EQTEC plc (AIM: EQT), a world-leading gasification solutions company building the future of a cleaner waste-to-energy industry, is pleased to announce its unaudited interim results for the six months ended 30 June 2021.
Highlights
· Growing conversion of pipeline opportunities into active development projects
· Financial Close of first Market Development Centre, with others following
· Investment in growth platform through Joint Ventures and expert teams
· Oversubscribed placing for £16 million in new development capital
· Ramp-up in engagement with policy makers, influencers and ESG interest groups
· On track to achieve seven times revenue growth over previous year
David Palumbo, CEO of EQTEC, commented:
“As we approach the United Nations Climate Change Conference (COP26) UK 2021 in November, we are pleased to share our Interim Results for 2021 and outlook for the second half of the year, along with a broader update about how we are strengthening our efforts to transform waste into clean energy and biofuels. Our hope for COP26 is that the EU, UK and USA in particular embrace more ambitious and stringent targets aimed at ultimate outcomes for the environment, such as increased carbon efficiency and reduced total emissions, especially of the most hazardous pollutants.
The Company has been increasingly active in 2021 with policy influencers and policymakers. Early in the year, we joined and worked closely with a number of industry associations in the EU and UK. We contributed directly to and co-authored the European Biogas Association’s upcoming whitepaper, Gasification: a sustainable technology for circular economies – scaling up to reach Net Zero by 2050 , and we made written submissions to consultations opened by UK Environment Agency and UK Department for Business, Energy and Industrial Strategy (BEIS).
Policymakers need to know that EQTEC’s Advanced Gasification is not a concept technology for the future – it is a ‘now’ solution for ‘now’ challenges of waste management and clean energy. Through the projects we are developing right now, EQTEC’s innovations are being aimed at:
· Preventing forest fires in California;
· Clearing farming waste and delivering clean energy in Greece, Italy and Croatia;
· Handling municipal solid waste and delivering clean energy at scale in the UK;
· Innovating synthetic natural gas (“SNG”) solutions in Ireland; and
· Converting legacy facilities in France to handle industrial and contaminated waste.
Our solutions deliver both a low emissions profile from waste treatment along with highly efficient production of energy or biofuel. So, even as we push harder to raise awareness of the immediate contribution we will make to the goals of COP26, we are hard at work identifying, qualifying and pursuing new projects in our target markets, for those who already know.
Throughout the first half of 2021, we focused our efforts on building out our platform for growth and scale. We converted more opportunities into active projects, formalised local, joint venture (“JV”) partnerships, kicked off acquisition and development of Market Development Centres (“MDCs”) and grew our team of experienced, project development experts to pursue more opportunities with quality and pace. As awareness and interest grows in gasification, we will be prepared to respond.
The Group is growing, making Advanced Gasification Technology more available to more places for more applications, but we want to move faster. To accelerate, we need stronger support from public policy, local authorities and the clean energy sector. EQTEC’s Advanced Gasification Technology was proven long ago, but we need to increase awareness further with EU, UK, US and others, of the superior efficiency, emissions profile and sustainability of our solutions versus legacy alternatives. The ESG strategy and marketing strategy we are currently developing for 2022 onwards will contribute to giving gasification a greater profile, and position EQTEC as the leader of the sector.
We look forward to closer engagement and collaboration with influencers and policymakers to position EQTEC as a leader in waste-to-energy for the present and the future. We believe the greatest proof of our capabilities is in implementing them more often, in more plants; but we also believe that an increasingly supportive policy environment, with incentives for superior cleantech solutions, would accelerate our progress and the benefits we deliver toward sustainable ecosystems.”
OPERATIONAL, COMMERCIAL AND CORPORATE HIGHLIGHTS
Plant construction:
· In the first half of the year, the Company progressed with installation of the gasification reactor and associated equipment inside the primary steel structures at its 2MWe facility at North Fork, in California, USA. The site was attended for three weeks in May by CTO Yoel Alemán and another EQTEC expert engineer, following relaxation of Covid-19 travel restrictions.
· Additionally, the Company and its partners ewerGy GmbH (“ewerGy”) and local partner ECO Hellas (“ECO Hellas”) progressed construction work on the 0.5 MWe Agrigas 1 biomass-to-energy plant in Larissa, Greece.
