REG - EQTEC PLC - 2022 Trading Update

EQTECAnnouncement

06/02/2023 07:00

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RNS Number : 9417O  EQTEC PLC  06 February 2023

6 February 2023

 

EQTEC plc

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

 

2022 Trading Update

 

EQTEC plc (AIM: EQT), a global technology innovator powering distributed,
decarbonised, new energy infrastructure through its waste-to-value solutions
for hydrogen, biofuels, and energy generation is pleased to provide an update
on its 2022 unaudited results and its progress in 2023.

 

Highlights

 

·      2022 revenues expected to meet guidance

·      Business plan adapted to meet changing market conditions

·      Three Market Development Centres progress steadily

·      Technology innovation and application reinforce EQTEC leadership

·      Strategic focus on Deeside and delegated approach to other
projects

 

2022 unaudited results

 

The Company is pleased to report successful achievement of 2022 revenues in
line with its guidance published on 01 December 2022. The Company is
undertaking its annual audit imminently and expects to report its fully
audited 2022 results in Q2 2023.

 

Strategic focus and business continuity

 

In response to changing market conditions in early 2022, the Company updated
its business plan to: focus its portfolio of active projects on the
strategically most important; reduce its project development liabilities; and
engage project developers and owner-operators in actively leading development
activities (the "Focus Plan").

 

To ensure business continuity in the face of the economic downturn and tighter
capital markets, the Company agreed two loan facilities, one as a convertible
loan facility with the Company's largest shareholder, Altair Group Investment
Limited. The Company also raised £3.75 million (before expenses) through the
placing of new ordinary shares, with the majority of the Board participating.

 

Market Development Centres (MDCs)

 

The Company continued to prioritise development of its MDCs as live,
profitable reference plants that demonstrate a range of EQTEC solutions for
different business models for waste conversion and syngas application. Three
priority plants will demonstrate EQTEC capabilities for Agricultural,
Industrial and Utility business models.

 

In Italy, the Company completed construction and started final commissioning
toward commercial operation of its Italy MDC. The Company expects full
operation of the plant imminently and already has prospective, strategic
partners and investors scheduling visits to the plant.

 

In Croatia, the Group confirmed completion of manufacturing for key components
and continued progress with investors in and operators of the recommissioned
plant. The Company expects financial close, commissioning and live operation
of the plant in 2023.

 

In France, the Group confirmed the French state's approval of its acquisition
of an existing waste-to-energy facility with a previously failed gasification
technology and its intention to retrofit the plant with its own technology.
Since late 2022, the Company has been making progress with a large
infrastructure investor and owner-operator toward acquiring the project and
recommissioning the facility. The Company expects live operation of the plant
in 2024.

 

Technology innovation and application

 

The Company made strong progress advancing the capabilities and application of
EQTEC technology, making three major announcements in 2022.

 

First, the Company upgraded its R&D facility housed at the Université de
Lorraine ("UL") for steam-oxygen gasification, which will allow trials for
advanced applications such as hydrogen, renewable natural gas ("RNG") and
liquid biofuels. This gives the Company a unique, applied R&D capability
and will support its growth into these new applications, with trials for
prospective customers and partners already planned for 2023.

 

Second, the Company received third-party validation of EQTEC technology's
suitability for clean conversion of contaminated plastic waste into synthesis
gas ("syngas"), resulting in a formal agreement with a French industrial waste
management company for joint pursuit of contaminated waste-to-energy projects
in France, starting with an initial project already secured by the partner
company.

 

Third, the Company announced a formal collaboration with a gas-to-liquids
technology company, for joint development of an integrated low-carbon
waste-to-liquid fuels solution, with a synthetic aviation fuels (SAF)
reference plant already targeted by the two companies for development.

 

Strategic project at Deeside, UK

 

At its Deeside, Flintshire, UK project, the Company progressed design work
through to completion of front-end engineering design by EQTEC, with global
engineering company Black & Veatch. EQTEC and technology partner Anaergia,
Inc. are together reviewing design options for simplification and refinement
of the financial model. In parallel, the Company and its partners, including
landowners Logik Developments, are pursuing investors in the project. The
Company intends to sell the SPV and ensure the project secures full funding in
2023.

 

Negotiations with the first prospective investor did not reach mutually
acceptable terms and on this basis the Company was forced to adjust its
revenue expectations for 2022 and issue new guidance. Discussions with and
pursuit of other investors continue, with both owner-operators and financial
investors expressing interest.

