REG - Accsys Technologies - Final investment decision - Accoya® USA JV

Accsys TechnologiesAnnouncement

04/03/2022 07:00

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RNS Number : 6162D  Accsys Technologies PLC  04 March 2022

AIM: AXS

Euronext Amsterdam: AXS

 

4 March 2022

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

 

Accsys Technologies PLC

("Accsys", the "Group" or the "Company")

 

Final investment decision made for Accoya(®) USA joint venture

 

·      Facility will enable Accsys to address the largest addressable
market for Accoya(®)

·      Key contracts concluded, including US$80 million of bank
financing

·      Construction to commence shortly

 

Accsys, the fast-growing and eco-friendly company that combines chemistry and
technology to create high performance, sustainable wood building products, is
pleased to announce that it has concluded a final investment decision to
construct and operate a new Accoya(®) production facility in the USA ('the
Project').

 

Final Investment Decision

 

Further to the Company's update on 23 November 2021, Accsys and Eastman
Chemical Company ('Eastman') have completed the remaining planning workstreams
required and made the final investment decision to proceed with the
construction of the US facility.

 

Furthermore, all key commercial agreements, including bank loans totalling
US$80 million, are now in place. Construction preparations have commenced, and
workers are due to start site mobilisation in the coming days for Accoya USA,
LLC, the previously announced joint venture ('JV') of Accsys and Eastman.

 

Strategic Benefits

 

The JV will construct the plant with an initial capacity of approximately
43,000 cubic metres per annum, strategically located at Eastman's Kingsport,
Tennessee site. The Project will replicate existing Accoya(®) technology at
Accsys' Arnhem production facility. North America represents a substantial
market opportunity for Accoya(®) and a growth acceleration opportunity for
Accsys. Accsys has established strong foundations in North America with
significant customer demand for Accoya(®). Accoya(®) supply is currently
constrained by production capacity at its existing Arnhem plant and requires
transatlantic transportation.

 

The strategic rationale for the Accoya(®) USA JV and construction of the
facility remains in line with that set out in the Company's announcement on 5
May 2021, and the target financial returns remain valid with an expected
targeted IRR of over 20%.

 

Timeline

 

Engineering work has already commenced and orders for key long lead-time
equipment including the Accoya(®) acetylation reactors have been placed.
Groundworks to facilitate the start of construction are expected to commence
shortly. The facility is expected to take up to approximately two years to
construct. Following construction, Accsys expects sales to ramp up to full
capacity within three years.

 

Project Funding

 

The total construction and start-up costs for the facility, including for the
initial two reactors, are expected to be approximately US$136 million ('Total
Project cost'). As previously announced, under the JV, Accsys holds a 60%
interest and Eastman a 40% interest.

 

$66 million of the Total Project cost will be funded by equity contributions
from the JV parties. Accsys' pro-rata share of US$39.6 million (€34.9
million) will be funded from Accsys' existing cash and debt facilities. This
includes funds raised by Accsys in May 2021 through a placing and open offer.
US$5.6 million has already been contributed to date into the JV by Accsys,
with US$3.8million by Eastman.

 

$70 million of the Total Project cost, will be funded through an eight-year
term loan to Accoya USA, LLC from First Horizon Bank ('FHB') of Tennessee,
USA. FHB are also providing a further US$10 million revolving line of credit
to be utilised to fund working capital.

 

The FHB term loan is secured on the assets of the JV and will be supported by
the JV's shareholders, including US$50 million through a limited guarantee
provided by each of the JV parties on a pro-rata basis, with Accsys' 60% share
representing US$30 million. An attractive interest rate has been secured which
is below the Group's average cost of debt and reflects the Project's strength
and underlying credit support(1).

 

Principal repayments commence one year following the completion and start-up
of the facility, and are calculated on a ten-year amortisation period. The JV
was advised by Dresner Partners, a Chicago based, mid-market investment bank,
in relation to the project debt financing.

 

Rob Harris, CEO of Accsys, commented:

 

"We are delighted to move forward with the construction phase of our North
American joint venture with Eastman. Our Accoya USA JV will allow Accsys to
further address the strong and growing demand in the US market, which we
believe is the largest addressable market for Accoya(®). We are excited to
demonstrate the ability to replicate our facilities from Arnhem, showing how
Accsys' production footprint can scale globally as we move towards our goal of
increasing production capacity to 200,000m(3) a year by 2025."

Brad Lich, Eastman Executive Vice President and Chief Commercial Officer
commented:

"We're pleased to partner with Accsys and excited to achieve this very
important milestone. Eastman is committed to becoming a leading sustainable
materials company, and Accoya's value proposition as a sustainable building
material is compelling. The great collaboration between our teams brings a
wealth of complementary experience and knowledge together, and positions
Accoya USA, LLC very well to benefit from the synergy between our acetyls
business and the Accoya production process. We look forward to progressing the
Accoya USA story and delivering on the great potential in the North American
market."

