REG - Active Energy Group - Audited results for year ended 31 December 2021
27/05/2022 07:00
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RNS Number : 0048N Active Energy Group PLC 27 May 2022
Active Energy Group Plc / EPIC: AEG / Sector: Alternative Energy
27 May 2022
Active Energy Group Plc
("Active Energy", "AEG", or the "Company")
Audited results for the year ended 31 December 2021
Active Energy, the London quoted international biomass based renewable energy
business, is pleased to announce the publication of its audited results for
the year ended 31 December 2021.
Operational Highlights
· Independent burn testing completed on CoalSwitch® which confirms its
superior performance to alternate biomass fuels.
· Completed construction of the Company's first reference plant at the
Ashland Facility and subsequently began production of commercial volumes of
CoalSwitch®.
· Commenced negotiations with potential customers both in the United
States, Japan and worldwide for the sale of CoalSwitch®.
· Supplied CoalSwitch® samples to twelve prospective customers
worldwide (both power generators and industrial partners), with ongoing
discussions to establish long-term supply agreements.
· Significantly advanced the Company's strategy towards the commercial
rollout of CoalSwitch® as a next generation biomass fuel.
Financial Highlights
· Successful financial restructuring of the Company's balance sheet and
raising of additional equity funding to complete the construction of the first
CoalSwitch® reference plant at the Ashland Facility.
· Revenue for the year of US$644,914 (2020: US$1,588,140).
· Loss for the year of US$5,881,768 (2020: US$8,757,919).
· Basic and diluted loss per share of 0.16 cents (2020: 0.65 cents).
Activities after the year end:
· Positive co-firing test results received from Utah, USA, further
proving the benefits of co-firing CoalSwitch® with coal, including:
o a minimal impact on heating values when co-fired with coal in furnaces;
o a material reduction of ash compared to burning 100% coal;
o a significant reduction in Nitrogen Oxide (NOx) and Sulphur Dioxide (SO2)
emissions compared to burning 100% coal; and
o CoalSwitch®, when blended with coal, can be milled in an unmodified bowl
mill and burnt in existing coal-fired burners without significant additional
capital expenditure and with lower energy consumption.
· Test results further demonstrated the premium qualities of the pellet
compared to existing white pellet, including:
o increased heating value of 9,313 British Thermal Units per pound (BTU/lb),
which represents a 12.9% premium to traditional white pellets;
o its hydrophobic properties allow easier logistics and storage options
· Received certification confirming compliance with the Forest Stewardship
Council® ("FSC") standards for its CoalSwitch® fuel, confirming that the
fuel is responsibly sourced.
· Sale of the Lumberton site for US$4.65 million, subject to due
diligence and closing.
· Commercial conversations continuing with potential customers to
purchase CoalSwitch®.
Outlook:
· Positive outlook for the business with CoalSwitch® successfully
transitioned from a concept to a proven product.
· The Company is well positioned to deliver on the increasing market
demand for biomass globally.
· The Company is in discussions with a number of interested commercial
partners for the sale of CoalSwitch®.
Michael Rowan, CEO, Active Energy Group, said:
"2021 was an important year for AEG. We have restructured the balance sheet,
extinguished former financial restrictions and raised monies to start to
develop CoalSwitch® to commercial production. CoalSwitch® was delivered to
potential customers in 2021 and this has continued during 2022. Prospective
customer tests and independent tests are proving the superior qualities of
CoalSwitch® to alternate biomass pellets currently available.
"Prospective customers have indicated that they would like CoalSwitch® to be
delivered as soon as possible and the current market conditions are
emphasising this demand. AEG is solely focused on attaining industrial scale
production from Ashland at the earliest opportunity. The last 6 months has
seen finalization of elements required to produce CoalSwitch®, namely design,
engineering and permit approvals and we now look forward to completion of the
plant."
Regulatory information
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.
ENDS
Enquiries
Active Energy Group Plc Michael Rowan (Chief Executive Officer) info@aegplc.com
Andrew Diamond (Chief Financial Officer)
Allenby Capital Limited Nick Naylor / James Reeve / Freddie Wooding (Corporate Finance) Office: +44 (0)20 3328 5656
Nominated Adviser and Joint Broker Amrit Nahal (Sales/Corporate Broking)
Panmure Gordon & Co John Prior / James Sinclair-Ford / Harriette Johnson (Corporate Finance) Office: +44 (0)20 7886 2500
Joint Broker
Hugh Rich (Corporate Broking)
Camarco Gordon Poole / Tom Huddart / Emily Hall aeg@camarco.co.uk (mailto:aeg@camarco.co.uk)
Financial PR Adviser Office: +44 (0)20 3757 4980
About Active Energy Group:
Active Energy Group plc is a London listed (AIM: AEG) renewable energy company
that has developed a proprietary technology which transforms low-cost biomass
material into high-value green fuels. Its patented product CoalSwitch® is the
world's only drop-in biomass fuel that can be mixed at any ratio with coal or
completely replace coal in existing coal-fired power stations without
requiring significant plant modification. Active Energy Group's immediate
strategic focus is the production and commercialisation of CoalSwitch®.
CHAIRMAN'S STATEMENT
In last year's letter I informed you that the Board had sharpened the Group's
strategy for the development and commercial roll-out of CoalSwitch®. We
believe that we can differentiate CoalSwitch® as a 'next generation' biomass
product which is distinct from existing biomass products, both in terms of
feedstock sourcing and in the manufacture of a renewable fuel which exceeds
existing performance parameters for pelletised fuels. We believe strongly in
the positive environmental impact this product can have on the operations of
current coal consumers, and at the same time assisting the lumber industry in
making strides in utilising residual waste products as feedstock. Our aim is
to create an environmental win-win for both industries as the world
transitions towards energy consumption within strict sustainable criteria.
In the year that has passed, we have worked hard to stay focussed on this
objective. Timber cutting permits in Ukraine and Newfoundland, which were not
aligned with the strategy, were abandoned or relinquished. The saw log and
sawmill operations in Lumberton, which would have required significant
additional investment to scale up to profitable operations, and which were
also not directly aligned with the biomass strategy, were exited.
An important landmark in February 2021 saw the completion of the balance sheet
restructuring of the Convertible Loan Notes (the "CLNs"). We were grateful for
the support of the CLN holders throughout the process to allow the Company to
restructure the balance sheet and release the Group from onerous financial
restrictions which were increasingly restricting the Company's strategy. We
are also grateful to those shareholders and new investors who contributed
toward the simultaneous £7.0 million (gross) capital raise. The Company
immediately deployed those funds toward the construction of future
CoalSwitch® production facilities.
Developing a new technology brings inevitable challenges and CoalSwitch® has
been no exception. The permit issues which suspended construction activities
in Lumberton in May 2021, and later in the year the suspension of production
in Ashland following a component failure, were the most significant issues
faced by the management team during 2021. The Company relocated production
from Lumberton to Ashland in Maine and, during Q2 2021 the Company achieved
its long-stated goal of scaled CoalSwitch® production as well as delivering
CoalSwitch® to PacifiCorp Inc. as part of its STEP Program. The subsequent
co-firing test program, completed in Q4 2021, co-ordinated by Brigham Young
University and Utah University, provided considerable encouraging performance
data and know-how for CoalSwitch®.
