Announcement PDF 16 May 2024 Unsolicited Take-Over Offer – Lodgement of Target’s Statement In accordance with item 14 of section 633(1) of the Corporations Act 2001 (Cth) (Corporations Act), attached is a copy of the target’s statement (Target’s Statement) of Locality Planning Energy Holdings Limited (ABN 90 147 867 301) (LPE) in response to the off-market takeover bid by River Capital Pty Ltd (ACN 073 531 469) as trustee for River Capital Embedded Network Trust (River Capital) for all of the fully paid ordinary shares in LPE (Offer). The Target’s Statement sets out the reasons for LPE Directors unanimously recommending that LPE shareholders REJECT the Offer. The Target’s Statement has been sent to River Capital and lodged with the Australian Securities and Investments Commission today. In accordance with section 110D of the Corporations Act, despatch of the Target's Statement to LPE shareholders will occur today by the following means: 1. LPE shareholders who have nominated an email address to receive communications from LPE will receive an email to their nominated email address, providing a link to an electronic copy of the Target’s Statement; and 2. LPE shareholders who have not nominated an email address to receive communications from LPE will receive a letter from LPE to their registered postal address, providing a link to an electronic copy of the Target’s Statement. Copies of the communications sent to LPE shareholders (and an equivalent communication sent to holders of LPE option and performance rights) are attached to this notice. LPE Shareholders are encouraged to read the Target’s Statement in its entirety as it will assist them in making an informed decision with respect to the Offer. Shareholders may also wish to seek independent legal, financial, taxation or other professional advice in relation to the Offer. The Board will keep LPE shareholders fully informed of any key developments. Authorised by the Board. For further information: David Jarjoura Executive Chairman investors@localityenergy.com.au 1800 040 168 Locality Planning Energy Holdings Ltd (ASX: LPE) Level 8, 8 Market Lane, Maroochydore BC QLD 4558 ENDS ABN 90 147 867 301 Telephone 1800 040 168 joinLPE.com.au About LPE LPE is a growing electricity provider to strata communities challenging the way customers receive their electricity; leaders in innovation, supporting communities to think of tomorrow. With first to market technology, LPE has delivered renewable solutions for apartment living and carbon neutral centralised hot water systems, creating shareholder value through long term supply agreements that provide strong recurring revenue. LPE predominantly service the Queensland energy market, selling electricity, hot water, solar and battery systems to strata communities. Supporting those living in strata communities to reduce their carbon footprint and energy bills with no upfront cost. 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You can find this through the following link or scanning the QR code: investorhub.localityenergy.com.au THIS IS AN IMPORTANT DOCUMENT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt as to its contents, you should contact your financial, tax or other professional adviser immediately Target’s Statement This Target’s Statement has been issued by Locality Planning Energy Holdings Limited (ASX:LPE) (ABN 90 147 867 301) (LPE) in response to the unsolicited offmarket cash takeover bid made by River Capital Pty Ltd (ACN 073 531 469) as trustee for River Capital Embedded Network Trust (River Capital) REJECT the Offer Your LPE Directors unanimously recommend that you REJECT the Offer and DO NOTHING in relation to any documents received from River Capital Legal adviser Important notices This document is the Target's Statement dated 16 May 2024 given by LPE under Part 6.5 Division 3 of the Corporations Act. This Target’s Statement is given in response to the Bidder's Statement dated 16 April 2024 which River Capital served on LPE on 16 April 2024 in relation to the Offer by River Capital to acquire all of your LPE Shares. The purpose of this Target’s Statement is to provide you, as a LPE Shareholder, with information in response to the Bidder’s Statement to assist you in your decision as to whether or not to accept the Offer. You should read this Target’s Statement in its entirety before making a decision as to whether or not to accept the Offer for your LPE Shares. Defined terms and interpretation Capitalised terms and certain abbreviations used in this Target’s Statement have the meanings set out in the glossary in Section 8.1. In addition, unless the contrary intention appears or the context requires otherwise, words and phrases used in this Target’s Statement have the same meaning and interpretation as in the Corporations Act. Section 8.2 sets out some rules of interpretation which apply to this Target’s Statement. Unless otherwise specified, all