Financial close:
· On 17 May, the Company announced it had formed a consortium to acquire and recommission a plant in Italy with EQTEC’s gasification technology at its centre. On 21 June, the Company announced Financial Close of the 1MWe, EQTEC Italia MDC biomass-to-energy project in Tuscany, Italy, the first of EQTEC’s Market Development Centres (“MDCs”). Once operational, it is expected that EQTEC will become the O&M contractor for the plant.
Project development:
· On 8 January, the Company signed a Memorandum of Understanding (“MoU”) with Nobilis Pro Energy S.A. (“Nobilis”). The agreement includes the collaborative development of Nobilis’s existing pipeline of opportunities in Thessalia and Central Greece and for the proposed delivery of these and further projects, including construction in Nobilis, Almyros, with grid connection and the land agreement in place.
· On 27 January, EQTEC received notification of planning approval from Stockton-on-Tees Borough Council for an improved waste-to-energy scheme for the Company’s RDF-to-energy project at Billingham, Teesside, which will be the UK’s first EQTEC Advanced Gasification plant (“Billingham”). On 26 February, the Company announced that the Billingham project Special Purpose Vehicle (“SPV”), Haverton WTV Limited, had signed a conditional Land Purchase Agreement (“LPA”) for the land on which the proposed plant will be constructed and commissioned. In June, the Company announced completion of concept design work for the core gasification process and progress with design on the full plant.
· On 9 February, the Company signed a Collaboration Framework Agreement with Logik Developments Limited (“Logik”), including the participation by both Parties to develop an RDF-to-energy project at Deeside, Flintshire, UK, through the Deeside WTV Limited SPV (“Deeside”). On 11 March, the Company announced it had signed a Collaboration Framework Agreement with Toyota Motor Manufacturing UK (“Toyota”), effective for three years. Through the Deeside RDF-to-energy project, the Company and Toyota agreed to collaborate to explore an innovative, circular and sustainable waste-to-energy solution for Toyota’s engine manufacturing plant in Deeside. This could include establishing a supply of power and gas to the Toyota engine manufacturing site and the potential supply of bio-methane gas and green electricity and conversion of manufacturing waste through the sharing of cost data, energy usage and other information. In June, the Company submitted a planning application for a Phase 2 gasification facility deploying EQTEC technology at the Deeside site where Phase 1 recycling and anaerobic digestion facilities are already approved for development. As most planning conditions have been satisfied for Phase 1, the project is on track for Financial Close.
Other business development:
· On 22 March, the Company announced it had entered into a Framework Partnership Agreement (“FPA”) with MetalNRG plc (“MetalNRG”), to develop shovel-ready, biomass-to-energy, RDF-to-energy and sustainable, clean energy projects in the UK and Europe through MetalNRG’s SPV, MetalNRG Eco Limited. The Company acquired £500,000 in MetalNRG shares through the exchange of the same value of EQTEC shares with MetalNRG as at 7 May 2021. MetalNRG has since participated in one EQTEC project, currently under construction, as a consortium investor, in the recommissioning and repowering of the Italia MDC project.
Broker appointment:
· On 29 March, the Company appointed Canaccord Genuity Limited as Joint Broker.
FINANCIAL HIGHLIGHTS
· Revenue: For the six-month period through to 30 June 2020, the Company recorded revenue of €0.5 million, predominantly from technology sales.
· Profit/(loss): For the same period, the Company recorded an adjusted net loss of €2.6 million, impacted by increased, growth-orientated operational expenditure and before a €1.4 million loss arising from a non-cash item relating to share-based payments.
· Assets: As at 30 June 2021, the net assets of the Group stood at €42.8 million, which included new capital raised from the Placing in May 2021.
· Cash: The cash balances of the Group as at 30 June 2021 were €15.3 million.
· Debt: In January 2021, the Company agreed a new loan facility of €1.25 million with EQTEC shareholder Altair Group Investment Limited (“Altair”), with a maturity date of 31 December 2021. The loan, fully drawn down to repay an outstanding debt with another lender, had a lower interest rate than the previously held debt facility but was then itself repaid in full to Altair, in June 2021, six months ahead of schedule.
· Placing: On 28 May 2021, the Company successfully completed a Placing that raised £16 million (€19 million), before expenses, in new investment capital aimed at accelerating the Company’s growth. The capital raised through the Placing has been and will continue to be deployed to three key areas: (1) project development of MDCs; (2) project development of larger, RDF-to-energy deals in the UK; and (3) growth in the Company’s capability and capacity. The Placing generated new interest in the Company and was oversubscribed.
