Q2 Trading Update

RNS Number : 5849F

EQTEC PLC

19 July 2021

 

Embargoed until 19 July 2021

EQTEC plc

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

Q2 Trading Update

EQTEC plc (AIM: EQT), a world-leading gasification solutions company that is building the future of a cleaner waste-to-energy industry, is pleased to provide the following trading update for Q2 2021.

Highlights

· Increase in pipeline opportunities moving into project development

· Financial close of Market Development Centre in Italy with second targeted in Croatia

· Billingham RDF project completes concept design and progresses toward financial close

· Revenue and EBITDA on track for 2021

· £16 million capital raise fuels strategic growth from project development business

· Finance Director search completed and transition underway

Plant construction and project development

· Plant construction. Two biomass-to-energy plants under construction by EQTEC and its partners are progressing despite pandemic-related challenges. The Agrigas 1 agricultural waste project in Larissa, Greece, the country's first advanced gasification waste-to-energy plant, is progressing to plan with EPC partner ewerGy GmbH ("ewerGy") and local partner ECO Hellas ("ECO Hellas"). The first of three planned batches of EQTEC equipment has been manufactured, shipped and received on site, on time, with the remaining two shipments on track. The feedstock line is expected to be commissioned and operational in July.

Construction at the North Fork Community Power ("NFCP") forestry waste project in California, USA has progressed with installation of the gasification reactor and associated equipment, inside the primary steel structures. The site was attended for three weeks in May by CTO Dr. Yoel Alemán and another EQTEC expert engineer, following relaxation of Covid-19 travel restrictions. The Company and its partners are refining plans to accelerate work in light of previously reported delays as a result of Covid-19 and local forest fires. The Company has also made a non-binding proposal to provide requisite funding, as a convertible loan facility, to take the Project to completion ("the Proposal"). The proposed facility, if fully drawn down and converted, would result in the Company's increasing its current minority stake to take a controlling interest in NFCP and the project. The Proposal has been signed by all Managing Members of NFCP including Phoenix Biomass Energy Inc. ("Phoenix Energy") and the North Fork Community Development Council ("NFCDC"). Parties to the agreement are finalising negotiation of terms for legal execution, which the Company anticipates will conclude shortly, so that the project may move to completion at pace.

· Financial close. On 21 June, the Company announced financial close on the Italia MDC Project, the first of a small number of Market Development Centres ("MDCs") to be co-owned and operated by the Company and used to showcase EQTEC technology in 'live' commercial environments. Working with a consortium of co-investors, the Company will recommission the 1 MWe biomass-to-energy plant in Tuscany, Italy. The plant will transform straw and forestry wood waste from local farms and forests into green electricity and heat for the local community. It is expected that the Company will earn technology sales of €1,750,000 as well as the recurring revenue and profits from the plant, once operational. Orders for the manufacture of equipment have been placed and the Company has invoiced for the first payment of technology sales. The EQTEC technical team is on site, completing engineering surveys, meeting EPC partners and local stakeholders. Other potential MDCs are being identified in Croatia, Greece and other key markets.

· Project development . The Company has established Synergy Projects d.o.o. ("Synergy Projects"), a joint venture ("JV") between EQTEC and its Croatian project development partner Sense ESCO d.o.o. ("Sense ESCO"). The Company will be the majority shareholder in the JV and will provide development capital to support the entity in qualifying and pursuing deals, with Sense ESCO providing a Managing Director, development team and local relationships to generate pipeline and drive projects to financial close and beyond. The JV is already pursuing two deals in Croatia, subject to due diligence and financing, including a second EQTEC MDC through recommissioning of a 1.2 MWe plant in Beliše, which has existing EQTEC Advanced Gasification Technology inside, and it is targeting a 1.2 MWe plant in Karlovac. Similar JVs will be established by the Company with partners in other target markets.

The Company is proceeding with development of three biomass-to-energy opportunities in Greece, through the Company's partnership with ewerGy and ECO Hellas. The first plant at Almyros, Thessalia, where the lease agreement for land and for a state grid connection have been established with Nobilis Pro Energy S.A. ("Nobilis") for construction of a 0.9 MWe gasification plant using local, agricultural waste as feedstock. The second is a new opportunity in North Central Greece , with a signed letter of intent with exclusivity to carry out due diligence for a new 5 MWe plant using locally sourced forestry waste as feedstock. The third is a new opportunity , with a signed letter of intent with exclusivity to carry out due diligence for a new 1 MWe plant using locally sourced agricultural waste as feedstock.

