REG - Accsys Technologies - Update on Tricoya – Consortium restructure

Accsys TechnologiesAnnouncement

02/11/2022 07:17

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RNS Number : 9972E  Accsys Technologies PLC  02 November 2022

AIM: AXS

Euronext Amsterdam: AXS

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

2 November 2022

Accsys Technologies PLC

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

 

Update on Tricoya - Consortium restructure

Accsys, the fast-growing and eco-friendly company that combines chemistry and
technology to create high performance, sustainable wood building products,
provides an update on the options for the world's first Tricoya plant in Hull,
UK (the "Tricoya Hull Project") and an update on construction of the Tricoya
Hull plant.

On 12 September 2022 the Company announced ongoing discussions with the
consortium partners regarding the Tricoya Hull Project and funding options
given rising plant costs following construction delays including the impact of
COVID-19 and the continuing volatility in energy and acetyls prices impacting
on the plant's short-term profitability.

Today the Company is pleased to announce the resolution of these discussions
resulting in Accsys agreeing to acquire 100% ownership of the Tricoya group
entities, being Tricoya Technologies Limited ("TTL") and Tricoya UK Limited
("TUK") (together with TTL the "Tricoya Entities"), along with the refinancing
and reduction of debt associated with TUK.

Key points:

·       Agreement has now been reached between the consortium being
Accsys, INEOS Acetyls Investments Limited ("INEOS"), Medite, BGF and Volantis
(together the "Consortium Partners") for Accsys to gain 100% ownership of the
Tricoya Entities including the construction project at Hull and the Tricoya
intellectual property and associated technology licences:

o The Consortium Partners will transfer their Tricoya Entity shares to Accsys
in return for 11.9m new Accsys shares (the "Share Issuance"), which represents
5.74% of Accsys' current issued share capital.

o INEOS and Medite will retain their existing supply and offtake agreements
respectively to the Tricoya Hull Project as committed commercial partners.
 

o NatWest has agreed to restructure its TUK debt facility, lowering the
principal amount by approximately €9m to total €6m, under a new 7-year
term.

o The agreement gives Accsys the option to take the Tricoya Hull Project
forward on its own terms and to benefit from 100% of the long-term returns
from Tricoya(®) wood including any future licencing in respect of the global
Tricoya market opportunity.

·       Updated Hull construction project outlook:

o Accsys will stop current site activity for at least six months (the "Hold
Period"), to mitigate the risk of weaker economics on start-up due to current
high and volatile acetyls raw material prices in Europe.

o Third party reports have been concluded confirming up to around €35m for
the remaining project capital costs to bring the plant into commercial
operation, with further reviews ongoing. This would bring the expected total
capital costs for the project to up to around €138m vs the previously
announced maximum of €103m reported in June 2022.

o Final total project costs will remain subject to the timeline that the
project is completed over and exclude up to €0.5m monthly costs anticipated
during the Hold Period.

o At normalised acetyls prices the Company expects that gross margins for the
Hull plant of up to 40% continue to be achievable once operating at target
capacity.

·       In the immediate term, Accsys will focus on increasing
Accoya(®) production at the Arnhem facility and resulting cash generation,
which will also support future financing options for the Tricoya Hull Project.

·       Accsys' Board is pleased to reach this solvent solution with
the Consortium Partners and create optionality over completing the Hull plant.

Commenting on the restructure, Rob Harris, CEO of Accsys said:

"Accsys is pleased to take over 100% of the Tricoya project. This provides us
certainty over the project, gives us full control and the ability to complete
the construction on our terms, at the right time. Whilst that time is not
right now, the validation work undertaken has demonstrated that the
opportunity to produce Tricoya(®) at attractive margins in the future remains
strong. We are also pleased to move ahead with the continued support of INEOS
and Medite as supply and offtake partners.

As we look ahead, with full ownership of the Tricoya Entities, Accsys can now
benefit from the full upside of the Hull plant and from any future facilities
or licences created globally where Accsys continues to see a compelling global
market opportunity for Tricoya(®). The Tricoya project remains synergistic
with the Accoya(®) market proposition which is building positive momentum
following the successful commissioning of the fourth reactor in Arnhem and
with the advancing construction of our facility in the USA."

Tricoya consortium restructure

Accsys has reached agreement to acquire full ownership of TUK and TTL, from
its Consortium Partners. The consideration for this will be satisfied by the
issue of 11.9 million new ordinary Accsys shares to the other Tricoya
Consortium Partners (the "Restructure"). The Share Issuance represents 5.74%
of the current issued share capital of Accsys and based on the Accsys share
price at close of trading on 1 November 2022 it represents a value of €9.8m
(based on the Euronext closing price) or £8.4m (based on the London Stock
Exchange closing price).

