 1,326 113 171 265 100% 171
PEDL 145 (N of Mersey) 116 181 299 23 36 60 100% 36
PEDL 145 (S of Mersey) 99 444 803 20 89 161 80% 71
PEDL 92-1 383 652 1,134 77 130 227 100% 130
Point of Ayr Onshore (PEDL 2 4 10 1 2 5 100% 2
107)
Point of Ayr O¡shore 87 162 1,141 43 81 571 100% 81
(110/19 Part)
Point of Ayr O¡shore (110/18 120 508 4,340 60 254 2,170 80% 203
Part and 110/23 Part)
PEDL 78-1 309 874 1,794 62 175 359 50% 88
PEDL 115-1 B (W) 226 832 1,923 45 166 385 50% 83
PEDL 115-1 A (E) 106 138 361 21 28 72 100% 28
TOTAL GIIP (bcf) 2,011 4,649 13,132 465 1,132 4,274 893

* The risk factor is an estimate to account for the chance of coals being absent or falling outside the cut-o¡ ranges used for GIIP
calculations.

3.4.4 Details of Primary Assets


3.4.4.1 Four Oaks, PEDL 145
Geologically, the area under licence is formed by strata of Carboniferous and Permo-Triassic Age, gently
dipping to the south and south-east. BGS geological maps show that these strata are cut by a number of
north-south striking normal faults, throwing to the east and west, creating a number of normal fault blocks
and horsts. The Carboniferous Westphalian coal measures sequence outcrops to the north of the licences.
The dip of the strata place the Westphalian at depths greater than 6,500’ to the south of the licence, which is
currently beyond the maximum depth for CBM exploitation as adopted by Nexen. This has an impact on the
GIIP calculations to the south of the river Mersey.

Activity at Four Oaks


Two wells have been drilled at the Doe Green site within PEDL 145. Planning is in place for another two
wells within the curtilage of Fiddlers Ferry power station; with commercial arrangements yet to be
consummated for use of this site. At Doe Green a vertical well was drilled and cored. The results of the coring
were as expected and correlated with the other bore hole data locally. A second well was drilled at Doe Green
with an in-seam lateral leg. This well was successfully de-watered and is currently on production test. Good
quality gas is £owing continuously to surface and the permeability of the coal has been demonstrated.
Although, it is too early to conclude on long term production rate potential, it is Nexen and IGL’s intention
to drill additional lateral legs in this well in 2008 and to continue production testing post this drilling.

21
3.4.4.2 Swallowcrofts and Greater Swallowcroft, PEDLs 040-1, 056-1, 78-1, 115-1
Swallowcroft (PEDLs 040-1 and 056-1): Geologically, the area is formed by a series of open, westward
plunging anticlines and synclines, outcropping rocks of Triassic to Carboniferous Age at surface, with the
Carboniferous Westphalian Coal Measures sequence outcropping to the north of the licences. A large fault,
the Wem Fault, downthrows Carboniferous strata to the westerly edge of the licences. Although
quanti¢cation of this throw is di⁄cult, estimates place it at more than 1km, making the Carboniferous strata
too deep for CBM exploration at present.
Greater Swallowcroft (PEDLs 78-1 and 115-1): Geologically, the area under licence is formed by strata of
Carboniferous and Permo-Triassic Age. Solid geological maps show the area to be generally dipping from
south to north, with a complex of north-south trending normal faults, commonly downthrowing to the east
in the case of PEDL 78-1 and to the west in the case of PEDL 115-1.

Activity at Swallowcrofts
Within PEDL 78 a well site has been identi¢ed and planning permission applied for a vertical assay well.
Negotiations are on-going with a local landowner and signi¢cant employer within PEDL 056-1 over land
access and a supply agreement for gas to their facilities. This is likely to become a production site, subject to
drilling results.

3.4.4.3 Drax, PEDL 92-1


Geologically, the area under licence is formed by strata of Carboniferous and Permo-Triassic Age, gently
dipping to the south and south-east. Mining in the area focused on Westphalian B coals, which, from the
available borehole data, are at depths of approximately 200m to 1000m below surface. Although the area has
been licensed historically for CBM exploration, no boreholes have been drilled on the licence for this
purpose.

22
Activity at Drax
A vertical well, designed primarily to obtain geological data and retain the licence acreage was drilled at Mill
Farm within PEDL 92 in September 2007. This well has been cored and logged and an injectivity test carried
out. The results of this activity were as expected and correlate with other borehole data locally.

3.4.4.4 Point of Ayr, PEDL 107 and SPPL 1481


Geologically, the area under licence is formed by strata of Carboniferous and Permo-Triassic Age, deformed
as an upthrown anticlinal structure, plunging northwards. For the most part, the onshore outcrop (with
PEDL 107) is composed of strata older than the Westphalian coal measures. Geological structure to the
o¡shore is poorly constrained in Blocks 110/18 and 11/23, and is discussed in more detail in the CPR below.

Activity at Point of Ayr


A site has been identi¢ed at Mostyn Docks and land access agreed. Planning permission has been granted
and a well on this site is expected to be spudded by early December. The purpose of this well is to log and core
the coal sequence and obtain data related to the permeability of the coals. This well will satisfy the drill or
drop obligation on PEDL 107.

3.4.4.5 Greater Swallowcroft, PEDL 115-2 and Four Oaks PEDL 116
Geologically these areas have not been evaluated for GIIP and there has been no signi¢cant activity in either
area to date.

3.4.5 Planning Permissions


IGL recognise that land access and approvals are essential to progress their current envisaged work
programme. As of the date of this document the Doe Green site on PEDL 145, the Mill Farm site on PEDL
98-1 and the Mostyn Quay site on PEDL 107 all have all permissions and relevant leases in place. An
application has been submitted for a site within PEDL 78-1, but planning permission has not been
determined. PEDL 56-1 and PEDL 115-1 are in the lease negotiation stage and/or have planning
applications pending.

3.5 Nexen relationship and agreements


3.5.1 Introduction to Nexen
Nexen is co-owner and operator of the Licences other than the MDLs as set out in 3.4.1 above. Nexen is a
Canadian-based, global energy company with a market capitalisation of approximately CN$16bn listed on
the Toronto and New York Stock Exchanges. It explores, produces and markets energy globally including in
the regions of the North Sea, the deep-water Gulf of Mexico, the Middle East, o¡shore West Africa and the
Canadian Athabasca oil sands. In addition to Nexen’s experience in conventional energy, it is an experienced
CBM explorer and developer having started out with CBM exploration in Alberta, West Canada in 2002. By
the end of 2006 Nexen held more than 448,000 acres of land in Alberta with CBM potential and has declared
an interest in increasing CBM production to at least 150 mmcf/d. It was Nexen’s extensive CBM experience
that led it to be selected by IGL to become its operating partner over the Licences.
Nexen has also made signi¢cant investment in the North Sea with approximately 36 per cent. of Nexen’s
total production coming from this region. Its stated strategy for the UK is to continue exploring and
exploiting assets near existing infrastructure.

3.5.2 Farm-In
The relationship between Nexen and IGL began in December 2005 when, following a period of due diligence
by Nexen over the Licences, geological data and IGL’s management team, the two parties agreed a farm-in
allowing Nexen an 80 per cent. equity interest in and the rights to operate the seven PEDLs then held by IGL,
namely, PEDLs 40-1, 56-1, 78, 92-1, 115, 116 and 145. Evidence of the development of the relationship
between Nexen and IGL is that they successfully applied together on a 50-50 basis for acreage in the
24th Seaward Round in 2007 along with the acquisition of the adjacent on-shore block PEDL 107. In
relation to these PEDLs Nexen is the Operator of this additional acreage.

Carry Agreements
Nexen and IGL also entered into carried interest agreements (the ‘‘Carry Agreements’’) whereby Nexen has
agreed to bear and pay IGL’s 20-50 per cent. share of the costs in relation to operations across the above
licences incurred before 31 December 2009. Nexen’s obligations under the Carry Agreements are subject to

23
approved budgets and are limited to an aggregate payment of up to »5.75 million, IGL’s share currently
equates to an investment across all licences of up to »26.5 million. Under the Carry Agreements, no interest
will accrue against IGL until commercial production commences, when IGL may be required, in certain
circumstances and on a PEDL by PEDL basis, to repay carried costs and interest arising post
commencement of production. The arrangements further provide that IGL may choose to meet obligations
related to certain PEDLs directly, thereby preserving the value of the Carry Agreements for higher risk
activities in other PEDLs, such as exploration and appraisal activity.

Management Services Agreements


This agreement is more fully described in paragraph 12.3(a)(ii) of Part VII of this document. In respect of
this agreement there are provisions in relation to change of control of IGL which have been waived for the
purposes of the Acquisition. Further, the agreement provides that the Proposed Directors must form the
majority of the board of IGL (which will be the Company’s wholly owned subsidiary following completion of
the Acquisition) for a minimum period related to that for which the management fees are paid. These
provisions fall away at the latest on 31 December 2009. Following 2 January 2008 the remaining
management fees outstanding will be »500,000.

3.5.3 Responsibilities of Nexen as operator


With Nexen being the nominated operator under the joint operating agreements (the ‘‘JOAs’’) for each of the
Licences that requires an operator, IGL has limited responsibilities and burdens in relation to the Licences.
Nexen conducts the operations by itself, with overall supervision of an operating committee, for each
Licence, composed of representation from both IGL and Nexen (the ‘‘Operating Committee’’). The operator
is only authorised to make such expenditures as are approved by the relevant Operating Committee, which in
the case of each of the JOAs requires the a⁄rmative vote of IGL to achieve approval.
The operators key duties and responsibilities can be summarised as follows:
(1) Annual submission of development program and budget to each Operating Committee for approval;
(2) Preparation and submission of authority for expenditure to the relevant Operating Committee for
approval, prior to any major capital expenditure;
(3) Provide to IGL reports, data and information concerning the operations;
(4) Procuring services and material relevant to the operations, subject to certain noti¢cation procedures;
(5) Procuring any necessary governmental or statutory consents or permissions, subject in certain
circumstances, to prior approval be the relevant Operating Committee; and
(6) Execution of approved capital and operating plans in accordance with good oil ¢eld practice.
However, IGL retains control over its own gas sales and relations with Berr regarding IGL’s Licence
holdings.

4. Further information on IGL


The Competent Persons Report on IGL is contained in Part III of this document. This report was prepared
by Equipoise Solutions Limited and provides details of key Licence terms and estimates of GIIP.

5. Objectives and Strategy


The Enlarged Group has clear objectives for 2008. As stated above, these are to:
(1) commence initial gas sales from CBM production from at least one property by the end of 2008;
(2) secure routes to market with a focus on electricity generation and access to the gas network. IGL has
identi¢ed four alternative routes to market and in conjunction with Nexen are evaluating the potential
from each. These are:
. Direct gas sales to the gas network;
. On-site generation of electricity;
. On-site compression and subsequent sales as compressed natural gas;
. Sales to local customers;

24
(3) continue to gather data and production experience to allow a proportion of GIIP to be classi¢ed as
‘‘recoverable resource’’;
(4) ful¢l well obligations on Licences as necessary to secure ownership into up coming second terms; and
(5) apply for acreage, together with Nexen, in the recently announced 13th licensing round.

Sequestration potential
In the UK, proposals have been made to ¢t plant to certain of the existing coal-¢red power stations that will
be capable of removing up to 90 per cent. of the carbon dioxide emissions from the stations where such plant
is ¢tted. The storage of such carbon dioxide in coal is being considered
The Directors believe that IGL’s acreage may in the future have the potential to be developed for the
sequestration of carbon dioxide (CO2), as its coal in situ may be capable of absorbing injected CO2. Any
sequestration in the UK would be subject to the characteristics of the coals that can only be assessed as IGL
puts its UK acreage into production. Accordingly, sequestration in coal remains totally unproven in the UK
at present. The potential value of the Licences could be enhanced as sequestration resources given the
proximity of IGL’s acreage to much of the UK’s coal-¢red power plant. IGL has no current plans to develop
sequestration as its focus is on developing the UK’s ¢rst commercial CBM gas production.

6. Current trading and prospects


The Company has been working towards rejuvenating its existing business and has reviewed new projects in
a number of energy related areas. A number of smaller projects from the Company’s existing portfolio have
been advanced following a period of inactivity due to ¢nancial constraints. Some revenue has been generated
from the Existing Projects but 60 per cent. of the net revenue will £ow to former creditors under the terms of
the CVA. Future revenues from such projects are uncertain.
With regard to the CVA, agreement has been reached with all the Company’s creditors who had proved in
the CVA. The proposed variations to the CVA will bring the CVA to an end and the Company will no longer
be bound by the conditions set out in the CVA. The Existing Projects will, subject to creditor and
Shareholder approval, be transferred to a new wholly owned subsidiary of the Company, KP Wind and
Biomass Limited and this Company will immediately be sold to Blenheim Energy Limited. Blenheim Energy
Limited and KP Wind and Biomass Limited will indemnify the Company against any further liability to
creditors arising under the CVA and will discharge any remaining obligations to creditors arising out of the
Existing Projects.
The Company published its interim results on 28 September 2007 which show a pro¢t before taxation of
»370,214, a result largely grounded on an exceptional pro¢t created by adjustments to prior provisions made
in connection with the CVA and capital reorganisation.
The Acquisition will not have any e¡ect on any employees of IGL. The Company has no employees as at the
date of this document. Prior to completion of the Acquisition the Company has no ¢xed business premises
and accordingly the Acquisition will have no e¡ect on the location of its places of business.
The Company will continue to pursue further equity capital investment with particular emphasis on
developing an institutional shareholder base and potentially accelerating the development of the business of
the Enlarged Group. Accordingly, the Resolutions to be proposed at the EGM include a disapplication of
pre-emption rights in respect of issues of New Ordinary Shares for each at 20 per cent. of the Enlarged Share
Capital of the Company.

7. Summary terms of the Acquisition


If the Acquisition proceeds, IGL Shareholders will receive:
for each A ordinary share in IGL held after the Scheme becomes e¡ective ç 70,707 Consideration Shares
for each B ordinary share in IGL held after the Scheme becomes e¡ective ç 92,592 Consideration Shares
for each C ordinary share in IGL held after the Scheme becomes e¡ective ç 92,592 Consideration Shares
for each D ordinary share in IGL held after the Scheme becomes e¡ective ç 256,410 Consideration Shares
Assuming a maximum number of 55,555,365 Consideration Shares will be issued pursuant to the
Acquisition, the IGL Shareholders will hold New Ordinary Shares representing approximately 94 per cent.
of the Enlarged Share Capital. Based on the Purchase Price of 90 pence per Ordinary Share , the Acquisition
values existing issued share capital of IGL at approximately »50 million (»47.3 million at the Suspension

25
Price). The outstanding »44,000 redeemable preference shares in IGL will be purchased at par by IGL in
accordance with the Scheme.
In the event that the Scheme does not become e¡ective or fails for any other reason, the Company and the
majority IGL Shareholders have reserved the right to attempt to complete the acquisition by private treaty.
Save as disclosed in Part I of this document (particularly as regards the acquisition of IGL and the transfer of
the Existing Projects to KP Wind and Biomass and the Associated ion-sale to Blenheim Energy Limited),
there will be no other major changes introduced to the business of the Company. The Consideration Shares
will rank pari passu in all respects with the New Ordinary Shares resulting from the consolidation of the
Existing Ordinary Shares. The Acquisition is conditional upon the Conditions being satis¢ed by 31 January
2008. Assuming that the Conditions are satis¢ed by that date, it is anticipated that dealings in the
Consideration Shares will commence on 31 December 2007.

8. Board of Directors
Mr John Bryant, Non-Executive Chairman, aged 61
Mr Bryant was appointed to the Board in May 2004. He is Chairman of Gas Turbine E⁄ciency plc and is a
Non-Executive Director of Weatherly plc. These are both quoted on AIM. He is also a board member of
the Attiki Gas Company, which supplies natural gas to Athens and the surrounding districts.
John Bryant previously served as President of Cinergy Global Resources Corp, responsible for all
international business and global renewable power operations of this US based electricity and gas utility
provider. Before joining Cinergy, John was Executive Director with Midlands Electricity plc. He has been
involved in developing a number of large gas ¢red power stations both in the UK and overseas, together with
both electricity and gas distribution in Europe and Africa, renewable power in Europe and North America
and gas and electricity trading. His prior experience was at British Sugar plc, Drexel Limited, the British
Oxygen Company and Unilever plc. Drexel, where he was President, was a global oil and gas equipment
manufacturing and servicing company.
Mr Bryant holds an MSc from Reading University and a BA from Nottingham University, and is a Fellow
of the Institute of Directors and a Fellow of the Royal Society of Arts.

Mr Richard Armstrong, Non-Executive Director, aged 59


Mr. Armstrong is an associate with Fiske plc, the AIM quoted stockbrokers. He is a former equity analyst
with extensive experience in reconstructing and raising capital for turnaround situations especially in the
quoted microcap sector, including Optimisa plc, Weatherly International plc and Artilium plc.

Mr Peter Redmond, Non-Executive Director, aged 61


Mr. Redmond has over 20 years’ experience in corporate ¢nance and venture capital. After leaving
Durlacher Limited in 2003, he joined Merchant House Group plc and is now Chief Executive O⁄cer of its
corporate ¢nance subsidiary, Merchant Capital Limited. He has been active in reconstructing a number of
AIM companies as investing companies in recent years including Optimisa plc, Weatherly International plc
and Artilium plc; and each of these have since successfully acquired or established operating businesses.
Mr Redmond is a director of AIM quoted Weatherly International plc and Bella Media plc.

9. Proposed Directors
As part of the Proposals, Francis Gugen, Andrew Austin and Brent Cheshire have agreed to join the Board
of the Enlarged Group. Mr Gugen, Mr Austin and Mr Cheshire are all currently directors of IGL.

Mr Francis Gugen, Proposed Executive Chairman, aged 58


Francis Gugen is the founder, majority owner and Executive Chairman of IGL. Francis has over thirty years
oil and gas industry experience. Between 1982 and 2000 he helped grow Amerada Hess in North West
Europe, ultimately becoming CEO. He is a member of the CBI’s Energy Policy and Economic a¡airs
Committees. Mr Gugen is also a past President of the UK O¡shore Operators Association, past chair of the
industries representation on the UK Government Oil & Gas Task Force (now known as Pilot) and of the
CBI’s Environmental A¡airs Committee.
Mr Gugen is a chartered accountant having worked for Arthur Andersen for eight years until 1982,
principally as an oil & gas specialist. He is currently a Non-Executive Director, Vice Chairman of the Board
and Chairman of the audit committee of Petroleum Geophysical Services ASA and a Non-Executive

26
Director and member of the audit committee of the Britannia Building Society. Until 2006 he served as Non-
Executive Director of North Sea gas ¢elds and pipelines operator CH4 Energy Limited before it was
acquired in 2006 by Venture Petroleum Plc for Euro 224 million. CH4, which was formed in late 2002, had
previously been ¢nanced by private equity investors 3i and Trust Company of the West, majority owned by
Societe Generale. Mr Gugen is also the non executive chair of Chrysaor Limited a new company focused on
developing North Sea oil and gas ¢elds, with »100 million of backing from Barclays Capital and private
equity investors Natural Gas Partners IX, LP and of Fraudscreen Limited a new ¢nancial services business.
Mr Gugen will assume the role of Executive Chairman of the Enlarged Group subject to his appointment
being approved at the EGM. Mr Gugen will devote such time to the Enlarged Group as is required to
discharge his duties which is expected to be not less than one and a half days per week.

Mr Andrew Austin, Proposed Chief Executive O⁄cer, aged 42


Andrew Austin is the Chief Executive O⁄cer of IGL. Mr Austin specialises in energy projects in the gas,
electricity and renewables sector. He has been involved in ventures as principal and has also raised
substantial funds of private and public equity for clients during the course of his career to date. Mr Austin
spent 17 years working in investment banking in the City of London with Merrill Lynch, Nomura, Citibank
and Barclays Capital. Latterly he was General Manager of Creditanstalt Investment Bank in London. He
also has six years of management and consultancy experience with clean tech companies including Generics
Group and Whit¢eld Solar.
Mr Austin will assume the role of Chief Executive O⁄cer of the Enlarged Group subject to his appointment
being approved at the EGM.
Mr Austin has been an executive director of IGL since 2004 and has been responsible for day to day
operations and business development throughout that period.

Mr Brent Cheshire, Proposed Executive Technical Director, aged 52


Brent Cheshire is the Technical Director of IGL. After 14 years at Shell, Mr Cheshire joined Amerada Hess
in 1991, where he had a range of roles culminating in Senior VP E&P Worldwide Technology and CEO
Scandinavia. Mr Cheshire has signi¢cant experience in geology, drilling technology and project management
and is managing director of DONG E&P (UK) Limited, under arrangements that allow him to devote
appropriate time to IGL.
He was responsible for Amerada’s entry into Denmark through identifying the potential of the un-drilled
South Arne prospect, managing its acquisition and developing its production. Mr Cheshire is a petroleum
engineer having graduated as a geologist from Durham University. Since leaving Amerada, Mr Cheshire has
been a senior adviser to the Danish Oil and Natural Gas company assisting it with the design and
implementation of its growth strategy.
Mr Cheshire will assume the role of Executive Technical Director of the Enlarged Group subject to his
appointment being approved at the EGM. Mr Cheshire will devote such time to the Enlarged Group as is
required to discharge his duties which is expected to be two days per week.

10. Warrants
It is proposed that in recognition of the services of Peter Redmond, Richard Armstrong and John Bryant, the
Existing Directors and David Lindley who recently stepped down from the Board, that warrants be granted
to these individuals in recognition of the work carried out by them in orchestrating the reconstruction and
re¢nancing of the Company. Each individual will receive 110,000 Warrants of which 82,500 are exercisable
into New Ordinary Shares at a price of 55p per New Ordinary Share and 27,500 are exercisable at a price of
75p per New Ordinary Share. The Warrants are in all cases exercisable for a period of 3 years, ending on the
third anniversary of Admission. The lowest exercise price for the ¢rst tranche of Warrants is based upon the
price at which the Company raised »900,000 by way of the Loan Note Issue. The Warrants collectively
represent 0.74 per cent. of the Enlarged Share Capital.

11. Lock-ins and orderly market arrangements


Following Admission, the Directors (and persons connected and/or associated with them) will be interested,
in aggregate, in 50,367,973 New Ordinary Shares representing approximately 85.2 per cent. of the Enlarged
Share Capital. Details of these shareholdings are set out in paragraph 9.1 of Part VII of this document.

27
Each of the Directors have undertaken to the Company and Libertas Capital that, save in certain limited
circumstances, he will not dispose of any of the New Ordinary Shares held by him after Admission for a
period of twelve months following Admission in the case of each Proposed Director and six months after
Admission in the case of each Existing Director (the ‘‘Directors Lock-up Period’’). In all cases the Directors
Lock-up Period may be waived or shortened in respect of some or all of the New Ordinary Shares by
agreement between Libertas Capital and the Director or Directors concerned. Each of the Existing
Directors/Proposed Directors has further undertaken to the Company and Libertas Capital that, in the 6
months following the Directors Lock-up Period in respect of the Existing Directors and the 12 months
following the Directors Lock-up Period in respect of the Proposed Directors, any sale of New Ordinary
Shares held by him will be e¡ected through Libertas Capital in such orderly manner as Libertas Capital may
reasonably require with a view to maintaining an orderly market in the share capital of the Company.
Each member of the Concert Party, other than the Proposed Directors whose arrangements are described
above (the ‘‘Other Concert Party Members’’), is expected, as part of the Scheme, to undertake to the
Company and Libertas Capital that, save in certain limited circumstances, he will not dispose of any of more
than 15 per cent. of the New Ordinary Shares held by him after Admission for a period of twelve months
following Admission. Such period may be waived or shortened in respect of some or all of the New Ordinary
Shares by agreement between Libertas Capital and the other Concert Party Member or Members concerned.
Each of the Other Concert Party Members is also expected, as part of the Scheme, to further undertake to the
Company and Libertas Capital that, in the 24 months after Admission, any sale of New Ordinary Shares
held by him will be e¡ected through Libertas Capital in such orderly manner as Libertas Capital may
reasonably require with a view to maintaining an orderly market in the share capital of the Company.
In all cases the lock-ins and orderly market arrangements do not prevent the restricted party from accepting,
or agreeing to accept, an o¡er made for the entire issued share capital of the Company.

12. Dispensation from Rule 9 of the Takeover Code


Under Rule 9 of the Takeover Code, if a person acquires, whether by a series of transactions over a period of
time or not, an interest in shares, which, taken together with shares in which he and persons acting in concert
with him are already interested, carries 30 per cent. or more of the voting rights of a company which is subject
to the Takeover Code then that person must normally make a general o¡er for all the remaining shares in the
company to acquire their shares. Similarly, when any person or persons acting in concert are interested in
shares which carry an aggregate not less than 30 per cent., but not more than 50 per cent., of the voting rights
of such a company, a general o¡er will normally be required if any further interests in shares are acquired by
any such person. However, where an obligation to make a mandatory o¡er under Rule 9 of the Takeover Code
arises following a new issue of shares the Panel will normally consent to a waiver of that obligation provided
that, amongst other things, this is approved by a vote of the independent shareholders of the Company
concerned.
An o¡er under Rule 9 must be in cash and at the highest price paid within the preceding twelve months for
any shares in the company by the person required to make the o¡er or any person acting in concert with him.
A concert party arises where persons acting in concert pursuant to an agreement or understanding (whether
formal or informal) co-operate, to obtain or consolidate control of that company or to frustrate the
successful outcome of an o¡er for a company. Control means an interest or interests in shares carrying 30 per
cent. or more of the voting rights of a company, irrespective of whether the interest or interests give de facto
control.
For the purposes of the Takeover Code, the IGL Shareholders are deemed to be acting in concert with each
other and are a Concert Party.

28
Full details of the resultant maximum potential shareholdings of the Concert Party following
implementation of the Scheme:
No. of
Consideration Resultant %
No. of Shares as % of of the
Consideration the Enlarged Enlarged
Name Shares Share Capital Share Capital
Andrew Austin 11,429,253 19.4 19.4
Brent Cheshire 11,429,253 19.4 19.4
Francis Gugen 27,419,097 46.4 46.4
Leigh Dyson 648,144 1.0 1.0
Edward Lasseter 648,144 1.0 1.0
Andrew Purcell 648,144 1.0 1.0
Michael Smith 769,230 1.4 1.4
Roger Smith 2,564,100 4.4 4.4
Total 55,555,365 94.0 94.0

Further details of, and information concerning, the Concert Party is set out in paragraph 7 of Part VIII of
this document.
Following implementation of the Scheme, the members of the Concert Party will between them hold
approximately 94 per cent of the Enlarged Share Capital of the Company and could thus be required by the
Panel to make a general o¡er under Rule 9 of the Takeover Code for the issued share capital of the Company
not already owned by them. In addition Mr Gugen will hold approximately 46.4 per cent of the Enlarged
Share Capital of the Company and could thus individually be required by the Panel to make a general o¡er
under Rule 9 of the Code for the issued share capital of the Company not already owned by him.
The Takeover Panel has agreed, however, to waive the requirement that would otherwise arise under Rule 9
of the Takeover Code as a result of the Concert Party and/or Mr Gugen individually acquiring New
Ordinary Shares pursuant to the implementation of the Scheme subject to the approval of Shareholders.
Accordingly Resolution 2 is being proposed at the Extraordinary General Meeting and will be taken on a
poll.
Following implementation of the Scheme and the approval by Shareholders of the waiver of Rule 9 the
members of the Concert Party will between them hold more than 50 per cent, of the Company’s voting share
capital and as a result, the Concert Party will be able to increase their aggregate interest in shares without
incurring any further obligation under Rule 9 to make a general o¡er for so long as they continue to be treated
as acting in concert (although individual members of the Concert Party will not be able to increase their
individual percentage shareholdings through or between a Rule 9 threshold without Panel consent).
Personal pro¢les of Mr Gugen, Mr Austin and Mr Cheshire are set out in paragraph 10 above. The other
members of the Concert Party are consultants to IGL, or were directors of StrataGas plc, brief biographical
details of these individuals are set out in paragraph 7 of Part VII of this document.

13. Dividend policy


The Company has not paid any dividends since its incorporation. The Directors intend to devote the
Company’s cash reserves to appraisal and development activities in the short to medium term and intend to
commence the payment of dividends only when they consider it to be commercially prudent to do so, having
regard to the availability of the Company’s distributable pro¢ts and the retention of funds required to
¢nance future growth.

14. Board Composition and Corporate Governance


The Board of Directors will be composed of 6 members at Admission. Each Director has one vote, with the
Chairman having a casting vote so long as Francis Gugen, Andrew Austin and Brent Cheshire together hold
more than 75 per cent. of the Company’s ordinary shares in issue. The Board of Directors has established an
audit committee, a remuneration committee and a nomination committee.
The Company expects that the Board of Directors will meet at least eight times per year and may meet at
other times at the request of any Director.

29
The Directors support high standards of corporate governance. The Company is a smaller company and
accordingly the Directors, after consultation with Libertas Capital believe it appropriate to follow the
Corporate Governance Guidelines for AIM Companies issued by the Quoted Company Alliance (the ‘‘QCA
Code’’). For smaller companies (i.e., companies in the FTSE 350 and smaller) such as the Company (based
on the Company’s enlarged market capitalisation), the QCA Code currently recommends that the board of
directors should include at least two independent non-executive directors. The QCA Code also provides that
both the audit and the remuneration committees should consist exclusively of independent non-executive
directors and that the majority of members of the nomination committee should also be independent non-
executive directors.

The QCA Code also recommends that the Board of Directors should appoint one of its independent non-
executive directors to be the senior independent director. The senior independent director should be available
to shareholders if they have concerns that contact through the normal channels has failed to resolve or for
which such contact is inappropriate. John Bryant has been designated as the senior independent non-
executive director.

From Admission, the Directors intend to comply with the QCA Code save as disclosed under the heading
‘‘Warrants’’.

At Admission, the Board of Directors will consist of 6 members, of whom 3 are non-executive Directors (all
three of whom are considered independent in the context of the business and their shareholdings of the
Enlarged Group).

The audit committee will be chaired by Richard Armstrong, and its other members will be John Bryant and
Peter Redmond. The committee will normally meet not less than four times a year and will meet the internal,
if any, and external auditors at least twice a year without the executive Directors present. The Chief
Executive O⁄cer and, because of his ¢nancial background, the Chairman of the Company will also attend
these meetings at the invitation of the committee.

The audit committee will be responsible for making recommendations to the Board of Directors on the
appointment of the external auditors and their remuneration. The committee will keep under review the
external auditors’ independence. The committee will consider the nature, scope and results of the auditor’s
work and will develop a policy on and review (reserving the right to approve) any non-audit services that are
to be provided by the external auditors. It will receive and review reports from management and the Enlarged
Group’s auditors relating to the Enlarged Group’s annual report and accounts. The committee will focus
particularly on compliance with legal requirements, accounting standards and the AIM Rules and on
ensuring that an e¡ective system of internal ¢nancial and non-¢nancial controls is maintained. The ultimate
responsibility for reviewing and approving the annual report and accounts will remain with the Board of
Directors.

The remuneration committee will be chaired by John Bryant and the other members are Richard Armstrong
and Peter Redmond. The committee, which will normally meet at least twice a year, will have responsibility
for making recommendations to the Board of Directors on the Company’s policy on the remuneration of the
Chairman, executive directors and other senior executives and for determining, within agreed terms of
reference, speci¢c remuneration packages for each of the Chairman and the executive directors of the
Company and such members of senior management as it is delegated to consider, including pension rights,
any compensation payments and the implementation of executive incentive schemes. In accordance with the
committee’s terms of reference, no Director may participate in discussions relating to their own terms and
conditions of service or remuneration.

The nomination committee will be chaired by John Bryant and its other members are Francis Gugen and
Richard Armstrong. The committee, which will normally meet not less than twice a year, will have
responsibility for considering the size, structure and composition of the Board of Directors, retirements and
appointments of additional and replacement directors and making appropriate recommendations to the
Board of Directors. The committee will also be tasked with ensuring that plans are in place for orderly
succession to the Board of Directors and senior management positions, so as to maintain an appropriate
balance of skills and experience within the Company and the Board of Directors. The Chief Executive O⁄cer
of the Company will be invited to attend meetings of the committee when the committee is discussing matters
related to executive management and such other matters as the committee chairman deems appropriate.

The identity of each of the chairman of the committees referred to above, will be reviewed on an annual
basis.

30
15. Extraordinary General Meeting
Attached to this document you will ¢nd a notice convening an extraordinary general meeting of the
Company which is to be held at the o⁄ces of Morrison & Foerster MNP, 7th Floor, CityPoint, One
Ropemaker Street, London EC2Y 9AW at 12.00 midday on 27 December 2007. The EGM Resolutions will
be proposed to:
(1) approve the Acquisition;
(2) approve the waiver of the requirement under Rule 9 of the Takeover Code for the Concert Party, to
make a general o¡er for the remainder of the issued share capital of the Company;
(3) approve the amendments to the CVA and the disposal of the Existing Projects to Blenheim Energy
Limited;
(4) approve the issue of the Warrants;
(5) consolidate every 50 of the Existing Ordinary Shares of 1p each into 1 New Ordinary Share of 50p;
(6) increase the authorised share capital of the Company to »45,000,000;
(7) authorise the Directors pursuant to section 80 of the Act to allot relevant securities including, amongst
others, the Consideration Shares;
(8) authorise the Directors to allot relevant securities for cash as if the statutory pre-emption rights set out
in section 89 of the Act did not apply to such allotment;
(9) appoint Francis Gugen as a director of the Company;
(10) appoint Andrew Austin as a director of the Company;
(11) appoint Brent Cheshire as a director of the Company;
(12) change the name of the Company to Island Gas Resources Plc;
(13) adopt New Articles of Association of the Company;
(14) authorise the Company to make o¡-market purchases to buy in the outstanding Deferred Shares; and
(15) approve a reduction of capital to relieve the existing de¢cit on pro¢t and loss account against share
premium account.
EGM Resolutions (1), (2), (3), (4), (5), (6), (7), (9), (10) and (11) will be proposed as Ordinary Resolutions
and EGM Resolutions (8), (12), (13), (14) and (15) will be proposed as Special Resolutions.
None of the Proposals will be implemented unless all of the Resolutions are passed and the Acquisition
Agreement becomes unconditional in accordance with its terms (save as to matters which involve
interconditionality).
EGM Resolution (2) will be taken on a poll of independent Shareholders and, if passed, would approve the
Rule 9 waiver so that the Concert Party, or Mr Gugen individually, would not be required to make a general
o¡er for the remainder of the issued share capital of the Company.
Resolution (13) is to adopt the New Articles. Recent changes to company law and practice are not re£ected
in the current Articles and the adoption of the New Articles is to address these issues. A summary of the New
Articles are set out in paragraph 6 of Part VII of this document.
The purpose of Resolution (14) is to deal with the Deferred Shares. The Deferred Shares arose as a result of
the capital reorganisation in April 2007 which was necessary to allow the Company to issue shares at a price
which would have otherwise been below the nominal value of the then existing ordinary shares. This is not
permitted under the Act and accordingly a share split was a¡ected and the Deferred Shares were created. The
Deferred Shares do not carry voting rights and have no economic value, so it is now proposed to remove
them from the Company’s capital by repurchasing all of them for a total price of 1p. No shareholder will
su¡er any economic disadvantage as a result and the Company will save expense of maintaining a register of
holders of Deferred Shares, which serves no purpose other than compliance with the Acts.
The purpose of Resolution (15) is to write o¡ the accumulated de¢cit on the Company’s balance against
share premium account. The Acts prevent the payment of dividends until any historic loss on pro¢t and loss
account is eliminated and the Company has distributable pro¢ts, the capital reduction will allow the payment
of dividends without the historic loss being eliminated out of pro¢ts and accordingly may allow dividends to
be paid sooner than would otherwise be the case.

31
Peter Redmond, Richard Armstrong and John Bryant and those shareholders connected with them will
abstain from voting on Resolution (4) on the basis that they are considered interested in the outcome of that
Resolution.

16. Admission, settlement and CREST


Application will be made to the London Stock Exchange for the New Ordinary Shares resulting from the
consolidation of the Existing Ordinary Shares to be re-admitted to trading on AIM and for the
Consideration Shares and New Ordinary Shares arising from the mandatory conversion of the Loan Notes
to be admitted to trading on AIM. Admission to trading on AIM of the consolidated Existing Ordinary
Shares and, subject to the Conditions being satis¢ed, admission of the Consideration Shares and New
Ordinary Shares arising from the mandatory conversion of the Loan Notes is expected to take place on or
around 31 December 2007.
CREST is a paperless settlement system enabling securities to be evidenced otherwise than by a certi¢cate
and transferred otherwise than by written instrument. The New Articles contain provisions concerning the
transfer of shares which are consistent with the transfer of shares in dematerialised form under the CREST
Regulations. Accordingly, settlement of transactions in the New Ordinary Shares following Admission may
take place within the CREST system if Shareholders so wish. CREST is a voluntary system and holders of
New Ordinary Shares who wish to receive and retain share certi¢cates will be able to do so.

17. Additional information


Your attention is drawn to the Risk Factors set out in Part II and to the information contained in Part VII of
this document.

18. Action to be taken


You will ¢nd enclosed with this document a Form of Proxy for use in connection with the Extraordinary
General Meeting. Whether or not you intend to be present at the Extraordinary General Meeting, you are
asked to complete the Form of Proxy in accordance with the instructions printed on it so as to be received by
the Company’s registrars, Computershare Investor Services Plc, as soon as possible but in any event not later
than 10.00 a.m. on 21 December 2007. Completion of the Form of Proxy will not preclude you from
attending and voting in person at the meeting should you so wish.

19. Recommendation
The Existing Directors, who have been so advised by Libertas Capital Corporate Finance Limited, consider
that the Acquisition and the waiver by the Panel of the obligations which would otherwise arise for the IGL
Shareholders to make a general o¡er for the Company under Rule 9 of the Takeover Code, as described in
paragraph 12 of this letter, are fair and reasonable and in the best interests of the Company and its
Shareholders as a whole. Accordingly, the Existing Directors unanimously recommend that you vote in favour
of the EGM Resolutions to be proposed at the Extraordinary General Meeting as they intend to do in respect
of their own bene¢cial holdings of 9,518,500 Existing Ordinary Shares, representing approximately
11.24 per cent. of the Existing Ordinary Shares (save in respect of Resolution 4 on which Peter Redmond,
Richard Armstrong, John Bryant and any persons connected with them will abstain from voting on the basis
that they are considered interested in the outcome of that Resolution). In providing advice to the Existing
Directors of the Company, Libertas Capital has taken into account the commercial assessments of the
Existing Directors.
In accordance with the requirements of the Takeover Code, a poll will be taken on Resolution 2. The Board
will make an announcement of the result of the voting on Resolution 2 as soon as practicable after the
Extraordinary General Meeting.
Yours faithfully,
John Bryant
Chairman

32
PART II

RISK FACTORS

An investment in the New Ordinary Shares may not be suitable for all recipients of this document. Investors
are therefore strongly recommended to consult an investment adviser under the FSMA, who specialises in
advising on investments of this nature before making their decision to invest.
The Directors consider the following risks and other factors to be most signi¢cant for potential investors, but
the risks listed do not necessarily comprise all those associated with an investment in the New Ordinary
Shares and the risks listed below are not set out in any particular order of priority. Potential investors should
carefully consider the risks described below before making a decision to invest in the New Ordinary Shares. If
any of the following risks actually occur, the Enlarged Group’s business, ¢nancial condition, results or future
operations could be materially adversely a¡ected. In such a case, the price of the New Ordinary Shares could
decline and investors may lose all or part of their investment.

Risks relating to Liquidity


Liquidity of the New Ordinary Shares and AIM generally
An investment in the New Ordinary Shares of the Enlarged Group is highly speculative and subject to a high
degree of risk.
Application has been made for the New Ordinary Shares to be traded on AIM. AIM is a market designed
primarily for emerging or smaller companies. The rules of this market are less demanding than those of the
O⁄cial List. Investments in shares traded on AIM carry a higher degree of risk than investments in shares
quoted on the O⁄cial List. Neither the London Stock Exchange nor the FSA have examined this document
for the purposes of the Admission.
An investment in the New Ordinary Shares may be di⁄cult to realise and the price at which the New
Ordinary Shares will be traded and the price at which investors may realise their investment will be
in£uenced by a large number of factors, some speci¢c to the Enlarged Group and its operations and some,
which may a¡ect quoted companies generally. Admission to AIM should not be taken as implying that there
will be a liquid market for the New Ordinary Shares particularly as, on Admission, the Enlarged Group will
have a limited number of shareholders. Approximately 93 per cent. of New Ordinary Shares in the Enlarged
Group will, following Admission, be subject to lock-in arrangements which will further limit the number of
freely tradable shares. The market for shares in smaller public companies, such as the Enlarged Group, is less
liquid than for larger public companies. The Enlarged Group is aiming to achieve capital growth and,
therefore, New Ordinary Shares may not be suitable as a short-term investment. Consequently, the share
price may be subject to greater £uctuation on small volumes of shares, and thus the New Ordinary Shares
may be di⁄cult to sell at a particular price. The value of the New Ordinary Shares may go down as well as
up. Investors may therefore realise less than their original investment, or sustain a total loss of their
investment.