( )

(1)Credit Support and Related Party transaction

 

To support Accsys' limited guarantee, Accsys will provide a US$20 million
Letter of Credit ('LC') to FHB. The LC is to be issued by ABN AMRO, Accsys'
existing debt provider, utilising part of the revolving credit facility agreed
in October 2021. To further support the LC, Accsys has agreed a €10 million
convertible loan with De Engh BV Limited ('De Engh'), an investment company
based in the Netherlands (the 'Convertible Loan'). The Convertible Loan
proceeds will be placed with ABN AMRO solely as cash collateral to enable ABN
AMRO to grant the US$20 million LC to FHB.

 

De Engh is an existing shareholder in Accsys, presently holding 10.4% of
Accsys' issued share capital and is a related party of Accsys and the
Convertible Loan agreement is a related party transaction under the AIM Rules
for Companies. The Convertible Loan is unsecured and carries an interest
margin of 6.75% above Euribor. Accsys expects to fully repay the Convertible
Loan within two years. If the Convertible Loan is not repaid within this
period, De Engh has an option (from the end of year two) to convert the
outstanding loan balance to ordinary shares in Accsys at €2.30 per share
(representing a 31% premium to the closing share price on 3 March 2022),
otherwise the interest rate increases by 2% in year three and by a further 2%
the following year if the loan has not been repaid or converted after 3 years.
The maximum term of the Convertible Loan is 3.5 years. The Directors are of
the opinion, having consulted with Numis as Nominated Advisor, that the terms
of the Convertible Loan are fair and reasonable insofar as shareholders of the
Company are concerned.

Ends

For further information, please contact:

 Accsys Technologies PLC                          ir@accsysplc.com (mailto:ir@accsysplc.com)

Sarah Ogilvie, Investor Relations
 Numis Securities (London)                        +44 (0) 20 7260 1000

Oliver Hardy (NOMAD), Ben Stoop
 Investec Bank plc (London)                       +44 (0) 20 7597 5970

Carlton Nelson, Alex Wright

                                                +31 20 344 2000
 ABN AMRO (Amsterdam)

Richard van Etten, Dennis van Helmond
 FTI Consulting (UK)                              +44 (0) 20 3727 1340

Matthew O'Keeffe, Alex Le May, Cally Billimore
 Off the Grid (The Netherlands)                   +31 681 734 236

Frank Neervoort, Yvonne Derske

 

Notes to editors:

 

Accsys (Accsys Technologies PLC) is a fast-growing business with a purpose:
changing wood to change the world. The company combines chemistry, technology
and ingenuity to make Accoya(®) wood and Tricoya(®) wood elements:  high
performance wood products that are extremely durable and stable, opening new
opportunities for the built environment and giving the world a choice to build
sustainably. Accsys transforms fast-growing, certified sustainable wood into
building materials with an up to 50-year warranty, locking carbon stored in
the wood into useful products for decades, with performance characteristics
that match or better those of non-renewable, resource-depleting and polluting
alternatives.  Accsys is listed on the London Stock Exchange AIM market and
on Euronext Amsterdam, under the symbols 'AXS'.  Visit www.accsysplc.com
(http://www.accsysplc.com)

Accoya(®) solid wood is sustainable, durable, and stable with exceptional
performance, finish and sustainability. Accsys' proprietary acetylation
process makes the wood more dimensionally stable and because it is no longer
easily digestible, extremely durable. It is one of very few building materials
to be Cradle to Cradle Certified™ at the Gold level, with a Platinum rating
for Material Health, confirming that no harmful or toxic additives or
chemicals are present to leach out into the environment. Primary applications
for Accoya(®) wood include windows, doors, cladding and decking, where the
combination of performance and sustainability benefits compete favorably
against hardwoods, plastics, metals and concrete. Visit www.accoya.com
(http://www.accoya.com)

Accoya USA, LLC is a joint venture between Accsys Technologies PLC and Eastman
Chemical Company, with an equity ratio of 60:40, to fund, design, build and
operate an Accoya(®) wood production plant in the USA for the North American
market.  Following the formation of the joint venture in 2020, the project
has since secured funding from Accsys and Eastman and project debt financing
for a combined $136 million to construct the facility.

Tricoya(®) acetylated wood elements are produced for use in the fabrication
of panel products such as medium density fibreboard (MDF). Panel products made
with Tricoya(®) wood elements are truly durable and stable enough for use
outdoors and in wet environments, unlocking new possibilities for design and
construction. They have been lauded as the first major innovation in the wood
composites industry in more than 30 years and bring the flexibility of
traditional panel products and sustainability benefits of wood to a whole new
range of applications. Visit www.tricoya.com (http://www.tricoya.com)

Any references in this announcement to agreements with Accsys shall mean
agreements with either Accsys or its subsidiary entities unless otherwise
specified. 'Accsys' and 'Accsys Technologies' are trading names of Titan Wood
Limited ("TWL"), a wholly-owned subsidiary of Accsys Technologies PLC.
Accoya(®), Tricoya(®) and the Trimarque Device are registered trademarks
owned by TWL, and may not be used or reproduced without written permission
from TWL, or in the case of the Tricoya(®) registered brand trademark, from
Tricoya Technologies Limited, a subsidiary of TWL with exclusive rights to
exploit the Tricoya(®) brand.

 

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