Under the agreement Accsys will acquire the remaining 38.2% holding in TUK
that TTL does not already own and the 23.5% holding in TTL that it does not
already own. The Restructure is expected to complete on or around 7 November
2022 once 11.6 million shares to be issued through the Share Issuance are
admitted to trading on the London Stock Exchange's AIM and Euronext Amsterdam
markets, with a further 0.3 million shares to be admitted in the days
following.

INEOS and Medite's respective supply and offtake agreements for the Hull plant
will continue on their current terms.

NatWest has agreed to restructure its TUK debt facility, reducing the
principal amount by approximately €9m to total €6m, under a new 7-year
term. The NatWest facility remains ringfenced from the Accsys Group, the
Accoya(®) plant at Arnhem and other joint ventures. No repayments are due
until the facility maturity date.

Further details are set out in the Notes below.

Benefits of the Restructure

Accsys' Board believes the Restructure is in the best interests of Accsys
shareholders and provides greater certainty and full control of the Hull plant
and Tricoya overall, with benefits to Accsys including:

·    Control and optionality over the completion of the Hull plant,
including the timing, cost, and basis of funding for the Tricoya Hull Project
plant.

·    Discretion over future development of the Tricoya proposition
including licencing.

·    No commitment to invest further capital now and time to assess
options in regard to funding any future capital requirements.

·    Simplifies the Group's structure and will streamline internal
governance.

·    Avoids a more uncertain insolvency risk for the Tricoya Entities due
to the lack of agreement of further funding into the Hull Tricoya Project
under the consortium structure.

Tricoya Hull Project outlook

Accsys intends to freeze current plant activity on construction and
commissioning for an anticipated period of at least six months. This will
significantly reduce the FY23 cash impact from Hull on a monthly cost run rate
basis from approximately €4m earlier in CY 2022 to around €0.5m going
forward. During the Hold Period the Accsys Board will continue to assess the
further work needed to finalise construction and commissioning of the Tricoya
Hull Project and the forecasting of the remaining costs. The length of the
Hold Period will be determined by the Board based on measurable parameters and
will not be for an indefinite period.

Two separate specialist firms were engaged to validate the capital costs for
the remaining construction and commissioning work required to bring the
Tricoya Hull Project into operation. Noting that the plant is the first of its
kind, the specialists suggest that the additional capital cost to complete and
commission the plant is expected to be up to around €35m. This would take
total project capital cost to up to around €138m, from the previously
announced expected maximum of €103m on 30 June 2022.

The monthly costs of the plant during the Hold Period will be up to
approximately €0.5m (on an average basis) for the ongoing security,
maintenance and care of the site. The length of the Hold Period, and the speed
over which the completion works are delivered, will impact the total cost of
the plant to bring it into commercial operation.

The Hold Period will have the strategic benefit of delaying and preventing the
Hull plant from coming into operation during volatile and historically high
gas and acetic anhydride prices:

·    The Tricoya(®) production process requires proportionately more
acetic anhydride per unit value of wood chip produced than the Accoya(®)
production process.

·    While Accsys' acetylation process continues to benefit from a partial
natural hedge through the sale of acetic acid by-product, commencing the
operation of the Hull plant during historically high and volatile prices for
acetic anhydride would further lower the initial profitability of the plant
during its early phases of ramp-up.

·    Therefore, delaying start-up of the Hull plant may improve the
profitability of the operational ramp up period and reduce funding
requirements for the project.

At the end of the Hold Period, Accsys will only commit capital to complete the
Hull plant if it is satisfied that Accsys can expect to receive an appropriate
return on further investment. Factors that the Board will evaluate in this
regard include:

·    Greater clarity on costs to complete and commission the facility;

·    Acetyls pricing, volatility and achievable margins;

·    Project delivery capability, organisation and structure in place to
give certainty, visibility and assurance of the project completion; and

·    Full exploration of funding options by Accsys, including
consideration of trade and financial co-investors, debt, new equity and
contributions from Accsys' cash resources.

Accsys' financial position

The Group remains adequately capitalised and the Restructuring will not impact
the cash resources of the Group given that it is being conducted by way of the
Share Issuance.

As at 30 September 2022, Accsys Group held adjusted net debt of approximately
€62m (31 March 2022: €55m). The Group's net debt figure is expected to
decrease by around €9.5m as a result of the Restructure given the reduction
of the NatWest facility from approximately €15m to €6m.

Following the successful completion of the fourth Accoya(®) reactor expansion
project, production and resulting sales volumes are now increasing. As a
result, and with reduced site activity at the Tricoya Hull Project as set out
above, the Group expects a good increase in cash generation progressively over
the remainder of the financial year.

The Tricoya Entities are currently loss making given that the plant is not yet
operational (FY 2022 operating loss of €4.1m). The Tricoya Entities are
currently fully consolidated into Group figures, therefore there will be
limited impact of the Restructuring on the presentation of the Accsys Group's
financial statements.

