REG - Active Energy Group - Business update

Active EnergyAnnouncement

17/01/2023 07:01

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RNS Number : 8899M  Active Energy Group PLC  17 January 2023

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the UK version of the Market
Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this
announcement via a Regulatory Information Service, this inside information is
now considered to be in the public domain.

 

 

17 January 2023

 

Active Energy Group Plc

("Active Energy", "AEG", the "Company" or the "Group")

 

Business update

 

Active Energy (AIM:AEG, OTCQB:ATGVF), the international biomass based
renewable energy business, is pleased to provide an update on its commercial
activities during H2 2022 and the Company's ongoing strategy and goals for
2023.

 

Highlights

 

Ashland update

 

·    Player Design Inc ("PDI") has commenced building of the future
CoalSwitch® production facility at Ashland, Maine (the "Ashland CoalSwitch®
Facility").

o  Work on the new reactor designs completed.

o  Component specifications for the CoalSwitch® manufacturing process,
including liaison with various key component manufacturers in the US,
completed.

o  Delivery dates for the final components to the Ashland CoalSwitch®
Facility are scheduled through Q1 2023.

·    PDI is working with the State of Maine to finalise the requisite
permit amendments to allow CoalSwitch® production to commence.

o  These will complement PDI's existing production operations at Ashland.

·    PDI has informed AEG that it anticipates construction will be
completed toward the end of Q1 2023 with first production volumes now being
generated in Q2 2023.

·    Initial CoalSwitch® production volumes targeted at a rate of 35,000
tons per annum, with the aim to increase this during 2023 toward an annualised
production rate of 100,000 tons per annum utilising existing production
equipment owned by AEG.

 

Marketing activities

 

·    Sales teams established in the US and the UK during H2 2022.

·    Commercial discussions for CoalSwitch® sales (including fuel
testing) continue in a number of countries.

o  Active discussions with 17 prospective CoalSwitch® customers.

o  CoalSwitch® test samples have been delivered to 8 prospective customers.

·    Prospective customers range from power generators, pulp and paper
operators and cement producers in the US, to established domestic heating fuel
pellet suppliers in the US and internationally.

o  CoalSwitch® samples provided to three European utilities for evaluation.

o  Letters of Intent ("LoIs") signed in the UK for future CoalSwitch® sales
with a number of prospective customers in the biomass heating fuel market.
Initial amounts under LoIs total over 3,000 tonnes, with fuel deliveries to
commence in Q2 2023.

o  In the US, first CoalSwitch® fuel order from Carolina Stalite, an
aggregates producer based in North Carolina, has been received.

·    Increasing commercial interest in the production technology for
CoalSwitch® should lead to complimentary future revenue opportunities for
both Active Energy and PDI.

 

Additional accreditation activities

 

·    In December 2022, Karbone Inc. ("Karbone") completed a full US and
Canadian analysis on the economic opportunities for CoalSwitch®.

o  This analysis concluded that CoalSwitch® will qualify for a range of
incentives and benefits in the US.

o  These benefits can either reduce CoalSwitch cost to customers (in the form
of rebates/incentives), or drive additional income streams to AEG in the form
of carbon credits on the voluntary carbon market.

·    Trademark filings for CoalSwitch® brand currently being completed in
Canada, Europe, UK, and Japan.

 

Michael Rowan, CEO of Active Energy, commented: "2022 was an extremely
productive year for Active Energy. Through PDI, the program to build
CoalSwitch production has made important progress. The production processes
have been finalised to enable scaled production at the Ashland CoalSwitch®
Facility in greater volumes than originally anticipated and AEG's goal is now
to commence fuel deliveries during Q2 2023.

 

"Throughout the year AEG has been able to accelerate its marketing activities
and has delivered test fuel samples to prospective clients worldwide.
CoalSwitch's® performance superiority to existing biomass fuels is being
consistently demonstrated through its testing program. The environmental
benefits of CoalSwitch®, particularly when co-fired with coal, are also being
confirmed.  AEG is developing a long-term customer pipeline for deliveries
beyond 2023 and the first CoalSwitch® LoI's from the UK and recent order from
the US just represent the start of this process.

 

"AEG's prime focus will remain on generating long-term supply contracts whilst
PDI complete the construction and operation of the forthcoming Ashland
CoalSwitch® Facility. We look forward to establishing CoalSwitch® as the
market standard for next generation biomass fuels in the coming years."

