TIDMAEG
RNS Number : 0048N
Active Energy Group PLC
27 May 2022
Active Energy Group Plc / EPIC: AEG / Sector: Alternative
Energy
27 May 2022
Active Energy Group Plc
("Active Energy", "AEG", or the "Company")
Audited results for the year ended 31 December 2021
Active Energy, the London quoted international biomass based
renewable energy business, is pleased to announce the publication
of its audited results for the year ended 31 December 2021.
Operational Highlights
-- Independent burn testing completed on CoalSwitch(R) which
confirms its superior performance to alternate biomass fuels.
-- Completed construction of the Company's first reference plant
at the Ashland Facility and subsequently began production of
commercial volumes of CoalSwitch(R).
-- Commenced negotiations with potential customers both in the
United States, Japan and worldwide for the sale of
CoalSwitch(R).
-- Supplied CoalSwitch(R) samples to twelve prospective
customers worldwide (both power generators and industrial
partners), with ongoing discussions to establish long-term supply
agreements.
-- Significantly advanced the Company's strategy towards the
commercial rollout of CoalSwitch(R) as a next generation biomass
fuel.
Financial Highlights
-- Successful financial restructuring of the Company's balance
sheet and raising of additional equity funding to complete the
construction of the first CoalSwitch(R) reference plant at the
Ashland Facility.
-- Revenue for the year of US$644,914 (2020: US$1,588,140).
-- Loss for the year of US$5,881,768 (2020: US$8,757,919).
-- Basic and diluted loss per share of 0.16 cents (2020: 0.65 cents).
Activities after the year end:
-- Positive co-firing test results received from Utah, USA,
further proving the benefits of co-firing CoalSwitch(R) with coal,
including:
o a minimal impact on heating values when co-fired with coal in
furnaces;
o a material reduction of ash compared to burning 100% coal;
o a significant reduction in Nitrogen Oxide (NOx) and Sulphur
Dioxide (SO2) emissions compared to burning 100% coal; and
o CoalSwitch(R), when blended with coal, can be milled in an
unmodified bowl mill and burnt in existing coal-fired burners
without significant additional capital expenditure and with lower
energy consumption.
-- Test results further demonstrated the premium qualities of
the pellet compared to existing white pellet, including:
o increased heating value of 9,313 British Thermal Units per
pound (BTU/lb), which represents a 12.9% premium to traditional
white pellets;
o its hydrophobic properties allow easier logistics and storage
options
-- Received certification confirming compliance with the Forest
Stewardship Council(R) ("FSC") standards for its CoalSwitch(R)
fuel, confirming that the fuel is responsibly sourced.
-- Sale of the Lumberton site for US$4.65 million, subject to due diligence and closing.
-- Commercial conversations continuing with potential customers to purchase CoalSwitch(R).
Outlook:
-- Positive outlook for the business with CoalSwitch(R)
successfully transitioned from a concept to a proven product.
-- The Company is well positioned to deliver on the increasing
market demand for biomass globally.
-- The Company is in discussions with a number of interested commercial partners for the sale of CoalSwitch(R).
Michael Rowan, CEO, Active Energy Group, said:
"2021 was an important year for AEG. We have restructured the
balance sheet, extinguished former financial restrictions and
raised monies to start to develop CoalSwitch (R) to commercial
production. CoalSwitch (R) was delivered to potential customers in
2021 and this has continued during 2022. Prospective customer tests
and independent tests are proving the superior qualities of
CoalSwitch (R) to alternate biomass pellets currently
available.
"Prospective customers have indicated that they would like
CoalSwitch (R) to be delivered as soon as possible and the current
market conditions are emphasising this demand. AEG is solely
focused on attaining industrial scale production from Ashland at
the earliest opportunity. The last 6 months has seen finalization
of elements required to produce CoalSwitch (R) , namely design,
engineering and permit approvals and we now look forward to
completion of the plant."
Regulatory information
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the Company's obligations under Article 17 of MAR.