 

Other projects

 

In line with its Focus Plan, the Company packaged up two other UK projects for
funding, and delegated projects in USA and Greece to development partners in
those markets. The Group's partners in the USA are pursuing COD in 2023 for
the North Fork Community Power (NFCP) plant in North Fork, California and
financial close on the Blue Mountain Electric Company (BMEC) project in
Wilseyville, California. The Group's joint venture in Greece, Synergy Projects
Limited, is pursuing financial close of a project in Livadia, Boeotia.

 

Engaging strategic investors

 

To support acceleration of EQTEC's growth and addressing the strong market
demand for its solutions, the Company has launched a project for engaging
large-scale, strategic investors. The Company has engaged a top-tier
investment bank and is approaching large owner-operators and other
infrastructure investors toward securing strategic investment at the project
level for a pipeline of projects with strategic priority.

 

The Company has in recent weeks led two visits with prospective investors to
the EQTEC installation at Mostos, Vinos y Alcoholes, S.A. ("Movialsa") in
Spain and other investors have expressed interest in visiting the Italy MDC.

 

David Palumbo, CEO of EQTEC, commented:

 

"At a time when the world is finally accepting the challenges of securing
energy supply and handling a wide variety of waste types cleanly and
sustainably, we recognise the need to meet market headwinds with even greater
determination and dexterity than before. EQTEC's technology is one of the best
solutions for both challenges. It addresses the baseload challenge, it
supports energy security and independence, and it is clean, proven and
scalable. The market opportunity is vast, our technology is at the core of new
energy infrastructure that can produce decarbonised power, heat and fuels and
it is ready to be deployed, profitably, now.  The challenges of 2022 have
strengthened our resolve to deliver EQTEC solutions to the world, and we are
engaging bigger, more capable, better financed businesses who are now driving
the demand. In many ways, 2022 was a catalyst for us in accelerating our
strategy toward working with stronger partners for development of projects and
plants that run on EQTEC solutions, and the progress we unlocked in the second
half of 2022 suggest that will bear fruit for us in 2023."

 

This announcement contains inside information as defined in Article 7 of the
EU Market Abuse Regulation No 596/2014, as it forms part of United Kingdom
domestic law by virtue of the European Union (Withdrawal) Act 2018, as
amended, and has been announced in accordance with the Company's obligations
under Article 17 of that Regulation.

 

ENQUIRIES

 

 EQTEC plc                                              +44 20 3883 7009

 David Palumbo / Nauman Babar

 Strand Hanson - Nomad & Financial Adviser              +44 20 7409 3494

 James Harris / Richard Johnson

 Panmure Gordon - Broker                                +44 20 7886 2500

 John Prior / Hugh Rich

 Instinctif - Media & investor relations enquiries      EQTEC@instinctif.com (mailto:EQTEC@instinctif.com)

 Guy Scarborough / Tim Field                            +44 791 717 8920 / +44 788 788 4794

 

2022 performance and EQTEC's response

 

2022 revenues declined versus the prior year due to a slowdown in project
progress driven by the dramatically reduced capital available to fund them.
Geopolitical and post-pandemic economic challenges combined to restrict both
the number of prospective investors and the size of their investments.
Importantly, several of the Company's projects require only project finance to
proceed, with many of them fully permitted, designed and otherwise packaged
for financial close.

 

The Company responded to these pressures by implementing a Focus Plan, which
reduced its portfolio of active projects to a small number of near-term,
strategically important projects including Market Development Centres ("MDCs")
in Italy, France and Croatia and the Deeside project in the UK ("Focus Plan").
In addition to reducing its workforce of external contractors supporting
projects, the Company redeployed several of its permanent staff, including
Company directors, onto critical projects. As part of the Focus Plan, the
Company also renegotiated key contracts, which released it from large capital
commitments. This reduced the Company's liabilities and accelerated its
business strategy toward becoming exclusively a technology innovator and
licensor by moving it away from project development obligations.