· Long-term Incentive Plan (“LTIP”): In February, the Company announced its LTIP for all directors and employees to link pay with Company and individual performance and to invest in talent to grow the business. It also announced the granting of share options for 2021, which would vest over three years starting the following year, subject to conditions. The Company confirmed that the LTIP is the Company’s sole, long-term incentive programme and that it therefore has no plans to issue further warrants as remuneration, as normal business practice. As at 30 June 2021, the Company had a total of 658,210,979 employee-related warrants and options outstanding, all of which were issued prior to the introduction of the LTIP.
POST PERIOD HIGHLIGHTS
July 2021
· On 12 July, the Company announced it had made a non-binding proposal to provide requisite funding, as a convertible loan facility, to take to completion the North Fork, California, USA project. The proposed facility, if accepted, fully drawn down and converted, would result in the Company’s increasing its current minority stake to take a controlling interest in the project project SPV, North Fork Community Power (NFCP). The Company expects legal execution to be concluded shortly.
· On 19 July, the Company confirmed that the first shipment of technology components was received on site at the Agrigas 1 project in Larissa, Greece.
· On 19 July, the Company announced that designs for the Billingham RDF-to-energy project had been reviewed with potential partners, including French waste-to-energy owner-operator, Groupe Idex (“Idex”). It also confirmed that the project team had launched engagement with prospective delivery partners including Tier 1 EPC companies.
· On 19 July, Nauman Babar was appointed to the board of directors as Finance Director.
August 2021
· On 11 August, the Company announced the acquisition, through Synergy Projects d.o.o. (“Synergy Croatia”), a joint venture between the Company and its Croatian project development partner Sense ESCO d.o.o. (“Sense ESCO”), of a 1.2 MWe biomass-to-energy gasification plant in Beliše, Croatia. The contract value of EQTEC’s technology sales for the plant is expected to be €1.7 million in technology and engineering upgrades. Once operational it will become the second EQTEC Market Development Centre. Additionally, it is expected that the Company will become the plant’s O&M contractor.
September 2021
· On 14 September, the Company announced the acquisition, through Synergy Croatia, of a 1.2 MWe biomass-to-energy gasification plant in Karlovac, Croatia. The plant, expected to be updated, recommissioned and repowered for operations towards the end of 2022, is expected to produce approximately 1.2 MW of electricity as well as high-quality biochar. The contract value of EQTEC’s technology sales for the plant is expected to be c. €4.5 million in technology and engineering. Additionally, is expected that the Company will become the plant’s O&M contractor.
· On 15 September, the Company confirmed that most technology components, including the Siemens Jenbacher engine, had arrived on site at Agrigas 1. The Company can now confirm that the final shipment of equipment, to include heat exchangers, gasifier, cyclone, filters and refractory, is expected to be shipped by the end of September and delivered on site in October.
· On 16 September, the Company announced it had signed a Heads of Terms with Kibo Energy plc (“Kibo”), with Kibo expected to acquire, after finalising a Share Purchase and Shareholders Agreement and securing of the requisite funding, a 54.54% equity stake in the Billingham, Teesside, UK project SPV, for a contribution of £3 million.
· On 24 September, the Company announced the formation of a JV, EQTEC Synergy Projects Limited (“Synergy Aegean”) between EQTEC and its Greek strategic partners, German EPC ewerGy GmbH (“ewerGy”) operating in Greece via its local partner, ECO Hellas M IKE (“ECO Hellas”) . It was also confirmed that Synergy Aegean had signed an agreement for the proposed acquisition of a 1MWe biomass-to-energy gasification project in Livadia, Greece and exclusivity for a second 1MWe project nearby.
· On 27 September, the Company announced that its wholly owned subsidiary, Southport WTV Limited, project SPV for the Southport, Merseyside, UK RDF-to-energy project, had signed a Share Purchase Agreement with Rotunda Group Limited (“Rotunda”) and its subsidiary Shankley Biogas Limited, to acquire full ownership of the Southport Hybrid Energy Park project from Rotunda through the acquisition of Shankley Biogas Limited.
Outlook
· The Company remains on track to achieve its previously stated 2021 revenue forecast of approximately €15 million, assuming timely closure of EQTEC projects as planned. This would represent a 700% increase in revenue over the €2.2 million in revenue delivered in 2020.
· The Company expects to deliver modest EBITDA for the year, following investments made to accelerate growth. This supports its aspiration for 2021 to be its first year with positive EBITDA whilst investing in commercial sustainablility and scale. Investments include expert support for project development and new talent to build the growth platform and R&D initiatives to keep EQTEC technology at the leading edge.