S
Enquiries
Active Energy Group Michael Rowan (Chief info@aegplc.com
Plc Executive Officer)
Andrew Diamond ( Chief
Financial Officer)
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Allenby Capital Limited Nick Naylor / James Office: +44 (0)20
Nominated Adviser Reeve / Freddie Wooding 3328 5656
and Joint Broker (Corporate Finance)
Amrit Nahal (Sales/Corporate
Broking)
--------------------------------- -------------------
Panmure Gordon & Co John Prior / James Sinclair-Ford Office: +44 (0)20
Joint Broker / Harriette Johnson (Corporate 7886 2500
Finance)
Hugh Rich (Corporate
Broking)
--------------------------------- -------------------
Camarco Gordon Poole / Tom Huddart aeg@camarco.co.uk
Financial PR Adviser / Emily Hall Office: +44 (0)20
3757 4980
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About Active Energy Group:
Active Energy Group plc is a London listed (AIM: AEG) renewable
energy company that has developed a proprietary technology which
transforms low-cost biomass material into high-value green fuels.
Its patented product CoalSwitch(R) is the world's only drop-in
biomass fuel that can be mixed at any ratio with coal or completely
replace coal in existing coal-fired power stations without
requiring significant plant modification. Active Energy Group's
immediate strategic focus is the production and commercialisation
of CoalSwitch(R).
CHAIRMAN'S STATEMENT
In last year's letter I informed you that the Board had
sharpened the Group's strategy for the development and commercial
roll-out of CoalSwitch(R). We believe that we can differentiate
CoalSwitch(R) as a 'next generation' biomass product which is
distinct from existing biomass products, both in terms of feedstock
sourcing and in the manufacture of a renewable fuel which exceeds
existing performance parameters for pelletised fuels. We believe
strongly in the positive environmental impact this product can have
on the operations of current coal consumers, and at the same time
assisting the lumber industry in making strides in utilising
residual waste products as feedstock. Our aim is to create an
environmental win-win for both industries as the world transitions
towards energy consumption within strict sustainable criteria.
In the year that has passed, we have worked hard to stay
focussed on this objective. Timber cutting permits in Ukraine and
Newfoundland, which were not aligned with the strategy, were
abandoned or relinquished. The saw log and sawmill operations in
Lumberton, which would have required significant additional
investment to scale up to profitable operations, and which were
also not directly aligned with the biomass strategy, were
exited.
An important landmark in February 2021 saw the completion of the
balance sheet restructuring of the Convertible Loan Notes (the
"CLNs"). We were grateful for the support of the CLN holders
throughout the process to allow the Company to restructure the
balance sheet and release the Group from onerous financial
restrictions which were increasingly restricting the Company's
strategy. We are also grateful to those shareholders and new
investors who contributed toward the simultaneous GBP7.0 million
(gross) capital raise. The Company immediately deployed those funds
toward the construction of future CoalSwitch(R) production
facilities.
Developing a new technology brings inevitable challenges and
CoalSwitch(R) has been no exception. The permit issues which
suspended construction activities in Lumberton in May 2021, and
later in the year the suspension of production in Ashland following
a component failure, were the most significant issues faced by the
management team during 2021. The Company relocated production from
Lumberton to Ashland in Maine and, during Q2 2021 the Company
achieved its long-stated goal of scaled CoalSwitch(R) production as
well as delivering CoalSwitch(R) to PacifiCorp Inc. as part of its
STEP Program. The subsequent co-firing test program, completed in
Q4 2021, co-ordinated by Brigham Young University and Utah
University, provided considerable encouraging performance data and
know-how for CoalSwitch(R).
CoalSwitch(R) has moved from being a concept to become a viable
new biomass fuel with proven co-firing benefits and a proven
industrial process for scaled manufacture. Product and design
enhancements have already been identified to improve the
CoalSwitch(R) fuel alongside additions towards the manufacturing
process to create further efficiencies for future production
volumes. In addition to the pellet analysis program in Utah (the
"STEP Program"), the Group established new partnerships to
accelerate the analysis of CoalSwitch(R) and its properties. The
positive independent product testing results from the University of
New Brunswick in Q3 2021 continue to assist the Group's sales
activities providing additional product credibility.
The last quarter of the year saw continued product and
manufacturing developments for CoalSwitch(R) co-ordinated by the
Company and working closely with Player Design Inc. ("PDI") in
Maine. In addition, the Company continued its capital raising
activities. The completion of the GBP3.0 million (gross) equity
fundraise at the end of the year allowed the planning and
engineering for the CoalSwitch(R) program to continue in 2022 as
the work with the State of Maine moves forward for permitting to
allow full scale production at the Ashland facility. The Board were
particularly pleased that Tyler Player participated in this
fundraising (by both investing funds and converting certain
liabilities into new shares in the Company).
