EQTEC plc (LON:EQT), the technology solution company for waste gasification to energy projects today announced its unaudited interim results for the six months ended 30 June 2019.
Operational Highlights
· Business Strategy updated and refined to focus on three key verticals
1. Recovery of clean energy from biomass
2. Industry specific elimination of waste streams
3. Elimination of waste streams
· Conditional MOU signed with COBRA Instalaciones Y Servicios and Scott Bros. Enterprises Limited to jointly develop the proposed 25MW Billingham Energy waste gasification and power plant
· Framework agreement signed with Phoenix Biomass Energy Inc. (“Phoenix”) to jointly develop biomass gasification power projects in the US, with five projects already identified, including North Fork and NAPA
· Agreement with Phoenix to acquire a 19.99% ownership of North Fork Community Power LLC (“NFCP”) for the development of a 2MW biomass project in North Fork, California for a consideration of US$2.5m to be satisfied by the supply of certain items of the existing equipment currently held at EQTEC’s Newry site
Financial Highlights
· Revenues of €1.56m (HY 2018: €0.55m)
· Loss for the period of €1.96m (HY 2018 Loss: €1.87m)
· Debt restructuring and placing announced in June 2019
– Debt for equity swap for, in aggregate, approximately £2.70m of existing debt, resulting in a reduction of approximately 60% in the Group’s debt obligations
– Raised £0.75m with new and existing shareholders
– Implementation of a cost reduction programme to reduce cash costs through to July 2020
· Net current assets at period end €0.53m (31 December 2018: net current liabilities of €2.65m)
· Net assets at period end €15.80m (31 December 2018: €11.87m)
Post 30 June 2019 highlights
· David Palumbo appointed to the Board in August 2019 and appointed as CEO in September 2019
· Dr Yoel Aleman appointed to the Board as Chief Technical Director in August 2019
· Cash cost reduction initiatives, including certain cash salary reductions for Directors and senior managers of the Company, currently being implemented
· Equipment Sale and Services Contract with NFCP signed, with a sales value of €2.2m to EQTEC, payable in stages according to a schedule of certain agreed milestones, with the first payment being €880,000 on NFCP’s financial close
· NAPA Project SPV to be relocated to an adjacent site to accommodate a larger 2MW capacity power plant, with planning having already been resubmitted in July 2019. Planning permits are expected to be in place in Q1 2020 and construction and installation is intended to start immediately after receipt
· SI Capital appointed as sole broker
The Chairman’s Statement and the unaudited interim results for the six months ended 30 June 2019, which are contained below and form part of this announcement, include further important information and disclosures. The announcement should be read in its entirety.
Chairman’s Statement
Introduction
The Company presents the 2019 Interim Report, which gives an update on the activities of the Group over the six month financial period to 30 June 2019, as well as providing an update on post-period developments.
The Company has made important progress on a number of fronts in the year to date and enters the remainder of the year with new leadership, a targeted and focused business strategy, a strengthened balance sheet together with reduced operating costs.
The progress being made in our key verticals, in particular in the US, is encouraging and we are focused on building on this foundation to become a reference technology partner across our key verticals.
During the financial period in question
· The Company restructured its balance sheet in June 2019
– Debt for equity swap, resulting in a reduction of approximately 60% in the Group’s debt obligations
– Raised £750,000 via a placing with new and existing shareholders
· The Company continues to be able to draw down a further £1.08 million pursuant to the revised facility agreement with Altair Group Investment Ltd (“Altair”), entered into at the time of the balance sheet restructuring in June 2019 (the “2019 Altair Facility”).