CoalSwitch® has moved from being a concept to become a viable new biomass
fuel with proven co-firing benefits and a proven industrial process for scaled
manufacture. Product and design enhancements have already been identified to
improve the CoalSwitch® fuel alongside additions towards the manufacturing
process to create further efficiencies for future production volumes. In
addition to the pellet analysis program in Utah (the "STEP Program"), the
Group established new partnerships to accelerate the analysis of CoalSwitch®
and its properties. The positive independent product testing results from the
University of New Brunswick in Q3 2021 continue to assist the Group's sales
activities providing additional product credibility.
The last quarter of the year saw continued product and manufacturing
developments for CoalSwitch® co-ordinated by the Company and working closely
with Player Design Inc. ("PDI") in Maine. In addition, the Company continued
its capital raising activities. The completion of the £3.0 million (gross)
equity fundraise at the end of the year allowed the planning and engineering
for the CoalSwitch® program to continue in 2022 as the work with the State of
Maine moves forward for permitting to allow full scale production at the
Ashland facility. The Board were particularly pleased that Tyler Player
participated in this fundraising (by both investing funds and converting
certain liabilities into new shares in the Company).
The current global environment and the terrible events in Ukraine have
continued to shift customer objectives towards security of supply,
sustainability and reducing pricing volatility. This has created a positive
backdrop for the launch of CoalSwitch® into the commercial marketplace as a
next generation black pellet fuel. New supply sources of biomass fuels have
become of critical importance and the Company's plan to establish production
volumes in the next 12 months could not be more opportune.
On behalf of the Company, I also wish to express our ongoing concern for the
safety and wellbeing of former employees, advisers and their families who
worked for Active Energy in its former Ukrainian operations over the last few
years. All at Active Energy support Ukraine during this unfortunate conflict.
2021 was a challenging year for Active Energy and its operations. Working
within the continuing COVID restrictions, both in the UK and the US, resulted
in additional delays and obstructions to travel into the US which impacted the
decision-making timelines in Lumberton. However, I would like to thank the
members of the Board for each of their contributions and tireless support
through these unprecedented times. I would also like to share the key reasons
why I believe in the future of this Company:
· AEG is now singularly focused on its strategic goal to
deliver CoalSwitch® to coal burning industries and existing biomass
facilities.
· AEG has produced CoalSwitch® at industrial scale and
independent analysis has validated its superior properties, and its ability to
co-fire with coal. These achievements are attracting prospective customers
both in North America and internationally.
· Working with PDI as an engineering partner has created strong
alignment of goals and brought necessary engineering expertise within the
Company.
· A restructured, unencumbered balance sheet has allowed AEG to
open additional financing discussions to fund the Group's future development
and growth.
In 2021, the Company has built the necessary foundations for AEG and its
business. The Company's start-up phase is nearing its end and now the goals of
production delivery and securing orders are the prime focus for the management
team. This will include establishing a base in Maine which can represent the
forefront of all AEG's forthcoming activities.
Post year-end, encouraging discussions have been held with potential customers
from both industry and power generators worldwide, which continues to provide
us with confidence that future orders for CoalSwitch® will be forthcoming. As
a result, the ability to supply CoalSwitch® in commercial volumes remains our
highest priority. The Board remains confident about the future for AEG and I
remain grateful for the ongoing support of all our stakeholders and look
forward to the future with confidence.
James Leahy
Non-executive Chairman
CHIEF EXECUTIVE OFFICER'S STATEMENT
Introduction
AEG is focussed on developing next generation biomass products and on the
manufacturing processes and technologies required to produce them. The
Directors believe that CoalSwitch® represents a step change for the biomass
pellet industry, due to its utilising steam treatment technologies to produce
a superior biomass fuel, thereby addressing both environmental and energy
concerns for industry in the immediate future.
In 2021, AEG achieved a number of significant milestones:
· the successful financial restructuring of the Company's balance
sheet and raising of additional equity funding to complete the construction of
the first CoalSwitch® reference plant;
· completed construction of a plant at Ashland, Maine (the "Ashland
Facility') and commenced production of CoalSwitch®;
· established sales and marketing activities in North America, Japan
and in other countries to promote future sales of CoalSwitch®;
· supplied CoalSwitch® samples to twelve prospective customers
worldwide (both power generators and industrial partners), with discussions
ongoing to establish long term supply agreements; and
· completed independent testing of first CoalSwitch® production to
show that CoalSwitch® is a superior biomass pellet fuel to existing white
pellets in terms of heating value, bulk density and its ability to be co-fired
with coal within existing infrastructure without the need for additional
capital expenditure.
Future role of biomass in energy supply
In recent months, economies have had to contemplate the possibilities of
energy shortages and reconsider their fossil fuel policies. The world is
continuing to examine their alignment with the goals surrounding
sustainability. To add to the complexity, energy security has now become a
material issue that every country is now forced to re-assess. Within these
agendas, biomass as an alternative fuel source is also being re-examined.
The tragic conflict in Ukraine has highlighted questions surrounding fossil
fuel dependency, but more importantly, it has had a significant impact on
pricing for all fossil fuels. Biomass has seen a dramatic increase in price
with prices for white pellet rising over 110% in the last 12 months and 32%
within the last 4 months. In addition, given that Russia was the fourth
largest biomass producer by volume in 2021, the biomass market is now having
to plan for a reduction of up to 4 million tonnes (circa 6% of the global
market) of future supply to take effect by mid-2022. These supply constraints
affect both short term and long-term contractual commitments for biomass,
mainly in Europe.
The biomass market is currently looking for all forms of additional capacity
to accommodate existing demand, without even considering the opportunities
presented in the new growth markets, notably Japan. New capacity will arise
from identified future production projects for white pellet coming on stream
over the next 24 months. Nonetheless, given that much of this future
production is already under off-take contract, there will remain a shortage of
supply.
Black Pellets, including CoalSwitch®, are increasingly being recognised as a
future source of additional biomass supply. The market is acknowledging the
operational and environmental benefits, including the ability to utilise waste
residual feedstocks, increase bulk density and provide greater energy. The
balance between economics and sustainability remains the industry driver.
In the long term, the future for the biomass industry remains robust. The
International Energy Agency's ("IEA") "Net Zero by 2050" report shows a
scenario of a global increase of 20 exajoules in biomass power to 2050
(equivalent to 12% of China's current annual electricity consumption) up from
7 exajoules to date. The Glasgow Declaration on Sustainable Bioenergy stated
that sustainable wood bioenergy would be projected to reduce net global
emissions by 600 million tonnes of CO(2) equivalent annually by 2030.
To date, Europe has led the way in the future use of biomass in power
generation and this will remain the case in the short term. Nonetheless, a
number of Asian countries, including Japan and South Korea, are adopting
similar policies toward biomass which is expected to lead to future growth in
these markets. Their focus is already upon next generation pellets, such as
CoalSwitch®, which meet modern demands for improved heating values and
improved sustainability. North America faces similar challenges to accommodate
consistent fuel supply on economic terms and to start to decrease the
dependence on coal consumption amidst forthcoming emissions legislation.
Next-generation biomass fuels, including CoalSwitch®, have never had a
greater opportunity.
Strategy
Our strategy is to commercialise CoalSwitch®, a proprietary technology which
transforms waste biomass material into high-value sustainable fuel which can
co-fire with existing fossil fuels to produce immediate environmental and
emissions benefits or replace existing biomass feedstock.
