HYR.L Regulatory News (HYR)

31 March 2021

Hydrodec Group plc

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

Business update

Cancellation of trading of the Company's shares on AIM

Hydrodec Group plc (AIM: HYR), the cleantech industrial oil re-refining group, today provides the following update: 

Financing update

The Company is pleased to confirm that it has reached agreement on a US$6.75 million (gross of fees and retentions) refinancing package in respect of the Canton, Ohio plant and assets in order to replace the existing equipment lease, which is over-collateralised, and to provide additional funds for feedstock, approved capital expenditure and growth opportunities. The Company has also reached agreement with its existing US lender as to repayment arrangements for the outstanding US$4.3 million loan. The funding will be drawn down in tranches with the first tranche expected to be received by 7 April 2021.

Potential new partner in HoNA

The Company has previously announced having signed non-binding heads of terms for a proposed joint venture (JV) in the US with an industrial recycling company to establish a facility for the purpose of dismantling and recycling pole and pad-mount electrical transformers at the Canton site.

The potential JV partner has since made an offer to acquire all of, or a controlling stake in, Hydrodec of North America (HoNA) itself. Whilst the offer did not meet the Board's expectations as to valuation, the parties remain in constructive discussions, including as to the possibility of the potential partner taking a minority stake in HoNA rather than the proposed JV structure.

The potential partner's proven access to the utilities (and used transformer oil) combined with Hydrodec's proven ability to produce re-usable transformer oil and generate carbon credits would be expected to create a market-leading re-refining business in the US.

The Company can also announce that the remaining historic interest in HoNA that had been held by G&S has now been transferred back to Hydrodec - as such Hydrodec is currently the 100% owner of HoNA.

Litigation of discontinued business

Following the Company's announcement on 3 February 2021 regarding the Australian court judgement which found against Hydrodec and in favour of Southern Oil Refining (SOR), the Company continues to evaluate its position and has lodged a notice of intention to appeal.

Should it not pursue the appeal, or if any appeal is ultimately unsuccessful, the Company will seek an appropriate arrangement in respect of the settlement of the claim.

Cancellation of trading in the Company's shares on AIM

Despite having now reached agreement as to the refinancing, the ongoing impact of the pandemic and the Company's financial constraints have resulted in the Group being unable to conclude its audit in respect of the 18-month period to 30 June 2020 at this time. The Company's shares were suspended on 1 October 2020 and, in accordance with the AIM Rules, trading in the Company's shares on AIM will now be cancelled with effect from 1 April 2021.

Whilst there will be no formal market mechanism enabling shareholders to buy or sell shares, the Company currently intends to offer a matched bargain facility and will provide further details on its website as soon as it has been established and will also include details when it circulates the audited accounts.

The regulatory and financial reporting regime applicable to companies whose shares are admitted to trading on AIM will no longer apply to Hydrodec. However, the Company will remain subject to relevant UK company law and it will continue to communicate information about the Company (including annual accounts) to its shareholders. The Company will continue to maintain a website and post updates on material developments, although shareholders should be aware that there will be no obligation for the Company to include all of the information required by the AIM Rules.

The Board notes that, in the recent past, the Company's market capitalisation and lack of liquidity in its shares have impacted certain of the potential advantages to having the shares admitted to trading on AIM. Whilst the Board had not intended to cancel the admission, it considers that it may be in the best interests of shareholders given, inter alia, the reduction in corporate running costs that result therefrom, noting the Company's financial constraints.

The Board remains committed to publishing its outstanding audited accounts at the earliest opportunity and will communicate further with registered shareholders at that time. 

For further information, please contact:

Notes to Editors:

Hydrodec's technology is a proven, highly efficient, oil re-refining and chemical process principally targeted at the multi-billion US$ market for transformer oil used by the world's electricity industry. The global transformer oil market is projected to reach USD 3.0 billion by 2025 from an estimated market size of USD 2.2 billion in 2020, at a CAGR of 6.9% during the forecast period (source: Markets and Markets). Used transformer oil is processed with distinct competitive advantage delivered through very high recoveries (near 100%), producing 'as new' high quality oils at competitive cost and without environmentally harmful emissions. The process also completely eliminates PCBs, a toxic additive banned under international regulations.

In 2016 Hydrodec received carbon credit approval from the American Carbon Registry ("ACR"), enabling its product to be sold with a carbon offset and creating an incremental revenue stream. The Group is now generating carbon offsets through the re-refining of used transformer oil, which would otherwise ordinarily be incinerated or disposed of in an unsustainable manner. This is a highly distinctive feature for the Group, confirming (as far as the Board is aware) Hydrodec as the only oil re-refining business in the world to receive carbon credits for its output. This is a significant endorsement of the Group's proprietary technology and standing as a leader in its field.

Hydrodec's operating plant is located at Canton, Ohio, US.

For further information, please visit www.hydrodec.com.