TIDMSCIR
RNS Number : 7181B
Scirocco Energy PLC
14 June 2021
14 June 2021
Scirocco Energy plc
("Scirocco Energy" of "the Company")
Proposed Investment into Energy Acquisitions Group Ltd and
entrance into Biogas Market
First transaction in line with growth strategy and stepping
stone to compelling opportunity pipeline within Biogas sector
Scirocco Energy (AIM: SCIR), the AIM investing Company targeting
attractive production and development opportunities within the
European energy market, is delighted to announce its proposed
investment into Energy Acquisitions Group Ltd ("EAG"), a specialist
acquisition and operating vehicle in the sustainable energy sector.
This investment of GBP1.2 million will be funded from current cash
resources and signals the Company's first investment as part of the
Company's revised strategy that targets opportunities within the
energy transition in Europe. By creating a joint venture platform
alongside EAG, Scirocco Energy will leverage EAG's strong network
and industry leading expertise to gain access to a series of
already identified acquisition opportunities within the anaerobic
digestion sector.
This initial investment will be used by EAG to acquire 100% of
Greenan Generation Limited ("GGL") and associated 0.5 MWe Anaerobic
Digestion plant located in County Londonderry, Northern Ireland.
Anaerobic digestion is a process that creates biogas, a renewable
energy source that will help the UK deliver on its decarbonisation
commitments.
This transaction signals a material change to Scirocco's
investment policy and as a result, it is conditional upon
shareholder approval, which is to be sought at the Company's AGM to
be held on 9th July, notice of which is being separately announced
this morning.
Highlights
-- Scirocco Energy proposes to invest GBP1.2m into EAG, a
specialist acquisition and operating vehicle in the sustainable
energy sector
-- Value accretive investment funded by cash on the balance sheet
-- Scirocco and EAG to form JV platform to execute initial
transaction and jointly explore further opportunities
-- Through this investment, EAG will acquire 100% of GGL and its
0.5MWe Anaerobic Digestion plant in Northern Ireland
-- GGL is a cash generative, operational AD plant which can be
optimised to enhance EBITDA margins and free cash flow
-- Further opportunity to invest in a pipeline of AD plants in
the UK totalling c.GBP30 million in value
-- This aligns as part of the new strategy proposed by Scirocco
Energy to deliver shareholder value through acquisitions in the
European energy market
-- As part of this transaction, Tom Reynolds and Muir Miller will join the board of EAG
Investment into EAG
EAG is a UK incorporated private company focused on creating a
portfolio of Anaerobic Digestion plants which meet a well-defined
set of operational and financial criteria. EAG was formed by Chris
Kerr, an engineer specialising in renewable energy, synthetic and
biogas sectors with over 20 years' experience. He was also
commercial Director, CEO and MD of a number of environmentally
driven businesses. In 2010, following the Government's incentive
schemes for renewable energy production, Chris became heavily
involved in the renewable sector, and in particular the synthetic
and biogas sectors, and was jointly responsible for conceiving and
delivering a number of AD plants in Ireland and the UK from
conception, through fund raise and into commissioning and
operations. He has provided numerous well known funds with
commercial and technical project assessment papers and assisted in
raising over GBP60 m of project capital, now deployed into a range
of complex assets, with multiple counter party contracts, including
EPC, O+M Feedstock and PPA's.
EAG was also initially funded via a shareholder loan from Riada
Partners, a company wholly owned by Neil Adair, who is a Director
of EAG alongside Chris Kerr. Neil has 36 years of senior experience
spanning corporate finance and restructuring, corporate and
commercial banking and operational business management having spent
significant time within the industry at a board level.
As part of this transaction, the CEO of Scirocco Energy, Tom
Reynolds and non-Executive Director, Muir Miller, will join the
Board of EAG. This will enable a joint venture to be established in
the assessment of future investments.
Acquisition of Greenan Generation Limited
The company is a special purpose vehicle which own a 0.5 MWe AD
plant and associated generation equipment. GGL has a combined heat
and power unit with 0.5MW capacity which can produce 4,000,000 kWh
per annum assuming a 91.3% load factor and commenced operations in
January 2016. The plant benefits from NIROC accreditation with 15
years remaining term.