The Board believes that CoalSwitch®'s proprietary qualities and development
program, have reached important milestones. CoalSwitch® has:
· utilised waste biomass material as a core feedstock for the
fuel;
· validated its steam treatment technology on an industrial
scale from running the test reactors at Ashland;
· acquired additional technical product knowledge and
manufacturing know-how during the first production cycles at Ashland;
· verified the properties of CoalSwitch® pellets, both as a
next generation fuel, and in its performance to co-fire with coal and reduce
emissions; and
· produced positive market interest in CoalSwitch® as an
alternative renewable fuel.
Next generation biomass fuels (such as CoalSwitch®) will play an important
part in addressing the increasing legislative and regulatory requirements
being imposed on power generators and heavy industry worldwide. This, combined
with increasing public awareness of sustainability provides commercial
opportunities for CoalSwitch®.
Production of CoalSwitch® from the first reference plant at Ashland in the
summer of 2021 provided considerable manufacturing data and know-how. As a
result of this data, the Board decided to commence construction of an
industrial scale facility to produce CoalSwitch®. The market requires a
scalable solution to produce next generation pellets in volume and the
Directors believe that AEG now has the technical solutions to deliver black
pellets, in commercial quantities, via its steam treatment technology.
CoalSwitch® - a fuel with solid credentials
To date, AEG has supplied fuels to twelve prospective clients and universities
for their own independent analysis in North America and Japan. Each customer
is assessing the fuel to meet its own individual consumption requirements.
The first test results from production volumes were published by the Wood
Science and Technology Center at the University of New Brunswick on 2
September 2021 and demonstrated the premium qualities of CoalSwitch® as a
biomass pellet compared to existing white pellets. The pellets were analysed
for their proprietary qualities, namely the quality of the pellet produced
from the Ashland Facility using waste feedstock, its heating value and organic
elemental analysis in a laboratory environment.
The results from the analysis of these CoalSwitch® pellets were as follows:
· produced to industry standard size and met the initial
hydrophobic tests set by the Pellet Fuels Institute;
· bulk density of 42.17 lb/ft3 (or 672 kg/m3) - a substantial
premium to existing white pellets;
· produced less ash (circa 3% inorganic ash) - a significant
reduction to customary ash content for coal;
· the elemental analysis contained circa 55% carbon and less
than 0.5% sulphur content - a significant improvement from white pellet; and
· an increased heating value over white pellet, namely 10,042
btu/lb (with the potential for even greater heating value yields by reducing
the underlying moisture content which had been attained during first
production runs).
In addition, CoalSwitch® was delivered to PacifiCorp in June 2021 as part of
the STEP Program in Utah. The program has been funded by Rocky Mountain
Power's Sustainable Transportation and Energy Plan to analyse next generation
fuels. The STEP Program was designed to evaluate the burning and material
handling properties of various black pellets including CoalSwitch®. The STEP
Program involved an analysis of each phase of the pellet burning process,
including materials handling as well as co-firing and emissions properties.
CoalSwitch® was tested through a bowl mill to better understand materials
handling when combining with coal and subsequently co-fired into a pulverised
coal research furnace operating at 1.3 megawatt of thermal output. The coal
research furnace, operated by Brigham Young University, has a firing system
and direct operational representation of industrial-scale utility boilers used
by power generators throughout the United States. As part of this assessment,
CoalSwitch® was tested over a one-week period both on its own, as well as
blended with Utah bituminous coal at various ratios. CoalSwitch® and coal
were successfully milled, with the milled fuel blends subsequently used for
combustion testing with a reduction in energy consumption.
The STEP Program was co-ordinated by Brigham Young University, Rocky Mountain
Power (a subsidiary of PacifiCorp), the University of Utah, Chalmers
University of Technology and Reaction Engineering International. The STEP
Program completed the materials analysis and burn testing in Q4 2021. The
first conclusions were reported in January 2022. The testing results were very
encouraging for AEG and demonstrate that CoalSwitch® is a viable solution for
coal consumers seeking to reduce their emissions.
The summary of key findings from the report on the testing were as follows:
· CoalSwitch® can be milled in an unmodified mill with only
small changes required to the mill settings;
· a material reduction in mill power requirements occurs when
milling CoalSwitch® compared to pure coal or other alternative biomass fuels;
· heating value of CoalSwitch® alone was 9,313 BTU/lb,
represented a 12.9% premium to traditional white pellets currently produced
for the market by the Company's competitors;
· on a blended mix of 75% coal and 25% CoalSwitch®, the
heating value increased to 11,807 BTU/lb, representing only a 7% drop from
normal coal burning values used in conventional coal fired facilities;
· CoalSwitch® consumed in the furnace produced 77% less ash
than coal;
· CoalSwitch® burnt in the furnace reduced NOx emissions by
20% versus existing coal consumption; and
· CoalSwitch® reduced sulphur dioxide emissions by 60% vs
coal.
The results of these independent testing programmes have proven the superior
performance credentials of CoalSwitch® which AEG had always believed to be
the case. More importantly, this independent research is important for
prospective customers as they commence their analysis toward testing and
evaluating CoalSwitch® and look toward long-term supply contracts. Following
the year end, AEG has been reviewing test burn data received from prospective
customers and these conclusions mirror all the analysis completed in 2021.
This provides a favourable backdrop towards commercial discussions.
CoalSwitch® meets established sustainability criteria
Post year end, in April 2022, AEG obtained Chain of Custody ("CoC") and
Controlled Wood certification compliant with the Forest Stewardship Council®
("FSC®") standards for its CoalSwitch® fuel produced in Maine. The
application process commenced in Q4 2021 to attain market standard
accreditation for both CoalSwitch® and AEG. The certification process
included an audit by an independent accredited certification body, which
examined the full CoalSwitch® production process, encompassing the entire
supply chain from feedstock source to final production of fuel. AEG's
certification to these FSC® standards confirms that the production of
CoalSwitch® will use forest-based materials from responsible sources and that
the Company's suppliers have committed to the strictest standards currently
governing forest management.
The FSC® certification is the basic market prerequisite to permit any biomass
products to be sold into many of AEG's target markets, notably Japan.
Certification for AEG from FSC® represents another significant milestone as
the Company seeks to establish CoalSwitch® as a 'true alternative fuel' and
engages with a wider range of prospective customers who also share our
commitment toward sustainability.
Sales and marketing activities for CoalSwitch® fuel
Signing trial orders and long term off-take agreements with prospective
customers both from the power generation sector and heavy industry is the
priority for AEG. Since first production was completed in Q3 2021, the Group
has focussed its sales activities both in North America and worldwide.
Personnel have been retained both in the USA and Japan to develop sales and
marketing opportunities in each region.
Within the USA, the prime focus has been to examine opportunities with
existing power utilities and other coal-consuming industries such as cement
and aggregate industries. Their interest is focussed on co-firing
opportunities needing to address the immediate environmental concerns over the
current consumption of coal or alternate biomass products. The team are
currently working with various prospective customers who wish to receive trial
volumes at specified locations in the USA. Based upon this success, these
customers will look to conclude long term supply contracts and AEG is already
receiving additional enquiries as to planned additional production facilities
in the USA. Whilst the current discussions are positive, AEG anticipates that
many of these off-take agreements will not be signed until later this year or
early next year.