The current global environment and the terrible events in
Ukraine have continued to shift customer objectives towards
security of supply, sustainability and reducing pricing volatility.
This has created a positive backdrop for the launch of
CoalSwitch(R) into the commercial marketplace as a next generation
black pellet fuel. New supply sources of biomass fuels have become
of critical importance and the Company's plan to establish
production volumes in the next 12 months could not be more
opportune.
On behalf of the Company, I also wish to express our ongoing
concern for the safety and wellbeing of former employees, advisers
and their families who worked for Active Energy in its former
Ukrainian operations over the last few years. All at Active Energy
support Ukraine during this unfortunate conflict.
2021 was a challenging year for Active Energy and its
operations. Working within the continuing COVID restrictions, both
in the UK and the US, resulted in additional delays and
obstructions to travel into the US which impacted the
decision-making timelines in Lumberton. However, I would like to
thank the members of the Board for each of their contributions and
tireless support through these unprecedented times. I would also
like to share the key reasons why I believe in the future of this
Company:
-- AEG is now singularly focused on its strategic goal to
deliver CoalSwitch(R) to coal burning industries and existing
biomass facilities.
-- AEG has produced CoalSwitch(R) at industrial scale and
independent analysis has validated its superior properties, and its
ability to co-fire with coal. These achievements are attracting
prospective customers both in North America and
internationally.
-- Working with PDI as an engineering partner has created strong
alignment of goals and brought necessary engineering expertise
within the Company.
-- A restructured, unencumbered balance sheet has allowed AEG to
open additional financing discussions to fund the Group's future
development and growth.
In 2021, the Company has built the necessary foundations for AEG
and its business. The Company's start-up phase is nearing its end
and now the goals of production delivery and securing orders are
the prime focus for the management team. This will include
establishing a base in Maine which can represent the forefront of
all AEG's forthcoming activities.
Post year-end, encouraging discussions have been held with
potential customers from both industry and power generators
worldwide, which continues to provide us with confidence that
future orders for CoalSwitch(R) will be forthcoming. As a result,
the ability to supply CoalSwitch(R) in commercial volumes remains
our highest priority. The Board remains confident about the future
for AEG and I remain grateful for the ongoing support of all our
stakeholders and look forward to the future with confidence.
James Leahy
Non-executive Chairman
CHIEF EXECUTIVE OFFICER'S STATEMENT
Introduction
AEG is focussed on developing next generation biomass products
and on the manufacturing processes and technologies required to
produce them. The Directors believe that CoalSwitch(R) represents a
step change for the biomass pellet industry, due to its utilising
steam treatment technologies to produce a superior biomass fuel,
thereby addressing both environmental and energy concerns for
industry in the immediate future.
In 2021, AEG achieved a number of significant milestones:
-- the successful financial restructuring of the Company's
balance sheet and raising of additional equity funding to complete
the construction of the first CoalSwitch(R) reference plant;
-- completed construction of a plant at Ashland, Maine (the
"Ashland Facility') and commenced production of CoalSwitch(R);
-- established sales and marketing activities in North America,
Japan and in other countries to promote future sales of
CoalSwitch(R);
-- supplied CoalSwitch(R) samples to twelve prospective
customers worldwide (both power generators and industrial
partners), with discussions ongoing to establish long term supply
agreements; and
-- completed independent testing of first CoalSwitch(R)
production to show that CoalSwitch(R) is a superior biomass pellet
fuel to existing white pellets in terms of heating value, bulk
density and its ability to be co-fired with coal within existing
infrastructure without the need for additional capital
expenditure.
Future role of biomass in energy supply
In recent months, economies have had to contemplate the
possibilities of energy shortages and reconsider their fossil fuel
policies. The world is continuing to examine their alignment with
the goals surrounding sustainability. To add to the complexity,
energy security has now become a material issue that every country
is now forced to re-assess. Within these agendas, biomass as an
alternative fuel source is also being re-examined.
The tragic conflict in Ukraine has highlighted questions
surrounding fossil fuel dependency, but more importantly, it has
had a significant impact on pricing for all fossil fuels. Biomass
has seen a dramatic increase in price with prices for white pellet
rising over 110% in the last 12 months and 32% within the last 4
months. In addition, given that Russia was the fourth largest
biomass producer by volume in 2021, the biomass market is now
having to plan for a reduction of up to 4 million tonnes (circa 6%
of the global market) of future supply to take effect by mid-2022.
