Big picture - Why invest in Active Energy Group PLC
Active Energy Group PLC Snapshot
Active Energy Group Plc (AIM:AEG.L) is an international supplier of industrial wood chip for MDF manufacturing and Biomass for Energy (BFE) power generation, revolutionary Biomass for Energy (BFE) fuel solutions and systems, and global forestry and natural resources development services.
Our vertically integrated business units, located across Europe and North America, have enabled us to secure the entire timber supply chain, from forest to finished product. Operating as independent divisions with a common purpose, they allow us to share knowledge, reduce costs, maximise resources and exploit new opportunities - benefitting our suppliers, forestry owners, customers and shareholders.
Respect for the environment is central to our overall business strategy. We strive to ensure that all of our operations are performed in an efficient and environmentally responsible manner; and are working towards achieving Forest Stewardship Council (FSC) Chain of Custody Certification for our timber sourcing, processing and distribution activities.
We have assembled an expert management team with international experience of logistics, manufacturing and trading in the forestry, agriculture, timber products and renewable energy sectors; and a successful track record of working in the regions in which our operations are based.
Alongside careful stewardship of our existing activities and assets, we are continually exploring new sources, products, markets and sectors to support our long-term strategic vision for Active Energy Group: combining innovation and commercial acumen to create a global leader in the Biomass renewable energy, timber processing and forestry development industries.
Wood Chip for MDF Manufacturing
Active Energy Group’s well-established wood chip division, AEG Wood Chip, has secured long-term supply contracts with forestry owners, sawmills and logging firms to provide us with high volumes of hardwood timber feedstock.
That raw timber - primarily cut logs (non-saw logs/technical lumber) and sawmill residues - is delivered to our modern processing facilities, strategically-located at major shipping and transport hubs, where we convert it into high-quality finished wood chip, a primary constituent for Medium-Density Fibreboard (MDF) manufacturing.
MDF is formed by crushing wood chip, combining the resulting fibres with waxes and resins, and applying high temperature and pressure. Because of their strength and flexibility, MDF panels and MDF-based products have become the materials of choice in the building, furniture and joinery industries.
Since large-scale manufacturing commenced in the early 1980s, MDF production has witnessed considerable growth, and global capacity is now c.85 million m3 per annum; 50% of which is made in China and 25% in Europe. Turkey is the largest manufacturer of MDF in Europe, producing c.4.3 million m3 in 2012 from six major plants, most of which are located close to the Black Sea.
Active Energy Group is uniquely positioned to supply the Turkish MDF manufacturing industry from our Ukrainian facilities at Yuzhny Port on the Black Sea. We are delivering ever-increasing volumes of fresh, high-quality wood chip in one-tenth of the shipping time from alternative transatlantic supply sources, providing our customers with significant savings on freight costs, valuable cash flow advantages through shorter lead times, and improved responsiveness.
We have already established relationships with all of the major players in the Turkish MDF market by demonstrating our ability to consistently manage regular high-volume shipments; and have recently invested in modern high-speed chipping equipment with a view to expanding this valuable area of our business, which is anticipated to grow one hundred-fold in just two years, from 4,000 tonnes delivered in 2012 to 400,000 tonnes in 2014.
Wood Chip for Biomass Power Generation
Active Energy Group’s well-established wood chip division, AEG Wood Chip, has secured long-term supply contracts with forestry owners, sawmills and logging firms to provide us with high volumes of softwood timber feedstock.
That raw timber - cut logs (non-saw logs/technical lumber), fire-damaged wood, forest thinnings and sawmill residues - is delivered to our modern processing facilities, strategically-located at major shipping and transport hubs, where we convert it into high-quality Biomass for Energy (BFE) wood chip for electricity generation in Biomass-fuelled power plants.
BFE is a renewable energy resource, because the trees and vegetation from which it is produced can be replenished by re-planting, and because the carbon dioxide (CO2) that is created when it is burnt is released into the atmosphere and used in the growing process. It delivers other environmental benefits, including a low carbon footprint, no harmful sulphur or mercury emissions; and produces significantly less nitrogen, resulting in less acid rain, smog and other toxic air pollutants.
Biomass is already the leading source of renewable energy worldwide - estimates vary from 44% to 65% - and has the potential to satisfy a sizeable proportion of energy demands in both the near- and long-term. In 2011, Biomass-fuelled power generators provided around 10% of the world’s energy supply, and the International Energy Agency predicts that global BFE electricity generation capacity will increase ten-fold, from 50GW (Gigawatts) in 2009 to 560GW in 2050.
European Union directives are greatly accelerating demand for BFE fuel, and member states’ consumption is expected to rise from 82 MToe (Million tonnes of oil equivalent) in 2014 to 110MToe in 2020. The European Renewable Energy Council estimates that Biomass-based energy production will grow from 43TWh (Terawatt Hours) in 2005 to 250TWh in 2020; and several large-scale BFE-fuelled power plants are currently operating across Europe, with more coming on stream.
