Active Energy making all the right moves

Shares in Active Energy (LON:AEG) rose 9% after the group told investors it had won US$50mln in wood fibre orders – with more deals potentially in the offing. The company, which also specialises in forestry management and green energy, announced the contracts alongside news of a planned upgrade to its facility at Yuzhny Port, near Odessa on the Black Sea. AEG’s WoodFibre business will supply Yildiz Entegre, Turkey’s leading medium density fibreboard (MDF) manufacturer, with up to 300,000 tonnes of its hardwood wood fibre, as well as up to another 200,000 tonnes of its new softwood material. Additional off-take supply negotiations with other Turkish MDF makers are ongoing, and the group expects to announce further contract wins over the coming months, investors were told. "We are extremely proud of securing these new supply contracts with one of AEG WoodFibre's largest clients, which both confirms our increasingly strong market presence and our position as the largest supplier of processed wood products from Ukraine,” said chief executive Richard Spinks. “Credit is due to our chief operating officer Matteo Girlanda and his entire team for all their efforts." To meet increased demand, the company is investing in a new softwood production line to augment its recently-upgraded hardwood facility at a cost of around US$750,000. In an update to trading, AEG said the wood fibre division had recovered from a difficult period of trading mid-year. The fourth-quarter saw it deliver for the first time three bulk cargo loads in a single month at good margins. “Demand for wood fibre continues to exceed supply, and regional developments provide a strong indication that this will continue,” said Spinks. “Expanding our wood fibre product range to include softwood is further evidence of our commitment to the long-term development of this vibrant and continually-expanding area of the group's business." By 2pm the shares had advanced 0.45p and were changing hands for 5.58p each, valuing AEG at £32mln. The stock has advanced 44% in the past year. As mentioned earlier, the company has two other businesses: AEG TimberLands and AEG CoalSwitch. The former has a joint-venture with indigenous Métis Settlements to commercialise 200,000 hectares of mature forests in Western Canada. CoalSwitch, meanwhile, is the world’s first biomass fuel that can directly replace coal completely in industrial power plants without requiring any furnace, logistics, handling or storage modifications. Uniquely, the fuel possesses comparable energy levels to coal, has similar handling characteristics and is safer than traditional biomass pellets or other fuels. In an update in December AEG said the CoalSwitch technical team was preparing the 'deposition burn' testing of the revolutionary new fuel in a certified US lab furnace. This key procedure - which measures the levels of deposits on furnace walls post-burning – is expected to confirm its suitability for full-scale industrial use, and will clear the way for commercial deployment in operational coal-fired power plants. The results are expected to be posted at some point in the first quarter. CoalSwitch, which is a 51%-owned joint venture with the technology’s inventor, Biomass Enhancements, is keen to then conduct a “burn test” at an industrial plant. Speaking to Proactive Investors, Spinks was upbeat on the company’s prospects. “On the wood chip side it is about maintaining volumes we have at the really good margins we have,” he said. “We are obviously focusing on the other two major deals people have their eye on with AEG, those being with the forestry business in Canada and the coal switch business, and taking that to the next level in next month or so from the test processes people are eagerly awaiting the results of.”