references to $, A$, AUD and cents are references to Australian currency. All references to times in this Target’s Statement are references to time in Sydney, unless otherwise stated. No account of personal circumstances This Target’s Statement and the recommendations and other information contained in it does not constitute financial product advice and should not be taken as personal financial or taxation advice, as each LPE Shareholder’s deliberations and decision will depend upon their own financial situation, tax position, investment objectives and particular needs. Your LPE Directors encourage you to seek independent financial and taxation advice before making a decision as to whether or not to accept the Offer for your LPE Shares. Disclaimer regarding forward looking statements This Target’s Statement contains forward looking statements. Forward looking statements generally relate to future events or future financial or operating performance. In some cases, you can identify forward looking statements because they contain words such as “aim”, “may", “might”, “will”, “likely”, “shall”, “should", “expects", “foresee”, “plans”, "anticipates”, “could", “is confident”, “intends”, “target”, "projects", "contemplates”, “believes", “estimates”, “predicts”, “potential” or “continue" or the negative of these words or other similar terms or expressions that convey expectations, strategy, plans or intentions. You should be aware that these statements are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties, assumptions and other important factors that could cause the actual results, performance or achievements of LPE to be materially different from future results, performance or achievements expressed or implied by those statements. Those risks and uncertainties include factors and risks specific to the industry in which LPE operates as well as general economic conditions and conditions in the financial markets. Actual events or results may differ materially from the events or results expressed or implied in any forward looking statement and deviations are both normal and to be expected. None of LPE, any of its officers or employees, or any person named in this Target’s Statement with their consent or any person involved in the preparation of this Target’s Statement makes any representation, warranty, assurance or guarantee (either express or implied) as to the accuracy or likelihood of fulfilment of any forward looking statement, or any events or results expressed or implied in any forward looking statement, except to the extent required by law. You are cautioned not to place undue reliance on any forward looking statements. The forward looking statements in this Target’s Statement reflect views held only as at the date of this Target’s Statement. Subject to any continuing obligations under the Listing Rules or the Corporations Act, LPE and its officers disclaim any obligation or undertaking to update or revise any forward looking statements to reflect any change in expectations in relation to them or any change in events, conditions or circumstances on which any forward looking statement is based. ASIC and ASX disclaimer A copy of this Target’s Statement was lodged with ASIC and given to ASX on 16 May 2024. None of ASIC, ASX or any of their respective officers takes any responsibility for the content of this Target’s Statement. Disclaimer as to information The information in this Target's Statement about River Capital has been compiled from or is otherwise based on information obtained from publicly available sources and has not been independently audited or verified by LPE or its advisers. Accordingly, LPE does not, subject to the Corporations Act, make any representation or warranty (either express or implied), as to the accuracy or completeness of this information. If the information obtained or the public sources are inaccurate or incomplete, this may affect the information included in this Target's Statement. In particular, if the information has been used as the basis for forward looking statements in this Target’s Statement, this may add to the risk that actual values, results, performance or achievements will differ materially from those expressed or implied by the statements. Foreign jurisdictions The release, publication or distribution of this Target’s Statement in jurisdictions other than Australia may be restricted by law or regulation in other jurisdictions and persons who come into possession of it should seek advice on and observe any restrictions. Any failure to comply with these restrictions may constitute a violation of applicable laws or regulations. This Target’s Statement has been prepared in accordance with Australian law and the information contained in this Target’s Statement may not be the same as that which would have been disclosed if this Target’s Statement had been prepared in accordance with the laws and regulations outside