To date, much of the Biomass fuel for European power plants has been imported from the Americas and Australasia - supply routes that, because of the necessity for long-distance transoceanic shipping, are inefficient, costly and have a negative environmental impact. Moreover, it has become increasingly difficult for plant owners to secure dependable long-term supplies for BFE feedstock from these traditional sources, and as a result some recently completed power plants are lying idle due to a lack of fuel.
Active Energy Group is already a significant player in the European BFE fuel market, providing a reliable, cost-effective and environmentally responsible supply of locally sourced wood chip. In addition to our high-volume processing facilities in Ukraine - where we are the principal producer in Europe’s second largest country - we have established operations in Spain to supply high-quality feedstock to Biomass-fuelled power plants across the European Union, and are expanding our reach via strategic partnerships into other member states, including the United Kingdom.
Biomass for Energy Fuel Solutions & Systems
We recently secured an exclusive global licensing and partnership agreement for a revolutionary Biomass fuel granulating process that could transform the economics of the BFE power generation industry; and in May 2014 established a new operating division, AEG Pelleting Limited, to exploit and commercialise this game changing technology.
The granulating system, which has been in development for over ten years, utilises an entirely clean and environmentally-friendly process to convert a range of industrial and agricultural by-products - including sawdust and timber processing residues - into high-calorific value Biomass fuel granules for use in micro-CHP (Combined Heat & Power) commercial and residential boilers, and large-scale industrial power plants.
The unique granule manufacturing system delivers several key advantages over existing pelleting processes, including entirely eliminating the need for heat energy to dry the raw Biomass material, considerably lowering capital expenditure outlay to a fraction of that of conventional pelleting plants, and substantially reducing production costs compared to traditional extruded pellet manufacturing. The granules themselves offer many benefits over standard fuel pellets: they are moisture-resistant, can be stored all year round in non-specialist storage facilities (including outdoors), and burn much more efficiently - producing up to 20% less carbon and ash residues.
Small- to mid-sized CHP boilers - increasingly used in homes, factories, municipal buildings and agricultural facilities - require clean-burning and efficient Biomass fuel pellets, and represent an important market opportunity. Moreover, European Biomass-fuelled power plants - such as Drax in the UK, which provides 7-8% of the country’s electricity requirements yet sources much its raw feedstock from the USA - need to secure reliable and cost-effective high volumes of BFE fuel to meet their electricity generation targets.
From a dedicated research and development facility in the United Kingdom, we are currently up-scaling the granulating technology and exploring its potential applications and markets. Although a number of challenges need to be addressed - including securing the intellectual property, technical design and process control systems - from our initial tests and the extremely positive industry response that we have received to date, we are optimistic that BFE fuel granule production and sales of granule manufacturing systems could represent important new revenue streams for Active Energy Group over the coming years.
Forestry & Natural Resources Development
In a further expansion of our business activities across the entire timber supply chain, in July 2014 we entered into a major Canadian joint venture, KAQUO Forestry & Natural Resources Development Corporation, to exclusively commercialise circa 200,000 hectares (circa 500,000 acres) of mature forestry assets in Western Canada, which are expected to yield considerably more than 20 million m3 of commercial timber per rotation.
The forests, owned by three indigenous Canadian aboriginal groups, contain prime mature standing hardwood and softwood species, which will provide valuable raw material for a wide range of sawmill and industrial applications, including furniture and joinery, pulp and paper, and - an area in which we have considerable experience and international market presence - wood chip and fuel granules for Biomass-powered electricity generation.
This major initiative, which we intend to be a model for further agreements with forestry and timberland owners worldwide, allows us to value and develop the forestry assets according to internationally recognised criteria, and commits us to exploit this highly valuable natural resource in an environmentally responsible and sustainable manner.
Commercial options include selling long-term tree farming permits with cutting rights of c.200 years duration to independent timberland investors and timber industry firms, and joint venture arrangements with third parties to create on-site logging and processing operations.
Additionally, Active Energy Group is currently developing an innovative strategy to work with investment partners to fully exploit the forestry assets by constructing and operating low logistics Biomass-fuelled power plants within the forests to provide electricity to local, regional and national electricity grids. Full details of our progress with this ground-breaking project will be published at regular intervals.
Active Energy Group plc is led by a highly experienced and dedicated management team, with a proven track record. They are committed to creating a European market leader in the sustainable Biomass energy and timber products industries.
Frank Lewis, FCA Non-Executive Chairman
Frank Lewis is a highly-experienced and accomplished public company director, having served as Non-Executive Chairman and Director for a number of international publicly-quoted firms with interests across the UK, Europe, Far East, Middle East and Africa.
He is a Fellow of the Institute of Chartered Accountants in England & Wales and serves as a committee member for its special interest group for Non-Executive Directors, and was previously a member of the AIM Advisory Council, which advises the London Stock Exchange on matters relating to the AIM market.
In addition to his non-executive roles, Frank has many years of listed and private company boardroom-level executive experience, including as Finance Director, CEO and Chairman, and has been involved in numerous areas of business, including strategic planning, growth management, IPOs, corporate governance and regulatory compliance. He has a sound understanding of different business cultures and working practices, as well as considerable expertise in the industrial, technology and natural resources business sectors.