Three RDF-to-energy projects in the UK are making good progress toward financial close. The Billingham, Teesside project development and associated engineering work, led by an EQTEC team, has produced a detailed design for the core gasification process and equipment and a concept design for the full plant. In July it is expected that this will be reviewed with potential funders, including French waste-to-energy owner-operator, Groupe Idex ("Idex"). Additionally, the project team is selecting delivery partners, including Tier 1 EPC companies. The Company will make further announcements about both funding and delivery partners.

In June the Company submitted a planning application for a Phase 2 gasification facility deploying EQTEC technology at the Deeside, Flintshire site where Phase 1 recycling and anaerobic digestion facilities are already approved for development. As most planning conditions have been satisfied for Phase 1, the project is on track for financial close. The development project is being pursued in partnership with Logik Developments Limited ("Logik"), with active engagement with local authorities throughout the planning process.

The Southport, Merseyside project is similar to the Deeside project with permission for a pre-existing Phase 1 anaerobic digestion facility and the intended Phase 2 addition of an advanced gasification facility. The Company will submit a revised planning application for Phase 1 in early August 2021, in advance of the intended Phase 2 planning submission that will be submitted later in the year. A pre-planning consultation has been carried out with the local authority whereby Phase 1 and Phase 2 master plans were welcomed by the local authority and given their support. The development project is being pursued by the Company with development partner Rotunda Group Limited ("Rotunda").

· New markets. Although the Company's business development efforts in Q2 have focused primarily on biomass-to-energy and RDF-to-energy opportunities, progress continues in Ireland on two opportunities for biomass-to-bioenergy, led by partner Carbon Sole Group Limited ("Carbon Sole"). For the Shannon site, Carbon Sole responded in May to the local authority's Further Information Request ("FIR") by filing environmental studies that confirm the proposed plant would have low-tier environmental impacts. A decision on planning approval at local level is anticipated in late July. For the Sligo site, all planning documentation is being finalised and is expected to be submitted by the end of July. Carbon Sole has signed letters of intent ("LoI") for feedstock supply for sustainable forestry waste for the proposed plants. Additionally, Carbon Sole is in the process of securing a third site, with the intention of securing exclusivity by Q4.

· Covid-19. With Covid-19 risks being closely managed in most developing markets, the ongoing external impacts of restrictions from the pandemic continue to be felt. In addition to issues with timing of shipments and a slower speed of administrative work by financial institutions and government authorities, the availability of commodities such as steel and cement has declined and as a result, commodity prices have increased. The Company is experiencing delays in a small number of specific orders as well as an increase in prices for some components and it continues to find travel to key sites difficult and less frequent. The management team expects to see the impact on travel lessen in Q3 and Q4 but with a longer recovery period for availability, pricing and delivery of some key components.

Strategic capital deployment

· Raise of new capital to accelerate growth. On 28 May, the Company successfully completed a Placing that raised £16 million (before expenses) in new investment capital aimed at accelerating the Company's growth strategy. The Placing generated new interest in the Company and was oversubscribed.

· Project development. The Company's success with growth of its technology sales is dependent on timely and high-quality development of complex projects for construction and commissioning of waste-to-energy plants with EQTEC technology at their core. Over the past year, the Company and its partners have increasingly taken a leadership role with a majority of projects under development and believe that both the speed and quality of development and construction readiness will benefit from this approach. This includes assessing, qualifying and progressing the opportunities that meet its stringent qualification criteria, confirming expert design specifications, securing feedstock supply, offtake agreements, funding and delivery control. The EQTEC team has defined these and more as a series of milestones for each project as it progresses towards financial close and subsequently through to commissioning, securing on-time, on-budget delivery, every time.

The capital raised through the recent Placing is being deployed to three key areas: (1) project development of MDCs in existing markets; (2) project development of larger, RDF-to-energy deals in the UK; and (3) growth in the Company's capability and capacity to take on more deals in more places. The first MDC is the 1 MWe biomass-to-energy plant in Tuscany, Italy. In addition to generating healthy revenue, profitability and IRR, the plant is expected to be a valuable showcase of EQTEC technology in a 'live' commercial environment. Additional MDCs are targeted in Croatia and other markets. The RDF-to-energy deals in Billingham and Deeside represent opportunities for meaningful returns, and the capital investment will safeguard financial close and de-risk the investment through securing the sites for Billingham and Deeside. Finally, EQTEC will expand its engineering capacity and business development capabilities to pursue more opportunities more rapidly.