Australia. Charts, diagrams and rounding Any diagrams, charts, maps, graphs and tables appearing in this Target’s Statement are illustrative only and may not be drawn to scale. Unless stated otherwise, all data contained in diagrams, charts, maps, graphs and tables is based on information available at the date of this Target’s Statement. A number of amounts, percentages, prices, estimates and other figures in this Target’s Statement are subject to the effect of rounding. Accordingly, actual numbers may differ from those set out in this Target’s Statement. Websites LPE’s website does not form part of this Target’s Statement and LPE Shareholders should not rely on its content. Any website links in this Target’s Statement are textual references only. Information contained in, or otherwise accessible from, those websites does not form part of this Target’s Statement. Privacy LPE has collected your information from the LPE Share Registry for the purpose of providing you with this Target’s Statement. The type of information LPE has collected about you includes your name, contact details and information on your shareholding in LPE. Without this information, LPE would be hindered in its ability to issue this Target’s Statement. The Corporations Act requires the name and address of shareholders to be held in a public register. Your information may be disclosed on a confidential basis to LPE’s Related Bodies Corporate and external service providers (such as the LPE Share Registry and print and mail service providers) and may be required to be disclosed to regulators such as ASIC. If you would like details of information about you held by LPE, please contact investors@localityenergy.com.au. LPE’s privacy policy is available at https://investorhub.localityenergy.com.au/ governance. The registered address of LPE is Level 8, 8 Market Lane, Maroochydore, Queensland, Australia. 1 Key dates Date of Offer 3 May 2024 Date of this Target’s Statement 16 May 2024 Scheduled close of Offer Period (unless withdrawn or extended) 5.00pm (AEST) on 7 June 2024 Note: the closing date for the Offer may change as permitted by the Corporations Act. 2 Table of Contents Chair’s letter 4 How to REJECT the Offer 6 Key Reasons to REJECT the Offer 6 LPE Directors’ recommendation and intention to REJECT the Offer 7 1 Reasons to REJECT the Offer 8 2 Frequently asked questions 12 3 Your choices as a LPE Shareholder 20 4 Information about River Capital and the Offer 23 5 Information on LPE 37 6 Risk factors 42 7 Additional information 46 8 Glossary 53 Annexure A 57 3 Chair’s letter Dear LPE Shareholder YOUR DIRECTORS RECOMMEND YOU REJECT THE OFFER You should have recently received a Bidder’s Statement from River Capital Pty Ltd as trustee for River Capital Embedded Network Trust (River Capital) in relation to its unsolicited offer to acquire all of your shares in Locality Planning Energy Holdings Limited (LPE) (Offer). River Capital is offering $0.08 cash per LPE Share. This Target’s Statement, which I encourage you to read in its entirety, sets out the recommendation of the LPE Directors in relation to the Offer and the key reasons for the LPE Directors’ recommendation to REJECT the Offer. Recommendation Your Directors have carefully considered the Offer to assess whether it is in the best interests of LPE Shareholders and unanimously recommend that you REJECT the Offer. Your Directors will continue to make decisions having regard to the best interests of LPE Shareholders. Reasons for the Directors’ recommendation The key reasons why your Directors unanimously recommend you REJECT the Offer are: 1. The Offer undervalues LPE and its growth prospects: Your Directors are of the view that the Offer undervalues LPE and that the value of LPE’s current business and long term prospects significantly exceeds $0.08 per LPE Share. Your Directors consider that the Offer does not reflect the success of recent LPE initiatives and the significant improvement in the net profit result for FY24 with the Board’s full year updated guidance in the range of $1.95m to $2.0m compared to a net loss of $12m for FY23. The Board’s EBITDA guidance is between $3.3m and $3.5m.1 Your Directors have shown conviction in their belief that LPE’s medium to long term prospects significantly exceed $0.08 per LPE Share by acquiring, in aggregate, 7,227,043 additional LPE Shares since the Offer was announced at an average price of $0.08 per LPE Share. 2. If you accept the Offer, you lose the potential upside of key initiatives being pursued by LPE: By accepting the Offer, LPE Shareholders may lose the opportunity to participate in the growth of LPE from various business initiatives currently being pursued by LPE. Your Directors consider that the Offer does not adequately reflect the potential value that can be realised for LPE through these ongoing initiatives. Accepting the Offer now will deny you the opportunity to participate in any value uplift to LPE that may occur in the future. 