Completion of the acquisition of GGL will take place following
approval of the change in Scirocco Energy's investing policy and
the approval of the investing policy is one of a number of
conditions to be satisfied.
Compelling market drivers in Biogas
The anaerobic digestion sector offers significant growth
potential. At its full potential in the UK, 170 million tonnes of
organic waste can be recycled through this process, providing 30%
of the saving needed to meet the 5(th) carbon budget for 2030. This
is equivalent to 27 million tonnes of CO2 saved.
Previously, there has been widespread deployment of renewable
technology, but with a focus on investment, rather than the
efficient deployment and operation of the technology. Particularly
after 2015, with many investment firms raising capital funds
through tax driven EIS schemes, significant capital was deployed
into large-complicated Biogas and Synthetic gas projects which
required full engineering teams and appropriate levels of operating
experience.
These firms are now looking for experienced management teams and
new capital to enable growth as the UK government continues to
encourage a move to decarbonisation. With increasing pressure from
the UK government and investors for more renewable sources of
energy, there will be more demand for the Biogas sector.
For more details on the proposed deal, the Greenan plant
acquisition, the Biogas sector and market drivers, please visit the
following presentation at the Company's website at
www.sciroccoenergy.com
Tom Reynolds, CEO at Scirocco Energy comments: "I am delighted
to update shareholders with this transaction today as we start to
implement the new strategy that Scirocco Energy announced last
year. The Biogas market is growing rapidly and will be key for the
UK's delivery of its decarbonization strategy. The investment into
EAG will provide a platform for further attractive investments in
the Biogas sector, enabling us to focus on growing a cash
generative asset base within a sustainable investment mandate.
While the initial investment and acquisition is relatively
small, it meets all our investment criteria in terms of cash
generation, upside potential and ability to deliver sustainable
returns. More importantly it provides us with an initial platform
from which to pursue our ambitious growth strategy. Going forward,
we intend to capitalize on the significant pipeline of
opportunities in this sector working with the EAG team. We also
believe that the addition of activities which benefit the UK's net
zero target will make Scirocco's investment proposition more
attractive for investors due to the growing importance of ESG
considerations."
Chris Kerr, Managing Director, EAG added:
"The establishment of this JV will enable both parties to
leverage our respective expertise and networks to capitalise on an
ever-growing pipeline of opportunities presented by the AD market.
EAG has extensive experience and understanding of this market, and
we bring an established network and pipeline of near-term
opportunities. The joint venture with Scirocco Energy will provide
us with the platform to access that investment to ensure that all
of our projects achieve best in class status over the next 20
years, and help all stakeholders achieve their goals.
Our specific sector experience means we are uniquely placed to
ensure acquisitions are completed on compelling valuation metrics,
and will be able to realise the upside value associated with these
assets through optimisation and innovative operating
techniques.
What is really exciting about the AD market is its unique
ability to de-carbonise the challenging sectors in industry such as
heating, transport and agriculture. We are seeing this already with
John Lewis, ASDA and Royal Mail adopting the use of biomethane in
their transport fleets, but many of the existing projects that will
service this growing demand for corporate decarbonisation require
investment and optimisation. There is a bright future ahead."
Audiocast and shareholder call - 22 June 2021
The Company will be hosting an audiocast presentation at 10am on
22 June 2021 and encourages shareholders to submit questions by
email to scirocco@buchanan.uk.com by midday on Friday 18(th) June.
The event will also include an interactive Q&A session.
Shareholders can register for the audiocast through the following
link:
https://webcasting.buchanan.uk.com/broadcast/609956e2576c9638976d54e7
For further information:
Scirocco Energy plc
Tom Reynolds, CEO +44 (0) 20 7466
Doug Rycroft, COO 5000
Strand Hanson Limited, Nominated Adviser +44 (0) 20 7409
James Spinney / Ritchie Balmer / Rory Murphy 3494
WH Ireland Limited, Broker +44 (0) 0207 220
Harry Ansell / Katy Mitchell 1666
Buchanan, Financial PR +44 (0) 20 7466
Ben Romney / Kelsey Traynor / James Husband 5000
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