Non guarantee of tax treatment


The pro¢ts of the Company and IGL are subject to UK Corporation Tax at rates of up to 30 per cent. IGL is
an on-shore gas company and it will also be subject to a supplementary charge to tax (SCT), currently 20 per
cent., in respect of UK upstream gas pro¢ts as and when these are generated. IGL is also subject to business
rates. There is no guarantee that the current tax treatment will continue. Changes in tax treatment could have
a materially adverse e¡ect on the pro¢tability of the Company.

Risks relating to the Enlarged Group


Appraisal, production and general operational risks
The business of exploration, appraisal and production of CBM involves a high degree of risk. In particular,
the operations of the Enlarged Group, may be disrupted by a variety of risks and hazards which are beyond
the control of the Enlarged Group, including, but not limited to, environmental hazards, industrial accidents,
occupational and health hazards, technical failures, labour disputes, unusual or unexpected rock formations
including lack of permeability, £ooding and extended interruptions due to inclement or hazardous weather
conditions or underground aquifers, explosions and other accidents and changes in the regulatory regimes
requiring di¡erent operational standards to be utilised with consequent cost and production rate
consequences. These risks and hazards could also result in damage to, or destruction of, production facilities,
personal injury, environmental damage, business interruption, monetary losses and possible legal liability. In

33
addition there is no guarantee that appraisal activities on the Enlarged Group’s licences will lead to
commercial reserves or, if there are such reserves, that the Enlarged Group will he able to realise them as
intended. If at any stage the Enlarged Group is precluded from pursuing its appraisal or production
programmes or decides not to continue, this is likely to have an e¡ect on the value of investors’ holdings.

The Enlarged Group will have no signi¢cant revenue from operations and its e¡orts are principally the
exploration for, appraisal of and potential exploitation of CBM deposits. Most exploration and appraisal
projects do not result in commercial deposits, resulting in write-downs of capitalised expenses and losses.

The expenditures to be made by the Enlarged Group in the exploration and appraisal of its properties, as
described herein, may not result in commercial quantities of CBM. Exploration and appraisal failure could
have signi¢cant negative e¡ect on the Enlarged Group, leaving it with substantially increased number of
shares outstanding and no prospects.

The properties in which the Enlarged Group has an interest are in the exploration and appraisal stage only
and are without proven commercial reserves of CBM. Interests on which gas reserves are not commercial
may be sold or disposed of causing the Enlarged Group to write-down or write-o¡ each respective interest,
thus sustaining a loss. Even if commercial proven reserves are con¢rmed, it could be years before substantial
revenue are generated, if ever.

Routes to market for the gas produced from the companies assets are developing, however the regulatory
regime is not always clear. Applications to connect to the local gas transmission system or local electricity
generating network can be time consuming and required re-enforcement can be expensive and at times
prohibitively so.

Although the Enlarged Group maintains and proposes to maintain insurance which it considers to be
appropriate in accordance with industry practice, there may be circumstances where the Enlarged Group’s
insurance will not cover or be adequate to cover the consequences of the events set out in the above
paragraph or where it may become liable for pollution or other operational hazards against which it either
cannot insure or may have elected not to have insured on account of high premium costs or otherwise.
Moreover, there can be no assurance that it will be able to maintain adequate insurance in the future at rates
it considers reasonable.

Estimates of resources
The GIIP data included in this document and in the Competent Person’s Report are estimates. Such
estimates are expressions of judgement based on knowledge, experience and industry practice. They are
therefore imprecise and dependent to some extent on interpretations, which may prove to be inaccurate.

Nothing in this document expresses any view or is intended to express any view regarding either recoverable
resources or recoverable reserves and no statement should be taken as making any suggestions or o¡ering
any guidance as to what, if any, these might eventually be concluded to be. There can be no assurance at this
stage of development of the Licences that the Enlarged Group will ever successfully be able to recognise
recoverable resources and or reserves from the currently estimated GIIP or that that amounts will be
su⁄cient or of the right quality, and subject to adequate permeability for the Enlarged Group to be able to
produce gas commercially. Should the Enlarged Group fail to be able to recognise recoverable resources and
reserves the Enlarged Group would have to recognise losses and might have to cease of operations.

Licences
The Enlarged Group’s activities are dependent upon the entering or grant and maintenance of appropriate
contracts, licences, concessions, leases, permits and regulatory consents (‘‘Authorisations’’) which may not
be entered into, granted or may be terminated, withdrawn or made subject to limitations. Although the
Enlarged Group believes that the Authorisations will be renewed following expiry or entered into, granted
(as the case may be), there can be no assurance that such Authorisations will be renewed, entered or granted
or as to the terms of such grants, contracts or renewals.

Authorisations, particularly onshore, are or may be subject to agreements with the proprietors of the land
and both on and o¡shore are or may also relate, inter alia, to government or government agency licences,
permits and if such agreements are terminated, found void or otherwise challenged, or cannot be put in place,
the Enlarged Group may su¡er signi¢cant damage through the loss of the opportunity to identify and extract
CBM.

34
Reliance on operating agreement with Nexen
The Enlarged Group’s day-to-day operations of exploration, appraisal and development are performed by
Nexen by way of formal joint operating agreements (‘‘JOA’’). The Enlarged Group does not have the
resources or technical ability to carry out operations and development functions on its own.

Nexen, as operator, is in day to day control of the amount of money spent on operations. However, under
the JOAs no material amounts may be expended, except in an emergency, without the prior approval of the
Enlarged Group. Under the Carried Interest Agreements between Nexen and IGL, Nexen has agreed to bear
and pay IGL’s 20-50 per cent. share of the costs in relation to operations across the Licences. Nexen’s
obligations under the Carry Agreements are subject to approved budgets and are limited to payments of up
to »5.75 million, IGL’s share, which equates to an aggregate investment across all Licences of up to
»26.5 million, Under the Carry Agreements, no interest will accrue against IGL until commercial production
commences, when IGL may be required, in certain circumstances and on a PEDL by PEDL basis, to repay
carried costs and interest arising post commencement of production. Nexen is not obliged to bear the cost of
IGL’s percentage interest share in the projects once expenditure exceeds »5.75 million, IGL share. In the
event that the carried amount of »5.75 million is exceeded, IGL will be liable for its share of the costs and
expenses of the operations in accordance with its percentage interest in the licence on which expenditure is
incurred. There is no guarantee that the Enlarged Group will have the funds available to bear such costs nor
that the Enlarged Group would be able to raise additional funding. This may have an adverse e¡ect on
projects then under development. This may prevent the Enlarged Group from progressing certain projects at
all.

Under the terms of the Licences any ¢nancial obligations incurred thereunder are incurred jointly and
severally as between Nexen and IGL. Such obligations can include work obligations, although for the
present Licences these obligations are all drill or drop or conditional and so can be avoided by surrender of
the relevant licence, but may include for example other obligations such as any commitments under future
¢eld development plans or certain costs of making good. Should Nexen fail to meet its obligations under any
of the Licences then IGL would be required to meet not only its share of costs but also those of Nexen. The
Enlarged Group might not have su⁄cient funds to meet such obligations nor any prospect of raising such
funds.

Environmental and planning


The Enlarged Group is exposed to environmental risks given the nature of its operations and an
environmental situation could arise in the future which could a¡ect the Enlarged Group’s pro¢tability and its
ability to pay dividends.
Environmental and safety legislation may change in a manner that may require stricter or additional
standards than those now in e¡ect, a heightened degree of responsibility for companies and their directors
and employees and more stringent enforcement of existing laws and regulations.
Whilst certain planning authorities currently appear supportive of the type of projects being pursued by the
Enlarged Group when considering the grant of planning permission for such projects there can be no
guarantee that as local structure plans are revised that this policy is not changed, modi¢ed or reversed and
there can be no assurance that planning might ever be obtained in those areas where authorities are currently
less supportive. The planning permission process involves local consultation and projects can be opposed,
either individually or on a general basis, at the planning level, by national or local pressure groups, as has
been the case in certain areas of the countryside in respect of CBM projects in the past; opposition to projects
could lead to the Enlarged Group being involved in appeals or public enquiries where costs could be
potentially large and the ultimate outcome uncertain including failure ever to obtain the permissions
necessary to pursue CBM or if granted to enable CBM to be pursued economically. Safety concerns may also
result in delays in obtaining planning permission or in conditions being imposed and costs being increased
potentially to a level where operations are rendered uneconomic.
The expense of meeting environmental regulations could cause a signi¢cantly negative e¡ect on pro¢tability
of the Enlarged Group as could failure to obtain certain necessary environmental permits.
The current and anticipated future operations of the Enlarged Group, including further exploration,
appraisal, development, production and ultimately decommissioning activities require permits from various
national and local governmental authorities. Such operations are subject to a substantial body of laws and
regulations governing land use, the protection of the environment, production, taxes, labour standards,
occupational health, waste disposal, toxic substances, mine safety and other matters.

35
The permits that the Enlarged Group may require for construction of CBM facilities and conduct of CBM
operations must be obtainable on reasonable terms to the Enlarged Group. Unfavourable amendments to
current laws, regulations and permits governing operations and activities of CBM companies, or more
stringent implementation thereof, could have a materially adverse impact on the Enlarged Group and cause
increases in capital expenditures which could result in a cessation of operations by the Enlarged Group.
Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement
actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease
or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional
equipment or remedial actions. Parties engaged in gas operations may be required to compensate those
su¡ering loss or damage by reason of the gas activities and may have civil or criminal ¢nes or penalties
imposed for violation of applicable laws or regulations.
The government extensively regulates the Enlarged Group’s operations, which imposes signi¢cant costs on
the Enlarged Group, and future regulations could increase those costs or limit its ability to produce CBM.
The Enlarged Group is subject to extensive regulations with respect to matters such as but not only:
(a) employee health and safety;
(b) permitting and licensing requirements;
(c) air quality standards;
(d) water quality standards;
(e) plant and wildlife protection;
(f) reclamation/restoration of CBM properties after production completed;
(g) discharge of materials into the environment, including, inter alia, water disposal and gas £aring and
venting;
(h) surface subsidence from underground CBM production; and
(i) the e¡ects of CBM operations on groundwater quality and availability.
Numerous permits and approvals are required for gas operations. The Enlarged Group is required to
prepare and present to national and local authorities data pertaining to the e¡ect or impact that any
proposed exploration and appraisal for or production of CBM may have upon the environment. The costs,
liabilities and requirements associated with these regulations may be costly and time-consuming and may
delay commencement or continuation of exploration, appraisal or production operations. The possibility
exists that new legislation, regulations and orders may be adopted that may materially adversely a¡ect the
Enlarged Group’s operations and its cost structure. New legislation or administrative regulations (or judicial
interpretations of existing laws and regulations), including proposals related to the protection of the
environment, that would further regulate and tax the industry may also require the Enlarged Group or its
customers to change operations signi¢cantly or incur increased costs.

Volatility of energy prices


The pro¢tability of the Enlarged Group’s operations will be dependent, inter alia, upon the market prices of
gas, gas storage and electricity which have £uctuated in the past. Gas, gas storage and electricity prices are
a¡ected by numerous factors beyond the control of the Enlarged Group, including international economic
and political conditions, levels of supply and demand which are impacted severely by weather, the discovery
and or production of other gas opportunities and currency exchange rates. Movements in market prices
could render uneconomic any of the extraction, production or storage activities undertaken or to be
undertaken.

Capital intensive nature of the projects


All of the projects which the Enlarged Group intends to develop are highly capital intensive. Whilst the
Enlarged Group will have obtained funding for its short term development and roll-out programme on
Admission, the funding then available to it will not allow it to complete some of the projects or to commence
others. It is anticipated that additional debt and/or equity funding will be sought in 2008. There can be no
guarantee that the Group will be able to raise the additional funding, which may have an adverse e¡ect on
projects then under development. In addition, the costs of any of the projects may overrun those estimated by
the Directors or the projects may be delayed. Any of these events may prevent the Enlarged Group from
progressing certain projects at all.

36
Competition
The Enlarged Group competes with other companies which have similar operations, and many such
competitor companies have operations and ¢nancial resources and industry experience far greater than those
of the Enlarged Group. Nevertheless, the market for the Enlarged Group’s potential future production of
CBM tends to be commodity-oriented rather than Enlarged Group-oriented. If it successfully reaches
commercial production, the Enlarged Group will still be subject to competition from much larger and
¢nancially stronger competitors and such competition may materially adversely a¡ect the Enlarged Group’s
¢nancial performance.

Geological and other technical risks


The Enlarged Group depends upon the results of surveys and assessments. In the event that a survey proved
to be incorrect in its ¢ndings or the actual geology of a site turned out to be signi¢cantly di¡erent to
expectations, this could render the proposed project or reservoir unviable.

Key personnel
In order to develop, support and maintain the business, the Enlarged Group must recruit and retain highly
skilled employees with particular expertise. The implementation of the Enlarged Group’s strategic business
plans could be undermined by a failure to recruit or retain key personnel, the unexpected loss of key senior
employees, failures in the Enlarged Group’s succession planning, or a failure to invest in the development of
key skills. Additionally, unless skills are supported by a su⁄cient infrastructure to enable knowledge and
skills to be passed on, the Enlarged Group risks losing accumulated knowledge if key employees leave the
Enlarged Group.

Litigation
The Enlarged Group faces the risk of litigation in connection with the business. In general, liability for
litigation is di⁄cult to assess or quantify; recovery may be sought for very large and/or indeterminate
amounts and the existence and magnitude of liability may remain unknown for substantial periods of time.
Although the Enlarged Group is not party to any material litigation at present, substantial legal liability in
the future could have a material adverse e¡ect on its business, results of operations and/or ¢nancial
condition.

Director Indemni¢cation
The New Articles contain provisions indemnifying its o⁄cers and directors against all costs, charges and
expenses incurred by them, which could interfere with shareholders successfully suing the Enlarged Group.
The New Articles contain provisions that state, subject to applicable law, the Enlarged Group shall
indemnify every director or o⁄cer of the Enlarged Group, subject to the limitations of the Companies Acts,
against all losses or liabilities that a company’s director or o⁄cer may sustain or incur in the execution of
their duties. The New Articles further state that no director of o⁄cer shall be liable for any loss, damage or
misfortune that may happen to, or be incurred by the Enlarged Group in the execution of their duties if they
acted honestly and in good faith with a view to the best interests of the Enlarged Group. Such limitations on
liability may reduce the likelihood of litigation against the Enlarged Group’s o⁄cers and directors and may
discourage or deter its shareholders from suing the Enlarged Group’s o⁄cers and directors based upon
breaches of their duties to the Enlarged Group, though such an action, if successful, might otherwise bene¢t
the Enlarged Group and its shareholders.

Increase in drilling costs and the availability of drilling equipment


The oil and gas industry has historically experienced periods of rapid cost increases. Increases in the costs of
appraisal and development would a¡ect the Enlarged Group’s ability to invest in prospects and to purchase
or hire equipment, supplies and services. The availability of drilling rigs and other equipment will be a¡ected
by the scale and scope of drilling activities taking place on-shore across the UK and Europe. An increase in
drilling operations may reduce the availability of equipment and services to the Enlarged Group. This
reduced availability may delay its work programme and adversely a¡ect the Enlarged Group’s operation and
pro¢tability.

Nexen’s option not to renew activity under the joint operating agreements
Nexen has the option at any time to cease operations and/or to decide to cease incurring further expenditure
on the Licences and/or to decide to surrender their acreage in whole or in part, except that Nexen is obliged
to execute any programme that is the subject of a budget and Authorisation for Expenditure (AFE). Nexen

37
has expressed its intention to continue operations and has put forward budgets for 2008 by the due date,
which require to be approved in December 2007 and the directors of IGL are not aware of any reason why
Nexen would not wish to continue operations under the Licences and the JOAs. However, were Nexen to
cease operations in accordance with the provisions of the JOAs, by, for example, not approving any further
programmes and budgets, the Enlarged Group would secure only reduced bene¢ts or may cease to secure any
further bene¢ts at all from the Carry Agreements This may have an adverse e¡ect on future projects and on
the proper exploration and/or appraisal and/or development and/or production under the Licences and
would have adverse ¢nancial consequences for the Enlarged Group. If Nexen were to surrender all its licence
interests the Enlarged Group would have the option of taking up Nexen’s interests.

38
PART III

COMPETENT PERSON’S REPORT

39
COMPETENT PERSON’S REPORT
CERTAIN COAL BED METHANE PROPERTIES
LICENCED BY ISLAND GAS LTD

Project Number: P0561


PREPARED FOR: Island Gas Ltd, KP Renewables plc
and Libertas Capital Corporate Finance Limited
BY: Equipoise Solutions Ltd

November 2007

40

Island_Gas_CPR_Rev1_client_relea1 1 9/11/07 19:13:31


Author: Adam Law

Approved by: Don Scott

Date released to client: 26th October 2007

Final report approved: 31st October 2007

Revision 1 released to client: 7th November 2007

Final report approved with revisions: 11th November 2007

Equipoise Solutions Ltd has made every effort to ensure that the interpretations, conclusions and
recommendations presented herein are accurate and reliable in accordance with good industry
practice. Equipoise Solutions Ltd does not, however, guarantee the correctness of any such
interpretations and shall not be liable or responsible for any loss, costs, damages or expenses
incurred or sustained by anyone resulting from any interpretation or recommendation made by
any of its officers, agents or employees.

41

Island_Gas_CPR_Rev1_client_relea2 2 9/11/07 19:13:31


The Directors
Island Gas Limited
Suite 407
International House
1 Yarmouth Place
London W1J 7BU

The Directors
KP Renewables plc
7th Floor
Aldermary House
10-15 Queen Street
London EC4N 1TX

Libertas Capital Corporate Finance Limited


16 Berkeley Street
London W1J 8DZ

7th November 2007

Dear Sirs

RE: Evaluation of the Coal Bed Methane Interests of Island Gas Limited

In response to your request, Equipoise Solutions Limited (Equipoise) has reviewed certain Coal
Bed Methane (CBM) interests held by Island Gas Limited (IGL), onshore and offshore UK. The
properties are summarised in Section 1 of this Report.

We were requested to provide an independent estimation of the Gas Initially in Place (GIIP) for
each of the assets we reviewed, in accordance with industry standard practice for the estimation
of CBM GIIP. The results of this work have been presented in accordance with the requirements
of the Alternative Investment Market of the London Stock Exchange, in particular as described in
the “Guidance Note for Mining, Oil and Gas Companies”, March 2006. As no estimates of reserve
or resource were made, we have not undertaken an independent economic evaluation of these
interests.

In conducting this review, we have utilised information and interpretations supplied directly or
indirectly by independent third parties, the Licence Operators, and IGL, comprising primary
subsurface information, such as borehole data, and technical reports. We have reviewed the
information provided, before undertaking our own independent estimates of GIIP. Site visits were
not considered necessary for the purposes of this report, and we have not verified the entitlement
of IGL to the interests stated in this report, as this entitlement was independently verified by the
Company's legal advisers.

Equipoise Solutions Limited, 3A Rathbone Square, 28 Tanfield Road, Croydon, CR0 1BT, UK
Tel: +44 (0) 20 8240 4459 Fax: +44 (0) 20 8240 4493 www.equipoise.co.uk
Registered England No. 3807074 Registered Office Eastbourne House, 2 Saxbys Lane, Lingfield, Surrey RH7 6DN

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Professional Qualifications

Equipoise is a privately owned independent consulting company established in 1998 with offices
in South London. The company specialises in petroleum geology and geophysics. Except for the
provision of professional services on a fee basis, Equipoise has no commercial arrangement with
any other person or company involved in the interests which are the subject of this report.

The work has been supervised by Dr. Adam Law, Director of Equipoise, a post-graduate in
Geology and a Fellow of the Geological Society of London. He has 14 years experience in the
evaluation of oil and gas fields and acreage. Mr. Donald Alastair Scott has reviewed and
approved these estimates. Mr. Scott is a Director of Equipoise, and has over 30 years experience
in the evaluation of oil and gas fields and acreage.

Yours faithfully,

Don Scott
Director, Equipoise Solutions Ltd

Equipoise Solutions Limited, 3A Rathbone Square, 28 Tanfield Road, Croydon, CR0 1BT, UK
Tel: +44 (0) 20 8240 4459 Fax: +44 (0) 20 8240 4493 www.equipoise.co.uk
Registered England No. 3807074 Registered Office Eastbourne House, 2 Saxbys Lane, Lingfield, Surrey RH7 6DN

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Competent Person’s Report: Island Gas Ltd

Executive Summary

In response to your request, Equipoise Solutions Limited (Equipoise) has reviewed certain Coal
Bed Methane (CBM) interests held by Island Gas Limited (IGL), onshore and offshore UK. These
include a 20% non-operated interest in Petroleum Exploration and Development Licences (PEDL)
40-1, 56-1 (collectively ‘Swallowcroft’), PEDL 92-1 (‘Drax’), 145 (‘Four Oaks’), 78-1 and 115-1
(‘Greater Swallowcroft’). IGL also have a 50% non-operated interest in PEDL 107, and offshore
Licences 110/18 (part), 110/19 (part) and 110/23 (part) – collectively ‘Point of Ayr’. We have not
evaluated PEDL 115-2 and 116, where IGL have a 20% non-operating interest. All the evaluated
licences are Operated by Nexen Petroleum (UK) Limited, a wholly owned subsidiary of Nexen inc
(‘Nexen’). A summary of the interests reviewed, and their associated work commitments, is given
in Table 1.1 of this report.

All licences have been acquired for the purposes of exploration for Coal Bed Methane gas
resources within coals of the Westphalian A and B Groups, which are Carboniferous in Age.
Carboniferous coals form the bulk of the mined coal strata in the UK. Thus, significant coal
resource exploration has occurred in many of the licences in Table 1.1, and areas within or
adjacent to the licences in Table 1.1 have been historically mined for this coal resource. A large
database has resulted from this activity, which was available to us for our analysis.

Nexen and IGL have an ongoing work programme to discharge the above licence obligations and
to determine the viability of CBM production in the licences themselves. As of 31/9/07, this had
included the drilling of Well Doe Green-1 and Doe Green-2 within PEDL 145, and the completion
of drilling activity on PEDL 92-1 (Well Mill Farm-1). Well Doe Green-2 is currently under long-term
production testing.

IGL recognise that land access and approvals are essential to progress their current envisaged
work programme. IGL have a number of sites identified for CBM drilling. Of these, as of 30/9/07
the Doe Green site on PEDL 145 and the Mill Farm site on PEDL 98-1 have all permissions and
relevant leases in place. Applications have been submitted for one site within PEDL 107 and
PEDL 78-1, but at the time of writing planning permission had not been awarded. As of 30/9/07,
sites in PEDL 56-1 and PEDL 115-1 are currently in the lease negotiation stage, or have planning
applications pending.

Coal bed methane can be seen as a non-conventional hydrocarbon resource. In conventional oil
and gas reservoirs, hydrocarbons are reservoired within the pore spaces of the rock. As
hydrocarbons are more buoyant than the surrounding formation water, some form of structural or
stratigraphic trap is required to prevent the hydrocarbons from leaking to surface. However, within
coals, the associated methane is chemically bound within the strata themselves, via a process
known as adsorbtion. It is important to note that as a result, geological structures play no role in
the accumulation of coal bed methane.

Our estimates of GIIP follow industry standard practice, and are discussed in detail in Section 1 of
this report. We have made three deterministic estimates for each of the licences, as low, mid and
high, based on depth, area, gas content and coal thickness variations. Where coal strata have not
been proved by drilling or mining over part or all of a licence, we have applied a risk factor to our
calculations as an estimate of the chance of coals being absent, or falling outside the cut-off
ranges used for our GIIP calculation. Our final estimates are summarised in Table 1.2 of this
report.

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Competent Person’s Report: Island Gas Ltd

Table of Contents
1. Introduction ......................................................................................................................... 3
1.1. Comparison of CBM and Conventional Oil and Gas Reservoirs ................................... 4
1.2. Evaluation Methodology................................................................................................. 6
1.2.1. Available Data............................................................................................................ 6
1.2.2. Estimation of Gas Content......................................................................................... 6
1.2.3. GIIP Estimation .......................................................................................................... 9
2. Swallowcroft: PEDL 40-1 and 56-1 .................................................................................. 12
2.1. Database and GIIP Estimation..................................................................................... 13
3. Four Oaks: PEDL 145 ...................................................................................................... 15
3.1. Database and GIIP Estimation..................................................................................... 16
4. PEDL 92-1: Drax .............................................................................................................. 18
4.1. Database and GIIP Estimation..................................................................................... 19
5. PEDL 107 and Offshore Exploration Blocks 110/18,19 and 23: Point of Ayr................... 21
5.1. Database and GIIP Estimation..................................................................................... 22
6. PEDL 78-1: Greater Swallowcroft .................................................................................... 26
6.1. Database and GIIP Estimation..................................................................................... 27
7. PEDL 115-1: Greater Swallowcroft .................................................................................. 29
7.1. Database and GIIP Estimation..................................................................................... 29

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Competent Person’s Report: Island Gas Ltd

1. Introduction
In response to your request, Equipoise Solutions Limited (Equipoise) has reviewed certain Coal
Bed Methane (CBM) interests held by Island Gas Limited (IGL), onshore and offshore UK. These
include a 20% non-operated interest in Petroleum Exploration and Development Licences (PEDL)
40-1, 56-1 (collectively ‘Swallowcroft’), PEDL 92-1 (‘Drax’), 145 (‘Four Oaks’) and 78-1 (‘Greater
Swallowcroft’). IGL also have a 50% non-operated interest in PEDL 107, and offshore Licences
110/18 (part), 110/19 (part) and 110/23 (part) – collectively ‘Point of Ayr’. Initially, we did not
evaluate PEDL 115-1 when version 1 of this report was issued on 31/10/07. Since then, we have
received instruction from you to evaluate this licence area. This version of the report therefore
includes a Section 7 summarising the results of our estimates for PEDL 115-1. We have also
updated Tables 1.1 to 1.3 of the document. We have not evaluated PEDL 115-2 or 116, where
IGL have a 20% non-operating interest. All the evaluated licences are Operated by Nexen
Petroleum (UK) Limited, a wholly owned subsidiary of Nexen inc (‘Nexen’).

A summary of these licences, including outstanding work commitments as of 31st September


2007, is given in Table 1.1, and summarised in Figure 1.1. Currently, all licences have the Status
of Exploration, under the terms of Appendix 1 of “Guidance Note for Mining, Oil and Gas
Companies”, March 2006.

Onshore Licences

PEDL W.I. (%) Block No. Operator Name Renewal Date Area (km2) Outstanding Licence Obligations
40-1 20% SJ47 Nexen Swallowcroft 17/03/2009 45 None
56-1 20% SJ84 Nexen Swallowcroft 17/03/2009 18.2 None
78-1 20% SJ73 Nexen Greater Swallowcroft 07/09/2008 100 1 Drill or Drop Well
145 20% SJ58 Nexen Four Oaks 30/09/2010 74 None
92-1 20% SE62, SE72 Nexen Drax 07/09/2008 200 None
107 50% SJ18 Nexen Point of Ayr 31/01/2008 21 1 Drill or Drop Well
115-1 20% SJ82, SJ92 Nexen Greater Swallowcroft 31/01/2008 200 1 Drill or Drop Well plus lateral

Offshore Licences

Licence W.I. (%) Operator Name Renewal Date Area (km2) Outstanding Licence Obligations
110/18 (part) 50% Nexen 31/03/2011 118.9
1 contingent well
110/19 (part) 50% Nexen Point of Ayr 31/03/2011 52.4
110/23 (part) 50% Nexen 31/03/2011 18.3

Table 1.1: Summary of Licence Interests and Work Commitments, Island Gas Limited (as of 31/09/2007)

All licences have been acquired for the purposes of exploration for Coal Bed Methane gas
resources within coals of the Westphalian A and B Groups, which are Carboniferous in Age
(Figure1.2). The Westphalian A and B are commonly referred to as the ‘coal measures’.
Carboniferous coals form the bulk of the mined coal strata in the UK. Thus, significant coal
resource exploration has occurred in many of the licences in Table 1.1, and areas within or
adjacent to the licences in Table 1.1 have been historically mined for this coal resource. A large
historic database has resulted from this activity, which was available to us for our analysis. These
data are discussed in more detail in Section 1 of this report.

Nexen and IGL have an ongoing work programme to discharge the above licence obligations and
to determine the viability of CBM production in the licences themselves. As of 31/9/07, this had
included the drilling of Well Doe Green-1 and Doe Green-2 within PEDL 145, and the completion
of drilling activity on PEDL 92-1 (Well Mill Farm-1). Well Doe Green-1 was extensively cored
through the Carboniferous coal bearing section in the well, to provide samples for the estimation
of gas desorbtion for the coals. Well Doe Green-2 is currently under long-term production testing.
Licence PEDL 145 has also been explored historically for CBM resources by another Operator,
resulting in the drilling of Well Four Oaks-1. This vertical well failed to produce economic volumes
of gas from the Carboniferous coals before it was plugged and abandoned. We are advised that

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Competent Person’s Report: Island Gas Ltd

this occurred for mechanical rather than technical reasons, due to the poor provision of pumping
equipment.

Onshore oil and gas operations within the UK are subject to certain planning and environmental
regulations. Furthermore, certain regulatory requirements have to be met to drill boreholes for the
purposes of CBM exploration. For onshore exploration drilling, IGL require planning permission
from the relevant local authority, and a Coal Authority Coal Access Agreement to specifically drill
for CBM resource. In addition, further bye law consent may be required for land drainage, topsoil
storage whilst the site is occupied, and water disposal. Cuttings and produced water can be
shipped from site by a recognised disposal contractor. At the time of writing, successful planning
applications do not require a full Environmental Impact Statement, but include noise assessment
and a base line ecology survey, including protected species.

For production operations, it is envisaged that further planning permission will be required for gas
evacuation and/or local power generation. Should water extraction rates rise to greater than 20m3
per day, an abstraction permit will also be required from the local water company, as well as a
suitable disposal method.

Finally, a suitable lease agreement must obviously be negotiated with the land owner of the
chosen site for the period of occupation.

IGL recognise that land access and approvals are essential to progress their current envisaged
work programme. IGL have a number of sites identified for CBM drilling. Of these, as of 30/9/07
the Doe Green site on PEDL 145 and the Mill Farm site on PEDL 98-1 have all permissions and
relevant leases in place. Applications have been submitted for one site each within PEDL 107
and PEDL 78-1, but at the time of writing planning permission had not been awarded. As of
30/9/07, sites in PEDL 56-1 and PEDL 115-1 are currently in the lease negotiation stage, or have
planning applications pending.

1.1. Comparison of CBM and Conventional Oil and Gas Reservoirs

Coal bed methane can be seen as a non-conventional hydrocarbon resource. In conventional oil
and gas reservoirs, hydrocarbons are generated from the thermal and pressure maturation of a
suitable organic source rock, including coals. These hydrocarbons are reservoired within the pore
spaces of a suitably porous and permeable rock. As hydrocarbons are more buoyant than the
surrounding formation water, some form of structural or stratigraphic trap is required to prevent
the hydrocarbons from leaking to surface. As a result, such traps generally form a fractional
subset of the areal distribution of the prospective reservoir interval.

Within coals, the associated methane is chemically bound within the strata themselves, via a
process known as adsorbtion. It is important to note that as a result, geological structures play no
role in the accumulation of coal bed methane. Thus, CBM potential is governed by the extent,
thickness and depth of the coal seams themselves, rather than by the areal extent of potential
traps. Coals can be regionally extensive, but are generally thin relative to conventional oil and gas
reservoirs. For instance, almost all the coals reviewed in this report are less than a few metres in
thickness. Coals are often vertically staked, although this will depend on the basin geometry at
the time of deposition. The amount of organic material within individual coal seams, where well
lithified (as with most UK Carboniferous coals), is generally quite high. However, ultimate gas
contents per coal seam depend on the burial history of the coals.

Adsorbed gas escapes from coals as they de-stress, for instance during the drilling or mining
process. As coals are of low permeability relative to most conventional oil and gas reservoirs, a
well developed fracture (cleat) network is essential for the extraction of gas at appreciable rates
during de-stressing. This network can be natural, or generated/enhanced by artificial stimulation.

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Competent Person’s Report: Island Gas Ltd

Production rates from CBM wells are commonly lower than those from conventional oil and gas
reservoirs.

Figure 1.1: Location of Island Gas Licences, Onshore and Offshore UK, as of 31/09/2007.

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Competent Person’s Report: Island Gas Ltd

1.2. Evaluation Methodology

Both the available data and methodology used is discussed on a licence specific basis within the
following sections of this report. However, a general methodology was applied to our evaluation
of GIIP, which is discussed below.

1.2.1. Available Data

Some of the IGL Licences have been licensed previously for the purposes of exploration for coal
bed methane gas resources. All have been extensively explored for conventional coal resources,
and in places have been mined for these resources, with the exception of PEDL 78-1, PEDL 145
south of the river Mersey (145 South), and the offshore Point of Ayr blocks 110/18 (Part) and
110/23 (Part).

A database of National Coal Board/Coal Authority (NCB/CA) exploratory boreholes, shaft records
and mine working diagrams were available to us. These commonly include a log of coal
thickness, coal stratigraphy, ash content and also seam gas content (where cored), corrected for
gas lost before measurement began. In many cases, borehole information was available as NCB
‘petrogram’ maps per coal seam, summarising the coal thickness and ash content at each
borehole location. Where possible, we have used these maps as a primary source of data, cross-
referenced against borehole data wherever possible.

In the case of the mine working information, we were also able to locate areas where the
Westphalian coals had already been mined, and thus are non-prospective for CBM.

No desorbtion curves were available within the NCB/CA data base available to us, and
description of measurement methodology and correction for gas lost was found to be ambiguous.
However, desorbtion data were available for the Doe Green-1 borehole within PEDL 145 which
we were able to use to calibrate the historic NCB/CA gas content data.

Limited seismic data were available, and we have not made interpretations of geological structure
between boreholes.

1.2.2. Estimation of Gas Content

There are many factors that control the gas in place within a coal seam. These include thermal
history, structuration, moisture content, volatile content, coal maturation (1e.g. British Coal 1987).
Where the coals are under-saturated with respect to gas content, many empirical trends can be
derived. However those models are not transportable between coal fields (Freudenberg 1996). If
the coals are saturated, it is be possible to establish a generic model across all coal fields based
on the physical process of adsorption since the adsorbed gas can account for as much as 98% of
the total gas in the coal (Harpalani & Schraufnagel 1990a,b).

Using data taken from figure 2 and 3 of Kim 1997 (see figure 1.2) we were able to define a
generic model of maximum coal gas storage based on the Langmuir equation. The Langmuir
equation is of the generic form:

Gas Capacity(m3/Tonne) = Vl(m3/Tonne)*Pressure(Mpa)/(Pl(MPa)+Pressure(MPa))

Vl and Pl are Langmuir volume and pressure constants.

This equation was simplified to a function of depth and Langmuir volume. Our equation assumes
hydrostatic pressure of 0.4 psi/ft and a temperature gradient of 0.018 degrees Celsius per metre
with a surface temperature of 11 degrees Celsius. We also expressed Langmuir Pressure as a

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Competent Person’s Report: Island Gas Ltd

function of Langmuir Volume. In this way we were able to produce a model that entirely replicates
the curves shown in figure 1.2 by a single variable, Langmuir Volume which correlates to coal
maturity. The equation can also be expressed as a function of depth to calibrate against core
measurements.

Figure 1.2 - Gas Capacity as a function of pressure and temperature (from Kim 1997)

Core based gas desorption measurements were available from the areas studied in this report
(Creedy 1992). The database included depth, methane and ethane measured in desorption and
an estimate of methane expelled from the coal prior to sealing the coal sample (gas lost). There is
uncertainty in the method of correction for lost gas, due to the limited nature of experimental
description in the Creedy reported data. For our estimates, we have assumed that these values
have been corrected for lost gas using industry standard methods.

It was noted that the gas lost estimate for the same sample varied from 30% to 60% of the
measured gas depending on whether a linear or quadratic extrapolation was used when plotting
gas desorped as a function of the square root of time of measurement. This, combined with a
statement made by Kim (1997) that “[gas desorption measurements are]…considered accurate
to +30% made us conclude that gas desorption data should be fitted through the centre of any
scatter in a crossplot of total gas desorped (lost and measured) versus depth.

Although we had derived a model of total gas capacity (m3/Tonne) as a function of Langmuir
volume, we needed to adjust the model to account for the moisture content and the atmospheric
pressure (101Kpa) used in coal desorption measurements made by the NCB. Once this was
done, we are able to define the optimum Langmuir volume for the model trend to pass through
the centre of each desorption dataset (mid case trend). Figure 1.3 shows the fit for each area.

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Figure 1.3 - Application of the simplified Langmuir model for four different coalfields..

It should be noted that there is a good correspondence between Kim's figures in Figure 1.2 and
the mid case model fit in Figure 1.3. For example, a Langmuir volume of 27.5 m3/Tonne models
as a high volatile coal in Kim's data and corresponds to the Drax trend which is also a high
volatile coal.

Establishing a low and high trend for each coal-field is non trivial; especially for Point of Ayr
where only 9 points are available. If experimental errors in desorption data are expected to be at
the level of 30%, the scatter in the trends above can be entirely explained in terms of
experimental uncertainty. However, to provide a consistent and auditable approach, we have
defined a low and high curve for each based on defining the Langmuir volume that creates a
trend where 90% or 10% of the samples lie above the trend respectively. In the case of Point of
Ayr, we have extrapolated these low, mid and high estimates, assuming similar error bounds.
Figure 1.4 shows the resultant Langmuir volumes for each coal field along with one example of
the low, mid and high trends for Swallowcroft.

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Figure 1.4 – low, mid and high Estimation of Langmuir volumes

Given that the depth trends created were based on the physical process of desoprtion of
saturated coal and that the inferred Langmuir volumes correspond broadly to the coal maturity
observed in each field, we conclude that the coals are likely to be saturated and that this model is
a reasoned approach to provide input parameters into the final gas in place calculations.

1.2.3. GIIP Estimation

We have applied industry standard methods to calculate coal bed methane GIIP for the above
Licences (e.g. Scott et al 1995), using the equation below

GIIP = (h.A).d.GC

Where:
h = coal thickness, A = area of prospect, d = coal density and GC = ash free gas content

As we have established that NCB/CA gas content measurements are on an ash free basis, we
have not corrected for ash content of the coals. To convert our coal volume estimate to tonnage,
we have used a constant coal density of 1.28 g/cm3, established from regional NCB/CA analysis.

For each area we have tabulated coal depth, thickness, and gas content (borehole or lab
measured, where available) for each of the correlateable coals in each available borehole. We
have also tabulated measured borehole gas against depth, (methane and ethane combined), and
have used this to derive both relationships for the increase in total gas content with depth for
each area, and also gas contents for coal where not recorded. These measurements could be
calibrated to sea level datum in the Swallowcroft area – necessary as the area has significant
topography. Few borehole elevation data were available in Four Oaks (North), Drax and Point of
Ayr to undertake the same calculation. However, these areas are relatively flat, and the impact of
topography on our calculations was found to be minor.

We initially calculated GIIP for methane and ethane combined on a layer average basis, taking
the average depth, thickness, ash content and measured gas content for each logged coal over
the study area. Where borehole coverage is sufficient, we have also undertaken a grid based
estimation, extrapolating coal thickness and depth for all logged and named coals between
boreholes across each licence area. Where it was possible to undertake both grid and layer
average estimates, we have chosen the former as being the more accurate method of estimation.

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We have adopted other methods where borehole data are sparse or unavailable, using other
geological information, such as maps of Solid Geology published by the British Geological Survey
(BGS). These methods are described in detail in the appropriate section.

Due to the lack of seismic data available, we have not made interpretations of geological
structure between the available borehole data. Our resulting estimates therefore alias geological
structure within the licences. Account should be taken of this for borehole specific studies, such
as drainage area per well, but the methodology adopted here is acceptable relative to the
subsurface uncertainties currently present.

We have undertaken our estimates of GIIP on a deterministic basis, making three estimates: low,
mid and high case, with our cases defined as follows:

Onshore Licences, Deterministic Cases

Low Case: all correlatable logged coals with a thickness of 1m or greater, (i.e. accessible by well
established drilling technology) above a maximum depth of 5,000’ or approximately 1,525m
(approximately the deepest borehole penetration within each licence), and with our low estimates
of gas content with depth using the Langmuir equation.

Mid Case: all correlatable logged coals with a thickness of 60cm (2’) or greater (i.e. accessible by
the in-seam drilling technology being utilised by IGL), to a depth of 5000’ or approximately
1,525m (approximately the deepest borehole penetration within each licence), and with the
average of the recorded gas content for that seam, or an estimate derived from our mid estimate
of gas content with depth using the Langmuir equation.

High Case: all correlatable logged coals, irrespective of thickness, plus an estimate of additional
coal that remained un-named in the available borehole data, to a maximum depth of 6,500’ or
approximately 2,000m (the current maximum estimated commercial depth as advised by Nexen),
and with our high case estimate of gas content using the Langmuir equation.