These supply constraints affect both short term and long-term
contractual commitments for biomass, mainly in Europe.
The biomass market is currently looking for all forms of
additional capacity to accommodate existing demand, without even
considering the opportunities presented in the new growth markets,
notably Japan. New capacity will arise from identified future
production projects for white pellet coming on stream over the next
24 months. Nonetheless, given that much of this future production
is already under off-take contract, there will remain a shortage of
supply.
Black Pellets, including CoalSwitch(R), are increasingly being
recognised as a future source of additional biomass supply. The
market is acknowledging the operational and environmental benefits,
including the ability to utilise waste residual feedstocks,
increase bulk density and provide greater energy. The balance
between economics and sustainability remains the industry
driver.
In the long term, the future for the biomass industry remains
robust. The International Energy Agency's ("IEA") "Net Zero by
2050" report shows a scenario of a global increase of 20 exajoules
in biomass power to 2050 (equivalent to 12% of China's current
annual electricity consumption) up from 7 exajoules to date. The
Glasgow Declaration on Sustainable Bioenergy stated that
sustainable wood bioenergy would be projected to reduce net global
emissions by 600 million tonnes of CO(2) equivalent annually by
2030.
To date, Europe has led the way in the future use of biomass in
power generation and this will remain the case in the short term.
Nonetheless, a number of Asian countries, including Japan and South
Korea, are adopting similar policies toward biomass which is
expected to lead to future growth in these markets. Their focus is
already upon next generation pellets, such as CoalSwitch(R), which
meet modern demands for improved heating values and improved
sustainability. North America faces similar challenges to
accommodate consistent fuel supply on economic terms and to start
to decrease the dependence on coal consumption amidst forthcoming
emissions legislation. Next-generation biomass fuels, including
CoalSwitch(R), have never had a greater opportunity.
Strategy
Our strategy is to commercialise CoalSwitch(R), a proprietary
technology which transforms waste biomass material into high-value
sustainable fuel which can co-fire with existing fossil fuels to
produce immediate environmental and emissions benefits or replace
existing biomass feedstock.
The Board believes that CoalSwitch(R)'s proprietary qualities
and development program, have reached important milestones.
CoalSwitch(R) has:
-- utilised waste biomass material as a core feedstock for the fuel;
-- validated its steam treatment technology on an industrial
scale from running the test reactors at Ashland;
-- acquired additional technical product knowledge and
manufacturing know-how during the first production cycles at
Ashland;
-- verified the properties of CoalSwitch(R) pellets, both as a
next generation fuel, and in its performance to co-fire with coal
and reduce emissions; and
-- produced positive market interest in CoalSwitch(R) as an alternative renewable fuel.
Next generation biomass fuels (such as CoalSwitch(R)) will play
an important part in addressing the increasing legislative and
regulatory requirements being imposed on power generators and heavy
industry worldwide. This, combined with increasing public awareness
of sustainability provides commercial opportunities for
CoalSwitch(R).
Production of CoalSwitch(R) from the first reference plant at
Ashland in the summer of 2021 provided considerable manufacturing
data and know-how. As a result of this data, the Board decided to
commence construction of an industrial scale facility to produce
CoalSwitch(R). The market requires a scalable solution to produce
next generation pellets in volume and the Directors believe that
AEG now has the technical solutions to deliver black pellets, in
commercial quantities, via its steam treatment technology.
CoalSwitch(R) - a fuel with solid credentials
To date, AEG has supplied fuels to twelve prospective clients
and universities for their own independent analysis in North
America and Japan. Each customer is assessing the fuel to meet its
own individual consumption requirements.
The first test results from production volumes were published by
the Wood Science and Technology Center at the University of New
Brunswick on 2 September 2021 and demonstrated the premium
qualities of CoalSwitch(R) as a biomass pellet compared to existing
white pellets. The pellets were analysed for their proprietary
qualities, namely the quality of the pellet produced from the
Ashland Facility using waste feedstock, its heating value and
organic elemental analysis in a laboratory environment.
The results from the analysis of these CoalSwitch(R) pellets
were as follows:
-- produced to industry standard size and met the initial
hydrophobic tests set by the Pellet Fuels Institute;
-- bulk density of 42.17 lb/ft3 (or 672 kg/m3) - a substantial
premium to existing white pellets;
-- produced less ash (circa 3% inorganic ash) - a significant
reduction to customary ash content for coal;
-- the elemental analysis contained circa 55% carbon and less
than 0.5% sulphur content - a significant improvement from white
pellet; and
-- an increased heating value over white pellet, namely 10,042
btu/lb (with the potential for even greater heating value yields by
reducing the underlying moisture content which had been attained
during first production runs).
