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React Energy strengthens position in UK biomass with GGES buy

Last updated: 03:21 06 Mar 2014 EST, First published: 04:21 06 Mar 2014 EST

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Clean energy specialist React Energy (LON:REAC) is to buy schools and university biomass specialist GG Eco as it boosts its position in the UK market.

GG Eco (GGES), which has two school biomass projects currently in operation and a further five under development, has been operating in the UK since 2009.

Its projects are typically between 150KW to 1MW thermal capacity, use wood as a sustainable fuel source and utilise proven, mature technology. 

In July of last year, GGES signed an agreement with financier Equitix providing it with access of up to £5 mln of committed project finance from the Green Investment Bank and a number of institutional investors.

As well as 600 schools and universities, React said the addressable market for GGES includes over 10,000 private hospitals and care homes and over 5,000 country house hotels in the UK. 

The total initial transaction cost of £2.3mln will be met by an issue of React shares at 38p per share, which includes conversion of a loan note. There is an additional maximum deferred consideration of £1.7mln depending on GGES’s performance.

React, which was formerly called Kedco, also intends to raise up to £1.5ln from new secured loan notes. It has already received commitments for £300,000 from its largest shareholder Farmer Business Developments, and a similar amount from Goran Nylin and Lyndon Dodd, the founders of GGES.

Gerry Madden, React’s chief executive, said: "This acquisition is a key part of the group's strategy to act as a consolidator of the fragmented UK biomass energy infrastructure market.

“It increases the depth and experience of the management team, with senior management coming across with the GGES business.

“We believe that this now positions the group as the leader in the mid-market biomass power generation sector in the UK. 

"The proposed issue of loan notes is a proactive, financially prudent step by the group to ensure that we are able to continue moving ahead with electricity and heat projects.”


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