In all cases, the minimum evaluated depth was 200’, although this was only applicable in the
Point of Ayr onshore PEDL 107.

In addition, we have applied a drilling radius cut-off for the Point of Ayr offshore licences as
follows:

Point of Ayr Offshore, Deterministic Cases

Low case: All correlatable logged coals coals with a thickness of 1m or greater, (i.e. accessible
by well established drilling technology) above a maximum depth of 5,000’ or approximately
1,525m (approximately the deepest borehole penetration within each licence), within a 3,000m
radius of the coastline (the current extent of available borehole data), with our low estimates of
gas content with depth using the Langmuir equation.

Mid Case: all correlatable logged coals with a thickness of 60cm (2’) or greater (i.e. accessible by
the in-seam drilling technology being utilised by IGL), to a depth of 5000’ or approximately
1,525m (approximately the deepest borehole penetration within each licence), within a 4,000m
radius of the coastline (Nexen assumed maximum distance that can be reached from an onshore
site), and with the average of the recorded gas content for that seam, or an estimate derived from
our mid estimate of gas content with depth using the Langmuir equation.

High Case: all correlatable logged coals, irrespective of thickness, plus an estimate of additional
coal that remained un-named in the available borehole data, to a maximum depth of 6,500’ or
approximately 2,000m (the current maximum estimated commercial depth as advised by Nexen),

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over the entire area of the offshore blocks where coals are likely to occur, and with our high case
estimate of gas content using the Langmuir equation.

Where we have used additional constraints, we have included further discussion in the relevant
section of this report. Some areas reviewed do not have the presence and thickness of the
Westphalian coal measures established by borehole data. Where this is the case, we have
applied an appropriate geological risk factor to our estimates.

Our final low, mid and high GIIP estimates are tabulated below.
(all figures in Bcf) Gross Net Risk Operator
Area Low Mid High Low Mid High Factor
PEDL 40-1 and PEDL 56-1 563 854 1,326 113 171 265 - Nexen
PEDL 145 (N of Mersey) 116 181 299 23 36 60 - Nexen
PEDL 145 (S of Mersey) 99 444 803 20 89 161 80% Nexen
PEDL 92-1 383 652 1,134 77 130 227 - Nexen
Point of Ayr Onshore (PEDL 107) 2 4 10 1 2 5 - Nexen
Point of Ayr Offshore (110/19 Part) 87 162 1,141 43 81 571 - Nexen
Point of Ayr Offshore
(110/18 Part and 110/23 Part) 120 508 4,340 60 254 2,170 80% Nexen
PEDL 78-1 309 874 1,794 62 175 359 50% Nexen
PEDL 115-1 B (west) 226 832 1,923 45 166 385 50% Nexen
PEDL 115-1 A (east) 106 138 361 21 28 72 - Nexen
TOTAL GIIP (Bcf) 2,011 4,649 13,132 465 1,132 4,274
Table 1.2: Low, mid and high estimates of GIIP (gross per licence and Net to IGL) for the IGL properties reviewed
in this report, as per Appendix 3, of “Guidance Note for Mining, Oil and Gas Companies”, March 2006. For
avoidance of doubt, all numbers are unrisked.

(all figures in Bcf) NET RISKED GIIP


Area Low Mid High
PEDL 40-1 and PEDL 56-1 113 171 265
PEDL 145 (N of Mersey) 23 36 60
PEDL 145 (S of Mersey) 16 71 128
PEDL 92-1 77 130 227
Point of Ayr Onshore (PEDL 107) 1 2 5
Point of Ayr Offshore (110/19 Part) 43 81 571
Point of Ayr Offshore
(110/18 Part and 110/23 Part) 48 203 1,736
PEDL 78-1 31 87 179
PEDL 115-1 B (west) 23 83 192
PEDL 115-1 A (east) 21 28 72
TOTAL GIIP (Bcf) 395 893 3,436

Table 1.3: Low, Mid and High net risked GIIP for the IGL properties reviewed in this report.

54

Island_Gas_CPR_Rev1_client_relea15 15 9/11/07 19:13:33


Competent Person’s Report: Island Gas Ltd

2. Swallowcroft: PEDL 40-1 and 56-1


PEDL 40-1 and 56-1 lie to the north west of the City of Birmingham, within the county of
Staffordshire, onshore UK (Figure 2.1). The currently licensed area lies immediately to the south
west of the town of Newcastle-Under-Lyme. The licences surround an area of extensive mine
workings, although mining activity has now ceased. As far as we can ascertain, the mined areas
fall outside the licensed area (Figure 2.1).

The licences PEDL 40 and PEDL 56 were originally acquired by Midlands Mining Holdings
Limited on 21st July 1998. Following several reassignments and part relinquishment, title and
100% equity was obtained in PEDL 40-1 and PEDL 56-1 by IGL via execution of an option of
assignment by StrataGas plc on 11th February 2005. The licences have undergone two
extensions of the first term, and are now in the second term, which currently expires on 17th
March 2009. Operatorship and 80% of the equity in PEDL 40-1 and PEDL 56-1 were assigned to
Nexen on 9th December 2005. The current licensed area and the UK onshore grid blocks that
form PEDL 40-1 and PEDL 56-1 are summarised in Table 1.1 of this document.

Geologically, the area is formed by a series of open, westward plunging anticlines and synclines,
outcropping rocks of Triassic to Carboniferous Age at surface, with the Carboniferous
Westphalian Coal Measures sequence outcropping to the north of the licences. A large fault, the
Wem Fault, downthrows Carboniferous strata to the westerly edge of the licences. Although
quantification of this throw is difficult, estimates place it at more than 1km, making the
Carboniferous strata too deep for CBM exploration at present.

Mining in the area focussed on Westphalian A and B coals at depths of approximately 0m to


1500m below surface. Although the area has been licensed historically for CBM exploration, no
boreholes have been drilled on the licence for this purpose.

370,000 380,000
PEDL 40-1/56-1
0 1,250 2,500 SWALLOWCROFT
metres  Borehole
350,000
New License Area

Coal Mining Extent

Fault

UK_APEDALE_2
UK_APEDALE_2
UK_APEDALE_2
UK_APEDALE_2
UK_APEDALE_2
UK_APEDALE_1
UK_APEDALE_1
UK_APEDALE_1
UK_APEDALE_1
UK_APEDALE_1

UK_SILVERDALE_SHAFT_17
UK_SILVERDALE_SHAFT_17
UK_SILVERDALE_SHAFT_17
UK_SILVERDALE_SHAFT_17
UK_SILVERDALE_SHAFT_17

UK_BOW
UK_BOW
UK_BOW
UK_BOW SEY_W
UK_BOWSEY_W
SEY_W
SEY_W OOD
SEY_WOOD
OOD
OOD
OOD
UK_FINNEY_GREEN
UK_FINNEY_GREEN
UK_FINNEY_GREEN
UK_FINNEY_GREEN
UK_FINNEY_GREEN

UK_QUARRY_BANK
UK_QUARRY_BANK
UK_QUARRY_BANK
UK_QUARRY_BANK
UK_QUARRY_BANK
UK_QUARRY_BANK
UK_TOP_FARM
UK_TOP_FARM
UK_TOP_FARM
UK_TOP_FARM
UK_TOP_FARM
UK_HOME_FARM
UK_HOME_FARM
UK_HOME_FARM
UK_HOME_FARM
UK_HOME_FARM
UK_BARKERS_W
UK_BARKERS_WOOD
UK_BARKERS_W OOD
OOD
UK_HIGHW
UK_HIGHWAY
UK_HIGHW
UK_HIGHW
UK_HIGHW AY
AY
AY
AY
UK_PENFIELDS_W
UK_PENFIELDS_W OOD_5
UK_PENFIELDS_WOOD_5
OOD_5
UK_PENFIELDS_W
UK_PENFIELDS_W
UK_PENFIELDS_WOOD_5
OOD_5
OOD_5
UK_HUNGERFORD
UK_HUNGERFORD
UK_HUNGERFORD UK_PENFIELDS_W
UK_PENFIELDS_W
UK_PENFIELDS_WOOD_6
UK_PENFIELDS_W
UK_PENFIELDS_W
UK_PENFIELDS_W OOD_6
OOD_6
OOD_6
OOD_6
OOD_6
UK_HUNGERFORD
UK_HUNGERFORD
UK_HUNGERFORD
UK_STONY_LOW
UK_STONY_LOW
UK_STONY_LOW UK_BEARS_2
UK_BEARS_2
UK_BEARS_2
UK_BEARS_2
UK_BEARS_2
UK_STONY_LOW
UK_STONY_LOW
UK_STONY_LOW
UK_DARDANELLES
UK_DARDANELLES
UK_DARDANELLES
UK_DARDANELLES
UK_DARDANELLESUK_BIRCH
UK_BIRCH
UK_BIRCH
UK_BIRCH
UK_BIRCH
UK_BIRCH UK_KEELE_1
UK_KEELE_1
UK_KEELE_1
UK_KEELE_1
UK_KEELE_1
UK_W
UK_W
UK_WERBURGH
UK_W
UK_W
UK_W ERBURGH
ERBURGH
ERBURGH
ERBURGH
ERBURGH
PEDL
PEDL 40-1/56-1
40-1/56-1 UK_ALDERSEY
UK_ALDERSEY
UK_ALDERSEY UK_BEARS_1
UK_BEARS_1
UK_BEARS_1
UK_PENFIELDS_W
UK_BROMLEY
UK_BROMLEY
UK_BROMLEY
UK_ALDERSEY
UK_ALDERSEY UK_PENFIELDS_W
UK_BEARS_1
UK_BEARS_1
UK_BEARS_1
UK_PENFIELDS_W
UK_BROMLEY
UK_BROMLEY
UK_BROMLEY
UK_PENFIELDS_W
UK_PENFIELDS_W
UK_PENFIELDS_W
OOD_1
OOD_1
UK_LYMES_ROAD
UK_PENFIELDS_W
UK_PENFIELDS_WUK_LYMES_ROAD
UK_LYMES_ROAD
OOD_1
OOD_1
OOD_1
UK_LYMES_ROAD
UK_LYMES_ROAD
UK_LYMES_ROAD
OOD_3
OOD_3
OOD_3ALLOW
UK_HEY_SPRINK
UK_HEY_SPRINK
UK_HEY_SPRINK UK_SW
UK_SW
UK_SW
UK_SW
UK_SW
UK_SW ALLOW
ALLOW
ALLOWCROFT
ALLOW
ALLOW CROFT
CROFT
CROFT
CROFT
CROFT
UK_HEY_SPRINK
UK_HEY_SPRINK
UK_HEY_SPRINK
UK_MADELEY
UK_MADELEY
UK_MADELEY
UK_MADELEY
UK_MADELEY UK_PENFIELDS_W
UK_PENFIELDS_WOOD_2
UK_PENFIELDS_W
UK_PENFIELDS_W
UK_PENFIELDS_W OOD_2
OOD_2
OOD_2
OOD_2
UK_CLAYTON
UK_CLAYTON
UK_CLAYTON
UK_CLAYTON
UK_CLAYTON
UK_PENFIELDS_W
UK_PENFIELDS_WOOD_4
UK_PENFIELDS_W
UK_PENFIELDS_W
UK_PENFIELDS_W OOD_4
OOD_4
OOD_4
OOD_4
UK_BITTERNS
UK_BITTERNS
UK_BITTERNS
UK_BITTERNS
UK_BITTERNS UK_SEABRIDGE
UK_SEABRIDGE
UK_SEABRIDGE
UK_SEABRIDGE
UK_SEABRIDGE
UK_BLACK_BOG
UK_BLACK_BOG
UK_BLACK_BOG
UK_BLACK_BOG
UK_BLACK_BOG

UK_W
UK_W
UK_W
UK_W HITMORE
UK_WHITMORE
HITMORE
HITMORE
HITMORE UK_SHUTLANEHEAD
UK_SHUTLANEHEAD
UK_SHUTLANEHEAD
UK_SHUTLANEHEAD
UK_SHUTLANEHEAD
UK_SHUTLANEHEADUK_GRANGE_W
UK_GRANGE_WOOD
OOD
OOD
UK_GRANGE_W
UK_GRANGE_W
UK_GRANGE_W OOD
OOD
UK_NORTHW
UK_NORTHW
UK_NORTHW
UK_NORTHW
UK_NORTHW OOD_1
OOD_1
OOD_1
UK_NORTHWOOD_1
OOD_1
OOD_1
UK_RADW
UK_RADWOOD
UK_RADW OOD
OOD

UK_HARGREAVES
UK_HARGREAVES
UK_PEACOCKS_LANE
UK_PEACOCKS_LANE
UK_HARGREAVES
UK_PEACOCKS_LANE
UK_HARGREAVES
UK_HARGREAVES
UK_PEACOCKS_LANE
UK_PEACOCKS_LANE
UK_LITTLE_PADDOCKS
UK_LITTLE_PADDOCKS
UK_LITTLE_PADDOCKS
UK_LITTLE_PADDOCKS
UK_LITTLE_PADDOCKS UK_HANCHURCH
UK_HANCHURCH
UK_HANCHURCH
UK_HANCHURCH
UK_HANCHURCH

UK_HOBGOBLIN
UK_HOBGOBLIN
UK_HOBGOBLIN
UK_HOBGOBLIN
UK_HOBGOBLIN
UK_TOFT
UK_TOFT
UK_TOFT
UK_TOFT
UK_TOFT
UK_KINGSW
UK_KINGSW OOD
UK_KINGSWOOD
OOD
340,000 UK_DRAYTON_ROAD
UK_DRAYTON_ROAD
UK_DRAYTON_ROAD
340,000
UK_DRAYTON_ROAD
UK_DRAYTON_ROAD
UK_DRAYTON_ROAD
370,000 380,000

Figure 2.1: Location map: PEDL 40-1, 56-1 (Swallowcroft), including location of mine workings, borehole data,
and the position of the Wem Fault.

55

Island_Gas_CPR_Rev1_client_relea16 16 9/11/07 19:13:34


Competent Person’s Report: Island Gas Ltd

2.1. Database and GIIP Estimation

Outwith the mined areas, we have located and logged 54 NCB/CA boreholes, which are
distributed across the acreage (Figure 2.1), largely as strip logs, although some of the wells had
geophysical logs, enabling us to cross check density. We have logged all correlatable coals from
the Black Band and Bricklin Coal within the available borehole strip logs, recording coal depth,
thickness and ash content where logged. In addition, we have recorded estimated gas content
from the NCB document “Printout from the British Coal Seam Gas Content Database” (Creedy
1992), summarising estimates of methane and ethane per seam where logged, including
estimates of lost gas. A table of logged coals is given in Appendix 1 of this report.

Some 2D seismic lines have also been acquired over the block, and a small 3D seismic survey,
acquired for coal exploration purposes, is also present to the east of the licences. We have not
used these data in our GIIP estimation, as geological structures play no role in the accumulation
of coal bed methane.

GIIP calculation for the Swallowcroft area was undertaken in the manner described in Section 1
of this report. We chose as an input area the currently licensed acreage for PEDL 40-1 and PEDL
56-1, excluding the area to the west of the Wem fault, where no borehole data are available and
the Carboniferous strata are deeply buried according to British Geological Survey mapping
(Figure 2.1). The net area was calculated as 50.26 km2.

Plotting borehole gas measurements against depth (corrected to sea level datum and lost gas)
then provided a gas content/depth relationship, to calculate average gas content where not
recorded, and also the uncertainty range in these estimates (Figure 2.2). Average gas contents
were found to be in the region of 8 to 10 m3/tonne. This agrees well with measured exsolved gas
volumes from local mine workings (e.g. Baker 1988).

Figure 2.2: Gas content with depth (mss), Swallowcroft Area, with low, mid and high estimates using the
Langmuir equation.

56

Island_Gas_CPR_Rev1_client_relea17 17 9/11/07 19:13:34


Competent Person’s Report: Island Gas Ltd

During our borehole logging, we found, on average, 30% of coals drilled were un-named and/or
were not correlatable between boreholes. We have included an uplift of 30% in our high case
estimate for the Swallowcroft area as a result. Our final GIIP estimates (Gross and net IGL) are
tabulated below.

(all figures in Bcf) Gross Net Risk Operator


Area Low Mid High Low Mid High Factor
PEDL 40-1 and PEDL 56-1 563 854 1326 113 171 265 - Nexen

Table 2.1: Estimates of GIIP, PEDL 40-1, 56-1 (Swallowcroft).

57

Island_Gas_CPR_Rev1_client_relea18 18 9/11/07 19:13:34


Competent Person’s Report: Island Gas Ltd

3. Four Oaks: PEDL 145

PEDL 145 lies around 15 miles to the east of the City of Liverpool, within the county of Cheshire,
onshore UK (Figure 3.1). The currently licensed area lies immediately east of the towns of
Runcorn and Widnes, and is bisected by the river Mersey. The licences lie adjacent to an area of
extensive mine workings, although mining activity has now ceased. As far as we can ascertain,
the mined areas fall outside the licensed area (Figure 3.1).

PEDL 145 was originally awarded to IGL in the 12th Onshore Licensing Round on 20th January
2005. The first licence term expires on 30th September 2010. The licence can be extended for a
second term, with relinquishment of 50% of the currently held area. Due to the unconventional
nature of CBM resources, the UK Department of Trade and Industry have indicated that no
relinquishment will be required should development activity continue, and extend to the south of
the Mersey. Operatorship and 80% of the equity in PEDL 145 were assigned to Nexen on 9th
December 2005. All first term licence commitments were met and exceeded with the drilling of
Wells Doe Green-1 and Doe Green-2.

The current licensed area and the UK onshore grid blocks that form PEDL 145 are summarised in
Table 1.1 of this document.
350,000

PEDL 145 SUTTON_MANOR_SHAFT_1


SUTTON_MANOR_SHAFT_2
SUTTON MANOR 1

FOUROAKS UG_BOLD_2_UP

NCB A3/6 (Burtonwood)


UG_77
Borehole
LONGF390,000
UG/SM/11 PARK FARM
UG_82_1
UG_82_2
IVY
COTTAGE PEDL
PEDL 145
145
License Area UG/SM/9
UG/SM/8 UG_69
BEW SEY

NCB A3/14-1 UG_90


UG_SM_12
UG_SM_14
Heathside Borehole
NCB A3/14 BINGLEY
UG_74 NCB

NO 3 A3/3
ST HELENS DALTH
SUTTON_MANOR_6
NCB A3/7
No.
SUTTON MANOR 70
TRIAL
2 BORE 6
UG_SM_13
UG/CF/7 South Lane Borehole
UG/CF/5 HAYFIELD FARM BOREHOLE
UG_CF_10

S MANOR W 20S UG8


TRIAL
Barrows BID
Green 5
Borehole
FOUROAK 1
TURNERS ASBESTOS
LAPORTE 1
NCB A3/4
Four Oak Borehole
NCB A3/17
NCB A3/19
Dans Road Borehole
FIDDLERS FERRY

CUERDLEY MARSH
ORRIS

CUERDLEY MARSH T
SULLIVANS NO.3
H. SULLIVANS
DENNIS & SON NO.2

MCKECKNES W IDNE
GASKELL DEACON

380,000 380,000
0 1,250 2,500
metres
350,000 360,000

Figure 2.1: Location map: PEDL 145 (Four Oaks) including location of borehole data.

58

Island_Gas_CPR_Rev1_client_relea19 19 9/11/07 19:13:34


Competent Person’s Report: Island Gas Ltd

Geologically, the area under licence is formed by strata of Carboniferous and Permo-Triassic
Age, gently dipping to the south and south-east. BGS geological maps show that these strata are
cut by a number of north-south striking normal faults, throwing to the east and west, creating a
number of normal fault blocks and horsts. The Carboniferous Westphalian coal measures
sequence outcrops to the north of the licences. The dip of the strata place the Westphalian at
depths greater than 6,500’ to the south of the licence, which is currently beyond the maximum
depth for CBM exploitation as adopted by Nexen. This has an impact on the GIIP calculations to
the south of the river Mersey.

Mining in the area focussed on Westphalian A and B coals, which, from the available borehole
data, are at depths of approximately 500m to 1700m below surface. The area has previously
been licensed for CBM exploration, with one 3D seismic survey and one vertical bore hole, Well
Four Oaks-1, acquired during this exploration campaign. Well Four Oaks-1 was placed on
production test, but failed to produce gas at economic rates, and was abandoned. We are
advised that this occurred for mechanical rather than technical reasons, due to the poor provision
of pumping equipment.

3.1. Database and GIIP Estimation

Outwith the mined areas, we have located and logged 127 NCB/CA boreholes, which are
distributed to the north and north-west of the licence around the historic mine workings (Figure
3.1). A number of ‘petrogram’ maps were also located for the area to the north of the Mersey, and
these were used as our primary source of coal thickness.

Some 2D seismic lines have also been acquired over the block, and a small 3D seismic survey,
as discussed above, is also present in the area local to Well Four Oaks-1. Depth structure maps
for the Florida Seam were also located, which we presume are based on a combination of
borehole and seismic data. We have not independently verified these maps, and have not used
these data in our GIIP estimation, as geological structures play no role in the accumulation of coal
bed methane.

We have logged all correlatable coals from the Crombourke to the Rushey Park Coal within the
available bore hole strip logs, recording coal depth and thickness where logged. In addition, we
have recorded estimated gas content from the NCB document “Printout from the British Coal
Seam Gas Content Database” (Creedy 1992), summarising estimates of methane and ethane per
seam where logged, including estimates of lost gas. The coals logged for GIIP calculation are
given in Appendix 1.

GIIP calculation for the Four Oaks area to the north of the Mersey was undertaken in the manner
described in Section 1 of this report. We chose as an input area the currently licensed acreage for
PEDL 145 to the north of the river. The net area was calculated as 21.15 km2.

No coal exploration or mining activity has occurred to the south of the river Mersey in PEDL 145,
and as a result, there are no available borehole data. To make estimates of GIIP to the south of
the Mersey, we have extended our coal seam grids southwards, controlling the dip using dip
estimates, cross-section information and strata out crop pattern from the BGS Solid Geology map
for the area (Runcorn Sheet 97). Uncertainty in coal measure depth was modelled by varying this
dip control, within the range of dips illustrated on the map, from 2o to 5o to the south or south-
east. This range of dips projects the Westphalian coal measures at increasing depth in this
direction, eventually below the depth cut-offs discussed in Section 1. In the case of a 5o dip, this
occurs within the licensed area. We have used these cut-offs to constrain our GIIP calculations to
the south of the Mersey in PEDL 145 on a seam by seam basis, and a result we have not
undertaken a layer average calculation for the area south of the Mersey.

59

Island_Gas_CPR_Rev1_client_relea20 20 9/11/07 19:13:34


Competent Person’s Report: Island Gas Ltd

The Westphalian coal measures have not been proved by mining or drilling to the south of the
Mersey on PEDL 145. There is therefore a risk that the coal measures are not developed.
However, the strata are conformable in this direction, and it is regionally unlikely that the coal
measures will change facies southwards. We therefore feel it is likely that a similar Westphalian
stratigraphy is developed to the south of the Mersey as to the north, and have assigned a chance
of 80% to this outcome.

Plotting borehole gas measurements against depth (corrected for lost gas) provides a gas
content/depth relationship, to calculate average gas content where not recorded, and also the
uncertainty range in these estimates (Figure 3.2). Average gas contents were found to be in the
region of 10 to 15 m3/tonne. We also reviewed these measurements against the desorbtion data
and gas content measurements acquired by IGL and Nexen from coal samples from Well Doe
Green-1. In general, the NCB reported lost gas and corrected gas contents were found to be
similar to those from Well Doe Green-1, and the results were incorporated without modification
into our gas content estimates.

Figure 3.2: Gas content with depth, PEDL 145 (Four Oaks) area, with low, mid and high estimates using the
Langmuir equation.

During our borehole logging, we found, on average, 15% of coals drilled were un-named and/or
were not correlatable between boreholes. We have included an uplift of 15% in our high case
estimate for the Four Oaks area as a result. Our final GIIP estimates (Gross and net IGL) for
PEDL 145 north and south of the Mersey are tabulated below.

(all figures in Bcf) Gross Net Risk Operator


Area Low Mid High Low Mid High Factor
PEDL 145 (N of Mersey) 116 181 299 23 36 60 - Nexen
PEDL 145 (S of Mersey) 99 444 803 20 89 161 80% Nexen

Table 3.1: Estimates of GIIP, PEDL 145 (Four Oaks)

60

Island_Gas_CPR_Rev1_client_relea21 21 9/11/07 19:13:35


Competent Person’s Report: Island Gas Ltd

4. PEDL 92-1: Drax


PEDL 92-1 lies to the east of the Penninnes, approximately 15 miles south of the City of York,
within the county of Yorkshire, onshore UK (Figure 4.1). The currently licensed area lies
immediately to the south east of the town of Selby, and is cut by the river Ouse. The licences are
around 10km to the north-west of the nearest subsurface workings. As far as we can ascertain,
the mined areas fall outside the licensed area (Figure 4.1).

The licence PEDL 92 was originally assigned to a consortium comprising PermaGas Limited and
Altwood Petroleum Limited on 29th November 2000. Following several reassignments and part
relinquishment, title and 100% equity was obtained in PEDL 92-1 by IGL via execution of an
option of assignment by StrataGas plc on 11th February 2005. The licences have undergone two
extensions of the first term, which currently expires on 7th September 2008, with the option of
extension to a three-year second term. Operatorship and 80% of the equity in PEDL 92-1 were
assigned to Nexen on 9th December 2005. The drilling of Well Mill Farm-1, which is currently
operating, fulfils all remaining commitments for the first licence term. The current licensed area
and the UK onshore grid blocks that form PEDL 92-1 are summarised in Table 1.1 of this
document.

Geologically, the area under licence is formed by strata of Carboniferous and Permo-Triassic
Age, gently dipping to the south and south-east. Mining in the area focussed on Westphalian B
coals, which, from the available borehole data, are at depths of approximately 200m to 1000m
below surface. Although the area has been licensed historically for CBM exploration, no
boreholes have been drilled on the licence for this purpose.

460,000 480,000

. PEDL 92-1
DRAX
 Borehole
License Area

430,000 430,000
New sholm e
Gateforth Com m on Burn Airfield 1
 Barlow 2

Cam blesforth 2 Drax 3


 West Haddlesley 1 Burn Airfield 2
 West Haddlesley 2
 Chapel Haddlesley
 Cam blesforth 3 Booth Ferry
Tem ple Hirst Cam blesforth 1
Drax 2
 Roall Lane Drax 1 (Old)
Kellington Airm yn
Drax 4
Eggborough 1 Airm yn Grange
 Eggborough 2  Carlton West Bank 2
Eggborough 3
Snaith
Gow dall Raw cliffe 2
 High Eggborough Raw cliffe 1 Percy Lodge
 Kellington Com m on
 Great Heck
 Pollington 1 (Old)
Raw cliffe Bridge
Pollington 3 West Cow ick
 Lee Lane
Pollington 2
New Bridge PEDL 92-1
PEDL 92-1
420,000 420,000
 Wom ersley 1
Top House
 Cross Hill
Balne Lodge

Eskholm
Pe incheon Green
 Walden Stubbs
 Fenw ick 
1Fenw ickHall
Ash Hill 0 1,250 2,500

Thorne Shafts 1 & 2 metres

460,000 480,000

Figure 4.1: Location map: PEDL 92-1 (Drax), including location of available borehole data.

61

Island_Gas_CPR_Rev1_client_relea22 22 9/11/07 19:13:35


Competent Person’s Report: Island Gas Ltd

4.1. Database and GIIP Estimation

We have located and logged 46 NCB/CA boreholes, which are distributed across the acreage
(Figure 4.1), largely as strip logs. Borehole density decreases eastwards across the licence, and
there is no control east of the town of Goole, (approximately 1/5 of the licence area). We have
also been provided with NCB petrogram maps for the main seams. We have logged all
correlatable named coals from the Sharlston Wood to the Winter coal within the available bore
hole strip logs and petrogram maps, recording coal depth, thickness and ash content where
logged. In addition, we have recorded estimated gas content from the NCB document “Printout
from the British Coal Seam Gas Content Database” (Creedy 1992), summarising estimates of
methane and ethane per seam, including estimates of lost gas. We could not locate the boreholes
from which gas content data was reported by the NCB (Creedy 1992), and have thus had to
calculate averages using the best fit functions as discussed in Section 1. The coals logged for
GIIP calculation are given in Appendix 1.

At the time of writing, No seismic data were available to us over the block, and we have not
determined geological structure. We have therefore assumed that the Westphalian coals as
logged in the boreholes are present throughout the licensed area of PEDL 92-1.

Plotting borehole gas measurements against depth (corrected for lost gas) provides a gas
content/depth relationship from which to calculate average gas content, and also the uncertainty
range in these estimates (Figure 4.2). Average gas contents were found to be in the region of 3 to
6 m3/tonne. Little datum information could be obtained for the boreholes within the area, and we
were unable to correct to sea level. However, the topography in the area is relatively flat and
close to sea level, and we found that this had little effect on the final calculations.

GIIP calculation for the Drax area was undertaken in the manner described in Section 1 of this
report, both on a layer average and a grid basis to cross-check the mid case estimate. We chose
as an input area the currently licensed acreage for PEDL 92-1 of 200km2, assuming coals are
present across the entire area.

62

Island_Gas_CPR_Rev1_client_relea23 23 9/11/07 19:13:35


Competent Person’s Report: Island Gas Ltd

Figure 4.2: Gas content with depth, PEDL 92-1 (Drax), with low, mid and high estimates using the Langmuir
equation.

During our borehole logging, we found, on average, 7% of coals drilled were un-named and/or
were not correlatable between boreholes. We have included an uplift of 7% in our high case
estimate for the Drax area as a result. Our final GIIP estimates (Gross and net IGL) are tabulated
below.

(all figures in Bcf) Gross Net Risk Operator


Area Low Mid High Low Mid High Factor
PEDL 92-1 383 652 1134 77 130 227 - Nexen

Table 4.1: Estimates of GIIP, PEDL 92-1 (Drax).

63

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Competent Person’s Report: Island Gas Ltd

5. PEDL 107 and Offshore Exploration Blocks 110/18,19 and 23: Point of
Ayr
PEDL 107 lies to the west of the Dee estuary, approximately 15 miles west-south-west of the City
of Liverpool, within the county of Flintshire, onshore UK (Figure 4.1). The currently licensed area
lies immediately to the east of the town of Prestatyn. Westphalian A and B Age strata are present
to the east of the licence, where they have been extensively mined within the Point of Ayr and
Mostyn collieries, which are now abandoned. PEDL 107 has limited potential for CBM as a result.

The licence is contiguous with the offshore exploration licence SPPL 1481, which includes blocks
110/18 (part), 110/19 (part) and 110/23 (part). The Westphalian A and B strata mined in PEDL
107 are proven in Block 110/18 (part) by a series of exploration boreholes and shallow seismic
lines acquired as part of a NCB coal exploration programme. As a result, IGL and Nexen see
CBM potential within the offshore blocks, with the onshore area providing a suitable location for
drilling access. PEDL 107, and the offshore exploration blocks 110/18 (part), 110/19 (part) and
110/23 (part) are here collectively referred to as Point of Ayr, as our evaluation methods
incorporate data from all licences. However, we have split out the onshore and offshore
components in our final tabulation of GIIP estimates.

The licence PEDL 107 was originally assigned 100% to Alkane Engergy plc (‘Alkane’) on 11th
March 2002. IGL and Nexen each acquired a 50% interest in the licence from Alkane on 23rd
January 2007, with Nexen carrying IGL’s share of commitment costs, as a minimum, and acting
as Operator. The first licence term expires on 31st January 2008, with a drill or drop commitment
of a well to at least 400m. No relinquishment is expected should the licence be retained for a
second term, as the area is below the 25km2 minimum retention area.

Offshore exploration blocks 110/18 (part), 110/19 (part) and 110/23 (part) were acquired by IGL
and Nexen as part of the 24th UK Offshore Licensing Round as Traditional Licence SPPL 1481.
The licence was acquired on a 50%/50% basis, with Nexen carrying IGL’s share of commitment
costs, as a minimum, and acting as Operator. The first licence term expires 31st March 2011,
where a 50% relinquishment may be required. The current licensed area, the UK onshore grid
blocks, and the offshore exploration blocks that form the Point of Ayr licenses are summarised in
Table 1.1 of this document.

Geologically, the area under licence is formed by strata of Carboniferous and Permo-Triassic
Age, deformed as an upthrown anticlinal structure, plunging northwards. For the most part, the
onshore outcrop (within PEDL 107) is composed of strata older than the Westphalian coal
measures. Geological structure to the offshore is poorly constrained in Blocks 110/18 and 11/23,
and is discussed in more detail in the section below.

Mining in the area focussed on Westphalian coals, which, from the available borehole data, are at
depths of approximately 200m to 700m below datum. Areas of the licence have been extensively
mined, and are not prospective for CBM as a result.

64

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Competent Person’s Report: Island Gas Ltd
295,000
295,000
295,000 305,000
305,000
305,000
305,000
305,000
305,000 315,000
315,000
315,000

110/18
110/18 110/19
110/19

390,000
390,000
390,000
390,000
390,000
390,000
390,000
390,000
390,000

Hoyle
Hoyle
HoyleBank
Hoyle
Hoyle Bank
Bank
Bank
Bank
POA
POA
POA
POA
POA 0/S
0/S
POA0/S
0/S
0/S No
No
0/SNo
No2
No
No 22
22
2 POA
POA
POA0/S
POA
POA
POA 0/S
0/SNo
0/S
0/S
0/S No
No4
No
No
No 44
444
POA
POA
POA0/S
POA
POA 0/S
0/SNo
0/S
0/S No
No6
No
No 666
6
POA
POA0/S
POA
POA
POA 0/SNo
0/S
0/S
0/S No3
No
No
No 3
333

POA
POA POA
POA0/S
POA 0/S
0/S
0/S POA
POA
No
No5
No 5550/S
0/SNo
50/S No
No1 1
111
POA 0/S No
No

PAUG-88
PAUG-88
PAUG-88
PAUG-88
PAUG-88
PAUG-88
PAUG-88
PAUG-88
PAUG-88
PAUG-88 777
7666
666
PAUG-88 7

 Talacre-2
Talacre-2
Talacre-2
Talacre-1
Talacre-1
Talacre-1
Talacre-2
Talacre-2
Talacre-1
Talacre-1
Talacre-1
  Talacre-3
Talacre-3
Talacre-3
Talacre-3
Talacre-3
Talacre-3
Talacre-6
Talacre-6
Talacre-6
Talacre-4
Talacre-4
Talacre-4
Talacre-4
Talacre-4
Talacre-5
Talacre-5
Talacre-5
Talacre-5
Talacre-5

PAUG-25
PAUG-25
PAUG-25
PAUG-25
PAUG-25

110/23
110/23

PEDL
PEDL 107-1
107-1 PEDL
PEDL 107-1
107-1 380,000
380,000
380,000
380,000
380,000
380,000
POINT
POINT OF
OF AYR
AYR AND
AND
OFFSHORE
OFFSHORE LICENSES
LICENSES
Onshore
Onshore
OnshoreLicense
Onshore
Onshore
Onshore License
License
License
License
License Coal
Coal
Coal Extents
Coal
Coal
Coal Extents
Extents
Extents
Extents

Offshore
Offshore
OffshoreLicense
Offshore
Offshore
Offshore License
License
License
License
License Coal
Coal
Coal Mining
Coal
Coal
Coal Mining
Mining Extents
Mining
Mining Extents
Extents
Extents
Extents 0 1,250 2,500

Rhuddlan
Rhuddlan metres
Rhuddlan
Rhuddlan
Rhuddlan
 Boreholes
Boreholes
Boreholes
Boreholes
Boreholes
Boreholes

305,000
305,000
305,000 315,000
315,000
315,000
315,000
315,000

Figure 5.1: Location map: PEDL 107 and Exploration Licence 1481 – Blocks 110/18 (part), 110/19 (part) and 110/23
(part) (collectively Point of Ayr), including location of mine workings and borehole data.

5.1. Database and GIIP Estimation

Little primary geological data are available for the Point of Ayr area. We have located and logged
13 NCB/CA boreholes, which are distributed largely in the offshore (Figure 5.1). In particular,
there are few onshore boreholes, and those that were drilled have no correlatable stratigraphy
(e.g. bore holes Talacre-1 to -6) apart from the Durbog seam. Where possible, we have logged all
correlatable named coals from the Warras to the Soft Five Quarters coal within the available bore
hole strip logs, recording coal depth, thickness and ash content where logged. Little datum
information could be obtained for the boreholes within the area, and we were unable to correct to
sea level. However, the topography in the area is relatively flat, and we found that this had little
effect on the final calculations. The named coals logged in this exercise are listed in Appendix 1.

In addition, we have recorded estimated gas content from the NCB document “Printout from the
British Coal Seam Gas Content Database” (Creedy 1992), summarising estimates of methane
and ethane per seam, including estimates of lost gas. Again, few seam gas content
measurements are made, and we have instead relied on estimates of gas content based on the
coal rank and associated Langmuir constants. As a result, we estimate a wide range of gas
contents at present (Figure 4.2). Observed gas contents in Point of Ayr are, however, some of the
highest logged during this exercise for their recorded depths, of between 8 to 12 m3/tonne.

GIIP calculation for the Point of Ayr area was undertaken in a similar manner to that described in
Section 1 of this report. However, due to the small number of available boreholes, we have used
a grid based method only to estimate GIIP. We have also subdivided our estimates between the
onshore PEDL 107 and offshore block 110/19. As the coal measures are not proven on blocks
110/18 or 110/23, we have also subdivided our estimates for these blocks, and have associated a
risk factor to our final estimates, based on the possibility that the coal measures are not
developed to the extent that we have modelled.

65

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Competent Person’s Report: Island Gas Ltd

Figure 5.2: Gas content with depth, Point of Ayr, with low, mid and high estimates using the Langmuir equation.

The onshore PEDL 107 has, for the most part, strata older than the Westphalian A and B coal
measures outcropping at surface. Where the coal measures are present, they are either too
shallow (<200’), for instance in the area drilled by the Talacre bore holes, or they have been
extensively mined. As a result, little remaining CBM potential is present within the licence.
However, we understand that the Bychton Two Yard and the Warras coals are not mined, and we
have included these areas, where below 200’, within our low and mid case estimates. Our high
case estimate for PEDL 107 also makes an estimate of the thickness of unnamed and un-mined
coals within the mined areas. Exploitation of coals in these areas for CBM will, however, be
technically challenging.

The immediate offshore to PEDL 107 (Block 110/19) was subject to an active exploration
campaign by the NCB in the mid 1980’s, which is fully reported (NCB 1986). This campaign
resulted in the drilling of several offshore boreholes and the acquisition of 2D seismic data to map
structure. These were combined to create a depth structure map for the Durbog Seam – a coal
seam towards the base of the mined and logged stratigraphy in the area (Figure 5.3). We have
cross-checked this map against the primary data made available to us by IGL, and believe it is a
fair representation of the offshore structure in the area. We have therefore adopted this as a
datum structure map, from which we have estimated the depths of the logged named coals above
and below the Durbog seam. We have also used these dips to extrapolate all logged named coal
seam grids away from control to the block or drilling boundaries, as discussed for our low and mid
cases in Section 1. Our low and mid cases are also bound to the east by a major fault identified
on seismic, and associated with a significant eastwards throw. However, we have included the
whole area of the block in our high case estimate, plus an estimate of additional, unlogged, coals
in the area, of approximately 30%.

66

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Competent Person’s Report: Island Gas Ltd

310,000 315,000

DURBOG SEAM DEPTH


110/19
GRID (M) OVER OFFSHORE
BLOCK 110/19

Onshore License

Offshore License

600
60
0
 Boreholes

00
650

10
0
95

600
0,000 390,00

0
90

550
500
60
0

45
Hoyle Bank
Bank

0
850
800
POA
POA 0/S
0/S No 22
0 750
55 POA 0/S
0/S No
No 4

400
700

POA
POA 0/S
0/S No
No 6

650
0
45

350
POA 0/S
0/S No
No 3
600

30
550

0
400
POA 0/S
0/S No
No 1
POA 0/S
POA 0/S No 55
500

450
0

250
50

400
PAUG-88
PAUG-88 66
400 PAUG-88
PAUG-88 7

350
Talacre-2
Talacre-2
TTalacre-1
alacre-1

5,000 385,00

Talacre-3
T alacre-3 300
300

 Talacre-6
T
Talacre-6
alacre-6
TTalacre-4
alacre-4
PEDL 107-1
250
250
0
30 Talacre-5
T alacre-5

PAUG-25
PAUG-25
0 500 1,000
metres

305,000 310,000 315,000

Figure 5.3: Top Durbog Seam Depth Map (mss), reconstructed from NCB mapping (NCB 1986).

It is probable that the coal measures extend under part or all of the other adjacent Blocks 110/18
(part) and 110/23 (part). Some maps are available in the public domain, as a result of oil and gas
exploration in the immediate offshore. Regional BGS structure maps for the Coal Measures and
Top Namurian Maps also extend over part of the licence. The limitations of these maps are
discussed further in Section 6 of this report. Furthermore, onshore borehole Rhuddlan-1 shows
the development of five coal seams within the Westphalian, all of which have thicknesses greater
than 60cm. However, the geological structure in these blocks is highly uncertain.