In addition, CoalSwitch(R) was delivered to PacifiCorp in June
2021 as part of the STEP Program in Utah. The program has been
funded by Rocky Mountain Power's Sustainable Transportation and
Energy Plan to analyse next generation fuels. The STEP Program was
designed to evaluate the burning and material handling properties
of various black pellets including CoalSwitch(R). The STEP Program
involved an analysis of each phase of the pellet burning process,
including materials handling as well as co-firing and emissions
properties.
CoalSwitch(R) was tested through a bowl mill to better
understand materials handling when combining with coal and
subsequently co-fired into a pulverised coal research furnace
operating at 1.3 megawatt of thermal output. The coal research
furnace, operated by Brigham Young University, has a firing system
and direct operational representation of industrial-scale utility
boilers used by power generators throughout the United States. As
part of this assessment, CoalSwitch(R) was tested over a one-week
period both on its own, as well as blended with Utah bituminous
coal at various ratios. CoalSwitch(R) and coal were successfully
milled, with the milled fuel blends subsequently used for
combustion testing with a reduction in energy consumption.
The STEP Program was co-ordinated by Brigham Young University,
Rocky Mountain Power (a subsidiary of PacifiCorp), the University
of Utah, Chalmers University of Technology and Reaction Engineering
International. The STEP Program completed the materials analysis
and burn testing in Q4 2021. The first conclusions were reported in
January 2022. The testing results were very encouraging for AEG and
demonstrate that CoalSwitch(R) is a viable solution for coal
consumers seeking to reduce their emissions.
The summary of key findings from the report on the testing were
as follows:
-- CoalSwitch(R) can be milled in an unmodified mill with only
small changes required to the mill settings;
-- a material reduction in mill power requirements occurs when
milling CoalSwitch(R) compared to pure coal or other alternative
biomass fuels;
-- heating value of CoalSwitch(R) alone was 9,313 BTU/lb,
represented a 12.9% premium to traditional white pellets currently
produced for the market by the Company's competitors;
-- on a blended mix of 75% coal and 25% CoalSwitch(R), the
heating value increased to 11,807 BTU/lb, representing only a 7%
drop from normal coal burning values used in conventional coal
fired facilities;
-- CoalSwitch(R) consumed in the furnace produced 77% less ash than coal;
-- CoalSwitch(R) burnt in the furnace reduced NOx emissions by
20% versus existing coal consumption; and
-- CoalSwitch(R) reduced sulphur dioxide emissions by 60% vs coal.
The results of these independent testing programmes have proven
the superior performance credentials of CoalSwitch(R) which AEG had
always believed to be the case. More importantly, this independent
research is important for prospective customers as they commence
their analysis toward testing and evaluating CoalSwitch(R) and look
toward long-term supply contracts. Following the year end, AEG has
been reviewing test burn data received from prospective customers
and these conclusions mirror all the analysis completed in 2021.
This provides a favourable backdrop towards commercial
discussions.
CoalSwitch(R) meets established sustainability criteria
Post year end, in April 2022, AEG obtained Chain of Custody
("CoC") and Controlled Wood certification compliant with the Forest
Stewardship Council(R) ("FSC(R)") standards for its CoalSwitch(R)
fuel produced in Maine. The application process commenced in Q4
2021 to attain market standard accreditation for both CoalSwitch(R)
and AEG. The certification process included an audit by an
independent accredited certification body, which examined the full
CoalSwitch(R) production process, encompassing the entire supply
chain from feedstock source to final production of fuel. AEG's
certification to these FSC(R) standards confirms that the
production of CoalSwitch(R) will use forest-based materials from
responsible sources and that the Company's suppliers have committed
to the strictest standards currently governing forest
management.
The FSC(R) certification is the basic market prerequisite to
permit any biomass products to be sold into many of AEG's target
markets, notably Japan. Certification for AEG from FSC(R)
represents another significant milestone as the Company seeks to
establish CoalSwitch(R) as a 'true alternative fuel' and engages
with a wider range of prospective customers who also share our
commitment toward sustainability.
