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Active Energy to sell off Ukrainian WoodFibre business as it unveils new structure

The company said the reorganisation will allow it to focus more on its CoalSwitch and forestry management divisions
coal fired power station
The CoalSwitch technology can be used to convert coal-fired power stations without the need for an expensive retrofit

Active Energy Group PLC (LON:AEG) is to sell off its WoodFibre operations in Ukraine as part of the new plan to refocus and reorganise its business which it unveiled today.

The AIM-quoted firm said it is shaking up its structure in order to focus more on the global roll-out of its CoalSwitch fuel product as well as the development of a forestry management business.

Active told investors it believes both of these businesses represent the “two principal growth areas” going forward.

WATCH: Active Energy to focus on 'enormous upside' of CoalSwitch and forestry management

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As a result of the refocusing, the company said it would listen to offers for its Ukrainian WoodFibre business in order to reduce its operating exposure to the Eastern European country.

A bid for the division looks likely to come from Active’s now ex-chief operating officer Matteo Girlanda, who has resigned from the role in order to present an offer to the company and avoid any conflicts of interest.

Active isn’t looking to totally rid itself of AEG WoodFibre though, stating that the plan is to keep a share of the current and future revenues from the business as part of of any deal.

Two separate affiliate companies

As part of the reorganisation, Active Energy has set up two separate affiliate companies; Advanced Biomass Solutions (ABS) and Timberlands International.

ABS will hold all of the current CoalSwitch operations controlled by Active Energy, as well as all future projects related to the group’s biomass coal replacement technology.

As the name suggests, Timberlands will house the timberland assets controlled by Active, as well as any future projects which the company might acquire further down the line.

Current group chief executive Richard Spinks has been appointed to the board of Timberlands while group chief financial officer Brian Evans-Jones will take a seat on the ABS board.

Active Energy said it has already received “significant international interest” for the activities of both ABS and Timberlands which “underpins the reorganisation now being implemented”.

How CoalSwitch Works

The CoalSwitch product is made from waste wood which would normally be left to decompose following forestry operations.

This includes pulp and saw mill by-products such as bark, sawdust and thinnings, and wood which is over-age, under-quality, blow-down, beetle-kill, forest-fire damaged, or industrial waste.

CoalSwitch will be rolled out where AEG can source high volume feedstock.  This may include empty fruit bunch and palm trunks in Asia, low-value hardwoods and mill waste streams in Alberta and fir tree and sawmill residues elsewhere in Canada.

Research, development and testing have taken place over the past two years with the help of the University of Utah, which has included both burn and handling tests. 

Timberlands

The Timberlands division has a joint venture with three native Métis Settlements of Alberta, Canada, to commercialise more than 300,000 hectares (around 750,000 acres) of assets owned by them.

The forests are projected to contain more than 35mln cubic metres of mature timber, as well as low-grade wood suitable for a range of industrial applications. The aim of the JV is to to produce Biomass-based renewable energy fuel using the CoalSwitch technology. The partners also want to find investors in the woodland.

Active Energy chairman: ‘New structure will help divisions to achieve potential’

Active Energy’s chairman, Michael Rowan, told investors: “ABS and Timberlands represent two highly compelling business opportunities, which we believe are capable of establishing important new franchises in each of their existing industry sectors.

“The reorganisation will decrease AEG's future involvement in AEG WoodFibre and operations in Ukraine, thus significantly reducing the group's perceived geographic risk profile and allow investors to focus on two exciting investment strategies that are complementary but also have significant value as standalone operations.”

Restructuring 'logical', says City broker

Shares slipped slightly to 2.3p on the back of the news, giving Active a market capitalisation of a little over £18.5mln.

In a note to clients, City broker Northland Capital said: "The refocus on CoalSwitch and timber assets management is logical and consistent with group strategy."

Active Energy raised £11mln earlier this year

Active Energy raised £11.57mln  in March via the issue of five-year convertible loan note to existing and new investors.

The cash is set to be used to accelerate the development of the company’s CoalSwitch technology.

AEG said it plans to build the first commercial-scale plant that will burn the revolutionary biomass product that can be burned by old, coal-fired generation facilities without the need for a retrofit.

WATCH: Active Energy boss "pleased"  with fundraise…

It also revealed “numerous utilities” and owners of coal power stations across the world have requested the delivery of commercial batches of “drop-in” biomass fuel.

"The completion of this capital raise supports our strategy to accelerate the production of CoalSwitch and to collaborate with forestry owners around the world to increase the commercial viability of their timberland assets,” said AEG chief executive Richard Spinks.

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Active Energy Group PLC Timeline

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September 21 2017

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