TEG.L Regulatory News (TEG)

1 April 2014

The TEG GROUP PLC

("TEG" or "the Company")

Acquisition of Composting Business

The TEG Group PLC (AIM: TEG), the AIM-listed green technology company, which develops and operates organic composting and energy plants, is pleased to announce that it has acquired the business and assets relating to a composting operation at Hillbarton, near Exeter. The acquisition was from Glendale Recycling Limited ("Glendale"), a subsidiary of Parkwood Holdings PLC.

The acquisition is on a cash-free, debt-free basis for a nominal initial consideration of £1 with a further potential deferred consideration of up to £400,000 payable dependent upon the profit performance of the operation over the next four years. The Board expects the site to operate profitably in its first 12 months following completion, with annualised revenues of approximately £1m per annum. It is intended that TEG will supply waste from its brokerage business that is currently processed through third party operators, to supplement the existing waste supplies to the site.

The Hillbarton site is a combined In Vessel ("IVC") and Open Air Windrow ("OAW") composting facility. It has a combined capacity of 34,000 tonnes per annum and is permitted to a capacity of 50,000 tonnes per annum, allowing the potential for future expansion. The IVC technology is the TEG Silo Cage, installed by TEG in 2008. The operation also benefits from established compost brands and supplies bagged compost products to the local retail market.

The site is leasehold and the lease has been assigned to TEG. The current operating team have transferred to TEG under TUPE arrangements to ensure full continuity of operations. The Board believes that the site has the potential for expansion and is exploring a number of strategic opportunities including the potential for an anaerobic digestion (AD) facility.

Mick Fishwick, CEO of TEG commented:

"We are delighted to have acquired this excellent facility from Glendale. It is a high quality operation, and one that we know well as TEG installed the IVC in 2008. The plant fits well from a geographical perspective, giving the Company an outlet to service the South West of England, and we have identified some exciting opportunities for future growth."

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Notes to Editors

TEG

TEG provides state of the art technology for handling organic wastes. Its in-vessel composting ("IVC") system is one of the few approved technologies capable of treating animal by-product ("ABP") waste and it is now providing an anaerobic digestion ("AD") technology to produce power from food waste. Plant economics are predominantly driven by the gate fees charged, rather than the value of the end product (compost).

The AD plants also benefit from power sales and Renewable Obligations Certificates ("ROCS") or Feed-in Tariffs ("FITs"). The TEG processes are an economic and sustainable alternative to landfill.

The TEG Silo Cage System

The Silo Cage system, one of the few technologies capable of treating organic waste, is a natural process producing compost as an end product. The compost is an excellent soil conditioner that fertilises, retains moisture, provides structure and reduces the incidence of plant disease. TEG's Silo-Cages are housed in self-contained buildings, suitable for urban environments, are not unsightly and are environmentally friendly.

TEG Biogas (Perth) Limited

TEG Biogas (Perth) Limited ("TEG Biogas Perth") is a joint venture company established by TEG with Albion LLP. TEG Biogas Perth has constructed a 15,000 tonnes per annum AD plant at TEG's Glenfarg site to produce nominally 0.7MW of electrical power and 0.2MW of heat that is to be used by Binn Eco Park. The facility has been in operation, generating revenues from waste sales and power generation since Quarter 1 of 2012. It has become one of the leading AD operations in Scotland.

TEG Biogas (London) Limited (TEGBL)

TEG Biogas (London) Limited ("TEG Biogas London") is a joint venture company established by TEG with funding partners led by Foresight Environmental Fund LP. TEG Biogas London has constructed a combined In Vessel Composting (IVC) and AD plant in Dagenham that will process approximately 50,000 tonnes per annum of organic wastes and will generate approximately 1.4MW of power, sufficient to power approximately 2000 homes. The plant went into full operation in Q1 2014. 

TEG received a contract to construct the facility, valued at approximately £16m, in September 2012. The Company is currently operating the facility, post handover, as part of a 15-year operating and maintenance contract. The Group has a minority shareholding in TEGBL.

General

Customers include local authorities, waste management companies, food processing companies, farmers and landowners. The Company's expanding market is driven by increasingly stringent EU and UK legislation regulating the treatment and disposal of organic waste. Statutory targets for the diversion of waste from landfill increase annually through to 2020, increasing TEG's market opportunity year on year.