We have incorporated all this information to make an estimate of the possible extent, depth and
range of thicknesses of the Westphalian A and B on Blocks 110/18 (part) and 110/23 (part). Due
to the lack of data, we have not mapped each logged named coal across blocks 110/18 and
110/23. Instead, we have made estimates of net coal thickness, and the depth range on block for
an approximate datum within the Westphalian A and B, the Durbog seam, used to review depth
cut-off extents and gas content values based on the relationships shown in Figure 5.2. Our depth
estimates range from 400 to 500mss, and thus none of our estimates place the coals at depths in
excess of the cut-offs described in Section 1.

Our estimates of average thickness of net coal within the block were based on the Point of Ayr
and Rhuddlan-1 bore holes. It is clear from these data that the coal seams are likely to thin from
offshore to onshore, but there were no geological or geophysical data available to us at the time
of writing to determine how this occurs. To account for this, we have made differing estimates of
net coal thickness for the two blocks, thinning the coals on block 110/23 relative to 110/18. This is
a simplistic method, and we would recommend further data are acquired in the future to better
determine the structural geometry from onshore to offshore.

67

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Competent Person’s Report: Island Gas Ltd

For block 110/18, we have estimated a low case net coal thickness based on the average of all
coals >1m in thickness within the Point of Ayr boreholes and the Rhuddlan-1 borehole (15.68m).
Our mid case took the average thickness of all coals >60cm in thickness within the Point of Ayr
boreholes alone, (26.38m). Our high case averaged all logged coals plus our estimate of
unnamed coals (30%), again using the Point of Ayr boreholes alone (37.5m).

For Block 110/23 we have thinned the coals based on the proximity of the licence to the
Rhuddlan-1 borehole. For our low case we have used the net coal thickness >1m logged in the
Rhuddlan-1 borehole (7.6m), our mid case averages the thickness of logged coals >60cm in both
the Rhuddlan-1 borehole and the Point of Ayr boreholes (16.99m), and our high case adopts the
same high case as block 110/18.

These have been combined with the low, mid and high case depth, gas content and areal extent
controls, as described in Section 1, to make low, mid and high case estimates of GIIP.

The Westphalian coal measures have not been proved by mining or drilling within Blocks 110/18
or 110/23. There is therefore a risk that the coal measures are not developed. However, the
strata appear conformable away from borehole control, based on the limited data we have to
hand, and it is regionally unlikely that the coal measures will change facies northwards. We
therefore feel it is likely that Westphalian coals are developed within Blocks 110/18 and 110/23 as
we have modelled, and have assigned a chance of 80% to this outcome.

(all figures in Bcf) Gross Net Risk Operator


Area Low Mid High Low Mid High Factor
Point of Ayr Onshore (PEDL 107) 2 4 10 1 2 5 - Nexen
Point of Ayr Offshore (110/19 Part) 87 162 1141 43 81 571 - Nexen
(110/18 Part and 110/23 Part) 120 508 4340 60 254 2170 80% Nexen

Table 5.1: Estimates of GIIP, Point of Ayr (PEDL 107 and Exploration Licence 1481).

68

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Competent Person’s Report: Island Gas Ltd

6. PEDL 78-1: Greater Swallowcroft


PEDL 78-1 lies to the north west of the City of Birmingham, within the county of Staffordshire,
onshore UK, due south of PEDL 56 (Figures 2.1 and 6.1). The currently licensed area is centred
on the town of Loggerheads. As far as we can ascertain, no coal mining or coal exploration has
occurred within the licensed area, and no boreholes have proven Westphalian coal measures to
be developed on-block.

The licence PEDL 78 was originally assigned to a consortium comprising PermaGas Limited and
Altwood Petroleum Limited on 16th October 2000. Following several reassignments and part
relinquishment, title and 100% equity was obtained in PEDL 78-1 by IGL via execution of an
option of assignment by StrataGas plc, and was assigned to IGL on 11th February 2005. The
licences have undergone two extensions of the first term, which currently expires on 7th
September 2008, with the option of extension to a three-year second term. The remaining licence
commitment is for one drill or drop well. Operatorship and 80% of the equity in PEDL 78-1 were
assigned to Nexen on 9th December 2005. The current licensed area and the UK onshore grid
blocks that form PEDL 78-1 are summarised in Table 1.1 of this document.

Geologically, the area under licence is formed by strata of Carboniferous and Permo-Triassic
Age. Solid geological maps show the area to be generally dipping from south to north, with a
complex of north-south trending normal faults, commonly downthrowing to the east. The one
available borehole within PEDL 78-1, the Sidway Mill (Mahr) borehole, show that the upper part of
the Westphalian does not contain coal. This borehole reached total depth at the Rowhurst Rider
marine band, and proved no coal on block. It does, however, provide a useful data point for
demonstrating the depth to the top of any potential remaining coals. The nearest borehole with a
penetration of the lower logged sequence is within the adjacent PEDL40-1 – the Bitterns
borehole. Thus, there is no evidence for the presence of Westphalian coals within PEDL 78-1.

370,000
370,000 380,000
380,000
UK_
UK_P
UK_
PEDL 78-1 UK_LITTLE_PADDOCKS
UK_LITTLE_PADDOCKS
GREATER SWALLOWCROFT UK_HOBGOBL
UK_HOBGOBL
UK
U
UK
Borehole
Borehole
Borehole 

 
340,000
340,000
UK
U
UK
License Area
License Area


UK_SIDWAY_MILL
UK_SIDWAY_MILL
UK_SIDWAY_M ILL UK_HARLEY
UK_HARLE
UK_HARLE
U
U

U
U

A
A B
B

PEDL 78-1
PEDL 78-1
330,000
330,000
330,000  
330,000
330,000

0 1,250 2,500

metres
370,000
370,000 380,000
380,000

Figure 6.1: Location map: PEDL 78-1 (Greater Swallowcroft), including licence area and the Sidway Mill-1
borehole. The subdivision into Areas A and B is also illustrated.

69

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Competent Person’s Report: Island Gas Ltd

6.1. Database and GIIP Estimation

As discussed, no borehole data penetrating the coal measures were available to us within PEDL
78-1, and no other geological or geophysical information could be sourced to make an estimate of
the presence, thickness and depth of the Westphalian coal measures. As a result, we have
adopted the coal measures stratigraphy as logged on the adjacent PEDL 040-1 and PEDL 056-1.
It is clear from the Sidway Mill (Maer) borehole that the upper parts of the Westphalian are not
developed on PEDL 78-1. We have therefore limited our model to the lower coal sequence from
the Burnwood to the Bullhurst seams.

We have made estimates of the average depth for the preserved coal measures we expect in our
model within PEDL 78-1, based on the available geological maps, and also a simplified Top
Namurian and Top Coal Measures depth maps published by the BGS. We have found that the
latter two maps generally simplify geological structure, and do not necessarily tie local boreholes.
For instance, extrapolating below the Rowhurst Rider Marine Band in the Sidway Mill borehole,
using the full sequence from the Bitterns borehole, places the Top Namurian at approximately
1500mss to 1600mss, whereas estimates from the regional map lie closer to 1200mss. Despite
their limitation, the regional maps do show a general thinning of the coal measures sequence
from north to south across the block. We have incorporated this thinning into our estimates of
GIIP for PEDL 078-1.

Rather than extrapolate each coal logged in PEDL40-1 and PEDL56-1, we have instead made
estimates of average coal thickness within the lower coal sequence (Burnwood to the Bullhurst
seams), in a similar manner to our analysis of offshore blocks 110/18 (part) and 110/23 (part) in
the Point of Ayr area. We have based these on the average of these seams used in our estimates
for the Swallowcroft area, accounting for section thinning observed on the BGS regional maps.
We have taken a low case thickness equal to half that of the average of the logged named coals
from the Burnwood to the Bullhurst seams in PEDL40-1 and PEDL56-1, (11.58m), and a high
case thickness as the average of the logged named coals from the Burnwood to the Bullhurst
seams in PEDL40-1 and PEDL56-1 (23.15m), plus a further uplift of 30% - the estimate of
unnamed coals logged in the Swallowcroft area. For our mid case, we have taken the average of
the low and high cases, before uplift (17.36m).

To determine average gas content, and to review depth cut offs, we have made estimates of the
depth to the mid-point of the gross coal sequence for each of our net coal thickness estimates
discussed above. To determine the gross coal sequence thickness for each of these estimates,
we have used the thickness of the gross coal bearing sequence as observed in the Bitterns
borehole (Burnwood to the Bullhurst seams) of around 370m. Rounding to an appropriate level of
error, we estimate a thickness of the gross coal bearing sequence for each of our net coal
estimates as 200m, 300m and 400m for low, mid and high respectively.

Using the BGS map of top Namurian and isopaching up using our high case gross thickness, we
estimate an average shallowest mid-point depth of 800mss. Using the BGS top coal measures
map and isopaching down using our mid case gross thickness, we estimate an average mid-point
depth of around 950mss. Using the results of the Sidway Mill borehole and our low case gross
thickness, we estimate an average mid point depth of around 1250mss.

A major north-south trending fault system cuts PEDL 78-1 towards the east: the Adbaston-
Sidway-Madley Fault (e.g. IMC 2001). Evidence from the BGS solid geology maps suggests that
the throw across this fault is between 300-600m to the east, based on logged sections. Using an
average throw of 450m and an average ground elevation of 150m, our estimates of mid point
depth suggest that the coal measures may exceed the GIIP depth cut-offs in the hanging wall low
(east) of this fault system in our deepest mid point depth estimate.

We have combined our thickness and mid-point depth estimates to generate estimates of GIIP for
PEDL78-1, over the 100km2 area of the licence. To simulate differences in fault throw, we have

70

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Competent Person’s Report: Island Gas Ltd

subdivided the licence into two areas (A and B, Figure 6.1), and made different estimates of gas
content for each.

Our low case combines the lowest estimate of net coal, the greatest estimated mid-point depth,
and the low case langmuir gas contents. As we estimate a mid-point for our coal stratigraphy
greater than 5,000’ below ground level to the east of the fault system in this case, Area B is
excluded from our calculations.

The mid case combines the mid estimate of net coal, the mid depth, and the mid case langmuir
gas contents. In this case, Area B is above the depth cut-off, and is included in our calculations.

The estimate for the high case combines the high estimate of net coal, plus an uplift of 30%
based on the unnamed logged coals in the Swallowcroft area, the shallowest depth, and the high
case langmuir gas contents. Again, Area B is above the depth cut-off, and is included in our
calculations.

The Westphalian coal measures have not been proved by mining or drilling within PEDL78-1.
Furthermore, the Sidway Mill (Maer) borehole demonstrates that coals are not developed within
at least some of the Westphalian that is coal bearing within PEDL 40-1 and PEDL 56-1. This
borehole data, coupled with structural cross sections generated by Nexen as part of their
research into the area, suggest that there is a significant risk that Westphalian coals are not
developed within PEDL 78-1 as we have modelled, and have assigned a chance of 50% to this
outcome.

Our final GIIP estimates (Gross and net IGL) are tabulated below.

(all figures in Bcf) Gross Net Risk Operator


Area Low Mid High Low Mid High Factor
PEDL 78-1 309 874 1794 62 175 359 50% Nexen

Table 6.1: Estimates of GIIP, PEDL 78-1 (Greater Swallowcroft).

71

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Competent Person’s Report: Island Gas Ltd

7. PEDL 115-1: Greater Swallowcroft


PEDL 115-1 lies to the north west of the City of Birmingham, within the county of Staffordshire,
onshore UK (Figure 2.1). Coal exploration has occurred to the east of the licence area, and the
Westphalian coals are proven in these boreholes. As far as we can ascertain, no coal mining
activity has occurred within the licence area.

The licence PEDL 115 was originally assigned to StrataGas plc on 11th March 2002. Following
part relinquishment, title and 100% equity was obtained in PEDL 115-1 by IGL via execution of an
option of assignment by StrataGas plc, and was assigned to IGL on 11th February 2005.
Operatorship and 80% of the equity in PEDL 115-1 were assigned to Nexen on 9th December
2005. The remaining licence commitment is for one drill or drop well, and the initial term of the
licence expires on 31st January 2008. Nexen and IGL are currently seeking an extension to this
date. The current licensed area and the UK onshore grid blocks that form PEDL 115-1 are
summarised in Table 1.1 of this document.

Geologically, the area under licence is formed by strata of Carboniferous and Permo-Triassic
Age. Solid geological maps show the area to be generally dipping from south to north, with a
complex of north-south trending normal faults, downthrowing to the west. Available borehole data
are concentrated to the east of the licence..
,
 YARNFIELD
YARNFIELD111
YARNFIELD
PEDL 115-1
Borehole
Borehole

License
License Area
License Area
Borehole
Borehole w
w ith
ith data
ith data
0
PEDL
PEDL 115-1
115-1
 ENSON
ENSON
ENSON
 NORTHSTAFFORD
 NORTH
NORTH
NORTH ENSON
STAFFORD
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 ALLOTMENT
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B
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 HOPTON
HOPTON POOL
POOL
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POOL
 TRENT
TRENTLANE
TRENT LANE
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 EVODECOMMON
EVODE
EVODE COMMON ROAD
COMMON ROAD STAFFORD
ROAD STAFFORD
STAFFORD
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COMMON ROAD STAFFORD  FIDDLERS
FIDDLERS
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 PARKHOUSE
PARK
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 BEACON
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BEACONFARM STAFFORD
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STAFFORD

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STAFFORD  HANYARDS
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 BRICKLAW
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 BRANCOTEGORSE
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BOREHOLE
 DEVILS
DEVILSDUMBLE
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 WWDUMBLE
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ARREN
ARREN
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ARREN
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 COPPICE
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COPPICE HILL  DICK
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 ASHFLATS
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COPPICE HILL DICKSLEES
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 QUARRY
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 CHERRY
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metres  BANK
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Figure 7.1: Location map: PEDL 115-1 (Greater Swallowcroft), including licence area and the subdivision into
Areas A and B is also illustrated. Logged boreholes (i.e. boreholes with data available to us) are also highlighted.

7.1. Database and GIIP Estimation

A number of NCB/CA coal exploration boreholes were available to us, located in the eastern part
of the licence, to the east of the Hopton fault (Figure 7.1). In all, we have located and logged six
of these boreholes, recording coal thickness and depth where available for all named coal seams
between the Bottom Robins and the Deep seams. We have also inspected the oil and gas
exploratory borehole Well Yarnfield-1, to cross check our estimates of depth and thickness for the

72

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Competent Person’s Report: Island Gas Ltd

Westphalian coal measures to the west of the licence. The logged named coals for the area are
tabulated in Appendix 1. Little datum information could be obtained for the boreholes within the
area, and we have had to estimate these using the available Ordanance Survey topographic
maps for the licence where they were not recorded in the borehole data.

Plotting borehole gas measurements against depth (corrected for lost gas from Creedy 1992)
provides a gas content/depth relationship from which to calculate average gas content, and also
the uncertainty range in these estimates (Figure 7.2). Average gas contents were found to be in
the region of 2 to 7 m3/tonne – the lowest in all the areas we have examined. The coals in 115-1
are described as being of lower rank than those in other licences, which may explain the low gas
content. This also suggests that coal rank is likely decrease from PEDL 40-1 and 56-1
(Swallowcroft) south and eastwards towards PEDL 115-1. We have attempted to simulate this in
our estimates of gas content for the licence (Area B), and would recommend further study of the
variation in rank and hence gas content for other licences in the Greater Swallowcroft area.

At the time of writing, No seismic data were available to us over the block, and we have not
determined geological structure.

Figure 7.2: Gas content with depth, PEDL115-1 area A, with low, mid and high estimates using the Langmuir
equation.

Due to the limited availability of borehole data in the licence, we have subdivided our estimates
into two areas, separated by the Hopton Fault (Figure 7.1). To the east (Area A), GIIP calculation
for was undertaken in the manner described in Section 1 of this report, both on a layer average
and a grid basis to cross-check the mid case estimate. We chose as an input area the currently
licensed acreage to the east of the fault, (58.6km2), assuming coals are present across the entire
area.

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Competent Person’s Report: Island Gas Ltd

There are no borehole data available to us west of the Hopton fault in PEDL 115-1. We have
therefore adopted a similar methodology to that used for PEDL 78-1, and the offshore blocks
110/18 (part) and 110/23 (part) in the Point of Ayr area. We have made estimates of the average
depth for the preserved coal measures we expect in our model within Area B, based on the
available geological maps. As with PEDL 78-1, is possible that the coal measures sequence thins
from north to south across Area B, and our range of estimates of net coal thickness reflect this.

Rather than extrapolate each coal logged in Area A, we have instead made estimates of average
coal thickness (Bottom Robins to the Deep seams). We have taken a low case thickness equal to
the thickness of all logged coals greater than or equal to 1m within the Ashflats-1 borehole, which
lies to the west of the Hopton fault, but to the south of the licence (7m). Our mid case estimate
was taken as the average thickness of all seams greater than 0.6 m as logged in all the available
boreholes (17.5m) and a high case the sum of the thickest log coal section, irrespective of seam
thickness, as logged in the Devils Dumble borehole (29m).

To determine average gas content, and to review depth cut offs, we have made estimates of the
depth to the mid-point of the gross coal sequence for each of our net coal thickness estimates
discussed above, including a correction for the throw of the Hopton Fault, which on average is
around 400m to the west. Our final low, mid and high depth estimates for the mid-point of the coal
sequence in Area B in mss are 1000, 1150 and 1300. Average surface elevation, estimated from
the Ordanance Survey topographic maps, is around 100m. On average, area B lies above the
depth cut-offs described in section 1 of this report in all our estimates.

Coal rank is uncertain to the west of PEDL 115-1. To account for the impact of this on gas
content estimates, we have averaged our low, mid and high estimates of langmuir temperature
and pressure constants derived for PEDL 115-1 and PEDL 40-1 and 56-1 to provide hybrid
functions for estimate of gas content within Area B. From these, and the average depths above,
we estimate low, mid and high gas contents 5, 7.5 and 10 m3/tonne respectively.

We have combined our thickness, mid-point depth and gas content estimates to generate
estimates of GIIP for PEDL115-1 Area B, which has an area of 141.4 km2. Our low case
combines the lowest estimate of net coal, the greatest estimated mid-point depth, and the low
case langmuir gas content from our hybrid functions. The mid case combines the mid estimate of
net coal, the mid depth, and the mid case langmuir gas content from our hybrid functions, and the
estimate for the high case combines the high estimate of net coal, the shallowest depth, and the
high case langmuir gas content from our hybrid functions.

The Westphalian coal measures have not been proved by mining or drilling within Area B of
PEDL115-1 within any of the data available to us. As discussed in Section 6 of this report, there is
also significant uncertainty as to the presence, depth and thickness of the Westphalian coals to
the north and west of the licence. Furthermore, there is uncertainty in the rank and therefore gas
content in this area, and there is a chance that this will fall outside the range of gas contents used
in our estimates. As a result, we see significant risk to the model we have used for the
Westphalian coals within PEDL 115-1 area B, and have assigned a chance of 50% to this
outcome, in a similar manner to PEDL 78-1.

Our final GIIP estimates (Gross and net IGL) are tabulated below.

(all figures in Bcf) Gross Net Risk Operator


Area Low Mid High Low Mid High Factor
PEDL 115-1 B (west) 226 832 1,923 45 166 385 50% Nexen
PEDL 115-1 A (east) 106 138 361 21 28 72 - Nexen

Table 7.1: Estimates of GIIP, PEDL 115-1 areas A and B (Greater Swallowcroft).

74

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Competent Person’s Report: Island Gas Ltd

References
Baker S.G. (1988). Long Hole In-Seam De-Gassification: A Solution to Methane Drainage
Enhancement at Silverdale Colliery? NCB Internal Report.

British Coal, (1987), European Communities Commission, "Investigation of Firedamp and Its
Emission in Coal Seams", Final Report on ECSC Research

Creedy, D.P. (1992). Printout from the British Coal Seam Gas Content Database. NCB Internal
Document.

Freudenberg U (1996) Main factors controlling coalbed methane distribution in the Ruhr District,
Germany Geol. Soc. Special Pub. No 109, pp67-88.

Harpalani, S., and R. A. Schraufnagel (1990a) Shrinkage of coal matrix with release of gas and
its impact on permeability of coal Fuel, Vol 69, no. 5, pp. 551-556.

Harpalani, S., and R. A. Schraufnagel (1 990b) Influence of matrix shrinkage & compressibility on
gas production from coalbed methane reservoirs Proceedings, SPE Chapter 10 408 Annual
Technology Conference and Exhibition, New Orleans, La., S vol., pp. 171 -179, SPE # 20729.
IMC (2001) UK PEDL78 Reconnaissance Study Into CBM Potential

Kim, A.G. (1977) Estimating methane content of bituminous coalbeds from Adsorption Data.
Report of Investigations; Bureau of Mines.

NCB (1986). Interim Geological Report on the 1985 Offshore Exploration Programme, Point of
Ayr Colliery. NCB Internal Report.

Scott, A.R, Zhou, N, Levine, J.R. (1995). A Modified Approach to Estimating Coal and Coal Gas
Resources: Example from the Sand Wash Basin, Colorado. AAPG Bulletin 79, p1337-1348

75

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Competent Person’s Report: Island Gas Ltd

Appendix 1: Coals Logged for GIIP calculation

PEDL 40-1/56-1 (SWALLOWCROFT)

10 Foot Coal Bed


5 Foot Coal Bed
Banbury Coal
Bassey Coal Bed
Bellringer Coal Bed
Bellringer Topleaf Coal Bed
Black Bass Coal Bed
Blackband Coal Bed
Blackmine Coal
Bowling Alley Coal
Brickiln Coal Bed
Bullhurst Coal
Burnwood Coal Bed
Cannel Coal Bed
Chalkey Coal Bed
Cockshead Coal
Flatts Coal
Great Row Coal Bed
Hams Coal Bed
Hard Mine Coal
Holly Lane Coal
Hoo Cannel Coal Bed
Moss Cannel Coal
Moss Coal Bed
Peacock Coal Bed
Ragman and Rough 7ft Coal
Red Mine Coal
Red Shag Coal Bed
Rowhurst Bottomleaf Coal
Rowhurst Rider Coal
Spencroft Coal Bed
Spencroft Coal Lower Bed
Stafford Coal Bed
Winghay Coal Bed
Winpenny Coal
Yard Coal Bed

76

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Competent Person’s Report: Island Gas Ltd

PEDL 92-1 (DRAX)

Beeston
Beeston Rider
Blocking
Dull Seam
Dunsil
Fenton + Parkgate
Flockton Thick
Flockton Thin
High Hazel
Haigh Moor
Houghton Thin
Kents Thick
Meltonfield
Middleton Eleven Yards
Newhill
Sharlston
Sharlston Yard
Stanley Main
Swallow Wood
Swinton Pottery
Thorncliffe + Wheatley Lime
Warren House + Barnsley
Wheatworth
Winter

Point of Ayr

Bychton Two Yard


Drowsell
Durbog
Five Yard
Hard Fivequarters
Lower Stinking
Powell
Smiths
Soft Fivequarters
Stone
Three Yard
Threequarters
Two Yard
Upper Stinking
Warras

77

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Competent Person’s Report: Island Gas Ltd

PEDL 145 (FOUROAKS)

Crombouke Coal
Higher Florida Coal Bed
London Delph Coal
Lower Florida Coal Bed
Peacock Coal Bed
Rushy Park Coal
Trencherbone Coal
Wigan 2 Feet Coal
Wigan 4 Feet Coal
Wigan 5 Feet Coal
St Helens Yard Coal
Ince Six Feet Coal
Sir John Coal
Plodder Coal
Haigh Yard Coal
Pigeon House

PEDL 115-1

Bass
Benches
Bottom Robbins
Brooch
Deep
Eight Feet
Lower Heathen
Lower Stinking
New Mine
Park
Shallow
Upper Heathen
Upper Stinking
Wyrley Yard
Yard

78

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Competent Person’s Report: Island Gas Ltd

Nomenclature

“bbl” means barrel – 42 US gallons


“Bcf” means thousands of millions of standard cubic feet
“Btu” means British thermal unit
“°C” means degrees Celsius
“CGR” means condensate gas ratio
“CA” means Coal Authority of Great Britain
“Eg” means gas expansion factor
“°F” means degrees Fahrenheit
“FDP” means field development plan
“ft” means feet
“FTHP” means flowing tubing head pressure
“FVF” means formation volume factor
“GIIP” means gas initially in place
“GDT” means gas down to
“GEF” means gas expansion factor
“GOC” means gas oil contact
“GRV” means gross rock volume
“GWC” means gas water contact
“Kair” means air permeability
“kh” means permeability thickness
“km” means kilometres
“LNG” means liquefied natural gas
“LPG” means liquefied petroleum gas
“M” “MM” means thousands and millions respectively
“md" or “mD” means millidarcy
“MBAL” means material balance computer programme
“MDT” means modular dynamic tester
“m/s” means metres per second
"mss" means metres subsea
“N/G” means net to gross ratio
“NCB” means National Coal Board of Great Britain
“Np” means cumulative oil production
“OWC” means oil water contact
“PEDL” means petroleum exploration and development licence
“Por” or “Phi” means porosity
“Proved” means Proved, as defined in Appendix 1
“Probable” means Probable, as defined in Appendix 1
“Possible” means Possible, as defined in Appendix 1
"P" means Proved
"P+P" means Proved + Probable
"P+P+P" means Proved + Probable +Possible
“P100” means 100 per cent probability
“P99” means 99 per cent probability

79

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Competent Person’s Report: Island Gas Ltd

"P90" means Proved


"P50" means Proved + Probable
"P10" means Proved + Probable +Possible
“P1” means one per cent probability
“P0” means zero per cent probability
“P/Z” means pressure divided by gas deviation factor (material balance)
“rcf” means cubic feet at reservoir conditions
“Rt” means true resistivity
“scf” means standard cubic feet measured at 14.7 pounds per square inch
and 60 degrees Fahrenheit
“Sg” means gas saturation
“So” means oil saturation
“Stb” means 42 US gallons measured at 14.7 pounds per square inch and 60
degrees Fahrenheit
“STOIIP” means stock tank oil initially in place
“TVDSS” means true vertical depth sub-sea
“twt” means two way time
“WF” means water-flood
“WGR” means water gas ratio
“WOR” means water oil ratio
“WUT” means water up to

80

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PART IV

FINANCIAL INFORMATION ON IGL

81
PART IV (a) ACCOUNTANTS’ REPORT ON ISLAND GAS LIMITED

Our Reference:
The Directors Mazars LLP
KP Renewables Plc 13 Sheldon Square
Aldermary House London
10-15 Queen Street W2 6PS
London EC4N 1TX
The Directors
Libertas Capital Corporate Finance Limited
16 Berkeley Street
London W1J 8DZ

27 November 2007

Dear Sirs

We report on the ¢nancial information (‘the Financial Information’) set out below on Island Gas Limited
(‘IGL’), which has been prepared for inclusion in the AIM admission document (‘the Document’) dated
27 November 2007 of KP Renewables Plc (‘the Company’) on the basis of the principal accounting policies
set out in Note 1 to the Financial Information. This report is required by Schedule Two of the AIM Rules
and is given for the purpose of complying with that schedule and for no other purpose.

Responsibilities
The Directors of the Company are responsible for preparing the Financial Information on the basis set out
below and in accordance with applicable International Financial Reporting Standards.

It is our responsibility to form an opinion as to whether the Financial Information gives a true and fair view,
for the purposes of the Document, and to report our opinion to you.

Basis of opinion
We conducted our work in accordance with Standards for Investment Reporting issued by the Auditing
Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the
amounts and disclosures in the Financial Information. It also included an assessment of signi¢cant estimates
and judgements made by those responsible for the preparation of the Financial Information underlying the
¢nancial statements and whether the accounting policies are appropriate to the entity’s circumstances,
consistently applied and adequately disclosed.

We planned and performed our work so as to obtain all the information and explanations which we
considered necessary in order to provide us with su⁄cient evidence to give reasonable assurance that the
Financial Information is free from material misstatement whether caused by fraud or other irregularity or
error.

Opinion
In our opinion the Financial Information gives, for the purposes of the Document dated 27 November 2007,
a true and fair view of the state of a¡airs of IGL as at the dates stated and of its pro¢ts and cash £ows for the
periods then ended in accordance with the basis of preparation set out below and in accordance with
applicable International Financial Reporting Standards and has been prepared in a form that is consistent
with the accounting policies adopted by the Company.

Declaration
For the purposes of paragraph (a) of Schedule Two of the AIM Rules, we are responsible for this report as
part of the Document and declare that we have taken all reasonable care to ensure that the information
contained in this report is, to the best of our knowledge, in accordance with the facts and contains no

82
omission likely to a¡ect its import. This declaration is included in the Document in compliance with Schedule
Two of the AIM Rules.

Yours faithfully

Mazars LLP
Chartered Accountants

83
INCOME STATEMENTS
The Income Statements of IGL for the 14 month period ended 31 December 2004 and for each of the two
years ended 31 December 2006 are set out below:
2004 2005 2006
Notes »’000 »’000 »’000
Revenue 1(e), 2 69 2 596
Cost of sales 4 (44) (259) (480)
Gross pro¢t/(loss) 25 (257) 116
Administrative expenses (22) (48) (50)
Exceptional gain on sale of intangible exploration
and evaluation assets 8 ç 380 ç
Operating pro¢t 3 3 75 66
Finance income 6 1 3 16
Pro¢t on ordinary activities before tax 4 78 82
Taxation 7 ç (29) (17)
Retained pro¢t for the period 4 49 65

84
BALANCE SHEETS
The Balance Sheets of IGL at 31 December 2004, 2005 and 2006 are set out below:
2004 2005 2006
Notes »’000 »’000 »’000
Non-current Assets
Intangible exploration and evaluation assets 8 ç ç 14
Current Assets
Trade and other receivables 9 8 195 33
Cash and cash equivalents 17 100 697 227
108 892 260
Current Liabilities
Trade and other payables 10 (15) (721) (50)
Current taxation liabilities ç (29) (17)
(15) (750) (67)
Net Current Assets 93 142 193
Non-Current Liabilities
Deferred tax liabilities 11 ç ç ç
Net Assets 93 142 207

Total Assets 108 892 274


Capital and Reserves (including non-equity
interests)
Called up share capital:
Ordinary Shares 13 1 1 1
Preference Shares 13 44 44 44
Share premium account 13 44 44 44
Pro¢t and loss account 14 4 53 118
Shareholders’ Funds 15 93 142 207

85
CASH FLOW STATEMENT
The Cash Flow Statements of IGL for the 14 month period ended 31 December 2004 and for each of the two
years ended 31 December 2006 are set out below:
2004 2005 2006
Notes »’000 »’000 »’000
Reconciliation of operating pro¢t to net cash £ow
from operating activities
Operating pro¢t 3 75 66
Exceptional gain on sale of intangible exploration
and evaluation assets 8 ç (380) ç
(Increase)/decrease in trade and other receivables (8) (187) 162
Increase/(decrease) in trade and other payables 15 706 (671)
Net cash in£ow/(out£ow) from operating activities 10 214 (443)
Interest received 16 1 3 16
Taxation paid ç ç (29)
Expenditure on exploration and evaluation assets 16 ç (151) (14)
Proceeds from disposal of Intangible exploration
and evaluation assets 8 ç 531 ç
Cash in£ow/(out£ow) before ¢nancing 11 597 (470)
Financing 89 ç ç
Increase/(decrease) in cash in the period 100 597 (470)

Reconciliation of net cash £ow to movements in net


funds
Increase/(decrease) in cash in the period 17 100 597 (470)
Net funds beginning of period 17 ç 100 697
Net funds at 31 December 17 100 697 227

86
NOTES TO THE FINANCIAL INFORMATION

1. ACCOUNTING POLICIES
a. Basis of Preparation of Financial Information
The ¢nancial information has been prepared under the historical cost convention in accordance with
International Financial Reporting Standards and International Accounting Standards, adopted for use by
the European Union (‘‘IFRS’’), and on the going concern basis.
The Company ¢nancial statements are presented in Sterling and all values are rounded to the nearest
thousand except when otherwise indicated.

b. Joint Ventures
Licence interests are all held jointly with others under arrangements whereby unincorporated and jointly
controlled Joint Ventures are used to explore, evaluate and ultimately develop and produce its gas interests.
Accordingly, IGL accounts for its share of assets, liabilities income and expenditure of Joint Ventures in
which IGL holds an interest, classi¢ed in the appropriate Balance Sheet and Income Statement headings,
except where its share of such amounts remain the responsibility of another party in accordance with the
terms of the carried interests as described at 1(f) below.

c. Signi¢cant Accounting Judgements and Estimates


Critical judgements in applying IGL’ accounting policies
IGL invests in the exploration, evaluation, development and production of gas from the UK. The assessment
of the production rates to be derived from such expenditure is a matter of judgement, as is the forecasting of
the future economic bene¢t that may be derived from such production. Finally, the period of time over which
the economic bene¢t associated with the expenditure will arise is also a matter of judgement. These
judgements a¡ect the carrying value of non current assets and impairment computations related to such
assets.

Estimates and assumptions


The key assumptions concerning the future and other key sources of estimation uncertainty at the balance
sheet date, that have a signi¢cant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next ¢nancial year are discussed below:

Current Taxes
IGL is subject to the provisions of income taxes. Signi¢cant judgment is required in determining
provision for income taxes. There are many transactions and calculations for which the ultimate tax
determination is, in the ordinary course of business, uncertain. IGL recognizes liabilities for taxation
issues which are open at the year end on the basis of whether it is more likely than not that a liability
will ultimately crystallise. Where the ¢nal tax outcome of such matters is di¡erent from the amounts
that were initially recorded, such di¡erences will impact the income tax and deferred tax provisions in
the period in which such determination is made. None of IGL’ tax computations have yet been
formally signed o¡ by the revenue authorities.

d. Exceptional Items
Exceptional items are those not considered to be part of the normal operation of the business. Such items are
identi¢ed as exceptional and a full explanation is given in the notes to the ¢nancial statements.

e. Revenue
Revenue comprises the invoiced value of goods and services supplied by IGL, net of value added tax and
trade discounts. Revenue is recognised in the case of gas sales when goods are delivered and title has passed
and in the case of services rendered only once a legally binding contract is in place when amounts billed for
services to be delivered over a period of time are accounted for evenly over that time period.

f. Non-Current Assets (Intangible exploration and evaluation assets and property, plant and equipment)
Intangible exploration and evaluation assets
IGL accounts for exploration and evaluation costs in compliance with the requirements of IFRS 6
‘Exploration for and Evaluation of Mineral Resources’ as follows:

87
. Exploration and evaluation assets are carried at cost less any impairment and are not depreciated or
amortised.
. Expenditures recognised as exploration and evaluation assets comprise those related to acquisition of
rights to explore; topographical, geological, geochemical and geophysical studies; exploratory drilling
(including coring and sampling); activities in relation to evaluating the technical feasibility and
commercial viability of extracting gas (including appraisal drilling and production tests); any land
rights acquired for the sole purpose of a¡ecting these activities.
. Expenditures not recognised as exploration and evaluation assets include those related to development
and production costs and any costs incurred prior to obtaining the legal rights to explore an area; which
latter costs are expensed immediately to the Income Statement.
. Tangible assets acquired for use in exploration and evaluation activities are classi¢ed as property, plant
and equipment, interests in oil and gas properties. However, to the extent that such tangible assets are
consumed in developing an intangible exploration and evaluation asset, the amount re£ecting that
consumption is recorded as part of exploration and evaluation asset costs.
. Expenditures recognised as exploration and evaluation assets are initially accumulated and capitalised
by reference to appropriate geographic areas, which may not be larger than a business segment,
currently the entirety of IGL’s UK gas business.
. Expenditures recognised as exploration and evaluation assets are transferred to property plant and
equipment, interests in oil and gas properties when technical feasibility and commercial viability of
extracting gas is demonstrable. Exploration and evaluation assets are assessed for impairment (on the
basis described below), and any impairment loss recognised, before reclassi¢cation.
. Expenditures recognised as exploration and evaluation assets are tested for impairment (on the basis
described below) whenever facts and circumstances suggest that they may be impaired, which includes
when a licence is approaching the end of its term and is not expected to be renewed; there are no
substantive plans for continued exploration or evaluation of an area; IGL decides to abandon an area;
whilst development is likely to proceed in an area there are indications that the exploration and
evaluation asset costs are unlikely to be recovered in full either by development or through sale. In the
event of goodwill arising on an acquisition being allocated to exploration and evaluation assets
impairment is tested for at least annually.
. Net proceeds from any disposal of exploration and evaluation assets are initially credited against
previously capitalised costs, with any surplus proceeds being credited to the Income Statement.

Property, plant and equipment, interest in oil and gas properties


Property plant and equipment interests in oil and gas properties are those assets, which have been assessed
for economic recoverability and are accounted for as follows:
. Expenditure relating to evaluated properties is depleted on a unit-of-production basis, commencing at
the start of commercial production. The depletion charge is calculated according to the proportion that
production bears to the recoverable reserves for each property.
. IGL’s property plant and equipment, interests in oil and gas properties are assessed for indications of
impairment whenever events or changes in circumstances indicate that the carrying value of an asset
may not be recoverable, when impairment is computed on the basis as set out below. Any impairment
in value is charged to the Income Statement as additional depreciation.
. Net proceeds from any disposal of development/producing assets are compared to the previously
capitalised cost for the relevant asset or group of assets. A gain or loss on disposal of a development/
producing asset is recognised in the Income Statement to the extent that the net proceeds exceed or are
less than the appropriate portion of the net capitalised costs of the asset or group of assets.

Impairment
Impairment reviews, when required as described above, are carried out on the following basis:
. By comparing the sum of any amounts carried as exploration and evaluation assets and as property
plant and equipment, interests in oil and gas properties as compared to the recoverable amount.
. The recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. IGL
generally relies on fair value less cost to sell assessed either by reference to comparable market

88
transactions between a willing buyer and a willing seller or on the same basis as standardly used by
willing buyers and sellers.
. Where there has been a charge for impairment in an earlier period that charge will be reversed in a later
period where there has been a change in circumstances to the extent that the recoverable amount is
higher than the net book value at the time. In reversing impairment losses, the carrying amount of the
asset will be increased to the lower of its original carrying value or the carrying value that would have
been determined (net of depletion) had no impairment loss been recognised in prior periods.

Decommissioning
Where appropriate costs relating to decommissioning of gas assets are recognised when the related facilities
are installed; the amount recognised is discounted to its present value and is re£ected in IGL’s non-current
liabilities. A corresponding asset is included in IGL’s property plant and equipment, interest in oil and gas
properties. The asset is depleted in accordance with IGL’s policy on depletion.

Carried Interests
Where IGL has entered into carried interest agreements, no amounts are recorded in the accounts where
expenditure incurred under such agreements is not refundable. Where expenditure is refundable, out of what
would but for the carry agreements have been IGL’s share of production, IGL records amounts as non-
current assets, with a corresponding o¡set in current liabilities or non-current liabilities, as appropriate, but
only once it is apparent that it is more likely than not that future production will be adequate to result in a
refund under the terms of any carry agreement; when IGL records refunds to the extent expected to be
repayable.

Non oil and gas related property plant and equipment


Other property plant and equipment is stated at net book value, i.e. cost less depreciation. Depreciation is
provided at rates calculated to write o¡ the cost of ¢xed assets, less their estimated residual values, over their
estimated useful lives at the following rates, with any impairment being accounted for as additional
depreciation:
Computer equipment ç over three years on a straight line basis
Furniture and ¢xtures ç over ¢ve years on a straight line basis
Leasehold property improvements ç over the period of the lease
IGL takes directly to the Income Statement costs of minor other property plant and equipment.

g. Financial Instruments
Trade and Other Receivables
Trade receivables are recognised when invoiced and are carried at the original invoiced amount less any
allowances for doubtful debts. Other receivables are recognised and measured at nominal value.

Cash and cash equivalents


Cash and cash equivalents comprise cash on hand and cash held on current account or on short-term
deposits at variable interest rates with maturity periods of up to 3 months. Any interest earned is accrued
monthly and classi¢ed as interest income within ¢nance income.

Trade and other payables and current taxation liabilities


These liabilities are all non interest bearing and so are measured at cost

Operating leases
Rentals under operating leases are charged to the Income Statement in the year in which they become due.

h. Taxation
The tax expense represents the sum of current tax and deferred tax.
The current tax is based on taxable pro¢t for each period. Taxable pro¢t di¡ers from net pro¢t as reported in
the Income Statement because it excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. IGL’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the Balance Sheet date.

89
Deferred tax is recognised in respect of all temporary di¡erences that have originated but not reversed at the
balance sheet date. Temporary di¡erences arise from the inclusion of items of income and expenditure in
taxation computations in periods di¡erent from those in which they are included in the ¢nancial statements.
Deferred tax liabilities are not discounted. Deferred tax assets are recognised to the extent that it is regarded
as more likely than not that there will be suitable taxable pro¢ts from which the underlying temporary
di¡erences can be deducted.

i. Equity
Equity instruments issued by IGL are recorded at the proceeds received, net of direct issue costs, and
allocated between called up share capital and share premium accounts as appropriate.

