Active Energy Regulatory News (AEG)

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

11 January 2019

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

Operations Update

Active Energy, the London quoted renewable energy and forestry management business focussed on biomass, announces an update relating to plans for the completion of the first industrial-scale CoalSwitch™ production facility and the market introduction of its revolutionary drop-in biomass fuel, together with developments from Active Energy's other business operations.

Overview

The substantive nature of discussions with potential offtake partners in Europe and Asia in recent weeks has further increased AEG's confidence in the scale of the commercial opportunities for Coalswitch™ and SuperFuel™.

· Reflecting this confidence, AEG has been focussed on securing a site in Lumberton, North Carolina, which ensures the Group has the scale of facilities to expand production of CoalSwitch™ and SuperFuel™ over the next 24 months.

· AEG has signed a letter of intent (the "LoI") with Alamac Holdings LLC ("Alamac"), a privately owned US entity, regarding the proposed purchase of a site in Lumberton which includes up to 415,000 sq ft of covered factory space and circa 145 acres of surrounding land (the "Lumberton Site").

o Pursuant to the terms of the LoI, AEG will conduct due diligence on the Lumberton Site until 28 February 2018 at which point the Company intends to formalise a commercial real estate purchase contract with Alamac, the specific terms of which will be finalised and agreed upon completion of the due diligence.

o The factory at the Lumberton Site is connected to Georgia Renewable Power LLC's ("GRP") power plant by an existing steam distribution pipeline.

· Following the proposed purchase of the Lumberton Site, AEG's immediate focus will be on installing the initial five tonne per hour Coalswitch™ plant and generating revenues at the earliest opportunity.

· AEG has also been progressing discussions with Andritz Group, a leading global engineering group, to support the installation of the initial Coalswitch™ plant at the Lumberton Site and provide engineering support to ensure that the Lumberton Site has the capacity to produce up to 400,000 tonnes of CoalSwitch™ per annum.

· Ongoing negotiations relating to the supply of feedstock to the Lumberton Site have demonstrated possible additional revenue generation opportunities for the Group which can be advanced alongside the development of the CoalSwitch™ plant. These opportunities include the possible co-ordination of AEG's activities with existing timber trading businesses to supply both saw log and biomass to new customers in Europe and Asia.

Product and Commercial Developments

Production of CoalSwitch™

The Company is now focussing on establishing its first industrial-scale CoalSwitch™ plant in North Carolina, which will act as the new base for all of Active Energy's CoalSwitch™ operations in the United States following the transportation of some facilities from the Company's initial site in Utah. This is a strategic location close to the Eastern Seaboard of the United States in the heart of the lumber production region in North America and is also an established location for sales to Western Europe and South East Asia.

The Group has signed an LoI with Alamac regarding the proposed purchase of the Lumberton Site which is connected to GRP's plant via an existing steam line. Pursuant to the terms of the LoI, Active Energy will conduct due diligence on the Lumberton Site until 28 February 2018 at which point the Company hopes to formalise a commercial real estate purchase contract with Alamac, the specific terms of which will be finalised and agreed upon completion of the due diligence.

The Lumberton Site is fully permitted for operations and the permits can be transferred to AEG upon completion of the purchase, thus reducing the time to market of the planned production of CoalSwitch™. The Lumberton Site also includes ancillary facilities, such as water treatment, an analysis lab, offices and IT hardware which AEG expect to be included in the proposed sale, thus reducing the amount of capital expenditure required for the Lumberton Site.

The Directors believe that the size of the Lumberton Site will ensure significant scope for the expansion of the initial CoalSwitch™ plant via the addition of extra CoalSwitch™ production facilities. Furthermore, the Directors expect that AEG will benefit from complementary biomass, saw logging and other commercial opportunities in the Lumberton area.

In addition, the Board continues to assess longer-term international expansion opportunities, with a particular focus on Western Europe and South East Asia. The Company has received multiple expressions of interest from potential partners in Asia and the CoalSwitch™ technology is now being evaluated by a number of engineering, procurement and construction contractors to build CoalSwitch™ production facilities. No assurances can be given at this stage that these expressions of interest will lead to formal contracts to construct CoalSwitch™ plants and the Company will provide further updates in regard to these discussions when appropriate.