 

Enquiries:

 Active Energy Group Plc        Michael Rowan (Chief Executive Officer)                                info@aegplc.com

                                Michelle Fagan (Chief Financial Officer)
 Allenby Capital Limited        Nick Naylor/James Reeve/Daniel Dearden-Williams (Corporate Finance)  Office: +44 (0)20 3328 5656

 Nominated Adviser and Broker   Amrit Nahal (Sales/Corporate Broking)
 Camarco                        Tom Huddart / Emily Hall / Lily Pettifar                             aeg@camarco.co.uk (mailto:aeg@camarco.co.uk)

 Financial PR Adviser                                                                                Office: +44 (0)20 3757 4980
 Scoville PR                    John Williams                                                        aeg@camarco.co.uk

 US PR Adviser

 

 Website         LinkedIn                                Twitter
 www.aegplc.com  www.linkedin.com/company/activeenergy   https://twitter.com/aegplc (https://twitter.com/aegplc)

                                                        @aegplc

 

 

Development of the Ashland CoalSwitch® Facility and future CoalSwitch®
production capability

 

PDI has been progressing the future CoalSwitch® production operations at
Ashland throughout the second half of 2022. PDI has also led the redesign and
configuration of the revised production reactor to re-establish CoalSwitch®
production.

 

Manufacture of the key components required to build the Ashland CoalSwitch®
Facility is well underway, with key delivery dates through Q1 2023 finalised.
PDI has informed the Company that it is confident that the construction of the
Ashland CoalSwitch® Facility will be completed during Q1 2023, slightly later
than previously anticipated. Nonetheless, CoalSwitch® is expected to be
available for delivery to prospective AEG customers in Q2 2023. Initial
production volumes are targeted at a rate of 35,000 tons per annum, with the
aim to increase this during 2023 toward an annualised production rate of
100,000 tons per annum. The Ashland CoalSwitch® Facility will utilize
existing production equipment owned by AEG and currently situated in Maine to
accelerate the increase in production capacity.

 

PDI is working with the State of Maine to finalise the relevant permissions to
allow operation of the new CoalSwitch® production facility in line with its
existing production operations at Ashland.  The Ashland CoalSwitch® Facility
will also allow AEG and PDI to demonstrate an operational CoalSwitch®
production facility to customers, prospective production joint venture
partners and technology licence partners, both in the US and internationally.

 

Sales activities by AEG through H2 2022

 

During H2 2022, and in particular Q4 2022, AEG saw a substantial increase in
the number of commercial enquiries for CoalSwitch® fuel. This reflects both
increasing market interest for an improved biomass pellet, assisted by changes
in environmental regulation in the US, and continuing market supply issues
requiring alternative long-term sources of biomass supply.  A number of
prospective customers have informed the Company that they wish to visit the
operational Ashland CoalSwitch® Facility at the earliest opportunity, once
operational, to confirm their long-term commercial interest in CoalSwitch®.

 

AEG has established sales teams in the US and in the UK with the goal to build
a sales pipeline of customers. In the US, the Company's sales team already has
established relationships with coal consumers in the pulp & paper, cement,
aggregate and power industries. Many of these prospective customers have
requested and already received CoalSwitch® fuel samples and have undertaken
their own analysis on the fuel.

 

In the UK, AEG's initial sales activities have focussed on the biomass heating
market. Activities to date have resulted in signed LoIs from a series of UK
based customers amounting to over 3,000 tons of CoalSwitch® for deliveries
commencing in Q2 2023. AEG is confident that orders from this sector in the UK
will continue to increase through 2023. The recent US order from Carolina
Stalite, an aggregates producer based in North Carolina, reflects not only an
underlying wish to use the fuel to co-fire with coal but also a wish to access
the CoalSwitch® production technology once completed.

 

As well as increasing commercial interest from the US and the UK,
international enquiries continue to expand. In Asia, active commercial
conversations continue in Japan and regulatory approval process for the use of
CoalSwitch® in Japan has commenced.  The Company has also entered into
discussions with several Japanese partners, including large scale utilities
and financial institutions to examine the long-term commercial opportunities
for the fuel in Japan.

 

In Southeast Asia, following the award of the patent in Malaysia in June 2022,
additional commercial enquiries have also been received from other countries
in the region. Finally, interest from customers in Southern Africa has
commenced, primarily for production licenses for the CoalSwitch® technology
in the region and for CoalSwitch's® future potential as an alternative or
complimentary fuel to coal.