The sales opportunity in Japan is on a greater scale. Japan has publicly
stated its goals for future biomass consumption, with a need to examine
various types of fuels. Black pellet, particularly CoalSwitch®, has been
identified as a potential fuel. AEG's marketing efforts in Japan are focussed
on specific future biomass plant projects and working with engineering,
procurement and construction ("EPC") partners to supply fuel on long term
contracts. First samples of CoalSwitch® fuel were delivered to prospective
customers and EPC partners in H2 2021 and in 2022 where testing produced
suitably favourable results compared with white pellet. Once again, AEG is
working towards securing long term supply contracts with fuel deliveries
commencing no earlier than 2024 and contractual negotiations have already
commenced to work within these infrastructure project deadlines.
Financial results for 2021
Following the ceasing of activities, the sawmill and sawlog businesses have
been accounted for as discontinued operations.
Losses for the year ended 31 December 2021 amounted to US$5.9 million (2020:
US$8.8 million). The current year losses included an impairment of US$2.0
million relating to the damaged reactors following the component failure at
Ashland. The basic and diluted loss per share for total operations was 0.16
cents (2020: 0.65 cents).
The balances restructuring in February 2021, during which the full CLN
obligation was redeemed or converted into equity, and £7.0 million (gross) of
equity was raised, resulted in a net cash position at 31 December 2021 of
US$2,087,402 (2020: net debt of US$21,467,000). This allowed the Group to
progress with the construction of the CoalSwitch® reference plants. In
addition, the restructuring resulted in the release of the corporate debenture
which was held as security for the CLN's. The Group was fully unencumbered at
31 December 2021. Further analysis of the results for the period are set out
in the financial review below.
Operational update
During 2021, AEG's operational activities were focussed in two centres on the
US East Coast, namely Ashland, Maine and Lumberton, North Carolina. AEG
remains focussed on developing manufacturing capacity in the USA, which is at
the heart of the current global biomass manufacturing industry. The locations
were chosen to allow association with the relevant wood baskets of New England
and the Appalachia and to allow AEG to make the greatest impact toward the
industry changes required of the biomass industry.
Operations at Ashland, Maine
During construction of the Lumberton reference plant, AEG and Player Design
Inc. ("PDI") received additional commercial enquiries about the possibility of
combining CoalSwitch® production facilities within existing lumber mill
operations in north-eastern USA. In April 2021, AEG and PDI worked with the
State of Maine to obtain a temporary operating permit to allow a second
CoalSwitch® reference plant to be constructed at PDI's existing facility at
Ashland.
In April 2021, a joint venture arrangement was established to combine AEG's
existing CoalSwitch® manufacturing equipment with PDI's existing operating
infrastructure at the site to construct a reference plant at the Ashland
Facility. The Board decided to proceed with this second development before the
permitting issues arose in Lumberton during May 2021.
With the subsequent events at Lumberton (which are described below), resources
within AEG and PDI were refocussed toward completion of construction of the
reference plant and for it to become operational within the existing
timetables agreed under the STEP Program. As a result, the reference plant at
the Ashland Facility was completed and operational within 14 weeks from the
date of issuance of the relevant temporary operating permit. First
CoalSwitch® fuel production commenced in May 2021 and first deliveries of
CoalSwitch® to the STEP Program were made in June 2021.
The Ashland Facility reference plant continued to produce volumes of
CoalSwitch® and operate to capacity until 5 August 2021 when a monitoring
component failure resulted in a suspension of production. The Board, together
with PDI, completed a detailed analysis of the manufacturing failure during Q3
2021 and were able to conclude that, save for the component failure, the steam
treatment technology within the reactors had performed as planned and that the
process could be expanded towards an industrial scale production system. The
component failure rendered both reactors inoperable but all other production
equipment at Ashland remained fully operable and capable of recommencing
CoalSwitch® production operations.
The reference plant at Ashland had validated the steam treatment technology to
produce next generation biomass fuels on an industrial scale and identified
the requirements to build larger scale facilities. Further, AEG has acquired
valuable manufacturing and product data necessary for the future development
of production facilities both in North America and elsewhere.
Since the beginning of 2022, both PDI and AEG have been working on the
engineering and permit activities to complete construction of a CoalSwitch®
production facility at Ashland. PDI is in a regular dialogue with the State of
Maine to address all relevant permit issues, including all permits required
for land use, water disposal and emissions. This process is ongoing and will
continue until the CoalSwitch® production facility is fully operational.
As this work has progressed, PDI and AEG have also been developing and
redesigning new larger scale CoalSwitch® production reactors and a larger
industrial scale manufacturing process. The intention is to build out an
industrial scale facility which should accommodate expansion of production
capacity with minimal disruption to production in the medium term. The new
production facility will also reuse equipment formerly at Lumberton, in order
to accelerate the current construction process. The current environment for
sourcing equipment is challenging in the USA and PDI are working to resolve
these issues to deliver an operational facility as soon as possible.
Operations at Lumberton, North Carolina
The property in Lumberton was purchased in 2019 to become the initial
production hub for CoalSwitch® and a variety of associated lumber activities,
including the production of rail ties and other lumber products. These
activities were believed to be complementary given AEG's primary aim was to
demonstrate that biomass fuel production could achieve sustainability goals
for the existing activities of the lumber operations. This operating model
attracted interest from prospective lumber partners throughout the USA and
Canada during 2021 and continues to attract the attention of the lumber
industry.
In respect of the lumber activities during the year, there were a number of
operational issues for Active Energy Renewable Power LLP ("AERP"), the
Company's operating subsidiary at Lumberton. These issues included adverse
weather conditions during Q1 2021 which disrupted log supplies to the
Lumberton Site, ongoing supply chain and logistics disruption globally for
product distribution and continuing operational limitations occurring in North
Carolina and the US as a result of COVID-19 through 2021 (including preventing
the Company's management being able to visit the site on a regular basis).
During Q1 2021, the Board undertook a review of the lumber and saw log
activities at the Lumberton Site and determined that they neither aligned with
the Group's strategic intent of utilising residual materials in the production
of biomass fuels, nor could the investment required to achieve scale for these
businesses be justified at the expense of developing CoalSwitch®. As a
result, in the first half of the year the Board took the decision to cease the
Company's lumber and saw log activities in AERP at Lumberton.
Since Q4 2020, AEG's focus at Lumberton was the production of CoalSwitch®
after relevant permits had been issued by the North Carolina Department of
Environmental Quality ("NCDEQ") in August 2020. Preparatory engineering work
was completed late in 2020 and AEG hired the engineering services of PDI.
Following completion of the fund raising and balance sheet reconstruction in
February 2021, engineering and construction activities accelerated in early
February 2021, with regular monitoring carried out by the NCDEQ.
In May 2021, AEG received a "notice of violation" from NCDEQ in respect of the
installation of additional control devices to enhance emissions reduction
which required an amendment to the existing air quality permits issued by
NCDEQ in 2020. AEG and its representatives immediately submitted the relevant
amendments to ensure construction might remain on schedule. No commercial
activity has taken place at the Lumberton Site since the issuance of this
notice. However, the NCDEQ then requested additional information on emissions
including data from an operational facility in order to revise and re-issue
the permits. During this period, AEG was required to suspend all construction
activities of the first reference plant at the Site. NCDEQ made it clear that
AEG could not resume the permit approval process without independent emissions
analysis being submitted. This resulted in AEG having to refocus its efforts
toward Ashland to ensure that such data might be presented to the NCDEQ. As a
result of the events at Ashland during Q3 2021, independently analysed
emissions data was not acquired and accordingly no further effort has been
made to amend the original permit.