However, given the additional capital costs identified to complete the Tricoya
Hull Project, and the uncertainty over the investment and completion timing,
Accsys will likely record a material exceptional non-cash impairment of a
proportion of the tangible fixed assets associated with the Hull plant in its
upcoming half year results. As at 31 March 2022 (FY22), Accsys reported plant
and machinery assets under construction at Hull with a net book value of
€93.6m on a fully consolidated basis.

Accsys will publish its financial results for H1 of the 2023 financial year on
22 November 2022, covering the six months to 30 September 2022.

Notes:

Tricoya entities

In relation to the development, manufacture and sale of acetylated wood chips
for the use in MDF ("Tricoya(®)"), Accsys has been part of a consortium
principally with INEOS Acetyls Investments Ltd ("INEOS") and MEDITE Europe DAC
("Medite") as key commercial partners. The Tricoya consortium has been funded
historically through a mixture of equity from the consortium members and debt
from NatWest Bank PLC ("Natwest") and Accsys. There are two elements to the
consortium:

·    Tricoya Technologies Limited ("TTL") - the company owning and
licencing Tricoya(®) related intellectual property. The shareholders of TTL
are: Medite, INEOS, Accsys, BGF (an investment firm) and Volantis (an
investment fund managed by Lombard Odier investment firm).

·    Tricoya UK Limited ("TUK") - the company established to build, own
and operate the world's first Tricoya(®) plant in Hull, UK.  The
shareholders of TUK are: Medite, INEOS and TTL.

Accsys share issuance

·    Under the Restructuring, Consortium Partners will each receive Accsys
shares in return for transferring their full shareholdings in TTL and TUK to
Accsys. Application will be made today in respect of the Share Issuance for
11,608,259 ordinary shares, which will rank pari passu in all respects with
the existing ordinary shares of the Company, to be admitted to the regulated
market operated by Euronext Amsterdam N.V. ("Euronext Amsterdam") and to the
London Stock Exchange's AIM market, which is expected to occur on or around
8.00 am UK time on 7 November 2022 ("Admission"). A separate application for
the remaining 267,542 ordinary shares is expected to be made shortly following
Admission.

·    Upon Admission, the total number of issued shares and the total
number of voting rights in the Company will be 218,504,968. This figure should
be used by shareholders in the Company as the denominator for the calculations
by which they will determine if they are required to notify their interest in,
or a change to their interest in, the share capital of the Company under the
Financial Conduct Authority's Disclosure Guidance and Transparency Rules.

·    The Accsys shares to be issued to consortium parties are subject to
lock up restrictions on the disposal of these shares, for up to 9 months
following completion (with partial release of tranches during the lock-up
period), subject to customary exceptions and orderly market provisions during
the 9 month period.

·    Under the Restructuring INEOS and Medite will receive 7,500,000 and
3,500,000 Accsys shares respectively.

·    INEOS and Medite are related parties to Accsys under the AIM Rules
for Companies. The arrangements with INEOS and Medite as part of the
Restructure are related party transactions under the AIM Rules for Companies.
The Directors consider, having consulted with Numis as Nominated Advisor, that
the terms of the arrangements with INEOS and Medite as part of the Restructure
are fair and reasonable insofar as shareholders of the Company are
concerned.

Tricoya restructure

·    The amended NatWest loan of €6m will accrue interest which will be
rolled up until the Hull plant is operational. The floating interest rate
remains in line with the previous loan terms. The loan has no financial
covenants.

·    Separate to, and in addition to the amended €6m loan, NatWest will
be entitled to obtain recovery of up to approximately €9.5m, on a contingent
basis, depending on profitability of the Tricoya Hull plant once operational.
The contingent payments to NatWest are based upon free cash-flow generated by
the Hull plant.

·    Accsys' recent bridging loan to TUK of €8m issued in August 2022
will now be committed and rank joint first with the NatWest Senior Loan.
Accsys' second ranked loan facility to TUK of €17m issued in 2021 will
remain and rank behind the other two loans.

Ends

This Announcement contains inside information for the purposes of EU MAR and
UK MAR (together, "MAR"). The person responsible for making this announcement
is Nick Hartigan, General Counsel and Company Secretary, Accsys Technologies
PLC.

For further information, please contact:

 Accsys Technologies PLC                          +44 20 7421 4322 (tel:+44%2020%207421%204322)

Investor Relations

                                                  ir@accsysplc.com (mailto:ir@accsysplc.com)
 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
 ABN Amro (Amsterdam)                             +31 20 344 2000
 Richard van Etten, Dennis van Helmond
 FTI Consulting (UK)                              +44 (0) 20 3727 1340

Matthew O'Keeffe, Alex Le May, Cally Billimore

                                                  Accsys@fticonsulting.com
 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)

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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