Financial performance

The Company's revenue forecast of approximately €15 million for the financial year ending 31 December 2021 remains in line with forecasts previously announced. Those forecasts anticipated a heavily back-loaded year for financial close of key opportunities and deal closure remains the primary focus of the Company. Financial close is critical both for receipt of fees for project development led by the Company and its partners throughout the months leading to financial close, as well as for beginning to take payment for sales of technology through the construction and commissioning work that follows. 

Subject to timely closure of target opportunities and timely receipt of development fees and initial payment for technology equipment and services, the Company still expects to see its first year of profitability in 2021.

New Finance Director

Following the announcement on 28 May that Finance Director Gerry Madden will retire in 2021, the Company can confirm that it has appointed his successor.

The Board of Directors is pleased to announce the appointment of Nauman Babar as Finance Director with immediate effect, subsequent to the Board's acceptance of Gerry Madden's resignation of that role. Nauman Babar brings both breadth and depth of expertise to EQTEC's Finance and Corporate Governance activities. His background features nearly 20 years in Finance-related roles, including at private equity-backed companies, accountancy and transaction services at PwC and EY, Finance transformation services at Accenture and a range of business leadership roles at Woodlands Energy Services. He is a UK national with director-level experience in the Energy and Utilities sectors across Europe and the Middle East.

The incoming and outgoing directors are working together and with the leadership team on a structured handover, with Gerry Madden continuing to support the transition through the end of August. The EQTEC Board of Directors express their thanks to Gerry Madden for his efforts and many years of service, as the Company has shifted and transitioned to where it is today.

Innovation

As announced on 22 March, the Company is progressing a number of significant R&D projects with its partners, to prepare its technology for application to a wider range of opportunities. The Company is working with leading certifications agency TÜV to achieve a certification for hydrogen-linked technologies. In Q3, the Company's technical team expects to test several types of RDF material with its partners at the Université de Lorraine in France and then carry out Fischer-Tropsch gas-to-liquid tests in Q4, subject to pending health and safety approvals for the laboratory, which are expected in Q3. The Company is also developing relationships with a number of new technology partners, which it expects to announce in the coming months.

Wood and EQTEC collaborated on and completed gasification technology and market reviews in Q1 2021. Throughout Q2, the Company and Wood have explored opportunities for technology and other collaboration and have progressed discussions with a view to identifying and pursuing new capabilities and solutions for the global, waste-to-energy market. The Company looks forward to working together to identify and pursue future opportunities with Wood.

The Company will update shareholders in its next planned quarterly update at publication of its Interim Results for 2021.

David Palumbo, CEO of EQTEC, commented:

"In our interim results for H1 2020 and again in our 2020 annual report, we committed to building beyond our technology and innovation excellence to establish a solid, sustainable platform for growth. Throughout 2021, and accelerating in Q2, the team has been building that platform, one founded on reliable, repeatable delivery excellence, in partnership with qualified, dependable partners. For EQTEC, delivery excellence starts with project development toward financial close and we have been converting our rapidly expanding pipeline into a growing set of prioritised development projects, with project plans and managed timelines. We believe that very few companies in waste-to-energy or even in large-scale infrastructure pursue the rigour and discipline we are embedding. These efforts are inspired by our ambition to be known not only as the best technology in our class but also, the most reliable development partner in waste-to-value."

Directors' dealings

As announced by the Company on 9 July 2020, certain Directors agreed cash reductions to their remuneration for the 12 month period from 1 July 2020 to 30 June 2021 (the "2020 Director Remuneration Arrangements"), which would be satisfied by the issue of shares, at the end of each six month period dated 31 December 2020 and 30 June 2021, at the issue price of 0.45 pence per share.

Shares were issued by the Company to the relevant Directors on 1 February 2021 to satisfy the unpaid remuneration (net of tax where relevant) owed to them for the six months ended 31 December 2020.

