Active Energy Regulatory News (AEG)

Active Energy Group Plc / EPIC: AEG / Sector: Alternative Energy

24 July 2019

Active Energy Group Plc

('Active Energy', 'AEG' or the 'Company')

Joint Venture Agreement for Saw-Logging Operations at Lumberton

Active Energy, the London quoted renewable energy business focussed on biomass, is pleased to announce that it has entered into a joint venture agreement (the "JV"), with Renewable Logistics Systems LLC ("RLS"), a supplier of saw-logs, pulpwood and wood chips to international and domestic markets. The JV will enable AEG to enter the saw logging export market via the commencement of operations at the Company's Lumberton Site, in Robeson County, North Carolina ("Lumberton") and will also provide further revenue opportunities for the Company.

Highlights

·; Pursuant to the terms of the JV, AEG and RLS have incorporated Renewable Energy Systems LLC ("RES") as an LLC to enter the saw-logging export market and to handle forthcoming logistics operations at Lumberton.

·; AEG will have an initial 30% equity share in RES and a right to increase this to 49%, when a 50 tonne per hour ('tph') CoalSwitch™ plant which AEG expects to be operational before the end of 2020.

·; Forestry waste products from RES's activities at Lumberton will be utilised as an additional feedstock resource for the production of all pelletised fuels including CoalSwitch™. 

·; RES will manage the material handling within Lumberton for AEG and the transportation services for the delivery of production of both saw logs and pellets to customers.

·; RES will enter into contracts for products from Lumberton and anticipates generating short term revenues from the export of the saw-logs.

·; Lumberton will be the initial operating site for RES.

·; AEG estimates the throughput of RES activities will be in the range of 200-500 containers per month of saw-logs for the export market, equivalent to 5,000-15,000 m3 per month.

·; As per the Company's announcement of 26 June 2019, AEG and RLS have an existing lease agreement; pursuant to the terms of the JV, the leased area will increase to cover 30 acres generating further rental income for Company.

Michael Rowan, CEO of Active Energy Group, said, "This JV with RLS is another important milestone and represents a further complimentary revenue stream for AEG. It also establishes an additional source of feedstock supply for the production of pelletised fuels, and importantly accommodates all the near-term logistics requirements for Lumberton for the supply of existing and new pelletised renewable fuels to customers.

"Revenue from the JV will be utilised for the future development of Lumberton and further demonstrates the value of our new operational centre, as it provides valuable commercial opportunities for the Company through being an industrial hub located strategically in the heart of America's forestry industry." 

Key Terms of JV

RLS is a supplier of saw logs, pulpwood and wood chips to international and domestic markets. Pursuant to the terms of the JV, RLS will provide the following:

·; An established saw-logging export operation at Lumberton with all requisite equipment, including vehicles, handling equipment and personnel.

·; Additional equipment to allow for material handling services required for the efficient operation of a pelletised plant operations for the initial 5 tph plant once in production and to accommodate the planned production capacity of up to 50 tph and a feedstock and handling requirements of up to one million tonnes per year.

·; New long-term lease agreement between AEG and RLS to cover 30 acres secured at Lumberton with appropriate space to perform the required material handling services and expand to meet the expansion plans at Lumberton.

·; In return, AEG will provide full utilisation of facilities at Lumberton for RES.

In addition, RES will be responsible for providing the following services:

·; Yard management, including:

o Receiving and storing feedstock at Lumberton;

o Organising the saw logging operations at Lumberton; and

o Providing and storing additional feedstock for pelletised fuel production.

·; Transportation, including:

o Hauling output material to shipping locations both within the US and internationally; and

o Co-ordinating with AEG customers for product delivery.

·; External feedstock material handling, including:

o Organising and operating a material handling facility within or in the proximity of Lumberton.

AEG and RLS have agreed that to perform the services stipulated in this JV, it will be necessary to acquire and install some additional equipment including a weigh scale, trucks, a tipper and wheel loader. This equipment shall be purchased by RES following consultation with Active Energy. RLS's core equipment will start arriving at Lumberton before the end of July 2019.

Related Party Transaction

Mr Antonio Esposito, the Company's Chief Operations Officer, is a former director of RLS. In addition, when aggregated with his wife's holding, Mr Esposito is the beneficial holder of more than 30% of the shares in RLS, with voting rights.

As such, the formation of Active Energy's JV with RLS constitutes a related party transaction in accordance with AIM Rule 13. Michael Rowan and Simon Melling are considered to be independent Directors for these purposes and, having consulted with the Company's Nominated Adviser, consider the terms of Active Energy's JV with RLS to be fair and reasonable insofar as the Shareholders are concerned.

Furthermore, Antonio Esposito has been excluded from any of AEG's commercial negotiations with RLS and is precluded from voting on any matters relating to the JV between AEG and RLS.

Additional Information on Lumberton

Lumberton comprises of 415,000 sq. ft of covered factory space and ~151 acres of surrounding land in Lumberton, North Carolina. The Company is currently focussed on establishing its first five-tonne per hour industrial-scale CoalSwitch™ plant at Lumberton however due to the size of the site, the Company has the scale of facilities to expand production of pelletised fuels including CoalSwitch™ and over the next 36 months targeting production of up to 400,000 tonnes per annum during 2021. The facility is also large enough to accommodate complementary activities including biomass, saw logging and other commercial opportunities in the Lumberton area and is intended to become an environmentally friendly manufacturing hub developing a range of complementary renewable technologies.

Lumberton includes all requisite ancillary facilities for the production of CoalSwitch™, including all relevant power supplies, water treatment facilities, an analysis lab and offices. Furthermore, the Company can benefit from additional near-term commercial opportunities including complementary biomass, saw-logs export and other opportunities in the Lumberton and North Carolina areas.

Lumberton is a strategic location close to the Eastern Seaboard of the United States in the heart of the lumber production region in North America. The Directors believe the location of the Lumberton Site will be advantageous for the Company as it seeks to generate regular sales of its products to Western Europe and South East Asia.

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014.

**ENDS**

Enquiries & Further Information:

About Active Energy Group:

Active Energy Group plc is a London listed (AIM: AEG) renewable energy company that has developed a proprietary technology which transforms low-cost biomass material into high-value biomass renewable fuels. Included in its products is its patented product CoalSwitch™ as one of the world's first drop-in biomass fuel that can be mixed at any ratio with coal or completely replace coal in existing coal-fired power stations without requiring plant modification.

Active Energy Group's immediate strategic focus is the production and commercialisation of CoalSwitch™ and other blended biomass pellets .