2. REVENUE AND SEGMENT INFORMATION


All revenue which represented turnover arose within the United Kingdom and is attributable to activities in
the Coal Bed Methane (CBM) sector.

3. OPERATING PROFIT
2004 2005 2006
»’000 »’000 »’000
Operating pro¢t is stated after charging:
Auditors remuneration 9 9 16

4. EMPLOYEE INFORMATION
2004 2005 2006
»’000 »’000 »’000
Sta¡ costs comprised:
Wages and salaries ç 20 337
Pension contributions ç ç ç
ç 20 337
Capitalised ç ç (3)
ç 20 334

No. No. No.


The average number of employees in the period comprised:
Services 2 2 2
Administrative 1 1 1
3 3 3

5. DIRECTORS’ EMOLUMENTS
2004 2005 2006
»’000 »’000 »’000
Directors’ emoluments and bene¢ts comprised:
Directors’ emoluments ç 20 300
Pension contributions ç ç ç
ç 20 300

The highest paid director received emoluments and bene¢ts as


follows:
Emoluments ç 8 100
Pension contributions ç ç ç
ç 8 100

90
6. FINANCE INCOME
2004 2005 2006
»’000 »’000 »’000
Interest received comprised:
Bank interest 1 3 16

7. TAXATION
2004 2005 2006
»’000 »’000 »’000
UK corporation tax:
Current tax on income for the period ç 29 16
Adjustments in respect of prior periods ç ç 1
Total UK taxation ç 29 17
Deferred tax:
Current tax on income for the period ç ç ç
ç 29 17

Factors a¡ecting the tax charge


The tax assessed for each period does not re£ect a charge equivalent to the pro¢t on ordinary activities
multiplied by the standard rate of corporation tax in the United Kingdom of 19 per cent. (2004 and 2005:
19 per cent.), for small companies. The di¡erences are explained below:
2004 2005 2006
»’000 »’000 »’000
Pro¢t on ordinary activities before tax 4 78 82

Pro¢t on ordinary activities multiplied by the standard rate of


corporation tax in the UK for small companies (19%) 1 15 15
Tax e¡ect of expenses not allowable for tax purposes ç 4 1
Movement on un-provided deferred tax balance ç 10 ç
E¡ect of nil tax band (1) ç ç
Prior year adjustment ç ç 1
ç 29 17

91
8. INTANGIBLE EXPLORATION AND EVALUATION ASSETS
Cost »’000
At 12 November 2003 and 1 January 2005 ç
Additions 151
Disposal (151)
At 1 January 2006 ç
Additions 14
Disposal ç
At 31 December 2006 14
Amortisation
At 12 November 2003 and 1 January 2005 ç
Charge for the year, including impairment ç
Disposals ç
At 1 January 2006 ç
Charge for the year, including impairment ç
Disposals ç
At 31 December 2006 ç
Net book amount
At 31 December 2006 14

At 31 December 2005 ç

At 31 December 2004 ç

On 9 December 2005, IGL entered into arrangements with Nexen Exploration U.K. Limited (Nexen),
whereby Nexen acquired an 80 per cent. interest in each of IGL’s Petroleum Exploration and Development
Licences (the ‘‘Original PEDLs’’) in exchange for »1.25 million. After taking account of costs of »719,000
incurred wholly and exclusively to e¡ect the disposal, the net disposal proceeds amounted to »531,000; of
which »151,000 was credited to exploration and evaluation assets to eliminate the amount held on the
account, with the balance of »380,000 being the pro¢t on disposal. The tax e¡ect in relation to the disposal
was a charge of »61,000.
Nexen have also agreed, in certain circumstances, to carry IGL for its share of any expenditure incurred in
relation to IGL’s remaining 20 per cent. interest in the Original PEDLs, up to a total of »5 million. The
repayment to Nexen of any amounts carried under these arrangements is dependent, on a licence by licence
basis, on successful operations yielding su⁄cient production to support repayment in accordance with terms
of the carry.
At 31 December 2006 »1,267,000 had been carried (2005 ç »2,000), which has not been recorded as either
non-current assets or liabilities, since repayment is currently su⁄ciently uncertain.

9. TRADE AND OTHER RECEIVABLES


2004 2005 2006
»’000 »’000 »’000
VAT recoverable ç 181 5
Trade debtors 1 14 26
Prepayments 7 ç 2
Total due within one year 8 195 33

92
10. CURRENT LIABILITIES
2004 2005 2006
»’000 »’000 »’000
Trade and other payables
Trade creditors ç 677 3
Taxation and social security ç 8 12
VAT payable ç ç ç
Accruals and other creditors 14 36 35
Prepaid fees 1 ç ç
15 721 50

Corporation Tax ç 29 17

11. NON-CURRENT LIABILITIES


Deferred Taxation
IGL has at 31 December 2006 »65,000 (2005 ç »52,000 and 2004 ç »Nil) of potentially unutilised Minerals
Extraction Allowances, the availability of which, to o¡set future pro¢ts, is dependent on IGL commencing a
Petroliferous Trade (as such is de¢ned for tax purposes), which itself is dependent on the commencement of
CBM production.

12. COMMITMENTS
2004 2005 2006
»’000 »’000 »’000
Exploration and evaluation ç ç ç
Other 24 ç ç
24 ç ç

As at 31 December 2006 (2005 ç »Nil and 2004 ç »Nil), no amounts have been included for exploration
and appraisal as these are expected to be covered by the carry arrangements referred to in Note 8 above. As
at 31 December 2004, IGL had signed an option agreement on 25 March 2004 under which IGL had
outstanding obligations, relating to licence fees up to anniversary of signing totalling »24,000 (2006 ç »Nil
and 2005 ç Nil).

13. CALLED UP SHARE CAPITAL AND SHARE PREMIUM ACCOUNT


2004 2005 2006
Authorised Equity No. »’000 No. »’000 No. »’000
A Ordinary shares of
»1 each 1,250 1 1,250 1 1,250 1
B Ordinary shares of
»1 each 231 ç 231 ç 231 ç
C Ordinary shares of
»1 each 264 ç 264 ç 264 ç
D Ordinary shares of
»1 each 55 ç 55 ç 55 ç

1,800 1 1,800 1 1,800 1


Non-Equity
Redeemable
preference shares of
»1 each 2,000,000 2,000 2,000,000 2,000 2,000,000 2,000
Total 2,001,800 2,001 2,001,800 2,001 2,001,800 2,001

93
Issued 2004 2005 2006
Allotted and Called Up (No.) »’000 »’000 »’000
Equity
12 27 25 16 19 23
November January March November November December
Nominal value ç »1 each 2003 2004 2004 2004 2004 2004
A Ordinary ç Half rights 1 54 55 ç ç ç 1 1 1
Full rights ç ç ç 275 ç ç ç ç ç
B Ordinary ç 21 ç ç 105 ç ç ç ç
C Ordinary ç 24 ç ç 120 ç ç ç ç
D Ordinary ç ç ç ç ç 13 ç ç ç

1 99 55 275 225 13 1 1 1

Non-Equity
Redeemable preference
Shares of »1 each ç ç 44,000 ç ç ç 44 44 44

Total 45 45 45

2004 2005 2006


Share Premium Account »’000 »’000 »’000
Arising on Ordinary Shares 44 44 44

All of the Ordinary and Preference shares are fully paid up and were issued at par, except the 500 Ordinary
shares issued in November 2004, which were issued at »90 each, giving a premium of »89 per share or »44,000
in total.
The shareholders who subscribed for the shares issued in November 2004 also made irrevocable
undertakings (the Irrevocable Undertakings) to IGL to subscribe for redeemable preference shares giving
IGL access to a further up to »834,000, intended to ensure that IGL should have access to su⁄cient ¢nancial
capability to be able to take up PEDL 145, which it did on 19 November 2004. With the sale and carry
arrangements made with Nexen on 9 December 2005, IGL now has access to su⁄cient funds to meet, inter
alia, its obligations under PEDL 145. It had always been intended that the Irrevocable Undertakings would
be cancelled should IGL be able to arrange alternative ¢nancing. Accordingly, the Irrevocable Undertakings
were cancelled on 9 December 2005.
The D Ordinary Shares issued in December 2004 carry no votes and do not share in distributions until
distributions to the A shareholders, including distributions made to them in respect of all their other
shareholdings in IGL, exceed at least »5 million. Thereafter, distributions due to the A shareholders,
including distributions made to them in respect of all their other shareholdings in IGL, were it not for the
existence of the D Ordinary Shares, are to be allocated between the D Ordinary shares and the A
shareholders in the ratio 13 to 100 respectively.
The Preference shares are redeemable by IGL, with the consent of the Preference shareholders, at anytime,
and, except to the extent not permitted by the Companies Act 1985, must be redeemed by 11 March 2008, or
upon any earlier sale or listing of IGL. The preference shares shall be redeemed in cash at nominal value. The
Preference shareholders are not entitled to participation in the pro¢t of IGL or to vote at any General
Meeting of IGL. On liquidation of IGL, the Preference shareholders have priority in receiving the nominal
value of the shares from the surplus assets of IGL remaining after payment of its liabilities.

14. PROFIT AND LOSS ACCOUNT


»’000
At 13 November 2003 ç
Retained pro¢t for the period 4
At 31 December 2004 4
Retained pro¢t for the year 49
At 31 December 2005 53
Retained pro¢t for the year 65
At 31 December 2006 118

94
15. RECONCILIATION OF MOVEMENT IN SHAREHOLDERS’ FUNDS
»’000
At 12 November 2003 ç
Ordinary shares issued 45
Preference shares issued 44
Retained pro¢t for the period 4
At 31 December 2004 93
Retained pro¢t for the year 49
At 31 December 2005 142
Retained pro¢t for the year 65
At 31 December 2006 207

16. GROSS CASH FLOWS


2004 2005 2006
»’000 »’000 »’000
Returns on investments and servicing of ¢nance
Interest received 1 3 16

Capital expenditure
Expenditure on intangible exploration and evaluation assets ç (151) (14)
Property, plant and equipment ç ç ç
Sale of non-current assets ç 531 ç
ç (380) (14)

17. CHANGES IN NET FUNDS


»’000
At 12 November 2003 ç
Cash £ow 100
At 31 December 2004 100
Cash £ow 597
At 31 December 2005 697
Cash £ow (470)
At 31 December 2006 227

18. SUBSEQUENT EVENTS


On 23 January 2007, IGL and Nexen, as operator, acquired PEDL 107 and, separately, were awarded an
O¡shore Licence, SPPL1481, covering four blocks o¡shore from PEDL 107; all together referred to as Point
of Ayr or PofA. IGL holds a 50 per cent. interest in each of the PofA licences. The obligations in relation to
this acreage comprise a drill or drop obligation to drill an investigative well in PEDL 107 and a contingent
well obligation in SPPL 1481.

On 18 May 2007 IGL entered into a further carry agreement with Nexen whereby Nexen have also agreed, in
certain circumstances, to carry IGL for its share of any expenditure incurred in relation to IGL’s 50 per cent.
interest in the PofA licences; with the total amount incurred for IGL’s share of the PofA licences, together
with that incurred under the Original PEDLs, not to exceed »5.75 million. The repayment to Nexen of any
amounts carried under the PofA licences is dependent on successful operations yielding su⁄cient production
from PofA to support repayment in accordance with terms of the carry.

On 5 July 2007, obligations on IGL’s PEDLs 115 and 116, which had been three drill or drop wells on each
licence, were reduced to one drill or drop well on each licence.

On 6 September 2007 and 11 September 2007 IGL’s PEDL 78 and PEDL 92, respectively, were each
extended for a further year to 7 September 2008 to give su⁄cient time for completion of certain drilling
operations that will then result in the licences being extended for a minimum of a further 3 years followed by
another 20 or more years thereafter if IGL decides to pursue production from within the acreage.

95
19. RELATED PARTY DISCLOSURE
Transactions with related parties
Directors’ interests
The IGL directors are each directors of management consulting companies that provided services to the IGL
on an arms length basis during the year ended 31 December 2005 as follows:

2004 2005 2006


Director »’000 »’000 »’000
F Gugen ç 242 ç
A Austin ç 110 ç
B Cheshire ç 106 ç
All of the above services were fully paid for during the year ended 31 December 2005 leaving no amounts
outstanding at 31 December 2006 (2005 and 2004: »Nil).

20. NATURE OF FINANCIAL INFORMATION


The ¢nancial information on IGL presented above does not constitute statutory accounts as de¢ned by the
Companies Act 1985 (as amended). Statutory accounts for the 14 month period ended 31 December 2004
and for the two years ended 31 December 2005 and 2006 have been ¢led with the Registrar of Companies.

96
PART IV (b) INTERIM RESULTS OF IGL
The unaudited interim ¢nancial statements of IGL for the period ended 30 June 2007 are shown below:

CONDENSED PROFIT & LOSS ACCOUNTS


Unaudited Unaudited Audited
6 months to 6 months to Year ended
30 June 30 June 31 December
2007 2006 2006
»’000 »’000 »’000
Revenue 391 280 596
Cost of sales (307) (214) (480)
Gross pro¢t 84 66 116
Administrative expenses (19) (17) (50)
Operating pro¢t 65 49 66
Finance income 10 9 16
Pro¢t on ordinary activities before tax 75 58 82
Tax on pro¢t on ordinary activities (14) (11) (17)
Retained pro¢t for the period 61 47 65

97
CONDENSED BALANCE SHEETS
Unaudited Unaudited Audited
30 June 30 June 31 December
2007 2006 2006
»’000 »’000 »’000
Non-Current assets
Intangible exploration and evaluation assets 29 8 14
Current Assets
Trade and other receivables 235 10 33
Cash and cash equivalents 425 505 227
660 515 260
Total assets 689 523 274

Equity
Called up share capital ç Ordinary 1 1 1
ç Preference 44 44 44
Share premium account 44 44 44
Retained earnings 179 100 118
Total equity 268 189 207

Current liabilities
Trade and other payables 390 293 51
Taxation 31 41 16
421 334 67
Total Equity and Liabilities 689 523 274

98
CONDENSED CASH FLOW STATEMENTS
Unaudited Unaudited Audited
6 months to 6 months to Year ended
30 June 30 June 31 December
2007 2006 2006
»’000 »’000 »’000
Net cash £ow from operating activities
Operating pro¢t 65 49 66
65 49 66
Movement in working capital
(Increase)/decrease in trade and other receivables (202) 185 162
Increase/(decrease) in trade and other payables 340 (427) (670)
Net cash in£ow/(out£ow) from operating activities 203 (193) (442)
Investing activities
Interest received 10 9 16
Net cash from investing activities 10 9 16
Taxation paid ç ç (30)
Expenditure on exploration and evaluation assets (15) (8) (14)
Cash in£ow/(out£ow) in the period 198 (192) (470)
Net funds beginning of the period 227 697 697
Net funds end of the period 425 505 227

99
NOTES TO THE INTERIM FINANCIAL INFORMATION
1. The interim results are unaudited and do not comprise statutory accounts within the meaning of
Section 240 of the Companies Act 1985. The results for the year ended 31 December 2006 have been
extracted from the restated ¢nancial statements for that year. These restated ¢nancial statements,
prepared under IFRS, have been derived from IGL’s statutory ¢nancial statements prepared under UK
GAAP and ¢led with the Registrar of Companies. IGL’s statutory ¢nancial statements included an
unquali¢ed auditors’ report.
2. The interim results have been prepared in accordance with the accounting policies adopted in the
restated ¢nancial statements for the year ended 31 December 2006, which have been prepared under
IFRS.
3. As at 30 June 2007 the issued share capital comprised 668 ordinary shares of »1 and 44,000 redeemable
preference shares of »1.
Allotted and Called Up Issued

12 27 25 16 19 23 30 June
November January March November November December 2007
Equity 2003 2004 2004 2004 2004 2004 »’000
Nominal value ç »1 each
A Ordinary ç 50% rights 1 54 55 ç ç ç 1
ç 100% rights ç ç ç 275 ç ç ç
B Ordinary ç 21 ç ç 105 ç ç
C Ordinary ç 24 ç ç 120 ç ç
D Ordinary ç ç ç ç ç 13 ç
1 99 55 275 225 13 1

Non-Equity
Redeemable preference Shares of »1 each ç ç 44,000 ç ç ç 44

Total 45

Share Premium Account


Arising on Ordinary Shares 44

All of the Ordinary and Preference shares are fully paid up and were issued at par, except the
500 Ordinary shares issued in November 2004, which were issued at »90 each, giving a premium of »89
per share or »44,500 in total.
The shareholders who subscribed for the shares issued in November 2004 also made irrevocable
undertakings (the Irrevocable Undertakings) to IGL to subscribe for redeemable preference shares
giving IGL access to a further up to »834,000, intended to ensure that IGL should have access to
su⁄cient ¢nancial capability to be able to take up PEDL 145, which it did on 19 November 2004. With
the sale and carry arrangements made with Nexen on 9 December 2005, IGL now has access to
su⁄cient funds to meet, inter alia, its obligations under PEDL 145. It had always been intended that
the Irrevocable Undertakings would be cancelled should IGL be able to arrange alternative ¢nancing.
Accordingly, the Irrevocable Undertakings were cancelled on 9 December 2005.
The D Ordinary Shares issued in December 2004 carry no votes and do not share in distributions until
distributions to the A shareholders, including distributions made to them in respect of all their other
shareholdings in IGL, exceed at least »5 million. Thereafter, distributions due to the A shareholders,
including distributions made to them in respect of all their other shareholdings in IGL, were it not for
the existence of the D Ordinary Shares, are to be allocated between the D Ordinary shares and the A
shareholders in the ratio 13 to 100 respectively.
The Preference shares are redeemable by IGL, with the consent of the Preference shareholders, at
anytime, and, except to the extent not permitted by the Companies Act 1985, must be redeemed by
11 March 2008, or upon any earlier sale or listing of IGL. The preference shares shall be redeemed in
cash at nominal value. The Preference shareholders are not entitled to participation in the pro¢t of IGL
or to vote at any General Meeting of IGL. On liquidation of IGL, the Preference shareholders have
priority in receiving the nominal value of the shares from the surplus assets of IGL remaining after
payment of its liabilities.

100
PART V

FINANCIAL INFORMATION ON THE COMPANY

101
PART V (a) ACCOUNTANTS’ REPORT ON THE COMPANY

Our Reference:
The Directors Mazars LLP
KP Renewables Plc 13 Sheldon Square
Aldermary House London
10-15 Queen Street W2 6PS
London EC4N 1TX
The Directors
Libertas Capital Corporate Finance Limited
16 Berkeley Street
London W1J 8DZ

27 November 2007

Dear Sirs

We report on the ¢nancial information (‘the Financial Information’) set out below on the Company (the
‘Company’) and its subsidiaries (together, the ‘‘Group’’), which has been prepared for inclusion in the AIM
Admission Document (‘the Document’) dated 27 November 2007 of the Company on the basis of the
principal accounting policies set out in Note 1 to the Financial Information. This report is required by
Schedule Two of the AIM Rules and is given for the purpose of complying with that schedule and for no
other purpose.

Responsibilities
The Directors of the Company are responsible for preparing the Financial Information on the basis set out
below and in accordance with applicable International Financial Reporting Standards.

It is our responsibility to form an opinion as to whether the Financial Information gives a true and fair view,
for the purposes of the Document, and to report our opinion to you.

Basis of opinion
We conducted our work in accordance with Standards for Investment Reporting issued by the Auditing
Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the
amounts and disclosures in the Financial Information. It also included an assessment of signi¢cant estimates
and judgements made by those responsible for the preparation of the Financial Information underlying the
¢nancial statements and whether the accounting policies are appropriate to the entity’s circumstances,
consistently applied and adequately disclosed.

We planned and performed our work so as to obtain all the information and explanations which we
considered necessary in order to provide us with su⁄cient evidence to give reasonable assurance that the
Financial Information is free from material misstatement whether caused by fraud or other irregularity or
error.

Opinion
In our opinion the Financial Information gives, for the purposes of the Document dated 27 November 2007,
a true and fair view of the state of a¡airs of the Company as at the dates stated and of its losses and cash
£ows for the periods then ended in accordance with the basis of preparation set out below and in accordance
with applicable International Financial Reporting Standards and has been prepared in a form that is
consistent with the accounting policies adopted by the Company.

Declaration
For the purposes of paragraph (a) of Schedule Two of the AIM Rules we are responsible for this report as
part of the Document and declare that we have taken all reasonable care to ensure that the information

102
contained in this report is, to the best of our knowledge, in accordance with the facts and contains no
omission likely to a¡ect its import. This declaration is included in the Document in compliance with Schedule
Two of the AIM Rules.

Yours faithfully

Mazars LLP
Chartered Accountants

103
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
The consolidated pro¢t and loss accounts of the Company for the period ended 31 December 2004 and for
each of the two years 31 December 2006, are set out below:
13m to Year to Year to
31 December 31 December 31 December
2004 2005 2006
Notes »’000 »’000 »’000
Administrative expenses (221) (1,968) (2,876)
Operating loss on ordinary activities before interest 2 (221) (1,968) (2,876)
Interest receivable 4 ç 30 10
Interest payable and similar charges 4 ç (1) ç
Loss on ordinary activities before taxation (221) (1,939) (2,866)
Taxation 5 ç ç ç
Loss on ordinary activities after taxation and for
the period 11 (221) (1,939) (2,866)

Loss per share:


Basic and diluted (pence)
Before exceptional items 3 ç 4 6

The Group had no recognised gains or losses other than the losses for the periods. All activities relate to
continuing operations.

104
CONSOLIDATED BALANCE SHEETS
The consolidated balance sheets of the Company as at 31 December 2004, and 2005 and 2006 are set out
below:
31 December 31 December 31 December
2004 2005 2006
Notes »’000 »’000 »’000
Fixed assets
Goodwill 6 515 218 ç
Current assets
Project Development Costs ç ç 14
Debtors 8 88 1,024 38
Cash at bank and in hand 11 1,100 12
99 2,124 64
Creditors: amounts falling due within one year 9 (157) (58) (646)
Net current assets/(liabilities) (58) 2,066 (582)
Total net assets 457 2,284 (582)

Capital and reserves


Share capital 10 404 466 466
Share option reserve 10 ç 244 244
Share premium 11 274 3,734 3,734
Accumulated losses 11 (221) (2,160) (5,026)
Equity shareholders’ funds 457 2,284 (582)

105
CONSOLIDATED CASH FLOW STATEMENTS
The consolidated cash £ow statements of the Company for the period ended 31 December 2004 and for each
of the two years ended 31 December 2006, are set out below:
31 December 31 December 31 December
2004 2005 2006
Notes »’000 »’000 »’000
Net cash £ow from operating activities 14 (221) (1,362) (2,658)
Increase in project development costs ç ç (14)
Decrease in receivables (66) (316) 986
Increase in payables 137 (78) 588
Shares issued in lieu of payment 1 ç ç
Net cash used in operating activities (149) (1756) (1,098)
Returns on investment and servicing of ¢nance
Interest received ç 30 10
Interest paid ç (1) ç
Net cash £ow from returns on investment and
servicing of ¢nance ç 29 10
Capital expenditure
Net cash acquired with acquisition of subsidiary 14 ç ç
Net cash £ow from capital expenditure and
¢nancial investment 14 29 10
Net Cash £ow before ¢nancing (135) (1,727) (1,088)
Financing
Proceeds from issue of share capital 95 2,837 ç
Loan from parent 50 (20) ç
Net cash £ow from ¢nancing 145 2,817 ç
Increase/(decrease) in cash in the period 10 1,090 (1,088)

Reconciliation of net Cash Flow to Movement in Debt


(Decrease)/increase in cash in the year 10 1,090 (1,088)
Cash £ow from decrease in debt and lease ¢nancing ç ç ç
Change in net funds resulting from cash £ows 10 1,090 (1,088)
Net funds brought forward ç 10 1,100
Net funds carried forward 10 1,100 12

106
CONSOLIDATED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
Period to Year to Year to
31 December 31 December 31 December
2004 2005 2006
»’000 »’000 »’000
Loss for the ¢nancial period after taxation (221) (1,939) (2,866)
Increase in share capital ç 3,522 ç
Share option reserve ç 244 ç
Movement in shareholders’ funds (221) 1,827 (2,866)
Opening shareholders’ funds 678 457 2,284
Closing shareholders’ funds 457 2,284 (582)

107
1. ACCOUNTING POLICIES
The Company is registered in England and Wales and incorporated under the Companies Act 1985. The
Company is a holding company and the Group was established to provide renewable energy services.
This ¢nancial information is presented in pounds sterling because that is the currency in which the Group
operates.

Basis of Preparation
The ¢nancial information has have been prepared under the historical cost convention and to comply with
International Financial Reporting Standards.

Basis of Consolidation
The accompanying consolidated ¢nancial information includes the accounts of the Company and its
subsidiaries for the 13 month period to 31 December 2004, and for each of the two years ended 2006. Inter-
company balances and transactions have been eliminated.

Goodwill
Goodwill on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair
value of the identi¢able assets, liabilities and contingent liabilities of a subsidiary, associate or jointly-
controlled entity at the date of acquisition. Goodwill is recognised as an asset and is tested for impairment
annually, or on such other occasions that events change in circumstances indicate that it might be impaired.
Goodwill arising on the acquisition of an associate is included within the carrying value of the associate.
Goodwill on the acquisition of subsidiaries and jointly-controlled entities is presented separately in the
balance sheet.
Goodwill arising on acquisitions before the date of transition to IFRS was retained at the previous UK
GAAP amounts and re-categorised as an investment on product development, subject to being tested for
impairment.

Pensions
The Group operates de¢ned contribution pension schemes and the pension charge represents the amounts
payable by the group to the funds in respect of the period.

Leasing
Assets held under ¢nance leases and hire purchase contracts are capitalised in the balance sheet and
depreciated over their useful life. The interest element of the rental obligation is charged to the income
statement over the period of the lease and represents a constant proportion of the balance of capital
repayments outstanding.
Rentals under operating leases are charged to the income statement on a straight line basis over the term of
the lease.

Research and development costs


Research and development costs are only recognised as an asset from the date when it is virtually certain that
the fuel supply project will commence and that the project is expected to result in future net cash in£ows with
a net present value no less than all amounts recognised as an asset.

Financial Instruments

Financial assets and ¢nancial liabilities are recognised on the Group’s balance sheet when the group becomes
a party to the contractual provisions of the instrument.

Revenue Recognition
Revenue comprises the value of services supplied by the Group, exclusive of value added tax, in respect of
renewable energy operations carried out in the year.

108
Share Based Payments
The group has applied the requirements of IFRS 2 Share Based Payments, in respect of payments made to
certain employees. Equity settled share-based payments are measured at fair value at the end of grant. The
fair value determined at the grant date of the equity settled share-based payments is expensed on a straight-
line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest. Share-
based payments, issued on the termination of employment, have been written o¡ immediately.
Fair Value is measured by use of a binomial model adjusted for a volatility factor.

Power Purchasing Contract Development Costs


Power purchasing development costs are recognised as pre-contract costs and will be written o¡ against the
income generated under the power purchasing agreements on the basis of power sales to third parties.

Trade receivables
Trade receivables are measured at initial recognition at fair value, and are subsequently measured at
amortised cost using the e¡ective interest rate method. Appropriate allowances for estimated irrecoverable
amounts are recognised in pro¢t or loss when there is objective evidence that the asset is impaired. The
allowance recognised is measured as the di¡erence between the asset’s carrying amount and the present value
of estimated future cash £ows discounted at the e¡ective interest rate computed at initial recognition.

Investments
Investments are measured at cost, including transaction costs, less any impairment loss recognised to re£ect
irrecoverable amounts. An impairment loss is recognised in pro¢t or loss when there is objective evidence
that the asset is impaired, and is measured as the di¡erence between the investment’s carrying amount and
the present value of estimated future cash £ows discounted at the e¡ective interest rate computed at initial
recognition. Impairment losses are reversed in subsequent periods when an increase in the investment’s
recoverable amount can be related objectively to an event occurring after the impairment was recognised,
subject to the restriction that the carrying amount of the investment at the date the impairment is reversed
shall not exceed what the amortised cost would have been had the impairment not been recognised.

Cash and cash equivalents


Cash and cash equivalents comprise cash on hand and short term deposits with a maturity of less than three
months with any qualifying ¢nancial institution.

Financial liabilities and equity


Financial liabilities and equity instruments are classi¢ed according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that evidences a residual interest in the
assets of the group after deducting all of its liabilities.

Bank borrowings
Interest bearing bank loans, stocking loans and overdrafts are recorded at the proceeds received, net of direct
issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs,
are accounted for on an accrual basis in pro¢t or loss using the e¡ective interest rate method and are added to
the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

Trade payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using
the e¡ective interest rate method.

Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs.

Earnings per share


Basic earnings per share is calculated by dividing the amounts or pro¢t attributable to ordinary equity
shareholders in the Company by the weighted average number of shares in issue during the period. Diluted
earnings per share is calculated by reference to the e¡ect of dilutive potential ordinary shares. Potential

109
ordinary shares are treated as dilutive when their conversion to ordinary shares would decrease earnings per
share or increase loss per share from continuing operations.

Liquid resources
The Group includes short term deposits and bank deposit accounts as part of liquid resources.

2. OPERATING LOSS ON ORDINARY ACTIVITIES BEFORE INTEREST


13m to Year to Year to
31 December 31 December 31 December
2004 2005 2006
»’000 »’000 »’000
Operating Loss on ordinary activities before taxation is stated
after charging:
Impairment of investment on product development and write-o¡
of related advance commission expenditure 1,088 297 ç
Aggregate directors’ emoluments 48 950 277
Auditors’ remuneration audit 4 19 20

3. STAFF COSTS
13m to Year to Year to
31 December 31 December 31 December
2004 2005 2006
No. No. No.
Employees
The average number of Group employees was:
Administration 3 4 2
3 4 2

Sta¡ costs »’000 »’000 »’000


Wages and salaries 43 490 401
Social security costs 5 22 28
Other pension costs ç 26 31
Amounts paid to former directors ç 211 ç
Share-based payments ç 244 ç
48 993 460

The Group contributes to personal pension schemes on behalf of certain employees. The schemes are
administered independently of the group. The total pension cost, which is charged to the Income Statement,
represents contributions payable by the Group and amounted to »30,575 (2005: »25,995, 2004: »Nil).
13m to Year to Year to
31 December 31 December 31 December
2004 2005 2006
»’000 »’000 »’000
Directors’ remuneration
Aggregate remuneration 43 469 266
Amounts paid to former director ç 211 ç
Share based payments ç 244 ç
Pension contributions 5 26 11
48 950 277

Highest paid director »’000 »’000 »’000


Remuneration 48 159 108
Pension contributions 18 26 ç
66 185 108

110
Amounts paid to former directors
During the year ended 31 December 2005, »211,026 was paid to former directors, P Taylor, R McGregor and
E Delamer House, all of whom resigned in 2004, following the receipt of funds from the raising of equity
¢nance and the admission of the Company’s shares to AIM.
Of the emoluments charged in respect of the directors in 2006, »121,721 was unpaid at 31 December 2006
and at the date of the Company Voluntary Agreement.

4. INTEREST
13m to Year to Year to
31 December 31 December 31 December
2004 2005 2006
»’000 »’000 »’000
Bank interest receivable ç 30 10

Interest payable ç 1 ç

5. TAXATION
No charge to taxation was made in the periods under review due to losses being incurred throughout.
At the 31 December 2006 the Group had a deferred tax asset (using a tax rate of 30 per cent.) of
approximately »1,500,000 (2005: »648,000; »2004: »66,000), which has not been recognised due to the
current uncertainty of future pro¢ts. Upon the commencement of trading and generation of pro¢ts, this asset
is expected to be recognised.

6. NON-CURRENT ASSETS
Investment
on product
development
»’000
Cost
At 11 December 2003 ç
Additions 515
On disposal ç
At 31 December 2004, 2005 and 2006 515

Impairment
At 11 December 2003 and 31 December 2004 ç
Charge for the period 297
On disposal ç
At 31 December 2005 297
Charge for the period 218
On disposal ç
At 31 December 2006 515

Net book value


At 31 December 2006 ç

At 31 December 2005 218

At 31 December 2004 515

The investment on product development of »514,791 arose on the purchase of KP Renewables (Operations)
Limited on 31 March 2004.
During the year ended 31 December 2005, following a review of its portfolio of power purchase agreements,
the board decided not to renew the contract with Centrico to supply 200 mega watts of power. The result of
this was an impairment loss of »296,995.

111
During the year ended 31 December 2006, the board concluded that the power purchase agreements no
longer had any value to the Group. The result of this was a further impairment charge of »217,796.
The impairment losses have been charged within administration expenses.

7. INVESTMENTS
E¡ective
Parent Country of Principal proportion
Name Company Incorporation Activity of shares held
KP Renewables (Operations) KP Renewables Plc England Holding Company 100%
Limited
KP Bioenergy Holding KP Renewables (Operations) England Holding Company 100%
Limited Limited
KP Wind Holdings Limited KP Renewables (Operations) England Holding Company 100%
Limited
KP Snodland Power Limited KP Bioenergy Holding England Renewable Energy 100%
Limited
KP Crayford Power Limited KP Bioenergy Holding England Renewable Energy 100%
Limited
North Otter Windfarm KP Wind Holdings Limited England Renewable Energy 100%
Limited
Lephinmore Windfarm KP Wind Holdings Limited England Renewable Energy 100%
Limited
Of these companies, only KP Renewables (Operations) Limited had incurred expenses at 31 December 2006.
The other subsidiaries all had an issued share capital of »2 represented by either cash or amounts due from
parent undertaking.

8. TRADE AND OTHER RECEIVABLES


31 December 31 December 31December
2004 2005 2006
»’000 »’000 »’000
Other debtors 14 57 ç
Prepayments 62 925 8
Other receivables 12 42 30
88 1,024 38

The payment of »925,455, carried forward at 31 December 2005, included non-refundable advance
commission expenditure on projects in developments, amounting to »870,000. This was written o¡ in 2006,
the Group having failed to both commence projects to generate power under the related contracts and also
raise new ¢nance to commence such projects.

9. TRADE AND OTHER PAYABLES


31 December 31 December 31December
2004 2005 2006
»’000 »’000 »’000
Loan from parent 20 ç 5
Accrued expenses ç parent undertaking 45 ç ç
Accrued expenses ç fellow subsidiary undertaking 37 ç ç
Accruals and other payables 55 58 641
157 58 646

112
10. SHARE CAPITAL
31 December 31 December 31December
2004 2005 2006
»’000 »’000 »’000
Authorised
2004: 75,000,000 ordinary shares of 1p each;
2005 & 2006: 100,000,000 share of 1p each 750 1,000 1,000

Allotted, called up and fully paid


2004: 40,446,374 ordinary shares of 1p each; 2005 & 2006:
46,589,662 ordinary shares of 1p each 404 466 466

Shareholder Entitlement
All shares rank equally in respect of all shareholder rights.

Share Options and Warrants


At 31 December 2006 the Company had the following unexercised share options:

Granted under the Company Share Option Plan

Number Price Exercise Dates


600,000 1p 17 June 2004 to 16 June 2009
850,000 1p 5 July 2006 to 4 January 2010
Warrants granted to a Supplier
200,000 125p 29 July 2005 to 28 July 2010
The options for 1,450,000 shares were granted to directors on their resignation and were charged to the
Income Statement in full in 2005.

The options were valued on the basis of the market price at the time the option was granted and were
calculated using the binominal method with a 75 per cent. volatility, covering the period to exercise cessation
date. The expected volatility was estimated on the basis of the share price history subsequent to £oatation.
The risk free interest rate was assessed at the yield on a gilt edged security with a maturity term of either 5 or
10 years, with the further assumption of no dividend yield. The options were valued at prices up to 17.2p per
share, the charge for the year ended 31 December 2005 being »244,000.

11. RECONCILIATION OF MOVEMENT IN SHAREHOLDERS’ FUNDS


Pro¢t & loss
Share Share account
Redemption & Capital Capital Total
Premium »’000 »’000 »’000
Balance at 11 December 2003 274 404 ç 678
Loss for the period ç ç (221) (221)
Balance at 31 December 2004 274 404 (221) 457
Loss for the year ç ç (1,939) (1,939)
Increase in share capital 3,704 62 ç 3,766
Balance at 31 December 2005 3,978 466 (2,160) 2,284
Loss for the year ç ç (2,866) (2,866)
Balance at 31 December 2006 3,978 466 (5,026) (582)

12. RELATED PARTY TRANSACTIONS


Period to 31 December 2004
On 31 March 2004, the Company acquired KP Renewable (Operations) Limited from Kwikpower
International plc, the Company’s parent undertaking, for »345,000, issuing 34,500,000 ordinary shares of 1p
each at par.

113
During the period ended 31 December 2004, KP Renewables (Operations) Limited incurred costs totalling
approximately »7,000 in connection with a services agreement with Kwikpower International plc. This
agreement provided for the services of inter alia, Dr James Watkins, a director of the Company. This
agreement was terminated on 30 April 2004 and replaced by an agreement between the Company and
Kwikpower International plc. At 31 December 2004, the liability had been settled in full.
During the period ended 31 December 2004, the Company was charged »64,000 by Kwikpower International
plc in respect of management charges, in accordance with a service agreement which commenced on 1 May
2004. At 31 December 2004, »44,740 remained outstanding. This agreement provided for the services of,
inter alia Dr J Watkins, a director of the Company.
During the period ended 31 December 2004, the Company was charged »35,000 by a fellow subsidiary
undertaking, Kwikpower Management Services Limited in respect of rental of o⁄ces. Other charges resulted
in »36,647 remaining outstanding as at 31 December 2004.
During the period ended 31 December 2004, CO2e, a company in which Mr Steve Durmmond, a non-
executive director of the Company since 5 May 2004, charged the Company »250,000, which monies were
payable on the Company’s admission on AIM. In addition, as noted in note 10, shares with a value of
»500,000 were to be issued to CO2e on the Company’s admission to AIM.
During the period ended 31 December 2004, Partner Capital Limited (formerly Crosby & Partners), a
company in which Mr Peter O’Kane, a non-executive director of the Company from 5 May 2004 to
18 August 2004, charged the Company »201,500, which monies were payable on the Company’s admission
to AIM.
During the period ended 31 December 2004, Kwikpower International plc loaned the Company »50,000 on
an interest free, unsecured basis, repayable on the Company’s successful raising of equity ¢nance. On
31 December 2004, »30,000 of this loan was converted into 3 million ordinary shares of 1p each, issued at
par, these shares were subsequently transferred to an external third party. At 31 December 2004, »20,000
remained outstanding.
Kwikpower International plc entered into an agreement with a creditor of the Group whereby it agreed to
transfer shares to the value of approximately »87,000 in full settlement of the debt due to the creditor by the
Group. This amount will be re-charged to the Group. These costs arose in connection with entering into a
framework power purchase agreement. Furthermore, Kwikpower International plc transferred further sales
to the creditor with a value of »50,000 in respect of services to be provided by this creditor to the Group.

Year Ended 31 December 2005


The Company was charged »166,417 by Kwikpower International plc in respect of management charges, in
accordance with a service agreement, which commenced on 1 May 2004. At 31 December 2005, nil remained
outstanding. This agreement provided for the services of, inter alia Dr J Watkins, a director of the Company.
CO2e.com Limited charged the Company »250,000, which monies were paid on 9 August 2005, following the
Company’s admission to AIM. In addition, shares with a total value of »500,000, were issued to CO2e.com
Limited. Mr Steve Drummond, then a non-executive Director of the Company, was a director of and a
shareholder in CO2e.com Limited.
Partner Capital Limited (formerly Crosby & Partners), a company related to Mr Peter O’Kane, charged the
Company »201,500, which monies became payable on the Company’s admission to AIM. Of this sum a
balance of »120,900 has not been paid, but, as such, is included within contingent liabilities (see note 17).
Mr O’Kane is a past non-executive director of the Company.
During the year ended 31 December 2005, the Company was charged »30,950 by Lindley Associates
Limited, in respect of consultancy services to the Company by Dr D Lindley OBE, a non-executive director
of the Company and a director of Lindley Associates Limited.

Year Ended 31 December 2006


During the year the Company was charged »132,500 by Kwikpower International plc, prior to the death of
Dr J Watkins, under the arrangement referred to above.
Prior to the death of Dr J Watkins the Company had advanced funds of »35,000 to Kwikpower International
plc and also incurred expenses on behalf of the Company of »34,131. These sums have not been repaid. The
directors consider there to be serious doubts over the recoverability of these funds and accordingly have

114
made full provision in the ¢nancial statements. The directors will however make every e¡ort to seek full
recovery of the sums due.
During the year the Company was charged »21,276 by Wellman Engineering Limited, which is a subsidiary
of Kwikpower International plc. The full balance was unpaid at the year end.

13. PARENT UNDERTAKING AND CONTROLLING PARTY


At 31 December 2006 the Company’s immediate parent undertaking was Kwikpower International plc, a
company incorporated in Gibraltar. The ultimate controlling party was the estate of Dr J Watkins. With
e¡ect from 10 April 2007 there was no controlling party.

14. RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM OPERATING


ACTIVITIES
13m to Year to Year to
31 December 31 December 31 December
2004 2005 2006
»’000 »’000 »’000
Operating loss on ordinary activities before interest (221) (1,968) (2,876)
Impairment loss ç 297 218
Share based payments ç 244 ç
Administration costs paid by issue of shares ç 65 ç
Net cash out£ow from operating activities (221) (1,362) (2,658)

15. CONTINGENT LIABILITIES


On 10 April 2007 each of the matters referred to below became subject to the terms of the CVA, details of
which are given in Note 17.
Under the terms of an agreement entered into on 2 December 2004, between the Company and Partner
Capital Limited (formerly Crosby Partners Limited), the balance of commission fees outstanding, up to a
maximum amount of »120,900, may become payable from additional funds raised from any source
subsequent to the admission to AIM in July 2005.
Under the terms of an agreement between Mr R McGrigor, a former director of the Company, who resigned
on 10 August 2004, an amount of »9,002 may become payable, for past services as a director, contingent on
the successful raising of additional funds subsequent to the admission to AIM in July 2005.
Under the terms of an agreement between the Company and Mr P Taylor, a former director of the Company
who resigned on 10 August 2004, an amount of »12,602 may become payable, for past services as a director,
contingent on the successful raising of additional funds subsequent to the admission to AIM in July 2005.
Following successfully raising of equity ¢nance by the Company a further payment, in the amount of
»10,000, may become payable to Mr P Carey, a former director of the Company who resigned on
28 February 2005, for past services as a director.
In 2006 the Company was noti¢ed of a claim against Kwikpower International plc by CO2e.com Limited. It
has been asserted by CO2e.com Limited that the Company is jointly and severally liable in respect of this
claim. The amount claimed by CO2e.com Limited to be due was »250,000. CO2e.com Limited has also
asserted that the Company will be jointly and severally liable with Kwikpower International plc for a further
claim which will not be determinable and which will not fall due until January 2007 at the earliest, but which
is currently estimated at »380,000. The Company has received legal advice that it has no such joint and
several liability in relation to either claim.
Under such arrangements the Company had agreed to pay brokerage fees to Kwikpower International plc,
as a percentage of revenue earned under its power purchase agreements, to a maximum value of »250,000.
The Company has issued a letter of support to enable one subsidiary to continue to trade as a going concern.

16. POST BALANCE SHEET EVENTS


Under the terms of a CVA agreed at meetings of the Company’s creditors and shareholders on 10 August
2007, creditors will receive either a payment of 4p in the » to be paid in cash or, at the option of individual
creditors, a cash payment of 2p in the » plus an allotment of new ordinary shares to the equivalent value of 2p

115
issued at par. Creditors who choose the cash and share alternative will be entitled to annual dividends to be
paid by the CVA Supervisor which will represent 60 per cent. of the net proceeds generated from the then
existing projects of the company earned over the ¢rst three years following the CVA, subject to a maximum
of 100 per cent. of each creditor’s claim under the CVA.
At an Extraordinary General Meeting of the Company held on 10 April 2007, special resolutions were
passed by the shareholders of the Company to sub-divide the then existing ordinary shares of the Company
of 1p each into one new ordinary share of 0.05p and one deferred share of 0.95p, and to consolidate
immediately these new ordinary shares on a 1 for 20 basis so that the nominal value of the shares in the
Company was 1p once more. This consolidation reduced the number of shares in the Company in issue from
46,589,662 to 2,329,483.
Conditional on the above the Company completed a placing issuing 75,000,000 shares at 1p per share,
raising »750,000 before expenses. Costs of »65,000 were settled by the issue of 6,500,000 shares, taking the
number of shares in issue to 83,829,483.
On 2 November 2007 the Supervisor of the Company’s CVA reached agreement with all of the Company’s
creditors who have proved in the CVA.
Pursuant to the CVA, the Company approved the payment to the creditors of »23,603.08, and the allotment
to the creditors of 832,127 new ordinary shares of 1p par value in the Company (the ‘‘New Shares’’). The
New Shares rank pari passu with the existing ordinary share capital of the Company.
On 27 November 2007, the Company disposed of all of its existing businesses to its subsidiary, KP Wind and
Biomass Limited. The disposal is conditional upon the approval of creditors as part of the CVA variation
proposals.

17. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS


The Group ¢nancial instruments comprise bank accounts and various items such as trade receivables and
payables that arise directly from its operations. The group does not enter into any derivative transactions
and has minimal exposure to exchange rate movement as its trade takes place entirely within the United
Kingdom.
At the year end the group held only a current bank account.
The fair value of the group’s ¢nancial assets and liabilities at 31 December 2006 is as stated in the balance
sheet at that date.

18. NEW STANDARDS AND INTERPRETATIONS


New standards and interpretations:
IFRS7 Financial instruments disclosure
IFRS8 Operating segments
IFRIC7 Applying the restatement approach under IAS29
IFRIC8 Scope of IFRS2 Share based payments
IFRIC9 Reassessment of embedded derivatives
IFRIC10 Interim ¢nancial reporting and impairment
IFRIC11 Group and treasury share transactions
IFRIC12 Service concession arrangements
Revisions of Existing Standards
The Directors do not expect the new standards and interpretations, or the revisions to existing standards, to
have any impact on the primary ¢nancial statements. However:
IFRS7 This standard will require additional disclosures concerning the Group’s and Company’s
¢nancial instruments, to enable the users of the ¢nancial statements to appreciate the ¢nancial
risks to which the Group and the company are subject. This standard is e¡ective for accounting
periods beginning on or after 1 January 2007.
IFRS8 The revisions to this standard will require additional disclosure and e¡ective for accounting
periods beginning on or after 1 January 2009.
IAS1 The revisions to this standard will require additional disclosures, both qualitative and
quantitative, concerning the capital of the Group and Company. The revisions to this standard
are e¡ective for accounting periods beginning on or after 1 January 2007.

116
19. NATURE OF FINANCIAL INFORMATION
The ¢nancial information on the Company presented above does not constitute statutory accounts as de¢ned
by the Companies Act 1985 (as amended). Statutory accounts for the period ended 31 December 2004 and
for each of the two years ended 31 December 2006 have been ¢led with the Registrar of Companies.

117
PART V (b) INTERIM RESULTS OF THE COMPANY
The following is the full text of the unaudited interim ¢nancial statements of the Company announced on
28 September 2007:

CONDENSED PROFIT & LOSS ACCOUNTS


Unaudited Unaudited Audited
6 months to 6 months to Year ended
30 June 30 June 31 December
2007 2006 2006
Notes »’000 »’000 »’000
Turnover ç ç ç
Administration expenses and operating loss (186) (2,281) (2,876)
Exceptional reduction to expenses 4 551 ç ç
Investment income 5 10 10
Interest paid ç ç ç
Pro¢t/(loss) for the period before tax 370 (2,271) (2,866)
Taxation ç ç ç
Retained pro¢t (loss) for the period 370 (2,271) (2,866)

Earnings/(loss) per diluted share (pence) ç basic


and diluted 3 0.94 (97.4) (123)

118
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited Unaudited Audited
30 June 30 June 31 December
2007 2006 2006
»’000 »’000 »’000
Current assets
Project development costs 22 ç 14
Trade and other receivables 49 108 38
Cash and cash equivalents 610 58 12
Total assets 681 166 64

Equity
Share capital 1,281 466 466
Shares to be issued 8 ç ç
Share option reserve 244 254 244
Share premium 3,682 3,734 3,734
Accumulated losses (4,656) (4,431) (5,026)
Total equity 559 23 (582)

Current liabilities
Trade and other payables 122 143 646
Total equity and liabilities 681 166 64

119
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
6 months to 6 months to Year ended
30 June 30 June 31 December
2007 2006 2006
»’000 »’000 »’000
Net cash £ow from operating activities
Cash £ow from operating activities (186) (2,053) (2,658)
Exceptional item 551 ç ç
365 (2,053) (2,658)
Movement in working capital
Increase in project development costs (9) ç (14)
(Increase)/decrease in receivables (10) 916 986
Increase/(decrease) in payables (516) 85 588
Net cash used in operating activities (170) (1,052) (1,098)

Investing activities
Interest received 5 10 10
Net cash from investing activities 5 10 10

Financing activities
Costs incurred in issue of share capital (52) ç ç
Proceeds from issue of share capital 815 ç ç
Net cash from ¢nancing activities 763 ç ç

Net increase/(decrease) in cash in the period 598 (1,042) (1088)

Cash and cash equivalents at beginning of the period 12 1,100 1,100


Cash and cash equivalents at end of the period 610 58 12

120
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Share
Share Capital to premium option Accumulated
Capital be issued account reserve losses Total
»’000 »’000 »’000 »’000 »’000 »’000
Balance at 1 January
2006 466 ç 3,734 244 (2,160) 2,284
Loss for the year ç ç ç ç (2,866) (2,866)
Balance at
31 December 2006 466 ç 3,734 244 (5,026) (582)
Pro¢t for the six
months ç ç ç ç 370 370
Issue of share capital 815 8 ç ç ç 823
Costs of issue of
shares ç ç (52) ç ç (52)
Balance at 30 June
2007 1,281 8 3,682 244 (4,656) 559

121
NOTES TO THE INTERIM FINANCIAL INFORMATION
1. The interim results are unaudited and do not comprise statutory accounts within the meaning of
Section 240 of the Companies Act 1985. The results for the year ended 31 December 2006 have been
extracted from the Group accounts for that period. Those ¢nancial statements have been ¢led with the
Registrar of Companies and included an auditors’ report, which was modi¢ed in respect of an emphasis
of matter of going concern.
2. The interim results have been prepared in accordance with the accounting policies adopted in the
accounts for the year ended 31 December 2006, which have been prepared under IFRS and those
policies to be adopted in respect of the 31 December 2007.
3. Earnings per share is based on a pro¢t after taxation of »370,214 and on 39,384,468 ordinary shares,
being the weighted average number in issue during the period. The loss per share for comparative
purposes has been restated to re£ect the share consolidation that took place in April 2007.
4. Exceptional costs totalling »154,816 were incurred as a consequence of the CVA and ¢nancial
reorganisation. The exceptional reduction in expenses of »551,266, being a reversal of amounts
previously estimated to be required, is stated after deducting these exceptional costs.
5. As at 30 June 2007 the issued share capital comprised 83,829,483 ordinary shares of 1p and 46,589,662
deferred shares of 0.95p. The deferred shares have no voting or dividend rights. A total of 832,127
ordinary shares of 1p are to be issued following the CVA.
6. No tax liability arises due to the losses incurred in prior periods.

122
PART VI

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

123
Set out below is an unaudited pro forma statement of consolidated net assets of the Enlarged Group, which has been
prepared on the basis of the consolidated ¢nancial information on the Company as adjusted for the reverse takeover as
set out in the notes below. The pro forma has been prepared for illustrative purposes only and, because of its nature, will
not represent the actual ¢nancial position of the Enlarged Group.
Adjusted Reverse
Company IGL net takeover Pro-forma
net assets assets adjustments balances
Notes (i) (ii) (iii)
»’000 »’000 »’000 »’000
ASSETS
Non-current assets:
Goodwill ç ç ç ç
Intangible exploration and evaluation assets ç 29 ç 29
Tangible ¢xed assets ç ç ç ç
Total non-current assets ç 29 ç 29
Current assets:
Trade and other receivables 49 235 ç 284
Cash at bank and in hand 1,465 425 ç 1,890
Total current assets 1,514 660 ç 2,174
Total assets 1,514 689 ç 2,203

LIABILITIES
Non-current liabilities
Deferred tax ç ç ç ç
Total non-current liabilities ç ç ç ç
Current liabilities:
Trade and other payables (122) (390) ç (512)
Tax payable ç (31) ç (31)
Total current liabilities (122) (421) ç (543)
Total liabilities (122) (421) ç (543)

NET ASSETS 1,392 268 ç 1,660

124
NOTES:
(i) The Company balances are extracted from the unaudited interim statements as at 30 June 2007 as set out in Section
B of Part V of this Document and adjusted for the following:
. The disposal of the Company’s Existing Projects to KP Wind and Biomass Limited and the subsequent
disposal of KP Wind and Biomass Limited to Blenheim Energy Limited for consideration of »1 and a full
indemnity against future claims under the CVA.
. The issue on 2 November 2007 of convertible loan notes totalling »855,000, net of transaction costs of
»45,000, and the subsequent conversion into 81,818,150 shares at 1.1p per share on the Acquisition. These
Loan Notes convert automatically to shares upon consummation of the transaction.
The
Company
as at Convertible Adjusted
30 June CVA loan note Company
2007 adjustment adjustment balances
»’000 »’000 »’000 »’000
ASSETS
Non-current assets:
Goodwill ç ç ç ç
Intangible exploration and evaluation assets ç ç ç ç
Tangible ¢xed assets ç ç ç ç
Total non-current assets ç ç ç ç
Current assets:
Project development costs 22 (22) ç ç
Trade and other receivables 49 ç ç 49
Cash at bank and in hand 610 ç 855 1,465
Total current assets 681 (22) 855 1,514
Total assets 681 (22) 855 1,514

LIABILITIES
Non-current liabilities
Deferred tax ç ç ç ç
Total non-current liabilities ç ç ç ç
Current liabilities:
Trade and other payables (122) ç ç (122)
Tax payable ç ç ç ç
Total current liabilities (122) ç ç (122)
Total liabilities (122) ç ç (122)

NET ASSETS 559 (22) 855 1,392

(ii) The balances of IGL are extracted from the unaudited interim statements as at 30 June 2007 as set out in
Section b of Part IV of this Document.
(iii) The reverse takeover of the Company by IGL, whereby the Company’s net assets are adjusted as follows:
. The Company’s net assets are adjusted to re£ect their fair value;
. The cost of the transaction will be:
(a) the Company’s market value based on the latest closing price before the date of this document,
which for the purposes of this document has been taken at close of business on 19 November
2007 at 1.6p per share giving a market capitalisation of »1,354,586, plus;
(b) the shares that will be created as a result of the Loan Note conversion (including shares issued
as a broking fee to e¡ect the fundraising) referred to at (i) above, which for the purposes of this
document have been valued on the same basis as referred to at (a) above, and taking account of
the costs of issuance, gives an additional market capitalisation of »1,397,980, plus;
(c) the costs of e¡ecting the transaction, which are currently projected to be »800,000: giving
(d) a total transaction cost of »3,552,566.
. Goodwill created by the Acquisition of »2,160,566 (being the cost of the transaction of »3,552,566 less
the fair value of the Company’s assets of »1,392,000) has been written o¡ to the pro¢t and loss account
immediately on Acquisition.

125
Our Reference:
The Directors Mazars LLP
KP Renewables Plc 13 Sheldon Square
Aldermary House London
10-15 Queen Street W2 6PS
London EC4N 1TX
The Directors
Libertas Capital Corporate Finance Limited
16 Berkeley Street
London W1J 8DZ

27 November 2007

Dear Sirs

We report on the unaudited pro forma ¢nancial information set out in Part VI of the AIM Admission
Document (‘the Document’) dated 27 November 2007 of KP Renewables Plc (‘the Company’) which has
been prepared on the basis of the notes thereto, for illustrative purposes only, to provide information about
how the New Ordinary Shares and the reverse takeover acquisition might have a¡ected the ¢nancial
information, presented on the basis of the accounting policies adopted by the Company in preparing the
¢nancial information at 30 June 2007. This report is required by Schedule Two of the AIM Rules and is given
for the purpose of complying with that schedule and for no other purpose.

Responsibilities
It is the responsibility of the Directors of the Company to prepare the pro forma ¢nancial information in
accordance with Schedule Two of the AIM Rules. It is our responsibility to form an opinion on the ¢nancial
information as to the proper compilation of the pro forma ¢nancial information and to report our opinion to
you.
In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on
any ¢nancial information used in the compilation of the pro forma ¢nancial information, nor do we accept
responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were
addressed by us at the dates of their issue.

Basis of opinion
We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing
Practices Board in the United Kingdom. The work that we performed for the purpose of making this report,
which involved no independent examination of any of the underlying ¢nancial information, consisted
primarily of comparing the unadjusted ¢nancial information with the source documents, considering the
evidence supporting the adjustments and discussing the pro forma ¢nancial information with the directors of
the Company.
We planned and performed our work so as to obtain all the information and explanations we considered
necessary in order to provide us with reasonable assurance that the pro forma ¢nancial information has been
properly compiled on the basis stated and that such basis is consistent with the accounting policies of the
Company.

Opinion
In our opinion:
(a) the pro forma ¢nancial information has been properly complied on the basis stated; and
(b) such basis is consistent with the accounting policies of the Company

126
Declaration
For the purposes of Paragraph (a) of Schedule Two of the AIM Rules we are responsible for this report as
part of the Document and declare that we have taken all reasonable care to ensure that the information
contained in this report is, to the best of our knowledge, in accordance with the facts and contains no
omission likely to a¡ect its import. This declaration is included in the Document in compliance with Schedule
Two of the AIM Rules.
Yours faithfully

Mazars LLP
Chartered Accountants

127
PART VII

ADDITIONAL INFORMATION

1. Responsibility
The Existing Directors and the Proposed Directors, whose names appear on page 3 of this document, accept
responsibility for the information contained in this document including collective and individual
responsibility for the compliance with the AIM Rules for Companies. To the best of the knowledge and belief
of the Existing Directors and the Proposed Directors (who have taken all reasonable care to ensure that such
is the case), the information contained in this document is in accordance with the facts and contains no
omission likely to a¡ect its import.
Each of Andrew Austin, Brent Cheshire, Francis Gugen, Leigh Dyson, Edward Lasseter, Andrew Purcell,
Michael Smith and Roger Smith, accepts responsibility for the information contained in this document
relating to the Concert Party. To the best of each of the knowledge and belief of Andrew Austin, Brent
Cheshire, Francis Gugen, Leigh Dyson, Edward Lasseter, Andrew Purcell, Michael Smith and Roger Smith
(having taken all reasonable care to ensure that such is the case) the information for which they each
accepted responsibility is in accordance with the facts and does not omit anything likely to a¡ect the import
of such information.

2. The Company and its subsidiaries


The Company is registered and domiciled in England and Wales, having been incorporated on 1 December
2003 under the Acts as a public company limited by shares with registered number 4981279.
2.1 The principal legislation under which the Company operates is the Acts and regulations made
thereunder.
2.2 The Company’s registered o⁄ce is at 7th £oor Aldermary House, 10-15 Queen Street, London,
EC4N 1TX. The telephone number of the Company’s registered o⁄ce is 020 7332 2200.
2.3 The business of the Company and its principal activity is to act as a holding company. The Enlarged
Group’s main activity will be appraising, developing and extracting CBM in the UK and providing
technical and other related services to CBM operators in the industry, this activity and operation will
be carried on by IGL.
2.4 The Company currently has two subsidiaries, KP Renewables (Operations) Limited and KP Wind and
Biomass Limited.
2.5 Immediately following Admission, the Company will be the holding company of the following
subsidiary companies:
Date of Country of
Name incorporation incorporation Interest
KP Renewables (Operations) Limited 22 May 2000 England 100%
Island Gas Limited 12 November 2003 England 100%
2.6 The Company and its subsidiaries do not currently have any employees. Following Admission the
Enlarged Group will have three employees.

3. Share capital of the Company


3.1 On incorporation, the Company had an authorised share capital of »50,000 divided into 50,000
ordinary shares of »1 each, of which 2 were issued to the subscribers to the memorandum or association
of the Company.
On 20 December 2003 ordinary resolutions of the Company were passed, subdividing each issued and
unissued ordinary shares in the capital of the Company into 100 new ordinary shares of 1 pence each
and increasing the authorised share capital of the Company by »700,000 by the creation of an
additional 70,000,000 Ordinary Shares of 1 pence each.
Between 1 December 2003 and 30 January 2004, the Board allotted 1,375,000 new Ordinary Shares at 1
pence per share, pursuant to subscription for cash.
Between 1 February 2004 and 29 March 2004, the Board allotted 601,000 new Ordinary Shares at
between 7.17 and 10 pence per share, pursuant to subscriptions for cash.

128
On 30 March 2004, the Board allotted 725,574 Ordinary Shares at between 18.07 and 72.30 pence per
share, pursuant to subscriptions for cash.
On 31 March 2004, the Board allotted 34,500,000 Ordinary Shares at 1 pence per share, pursuant to
subscriptions for cash.
On 3 December 2004, the Board allotted 3,244,600 Ordinary Shares at 1 pence per share, pursuant to
subscriptions for cash.
On 31 January 2005, the Board allotted 850,600 Ordinary Shares at 1.02 pence per share, pursuant to
subscriptions for cash.
On 13 May 2005 an ordinary resolution of the Company was passed, increasing the authorised share
capital of the Company by »250,000 by the creation of an additional 25,000,000 Ordinary Shares of
1 pence each.
On 26 July 2005, the Board allotted 2,282,464 Ordinary Shares at 40 pence per share, to certain persons
pursuant to a pre-IPO subscription.
On 27 July 2005, the Board allotted 2,373,664 Ordinary Shares at 125 pence per share, to certain
persons pursuant to the IPO subscription.
On 5 August 2005, the Board allotted 30,080 Ordinary Shares at 82.5 pence per share, to certain
persons.
On 12 August 2005, the Board allotted 58,480 Ordinary Shares at 85.5 pence per share to Dr Hussan
Fakhroo.
On 15 August 2005, the Board allotted 400,000 Ordinary Shares to coze.com pursuant to a contract
between the parties dated 2 July 2004.
On 16 August 2005, the Board allotted 148,000 Ordinary Shares to BizzEnergy Ltd pursuant to a
contract dated 16 May 2005.
On 10 April 2007, special resolutions were passed sub-dividing each issued ordinary share of the
Company into one deferred share of 0.95 pence and one ordinary share of 0.05 pence each. Further,
each ordinary share of 0.05 pence each was consolidated on a twenty to one basis to create new
consolidated Ordinary Shares of 1 pence each.
On 10 April 2007, an ordinary resolution was passed to increase the Company’s authorised share
capital by »5,000,000 through the creation of 500,000,000 Ordinary Shares of 1 pence each.
On 10 April 2007, the Board allotted 75,000,000 Ordinary Shares at 1 pence per share pursuant to a
fund raising.
On 10 April 2007, the Board allotted 6,500,000 Ordinary Shares at 1 pence per share as consideration
for services provided to the Company in the aggregate total amount of »65,000 and payable as fees.
On 2 November 2007, the Company issued »900,000 of Loan Notes at par value. The Loan Notes
convert into Existing Ordinary Shares at a price of 1.1p per Existing Ordinary Share (equivalent to 55p
per New Ordinary Share). The Loan Notes convert on a mandatory basis in the event that the
Proposals are completed and will result in the issue of 1,636,364 New Ordinary Shares.
On 7 November 2007, the Existing Directors allotted 832,127 Ordinary Shares to former creditors,
pursuant to the CVA.
3.2 The existing authorised and issued fully paid up share capital of the Company as at the date of this
document is set out below:
Authorised Issued
Number » Number »
Existing Ordinary Shares of 1p each 555,739,821 5,557,398.21 84,661,610* 846,616
Deferred Shares of 0.95p 46,589,662 442,601.79 46,589,662 44,260,178
*This does not include the shares to be issued pursuant to the conversion of the Loan Notes.
3.3 Save as otherwise disclosed in paragraph 3.1 above there has been no change in the amount of the
issued share or loan capital of the Company and no material change in the amount of the issued share
or loan capital of any other member of the Enlarged Group (other than intra-group issues by wholly-

129
owned subsidiaries) in the three years preceding the date of this document/since the incorporation of
the Company. No shares in the Company are held by the Company or any of its subsidiary
undertakings.
3.4 Save as disclosed in this document, there are no acquisition rights or obligations over authorised but
unissued share capital of the Company and there is no undertaking to increase the share capital.
3.5 Resolutions have been proposed, which if approved by shareholders on 27 December 2007, would
grant the following powers and authorities to the Directors to issue New Ordinary Shares:
(i) the authorised share capital of the Company will be increased from »6,000,000 to »45,000,000 by
the creation of 78,000,000 New Ordinary Shares of 50p each;
(ii) in substitution for all previous authorities (save to the extent already exercised) the Directors will
be generally and unconditionally authorised in accordance with section 80 of the Act to exercise
all powers of the Company to allot relevant securities (as de¢ned by section 80(2) of the Act) up
to an aggregate nominal amount of »15,000,000; for a period expiring (unless previously renewed,
varied or revoked by the Company in general meeting) at the conclusion of the Company’s
annual general meeting next following the passing of the resolution or 15 months after the date of
the passing of this resolution, whichever is the earlier, but the Company may before such expiry,
revocation or variation make an o¡er or agreement which would or might require relevant
securities to be allotted after such expiry, revocation or variation and the Directors may allot
relevant securities in pursuance of such o¡er or agreement as if the authority conferred by the
resolution had not expired or been revoked or varied;
(iii) the Directors will be empowered pursuant to section 95 of the Act, to allot equity securities
(within the meaning of section 94(2) of the Act) for cash, pursuant to the authority conferred by
paragraph (ii) above as if section 89(1) of the Act did not apply to such allotment provided that
this power is limited to:
(a) the allotment of equity securities up to a maximum aggregate nominal amount to permit
the issue of the Consideration Shares pursuant to the terms of the Acquisition;
(b) the allotment of equity securities up to a maximum aggregate nominal amount to permit
the issue of New Ordinary Shares in connection with the exercise of the Warrants;
(c) the allotment of equity securities pursuant to a rights issue, open o¡er scrip dividend
scheme or other pre-emptive o¡er or scheme in favour of holders of New Ordinary Shares
and any other persons who are entitled to participate in such issue, o¡er or scheme where
the equity securities o¡ered to each such holder and other person are proportionate (as
nearly as may be) to the respective numbers of New Ordinary Shares held or deemed to be
held by them for the purposes of determining their inclusion in such issue, o¡er or scheme
on the record date applicable thereto, but subject to such exclusions or other arrangements
as the Directors may deem ¢t to deal with fractional entitlements, legal or practical
problems arising under the laws of any overseas territory, the requirements of any
regulatory body or stock exchange or by virtue of shares being represented by depositary
receipts or by virtue of any other matter whatever which the Directors consider to require
such exclusions or other arrangements; and;
(d) the allotment of equity securities for cash otherwise than pursuant to sub-paragraphs (a)
and (b) above up to an aggregate nominal amount of »6,000,000.
and that, subject to the case of an allotment of equity securities, to the continuance of the
authority conferred by paragraph (d) above, the power conferred by the resolution shall expire 15
months after the passing of the resolution or at the conclusion of the Company’s annual general
meeting next following such passing, whichever is the earlier, but may be previously revoked or
varied from time to time by special resolution but so that the Company may before such expiry,
revocation or variation make an o¡er or agreement which would or might require equity
securities to be allotted after such expiry, revocation or variation and the Directors may allot
equity securities in pursuance of such o¡er or agreement as if such power had not expired or been
revoked or varied.
3.6 The provisions of section 89 of the Act, which confers on shareholders rights of pre-emption in respect
of the allotment of equity securities which are, or are to be, paid up fully in cash, other than by way of
allotment to employees under an employee share scheme (as de¢ned in section 743 of the Act) will

130
apply to the balance of the authorised but unissued Ordinary Share capital of the Company, to the
extent that such rights are not disapplied by special resolution by the shareholders pursuant to section
95 of the Act in accordance with paragraph 3.5 above or otherwise.
3.7 The New Ordinary Shares to be issued pursuant to the Acquisition will, on Admission, rank pari passu
in all respects with the Existing Ordinary Shares (on a post consolidation basis), including the right to
receive all dividends and other distributions declared, made or paid after the date of this document and
will have the rights and be subject to the restrictions referred to in paragraph 6 of this Part VII.
3.8 Save as disclosed in this document, no commission, discounts, brokerages or other speci¢c terms have
been granted by the Company in connection with the issue or sale of any of its share or loan capital.
3.9 The International Securities Identi¢cation Number (ISIN) for the Existing Ordinary Shares is
GB00BIVNNX82. The ISIN for the New Ordinary Shares is GB00B1VNNX82.
3.10 Following Admission, the New Ordinary Shares may be held in either certi¢cated or uncerti¢cated
form.

4. Share Options and Warrants


4.1 Save as set out in paragraph 4.3, below, there are no outstanding share options or warrants.
4.2 Save as disclosed in this document, no share capital of the Company will, at Admission, be under
option or be agreed conditionally or unconditionally to be put under option.
4.3 It is proposed that in recognition of the services for Peter Redmond, Richard Armstrong and John
Bryant, the Existing Directors and David Lindley who recently stepped down from the Board that
Warrants be granted to these individuals in recognition of the work carried out by them in
orchestrating the reconstruction and re¢nancing of the Company. Each individual will receive 110,000
Warrants of which 82,500 are exercisable into New Ordinary Shares at a price of 55p per New
Ordinary Share and 27,500 are exercisable at a price of 75p per New Ordinary Share. The Warrants are
in all cases exercisable for a period of 3 years, ending on the third anniversary of Admission. The lowest
exercise price for the ¢rst tranche of Warrants is based upon the price at which the Company raised
»900,000 by way of the issue of the Loan Notes.
On 10 April 2007 the Company entered into a warrant agreement with Merchant Capital Limited
pursuant to which Merchant Capital Limited was granted warrants to acquire up to 4,191,474
Ordinary Shares at a price of 1p per Ordinary Share. The warrants lapse on 10 April 2009. If the
Resolutions are passed the adjustment mechanism set out in the agreement will operate to rebase the
warrants so that they reduce in number to 83,830 and the exercise price increases to 50p per New
Ordinary Share.
On 16 May 2005 the Company entered into a warrant instrument with KBC Peel Hunt Limited
pursuant to which KBC Peel Hunt Limited is entitled to subscribe for ordinary shares in the Company
as is equal to »250,000, at the last price the Ordinary Shares were subscribed prior to the original
admission of the Ordinary Shares to trading on AIM. KBC Peel Hunt Limited may subscribe for
shares during the period commencing on the date of admission of the ordinary shares to trading on
AIM and expiring on the ¢fth anniversary of such date. The warrant may be exercised in whole or in
part on any one or more occasions during this period. KBC Peel Hunt Limited has been given notice
that the warrant is now rebased on a warrant to subscribe for 31,250 Ordinary Shares at a price of
»8.00 per Ordinary Share and if the Resolutions are passed it will be further rebased as a warrant to
subscribe for 625 New Ordinary Shares at a price of »400.00 per New Ordinary Share.
On 5 January 2005 the Company entered into a share option agreement with Castle Trust and
Management Services Limited as Trustees of the Kwikpower Employee Bene¢t Trust pursuant to
which the Company agreed to grant to Castle Trust and Management Services Limited an option over
850,000 of the Ordinary Shares at 1 pence per share. Such options are held by Castle Trust and
Management Services Limited as Trustees of the Kwikpower Employee Bene¢t Trust on behalf of
Elaine Delamer House. The option cannot be transferred, assigned or otherwise disposed of and is
capable of being exercised at any time up to 5 January 2010. This option has been released as a result of
the resolutions passed on 10 April 2007 and is now an option to acquire 42,500 Existing Ordinary
Shares at a price of 20p per Existing Ordinary Share. Assuming the Resolutions are passed this option
will be released to become an option to acquire 850 New Ordinary Shares at a price of »10.00 per New
Ordinary Share.

131
On 17 June 2004 the Company granted Philip Taylor an option over 600,000 of the Company’s
ordinary shares at 1 pence per share under the terms of the KP Renewables plc Share Option Plan 2004.
The option is capable of being exercised at any time up to 5 January 2009. This option has been released
as a result of the resolutions passed on 10 April 2007 and is now an option to acquire 30,000 Existing
Ordinary Shares at a price of 20p per Existing Ordinary Share. Assuming the Resolutions are passed
this option will be released as an option to acquire 600 New Ordinary Shares at a price of »10.00 per
New Ordinary Share.

5. Memorandum of Association
The principal object of the Company, which is set out in Clause 4(A) of its Memorandum of Association is to
carry on business as a general commercial company and to carry on any trade or business whatsoever and to
do all such things as are incidental or conducive to the carrying on of any trade or business by it. The objects
of the Company are set out in full in Clause 4 of the Memorandum of Association.

6. Articles of Association
It is proposed that the New Articles will be adopted by a special resolution of the Company at the EGM and
will contain, inter alia, provisions to the following e¡ect:

6.1.1 Rights attaching to Ordinary Shares


(a) Voting rights of members
Subject to disenfranchisement in the event of (a) non-payment of any call or other sum due and payable in
respect of any share or (b) any non-compliance with any statutory notice requiring disclosure of the
bene¢cial ownership of any shares and subject to any special rights or restrictions as to voting for the time
being attached to any shares (as to which there will be none following Admission), on a show of hands every
member who, being an individual, is present in person or by proxy or being a corporation, is present by a
duly authorised representative who is not himself a member entitled to vote shall have one vote and on a poll
shall have one vote for every share of which he is a holder. In the case of joint holders, the vote of the person
whose name stands ¢rst in the register of members is accepted to the exclusion of any votes tendered by any
other joint holders.

(b) Dividends
Subject to the rights attached to any shares issued on any special terms and conditions (as to which there will
be none at Admission), dividends shall be declared and paid according to the amounts paid up on the shares
on which the dividend is paid, but no amount paid up on a share in advance of a call shall be regarded as paid
up on the share. Dividends are not payable on any ¢xed dates.

(c) Return of capital


Subject to the rights attached to any shares issued on any special terms and conditions (as to which there will
be none at Admission), on a winding-up the surplus assets remaining after payment of all creditors of the
Company will be divided amongst the members of the Company according to their respective holding of
shares. The liquidator may, with the sanction of an extraordinary resolution of the Company and any other
sanction required by statute (a) divide amongst the members in specie the whole or any part of the assets of
the Company, or (b) vest the whole or any part of the assets in trustees on such trusts for the bene¢t of
members as the liquidator shall determine, but no member shall be compelled to accept any assets upon
which there is any liability.

(d) Restrictions on shareholders


Subject to the AIM Rules, if a member or any other person appearing to be interested in shares, has been
given notice under section 793 of the Companies Act 2006 and has failed to give information of their interest
in any shares (the ‘‘Default Shares’’) within a prescribed time, the member shall not be entitled in respect of
the Default Shares to attend or vote either personally or by proxy at a general meeting of the Company or a
meeting of the holders of any class of shares or to exercise any other right in relation to general meetings of
the Company or meeting of the holders of any class of its shares.
Where the Default Shares represent 0.25 per cent. or more (in nominal value or number) of the issued shares
of a class, then the Company shall be entitled to withhold any dividend (or part thereof), any right to receive
shares instead of a dividend or other money which would otherwise be payable in respect of the Default
Shares. Where the Default Shares represent 0.25 per cent or more (in nominal value or number) of the issued

132
shares of a class, then no transfer of the Default Shares shall be registered unless the shareholder is not
himself in default as regards supplying the information required and provides evidence, to the satisfaction of
the Directors, that no person in default as regards supplying such information is interested in any of the
shares which are the subject of the transfer or registration is required by the Uncerti¢cated Securities
Regulations 2001.

6.1.2 Rights attaching to the Deferred Shares


The speci¢c rights attaching to the Deferred Shares are as follows:
(a) the Deferred Shares shall not be entitled to any dividends or to any other right or participation in the
pro¢ts of the Company;
(b) on return of assets on liquidation, the Deferred Shares shall confer on the holders thereof an
entitlement to receive out of the assets of the Company available for distribution amongst the members
(subject to the rights of any new class of shares with preferred rights) the amount paid up or credited as
paid up on the deferred shares held by them respectively after (but only after) payment shall have been
made to the holders of the ordinary shares of the amounts paid up or credited as paid up on such shares
and the sum of »10,000,000 in respect of each ordinary share held by them respectively. The holders of
the Deferred Shares shall have no further right to participate in the assets of the Company;
(c) the holders of the Deferred Shares shall not be entitled to vote upon any resolution and shall not be
entitled to receive notice of, attend any general meeting, or be part of the quorum thereof as the holders
of the Deferred Shares;
(d) any reduction of capital involving the cancellation of the Deferred Shares for no consideration shall not
be deemed to be a variation of the rights attaching to them nor a modi¢cation or abrogation of the
rights or privileges attaching to the Deferred Shares;
(e) the special rights conferred upon the holders of the Deferred Shares shall be deemed not to be modi¢ed,
varied or abrogated by the creation or issue of further shares ranking pan passu with or in priority to
the Deferred Shares; and
(f) the Company shall have irrecoverable authority at any time to appoint any person to execute on behalf
of the holders of the Deferred Shares a transfer thereof and/or an agreement to transfer the same,
without making any payment to the holders thereof or g, to such person as the Company may
determine as custodian thereof and/or to cancel the same without making any payment to the holders
thereof and/or acquire the same (in accordance with the provisions of the Acts) without making any
payment to or obtaining the sanction of the holders thereof.

6.1.3 Transfer of shares


A member may transfer all or any of his uncerti¢cated shares and the Company shall register the transfer of
any uncerti¢cated shares in accordance with any applicable statutory provision. The Directors may refuse to
register the transfer of an uncerti¢cated share or any renounceable right of allotment of a share which is a
participating security held in uncerti¢cated form in accordance with the CREST Regulations to the extent
that the Company is permitted to do so by the CREST Regulations, provided that where the uncerti¢cated
shares are admitted to AIM, such a refusal would not prevent dealings in the shares of that class taking place
on an open and proper basis. If the board of directors refuses to register a transfer of an uncerti¢cated share
it shall, within two months of the date on which the operator instruction relating to such a transfer was
received by the Company, send to the transferee notice of the refusal.
A member may transfer all or any of his certi¢cated shares by an instrument in writing in any usual form, or
in any other form which the Directors may approve. The instrument of transfer shall be executed by or on
behalf of the transferee. The Directors may, in their absolute discretion and without giving any reason, refuse
to register the transfer of a certi¢cated share which is not fully paid up but shall not be bound to specify the
grounds upon which such registration is refused provided that, where any such shares are admitted to AIM,
such a refusal would not prevent dealings in the shares of that class taking place on an open and proper basis.
The Directors may also refuse to register a transfer of a certi¢cated share or a renunciation of a renounceable
letter of allotment, whether or not fully paid, unless the instrument of transfer is lodged, duly stamped or
adjudged or certi¢ed as not chargeable to stamp duty, at the transfer o⁄ce, or such other place as the
Directors may appoint and is accompanied by the certi¢cate(s) for the share(s) to which it relates (except
where the shares are registered in the name of a market nominee and no certi¢cate has been issued for them)
and such other evidence as the Directors may reasonably require to show the right of the transferor to make

133
the transfer or the person renouncing to e¡ect the renunciation. If the Directors refuse to register a transfer
of a share they shall, within two months after the date on which the transfer was lodged with the Company,
send to the transferee notice of the refusal.
The Directors may refuse to register any transfer unless it is in respect of only one class of share and is in
favour of not more than four transferees or renouncees.

6.1.4 Changes in capital


The Company may by ordinary resolution:
(a) increase its share capital by a sum to be divided into shares of such amounts as the resolution shall
prescribe;
(b) consolidate and divide all or any of its share capital into shares of a larger amount than its existing
shares;
(c) sub-divide its shares, or any of them, into shares of a smaller amount than is ¢xed by the Memorandum
of Association; and
(d) cancel shares which, at the date of the passing of the resolution, have not been taken or agreed to be
taken by any person and diminish the amount of its share capital by the amount of the shares so
cancelled.
Subject to the provisions of the statutes and the AIM Rules and to the rights attaching to existing shares, the
Company may:
(i) by extraordinary resolution purchase, or enter into a contract under which it will or may purchase, its
own shares; and
(ii) by special resolution reduce its share capital, any capital redemption reserve share premium account or
other undistributable reserve in any manner.

6.1.5 Variation of rights


Subject to the provisions of the statutes, if at any time the capital of the Company is divided into di¡erent
classes of shares (which it will not be following Admission), the rights attached to any class may be varied or
abrogated in such manner (if any) as may be provided by these rights or in the absence of any such
provisions, with the consent in writing of the holders of not less than three-quarters in nominal value of the
issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the
holders of the shares of that class. At any separate general meeting, the necessary quorum shall be two
persons holding or representing by proxy at least one-third in nominal amount of the issued shares of the
class in question or, at any adjourned meeting of such holders, shall be one person holding shares of the class
in question in person or by proxy whatever his or their holding. Every holder of the shares of the class present
in person or by proxy shall, on a show of hands or on a poll, have one vote in respect of every share of the
class held by them respectively and a poll may be demanded in writing by any holder of shares of the class
present in person or by proxy.

