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Active Energy expecting significant growth this year from its CoalSwitch initiative

While the group is weathering the effects of political unrest in the Black Sea region as best it can, its CoalSwitch technology, which cleanses raw timber biomass, is the area that looks to offer the best growth opportunities
Green energy
The alternative fuel produced by CoalSwitch can be burned in coal-fired power stations, obviating the need for an expensive conversion

CoalSwitch, an environmentally-friendly process that cleanses raw timber biomass, is set to be the primary area of growth this year for Active Energy Group PLC (LON:AEG).

Management intends to focus this year on commercialising the revolutionary technology, it said in a trading update on Wednesday morning.

Locations have been identified for the first reference plant in North America and management is confident the reference plant will be operational before the end of the year.

Active Energy has three divisions: a forestry management business called AEG TimberLands;  a wood chip for MDF supplier, AEG WoodFibre, which is currently the core revenue generator; and AEG CoalSwitch, which is all about replacing coal with alternative fuels.

Coalswitch

The AEG TimberLands division has previously announced a joint venture with three Métis Settlements of Alberta, Canada, to commercialise more than 300,000 hectares (around 750,000 acres) of assets owned by them, and the settlements are also on board with the Coalswitch initiative too.

Today AEG revealed a series of meetings and discussions took place in recent weeks between representatives of the Métis Settlement Partners, officials representing the interests of the Government of Alberta and members of the Active Energy board to discuss the requisite regulatory, legal, operational issues and establish the corporate framework for the CoalSwitch initiative. 

Active Energy also disclosed it has expanded its commercial development pipeline with numerous groups in North America, as well as in Europe and Asia. 

Based upon these discussions, the company hopes that an additional reference plant will also be established either in Malaysia or in the Baltic States during 2017, subject to available funding.  

AEG Timberlands

Management is currently talking to potential partners regarding the acquisition of additional harvesting rights for forestry assets in North America and Europe.

AEG WoodFibre

The wood fibre business, which is focused on the Black Sea region saw a slow-down in activity as a result of the military coup in Turkey in July 2016.

AEG indicated revenues for this division in 2016 were down year-on-year though gross profits are expected to be up on 2015's levels.

The market has now settled following the disruption in the second half of the year, enabling AEG to execute its long-term investment plan to increase production output to meet demand for both hardwood and softwood in the region.

“Given the significant global market opportunity for AEG CoalSwitch and international interest regarding the CoalSwitch development programme, we believe that this area of the group's activities has the potential to experience significant growth in 2017 and beyond,” said chief executive officer Richard Spinks.

“AEG's CoalSwitch division is also attracting interest from regional and national governments globally and we intend to develop our management team and financial structure accordingly to accommodate future developments,” he revealed.

"AEG WoodFibre has often had the backdrop of political and economic uncertainty to contend with, but we have persevered through many challenges in Ukraine over the past three years, developing a strong business and great relationships in the region's wood fibre industry,” Spinks went on. 

“We were stymied by political unrest within our core sales market, Turkey, for the first time in 2016, when the attempted coup unsettled our customers and the Turkish currency markets for a period during the second half of 2016. We are disappointed with the impact this has had on our revenues during this period but anticipate a recovery in these markets in 2017.

 "I believe that we are at an exciting juncture in AEG's development and I look forward to providing our shareholders with further updates as appropriate," Spinks concluded.

Shares in Active energy fell 0.23p to 2.89p on the update.

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