 

Quality assurance & test program for CoalSwitch®

 

To date, CoalSwitch® has consistently demonstrated its premium heating value
and environmental benefits. The testing program has focused on the underlying
proprietary and performance metrics of CoalSwitch® itself and the co-firing
properties, as a blend of coal and CoalSwitch®, which could be used in
industrial furnaces and power generators.

 

In H2 2022, AEG completed a series of independent laboratory analysis of the
fuel in the US, the UK and Europe using its remaining stocks of CoalSwitch®
(produced at the Ashland in 2021). Additional samples of CoalSwitch® were
delivered on a regular basis throughout H2 2023 to potential customers for
further analysis. To date CoalSwitch® samples have been consistently
demonstrated its premium heating value compared to existing biomass pellets
and confirmed the positive environmental benefits of co-firing coal with
CoalSwitch®.

 

The Company continues to work with Brigham Young University and the University
of Utah on further co-firing test opportunities and developing a new test
program for 2023 using new production volumes from the Ashland CoalSwitch®
Facility. In the UK, CoalSwitch® fuel was delivered in August 2022 for
independent testing and analysis by prospective customers requiring an
enhanced heating biomass pellet fuel.  The goal of these tests is to ensure
that the CoalSwitch® fuel meets the regulatory ENplus A1 standards to permit
sales not only in UK, but also throughout Europe. AEG is currently looking to
complete final analysis as soon as new CoalSwitch® supplies are available.

 

Fuel samples have been analysed by prospective customers in Europe, Japan and
Southern Africa during H2 2022. The quality assurance program will accelerate
when new supplies of CoalSwitch® become available in Q2 2023.

 

Additional environmental accreditations for CoalSwitch®

 

In November 2022, AEG appointed Karbone, a financial services platform
focussed on renewable energy and decarbonisation markets, to analyse the value
of CoalSwitch® in its future use. The Karbone analysis report was completed
in December 2022 and demonstrated that the consumption of CoalSwitch® creates
opportunities for subsidies in the US and Canada in terms of renewable energy
credits (RECs) and regional greenhouse gas (RGGIs) credits and the creation of
carbon credits marketable in the Voluntary Carbon Markets (VCM).

 

In addition, the Karbone report shows that CoalSwitch® could qualify for
significant subsidies from individual US states of up to $90 per ton in
consumption which makes our fuel cost competitive with coal and which will
open up some credible new commercial opportunities for CoalSwitch® in the US
and Canada. This analysis is currently an important component in ongoing
commercial conversations with power generators in US and Canada.

 

Financial update

 

Having completed the sale of the Lumberton site in Q2 2022, AEG received net
proceeds of $3.9 million, as reported in the Company's interim results
announced on 28 September 2022. As of 31 December 2022, AEG's cash balance was
in excess of $2.5 million, which allows the Company to fund itself in the near
term as production and sales activities for CoalSwitch® accelerate in H1
2023.

 

Lumberton litigation update

 

In addition to former operational issues at Lumberton, AEG had received a
series of legal challenges from the Southern Environmental Law Center (the
"SELC"), based in North Carolina, during 2021 and 2022, regarding alleged
operational permit breaches from an existing wastewater treatment plant
located within the facility, details of which have been previously announced.
In November 2022, the North Carolina Department of Environmental Quality
confirmed in writing that, during AEG's ownership of the Lumberton site, AEG
had been in full compliance with existing applicable permits and all
procedures had been correctly complied with.

 

In the light of this, AEG continues to wholly refute all of SELC's claims
relevant to this or any additional claims. Based on the legal advice that it
has now received, the Company strongly believes that there is not, nor has
there ever been, any merit in any of the SELC's claims and allegations made
against AEG and its subsidiaries and AEG will now examine the various legal
forms of redress against SELC.

 

Outlook

 

Active Energy has a number of key milestones to achieve in 2023.  These
include working with PDI to allow it to commence production of commercial
volumes of CoalSwitch® at the Ashland CoalSwitch® Facility and for AEG to
deliver fuel to prospective customers.  With an operational facility at
Ashland, PDI and AEG will finalise the path toward expansion of CoalSwitch®
production volumes throughout the US with the construction of additional
production facilities in the US and establish CoalSwitch® as the market
standard for next generation biomass fuels in the coming years.

 

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