In addition to these operational issues at Lumberton, AEG received a series of
legal challenges from the Southern Environmental Law Center ("SELC") based in
North Carolina during 2021 regarding alleged operational permit breaches from
an existing wastewater treatment plant located within the facility. The
alleged action correlates to the period when the Group first assumed ownership
of the property. Throughout the time of ownership of Lumberton, the Company
has complied with all federal and state environmental regulations imposed at
the facility and ensured that all reporting obligations and records have been
correctly maintained. Accordingly, the Directors are confident that the Group
has fully complied with its environmental and permit obligations and wholly
refutes SELC's claims. Based on the legal advice that it has received the
Company strongly believes that there is no merit in any of the SELC's claims
and allegations and will continue to vigorously defend its position.
In late 2021, the Board reviewed the options for Lumberton. Our operational
experience at Ashland had demonstrated the exact site requirements any future
CoalSwitch® facility may require and it was agreed that other options should
be considered given the existing circumstances. As part of the options,
Lumberton was placed on the market during Q4 2021, either to sell or for lease
to third parties. On 31 March 2022, AEG announced that it had entered into a
sale and purchase agreement with Phoenix LLC for the sale of the Lumberton
Site for gross cash proceeds of US$4.65 million. The sale is subject to a
75-day due diligence and closing period, with closing of the transaction and
receipt of sale proceeds expected in June 2022. At present, the sale and due
diligence process continue as expected.
As part of this process, all production equipment acquired in 2020 and 2021
for future CoalSwitch® manufacture will be transferred to the Ashland
facility for use in the new scaled manufacturing plant including the former
proprietary CoalSwitch® reactors which may continue to be used for further
product development activities.
Intellectual property and registered trademarks
During 2021, AEG continued to develop its intellectual property portfolio and
production know-how regarding CoalSwitch® and its manufacture. The award of
the patent in the USA in December 2020 (Patent No: 10,858,607) has accelerated
additional patent applications in the USA. Complimentary patent applications
surrounding the beneficiation process have been submitted in the USA to
further protect the manufacture process during 2021.
On 4 June 2021, AEG was notified by the Canadian Intellectual Property Office
of the grant of notice of allowance confirming the award of the Canadian
patent. On 1 November 2021, AEG announced the formal award of the Canadian
patent (Canadian Patent No. 2,999,447). These patents follow in substance the
patents already issued in the USA. The Company continues to file further
patent applications around the world with complementary patent applications
currently in progress in South-East Asia and the EU.
Production data and the future manufacturing plans for larger scale reactors
necessitate the development of additional activities for CoalSwitch®
intellectual property program within North America and internationally.
Post year end, in April 2022, AEG was awarded the registered trademark of
CoalSwitch® for use on all future black pellet production created by AEG or
its authorised licencees in the USA. This approval process has taken over 18
months to complete. Additional trademark applications have commenced for
registration of the trademark in international markets.
Technology licensing
Finally, throughout the year, AEG has continued to focus on opportunities for
production joint ventures and partners for production licensing, using AEG's
proprietary intellectual property and manufacturing know how. Ongoing
conversations continue with prospective partners in South-East Asia and South
Africa. Completion and operation of the first manufacturing plant in Ashland
will demonstrate the opportunities that CoalSwitch® and its production
technologies represent
Going concern
The Directors have given careful consideration to the appropriateness of the
going concern basis in the preparation of the Annual Report and Account for
the year ended 31 December 2021. Further details of our current financial
position and material uncertainties which may affect the Company's ability to
continue operating as a going concern are to be found in the Financial Review
and in Note 1 of the Financial Statements.
At the time of completion of the equity fundraise in December, shareholders
were advised that the funding required to complete the production facility in
Ashland was more than the proceeds raised. The net proceeds from the sale of
the Lumberton Site, will allow the Company to further the development of the
Ashland Facility, but additional sources of funding will be required for its
completion.
Whilst there can be no guarantee that funding will be available on terms that
will be acceptable to the Company, or at all, the directors are confident that
the funding required for the Group to continue as a going concern will be
secured within a period of 12 months from the date of approval of the
financial statements and have therefore prepared the financial statements on a
going concern basis.
Outlook
In the current economic and geopolitical environment, the role of biomass has
increased in importance as an alternative renewable fuel in recent months. The
sharp spikes in the pricing for biomass fuel in recent weeks may prove to be
short term, but the tragic events in Ukraine have highlighted energy security
concerns across Europe, US and Asia. Biomass, sourced from North America, has
clear advantages in terms of energy security and this fact is proving an
important consideration for our potential customers.
To add to this, the questions surrounding sustainability, particularly amongst
industrial companies, continue to gather momentum. The consumption of coal
continues but the legislative pressure increases to seek immediate solutions
towards reduction in coal usage and corresponding reduction in emissions. With
this backdrop, accelerating level of enquiries from prospective customers
worldwide continue to seek volumes of CoalSwitch® fuel as soon as possible.
In spite of the current disruption, global conditions have never been better
for a next generation biomass fuel with the capacity to be co-fired in coal
operations without the need for additional capital expenditure.
The priority for AEG is to begin commercial production of CoalSwitch® at the
earliest opportunity. Technical design for the new production facility has
been completed, encapsulating the current requests from the State of Maine and
AEG is currently negotiating equipment and plant delivery schedules. By
re-deploying the equipment formerly at Lumberton and reinvesting the proceeds
from the sale of the Lumberton site, AEG is examining all optimum ways to
accelerate toward that first date of commercial production.
The medium-term strategic focus will subsequently evolve to locating and
developing additional production sites in the US and Canada to meet future
customer offtake commitments. Current discussions with prospective customers
are proving invaluable in planning this strategy.
We look forward to delivering CoalSwitch® to customers in North America and
worldwide.
Michael Rowan
Chief Executive Officer
FINANCE REVIEW
FOR THE YEAR ENDED 31 DECEMBER 2021
The Consolidated Financial Statements for the year ended 31 December 2021
("current year") is compared to the year ended 31 December 2020 ("prior
year").
Positioning to move forward - a restructured balance sheet
In January 2021, Advanced Biomass Solutions Plc ("ABS"), a subsidiary of the
Company, agreed a debt facility up to £1 million and drew down £550,000. The
loan allowed the Company to manage its working capital requirements in advance
of the February fundraising. The debt was repayable within twelve months with
monthly capital repayments following a four-month repayment holiday.
Initiation fees of 7% were payable, and interest was charged at 10% per annum
payable quarterly in arrears. The Company provided a corporate guarantee as
security. ABS had fully repaid the obligation at 31 December 2021, and the
securities had been released. Following that, in February 2021, the CLN
holders agreed to either convert their CLN's or have them redeemed and agreed
to a release of the corporate debenture previously held over the Group's
assets by the CLN holders.
These actions restructured the Group's balance sheet, positioning it to
advance CoalSwitch® production. The group reports a net cash position at 31
December 2021 of US$1.8 million (2020: net debt position of US$21.5 million).
In addition to this improvement, the Group's balance sheet was unencumbered at
year end, as opposed to the stringent securities in place in the prior year.
As the Group looks forward to developing CoalSwitch®, after completion of the
first production facility in Ashland, it will have the option to debt finance
future developments.
