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Active Energy Group surges after acquiring a controlling interest in Canadian forestry company

As part of the proposed agreement and subject to available funding, Active Energy will build an initial 25 tonnes per hour CoalSwitch plant at the PowerWood site to produce the company's unique biomass fuel pellet
Cutting down a forest
“Aspen has no real use in any volume,” Spinks explained.

Active Energy Group PLC (LON:AEG) is to acquire a controlling interest in PowerWood Canada Corp, a privately owned Canadian forestry company.

PowerWood holds substantial forestry assets in Alberta, Canada, under forestry management agreements, and deciduous cutting rights issued by the Crown Province of Alberta.

READ: Active Energy's first CoalSwitch plant to be completed next month

Active Energy Group (AEG) said in a statement that the proposed acquisition would secure feedstock and support the proposed roll-out of CoalSwitch in the province of Alberta.

PowerWood has access to 300,000 tonnes of merchantable timber (not including biomass or residues from forestry operations) annually from a total forestry area of circa five million hectares in mature, established, natural forestry in Northern Alberta.

AEG said it plans to construct a 25 tonnes per hour CoalSwitch plant at the PowerWood site. AEG believes the CoalSwitch technology can significantly improve forestry economics due to its ability to use timber processing waste, forestry residues and aspen - the dominant species in these forests - to produce CoalSwitch fuel and PeatSwitch soil amendments.

Off-take agreements, which are subject to the commencement of production, are in place for this project, AEG said.

WATCH: Active Energy to acquire controlling stake in forestry company in Alberta

"This MoU [memorandum of understanding] represents a further step forward in our focused strategy to secure long-term forestry assets and guarantee feedstock volumes to support our planned roll-out of CoalSwitch plants in Canada and Europe,” said Richard Spinks, the chief executive of AEG.

“I am confident that this arrangement with PowerWood Canada will lead to other governmental and private sector forestry owners signing further commercial agreements with the company in the near future.

“We believe we have an excellent platform in place from which to scale up our activities and build Active Energy into a leading producer of environmentally friendly, second generation biomass fuels worldwide,” he added.

Northland Capital Partners said: "AEG has sought to develop a presence in Alberta, in addition to similar efforts in Newfoundland, the aim being to combine efficient forestry with the provision of feedstock for the commercialisation of its CoalSwitch™ biomass replacement for coal in power generation. Today’s development is realisation of this aim."

Speaking to Proactive Investors, Spinks said: “We now can guarantee feedstock into a plant for the long term, at the right price, without market influence; in other words, we’re not buying from traders or in the market place.”

Spinks said the deal was great for Alberta, “because its Aspen we’re talking about”.

“Aspen has no real use in any volume,” Spinks explained. “It makes nearly 80% of the forestry in the regions in which we’re going to be operating, so we’re doing a service for the environment, sustainably, hand-in-hand with the requirements of the local population and government.”

Spinks implied that the deal may be even better than it appears at first glance, as the numbers quoted in the stock market statement are “merchantable timber numbers”, whereas AEG’s technology will be able to use forestry residues, waste and other material that is not usually calculated as part of the value proposition or the volume numbers for this type of arrangement”.

“We have a lot of interest from forestry and timber industry, forestry management organisations and so on, who really want to know now what is it that these guys are doing differently,” Spinks said.

“Why is this attractive and why do they operate in places where we don’t? The answer is CoalSwitch,” he added.

Spinks said the company would start off with one CoalSwitch plant but given the size of the area covered by the agreement, it was very likely the company would build further plants in Alberta.

While clearly pleased with today’s deal, Spinks revealed that the company is extremely close to finalising a similar arrangement with the province of Newfoundland and Labrador.

“It is a complex deal; the first time it has ever been done in Newfoundland and Labrador,” Spinks said.

Shares in Active Energy were up 14% at 4.55p.

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