 

Additionally, the Company undertook a number of actions in 2022 to ensure
business continuity in light of the economic downturn and tighter capital
markets. On 29 March 2022, the Company announced that it had agreed provision
of a new unsecured loan facility for up to £10 million with an initial
advance of £5 million. On 14 July 2022, the Company announced that it had
successfully raised £3.75 million (before expenses) through the placing of
shares. This included subscriptions by five of six directors on the Board of
Directors and followed investment in shares earlier in the year by CEO David
Palumbo and COO Jeffrey Vander Linden. On 09 December 2022, the Company
announced that it had entered into a loan facility with Altair Group
Investment Ltd., the Company's largest shareholder. The facility provides the
Company with an up to £2.0 million unsecured loan that may be paid back for
all or part in shares, at the Company's own discretion.

 

R&D and innovation

 

On 30 May 2022, the Company announced that the Université de Lorraine ("UL")
had released a report verifying that EQTEC's Advanced Gasification Technology
successfully converts contaminated plastic waste into synthesis gas ("syngas")
cleanly, stably and efficiently. The tests were a final step for the Company
in formalising its collaboration with SEPS SAS ("SEPS"), a French company
specialising in the management and recycling of industrial waste. The Company
and SEPS will combine their technologies to pursue a pipeline of projects,
starting with an on-premises, industrial facility in Haute-Garonne, France.

 

On 07 July 2022, the Company announced that it had signed a collaboration
framework agreement with CompactGTL Limited ("CompactGTL"), another technology
innovator that specialises in the production of synthetic fuels from gases,
including syngas. The Company and CompactGTL agreed to collaborate on design,
development, construction, and operation of waste-to-fuel projects and to
share commercial opportunities, starting with a reference-demonstration
project already identified by the parties.

 

On 31 October 2022, the Company announced the successful completion of
steam-oxygen gasification tests that confirm the suitability of EQTEC's syngas
technology for advanced biofuels production. The tests were performed
following an upgrade by EQTEC to the Laboratoire d'Etudes et de Recherche sur
le Matériau Bois ("LERMAB") facility at UL that houses EQTEC's R&D
technology. The upgraded R&D capabilities are commercially significant for
the Company, as steam-oxygen gasification enables hydrogen, renewable natural
gas ("RNG") and other advanced biofuel applications.

 

Additionally, the Company announced on 30 June 2022 that it had selected
global technology and engineering company Wood and its VESTA technology as the
technology partner for design and deployment of a clean, waste-to-hydrogen
solution at Southport Hybrid Energy Park, Merseyside.

 

Market Development Centres

 

MDCs are live, profitable plants that demonstrate EQTEC solutions, attract
investment and incubate new demand. The Company is working on at least three
MDCs: in Italy, Croatia and France.

 

On 22 December 2022, the Company confirmed mechanical and electrical
completion at its Italy MDC in Castiglione d'Orcia, Italy, indicating closure
of construction and start of commissioning of the plant, including
enhancements to the original plant design that will further improve the
profitability and resilience of its business model. In mid-January 2023, the
Company and plant operations team ran the full gasification process on manual
controls and is now setting it up for automatic mode. As part of its tests,
the Company also produced biochar from the plant.

 

On 08 September 2022, the Group confirmed that it had received final approval
from France's Ministère de l'économie, des finances et de l'industrie
("MINEFI") to acquire an existing, 6.5MWe waste-to-energy gasification plant
in Villers-sous-Montrond, France. The Company intends to retrofit the failed
technology with its own and position it as its France MDC. Once
recommissioned, the Plant is expected to be France's largest ever combined
heat and power ("CHP") gasification project, transforming c. 45,000 tonnes of
mixed and contaminated wood waste and refuse-derived fuel ("RDF") for export
of clean electricity to the national grid, with the option of increasing its
production capacity in future. The Company is making good progress with a
large infrastructure investor and owner-operator toward acquiring the project
and recommissioning the facility with EQTEC solutions and engineering. The
Company expects the France MDC to be operational in 2024.

 

On 29 September 2022, the Group confirmed that key components had been
manufactured to support upgrade of the Croatia MDC in Belišće, Croatia to
1.5MWe from the original 1.2MWe. It further confirmed that discussions with
investors and operators for the sale of the project were continuing
productively. Those discussions continued through to the end of the year and
the prospective investors have confirmed that they intend to visit the Italy
MDC as part of finalising their interest in the project. The Company expects
financial close, construction and commissioning of the Croatia MDC in 2023.