3. If you accept the Offer, you may not benefit from the value of the loan to Bundaberg BioHub and tax losses: Your Directors believe that the Offer does not fully account for the value of the loan to Bundaberg BioHub which is currently due for repayment on 28 June 2024 nor LPE’s accrual of significant historic tax losses from which it can benefit as it returns to profitability. Accepting the Offer will deny you the opportunity to benefit from these assets. 1 This guidance extrapolates the 10-month net profit position to 30 April 2024 out to the end of FY24. However, the Board is not aware of any reason that extrapolating the result in that way is not reasonable. As with all forward-looking information, it is subject to circumstances outside the control of LPE and both revenue and cost metrics may be higher or lower than anticipated. As a result, there can be no assurance that the ultimate result will be consistent with guidance. 4 4. The Offer is opportunistically timed: Your Directors believe that the announcement of the unsolicited Offer was opportunistically timed so as to avoid offering full value for LPE Shares. The Offer: ▪ takes advantage of recent significant changes which have adversely affected the value of LPE but which the Board believes have been resolved; ▪ was announced just prior to the release of LPE’s March quarterly report which showed significant improvement in LPE’s year to date cash flows and the Board’s profit guidance of $1.6m to $1.8m net profit for FY24 (subsequently updated to $1.95m to $2.0m); and ▪ has been timed shortly before the due date for repayment of the loan from Bundaberg BioHub and may not adequately reflect the value of the loan to LPE Shareholders. 5. Your Directors intend to REJECT the Offer: Each of your Directors has confirmed that they consider the Offer of $0.08 per LPE Share undervalues LPE and that they have no intention to accept the Offer in respect of the LPE Shares which they hold or control. The Directors’ holdings in aggregate represent approximately 23.66% of the issued LPE Shares. Their rejection of the Offer will mean that the Offer will not become effective unless River Capital waives its 90% Minimum Acceptance Condition or declares the Offer unconditional. As a result, River Capital will not be able to reach 90% voting power in LPE and therefore will not become entitled to squeeze-out any non-accepting LPE Shareholders following the Offer through Compulsory Acquisition. 6. The Offer is conditional and uncertain to proceed: The Offer is subject to various Conditions and triggering any of those Conditions may cause the Offer to lapse. There is therefore no certainty the Offer will proceed. If you accept the Offer whilst it remains subject to Conditions, you may lose control of your LPE Shares and be unable to trade your LPE Shares for the duration of the Offer Period. 7. If you accept the Offer, you may be unable to benefit from the proposed LPE Share Buyback: Accepting the Offer may deny you the benefit of the proposed LPE Share Buyback announced by LPE on 24 April 2024, which will enable LPE to return surplus cash and provide additional liquidity for LPE Shareholders looking to realise their investment whilst allowing remaining LPE Shareholders the opportunity to access greater earnings per share. 8. If you accept the Offer, you may be unable to accept a superior proposal if one emerges: Accepting the Offer may deny you the benefit of any subsequent superior proposal by another party, should one emerge during the Offer Period 2. More information on the reasons your Directors recommend you REJECT the Offer can be found in Section 1 of this Target’s Statement. Each of your LPE Directors intends to REJECT the Offer in relation to the LPE Shares which they hold or control. To REJECT the Offer, you should DO NOTHING and TAKE NO ACTION in relation to all documents sent to you by River Capital. Yours sincerely David Jarjoura Executive Chair Locality Planning Energy Holdings Limited 2 As at the date of this Target’s Statement, no superior proposal has emerged. 5 How to REJECT the Offer 1. To REJECT the Offer, DO NOTHING and TAKE NO ACTION in relation to all documents sent to you by River Capital. 2. You should read this Target’s Statement which contains your LPE Directors’ unanimous recommendation to REJECT the Offer and the reasons for this recommendation. 