REG - Scirocco Energy PLC - Corporate Update & Investor Event

Scirocco EnergyAnnouncement

07/12/2022 07:00

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RNS Number : 8253I  Scirocco Energy PLC  07 December 2022

7 December 2022

Scirocco Energy plc

("Scirocco" or the "Company")

Corporate Update & Investor Event

Scirocco (AIM: SCIR), the AIM investing company targeting attractive assets
within the European sustainable energy and circular economy markets, is
pleased to provide a corporate update ahead of the Investor Event that it is
hosting later today.  The update includes various strategic targets as well
as the announcement of an exclusivity agreement for the acquisition of an
additional bio-gas plant.

The new Corporate Presentation that is being used for the Investor Event will
be made available on the website via the following link:

https://www.sciroccoenergy.com/investors/presentations/
(https://www.sciroccoenergy.com/investors/presentations/)

Strategy Update

At the Investor Event, the Board will provide an update on its strategic
progress as it seeks to construct a portfolio capable of supporting attractive
dividend yield and further growth through re-investment.  To date, through
the establishment of its Joint Venture with EAG (SCIR 50%), EAG has completed
the acquisition of 100% of Greenan Generation Limited (GGL) and its 0.5 MWe
Anaerobic Digestion (AD) plant in Northern Ireland.  Since completing that
acquisition in October 2021, GGL has performed strongly, generating for EAG a
12 month EBITDA estimate to 30 September 2022 of £602,000 (unaudited),
after c. £375,000 of costs associated with operating investments and business
development.

Since establishing the joint venture, EAG has developed a pipeline of Biogas
acquisitions in line with the stated strategy to acquire "bitesize" plants in
the value range of £3-4m each.  The goal is to acquire individual plants
using EAG's "cookie cutter" approach whereby target assets are acquired as
SPVs through a combination of debt and equity, the assets are then optimised
through operating techniques and investments to grow profitability and enhance
the value of each asset and the portfolio as a whole.  A typical SPV is
forecast to generate c. £850k EBITDA with enterprise value in the range of
£7.5-£8.5m per plant, thereby demonstrating the appealing value proposition
of the strategy.

Based on the strategic objectives and current deal flow pipeline being
progressed by EAG, it is the intention that EAG will, subject to securing the
necessary funding, acquire two plants through 2023 and a further two plants in
2024.  Should EAG be successful in converting these opportunities as guided
then EAG would create a business generating over £5 million EBITDA per annum
with an implied cash on cash multiple of c. 2.5x accruing to EAG investors.

Exclusivity Agreement for target plant

Consistent with the stated strategy, Scirocco is pleased to announce that EAG
has entered into an exclusivity agreement to acquire 100% of the share capital
in a target SPV which has been delivering consistent operational and financial
results over the past 7 years, generating an EBITDA of £567k for its last
financial year.  It is EAG's expectation that its plans to optimise
performance can increase EBITDA at the plant to £725k in its first year of
ownership.

EAG has completed phase 1 of its DD process using its internal resources and,
following signing of exclusivity, will move into Phase 2 which includes
drafting of the SPA and associated project documents.  The acquisition
requires £3.8m of acquisition capital as well as approximately £200k in
closing costs, and will be debt funded to approximately 70% of the total.
Assuming all progresses as planned, including sourcing of the necessary
finance, then EAG is targeting a completion date at the end of February 2023.
Further updates will be provided as and when appropriate.

Tom Reynolds, Scirocco's CEO commented:

"We're pleased to provide investors with a deeper dive into our strategy and
the market drivers that support our strategic focus. Our JV with EAG gives
Scirocco unique access to a compelling opportunity pipeline that can be
converted on highly attractive and value accretive terms.  The JV's initial
acquisition of GGL last year demonstrates the low-risk and high-margin
profitability of these assets and the value uplift that EAG provides upon
completion.  In that regard, we are pleased to provide the market with
strategic targets that we believe can be comfortably delivered by EAG based on
the pipeline being progressed.  As detailed in the presentation we provide
today, subject to financing being available as expected, the team is confident
of building an asset base with enterprise value of up to £100 million by
2027.

In the context of this update, we are also pleased to announce the Exclusivity
Agreement that EAG has signed with a target SPV. The team's extensive internal
DD on the target indicates that this SPV benefits from all the factors
consistent with EAG's investment model and represents a compelling opportunity
for EAG and Scirocco.  While this process is still relatively early stage and
formal DD is required, we are hopeful that EAG will progress this opportunity
to SPA in the coming months with a view to adding a second plant to the
portfolio in Q1'23.  In parallel with the DD process, EAG is also progressing
funding discussions and is confident that the implied multiples of these
targets and the compelling market drivers that support investment into this
sector in pursuit of UK's net-zero targets will ensure the most appropriate
form of funding can be secured to complete any subsequent transaction."

 

 

 

For further information:

 Scirocco Energy plc                               +44 (0) 20 7466 5000

 Tom Reynolds, CEO

 Doug Rycroft, COO

 Strand Hanson Limited, Nominated Adviser          +44 (0) 20 7409 3494

 Ritchie Balmer / James Spinney / Robert Collins

 WH Ireland Limited, Broker                        +44 (0) 0207 220 1666

 Harry Ansell / Katy Mitchell

 Buchanan, Financial PR                            +44 (0) 20 7466 5000

 Ben Romney / Jon Krinks

Inside Information

The information contained within this announcement is deemed by Scirocco to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) no. 596/2014 ("MAR"). On the publication of this announcement via
a Regulatory Information Service ("RIS"), this inside information is now
considered to be in the public domain.

 

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