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Westport signs US$71 million investment agreement

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Hydrocarbon Engineering,

Westport Innovations Inc., a company that engineers some of the world's most advanced natural gas engines and vehicles, has announced that it has entered into an agreement with Cartesian Capital Group, of New York, for up to US$71.3 million in financing to support global growth initiatives. The financing agreement immediately provides US$17.5 million in non-dilutive capital with up to US$53.8 million in additional capital, contingent on reaching key milestones and establishing new investment opportunities. This financing package includes a contingent payment (derived substantially from future High Pressure Direct Injection (HPDI) product sales), a convertible debenture, non-core asset sales and incremental funding capacity to support future product development. As part of the financing agreement, Peter Yu, Managing Partner and Founder of Cartesian, will be appointed to Westport's Board of Directors.

The investment by Cartesian includes four different tranches:

  • US$17.5 million immediately: in consideration for an innovative technology income streaming facility, contingent payments to Cartesian are based on a percentage of amounts received by Westport on select HPDI and joint venture products in excess of agreed thresholds through 2025.
  • US$17.5 million in convertible debenture notes: the convertible debenture notes, expected to close upon completion of the Fuel Systems Solutions (FSYS) merger scheduled for mid-February, feature a 9% coupon, a four and half year term, and are convertible into newly issued shares of Westport at US$2.31 per share – a 51% premium to Friday, January 8th's closing price. 50% of the convertible debenture notes may be converted into equity at Westport's election if, after two years, the share price is greater than US$4.62 for 20 out of 30 days and reflects more than US$3 million in average daily trading volume.
  • US$16.3 million through the sale of assets: Westport has agreed to sell US$16.3 million in assets to Cartesian, subject to final due diligence, and expects this transaction to be completed by May 30th. Details of the assets will be disclosed upon completion.
  • US$20 million in additional streaming capacity: Cartesian has committed up to an additional US$20 million to Westport to support two or more product development ventures as may be agreed upon between the parties. The new streaming facilities would provide development funding for Westport in exchange for a contingent payment on products developed by the new ventures.

The investment agreement also provides for Westport to receive 30% of gains realised by Cartesian if certain return thresholds are met."This financing creates a solid financial foundation and clear path to the commercial launch of key products," said David Demers, CEO of Westport. "It also removes any concern regarding Westport's balance sheet."

"The commitment from Cartesian signifies the importance of natural gas to the environment and ratifies that short term energy market volatility has masked the importance of methane as a transport fuel. The natural gas engine and vehicle industry has a compelling future and Westport represents a key part of that future. This financing will be a critical part of our success and the addition of Peter Yuto our Board of Directors will add keen financial acumen and bench strength."

"The pending merger with FSYS, combined with this financing agreement, creates a formidable global force in the natural gas engine and vehicle market. With the financing behind us and the merger progressing towards completion, we can increase our focus on streamlining operations, investing in innovative technology and launching key products into attractive markets," added Demers.

"We are proud to partner with Westport as it enters into this next chapter in its development," said Peter Yu, Managing Partner and Founder of Cartesian Capital. "The company's proven technology, unmatched innovation capabilities, and world class management will continue to lead and drive the natural gas engine industry - an industry that is essential for sustainable global growth, " said Yu. "We look forward to working with Westport's leadership on this globally compelling mission."

Adapted from press release by Francesca Brindle

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