3. If you have any queries in relation to the Offer, please contact: investors@localityenergy.com.au. To REJECT the Offer, DO NOTHING and TAKE NO ACTION in relation to all documents sent to you by River Capital. Key Reasons to REJECT the Offer 1. The Offer undervalues LPE and its growth prospects 2. If you accept the Offer, you lose the potential upside of key initiatives being pursued by LPE 3. If you accept the Offer, you may not benefit from the value of the loan to Bundaberg BioHub and tax losses 4. The Offer is opportunistically timed 5. Your Directors intend to REJECT the Offer 6. The Offer is conditional and uncertain to proceed 7. If you accept the Offer, you may be unable to benefit from the proposed LPE Share Buyback 8. If you accept the Offer, you may be unable to accept a superior proposal if one emerges 6 LPE Directors’ recommendation and intention to REJECT the Offer Directors of LPE The LPE Directors as at the date of this Target’s Statement are: • Mr David Jarjoura, Executive Chair; • Mr Stanislav (Stan) Kolenc, Non Executive Director; and • Mr Simon Tilley, Non Executive Director. Recommendations and intentions In assessing the Offer, your Directors have had regard to a number of considerations, including the information set out in this Target’s Statement and the Bidder’s Statement. Based on this assessment and for the reasons set out in this Target’s Statement (in particular those set out in Section 1), your LPE Directors believe that the Offer Consideration of $0.08 cash per LPE Share offered by River Capital undervalues LPE and is opportunistically timed. Each of your LPE Directors recommends that you REJECT the Offer. Each of your LPE Directors intends to REJECT the Offer in relation to the LPE Shares which they hold or control3 (refer to Section 7.1(a) for more information on the respective LPE shareholdings of your LPE Directors). To REJECT the Offer you should DO NOTHING and TAKE NO ACTION in relation to all documents sent to you by River Capital. 3 Absent any unforeseen personal circumstances. 7 1 Reasons to REJECT the Offer 1.1 The Offer undervalues LPE and its growth prospects Your Directors are of the view that the Offer undervalues LPE and that the value of LPE’s current business and its long term prospects significantly exceeds $0.08 per LPE Share. Your Directors consider that the Offer does not reflect the success of recent LPE initiatives and the significant improvement in the net profit result for FY24 with the Board’s full year updated guidance in the range of $1.95m to $2.0m compared to a net loss of $12m for FY23. The Board’s EBITDA guidance for FY24 is between $3.3m and $3.5m.4 Your Directors consider that the Offer does not adequately reflect the underlying strength in LPE’s business model for the following reasons: • LPE is one of the largest embedded network operators in Queensland which is an attractive market with strong future growth potential. Queensland accounts for over 20% of the Australian population and is consistently in the top 3 Australian states and territories in terms of energy demand per capita and approvals for residential apartments; • LPE is a utility services business that has a contracted customer base of over 32,000 service points under medium to long term contracts. This underpins stable and reliable future income for LPE when compared to more project based or transactional businesses and therefore can attract relatively higher valuations; and • LPE has a large customer base to which it can sell more services. LPE currently provides primarily electricity and hot water to its customers. There are, however, significant future opportunities to provide more services to this same customer base such as increased hot water systems to LPE’s embedded electricity customers and internet, fibre to the premises, and building technologies and systems. For these reasons and the points raised below, your Directors believe the value of LPE is significantly higher than the Offer Consideration of $0.08 per LPE Share offered by River Capital. Your Directors have shown conviction in their belief that LPE’s prospects significantly exceed $0.08 per LPE Share by acquiring, in aggregate, 7,227,043 additional LPE Shares since the Offer was announced at an average price of $0.08 per LPE Share. Further details of the acquisitions recently undertaken by LPE Directors are set out at Section 7.1(b). 1.2 If you accept the Offer, you lose the potential upside of key initiatives being pursued by LPE By accepting the Offer, LPE Shareholders may lose the opportunity to participate in the growth of LPE from various business initiatives currently being pursued by LPE which include the following: (a) 4 in the short period that the Board has existed as currently composed, it has sought to strengthen the management team and increase accountability. This has resulted in reshaping organisational leadership to ensure a singular focus on business improvement; This guidance extrapolates the 10-month net profit position to 30 April 2024 out to the end of FY24. However, the Board is not aware of any reason that extrapolating the result in that way is not reasonable. As with all forward-looking information, it is subject to circumstances outside the control of LPE and both revenue and cost metrics may be higher or lower than anticipated. As a result, there can be no assurance that the ultimate result will be consistent with guidance. 