6.1.6 Directors
(a) The number of directors (other than alternate directors) shall not be less than four. There shall be no
more than 10 directors. The quorum for meetings of the board shall be 4 in number.
(b) A Director shall not be required to hold any shares of the Company by way of quali¢cation.
(c) There shall be no age limit for Directors.
(d) At each annual general meeting at least one-third of the Directors for the time being shall retire from
o⁄ce by rotation. The Directors to retire by rotation shall include, ¢rstly, any Director who wishes to
retire at the meeting and not o¡er himself for re-election and, secondly, those Directors who have been
longest in o⁄ce since their last appointment or reappointment, provided always that each director shall
be required to retire and o¡er himself for re-election at least every three years. The retiring Director
shall, if willing to act, be deemed to have been reappointed, unless at the general meeting it is resolved
not to ¢ll the vacancy or a resolution for the reappointment of the director is put to the meeting and not
passed.
(e) The Directors (other than alternate directors) shall be entitled to such remuneration by way of fees for
their services in the o⁄ce of a director as the Directors may determine (not exceeding »200,000 in

134
aggregate per annum or such larger sum as the Company may, by ordinary resolution, decide). Such
fee shall be divided between the Directors as they agree or, failing agreement, equally. The fees shall be
distinct from any salary, remuneration or other amount payable to a Director in respect of any
executive o⁄ce held by him or other work performed by him which is beyond the scope of his o⁄ce as a
Director.
(f) The Directors may also be paid all travelling, hotel and other expenses properly incurred by them in
connection with their attendance at meetings of the Directors or of committees of the Directors or
general meetings or separate meetings of the holders of any class of shares of the Company.
(g) The Directors may provide bene¢ts, whether by the payment of gratuities or pensions or by purchasing
and maintaining insurance or otherwise, for the bene¢t of any persons who are or were at any time
Directors or the holders of any executive or comparable o⁄ce of employment with the Company or
any other company or undertaking which is or has been (a) a subsidiary of the Company or (b)
otherwise allied to or associated with the company or a subsidiary of the Company or (c) a predecessor
in business of the Company or of any such subsidiary, or (d) for any member of his family (including a
spouse and a former spouse) or any person who is or was dependent on him, and may (as well before or
after he ceases to hold such o⁄ce or employment) establish, maintain, subscribe and contribute to any
fund and pay premiums for the purchase or provision of any such bene¢t.
(h) Subject to the provisions of the statutes a Director may be a party to or otherwise interested in any
contract, transaction, arrangement or proposal with the Company or in which the Company is
otherwise interested either in regard to his tenure of any o⁄ce or place or pro¢t or as vendor purchaser
or otherwise. A Director may hold any other o⁄ce or place of pro¢t under the Company (except that of
auditor or auditor of a subsidiary of the Company) in conjunction with the o⁄ce of director and may
act by himself or through his ¢rm in such professional capacity to the Company and in any such case on
such terms as to remuneration and otherwise as the Directors may arrange. Any remuneration shall be
in addition to any remuneration provided for by any other article.
(i) A Director who to his knowledge is in any way (directly or indirectly) interested in a contract,
transaction, arrangement or proposal with the Company shall declare the nature of his interest at the
meeting of the Directors at which the question of entering into such contract, transaction, arrangement
or proposal is ¢rst considered if he knows his interest then exists or in any other case at the ¢rst meeting
of the directors after he knows that he is or has become so interested.
(j) A Director shall not vote or be counted in the quorum on any resolution of the directors concerning his
own appointment (including the ¢xing and varying of terms of appointment) as the holder of any o⁄ce
or place of pro¢t with the Company or any other company in which the Company is directly or
indirectly interested. Where proposals are under consideration concerning the appointment (including
the ¢xing or varying of terms of appointment) of two or more Directors to o⁄ces or employment with
the Company or any body corporate in which the Company is interested the proposals may be divided
and considered in relation to each director separately and (provided he is not under the Articles or for
any other reason precluded from voting) each of the directors concerned shall be entitled to vote and be
counted in the quorum in respect of each resolution except that concerning his own appointment.
(k) A Director shall not vote or count in the quorum in relation to a resolution or meeting of the Directors
in respect of any contract or arrangement or any other proposals whatsoever in which he has an interest
which (together with any interest of a connected person) to his knowledge is material interest.
Notwithstanding the above, a Director shall be entitled to vote (and be counted in the quorum) on: (a)
any contract in which he is interested by virtue of his interest in shares or debentures or other securities
of or otherwise in or through the Company; (b) the giving of any guarantee, security or indemnity to
him in respect of money lent or obligations incurred by him or by any other person at the request of, or
for the bene¢t of, the Company or any of its subsidiary undertakings; or the giving of any guarantee,
security or indemnity to a third party in respect of a debt or obligation of the Company or any of its
subsidiary undertakings for which he himself has assumed responsibility in whole or in part and
whether alone or jointly with others under a guarantee or indemnity or by the giving of security; (c) any
matter relating to an o¡er of shares, debentures or other securities of or by the Company or any of its
subsidiary undertakings in which o¡er the Director is or may be entitled to participate as a holder of
securities or in the underwriting or sub-underwriting of which the Director is to participate; (d) any
contract, transaction, arrangement or proposal to which the Company is or is to be a party relating to
another company, including any subsidiary of the Company, in which he and any persons connected
with him do not to his knowledge (directly or indirectly) hold an interest in shares (as that term is used

135
in Part 22 of the Companies Act 2006) whether as an o⁄cer, shareholder, creditor or otherwise
representing one per cent. or more of any class of the equity share capital, or the voting rights, in that
company or of any other company through which his interest is derived; (e) any contract, transaction,
arrangement or proposal for the bene¢t of employees of the Company or any of its subsidiary
undertakings (including in relation to a pension fund, retirement, death or disability bene¢ts scheme or
personal pension plan) which does not award him any privilege or bene¢t not generally awarded to the
employees to whom the arrangement relates; and (f) any contract, transaction, arrangement or
proposal concerning insurance which the Company proposes to maintain or purchase for the bene¢t of
directors or for the bene¢t of persons including directors.
(l) For so long as Francis Gugen, Andrew Austin and Brent Cheshire collectively hold shares representing
more than 75 per cent. of the outstanding voting rights comprised in the issued ordinary share capital
of the Company, Mr Gugen in his capacity of Chairman of the Board shall have a second casting vote
in the event of deadlock on voting at Board Meetings. This second casting vote will fall away in the
event that the aggregate shareholdings of Francis Gugen, Andrew Austin and Brent Cheshire fall
below 75 per cent. of the outstanding voting rights comprised in the issued ordinary share capital of the
Company.

6.1.7 Borrowing powers


The board of Directors may exercise all the powers of the Company to borrow money and to mortgage or
charge all or any part of its undertaking, property and assets (both present and future) and uncalled capital
and to issue debentures and other securities, whether outright or as collateral security for any debt, liability
or obligation of the Company or of any third party. The board of Directors shall restrict the borrowings of
the Company and exercise all voting and other rights or powers of control exercisable by the Company in
relation to its subsidiary undertakings (if any) so as to secure (as regards subsidiary undertakings only so far
as by such exercise it can secure) that the aggregate principal amount outstanding at any time in respect of all
borrowings by the Enlarged Group (exclusive of any borrowings which are owed by one Enlarged Group
company to another Enlarged Group company) after deducting the amount of cash deposited will not,
without the previous sanction of the Company in general meeting, exceed an amount equal to »100,000,000
or any higher limit ¢xed by ordinary resolution of the Company which is applicable at the relevant time.

6.1.8 Meetings
Subject to the provisions of the Act, an annual general meeting shall be called by at least twenty-one clear
days’ notice, and all extraordinary general meetings shall be called by at least fourteen clear days’ notice. The
notice should specify the place, the date and the time of meeting and the general or special nature of business
to be transacted. A general meeting shall, notwithstanding that it has been called by shorter notice than that
speci¢ed above, be deemed to have been duly called if it is so agreed the case of an annual general meeting, by
all the members entitled to attend and vote at the meeting; and in the case of any other meeting, by a majority
in number of the members having a right to attend and vote at that meeting, being a majority together
holding not less than 95 per cent. in nominal value of the shares giving that right.

6.1.9 Unclaimed dividends


Any dividend which has remained unclaimed for twelve years from the date when it became due for payment
shall, if the directors so resolve, be forfeited, revert to and cease to remain owing by the Company.

6.2 Mandatory Bids


The Takeover Code applies to the Company. Under the Takeover Code, if an acquisition of an interest in
shares, whether by a series of transactions over a period of time or not were to increase the aggregate
interests of the acquiror and its concert parties to an interest in shares carrying 30 per cent. or more of the
voting rights in the Company, the acquiror and, depending on the circumstances, its concert parties would be
required (except with the consent of the Panel) to extend o¡ers for the outstanding shares in the Company at
a price not less than the highest price paid for the Ordinary Shares by the acquiror or its concert parties
during the previous 12 months. This requirement would also be triggered by any acquisition of an interest
shares by a person holding (together with its concert parties) shares carrying between 30 and 50 per cent. of
the voting rights in the Company if the e¡ect of such acquisition were to increase that person’s percentage of
shares voting rights in which he is interested. There are no provisions in the New Articles of Association of
the Company delaying, deterring or preventing a change of control of the Company.

136
6.3 Mandatory compulsory purchase or ‘‘squeeze out’’ provisions
Sections 974 to 991 of the Companies Act 2006 are applicable to the Company, so should a takeover o¡er be
made for all the Ordinary Shares then in issue (other than any already held by the o¡eror) and the o¡eror, by
virtue of acceptances of the o¡er, has acquired or contracted to acquire not less than nine-tenths of such
Ordinary Shares, excluding any such shares held in treasury, the o¡eror may compulsorily acquire the rest of
such Ordinary Shares upon the same terms as those contained in the o¡er by serving a statutory notice on
each holder of such Ordinary Shares who has not accepted the o¡er. Further, a holder of Ordinary Shares
who has not accepted the o¡er may, where the o¡eror has acquired or contracted to acquire not less than
nine-tenths of such Ordinary Shares, give notice to the o¡eror, requiring the o¡eror to purchase his Ordinary
Shares. If the o¡eror has not previously served notice requiring the compulsory acquisition by the o¡eror of
the outstanding Ordinary Shares it must serve notice upon each holder of such Ordinary Shares who has not
accepted the o¡er, within one month of the right of the holder to require the o¡eror to purchase his Ordinary
Shares arising, setting out the rights of such holders to require the o¡eror to purchase their Ordinary Shares
which may specify a time limit for the exercise of those rights which may end no earlier than three months
after the end of the period within which the o¡er can be accepted.
Where a notice has been served by the o¡eror on a holder of Ordinary Shares requiring the compulsory
acquisition of his Ordinary Shares, such holder may challenge the same by applying to the court within six
weeks of the notice being served upon him. The court may order that the o¡eror shall not be entitled to
acquire the relevant Ordinary Shares or that it may only do so on di¡erent terms from those of the o¡er,
although to succeed the relevant holder of Ordinary Shares will have to show that the terms of the o¡er are
unfair. Where a holder of Ordinary Shares has served a notice upon an o¡eror, requiring the o¡er to
purchase his Ordinary Shares, either such holder or the o¡eror may apply to the court for an order that the
relevant Ordinary Shares shall be acquired on di¡erent terms to those set out in the o¡er. The court may not
order a holder of Ordinary Shares who is making an application to pay any costs or expenses unless it
considers that the application was unnecessary, improper or vexatious, there has been unreasonable delay in
making his application or unreasonable conduct on his part in conducting the proceedings.

6.4 Notice of 3 per cent. interests


Subject to certain quali¢cations and exceptions, Chapter 5 of the Admission and Disclosure Rules of the
Financial Services Authority requires that a person who acquires an interest in 3 per cent. or more of the
voting rights attaching to issued voting shares of a company whose shares are admitted to trading on AIM
must, within two business days of such acquisition, or of his becoming aware of the facts constituting the
acquisition of the interest, notify the Company and the Financial Services Authority of his interest. If while
he has such an interest, he acquires or disposes of an interest in 1 per cent. or more of the voting rights
attaching to issued voting shares of the Company he must notify that event, and must also notify the
cessation of his having a 3 per cent. interest. Where a person is party to an agreement between two or more
persons which obliges them to adopt by concerted exercise of voting rights a lasting common policy towards
the management of the Company, the interests of all such persons are aggregated for the purposes of the
noti¢cation provisions and each party is required to notify not only his own interests and changes therein but
those of the other parties to the agreement. All noti¢cations received under these provisions will be the
subject of a public announcement under the AIM Rules.

6.5 Requirement to disclose interests in voting rights


Under provisions contained in Part 22 of the Companies Act 2006 the Company may serve a notice on any
person who it believes has, or may in the three previous years have had , an interest in its voting shares
requiring them to give particulars of their interest, or, if no interest is then held, of any person to whom any
previous interest was transferred. The Company must exercise its right to serve such a notice if required to do
so by holders of at least 10 per cent. of its paid up voting shares. Failure to comply with a notice is a criminal
o¡ence and the Company may impose sanctions against the shareholder concerned under its Articles of
Association including disenfranchisement, withholding of dividends and restrictions on transfer. ‘‘Interest’’
is widely de¢ned and includes an interest of any kind in the shares, subject to certain speci¢c exclusions, but
‘‘interest’’ includes, inter alia, an agreement to purchase shares or the right to do so by virtue of an option
and a person is interested in shares held by companies which he controls or by his spouse, civil partner and
children and where a person is party to an agreement between two or more persons that includes provisions
for the acquisition by any one or more of them of interests in shares of the Company which imposes
obligations or restrictions on any one or more of the parties with respect to their use, retention or disposal of
such interests and such interests are acquired in pursuance of any agreement, each party to the agreement is
regarded as interested in the shares held by each other such party.

137
7. Information on the Concert Party
The names and addresses of the members of the Concert Party are:
Andrew Austin The Vineyards
Beaulieu
Brockenhurst
SO42 7YL
Brent Cheshire Woodpeckers
The Haven
Billinghurst
West Sussex
RH14 9BE
Leigh Dyson 18 Paddock Close
Edwinstowe
Mans¢eld
Nottinghamshire
NG21 9LP
Francis Gugen 38 Argyll Road
London
W8 7BS
Edward Lasseter 1009 Fairfax Drive
Tuscaloosa,
AL 35406
USA
Andrew Purcell 9 Masson Court
Wellington Point
QLD, 4160
Australia
Michael Smith 39 Bedford Road
St Albans
Hertfordshire
AL1 3BH
Roger Smith 7 Newton Road
Swepstone
Coalville
Leicestershire
LE67 2SH
Further information about Andrew Austin, Brent Cheshire and Francis Gugen, who are Proposed Directors
of the Company is set out on pages 28 to 29 of Part I of this document and in paragraph 10 of Part VII of this
document.
Michael Smith has 15 years oil and gas experience as a geologist. He currently works as a consultant to
companies in the E&P sector, particularly in relation to the giving of strategic corporate advice. He currently
acts as Head of Geoscience for IGL for whom he has worked part time as a contractor since April 2004. Mr
Smith was previously a senior corporate strategic planner at Amerada Hess.
Roger Smith has 22 years mining and 14 years CBM experience in UK/Minerals Surveyor and works as a
Consultant to energy sector specialising in mining, land and planning. He presently acts as Development
Manager for IGL for whom he has worked extensively as a contractor since May 2004.
Andrew Purcell joined Arrow Energy in August 2006 after being appointed Chief Executive O⁄cer of CH4
Gas earlier in that year. Prior to that Mr Purcell was chief executive o⁄cer and managing director of Sydney
Gas. He is a mechanical engineer with over 20 years international experience in coal, base minerals and
metals and gas industries. He began his career in the UK coal mines, moved to South Africa where he took
up several engineering and executive roles before returning to the UK in 1994. He was part of a management
buy-out team that purchased two of the few cash generative coal mines in 1996 and began to generate power
for local markets from coal seam gas thereafter. From June 2000 to January 2004 Mr Purcell was Managing

138
Director of Stratagas plc; where he worked with Mr Francis Gugen who was Chairman from September
2000 until September 2005 and from whom IGL acquired a number of its Licences as described elsewhere in
this document, as a result of which acquisition Mr Purcell became a shareholder in IGL.
Leigh Dyson is currently pursuing non-Oil & Gas interests in the UK. From June 2000 to December 2003 Mr
Dyson was business development director, and then until April 2006, a director of StrataGas plc where he
worked with Mr Francis Gugen who was Chairman from September 2000 until September 2005 and from
whom IGL acquired a number of its Licences as described elsewhere in this document, as a result of which
acquisition Mr Dyson became a shareholder in IGL.
Edward Lasseter is currently pursuing entrepreneurial interests in the US in Oil & Gas including CBM
interests. From June 2000 to December 2003 Mr Lasseter was director of planning, and then until April
2006, a director of Stratagas plc where he worked with Mr Francis Gugen who was Chairman from
September 2000 until September 2005 and from whom IGL acquired a number of its Licences as described
elsewhere in this document, as a result of which acquisition Mr Lasseter became a shareholder in IGL.

8. Substantial shareholders
8.1 Save for the following persons and those disclosed below, the Company is not aware of any person
who, at the date of this document and following the Acquisition, directly or indirectly, jointly or
severally, holds or will hold three per cent. or more of the ordinary share capital of the Company or
exercises or could exercise control over the Company:
Immediately following
the Acquisition (taking
into account conversion of
the Loan Notes but
As at the date of this assuming no exercise of
document Warrants)
No. of % of % of
Existing Existing No. of New Enlarged
Ordinary Ordinary Ordinary Share
Shares Shares Shares Capital
Francis Gugen 0 0 27,419,097 46.4%
Andrew Austin 0 0 11,429,253 19.3%
Brent Cheshire 0 0 11,429,253 19.3%
Roger Smith 0 0 2,564,100 4.3%
Merchant House Group Plc 5,000,000 5.9% 211,111 0.4%
Libertas Capital Ventures Limited 5,000,000 5.9% 211,111 0.4%
David Newton 5,000,000 5.9% 100,000 0.2%
Ezenet Limited 3,000,000 3.5% 60,000 0.1%
Wolf Martinick 3,000,000 3.5% 150,909 0.3%
8.2 All shareholders have identical voting rights in respect of the Existing Ordinary Shares held by them.
8.3 Save as disclosed below, there have been no dealings for value by the Existing Directors (pursuant to
Part 22 of the Companies Act 2006) during the Disclosure Period or by IGL, the Concert Party
(pursuant to Part 22 of the Companies Act 2006) nor any persons acting in concert with the Concert
Party during the Disclosure Period, in each case in relevant securities of the Company.
Price of
Existing
Number of Ordinary
Existing Shares
Ordinary (pence)
Date Nature of transaction Shares when dealt
Richard Armstrong 18 April 2007 Shares subscribed 1,000,000 1p
John Bryant 18 April 2007 Shares subscribed 2,518,500 1p
Peter Redmond 18 April 2007 Shares subscribed 1,000,000 1p
Merchant House Group Plc 18 April 2007 Shares subscribed 5,000,000 1p
8.4 Save as disclosed below, there have been no dealings for value in relevant securities of the Company by
persons falling within the categories speci¢ed in paragraphs (A), (B) and (D) of the de¢nition of
‘‘associate’’ in paragraph 8.8(ii) below, in relation to the Company during the Disclosure Period:

139
Price of
Existing
Ordinary
Number of Shares
Existing (pence)
Ordinary when
Date Nature of transaction Shares granted
Merchant Capital plc 10 April 2007 Grant of Warrants 4,191,474 1p
8.5 Save as disclosed in paragraphs 8.1, 8.2, 8.3 and 8.4 above and 9.1 below:
(i) neither the Company nor any subsidiary of the Company, is interested in any relevant securities
(as de¢ned below) or has rights to subscribe for, or short positions in any relevant securities of
any member of the Concert Party;
(ii) no Existing Director is interested directly or indirectly in any relevant securities of any member of
the Concert Party;
(iii) no person acting in concert with the Company or any of its connected advisers is interested in any
relevant securities or has rights to subscribe for, or short positions in any relevant securities of the
Company;
(iv) no associate of the Company, nor any person whose investments are managed on a discretionary
basis by fund managers (other than exempt fund managers) connected with the Company or any
of its associates, nor any employee bene¢t trust of the Company or any of its associates, nor any
connected adviser (excluding exempt principal traders) to the Company or any of its associates
(including any persons controlling, controlled by, or under the same control as any such
connected adviser), owns or controls or is interested, directly or indirectly in any relevant
securities or has rights to subscribe for, or short positions in any relevant securities of the
Company nor has any such person dealt for value in, or borrowed or lent any relevant securities
during the Disclosure Period;
(v) no member of the Concert Party or any person acting in concert with the Concert Party is
interested directly or indirectly in any relevant securities of the Company, or has any right to
subscribe for or had any short position in relation to relevant securities of the Company;
(vi) no director of IGL nor of any member of the Concert Party is interested in any relevant securities
or has rights to subscribe for, or short positions in any relevant securities of the Company; and
(vii) neither IGL, nor the Concert Party nor any persons acting in concert with any of them has any
short positions in or options over or rights to subscribe (or has borrowed or lent) any relevant
securities.
8.6 No member of the Concert Party nor any person acting in concert with the Concert Party has dealt for
value in any relevant securities of the Company during the Disclosure Period.
8.7 Neither the Company nor any person acting in concert with it has any short position in or options over
or rights to subscribe (or has borrowed or lent) any relevant securities.
8.8 For the purposes of this Part VII:
(i) ‘‘relevant securities’’ in relation to any company are:
(A) shares comprised in the ordinary share capital (including, in the case of the Company,
Ordinary Shares);
(B) securities convertible into such shares, rights to subscribe for such shares, options
(including traded options) in respect of, and derivatives referenced to, any of the foregoing;
(ii) references to an ‘‘associate’’ of the Company are to any of:
(A) its subsidiaries, its associated companies and companies of which any such subsidiaries or
associated companies are associated companies;
(B) connected advisers to the Company (as de¢ned in the Takeover Code) or any company
within (A) above, including persons controlling, controlled by or under the same control as,
such connected advisers;
(C) the directors (together with their close relatives and related trusts) of the Company or a
company within (A) above; and
(D) the pension funds of the Company or a company within (A) above;

140
(iii) references to a ‘‘connected adviser’’ are to:
(A) in relation to the Company or any associate of the Company an organisation which is
advising the Company or any such associate in relation to the Proposals and any corporate
broker to any such party (other than any corporate broker who is unable to act in
connection with the Proposals because of a con£ict of interest); and
(B) in relation to a person who is acting in concert with the Company, an organisation which is
advising that person in relation to the Proposals or in relation to the matter which is the
reason for that person being a member of the relevant concert party;
(iv) ownership or control of 20 per cent. or more of the equity share capital of a company is regarded
as the test of associated status and ‘‘control’’ means a holding or aggregate holdings of shares
carrying 30 per cent. or more of the voting rights attributable to the share capital of a company
which are currently exercisable at a general meeting, irrespective of whether the holding or
aggregate holding confers de facto control;
(v) ‘‘derivative’’ includes any ¢nancial product whose value, in whole or in part, is determined,
directly or indirectly, by reference to the price of any underlying security;
(vi) ‘‘acting in concert’’ with a party mean any such person acting or deemed to be acting in concert
with that party for the purposes of the Takeover Code;
(vii) ‘‘arrangement’’ include indemnity or option arrangements and any agreement or understanding,
formal or informal, of whatever nature relating to relevant securities which may be an
inducement to deal or refrain from dealing;
(viii) ‘‘dealing’’ or ‘‘dealt’’ include:
(a) the acquisition or disposal of securities, of the right (whether conditional or absolute) to
exercise or direct the exercise of the voting rights attaching to securities, or of general
control of securities;
(b) the taking, granting, acquisition, disposal, entering into, closing out, terminating, exercising
or varying of an option in respect of any securities;
(c) subscribing or agreeing to subscribe for securities;
(d) exercising or converting any securities carrying conversion or subscription rights;
(e) the acquisition, disposal, entering into, closing out, exercise of any rights under, or varying,
a derivative referenced, directly or indirectly, to securities;
(f) entering into, terminating or varying the terms of any agreement to purchase or sell
securities; and
(g) any other action resulting, or which may result, in an increase or decrease in the number of
securities in which a person is interested or in respect of which he has a short position;
(ix) a person having an ‘‘interest’’ in relevant securities include where a person:
(a) owns securities;
(b) has the right (whether conditional or absolute) to exercise or direct the exercise of the voting
rights attaching to securities or has general control of them;
(c) by virtue of any agreement to purchase, option or derivative, has the right or option to
acquire securities or call for their delivery or is under an obligation to take delivery of them,
whether the right, option or obligation is conditional or absolute and whether it is in the
money or otherwise; or
(d) is party to any derivative whose value is determined by reference to the price of securities
and which results, or may result, in his having a long position in them.
(x) ‘‘short position’’ mean any short position (whether conditional or absolute and whether in the
money or otherwise) including any short position under a derivative.

9. Existing Directors’, Proposed Directors’ and other interests


9.1 The interests and short positions in relevant securities of the Existing Directors, the Proposed
Directors, their immediate families and as far as they are aware having made due and careful enquiries,

141
of persons connected with them, (pursuant to Part 22 of the Companies Act 2006) in the share capital
of the Company as at 26 November 2007 (being the latest practicable date prior to the publication of
this document) and at Admission, all of which are bene¢cial unless otherwise stated are set out below:
Immediately following implementation
As at date of this document of the Proposals
% of % of
No. of Existing No. of New Enlarged
Ordinary Ordinary No of Ordinary Share No of
Shares Shares Warrants Shares Capital Warrants
John Bryant 2,518,500 2.97% 0 50,370 0.09% 110,000
Peter Redmond 1,000,000 1.18% 0* 20,000 0.03% 110,000
Richard Armstrong 1,000,000 1.18% 0 20,000 0.03% 110,000
Francis Gugen 0 0% 0 27,419,097 46.39% 0
Andrew Austin 0 0% 0 11,429,253 19.34% 0
Brent Cheshire 0 0% 0 11,429,253 19.34% 0
* Mr Redmond is also a director of Merchant Capital Limited, a wholly owner subsidiary of Merchant House Group plc which owns
5,000,000 shares and 4,191,474 warrants in the Company.

Full details of the outstanding Warrants are set out in paragraph 4 of this Part VII.

10. Existing Directors’ and Proposed Directors’ employment agreements and letters of appointment
10.1 The following are particulars of the Existing Directors’ and the Proposed Directors’ employment
agreements or letters of appointment with the Company.

Executive Directors:
Francis Gugen
Mr Gugen’s services are provided to the Company pursuant to a letter agreement with the Company
dated 27 November 2007 which is conditional upon Admission. This agreement employs Mr Gugen
under the same terms and conditions (with such amendments as are noted below) he was previously
employed by IGL under an agreement dated 9 December 2005 (as amended from time to time). Under
the agreement Mr Gugen has agreed to act as executive chairman to the Company for which he will
devote such time as is required require to discharge his duties, which is expected to be not less than one
and a half days per week. The terms of his engagement as executive Chairman are terminable by either
party giving 12 months notice in writing. The appointment carries a salary of »100,000 per annum. Mr
Gugen will be eligible to receive a bonus dependent upon the achievement of various objective targets
and milestones to be set by the Remuneration Committee.

Andrew Austin
Mr Austin’s services are provided to the Company pursuant to a letter agreement with the Company
dated 27 November 2007 which is conditional upon Admission. This agreement employs Mr Austin
under the same terms and conditions (with such amendments as are noted below) he was previously
employed by IGL under an agreement dated 9 December 2005 (as amended from time to time). Under
the agreement Mr Austin has agreed to act as Chief executive o⁄cer of the Company for which he will
devote all of his working time. The terms of his engagement as Chief Executive O⁄cer is terminable by
either party given 12 months notice in writing. The appointment carries a salary of »200,000 per
annum. Mr Austin will be eligible to receive a bonus dependent upon the achievement of various
objective targets and milestones to be set by the Remuneration Committee.

Brent Cheshire
Mr Cheshire’s services are provided to the Company pursuant to a letter agreement with the Company
dated 27 November 2007 which is conditional upon Admission. This agreement employs Mr Cheshire
under the same terms and conditions (with such amendments as are noted below) he was previously
employed by IGL under an agreement dated 9 December 2005 (as amended from time to time). Under
the agreement Mr Cheshire has agreed to act as technical director to the Company for which he will
devote such time as is required to discharge his duties, which is expected to be two days per week. The
terms of his engagement as technical director is terminable by either party given 12 months notice in
writing. The appointment carries a salary of »100,000 per annum. Mr Cheshire will be eligible to

142
receive a bonus dependent upon the achievement of various objective targets and milestones to be set
by the Remuneration Committee.

Non-Executive Directors:
Peter Redmond
Mr Redmond’s services are provided to the Company pursuant to an agreement entered between the
Company and Mr Redmond on 29 October 2007, e¡ective from 10 April 2007. Under the agreement,
Mr Redmond has agreed to act as non-executive director to the Company for which he is entitled to a
fee of »15,000 per annum for working up to 3 days in any month with a day rate of »750 for days
worked in excess of that amount. The engagement is terminable by the Company on 3 months’ written
notice, or immediately by the Company in the event that Mr Redmond ceases to be a director of the
Company for any reason provided that Mr Redmond receives the amount that he would otherwise be
due for working such notice period. Were the Company to terminate Mr Redmond’s engagement
before the ¢rst year anniversary of Admission, he would (if greater than the amount otherwise due)
instead be entitled to the amount due for working the unexpired period of such ¢rst year.
Conditional upon Admission Mr Redmond will enter into a new agreement with the Company. Under
the terms of the new agreement Mr Redmond agrees to act as non-executive director of the Company
for a ¢xed period of 6 months, terminable after 3 months by either party on 3 months’ notice and at a
fee of »15,000 based on 12 days commitment per annum with any additional days being charged on a
pro rata basis. This fee arrangement will be reviewed after 6 months.

Richard Armstrong
Mr Armstrong’s services are provided to the Company pursuant to an agreement entered into on
29 October 2007, e¡ective from 10 April 2007. Under the agreement, Mr Armstrong has agreed to act
as non-executive director to the Company for which he is entitled to a fee of »15,000 per annum for
working up to 3 days in any month with a day rate of »750 for days worked in excess of that amount.
The engagement is terminable by the Company on 3 months’ written notice, or immediately by the
Company in the event that Mr Armstrong ceases to be a director of the Company for any reason
provided that Mr Armstrong receives the amount that he would otherwise be due for working such
notice period. Were the Company to terminate Mr Armstrong’s engagement before the ¢rst year
anniversary of Admission, he would (if greater than the amount otherwise due) instead be entitled to
the amount due for working the unexpired period of such ¢rst year.
Conditional upon Admission Mr Armstrong will enter into a new agreement with the Company.
Under the terms of the new agreement Mr Armstrong agrees to act as non-executive director of the
Company for a ¢xed period of 6 months, terminable after 3 months by either party on 3 months’ notice
and at a fee of »15,000 based on 12 days commitment per annum with any additional days being
charged on a pro rata basis. This fee arrangement will be reviewed after 6 months.

John Bryant
Mr Bryant’s services are provided to the Company pursuant to an appointment agreement and a
consultancy agreement entered into between the Company and Axeman Overseas Limited (the
‘‘Consultant’’) on 29 October 2007, e¡ective from 10 April 2007. Under the terms of appointment, Mr
Bryant has agreed to act as a non-executive director of the Company for no remuneration and the
engagement is terminable on three months’ written notice from the Company or one months’ notice
from Mr Bryant. Under the consultancy agreement, the Consultant has agreed to provide the services
of Mr Bryant for which the Consultant will receive a fee of »15,000 per annum for working up to 3 days
in any month with a day rate of »750 for days worked in excess of that amount. The consultancy
agreement can be terminated on the same terms as the appointment agreement.
Conditional upon Admission Mr Bryant’s terms of appointment and the consultancy agreement with
Axeman Overseas Limited will be amended to extend them to run for a ¢xed term of 6 months from the
date of Admission and to be terminable after his ¢rst three months by any party on 3 months’ notice.
Fees payable will be »15,000 based on 12 days commitment per annum with any additional days being
charged on a pro rata basis. This fee arrangement will be reviewed after 6 months.
10.2 Save for the payment in lieu of notice, there are no employment agreements or letters of engagement
between any Existing Directors or Proposed Directors and the Company which provide for bene¢ts
upon termination of employment.

143
10.3 Save as disclosed in paragraph 10.1, no service contracts, consultancy agreements or letters of
appointment have been entered into or amended within 6 months of the date of this document with the
Company.
10.4 The aggregate remuneration paid and bene¢ts in kind granted to the Existing Directors for the year
ended 31 December 2006 was »277,000. It is estimated that the aggregate remuneration paid and
bene¢ts in kind granted to the Existing Directors for the year ending 31 December 2007, under the
arrangements in force at the date of this document, will amount to approximately »65,000.
10.5 None of the Directors are, nor have been within the ¢ve years prior to the publication of this document,
partners in any partnerships. The Directors have held the following directorships (in addition, where
relevant, to being a director of the Company) within the ¢ve years prior to the publication of this
document.
Director Current Directorships Past Directorships
John Bryant Attiki Denmark ApS Anglian Ash Limited
Attiki Gas Supply Company SA Anglian Straw Limited
Axeman Overseas Limited Cinergy Global (Cayman) Holdings, Inc
Cinergy Global Hellas s.a. Cinergy Global Ely, Inc.
Gas Turbine E⁄ciency Limited Cinergy Global Foote Creek, Inc
Weatherly International plc Cinergy Global Hydrocarbons Pakistan
Cinergy Global Power (UK) Limited
Cinergy Global Power Iberia SA
Cinergy Global Power Services Limited
Cinergy Global Power, Inc.
Cinergy Global Resources Inc..
Cinergy Global Trading Limited
Cinergy Global Tsavo Power
Cinergy Holdings, BV
Cinergy MPI II, Inc.
Cinergy MPI IV, Inc.
Cinergy MPI IX, Inc.
Cinergy MPI V, Inc.
Cinergy MPI VI, Inc.
Cinergy MPI VII, Inc.
Cinergy MPI VIII, Inc.
Cinergy MPI X, Inc.
Cinergy MPI XI, Inc.
Cinergy MPI XII, Inc.
Cinergy MPI XIII, Inc.
Cinergy MPI XIV, Inc.
Cinergy MPI XV, Inc.
Cinergy Renewable Trading Limited
Cinergy Trading and Marketing
Limited
Cinergy Zambia BV
Commercial Electricity Supplies
Limited
Construcciones Y Representaciones
Industriales, S.A.
Copperbelt Energy Corporation PLC
Ely Power Limited EPR Ely Limited
EPR Ely Power Limited
IPS-Cinergy Power Limited
Midlands Hydrocarbons (Bangladesh)
Limited
Midlands Power (HPL) Limited
Midlands Power (Indus) Limited
Midlands Power (One) Limited
UK Electric Power Limited
Vendresse Limited

144
Director Current Directorships Past Directorships
Peter Redmond Bella Media Plc Artilium plc
BWA Group plc Merchant House Group plc
Fort¢eld Investments plc Petsome Plc
Merchant Capital Limited Stratus Holdings plc
Merchant House Finance Limited Victoria Oil & Gas Central Asia
Synigence Plc Limited
Weatherly International plc
Westover Wines plc
Richard AlphaWorx plc Artilium plc
Armstrong BWA Group plc Bella Media plc
Belisarius Limited Briar Abbey Services Limited
Camvaxx Limited Crescent Technology Ventures plc
Fort¢eld Investments plc (Ireland) Crescent Hydropolis Resorts plc
Safevaxx Limited Holroyd Consultants Limited
Stageworx plc Merchant House Group plc
Voipnetwork Limited Parallel Media Group plc
Victoria Oil & Gas Central Asia
Limited
Weatherly International plc
Zoa Corporation plc
Francis Gugen Britannia Building Society CH4 Energy Limited
Chrysaor Holdings Limited CH4 Limited
Gugen Consulting Limited CH4 Pipelines Limited
Echo Petroleum Limited Permagas Limited
Fraudscreen Limited Stratagas CBM Limited
Petroleum Geo-Services ASA Stratagas Plc
Raft Trustees Limited
Andrew Austin Austin and Austin Limited Recombinagen Limited
Trafalgar Marine Limited
Trafalgar International Marine Limited
M. A. Keeping Limited
Whit¢eld Solar Limited
Brent Cheshire Cheshire Energy Resources Limited Amerada Hess Energy Aps
Dong E&P (UK) Limited Amerada Hess Nominees Limited
Amerada Hess Limited
Amerada Hess NWE Holdings
Amerada Hess International LLC
Amerada Hess Aps
Amerada Hess Scandinavia Aps
Amerada Hess Norge A/S
United Kingdom O¡shore Operators
Association Limited
10.6 Save as disclosed below, none of the Directors has:

(a) any unspent convictions in relation to indictable o¡ences;

(b) had a bankruptcy order made against him or entered into any individual voluntary arrangement;

(c) been a director of a company which has been placed in receivership, compulsory liquidation,
creditors’ voluntary liquidation or administration or entered into a company voluntary
arrangement or any composition or arrangement with its creditors generally or any class of its
creditors whilst he was a director of that company at the time of, or within the twelve months
preceding, such events;

(d) been a partner of a ¢rm which has been placed in compulsory liquidation or administration or
which has entered into a partnership voluntary arrangement whilst he was a partner of that ¢rm
at the time of, or within twelve months preceding, such events;

145
(e) had any asset belonging to him placed in receivership or been a partner of a partnership whose
assets have been placed in receivership whilst he was a partner at the time of, or within twelve
months preceding, such receivership; or
(f) been publicly criticised by any statutory or regulatory authority (including any recognised
professional body) or ever been disquali¢ed by a court from acting as a director of a company or
from acting in the management or conduct of the a¡airs of any company.
Mr Redmond is a director of BWA Group Plc, Bella Media plc, Weatherly International plc, all of
which are or, have in the past been, subject to CVAs. Mr Redmond joined the boards of the companies
concerned in order to assist in the re¢nancing and reconstruction immediately after the CVAs had been
put in place. In all cases the CVAs have concluded or are in the course of satisfactory conclusions.
Mr Armstrong was a director of Crescent Technology Ventures plc and of Holroyd Consultants
Limited which went into members’ voluntary liquidation on a solvent basis. Mr Armstrong is a director
of BWA Group plc and was formerly a director of Parallel Media Group plc, Bella Media plc and
Weatherly International plc all of which are or, have in the past been, subject to CVA’s. Mr Armstrong
joined the boards of the companies concerned in order to assist in the re¢nancing and reconstruction
immediately after the CVA’s had been put in place. In all cases the CVAs have concluded or are in the
course of satisfactory conclusions.
10.7 No Director has been interested in any transaction with the Company, which was unusual in its nature
or conditions or signi¢cant to the business of the Company during the current or previous ¢nancial
year or during any previous ¢nancial year that remains outstanding or unperformed.
10.8 Andrew Austin, a Proposed Director, will receive a bonus of »40,000 on the successful completion of
the Acquisition pursuant to an agreement with IGL.

11. Lock-in, orderly market arrangements and agreements with Nominated Adviser and Broker
11.1 Lock-ins and orderly market arrangements
The Existing Directors and the Proposed Directors have entered into lock-in and orderly marketing
arrangements with Libertas Capital pursuant to which the Directors have undertaken, subject to
certain limited exceptions, including a sale in the event of an o¡er for all the New Ordinary Shares in
the Company, not to dispose of any of the New Ordinary Shares which they hold immediately
following Admission for a period of 12 months, in the case of the Proposed Directors, and 6 months, in
the case of the Existing Directors (the ‘‘Directors Lock-up Period’’), following Admission without the
prior written consent of Libertas Capital. In all cases the Directors Lock-up Period is capable of waiver
or being shortened by agreement between Libertas Capital and the Director or Directors concerned in
respect of all or a part of the New Ordinary Shares subject to the Lock-up arrangement. Each Director
has also agreed that, in the 12 months in the case of the Proposed Directors and 6 months in the case of
the Existing Directors, following the expiry the Directors Lock-up Period, any sale of New Ordinary
Shares held by him will be e¡ected through Libertas Capital in such orderly manner as Libertas Capital
may reasonably require with a view to maintaining an orderly market in the share capital of the
Company.
Each member of the Concert Party, other than the Proposed Directors whose arrangements are
described above (the ‘‘Other Concert Party Members’’), is expected, as part of the Scheme, to
undertake to the Company and Libertas Capital that, save in certain limited circumstances, he will not
dispose of any of more than 15 per cent. of the New Ordinary Shares held by him after Admission for a
period of twelve months following Admission. Such period may be waived or shortened in respect of
some or all of the New Ordinary Shares by agreement between Libertas Capital and the Other Concert
Party Member of Members concerned. Each of the Other Concert Party Members is also expected, as
part of the Scheme, to further undertake to the Company and Libertas Capital that, in the 24 months
after Admission, any sale of New Ordinary Shares held by him will be e¡ected through Libertas Capital
in such orderly manner as Libertas Capital may reasonably require with a view to maintaining an
orderly market in the share capital of the Company.
In all cases the lock-ins and orderly market arrangements do not prevent the restricted party from
accepting or agreeing to accept and o¡er made from the entire issued share capital of the Company.
11.2 On 20 March 2007 the Company entered into an agreement with Libertas Capital pursuant to which
Libertas agreed to act as nominated adviser and broker to the Company for a fee in the sum of »25,000
per annum. The Company has given warranties and indemnities typical for this kind of transaction.

