Richard Spinks, the chief executive of AIM-listed Active Energy (LON:AEG), meets Proactive Investors’ Nigel Roberts to talk about the new joint venture unveiled with three indigenous aboriginal Canadian groups.
He explains that the deal will exclusively commercialise mature forestry assets in Alberta, Western Canada.
Nigel Roberts: Tell us about this deal. It seems the news out today is even bigger than news announced in July?
Richard Spinks: First of all, it’s larger in land area, but more importantly what’s on that land is significantly, it seems, more valuable than what we originally surmised from taking an overall view of it. We actually went into detailed survey of a significant proportion of the forestry there. We selected an area that was the most commercially viable the quickest because it has infrastructure – railway, road and other connections to allow for this to be financially modelled for the investment community to show what the likely return might be if handled sensitively and in a sustainable and environmentally friendly fashion. So it gave us a range of values that we might present to the investment community.
NR: And actually that range of values is much more than you expected. By how much?
RS: I can’t give you the numbers right now. They’ll be given to the investors we’ll be meeting over the next two weeks under confidentiality agreements obviously. But we’re very encouraged.
NR: Because you are moving into Canada and it’s bigger than you expected, does this mean the strategic focus of the company is moving away from Ukraine?
RS: Ukraine’s critical to us. Ukraine’s going very well. We’re expanding in Ukraine, not contracting. It provides us at the moment with our only revenues and our only margins and income. And sufficient to allow us to explore these other opportunities. So we have the Canadian opportunity, we also have our fuel technology opportunity which is still ongoing but a little bit further out. Ukraine’s critical to AEG at the moment – we’ll continue to work there as long as we can and for as long as it makes sense financially and politically it’s possible for us to do so. It’s really allowing us to do all kinds of other very exciting things.
NR: Let’s go back to the Canadian deal, it’s not just Active Energy, it’s KAQUO as well – a joint venture partnership. Just explain a bit more about that.
RS: KAQUO is a Cree word which was given to the business by our Métis partners. They are an indigenous group from north-west Alberta, they own their own land and the forestry on that land is theirs to manage and commercialise as they see fit – it has not been commercialised in the past. They are very excited about working with us. We work together in a mutually beneficial way, we have equal participation in the business, which is something they haven’t seen before.
Normally, they would not receive their rightful share of the revenues or the cash the might be generated from any given asset on their land. Something we’re working closely at the moment with them on is forestry but in the future potentially on many other natural resource projects on the land. They’re very resource rich and very cash poor currently so that’s something we’re aiming to change in the coming months. It’s all about them trusting us and it’s taken a very long time for us to build that up to the point where they would work with us, if you like, as a ‘white’ business and allow us to take the reins in their relationships with international investment communities.
Tomorrow, we’re off for two weeks visiting a significant number of the world’s largest funds with an interest in this type of asset – in Asia mainly, subsequently in the Middle East and then following that we’ll probably go across to the States. But we’ve got a lot of interest in Asia already.
NR: So Richard a very interesting model. It’s ecologically sound, but also it’s about social enterprise and involving the indigenous communities.
RS: It’s also about bringing into the market - which has a dearth of assets at the moment of this type globally - assets that were otherwise unreachable by the investment community because they don’t have those relationships – they haven’t got the time to spend to invest in building the trust with the asset owner that we’ve managed to do. It’s taken us seven years to do – it’s not been a meeting in a room and signing a piece of paper. This has been a long-term process of building trust and explaining to people that what we’re doing is in their best interests.