Approval and Commercial Development of SuperFuel™

Further to the update provided on 28 September 2018, Active Energy's Joint Venture company with Cobant Sp. z o.o., submitted an application to the National Centre for Research and Development ("NCBR") in Poland whom are responsible for the disbursement of EU grants, requesting grant funding to subsidise the development of its SuperFuel™ technology. The approval for this funding by NCBR is still pending. Although no assurances can be given that NCBR will approve the funding, there have been ongoing discussions between the relevant parties over recent weeks and the Board of Active Energy has been advised that a definitive decision should be communicated during Q1 2019.

Negotiations with potential off-take partners in Poland for the SuperFuel™ product also continue and the Company will provide further updates to the market in this regard as appropriate.

Development of PeatSwitch™

The Company's PeatSwitch™ product, a beneficiated, soil substrate product made from waste fibre utilising the Company's proprietary PeatSwitch™ process, continues to represent an area of complimentary commercial opportunity for Active Energy. The Board has received a number of approaches from a variety of industries regarding the possible application of PeatSwitch™ technology and these will continue to be evaluated over the coming months.

The Company's previously announced MOU with Young Living Farms ('YLF') relating to PeatSwitch™ plant sales has not resulted in a definitive contract at this stage due to an internal strategic review at YLF. The Board will issue further updates in regard to the commercial activities with YLF as appropriate.

 The Company is continuing to work with Kellogg Garden Products, a market leading company in the development and manufacture of a range of garden and agricultural soil enhancements, following the commencement of initial test work as previously announced on 28 September 2018. Initial test results highlighted some technical issues which both AEG and Kellogg are now working to resolve. It is agreed that more testing by both parties will be undertaken in H1 2019 and Active Energy will provide further updates on this programme as appropriate. 

Commercial Developments for Timberlands International

Newfoundland

Following the previously announced grant of two five-year Commercial Timber Permits ('CTPs') for Forestry Management Areas 17 and 18 located within the Crown Province of Newfoundland and Labrador (the "Province") in November 2018, the management is now developing, for the Board to evaluate, an operational plan regarding activities in the Northern Peninsula, including a short term route to commercialise the value of these permits.

Alberta

Further to the Company's announcement on 17 May 2018, discussions regarding the Group's MOU with Powerwood Canada continue to progress. Powerwood and AEG have commenced a process to allow financial due diligence by potential funders for the joint venture project in Alberta. The owners of Powerwood remain keen for Active Energy to be involved to utilise both its forestry expertise and CoalSwitch™ processes to increase the underlying value of the relevant assets. The Board of AEG will evaluate the project once the definitive financial terms are presented to both AEG and Powerwood. The Company will make further announcements regarding the collaboration with Powerwood as soon as practicable.

Michael Rowan, Active Energy Chief Executive said, "The Active Energy team has been working hard over recent weeks to implement the Company's refocussed strategy and achieve revenue generation in as short a timeframe as possible. With this in mind, the installation of our first CoalSwitch™ plant at the Lumberton Site is a priority and we have made important strides forward toward achieving this with the assistance of GRP. The LoI with Alamac is a critical component of this process and, subject to the satisfactory completion of due diligence, will enable activities on the ground to accelerate with the objective of achieving first CoalSwitch™ production and sales in the first half of this year. In addition, our discussions with leading global engineering company Andritz Group are proving encouraging and we are optimistic that a long term relationship will be established. We intend to expand the Lumberton Site with their assistance and roll out further CoalSwitch™ plants both in North America and internationally.

"The Board sees the commercial introduction of CoalSwitch™ as the springboard for both product credibility and the catalyst for new prospective customers to sign for both new plants and for new off-take agreements. We have already generated considerable interest from a range of potential customers, partners and off-takers. 

"Alongside the large-scale market introduction of CoalSwitch™, we continue to advance our activities in Newfoundland following the grant of cutting permits in November 2018, with the objective of delivering cash flow in the near term. 

"The AEG team is focussed on generating value for our shareholders and although there can be no guarantees, I firmly believe that the quality of our intellectual capital, our partner and customer relationships and our long term strategic focus will be reflected in excellent returns for our shareholders. This is a strategy which I believe will dominate our corporate development during the first part of 2019 as we chart a course towards achieving critical commercial milestones, revenue generation and corporate growth." 

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 (AIM: AEG.L) is a London Stock Exchange-listed international renewable energy business based upon forestry assets. Its model is focussed on capturing the entire forestry value chain through sourcing, utilising and commercialising assets, and setting a new standard in the sustainable management and optimisation of timber resources.

The Company is led by a highly technical and commercial team with the experience to execute its defined growth strategy and build its visibility, primarily as a London-listed timber opportunity with a revolutionary biomass fuel technology.