· The Company expects to continue increasing the number of pipeline opportunities it converts to projects under active development. In support of this growth, it expects to invest in increased engineering capability and capacity, especially in mechanical, electrical and civil engineering, and grow its engineering and project management capabilities to undertake more projects in parallel, in more places, at the same time.
· Inspired by a highly active and accelerating interest in cleantech from the French national, regional and local governments and from potential lenders and development partners, the Company has identified and is pursuing a number of opportunities in France. These include potential projects for biomass-to-energy and for gasification of industrial and contaminated waste, including retro-fitting of legacy, fossil fuel facilities for reuse as cleantech businesses.
· The Company and its Ireland-based partner Carbon Sole Group Limited (“Carbon Sole”) continue to pursue development of two or more projects in Ireland for biomass-to-bioenergy plants and in particular sustainable forestry waste for production of synthetic natural gas (“SNG”). To further support these efforts, EQTEC is discussing technology collaboration with potential partners for methanation and other technologies that help convert syngas into various forms of bioenergy.
· The Company continues to actively pursue its innovation, research and development (“R&D”) programme, especially through its partnership with the Université de Lorraine (“UoL”) in France. At least three R&D trials are planned at the end of 2021 with UoL and other partners, toward testing of RDF, plastic residues and waste wood biomass feedstocks. New projects and a new R&D agenda for 2022 will be defined by year end with UoL and other technology partners.
· Aligned with its mission, the Company is committed to demonstrating the importance of leading delivery of environmental, social and governance (“ESG”) initiatives. Working with a leading third-party consultancy, the Company is developing an ESG statement of intent and incorporation of specific, ESG objectives and activities into its strategy and business plans. The Company looks forward to providing an update on its ESG intentions at the end of the year.
The unaudited interim results for the six months ended 30 June 2021, which are contained below and form part of this announcement, include further important information and disclosures. The announcement should be read in its entirety.
The Company will update shareholders in its next planned quarterly update in early 2022.
This announcement contains inside information as defined in Article 7 of the EU Market Abuse Regulation No 596/2014 and has been announced in accordance with the Company’s obligations under Article 17 of that Regulation.
CEO REPORT
The first half of 2021 was formative for EQTEC, and it is my shared expectation with the Board of Directors that the Group will see the fruit of these efforts in our 2021 annual results.
We converted more pipeline opportunities into projects focused on and ready for development, building a platform for growth and scale from which to launch them and increasing the number of future projects to Financial Close and beyond. The Group is growing: in terms of opportunities, projects, relationships, partnerships and formal channels for establishing our Advanced Gasification Technology as the core of more business models that address today’s problems of how to reduce waste and generate more energy, more cleanly, in more markets.
The Board of Directors remains steadfast in our focus on achieving our revenue target this year. Delivery of c.€15 million in revenue would represent a seven-fold increase over 2020 and truly indicate the pace of growth we are experiencing. As indicated in our Q2 Trading Update, the Company entered 2021 with full knowledge that the second half of the year would see the financial results of strong efforts in the first half.
With that in mind, the first half of 2021 was focused on:
1. Market growth . It was only one year ago, in our 2020 Interim Results, that we announced pipeline growth from 15 to 41 opportunities. In our March 2021 Trading Update, we announced pipeline growth from 41 to 75 opportunities and since then, the number of opportunities continues to grow. Perhaps more significantly, and following the closure of two deals in 2020, we announced in March that 10, specific projects were under construction or under development, demonstrating our ability to successfully convert that pipeline into revenue generating projects. By the end of June, that number was 13, as outlined in our Q2 Trading Update. As of this report, we have 17 projects under construction or development, indicating steady growth based on the strength of our project development teams and our local partnerships in target markets.
In March, we announced the evolution of some go-to-market partner relationships into formal, joint ventures. We announced the first, in Croatia, with formation of Synergy Projects d.o.o. (“Synergy Croatia”). The second, formalised this month, is for Greece, with the formation of EQTEC Synergy Projects Limited. Both are led by the Group and link us with local markets through well established partners, who will lead local development activities, nurture relationships with local communities and decision-makers and provide a range of other services from funding management to commercial negotiation, and from plant engineering and procurement to construction and commissioning management. We look forward to announcing JVs in other target markets.
In May, we announced the acquisition of our first MDC in Italy, later in the year announcing a second in Croatia. We also indicated our intentions to invest in MDCs in other markets. The MDCs will showcase EQTEC technology in live, commercial environments and drive greater awareness and understanding of our contribution to cleaner, more efficient energy and biofuel production.