Fundraising activities through 2021
At the same time as the CLN conversion, the Company raised £7.0 million
(gross) in an equity fundraising. The proceeds received by the Company, after
certain CLN redemptions, were used to progress the construction of the
reference plants at Lumberton and Ashland.
In December 2021, the Company raised a further £3.0 million (gross) in an
equity fundraising. The proceeds of this fundraise have been used to:
· Complete engineering and design work required for the Ashland
Facility;
· Complete the application for the necessary operational and
construction permits for the Ashland Facility;
· Order additional engineering equipment with long lead-times
required for the construction of the Ashland Facility; and
· To accommodate the Company's general working capital
requirements.
The December fundraise included a subscription of US$1.0 million by Tyler
Player, owner of PDI, the Company's technology partner for construction and
design of CoalSwitch® plants. The Group is very pleased to have Tyler Player
as a significant shareholder of the Company, and PDI as its technology partner
as it readies itself for CoalSwitch® commercialisation and production
expansion. As at 31 December 2021, Tyler Player held 6.64% of the Company's
ordinary share capital.
We thank the new shareholders who participated in the two fundraisings for
their confidence in the Group, and our existing shareholders for their ongoing
support.
Going concern
The Financial Statements have been prepared on a going concern basis. Note 1
of the Financial Statements lays out the material uncertainties relating to
the Company's ability to continue as a going concern.
At the time of the December fundraise, shareholders were advised that the
funding required to complete the production facility in Ashland was
considerably more than the amount raised.
The nature of the Company's strategy, which is focussed on delivery of the
first CoalSwitch® production facility in Ashland, means that the precise
timing of milestones and funds generated during the early years of development
projects are difficult to predict. The Directors have prepared financial
forecasts to estimate the likely cash requirements of the Group over the next
twelve months from the date of approval of the financial statements. The
forecasts show that the Group requires the near-term disposal of the Lumberton
facility to be successful as well as additional external funding within the
12-month forecast period to be able to continue as a going concern. At the
date of approval of the financial statements the buyer is in the due diligence
phase prior to completion and no additional funding is as yet committed.
Whilst there can be no guarantee that funding will be available on terms that
will be acceptable to the Company, or at all, the directors are confident that
the funding required for the Group to continue as a going concern will be
secured within a period of 12 months from the date of approval of the
financial statements and have therefore prepared the financial statements on a
going concern basis. The Directors are considering a number of options for
securing the additional funding including via the sale of assets, the raising
of debt or equity or a combination of both. The directors have also identified
alternative options which could be pursued to provide additional working
capital to enable the Group to meet its liabilities as they fall due over the
next 12-month period.
The financial statements do not include any adjustments that would arise if
the Group were unable to continue as a going concern.
CoalSwitch® development
Having suspended construction activities for a CoalSwitch® reference plant in
Lumberton, on 20 May 2021, the Company announced its 50/50 joint venture
arrangement with PDI. Under this joint venture, AEG and PDI jointly owned a
CoalSwitch® plant in Ashland, Maine. This reference plant construction was
completed and production commenced in May 2021 under a temporary production
permit obtained by PDI and AEG.
On 5 August 2021, a monitoring component failure resulted in an unexpected
interruption in production cycles. As a result of this failure, both reactors
at the Ashland Facility were rendered inoperable, resulting in an impairment
charge of US$2.0 million (see Note 4). All other equipment remains operable
and will be incorporated in the Ashland CoalSwitch® production facility along
with other plant and equipment currently located in Lumberton.
Subsequent events
The Company announced the sale of the Lumberton site in March 2022 for gross
cash proceeds of US$4.65 million. The sale is subject to a 75-day due
diligence and closing period, with the closing of the transaction and receipt
of sale proceeds expected in June 2022.
During 2021, the Southern Environmental Law Center has commenced a legal
action against the Group for alleged permit breaches in operational activities
at the Lumberton Site. Upon receipt of legal advice, the Directors are
confident that the Group has fully complied with its environmental and permit
obligations since ownership of the Site and strongly believes that there is no
merit in any of the SELC's claims and allegations and will continue to
vigorously defend its position.
Performance
In the first half of 2021, the Board reassessed AEG's strategy and determined
that the saw log export business, which involved loading saw logs into
containers to be shipped to South-East Asia, did not align with AEG's
environmental strategy to focus on the use of residual and waste forestry
products from the lumber industry. In addition, the Company was not able to
operate the saw log export business at a scale to produce profitable returns.
Furthermore, the equipment operated by the sawmill business restricted
production expansion, and the business struggled to operate profitably. The
level of capital investment required to scale up and operate both businesses
profitably, to the detriment of CoalSwitch® development, was deemed
unacceptable and the Board decided it was in the best interests of the Company
to cease the operations of these businesses. In accordance with IFRS 5, the
results for these businesses have been accounted for as discontinued
operations.
Continuing operations
Gross loss in the current year of US$517,238 (2020: US$nil) reflects the
non-capitalised expenses of the Ashland reference plant during the period of
production.
Impairment charges of US$2,000,000 (2020: US$4,758,707) account for the two
reactors which were damaged following the component failure at Ashland.
Administrative costs were US$3,191,554 (2020: US$1,644,480). The increase
reflects the non-cash share-based payment charge of US$639,746 (2020:
US$56,382) arising from LTIP and warrant awards. Certain administrative costs
previously transferred to operating entities and reflected in cost of goods
sold are now fully reflected within administrative costs.
Other income of US$361,237 (2020: US$96,405) reflects the forgiveness of CLN
indebtedness.
Finance costs reflects the impact of the CLN conversion and redemption, as
well as the foreign exchange impacts on funds raised during the year.
Discontinuing operations
The termination of the saw log and sawmill businesses is disclosed in the loss
from discontinued operations of US$919,211 (2020: US$1,923,593). The losses
reflect the difficult trading conditions and the impact of operating below
optimal scale operations. Costs associated with the closure of the saw log and
sawmill businesses have been fully accounted for. The Group does not currently
have any revenue generating operations.
Loss for the year was US$5,881,768 (2020: US$8,757,919), and total basic and
diluted loss per share was 0.16 cents (2020: 0.65 cents).
Financial position
Non-current assets
As part of the December fundraising, AEG acquired the remaining 50% of the
joint venture from PDI. Know-how of US$400,000, acquired during the
CoalSwitch® production period, was recognised. Going forward with the
construction of the CoalSwitch® facility in Ashland, AEG will own 100% of the
assets and operations of the facility.
Additions to plant and production equipment of US$3,957,944 (2020:
US$1,323,499) relate to the development of the Lumberton and Ashland
CoalSwitch® plants. The termination of leases following the cessation of the
sawmill business resulted in a deemed disposal of US$253,788 of plant and
equipment.
Current assets
Trade and other receivables of US$1,628,959 (2020: US$270,755) consist mainly
of US$1,190,315 of project advances to PDI for the development of the Ashland
Facility.
Current liabilities
Trade and other payables were US$1,222,030 (2020: US$2,241,657). An accrual of
approximately US$700,000 for Lumberton and Ashland construction costs was
included in 2020 with the remaining reduction owing largely to the cessation
of timber trading activities and stringent cost management.
Non-current liabilities
Loans and borrowings of US$143,931 (2020: US$22,105,551) reflects the impact
of the removal of the CLN obligation. The removal of all securities
accompanied the CLN removal.