 

Deeside, UK project

 

On 01 April 2022, the Company announced its appointment of Black & Veatch
("B&V") to review its project at Deeside Industrial Estate, Deeside,
Flintshire, with a particular focus on integration risks in light of the
multiple technologies for the plant, provided by EQTEC and technology partner
Anaergia, Inc. ("Anaergia"). The proposed plant, aimed primarily at supplying
energy to Toyota Motor Company's ("Toyota") neighbouring Deeside engine plant,
would house a 2MW anaerobic digestion facility built around Anaergia
technology and a 9.9MWe syngas production facility built around EQTEC
technology.

 

The Company further confirmed on 01 April 2022 that, based on successful
completion of feasibility work for hydrogen production from syngas expected in
future phases of development, EQTEC had received proposals from prospective
partners for provision of syngas-to-hydrogen technology.

 

On 11 July 2022, the Company announced its appointment of B&V as front-end
engineering and design ("FEED") partner with the added remit of preparing an
engineering, procurement and construction ("EPC") cost estimate for power
generation equipment and systems. FEED work has now completed, and the Company
is working closely with Anaergia and other project partners to consider its
options for proceeding at the site, including appointment of an EPC partner.

 

On 07 October 2022, Company executives joined Toyota's celebration of 30 years
of operation of their engine production facility at Deeside. In addition to
having the opportunity to participate in celebration of the facility's
performance and contributions to the local communities, the Company heard
reiterated Toyota's expectations for the Deeside waste-to-energy facility
through the words of its President and CEO of Toyota Europe, Matt Harrison,
who said to the Deeside Toyota team, "On top of your efforts for biodiversity
and onsite renewable energy, you are contributing to a new circular economy
through your collaboration with EQTEC….These efforts firmly place Deeside as
the front runner to be our first global carbon neutral plant globally by
2025."

 

On 01 December 2022, the Company revealed that discussions with a prospective,
corporate investor had not reached mutually acceptable commercial terms. This
concluded a process and commitment by the investor to the Company and
development partners Logik Developments Limited that had commenced in
September 2022. The Company further confirmed that it is responding to
additional interest in the Project from other, prospective investors.

 

As indicated in the Company's interim results published on 29 September 2022,
the Deeside project would have been the single, largest contributor to the
Company's 2022 revenues. Given that, stoppage of initial negotiations resulted
in the greatest single impact on the Company's revenue pursuits for the year
and resulted in the final update to its revenue guidance on 01 December 2022.

 

Other projects

 

UK

 

The Company announced on 24 June 2022 that Anaergia, also a technology partner
at the Company's project at Southport Hybrid Energy Park in Southport,
Merseyside, had agreed to be the EPC partner for construction of the facility
housing its technology and to be the operations & maintenance ("O&M")
partner for the resulting plant running its technology.

 

On 21 September 2022, the Company announced that it had agreed with Rotunda
Group Limited ("Rotunda") a new agreement under which Rotunda would retain the
Anaerobic Digestion (AD) Project and deploy Anaergia technology, releasing the
Company from liabilities for acquisition of project scope deploying non-EQTEC
technology, whilst securing all development services fees due to the Company
for the development of the AD plant in the form of a secured Convertible Loan
Note (CLN) with Shankley Biogas Limited.  The Company also entered into an
Option to Lease with Form of Lease agreed with Rotunda for the development of
UK's first waste-to-hydrogen plant, deploying EQTEC technology. The Company is
now working with Wood plc on the integrated technical solution whilst seeking
investment for the development of the project.

 

The Company also confirmed on 15 February 2022 that it had a fully consented
scheme for advanced thermal conversion at its Haverton Hill, Billingham,
Teesside site and that it was exploring a range of additional solutions on the
17-acre site. The Company has since finalised its strategy for a
multi-technology, waste-to-energy park with a complete review and renewal of
the financial model and business case for the up to 25 MWe / 34 MWth
RDF-to-electric power and thermal energy plant that would occupy just under
half of the land at the site. Following its confirmation at its May AGM that
it was developing financial models for a variety of scenarios at the site, the
Company can confirm that additional uses considered for the site include a
waste-to-hydrogen facility, a battery storage park, a battery disposal
facility and a hydrogen refuelling station for lorries and buses in Teesside.

 

On 18 July 2022, the Company announced its selection of Petrofac Limited
("Petrofac") as FEED contractor and potential EPC partner. With multiple
feedstock term sheets at attractive gate fees, established grid connection and
highly favourable power purchase agreement, the Company is now pursuing
investment into the site, with optionality around its configuration around the
anchor plant with EQTEC technology. Once funded, the project is expected to
move quickly into FEED work with Petrofac. Petrofac has confirmed it will
support the Company's efforts with engagement of funding candidates toward
that end.