He previously co-founded South Africa’s largest retail computer chain, which he listed on the Johannesburg Stock Exchange, and held Non-Executive positions at several AIM-listed and private companies in the UK. Alongside his role as Non-Executive Chairman of Active Energy Group Plc, Frank currently holds Non-Executive Directorships at China Africa Resources Plc, Durham Infrastructure 5 Limited and Community Solar UK Limited.
Richard Spinks, Chief Executive Officer
Richard Spinks is a seasoned entrepreneur, with a proven track record in business development within the hi-tech, food processing, agriculture and forestry/biomass industries.
He has worked in Central and Eastern Europe since 1980, gaining vast experience and a network of high-level contacts across different industry sectors in a number of emerging markets, including Russia, Ukraine and Poland.
Richard was a pioneer in the emerging Internet industry, and was Director of Business Development at Lycos Bertelsmann GmbH in the late-1990s, before founding and serving as Chief Executive Officer at Vavo.com, an innovative social media platform. From 2001-2004 he held a number of roles at British Seafood Plc, successfully developing it to become one of the largest sector companies in both the Polish and Russian markets. Prior to his appointment as Chief Executive Officer at Active Energy Group Plc in 2012, he founded and served as Chief Executive Officer (2004-2009) at Landkom International Plc, the first AIM-listed company in the agricultural sector, based in Ukraine.
Matteo Girlanda, Chief Operating Officer
Matteo Girlanda has over ten years experience in pan-European wood trading, processing and logistics for the Biomass fuel and MDF manufacturing sectors, as well as considerable knowledge of forestry management, renewability and sustainability.
After graduating from the University of Verona with a BSc in Economics and Management, he was an accountant at Studio Bogoni (2000-2002), before founding Gecofin SRL, a management consultancy specialising in M&A activity (2002-2010) and Interconsult SRL, an international steel and wood trading firm (2002-2012).
Matteo has worked in Ukraine since 2005, initially as Director of ICL Ukraine (2005-2011), a woodchip processing and shipping company. He then founded and headed up Nikofeso Group, which owned and operated high-volume woodchip processing, logistics and port facilities in Western and Southern Ukraine, and which he developed to become the country’s leading exporter of woodchip to the EU and Turkey. Active Energy Group Plc acquired Nikofeso Group in June 2013, and he was appointed to the board as Chief Operating Officer at that time.
Brian Evans-Jones, Finance Director
Brian Evans-Jones is a qualified Chartered Accountant, with many years international experience working with start-ups and established businesses across a broad range of industry sectors.
After graduating with a B.Sc (Econ) Honours degree in International Politics from the University of Wales, he trained and qualified with Coopers & Lybrand (now PriceWaterhouseCoopers), before joining a provincial accountancy practice, which he subsequently took over. From 1995 to 2003 he ran his own professional practice, specialising in SMEs, business consultancy and tax planning.
Since that time he has has acted as a consultant to, officer of, and investor in a number of businesses in the food, manufacturing, construction and property sectors across the UK, Europe and CIS, including several turn-around situations and early stage companies. His clients have included Harsco Inc., Ensemble Combined Services, Celtic Oriental, Boditronics, Ty Nant Spring Water (where he was a Founder and Finance Director) and Seconds Ahead. Before assuming his position at Active Energy Group, he was retained as a consultant and advisor on several new business opportunities that the company continues to explore.
Michael Rowan Non-Executive Director
Michael Rowan is a qualified solicitor, experienced investment manager and successful corporate financier with a broad range of international commercial and legal contractual experience.
After graduating from the University of Cambridge, he practised as a solicitor at Linklaters in London, Hong Kong and New York, working with leading global financial institutions. He then moved to Merrill Lynch International in London and New York, initially as Vice President & Senior Legal Counsel of Equity Capital Markets, before being appointed Director/Co-Head of the Syndicate Desk, Equity Capital Markets, with responsibility for origination, execution and commercial negotiation of equity and equity-linked transactions, including major privatisations in the UK and EMEA regions.
Since then he has held a number of senior roles within the Venture Capital, Mid Cap Broking and Asset Management sectors with Accelera Capital, Numis Securities and Charles Stanley Securities in London and Hong Kong; and was most recently Business Development Director and Investment Manager at JM Finn & Co, where his responsibilities included strategic advice and investment management for equities, bonds, collectives, small cap and alternative assets. He was also a Non-Executive Director at Voiamo Group Plc, a global provider of advanced mobile data connectivity and communication solutions.
His current Board-level roles include Director and Partner at RD Active Capital Limited and Rowan & Associates Limited, private companies that specialise in international micro capital and seed financing opportunities.
Total Shares In Issue579,658,903
Holder Amount Percent
Gravendonck Private Foundation 169,500,000 29.13%
Windstar Investment SA 63,360,000 10.89%
Ruffer LLP 46,491,002 7.99%
Ronald M Derrickson 27,733,333 4.77%
Brahma Finance Limited 18,219,543 3.13%
RG Spinks 9,787,000 1.68%
Active Energy Group Plc
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