· A conditional memorandum of understanding was signed with COBRA Instalaciones Y Servicios (“COBRA”), the Company’s strategic partner for the development of the waste-to-energy projects, and Scott Bros. Enterprises Limited (“Scott Bros”), to jointly develop the proposed 25MW Billingham Energy waste gasification and power plant
· A framework agreement was signed with Phoenix Biomass Energy Inc. (“Phoenix”) to jointly develop biomass gasification power projects in the US, with five projects already identified; and
· The Company entered into an agreement with Phoenix to acquire a 19.99% ownership of North Fork Community Power LLC (“NFCP”) for the development of a 2 MW biomass project in North Fork, California for a consideration of US$2.5m, to be satisfied by the supply of certain items of the existing equipment currently held at EQTEC’s Newry site
Post period end
· The Company identified a series of cash cost reduction initiatives, including cash salary reductions currently agreed through to July 2020, which are being implemented and which the Board believes will lead to an eventual current annualised cash cost reduction of approximately 30%
· In order to preserve cash and further align senior managements’ interests with shareholders
– the Executive Team (consisting of Messrs Price, Madden, Aleman and Palumbo) agreed to take shares in lieu of 40% of their cash remuneration until 30 June 2020
– Thomas Quigley, Non-Executive Director, agreed to take shares in lieu of his entire cash remuneration until 30 June 2020
· David Palumbo and Yoel Aleman were appointed to the Board in August 2019, with Mr Palumbo taking over the role of CEO in September 2019
· Equipment Sale and Services Contract signed with NFCP, with a sales value of €2.2m to EQTEC, payable in stages according to a schedule of certain agreed milestones, with the first payment being €880,000 on NFCP’s financial close
· NAPA Project SPV relocated to an adjacent site to accommodate a larger 2MW capacity power plant, with planning having already been resubmitted in July 2019. Planning permits are expected to be in place in Q1 2020 and construction and installation is intended to start immediately after receipt of the permits
· The Company appointed SI Capital as its broker in August 2019
Business Strategy
The Group’s business model involves sourcing and providing assistance in developing waste elimination projects to which it will ultimately sell its EQTEC Gasifier Technology (“EGT”) and provide Operation & Maintenance (“O&M”) services. EGT enables project developers to construct waste elimination plants and recover electrical and thermal energy from the waste streams.
EQTEC sources projects that have a local supply of waste in need of elimination and conversion. It builds relationships and brings together the developers, the waste owners, the building contractors and funders. It then supplies the energy recovery technology and provides engineering services to the projects.
EQTEC also seeks to provide O&M services to established operating co-generation plants generating recurring revenues over the life of the projects.
We spent time during the period refocusing our business to ensure that we remain a progressive technology partner to those in the waste to energy sector.
Based on our extensive knowledge of the sector and our close relationships with operators, developers, contractors and funders we have focused our activities on three key verticals:
Recovery of Clean Energy from Biomass – this involves a focus on the recovery of energy from biomass feedstocks with projects in the 2.5-5 MW project size, primarily in the US, and in particular California which has a significant need for waste wood solutions, where we have entered into a framework agreement with Phoenix jointly develop biomass gasification projects ion the US.
Industry Specific Elimination of Waste Streams – this involves a focus on energy recovery, typically in the 2-10 MW project size, initially focusing on the elimination of olive pomace waste in the Mediterranean area.
Elimination of Waste Streams – this involves Municipal Solid Waste (MSW) and Refuse Derived Fuel (RDF) with a focus on projects typically in the 10-30 MW range, such as the proposed 25 MW Billingham Energy waste gasification and power plant announced in May 2019.
Current Trading and Prospects
The Group is concentrating on the three abovementioned verticals in the highly attractive waste to energy market. We have made progress in all three and specifically in the recovery of clean energy from biomass for projects in California.
Our framework agreement with Phoenix, which involves five identified projects, has already demonstrated progress for EQTEC, with the Group engaged to provide its proprietary EGT to Phoenix for two power plants in California. The design work for the first power plant in Napa County has already been completed and paid for and the Company has also agreed with Phoenix to acquire a 19.99% ownership of NFCP on financial close, for a consideration of US$2.5m to be satisfied by the supply of certain items of the existing EGT equipment currently held at our Newry site.
In September 2019, we entered into an Equipment Sale and Services Contract with NFCP, with a sales value of €2.2m to EQTEC, payable in stages according to a schedule of certain agreed milestones, with the first payment being €880,000 on NFCP’s financial close, which is currently anticipated to occur in October 2019.
With over 90,000 hours of operational data at the Movialsa plant in Spain which eliminates olive pomace waste and recovers energy, we believe we are the reference gasification technology for this waste stream and believe we are well positioned to secure new projects. EQTEC is in continued discussions with a major Spanish business group, which is active in the sector, to partner and collaborate on potential projects in Spain. We are also seeking other partnerships in the space to supply technology and services to other olive pomace waste producers in the greater Mediterranean area.
Outlook
During the first half of 2019, we continued to make strong progress in developing our project pipeline in all targeted sectors and this has continued into the second half of the year with the signing of the NFCP Equipment Sales and Services contract, which, assuming financial close, will represent a significant milestone for the Group.
The focus of the Board will be on building on the foundation for growth, focusing on increasing sales in the context of a leaner organisation, continuing to solidify the capital structure of the Group and focus on funding requirements including establishing new funding structures for project finance and additional funds to continue with its activities and its planned development programme.
We look forward to keeping shareholders updated on key developments going forward.
Ian Pearson
Non-Executive Chairman