On 11 February 2021 the Company announced the adoption of the EQTEC All Employee Long-term Incentive Plan (the "LTIP") as part of which David Palumbo and Yoel Alemán, Directors of the Company, agreed that the Company's obligation to issue them new Ordinary Shares pursuant to the 2020 Director Remuneration Arrangements, applicable to the six months ended 30 June 2021, would be replaced by Incentive Shares.

Accordingly, the Company announces that it has issued, in aggregate, 8,380,000 New Ordinary Shares to a current Director, Thomas Quigley and, as of 16 July 2021, a former Director Gerry Madden, to satisfy the unpaid remuneration (net of tax where relevant) owed to them for the six months ended 30 June 2021 under the 2020 Director Remuneration Arrangements.

On Admission (as defined below), the relevant Director interests will be as follows:

Director	No. of New Ordinary Shares	Resultant holding of Ordinary Shares on Admission	Percentage of total voting rights on Admission
Thomas Quigley	1,600,000	34,654,154	0.41%

Admission and total voting rights

The Company will make an application to London Stock Exchange plc for the 8,380,000 New Ordinary Shares to be admitted to trading on AIM ("Admission"). It is expected that Admission will become effective and dealings will commence on or around 23 July 2021. The New Ordinary Shares will rank pari passu with the existing Ordinary Shares.

Following Admission, there will be 8,443,424,926 Ordinary Shares in issue. This number may be used by shareholders as the denominator for the calculation by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company.

Further details regarding Nauman Babar's appointment

The following details in relation to the appointment of Nauman Babar are disclosed in accordance with AIM Rule 17 and Schedule 2(g) of the AIM Rules:

Nauman Babar (aged 39) has not held any directorships and/or partnerships in the past five years.

There is no further information to be disclosed in relation to Nauman Babar's appointment pursuant to AIM Rule 17 or Schedule Two, paragraph (g) (i)-(viii) of the AIM Rules for Companies.

This announcement contains inside information as defined in Article 7 of the EU Market Abuse Regulation No 596/2014 and has been announced in accordance with the Company's obligations under Article 17 of that Regulation.

ENQUIRIES

EQTEC plc	[phone]
David Palumbo / N auman Babar
Strand Hanson - Nomad & Financial Adviser	[phone]
James Harris / James Dance
Arden Partners - Joint Broker	[phone]
Paul Shackleton (Corporate) / Simon Johnson (Sales)
Canaccord Genuity - Joint Broker	[phone]
Henry Fitzgerald-O'Connor / James Asensio / Patrick Dolaghan
Alma PR - Financial Media & Investor Relations	[phone]
Josh Royston / Sam Modlin	[e-mail]
BECG - General Media Enquiries	[phone] / [phone]
Carrie Lowe / Tom Gosschalk	[e-mail]

About EQTEC plc

As one of the world's most experienced gasification technology and engineering companies, with a growing track record of delivering operational and commercial success for transforming waste-to-energy through best-in-class technology innovation, engineering and project development , EQTEC brings together design innovation, project delivery discipline and solid commercial experience to add momentum to the global energy transition. 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, supplies and builds advanced gasification facilities in the UK, EU and US, with highly efficient equipment that is modular and scalable from 1MW to 30MW. EQTEC's versatile solutions process over 50 varieties of feedstock, including forestry wood waste, vegetation and other agricultural waste from farmers, industrial waste and sludge from factories 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 synthetic 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 .

PDMR Notification Form :

The notification below is made in accordance with the requirements of UK MAR:

1.	Details of the person discharging managerial responsibilities / person closely associated
a)	Name	1. Thomas Quigley
2.	Reason for the Notification
a)	Position/status	1.  NED
b)	Initial notification/amendment	Initial notification
3.	Details of the issuer, emission allowance market participant, auction platform, auctioneer or auction monitor
a)	Name	EQTEC plc
b)	LEI	63540085VSYVDEINJO04
4.	Details of the transaction(s): section to be repeated for (i) each type of instrument; (ii) each type of transaction; (iii) each date; and (iv)each place where transactions have been conducted
a)	Description of the Financial instrument, type of instrument	Ordinary Shares of EUR0.001 each
	Identification code	IE00BH3XCL94
b)	Nature of the Transaction	Issue of shares
c)	Price(s) and volume(s)	Price(s) Volume(s) 0.45 pence 1. 1,600,000
d)	Aggregated information Aggregated volume Price	N/A (Single transaction)
e)	Date of the transaction	19 July 2021
f)	Place of the transaction	AIM (LSE)

 

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