146
The agreement may be terminated by either party by written notice. This agreement will be replaced on
31 March 2008 and by the agreement described in the paragraph below.
11.3 On 17 October 2007, the Company entered into an agreement with Libertas Capital pursuant to which
(i) Libertas Capital agreed to act as ¢nancial adviser and Rule 3 adviser to the Company with respect to
the Proposals for a corporate ¢nance fee of »200,000 of which »100,000 is payable in cash and »100,000
in New Ordinary Shares at the Reference Price; and (ii) conditional upon Admission pursuant to which
Libertas Capital agreed to act as nominated adviser and broker to the Company commencing from
1 April 2008 for a fee of »50,000 per annum. The Company has given certain indemnities which are not
unusual in this type of transaction. The agreement may be terminated by either party by written notice.

12. Material contracts


12.1 In addition to the Nominated Adviser and Broker Agreements details of which are set out in paragraph
11 above, the following contracts (not being contracts entered into in the ordinary course of business)
have been entered into by the Company or another member of the Enlarged Group (i) within the two
years immediately preceding the date of this document and are, or may be, material; or (ii) at any time
and contain provisions under which any member of the Enlarged Group has an obligation or
entitlement which is material to the Enlarged Group at the date of this document.
12.2 The following contracts, not being contracts entered into in the ordinary course of business, have been
entered into by the Company (or its subsidiaries) in the two years prior to the date of this document,
and are, or may be, material:
(a) The share warrant agreements set out at paragraph 4.3, above.
(b) On 30 July 2006 KP Renewables (Operations) Limited entered into a framework agreement with
BizzEnergy Limited, as amended by an amendment agreement dated 16 May 2007, pursuant to
which KP Renewables (Operations) Limited has the right to require BizzEnergy to purchase from
KP Renewables (Operations) Limited renewable energy generated by facilities developed by KP
Renewables (Operations) Limited within England and Wales. The parties to the framework
agreement acknowledge that the terms of the agreement allow KP Renewables (Operations)
Limited to develop, ¢nance, construct and commission a series of renewable energy plants in the
knowledge that BizzEnergy Limited will take and pay for the energy and associated bene¢ts from
each renewable energy plant. Subject to termination the agreement shall continue until the earlier
of (a) the date on which KP Renewables (Operations) Limited has entered into obligations having
a total aggregate contracted output of 150MW or (b) 30 June 2008.
(c) On 18 October 2007 the Company created the Loan Notes by deed. The loan note instrument
creates up to »900,000 of Loan Notes issuable in denominations of »1.00 which are convertible
into Ordinary Shares at a price of 1.1p per Existing Ordinary Share, equivalent to 55p per New
Ordinary Share. The loan note instrument contains additional provisions governing the transfer
of the Loan Notes and the holding of meetings of holders of the Loan Notes. In connection with
the issue of the Loan Notes, the Company paid an aggregate commission of »44,127.30 to Fiske
plc and Merchant Capital plc.
(d) On 27 November 2007 the Company and KP Renewables (Operations) Limited entered into an
agreement with KP Wind and Biomass Limited, conditional upon Admission, for the disposal of
the Existing Projects to KP Wind and Biomass Limited. The agreement contains an indemnity in
favour of the Company and KP Renewables (Operations) Limited in respect of any further
creditor claims under the CVA. The consideration is the sum of »1.00 subject to upward
adjustment in the event that the Company expends any sums on further development of the
Existing Projects prior to completion of the agreement which would result in its net cash balance
immediately prior to Admission falling below »1,409,000.
(e) On 27 November 2007 the Company entered into an agreement with Blenheim Energy Limited,
conditional upon Admission, for the disposal of KP Wind and Biomass Limited to Blenheim
Energy Limited. The price for the sale is »1.00. The agreement contains a guarantee in favour of
the Company of the obligations of KP Wind and Biomass Limited pursuant to the agreement
referred to at paragraph 12.2(a) above.
(f) On 27 November 2007 the Company entered into the Implementation Agreement with IGL,
Andrew Austin, Brent Cheshire and Francis Gugen. The Implementation Agreement sets out and
regulates the steps to be taken to implement the Scheme and contains warranties and

147
representations from Andrew Austin, Brent Cheshire and Francis Gugen in favour of the
Company concerning the business of IGL. The Implementation Agreement also contains
representations from the Company to Andrew Austin, Brent Cheshire and Francis Gugen
concerning the Company and its operations.
(g) The Company executed an engagement letter with Businesscare Solutions Limited (‘‘BSL’’) on
23 February 2007 pursuant to which BSL agreed to provide services in connection with the CVA.
BSL agreed a fee of »10,000 plus Ordinary Shares with a value of »5,000 at the re¢nancing price
of 1p per Share in consideration for its services.
(h) The Company entered into any engagement letter with Merchant Capital plc on 1 February 2007.
Under this agreement Merchant Capital plc received »127,500 for corporate ¢nance services in
relation to the reconstruction and re¢nancing of the Company of which »30,000 was taken in
Ordinary Shares at the re¢nancing price, and a grant of warrants (described in paragraph 4.3
above). This agreement was amended on 30 April 2007 pursuant to which Merchant Capital plc
was engaged to provide additional services for a monthly retainer of »2,000 for one full day per
week. This retainer was terminated on 13 September 2007.
(i) The Company entered into an engagement letter with Merchant Capital plc on 3 November 2007
under which Merchant Capital plc agreed to act as adviser to the Company in respect of the
Acquisition in consideration for the issue of »100,000 in value of New Ordinary Shares at the
Purchase Price.
12.3 The following contracts, not being contracts entered into in the ordinary course of business, have been
entered into by IGL in the two years prior to the date of this document, and are, or may be, material:

(a) Agreements with Nexen


(i) Asset Purchase Agreement and related documents
On 9 December 2005, IGL entered into an asset purchase agreement with Nexen in respect
of certain licences (PEDLs 40-1, 56-1, 78-1, 115, 92-1, 116 and 145).
Pursuant to the terms of the agreement, IGL sold an undivided legal interest and an 80 per
cent. bene¢cial interest in each of the licences. The consideration for the sale was
»1,200,000.
By letter agreement dated the same date as the asset purchase agreement, IGL agreed that if
it was considering marketing or selling o¡, or if it received an unsolicited o¡er for the
acquisition of, all or part of its interest in a licence and in and under any joint operating
agreement, it would notify Nexen, and allow Nexen to make an o¡er for all or part of such
interest. The letter did not impose any obligation on IGL to accept any such o¡er from
Nexen.
In connection with the asset purchase agreement, Nexen Petroleum (U.K) Limited (a
company incorporated in the UK with Nexen as its sole shareholder) gave an unconditional
and irrevocable guarantee to IGL in respect of the due and punctual performance by Nexen
of all of its obligations and liabilities arising out of or in connection with the asset purchase
agreement, the carried interest agreements, the management services agreement and the
secondment agreement. The guarantee is a continuing security. Neither party may assign
the bene¢t of the guarantee without the consent of the other.

(ii) Management Services Agreement


On 9 December 2005, IGL and Nexen entered into a management services agreement.
Pursuant to the terms of the agreement, IGL was required to procure that Francis Gugen,
Brent Cheshire and Andrew Austin were made available to provide management, advisory
and technical services in respect of the licences.
Under the terms of the management services agreement a service fee of »2,000,000 (plus
VAT), was payable in four equal instalments with the ¢nal two payments of »500,000 each
being payable on 2 January 2008 and 2 January 2009. If, at any time prior to 31 December
2009, Francis Gugen, Andrew Austin or Brent Cheshire cease to own at least 50 per cent. of
the issued share capital of IGL (which provision was subsequently varied to allow the
Company to acquire IGL) or cease to form a majority of the board, no further instalment of
the management service fee is payable.

148
On 18 May 2007, the parties entered into an additional management services agreement for
the provision of 100 days of additional management services to be provided during the
calendar year 2007. »150,000 was payable by Nexen on 18 May 2007 as a fee for the
provision of these services.

(iii) Licence Application Agreement


On 15 May 2006, IGL and Nexen entered into a licence application agreement in respect of
the 13th onshore licensing round.
Consistent with the existing contractual relations between IGL and Nexen concerning the
licences, the parties agreed that the rights, bene¢ts, assets, obligations and liabilities in
respect of any application made or licence granted should be in the following proportions:
Nexen 80 per cent.; IGL 20 per cent.
The 13th onshore licensing round has not currently been announced and consequently no
applications have been made. It is expected that it shall be announced by the end of 2007.

(iv) Subcontractor Agreement


On 8 August 2007, IGL entered into an agreement with MAS Energy Solutions Ltd, a
consultancy company, pursuant to which that company agreed to perform management
services for IGL for the period of twelve months from 1 September 2007 to 31 August 2008.
Either party may, at any time, terminate the agreement or the services on giving 90 days’
prior written notice to the other party.

(b) Licence Agreements with Nexen


(i) Joint Operating Agreements in respect of PEDLs 040-1, 056-1, 078-1, 092-1, 115, 116 & 145
On 9 December 2005, Nexen and IGL as the present holders of the licences entered into
joint operating agreements for the purpose of de¢ning their respective rights, interests,
duties and obligations in connection with the licences and all petroleum produced
thereunder.
The scope of the joint operating agreements shall extend to the exploration for, the
development of and the production of petroleum under the licences but shall not extend to
any joint ¢nancing arrangements.
All joint property, joint petroleum and all costs and obligations incurred in the conduct of
the joint operations shall be owned and borne by the parties in proportion to their
respective percentage interests (Nexen 80 per cent. and IGL 20 per cent.).
Nexen is designated as the operator under the joint operating agreements and has been
approved as such by the Secretary of State for Berr.
Each party shall have access and inspection rights under the terms of the joint operating
agreements.
Nexen shall obtain and maintain in respect of joint operations all insurance required under
the licences or any applicable law.
Each of the parties shall have the right to take in kind and separately dispose of its
percentage interest share of the total quantities of petroleum won and saved under joint
operations. Provided that Nexen shall have the right to use, in any joint operations, as much
of such petroleum as is needed by it.
Each party shall have the obligation to lift and dispose of its percentage interest share of
such petroleum in accordance with the quantities and procedures agreed between the
parties but so that the rights of each party to lift petroleum to which they are entitled is not
prejudiced.
The terms of the joint operating agreements and all data and information acquired or
received by any party under the agreement shall be held con¢dential during the continuance
of the joint operating agreements and for a period of 5 years thereafter.
If both parties give notice to withdraw from any of the joint operating agreements within 30
days of one another no assignment shall take place and it shall be deemed that the joint

149
operations and licences conducted under such joint operating agreements have been
abandoned and surrendered at the earliest date.
If less than all the other parties give such notice to withdraw, the withdrawing parties shall
assign their respective interests in such licences and under the respective joint operating
agreement to the non withdrawing party.
Subject to certain restrictions and conditions including the consent of the Secretary of State
for Berr and the other parties any party may at any time upon notice to the other parties
assign all or part of its interest.

(ii) Carried Interest Agreements in respect of PEDLs 040-1, 056-1, 078-1, 092-1, 115, 116 & 145
On 9 December 2005, IGL and Nexen as holders of the licences entered into carried interest
agreements to govern Nexen’s payment obligations and rights in IGL production as a
consequence of the joint operating agreements.
In consideration of the transfer of an interest in the licences pursuant to the Asset Purchase
Agreement Nexen shall bear the cost of joint operations conducted pursuant to an
approved budget and IGL shall grant to Nexen the right to lift a proportion of its
hydrocarbon entitlement derived from joint operations. This agreement operates on a
licence by licence basis.
Nexen’s obligations shall immediately cease when the combined payments made pursuant
to the carried interest agreements in respect of these licences are equal to »5,000,000.
Neither party shall assign or dispose of any interest in the carried interest agreements
without ¢rst having made an assignment of an equivalent percentage interest under the
respective joint operating agreement and having obtained the prior written consent of the
other party.

(iii) Deeds of Assignment in respect of PEDLs 040-1, 056-1, 078-1, 092-1, 115, 116 & 145
On 9 December 2005 IGL assigned to Nexen all rights, interest, obligations and liabilities of
IGL in under and pursuant to and in respect of the licences. The Secretary of State for Berr
gave his consent to the assignments by way of a letter dated 8 December 2005.
IGL and Nexen jointly and severally covenant in favour of the Secretary of State for Berr
that they will perform and observe the terms and conditions contained in the licences.

(iv) Carried Interest Agreements in respect of PEDL 107 & SPPL 1481
On 18 May 2007 IGL and Nexen entered into carried interest agreements in respect of joint
operations under these licences. IGL and Nexen as the holders of the licences will enter into
joint operating agreements in due course, in a form similar to those that apply to the other
Licences.
In consideration for IGL granting to Nexen the right to lift a proportion of its hydrocarbon
entitlement derived from joint operations Nexen shall bear the cost of joint operations
conducted pursuant to an approved programme and budget.
Nexen’s obligations shall cease when aggregate payments made pursuant to the initial
carried interest agreements and the carried interest agreements in respect of PEDL 107 and
SPPL 1481 are equal to »5,750,000.
If, at any time prior to 18 May 2008, Francis Gugen, Andrew Austin and Brent Cheshire
cease to own at least 50 per cent. of the issued share capital of IGL (which provision was
subsequently varied to allow the Company to acquire IGL), IGL shall pay to Nexen
amounts paid by Nexen, together with interest. All rights under the agreement shall
terminate.
Neither party shall assign or dispose of any interest in this agreement without ¢rst having
made an assignment of an equivalent percentage interest under the respective joint
operating agreement and having obtained the prior written consent of the other party.

150
(v) Deed of Assignment in respect of PEDL 107
On 23 January 2007 pursuant to a deed of assignment, Alkane Energy UK Limited
assigned all rights, interests, obligations and liabilities in respect of the licence to Nexen
50 per cent. and IGL 50 per cent. The Secretary of State for Berr gave his consent to this
assignment by way of letter dated 22 January 2007.
IGL and Nexen jointly and severally covenant in favour of the Secretary of State that they
will perform and observe the terms and conditions contained in the licence.

(vi) Deed of Assignment in respect of SPPL 1481


IGL and Nexen Petroleum UK Limited assigned all rights, interests, obligations and
liabilities in respect of the licence to Nexen and IGL to be held in equal proportions. We
have not been provided with the Deed of Assignment approved by the Secretary of State on
12 July 2007, but have been informed by the Company that the DTI has con¢rmed that
these documents have been executed.

(c) Implementation Agreement


IGL is a party to the Implementation Agreement described at paragraph 12.2(d) above.
12.4 Related party transactions (which for these purposes are as set out in the standards adopted according
to the Regulation (EC) No 1606/2002) that members of the Enlarged Group have entered into during
the period from 1 April 2004 to 31 December 2004 and the two ¢nancial years ended 31 December
2005, and 31 December 2006 and up to the date of this document are set out on pages 113 to 115 of Part
V(a) of this document.
12.5 No members of the Concert Party have entered into any contracts (not being contracts in the ordinary
course of business) in relation to the Proposals during the two years immediately preceding the date of
this document which are, or may be, material other than the Implementation Agreement details of
which appear in paragraph 12.2(f) above, the bonus arrangement with Mr Austin described in
paragraph 10.8 above, and a bonus of »50,000 payable to Michael Smith in the event that IGL or its
parent undertaking raises at least »2,000,000 of new equity share capital.

13. Working capital


The Directors are of the opinion having made due and careful enquiry, that the working capital available to
the Enlarged Group will be su⁄cient for its present requirements, that is for at least the next 12 months from
the date of Admission.

14. Litigation
There are no governmental, legal or arbitration proceedings, active, pending or threatened against, or being
brought by, the Company or any of its subsidiaries, which may have or have had during the 12 months
preceding the date of this document a signi¢cant e¡ect on the Company’s ¢nancial position or pro¢tability.

15. Overseas Securities Laws


It is the responsibility of any person (including, without limitation, nominees and trustees) outside the
United Kingdom wishing to purchase the New Ordinary Shares to satisfy himself as to the full observance of
the laws of the relevant jurisdiction in connection therewith, including the obtaining of any governmental or
other consents which may be required, the compliance with other necessary formalities and the payment of
any issue, transfer or other taxes due in such jurisdiction. The comments set out in this paragraph are intended
as a general guide only and anyone who is in doubt as to his position should consult his professional adviser
without delay.
Persons receiving a copy of this document should not distribute or send it into any jurisdiction where to do so
would or might contravene local securities laws or regulations.

16. Taxation
16.1 UK taxation
The following information is based upon law and practice currently in force in the United Kingdom. Except
when expressly stated, it applies to persons resident in the United Kingdom for tax purposes. The
information is of a general nature only, and is not a full description of all relevant tax considerations. In

151
particular, it does not apply to persons who do not hold their New Ordinary Shares as investments and may
not apply to certain classes of shareholders, such as dealers in securities, insurance companies and collective
investment schemes. Any person who is in any doubt as to his tax position should consult a professional
adviser concerning his tax position in respect of the acquisition, holding or disposal of New Ordinary Shares.

(a) Dividends ç UK resident shareholders


Under current United Kingdom taxation legislation no withholding tax applies on dividends paid by
the Company.
Where the Company pays a dividend, a holder of New Ordinary Shares who is an individual and who
receives that dividend is generally entitled to a tax credit in respect of the dividend received. The tax
credit currently equals 10 per cent. of the combined amount of the dividend and tax credit (the ‘‘gross
dividend’’), which together will be regarded as the top slice of the individual recipients’ income for tax
purposes and will be subject to UK income tax at the rates of the tax described below.
Individual shareholders who are liable to income tax at lower or basic rate will be liable to tax on the
gross dividend received at the rate of 10 per cent. This means that the tax credit will fully satisfy the
individual’s liability to pay income tax at the lower or basic rate.
The rate of income tax applied to dividends received by individual shareholders liable to income tax at
the higher rate will be the Schedule F upper rate (currently 32.5 per cent. of the gross dividend). After
taking into account the 10 per cent. tax credit a higher rate tax payer will be liable to additional income
tax of 22.5 per cent. of the gross dividend, equal to 25 per cent. of the net dividend.
A corporate shareholder will not be liable to UK corporation tax on any dividend received from the
Company.
Shareholders who are not liable to income tax on the dividend income cannot reclaim payment of the
tax credit from the HM Revenue & Customs.

(b) Dividends ç non UK resident shareholders


Shareholders not resident in the UK are generally not taxed in the UK on dividends received by them.
By virtue of double taxation agreements between the UK and other countries, some overseas
shareholders may be able to claim payment of all or part of the tax credits carried by the dividends they
receive from UK companies. Such shareholders should note, however, that due to a change in law, the
level of tax credit in most cases is now minimal. Persons who are not resident in the UK should consult
their own tax advisers on the possible applicability of such provisions, the procedure for claiming
repayment and what relief or credit may be claimed in respect of such tax credit in the jurisdiction in
which they are resident.

(c) Taxation of chargeable gains


Any disposal of New Ordinary Shares by a shareholder resident or ordinarily resident for tax purposes
in the UK or a non-UK resident shareholder who carries on a trade, profession or vocation in the UK
through a branch or agency and has used, held or acquired the New Ordinary Shares for the purposes
of such trade, profession or vocation or such branch or agency may, depending on the shareholder’s
circumstances, and subject to any available exemptions, allowances or reliefs, give rise to a chargeable
gain or an allowable loss for the purposes of UK capital gains tax (or for companies, corporation tax
on chargeable gains unless the gain is exempted by the Substantial Shareholding Exemption
legislation). Special rules apply to disposals by individuals at a time when they are temporarily not
resident or ordinarily resident in the UK.
Any chargeable gain (or allowable loss) will be calculated by reference to the consideration received
from the disposal of the New Ordinary Shares less the allowable cost to the shareholder of acquiring
the New Ordinary Shares. For shareholders within the charge to UK corporation tax, an indexation
allowance (calculated by reference to UK retail prices index) in respect of the acquisition cost of the
New Ordinary Shares should be available to reduce the amount of any chargeable gain realised on a
subsequent disposal. A corporate shareholder owning at least 10 per cent. of Ordinary Shares in the
Company, may, subject to satisfaction of certain exemption conditions, qualify under the ‘‘Substantial
shareholder exemption’’ for exemption from corporation tax in respect of any gains arising on a
disposal of such shares. For individual shareholders, a relief known as ‘‘taper relief’’ may be available
to reduce the proportion of any chargeable gain subject to tax. It was recently announced by the

152
Chancellor of Exchequer that taper relief will be abolished with e¡ect from 6 April 2008 and replaced
with a £at capital gains tax rate of 18 per cent.

(d) Stamp duty and stamp duty reserve tax


The conveyance or transfer or sale of New Ordinary Shares, which are held in certi¢cated form
following registration will be subject to stamp duty on the instrument of transfer, at the rate of 0.5 per
cent. (rounded up to the nearest multiple of »5) of the amount of the value of the consideration. The
agreement to transfer such shares or warrants will also give rise to a SDRT liability, again at the rate of
0.5 per cent. of the amount of the value of the consideration. This liability is cancelled (and any SDRT
paid, refunded) if the agreement is completed by a duly stamped transfer within six years of the
agreement becoming unconditional. Where New Ordinary Shares are held in uncerti¢cated form within
CREST a liability to SDRT will arise where a change in the legal and/or bene¢cial ownership of those
Ordinary Shares occurs.
The above is a summary of certain aspects of current law and practice in the UK. Any person who is in
any doubt as to his tax position or who is subject to tax in a jurisdiction other than the UK, should
consult his or her professional adviser.

17. Other information


17.1 There is no agreement, arrangement or understanding between any of the Directors, recent directors,
shareholders or recent shareholders of KP Renewables having any connection with or dependence
upon the completion of the Proposals.
17.2 There is no agreement, arrangement or understanding whereby the bene¢cial ownership of the New
Ordinary Shares to be acquired by the Concert Party pursuant to the Proposals will be transferred to
any other person.
17.3 The Company currently has no employees and the Acquisition will have no material e¡ect on the
subsidiaries of the Company, save for KP Wind and Biomass Limited which will be disposed of.
17.4 The following table sets out the middle market quotations for the Existing Ordinary Shares as derived
from the Daily O⁄cial List for the ¢rst business day of each month from 1 June 2007 to 1 November
2007 inclusive and for 26 November 2007 (the latest practicable date prior to the posting of this
document).
Date Price
1 June 1.6p
2 July 1.6p
1 August 1.38p
3 September 1.1p
1 October 1.23p
1 November 1.6p
17.5 There is no intention that the payment of any interest on repayment of or security for any liability of
any members of the Concert Party (contingent or otherwise) will depend to any signi¢cant extent on the
business of the Company.
17.6 The total costs and expenses payable by the Company in connection with or incidental to the Proposals
including London Stock Exchange fees, printing and advertising and distribution costs, legal and
accounting fees and expenses are estimated to amount to approximately »800,000 (including any
irrecoverable VAT).
17.7 Save as disclosed in this document, no person (excluding professional advisers otherwise disclosed in
this document and trade suppliers) has:
(a) received directly or indirectly from the Company within twelve months preceding the Company’s
application for Admission; or
(b) entered into contractual arrangements for (not otherwise disclosed in this document) to receive,
directly or indirectly, from the Company on or after Admission any of the following:
(i) fees totalling »10,000 or more; or
(ii) securities in the Company with a value of »10,000 or more calculated by reference to the
Suspension Price; or

153
(iii) any other bene¢t with a value of »10,000 or more at the date of Admission.
17.8 Save for the Acquisition and as disclosed in this document, there has been no signi¢cant change in the
trading or ¢nancial position of the Company or IGL since the last published audited accounts of the
Company or IGL respectively.
17.9 Save for the Acquisition and as disclosed in this document, there has been no signi¢cant change in the
trading or ¢nancial position of IGL since 30 June 2005.
17.10 Save as disclosed in this document, the Directors are not aware of any exceptional factors which have
in£uenced the Company’s activities.
17.11 The auditors of the Company for the period covered by the historical ¢nancial information contained
in Part IV of this document are as follows:
(a) 31 December 2004 ç Moore Stephens LLP
(b) 31 December 2005 ç Moore Stephens LLP
(c) 31 December 2006 ç Moore Stephens LLP
All of the auditors listed above are members of the Institute of Chartered Accountants of England and
Wales.
17.12 Save as disclosed in this document, there are no patents, licences, industrial, commercial or ¢nancial
contracts or new manufacturing processes which are material to the business or pro¢tability of the
Company.
17.13 Save as disclosed in this document and in particular on pages 113 to 115 of Part V(a) of this document,
there have been no related party transactions entered into by the Company prior to the date of this
document.
17.14 The Company’s accounting reference date is 31 December.
17.15 There has been no public takeover bid for the whole or any part of the share of the Company or any
member of the Enlarged Group prior to the date of this document. There are no mandatory takeover
bids and/or squeeze out and sell out rules in relation to the Ordinary Shares.
17.16 Save as disclosed in this document there are no exceptional factors which have in£uenced the Enlarged
Group’s activities.
17.17 There are no arrangements in place under which future dividends are to be waived or agreed to be
waived.
17.18 The Company’s principal investments in progress and for each ¢nancial year for the period covered by
the historical ¢nancial information are as set out in Part I of this document and from Admission
comprise its investment in IGL. Neither the Company nor any member of the Enlarged Group have
made any other ¢rm commitment in respect of any other investments.
17.19 No ¢nancial information contained in this document is intended by the Company to represent or
constitute a forecast of pro¢ts by the Company nor to constitute publication of accounts by it.
17.20 Save as set out in this document, the Enlarged Group has not sold any products or performed any
services during the period covered by the historical ¢nancial information and there are therefore no
signi¢cant trends in production, sales and inventory costs and selling prices between the end of the last
¢nancial year and the date of this document.
17.21 Equipoise Solutions Limited has given and not withdrawn its written consent to the inclusion of its
reports in the form set out in Part III of this document and the references to such reports in the form
and context in which they appear and accepts responsibility for such reports.
17.22 Mazars LLP has given and not withdrawn its written consent to the inclusion of its reports and letter in
the form set out in Parts IV, V and VI of this document and the references to such reports and letter in
the form and context in which they appear and accepts responsibility for such reports.
17.23 Libertas Capital Corporate Finance Limited has given and not withdrawn its written consent to the
inclusion in this document of references to its name in the form and context in which it appears.
17.24 Libertas Capital Securities Limited has given and not withdrawn its written consent to the inclusion in
this document of references to its name in the form and context in which it appears.

154
17.25 Nexen has given and not withdrawn its written consent to the inclusion in this document of references
to its name in the form and context in which it appears.
17.26 Where information in this document is indicated as having been sourced from a third party, such
information has been accurately reproduced and as far as the Company is aware from information
published by the relevant third parties (comprising pages 113 to 115), no facts have been omitted from
this document which would render the information inaccurate or misleading.

18. Documents available for inspection


18.1 Copies of the following documents will be available for inspection from the date of this document until
the date which is one month after Admission, at the o⁄ces of Morrison & Foerster MNP, 7th Floor,
CityPoint, One Ropemaker Street, London EC2Y 9AW.
18.2 the memorandum and articles of association of the Company;
18.3 the published accounts of KP Renewables for the two year ended 31 December 2005 and 2006;
18.4 the Accountant’s Reports and Letter set out in Part IV, V and VI;
18.5 the letters of consent referred to in paragraph 17 above;
18.6 the report set out in Part III of this document;
18.7 the consultancy agreements and letters of appointment referred to in paragraph 10 above;
18.8 the material contracts of the Company and IGL set out in paragraphs 11 and 12 above;
18.9 the published accounts for Island Gas Limited for the two years ended 31 December 2005 and 2006;
and
18.10 this document.

Dated: 27 November 2007

155
PART VIII

NOTICE OF EXTRAORDINARY GENERAL MEETING

KP Renewables plc
(Incorporated and registered in England and Wales with Registered No. 04981279)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of KP Renewables plc (the
‘‘Company’’) will be held at the o⁄ces of Morrison & Foerster, CityPoint, One Ropemaker Street, London
EC2Y 9AW at 12.00 midday on 27 December 2007 for the purposes of considering and, if thought ¢t,
passing the following resolutions which will be proposed in the case of resolutions (1), (2), (3), (4), (5), (6), (7),
(9), (10) and (11) as ordinary resolutions and in the case of resolutions (8), (12), (13), (14) and (15) as a special
resolutions.
In accordance with the requirements of the Takeover Code, a poll will be taken on Resolution 2.

ORDINARY RESOLUTIONS

1. THAT:
(A) the proposed acquisition by the Company of the entire issued and to be issued share capital of Island
Gas Limited (‘‘IGL’’) to be e¡ected pursuant to a scheme of arrangement (the ‘‘Scheme’’) under
Section 425 of the Companies Act 1985 (the ‘‘Act’’) between IGL and the holders of the Scheme Shares
(as de¢ned in the Scheme), details of which are contained in a document dated 13 November 2007 (the
‘‘Scheme Document’’), a copy of which, initialled by the Chairman of the meeting for the purposes of
identi¢cation, has been produced to the meeting or on such other terms (which are not materially
di¡erent to the terms of the Scheme as set out in the Scheme Document but which may include an
acquisition implemented by way of takeover o¡er pursuant to Sections 974 to 993 of the Companies
Act 2006 and subject to such other conditions as may be approved by the directors of the Company (the
‘‘Board’’) (or any duly authorised committee thereof) be and is hereby approved in accordance with
Rule 14 of the AIM Rules for Companies published by the London Stock Exchange plc; and
(B) the directors (or any duly authorised committee thereof) be and are hereby authorised to bind the
Company to the Scheme in its original or in any modi¢ed or amended form if approved by them and to
take all necessary or appropriate steps to complete or to procure the completion of such acquisition and
give e¡ect thereto with such modi¢cations, variations, revisions, waivers or amendments (not being
modi¢cations, variations, revisions, waivers or amendments which are of a material nature) as the
Board or any duly authorised committee thereof may deem necessary, expedient or appropriate.
2. THAT the waiver granted by the Panel on Takeovers and Mergers of the obligations which would
otherwise arise on the members of the Concert Party (as de¢ned in the circular to shareholders dated 27
November 2007 of which this notice forms part (the ‘‘Circular’’)) to make a general o¡er to the
shareholders of the Company pursuant to Rule 9 of the Takeovers Code as a result of the issue to them
of New Ordinary Shares (as de¢ned in the Circular) in the Company as consideration for the sale by
them of any shares in IGL pursuant to the Scheme or upon the exercise by any of them of the Options
(as de¢ned in the Circular) be and is hereby approved.
3. THAT the amendments to the Company Voluntary Arrangement pursuant to Part I of the Insolvency
Act 1986 made on 10 April 2007 in the form produced to the Meeting and initiated by the Chairman for
the purposes of identi¢cation be approved and that the sale of KP Wind and Biomass Limited, a wholly
owned subsidiary of the Company and the bene¢cial and legal owner of the Existing Projects (as
de¢ned in the circular to shareholders dated 27 November 2007 of which this notice forms part) to
Blenheim Energy Limited be approved on the terms of the contract now produced to the Meeting and
initialled by the Chairman for the purposes of identi¢cation.
4. THAT the terms and grant of the Warrants (as de¢ned in the circular to shareholders dated
27 November of which this notice forms part) to Peter Redmond, Richard Armstrong, John Bryant
and David Lindley be approved.

156
5. THAT every 50 of the authorised Existing Ordinary Shares of 1p each be consolidated into 1 New
Ordinary Share of 50p and that any fractions arising from the inability to fully consolidate individual
holdings of Existing Ordinary Shares be consolidated in aggregate and sold in the market for the
bene¢t of the Company.
6. THAT the authorised share capital of the Company be increased from »6,000,000 to »45,000,000 by
the creation of an additional 78,000,000 New Ordinary Shares of 50p each.
7. THAT the Directors be and are hereby generally and unconditionally authorised, in substitution for all
previous authorities, pursuant to Section 80 of the Companies Act 1985 (the ‘‘Act’’) to exercise all the
powers of the Company to allot relevant securities (as de¢ned in section 80(2) of the Act) up to an
aggregate nominal amount of »15,000,000 for a period expiring (unless previously renewed, varied or
revoked by the Company in general meeting) at the conclusion of the Company’s next Annual General
Meeting or 15 months after the date of the passing of this resolution, whichever ¢rst occurs, but the
Company may make an o¡er or agreement which would or might require relevant securities to be
allotted after expiry of this authority and the Directors may allot relevant securities in pursuance of
that o¡er or agreement as if the authority conferred hereby had not expired or been varied or revoked.

SPECIAL RESOLUTION

8. THAT the Directors are hereby empowered pursuant to section 95 of the 1985 Act to subject to and
conditionally upon the passing of resolution No 7 allot equity securities (as de¢ned by section 94(2) of
the 1985 Act) for cash pursuant to the authority conferred by resolution No 7 as if section 89(1) of the
1985 Act did not apply to any such allotment; provided that such powers are limited to:
(a) the allotment of equity securities up to a maximum aggregate nominal amount su⁄cient to
permit the issue of the Consideration Shares (as de¢ned in the Circular to shareholders dated
27 November 2007 of which this notice forms part (the ‘‘Circular’’);
(b) the allotment of equity securities up to a maximum aggregate nominal amount to permit the issue
of New Ordinary Shares (as de¢ned in the Circular) in connection with the exercise of Warrants
(as de¢ned in the Circular);
(c) the allotment of equity securities pursuant to a rights issue, open o¡er, scrip dividend scheme or
other pre-emptive o¡er or scheme in favour of holders of New Ordinary Shares (as de¢ned in the
Circular) and any other persons who are entitled to participate in such issue, o¡er or scheme
where the equity securities o¡ered to each such holder and other person are proportionate (as
nearly as may be) to the respective numbers of New Ordinary Shares held or deemed to be held by
them for the purposes of their inclusion in such issue, o¡er or scheme on the record date
applicable thereto, but subject to such exclusions or other arrangements as the Directors may
deem ¢t or expedient to deal with fractional entitlements, legal or practical problems under the
laws of any overseas territory, the requirements of any regulatory body or stock exchange in any
territory, shares being represented by depositary receipts, directions from any holders of shares or
other persons to deal in some other manner with their respective entitlements or any other matter
whatever which the Directors consider to require such exclusions or other arrangements; and
(d) the allotment of equity securities for cash otherwise than pursuant to sub-paragraphs (a) and (b)
up to an aggregate maximum nominal amount of »6,000,000;
and that subject to the case of an allotment of equity securities, to the convenience of the authority
conferred by paragraph (b) above the power conferred by this resolution shall expire ¢fteen months
after the passing of this resolution or at the conclusion of the next annual general meeting of the
company following the passing of this resolution, whichever occurs ¢rst, but may be previously
revoked or varied from time to time by special resolution but so that the Company may before such
expiry, revocation or variation make an o¡er or agreement which would or might require equity
securities to be allotted after such expiry, revocation or variation and the Directors may allot equity
securities in pursuance of such o¡er or agreement as if such power had not expired or been revoked or
varied.

ORDINARY RESOLUTIONS

9. THAT Francis Gugen, having consented to act, be appointed as a director of the Company to serve as
executive chairman.

157
10. THAT Andrew Austin, having consented to act, be appointed as a director of the Company to serve as
chief executive o⁄cer.
11. THAT Brent Cheshire, having consented to act, be appointed as a executive technical director of the
Company.

SPECIAL RESOLUTIONS

12. THAT the name of the Company be changed to Island Gas Resources Plc.
13. THAT the regulations contained in the printed document produced to the meeting and signed for the
purpose of identi¢cation by the Chairman of the meeting be adopted as the new Articles of Association
of the Company in substitution for the existing Articles of Association.
14. THAT the Company be generally and unconditionally authorised in accordance with the Articles of
Association and generally to make o¡-market purchases (within the meaning of section 163(1) of the
Act) of all issued Deferred Shares (as de¢ned in the Circular) pursuant to the terms of a draft contract
produced to the meeting and initialled by the Chairman for the purpose of identi¢cation (the
‘‘Contract’’) the terms of which Contract are hereby approved for the purposes of Section 164 of the
Act generally. The authority hereby conferred shall expire on the earlier of 18 months from the date of
this Notice or the close of the next annual general meeting of the Company.
15. THAT the capital of the Company be reduced by applying the sum of »5,000,000 standing to the credit
of the share premium account and any capital redemption reserve arising on the repurchase of the
Deferred Shares in eliminating the debit balance standing on the Company’s accumulated pro¢t and
loss account.

27 November 2007
Registered O⁄ce: By Order of the Board
7th Floor, Aldermary House Aldermary Secretaries Limited
10-15 Queen Street
London Company Secretary
EC4N 1TX

Notes:
(1) A Shareholder entitled to attend and vote at the meeting is also entitled to appoint one or more proxies to attend, speak and vote
instead of him or her. The proxy need not be a member of the Company. Where a Shareholder appoints more than one proxy, each
proxy must be appointed in respect of di¡erent shares comprised in his or her shareholding which must be identi¢ed on the proxy
form. Each such proxy will have the right to vote on a poll in respect of the number of votes attaching to the number of shares in
respect of which the proxy has been appointed but such proxies will only be entitled to one vote between them on a show of hands.
The proxy who is to exercise the one vote on a show of hands must be identi¢ed on the appropriate proxy form. Where more than
one joint Shareholder purports to appoint a proxy in respect of the same shares, only the appointment by the most senior
Shareholder will be accepted as determined by the order in which their names appear in the Company’s register of members. If you
wish your proxy to speak at the meeting, you should appoint a proxy other than the chairman of the meeting and give your
instructions to that proxy.
(2) If you are not a Shareholder but you have been nominated by a Shareholder to enjoy information rights, you do not have the right
to appoint a proxy or proxies pursuant to Note (1). Please read Note (7) below.
(3) To be e¡ective an instrument appointing a proxy and any authority under which it is executed (or a notarially certi¢ed copy of such
authority) must be deposited at the o⁄ces of Computershare Investor Services PLC, at PO Box 1075, The Pavillions, Bridgewater
Road, Bristol BS99 3FA, not later than 12.00 midday on 21 December 2007 except that, (a) should the meeting be adjourned, such
deposit may be made not later than 48 hours before the time of the adjourned meeting and (b) in the case of a poll taken more than
48 hours after it was demanded, such deposit may be made not later than 24 hours before the time appointed for the taking of the
poll. In calculating the said periods of 48 and 24 hours, there is to be excluded any part of a day which is a Saturday or Sunday,
Christmas Day, Good Friday or a bank holiday in England. A Form of Proxy is enclosed with this notice. Shareholders who intend
to appoint more than one proxy can obtain additional Forms of Proxy from Computershare Investor Services PLC by telephoning
them on 0870 7071106. Alternatively, the form provided may be photocopied prior to completion.
(4) An abstention (or ‘‘vote withheld’’) option has been included on the Form of Proxy. The legal e¡ect of choosing the abstention
option on any resolution is that the shareholder concerned will be treated as not having voted on the relevant resolution. The
number of votes in respect of which there are abstentions will however be counted and recorded, but disregarded in calculating the
number of votes for or against each resolution.
(5) In accordance with Regulation 41 of the Uncerti¢cated Securities Regulations 2001, the Company speci¢es that only those
Shareholders registered in the register of members of the Company as at 12.00 midday on 27 December 2007 or, in the event that
the meeting is adjourned, in such register not later than 48 hours before the time of the adjourned meeting, shall be entitled to
attend, or vote (whether in person or by proxy) at the meeting in respect of the number of shares registered in their names at the
relevant time. Changes after the relevant time will be disregarded in determining the rights of any person to attend or vote at the
meeting.
(6) CREST members who wish to appoint a proxy or proxies by using the CREST electronic proxy appointment service may do so by
utilising the procedures described in the CREST Manual. The message, (a CREST proxy instruction) must be properly

158
authenticated in accordance with the speci¢cations of Euroclear UK & Ireland Limited (‘‘EUI’’) and must contain the information
required for such instructions, as described in the CREST manual. The message, regardless of whether it relates to the appointment
of a proxy or to an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so
as to be received by the Company’s agent not later than the time stated in Note (2) above. For this purpose, the time of receipt will
be taken to be the time (as determined by the time stamp applied to the message by the CREST Applications Host) from which the
Company’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by EUI.
CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI does not make
available special procedures for any particular messages. Normal system timings and limitations will therefore apply in relation to
the input of CREST proxy instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member
is a CREST personal member or sponsored member or has appointed a voting service provider, to procure that his CREST sponsor
or voting service provider takes) such action as shall be necessary to ensure that a message is transmitted by any particular time.
Reference should be made to those sections of the CREST Manual concerning practical limitations of the CREST system and
timings.
The Company may treat as invalid a CREST proxy instruction in the circumstances set out in Regulation 35(5)(a) of the
Uncerti¢cated Securities Regulations 2001.
(7) If you are a person who has been nominated under section 146 of the 2006 Act to enjoy information rights, you may have a right,
under an agreement between you and the Shareholder who nominated you, to be appointed or to have someone else appointed for
you as a proxy for the meeting. If you do not have such a right, or you do have such a right but do not wish to exercise it, you may
have a right under such an agreement to give instructions to the Shareholder who nominated you as to the exercise of the voting
rights attached to the Ordinary Shares in respect of which you have been nominated.

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Sterling Greenaways. 94534
PROJECT EARTH – LANDKOM INTERNATIONAL PATHFINDER PROOF
DRAFT 12-OCTOBER-2007
TOTAL SIZE: 512 x 383mm
DOCUMENT SIZE: 436 x 303 mm
10mm spine, 3mm bleed

KP RENEWABLES PLC
to be renamed

ISLAND GAS RESOURCES PLC

Acquisition and Admission to trading on AIM

Libertas Capital
Nominated Adviser & Broker