2. Platform for sustainable growth . To support the growth in pipeline and our ability to convert more opportunities into projects in more markets, without sacrificing the quality or pace of development, we invested in capabilities and capacity to support the quality and pace we require as we further grow the business into the future.
Toward driving high-quality project development at pace, we invested in onboarding a cadre of veteran project developers and waste-to-energy commercial experts to work with us on our most complex projects. We established a framework for EQTEC project development across commercial, funding, engineering and delivery readiness activities and we appointed ‘integration leads’ to drive project development to a single plan for high-quality, on-time outcomes. Combined with the experience and expertise of our strategic partners in target markets, we will combine the ‘best of the best’ into standards, methods and tools for consistent use.
We appointed a new Finance Director, who reviewed current financial management and statutory compliance arrangements and outlined near-term and longer-term priorities for further building out financial controls, compliance and reportin g, project finance standards and financial modelling capabilities. We refined our financial modelling tools and ran multiple scenarios in various projects to maximise IRRs and risk mitigation. We continued identifying and negotiating with prospective offtake customers, feedstock providers and project investors.
Critically, we built a plan to rapidly scale our engineering capability alongside our established engineering partners and look forward to making future announcements about our progress.
3. Market awareness. We improved our engagement with news media and key stakeholders including policy influencers and policy-makers.
We joined the Association for Renewable Energy and Clean Technology (REA) in the UK and Bioenergy Europe and the European Biogas Association (EBA) in the EU. We joined advanced thermal conversion technology (ATCT) working groups and we contributed evidence to the Environment Agency and the UK Department for Business, Energy and Industrial Strategy (BEIS) Biomass Strategy call for evidence in The Role of Biomass in Achieving Net Zero.
We responded to Bioenergy Europe’s call for case studies to input to its Study: Bioenergy in 2050. We submitted additional information to these organisations about the positive impacts of gasification plants in supporting a circular economy; plants complementary with other technologies in reducing emissions, creating employment and stimulating local communities and economies.
We played a key role in co-authoring the EBA’s first gasification whitepaper, Gasification: a sustainable technology for circular economies – scaling up to reach Net Zero by 2050 , to be published in October aimed at growing awareness from EU policymakers, media and other stakeholders as to the full potential of gasification as a circular economic model and enabler for realising Net Zero targets.
To fund the build-out and application of our platform for growth and scale, we announced in May a successful, over-subscribed Placing, which raised more than £16 million in investment capital. We have been quick and efficient at deployment of much of this capital as intended.
The Company feels very different at Interim Results 2021 than it did at Interim Results 2020, and the Board of Directors shares my view that it will feel very different again at Interim Results 2022. The growing stability of our platform allows us now to look for growth as a Group business in multiple markets and increasingly, with multiple use cases and business models based on EQTEC technology.
The versatility of EQTEC technology accommodates a wide range of feedstock and a wide range of applications as well. We are currently pursuing predominantly power and heat applications from a range of feedstocks. But we are running trials and tests with our R&D partners for both feedstock and applications, and we are growing our relationships with technology partners to work with us on a more diverse range of applications such as SNG, biofuels and hydrogen.
I note that hydrogen has been much in the news over recent weeks. As one of the three major components of the syngas produced through EQTEC Advanced Gasification Technology, we have long anticipated the rise of hydrogen as a commercially viable proposition. A clear hydrogen economy has yet to emerge, due both to the prohibitive cost of electrolysers and a lack of quantifiable, commercial demand.
However, because we see resolution of these challenges on the horizon, EQTEC will be ready. Our technology is exceptionally well-positioned by the ultra-pure, intermediate fuel it produces for a range of applications, including hydrogen via water-gas shift (“WGS”) reaction. We are actively exploring certification with TÜV for hydrogen-linked technologies. In parallel, we are actively developing agreements with leading technology partners for joint, go-to-market solution development based on hydrogen and other applications. For at least one project under development where there is qualified commercial demand for hydrogen, we are considering proposal of syngas-based alternatives to the proposed electroloysis solution. We expect to make announcements on these points shortly.
As the global community turns its attention towards COP 26 in Glasgow this November, I am pleased to reaffirm that the Company is taking a greater role in more places, with more partners and with increasing impact to define our place in the Net Zero economy and make a meaningful contribution to sustainable, cleantech businesses around the world.
David Palumbo
Chief Executive Officer