Sales and marketing activities for CoalSwitch(R) fuel
Signing trial orders and long term off-take agreements with
prospective customers both from the power generation sector and
heavy industry is the priority for AEG. Since first production was
completed in Q3 2021, the Group has focussed its sales activities
both in North America and worldwide. Personnel have been retained
both in the USA and Japan to develop sales and marketing
opportunities in each region.
Within the USA, the prime focus has been to examine
opportunities with existing power utilities and other
coal-consuming industries such as cement and aggregate industries.
Their interest is focussed on co-firing opportunities needing to
address the immediate environmental concerns over the current
consumption of coal or alternate biomass products. The team are
currently working with various prospective customers who wish to
receive trial volumes at specified locations in the USA. Based upon
this success, these customers will look to conclude long term
supply contracts and AEG is already receiving additional enquiries
as to planned additional production facilities in the USA. Whilst
the current discussions are positive, AEG anticipates that many of
these off-take agreements will not be signed until later this year
or early next year.
The sales opportunity in Japan is on a greater scale. Japan has
publicly stated its goals for future biomass consumption, with a
need to examine various types of fuels. Black pellet, particularly
CoalSwitch(R), has been identified as a potential fuel. AEG's
marketing efforts in Japan are focussed on specific future biomass
plant projects and working with engineering, procurement and
construction ("EPC") partners to supply fuel on long term
contracts. First samples of CoalSwitch(R) fuel were delivered to
prospective customers and EPC partners in H2 2021 and in 2022 where
testing produced suitably favourable results compared with white
pellet. Once again, AEG is working towards securing long term
supply contracts with fuel deliveries commencing no earlier than
2024 and contractual negotiations have already commenced to work
within these infrastructure project deadlines.
Financial results for 2021
Following the ceasing of activities, the sawmill and sawlog
businesses have been accounted for as discontinued operations.
Losses for the year ended 31 December 2021 amounted to US$5.9
million (2020: US$8.8 million). The current year losses included an
impairment of US$2.0 million relating to the damaged reactors
following the component failure at Ashland. The basic and diluted
loss per share for total operations was 0.16 cents (2020: 0.65
cents).
The balances restructuring in February 2021, during which the
full CLN obligation was redeemed or converted into equity, and
GBP7.0 million (gross) of equity was raised, resulted in a net cash
position at 31 December 2021 of US$2,087,402 (2020: net debt of
US$21,467,000). This allowed the Group to progress with the
construction of the CoalSwitch(R) reference plants. In addition,
the restructuring resulted in the release of the corporate
debenture which was held as security for the CLN's. The Group was
fully unencumbered at 31 December 2021. Further analysis of the
results for the period are set out in the financial review
below.
Operational update
During 2021, AEG's operational activities were focussed in two
centres on the US East Coast, namely Ashland, Maine and Lumberton,
North Carolina. AEG remains focussed on developing manufacturing
capacity in the USA, which is at the heart of the current global
biomass manufacturing industry. The locations were chosen to allow
association with the relevant wood baskets of New England and the
Appalachia and to allow AEG to make the greatest impact toward the
industry changes required of the biomass industry.
Operations at Ashland, Maine
During construction of the Lumberton reference plant, AEG and
Player Design Inc. ("PDI") received additional commercial enquiries
about the possibility of combining CoalSwitch(R) production
facilities within existing lumber mill operations in north-eastern
USA. In April 2021, AEG and PDI worked with the State of Maine to
obtain a temporary operating permit to allow a second CoalSwitch(R)
reference plant to be constructed at PDI's existing facility at
Ashland.
In April 2021, a joint venture arrangement was established to
combine AEG's existing CoalSwitch(R) manufacturing equipment with
PDI's existing operating infrastructure at the site to construct a
reference plant at the Ashland Facility. The Board decided to
proceed with this second development before the permitting issues
arose in Lumberton during May 2021.
With the subsequent events at Lumberton (which are described
below), resources within AEG and PDI were refocussed toward
completion of construction of the reference plant and for it to
become operational within the existing timetables agreed under the
STEP Program. As a result, the reference plant at the Ashland
Facility was completed and operational within 14 weeks from the
date of issuance of the relevant temporary operating permit. First
CoalSwitch(R) fuel production commenced in May 2021 and first
deliveries of CoalSwitch(R) to the STEP Program were made in June
2021.