 

On 20 December 2022, the Group announced that it had executed with Billingham
site landowners Scott Bros. Enterprises Limited ("Scott Bros") an option for
the grant of a lease in respect of the project land, releasing the Company
from liabilities for acquisition of the project land and enabling it to focus
on funding, detailed design and financial close of the project.

 

USA

 

The Company is, with development partner Phoenix Biomass Energy Inc.
("Phoenix") pursuing commissioning and start-up of the North Fork Community
Power LLC ("NFCP") plant and business, and financial close of the Blue
Mountain Energy Company LLC ("BMEC") project.

 

On 12 October 2022, the Company announced that, following many months of delay
due to a combination of local forest fires, pandemic-related challenges in
labour and supply chain and the ensuing need to re-finance the project to
address delays, NFCP had entered into an agreement for financial restructuring
with the project lenders towards full funding of the project up to the
commercial operations date ("COD") of the North Fork, California plant. It
further revealed that the third-party funding had been agreed through
pre-negotiated, Chapter 11 bankruptcy arrangements. The restructure project
finance has enabled work to restart at the site and the Company anticipates
that NFCP will reach COD later in 2023. Three of the Company's executive
directors will be on site there in February, toward development of the plan
for both technical and business readiness of the plant.

 

Phoenix is also pursuing development of the BMEC project in Wilseyville,
California. In its interim results on 29 September 2022, the Company revealed
that development funding had been secured to support concept design work
toward application for a large, federal loan to support construction of the
plant and that additional term sheets had been received from both equity
investors and lenders. The Company understands that the concept design work
was completed, and the federal loan application submitted in January 2023 and
that a response is expected by early April 2023. Subject to achievement of
full funding by Phoenix, the Company is told to expect by May 2023 a contract
for detailed design and technology sales.

 

Greece

 

The Company's joint venture Synergy Projects Limited ("Synergy Projects
Greece") is pursuing a project in Livadia, Boeotia. The Company announced on
21 June 2022 that its partners ewerGy GmbH and ECO Hellas M IKE had confirmed
a new debt facility with Optima Bank S.A ("Optima") to support construction of
the plant, making it 80 per cent funded. The Optima facility is backed in part
by the Recovery and Resilience Facility for Greece. Since that time, due
diligence work has been completed by the appointed third parties and Synergy
Project Greece is pushing for release of funding, while advancing with equity
investors to provide the following 20% of funding. The Company expects to
start detailed design work on the Livadia project later in 2023 with
construction to start in the second half of the year and COD in early 2024.

 

About EQTEC plc

 

As one of the world's most experienced thermochemical conversion technology
and engineering companies, EQTEC delivers waste management and new energy
solutions through best-in-class innovation and infrastructure engineering and
value-added services to owner-operators. EQTEC is one of only a few technology
providers directly addressing the challenge of replacing fossil fuels for
reliable, baseload energy. EQTEC's proven, proprietary and patented technology
is at the centre of clean energy projects, sourcing local waste, championing
local businesses, creating local jobs and supporting the transition to
localised, decentralised and resilient energy systems.

 

EQTEC designs, specifies and delivers clean, syngas production solutions in
the USA, EU and UK, with highly efficient equipment that is modular and
scalable from 1MW to 30MW. EQTEC's versatile solutions process 60 varieties of
feedstock, including forestry waste, agricultural waste, industrial waste and
municipal waste, all with no hazardous or toxic emissions. EQTEC's solutions
produce a pure, high-quality synthesis gas ("syngas") that can be used for the
widest range of applications, including the generation of electricity and
heat, production of renewable natural gas (through methanation) or biofuels
(through Fischer-Tropsch, gas-to-liquid processing) and reforming of hydrogen.

 

EQTEC's technology integration capabilities enable the Group to lead
collaborative ecosystems of qualified partners and to build sustainable waste
reduction and green energy infrastructure around the world.

 

The Company is quoted on AIM (ticker: EQT) and the London Stock Exchange has
awarded EQTEC the Green Economy Mark, which recognises listed companies with
50% or more of revenues from environmental/green solutions.

 

Further information on the Company can be found at www.eqtec.com
(http://www.eqtec.com/) .

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