Scirocco Energy (SCIR) 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 £1.2 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.
- Scirocco Energy proposes to invest £1.2m 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.£30 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 £60 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 5th 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.
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."