Cashflow
Operating cash outflows were US$5,618,404 (2020: US$1,302,560). The increased
outflow of US$4,315,844 comprises US$2,236,562 relating to operating
performance, and US$2,079,282 attributable to working capital reduction.
Investing outflows of US$4,375,624 (2020: US$1,400,932) relate to the purchase
of relevant equipment related to the CoalSwitch® facilities in Lumberton and
Ashland.
Financing activities included US$12,722,200 of net equity raised in the
fundraisings in February 2021 and December 2021, less US$1,571,222 of CLNs
redeemed as part of the balance sheet restructuring process.
US$1,940,871 of cash and cash equivalents was on hand at year end (2020:
US$999,631).
Section 172 Statement
The Directors are well aware of their duty under Section 172 of the Companies
Act 2006 to act in the way which they consider, in good faith, would be most
likely to promote the success of the Company for the benefit of its members as
a whole and, in doing so, to have regard (amongst other matters) to:
· The likely consequences of any decision in the long term;
· The interests of the Company's employees;
· The need to foster the Company's business relationships with
suppliers, customers and others;
· The impact of the Company's operations on the community and
the environment;
· The desirability of the company maintaining a reputation for
high standards of business conduct; and
· The need to act fairly between members of the Company.
The Board recognises that the long-term success of Active Energy Group
requires positive interaction with its stakeholders, including customers,
suppliers, governmental and regulatory authorities. The Directors seek to
actively identify and positively engage with key stakeholders in an open and
constructive manner. The Board believes that this strategy enables our
stakeholders to better understand the activities, needs and challenges of the
business and enables the Board to better understand and address relevant
stakeholder views which will assist the Board in its decision making and to
discharge its duties under Section 172 of the Companies Act 2006.
Andrew Diamond
Finance Director
CONSOLIDATED STATEMENT OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
2021 2020
US$ US$
CONTINUING OPERATIONS
REVENUE - -
GROSS LOSS (517,238) -
Impairment charges (2,000,000) (4,191,039)
Administrative expenses (3,191,554) (1,644,480)
Other income 361,237 96,405
OPERATING LOSS (5,347,555) (5,739,114)
Net finance costs 382,208 (1,309,388)
LOSS BEFORE TAXATION (4,965,347) (7,048,502)
Taxation 2,790 214,176
LOSS FROM CONTINUING OPERATIONS (4,962,557) (6,834,326)
LOSS FROM DISCONTINUED OPERATIONS (919,211) (1,923,593)
LOSS FOR THE YEAR - ATTRIBUTABLE TO THE PARENT COMPANY (5,881,768) (8,757,919)
Basic and Diluted loss per share (US cent) - Continuing operations (0.13) (0.51)
Basic and Diluted loss per share (US cent) - Discontinued operations (0.03) (0.14)
Basic and Diluted loss per share (US cent) - Total operations (0.16) (0.65)
OTHER COMPREHENSIVE LOSS
Items that may be subsequently reclassified to profit or loss
Exchange differences on translation of operations (2,239,354) (117,701)
Revaluation of other financial assets - (539,327)
Total other comprehensive loss (2,239,354) (657,028)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR (8,121,122) (9,414,947)
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
Group Group Company Company
2021 2020 2021 2020
US$ US$ US$ US$
NON-CURRENT ASSETS
Intangible assets 5,659,024 5,259,024 - -
Property, plant & equipment 11,512,953 10,443,641 2,573 900
Investment in subsidiaries - - 6,417,741 1,495,943
Long term loans - - 25,296,460 23,204,528
Other financial assets 922,275 931,312 922,275 931,312
18,094,252 16,633,977 32,639,049 25,632,683
CURRENT ASSETS
Inventory 27,250 237,506 - -
Trade and other receivables 1,628,959 270,755 432,041 -
Cash and cash equivalents 1,940,871 999,631 1,915,571 811,901
3,597,080 1,507,892 2,347,612 811,901
TOTAL ASSETS 21,691,332 18,141,869 34,986,661 26,444,584
CURRENT LIABILITIES
Trade and other payables 1,222,030 2,241,657 602,062 1,183,827
Lease liabilities - 136,891 - -
Loans and borrowings 14,013 21,772 13,015 21,772
1,236,043 2,400,320 615,077 1,205,599
NON-CURRENT LIABILITIES
Deferred taxation 147,349 150,139 - -
Lease liabilities - 202,417 - -
Loans and borrowings 143,931 22,105,551 47,029 21,961,104
291,280 22,458,107 47,029 21,961,104
TOTAL LIABILITIES 1,527,323 24,858,427 662,106 23,166,703
NET ASSETS/(LIABILITIES) 20,164,009 (6,716,558) 34,324,555 3,277,881
EQUITY
Share capital - Ordinary shares 786,867 219,436 786,867 219,436
Share capital - Deferred shares 18,148,898 18,148,898 18,148,898 18,148,898
Share premium 55,349,883 18,711,637 55,349,883 18,711,637
Merger reserve 2,350,175 2,350,175 2,350,175 2,350,175
Foreign exchange reserve (2,424,329) (184,975) (2,004,424) (124,920)
Own shares held reserve (268,442) (268,442) (268,442) (268,442)
Convertible debt/warrant reserve 1,165,911 3,701,803 1,165,911 3,701,803
Retained earnings (55,449,600) (49,899,736) (41,204,313) (39,460,706)
Revaluation reserve 504,646 504,646 - -
TOTAL EQUITY 20,164,009 (6,716,558) 34,324,555 3,277,881
GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
Share capital Share premium Merger reserve Foreign exchange reserve Own shares held reserve Convertible debt and warrant reserve Retained earnings
Revaluation Reserve Total equity
US$ US$ US$ US$ US$ US$ US$ US$ US$
At 31 December 2019 17,265,379 17,303,159 2,350,175 (67,274) (268,442) 3,490,621 (40,206,405) 504,646 371,859
Loss for the year - - - - - - (8,757,919) - (8,757,919)
Other comprehensive income - - - (117,701) - - (539,327) - (657,028)
Total comprehensive income - - - (117,701) - - (9,297,246) - (9,414,947)
Issue of share capital 835,801 1,381,401 - - - - (452,467) - 1,764,735
Conversion of CLN 267,154 27,077 - - - - - - 294,231
Embedded derivative on CLN issue - - - - - 211,182 - - 211,182
Share based payments - - - - - - 56,382 - 56,382
At 31 December 2020 18,368,334 18,711,637 2,350,175 (184,975) (268,442) 3,701,803 (49,899,736) 504,646 (6,716,558)
Loss for the year - - - - - - (5,881,768) - (5,881,768)
Other comprehensive income - - - (2,239,354) - - - - (2,239,354)
Total comprehensive income - - - (2,239,354) - - (5,881,768) - (8,121,122)
Issue of share capital 334,391 13,087,809 - - - - - - 13,422,200
Conversion of CLN 233,040 23,550,437 - - - (2,843,734) - - 20,939,743
Share based payments - - - - - 307,842 331,904 - 639,746
At 31 December 2021 18,935,765 55,349,883 2,350,175 (2,424,329) (268,442) 1,165,911 (55,449,600) 504,646 20,164,009
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
Share capital Share premium Merger reserve Foreign exchange reserve Own shares held reserve Convertible debt and warrant reserve Retained earnings
Total equity
US$ US$ US$ US$ US$ US$ US$ US$
At 31 December 2019 17,265,379 17,303,159 2,350,175 (468,793) (268,442) 3,490,621 (31,791,515) 7,880,584
Loss for the year - - - - - - (6,733,779) (6,733,779)
Other comprehensive income - - - 343,873 - - (539,327) (195,454)
Total comprehensive income - - - 343,873 - - (7,273,106) (6,929,233)
Issue of share capital 835,801 1,381,401 - - - - (452,467) 1,764,735
Conversion of CLN 267,154 27,077 - - - - - 294,231
Embedded derivative on CLN issue - - - - - 211,182 - 211,182
Share based payments - - - - - - 56,382 56,382
At 31 December 2020 18,368,334 18,711,637 2,350,175 (124,920) (268,442) 3,701,803 (39,460,706) 3,277,881
Loss for the year - - - - - - (2,075,511) (2,075,511)
Other comprehensive income - - - (1,879,504) - - - (1,879,504)
Total comprehensive income - - - (1,879,504) - - (2,075,511) (3,955,015)
Issue of share capital 334,391 13,087,809 - - - - - 13,422,200