8 (b) with a change in leadership in LPE, there has been a restructure of LPE’s sales team with a new Head of Sales and Solutions which has enabled a singular focus on and capacity to pursue new customers. During April 2024, qualified leads for new service points had increased 70% on the prior corresponding period in 2023; (c) the LPE team is focused on improving its customer experience and retention. Business functions across communications, billing, delivery and procurement are being reviewed with new systems and processes being actively implemented. Improving customer experience is expected to result in better retention, operating efficiencies and greater ability to sell more services; (d) LPE continues to review its cost structure and has identified areas for savings. Of note, LPE is in the process of finalising a new energy supply contract that could deliver up to 10-15% savings to the business’ energy costs. This could equate to $1m to 1.5m5 in savings per annum commencing in July 2024; and (e) LPE is actively exploring future growth opportunities and has commenced discussions with potential partners regarding the delivery of additional internet services to its sites. This could unlock the potential to deliver additional revenues of up to a further 10% per converted customer per year with minimal additional costs. Your Directors consider that the Offer does not adequately reflect the potential value that can be realised for LPE through the above initiatives. Accepting the Offer now will deny you the opportunity to participate in any value uplift to LPE that may occur in the future. 1.3 If you accept the Offer, you may not benefit from the value of the loan to Bundaberg BioHub and tax losses Your Directors believe that the Offer does not fully account for the value of the following additional LPE assets and therefore accepting the Offer will deny you the opportunity to benefit from them: 1.4 • LPE has a loan to Bundaberg BioHub which is currently due for repayment by Bundaberg BioHub on 28 June 2024. As at 1 May 2024 the total debt owed to LPE was $6,153,8628 which includes interest which was being capitalised until the start of 2024. Bundaberg BioHub has now commenced paying interest on the loan and LPE’s last interest payment was received on 30 April 2024, in line with the current agreement. The debt is secured by a second ranking mortgage over the property owned by Bundaberg BioHub in Bundaberg East and a second ranking general security over all the present and after-acquired personal and other property of Bundaberg BioHub. While there can be no assurance that the debt will be repaid in full when due, to the extent that repayments are received they could benefit shareholders up to a maximum amount of $0.034 per LPE Share; and • LPE has accrued significant historic tax losses from which it can benefit as it returns to profitability. The value of LPE gross tax losses as at 30th June 2023 totalled $21,056,265. The Offer is opportunistically timed Your Directors believe that announcement of the unsolicited Offer was opportunistically timed so as to avoid offering full value for LPE Shares: • the Offer takes advantage of recent significant changes which have adversely affected the value of LPE. The Board believes that these issues have now been 5 Calculated based on estimated customer annual usage and estimated rate per kilowatt hour. 9 resolved with a number of strategies already implemented to deliver future growth and profitability to LPE; 1.5 • the Offer was announced just prior to the release of LPE’s March quarterly report which showed significant improvement in LPE’s year to date cash flows and the Board’s profit guidance of $1.6m to $1.8m net profit for FY24 (subsequently updated to $1.95m to $2.0m). This means that the Offer was not informed by these updates; and • the Offer has been timed shortly before the due date for repayment of the loan to Bundaberg BioHub and may not adequately reflect the value of the loan to LPE Shareholders. Your Directors intend to REJECT the Offer Each of your Directors has confirmed that they consider the Offer of $0.08 per LPE Share undervalues LPE and that they have no intention to accept the Offer in respect of the LPE Shares which they hold or control.6 The Directors’ holdings in aggregate represent approximately 23.66% of the issued LPE Shares. Their rejection of the Offer will mean that the Offer will not become effective unless River Capital waives its 90% Minimum Acceptance Condition or declares the Offer unconditional. As a result, River Capital will not be able to reach 90% voting power in LPE and therefore will not become entitled to squeeze-out any non-accepting LPE Shareholders following the Offer by Compulsorily Acquiring the remaining LPE Shares. 1.6 The Offer is conditional and uncertain to proceed The Offer is subject to various Conditions and triggering any of those Conditions may cause the Offer t