Conversion of CLN 233,040 23,550,437 - - - (2,843,734) - 20,939,743
Share based payments - - - - - 307,842 331,904 639,746
At 31 December 2021 18,935,765 55,349,883 2,350,175 (2,004,424) (268,442) 1,165,911 (41,204,313) 34,324,555
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
Group Group Company Company
2021 2020 2021 2020
US$ US$ US$ US$
Cash (outflow)/inflow from operations (5,618,404) (1,302,560) (3,416,684) (1,761,243)
Income tax paid - - - -
Net cash (outflow)/inflow from operating activities (5,618,404) (1,302,560) (3,416,684) (1,761,243)
Cash flows from investing activities
Purchase of intangible assets - (661,939) - -
Advances to acquire property, plant and equipment (800,000) - - -
Purchase of property, plant and equipment (3,957,944) (738,993) (2,979) (1,222)
Sale of property, plant and equipment 382,320 - - -
Net cash outflow from investing activities (4,375,624) (1,400,932) (2,979) (1,222)
Cash flows from financing activities
Issue of equity share capital, net of share issue costs 12,722,200 1,754,489 12,722,200 1,754,489
Issue of CLN - 1,467,778 - 1,467,778
Redemption of CLN (1,571,222) (1,571,222)
Intercompany loans advanced - - (6,617,719) (1,076,176)
Unsecured debt repaid (1,040,400) - (8,547) -
Unsecured debt proceeds 885,234 212,600 - 68,153
Principal elements of lease payments (57,900) (95,758) - -
Finance expenses (37,842) - -
Net cash inflow from financing activities 10,937,912 3,301,267 4,524,712 2,214,244
Net increase in cash and cash equivalents 943,884 597,775 1,105,049 451,779
Cash and cash equivalents at beginning of the year 999,631 397,323 811,901 360,622
Exchange losses on cash and cash equivalents (2,644) 4,533 (1,379) (500)
Cash and cash equivalents at end of the year 1,940,871 999,631 1,915,571 811,901
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
1. PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information, for the year ended 31 December 2021, set out in
this announcement does not constitute statutory accounts. This information has
been extracted from the Group's 31 December 2021 statutory financial
statements upon which the auditors' opinion is unqualified. However, the
auditors' report highlights material uncertainty relating to going concern and
includes the following additional key audit matters:
· Carrying value of intangible assets;
· Carrying value of property, plant and equipment; and
· Carrying value of investments and intercompany loans (Company only).
2. BASIS OF PREPARATION
The financial information, for the year ended 31 December 2021, set out in
this announcement, has been:
· presented in accordance with International Financial Reporting
Standards ("IFRSs"), however this preliminary announcement does not contain
sufficient information to comply with IFRSs. The IFRS compliant Consolidated
Financial Statements is published in the Annual Report and Accounts for the
year ended 31 December 2021, available on the Company's website;
· prepared on the going concern basis, however the Directors have
highlighted a number of material uncertainties which may affect the Company's
ability to continue operating as a going concern; and
· prepared on the basis of the accounting policies as stated in the
Report and Accounts for the year ended 31 December 2020, with the exception of
those changes required in the application of new and revised IFRSs, none of
which has a material impact on the Group.
3. GOING CONCERN
The Directors are required to give careful consideration to the
appropriateness of the going concern basis in the preparation of the Financial
Statements.
In February 2021, the Company restructured its balance sheet by securing the
conversion and redemption of the entire convertible loan note obligation
("CLN"). Furthermore, the securities in place for the CLN holders were
revoked. The Group had loans of US$0.2 million at 31 December 2021, consisting
of government support loans on favourable terms, with a low annual repayment
burden. The balance sheet is entirely unencumbered.
At the same time as the balance sheet restructuring, the Company recapitalised
the business by raising equity of £7.0 million (gross) and in December 2021
it raised a further £3.0 million (gross). The earlier fundraise proceeds were
used for the construction of the Lumberton and Ashland CoalSwitch® reference
plants, certain CLN redemptions and improvement of the working capital
position. The December proceeds were used principally to enhance the
CoalSwitch® reactor design and engineering and initiation of the permitting
process in Ashland for the construction of a production facility.
At the time of the December fundraise, shareholders were advised that the
funding required to complete the production facility in Ashland was
considerably more than the amount raised.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
The nature of the Company's strategy, which is focussed on delivery of the
first CoalSwitch® production facility in Ashland, means that the precise
timing of milestones and funds generated during the early years of development
projects are difficult to predict. The directors have prepared financial
forecasts to estimate the likely cash requirements of the Group over the next
twelve months from the date of approval of the financial statements.
The cash forecast includes the following assumptions:
· the requisite permits are obtained to commence with construction
of the Ashland facility. At the time of reporting an application for air and
construction permits has been submitted to the State of Maine;
· the near-term disposal of the Lumberton facility. As announced on
31 March 2022, the sale of the property has been agreed and the buyer is in
the due diligence phase prior to completion. The sale will provide funding for
the Ashland facility and reduce overhead costs at Lumberton;
· a suitable long-term off-take agreement for CoalSwitch® will be
secured enhancing the Company's ability to secure investors to provide
development funding for completion of the Ashland facility; and
· the current overhead cost run rate.
The forecasts show that the Group requires the near-term disposal of the
Lumberton facility to be successful as well as additional external funding
within the 12-month forecast period to be able to continue as a going concern.
However, as stated above, at the date of approval of these financial
statements the buyer is in the due diligence phase prior to completion and no
additional funding is as yet committed.
Whilst there can be no guarantee that funding will be available on terms that
will be acceptable to the Company, or at all, the directors are confident that
the funding required for the Group to continue as a going concern will be
secured within a period of 12 months from the date of approval of the
financial statements and have therefore prepared the financial statements on a
going concern basis. The directors are considering a number of options for
securing the additional funding including via the sale of assets, the raising
of debt or equity or a combination of these. The directors have also
identified alternative options which could be pursued to provide additional
working capital to enable the Group to meet its liabilities as they fall due
over the next 12-month period.
Should additional funding not be secured within 12 months from the date of
approval of these financial statements, the Group would not be a going
concern. As such, these conditions indicate the existence of a material
uncertainty that may cast significant doubt on the Group's ability to continue
as a going concern.
The financial statements do not include any adjustments that would arise if
the Group were unable to continue as a going concern.
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