The Ashland Facility reference plant continued to produce
volumes of CoalSwitch(R) and operate to capacity until 5 August
2021 when a monitoring component failure resulted in a suspension
of production. The Board, together with PDI, completed a detailed
analysis of the manufacturing failure during Q3 2021 and were able
to conclude that, save for the component failure, the steam
treatment technology within the reactors had performed as planned
and that the process could be expanded towards an industrial scale
production system. The component failure rendered both reactors
inoperable but all other production equipment at Ashland remained
fully operable and capable of recommencing CoalSwitch(R) production
operations.
The reference plant at Ashland had validated the steam treatment
technology to produce next generation biomass fuels on an
industrial scale and identified the requirements to build larger
scale facilities. Further, AEG has acquired valuable manufacturing
and product data necessary for the future development of production
facilities both in North America and elsewhere.
Since the beginning of 2022, both PDI and AEG have been working
on the engineering and permit activities to complete construction
of a CoalSwitch(R) production facility at Ashland. PDI is in a
regular dialogue with the State of Maine to address all relevant
permit issues, including all permits required for land use, water
disposal and emissions. This process is ongoing and will continue
until the CoalSwitch(R) production facility is fully
operational.
As this work has progressed, PDI and AEG have also been
developing and redesigning new larger scale CoalSwitch(R)
production reactors and a larger industrial scale manufacturing
process. The intention is to build out an industrial scale facility
which should accommodate expansion of production capacity with
minimal disruption to production in the medium term. The new
production facility will also reuse equipment formerly at
Lumberton, in order to accelerate the current construction process.
The current environment for sourcing equipment is challenging in
the USA and PDI are working to resolve these issues to deliver an
operational facility as soon as possible.
Operations at Lumberton, North Carolina
The property in Lumberton was purchased in 2019 to become the
initial production hub for CoalSwitch(R) and a variety of
associated lumber activities, including the production of rail ties
and other lumber products. These activities were believed to be
complementary given AEG's primary aim was to demonstrate that
biomass fuel production could achieve sustainability goals for the
existing activities of the lumber operations. This operating model
attracted interest from prospective lumber partners throughout the
USA and Canada during 2021 and continues to attract the attention
of the lumber industry.
In respect of the lumber activities during the year, there were
a number of operational issues for Active Energy Renewable Power
LLP ("AERP"), the Company's operating subsidiary at Lumberton.
These issues included adverse weather conditions during Q1 2021
which disrupted log supplies to the Lumberton Site, ongoing supply
chain and logistics disruption globally for product distribution
and continuing operational limitations occurring in North Carolina
and the US as a result of COVID-19 through 2021 (including
preventing the Company's management being able to visit the site on
a regular basis).
During Q1 2021, the Board undertook a review of the lumber and
saw log activities at the Lumberton Site and determined that they
neither aligned with the Group's strategic intent of utilising
residual materials in the production of biomass fuels, nor could
the investment required to achieve scale for these businesses be
justified at the expense of developing CoalSwitch(R). As a result,
in the first half of the year the Board took the decision to cease
the Company's lumber and saw log activities in AERP at
Lumberton.
Since Q4 2020, AEG's focus at Lumberton was the production of
CoalSwitch(R) after relevant permits had been issued by the North
Carolina Department of Environmental Quality ("NCDEQ") in August
2020. Preparatory engineering work was completed late in 2020 and
AEG hired the engineering services of PDI. Following completion of
the fund raising and balance sheet reconstruction in February 2021,
engineering and construction activities accelerated in early
February 2021, with regular monitoring carried out by the
NCDEQ.
In May 2021, AEG received a "notice of violation" from NCDEQ in
respect of the installation of additional control devices to
enhance emissions reduction which required an amendment to the
existing air quality permits issued by NCDEQ in 2020. AEG and its
representatives immediately submitted the relevant amendments to
ensure construction might remain on schedule. No commercial
activity has taken place at the Lumberton Site since the issuance
of this notice. However, the NCDEQ then requested additional
information on emissions including data from an operational
facility in order to revise and re-issue the permits. During this
period, AEG was required to suspend all construction activities of
the first reference plant at the Site. NCDEQ made it clear that AEG
could not resume the permit approval process without independent
emissions analysis being submitted. This resulted in AEG having to
refocus its efforts toward Ashland to ensure that such data might
be presented to the NCDEQ. As a result of the events at Ashland
during Q3 2021, independently analysed emissions data was not
acquired and accordingly no further effort has been made to amend
the original permit.
In addition to these operational issues at Lumberton, AEG
received a series of legal challenges from the Southern
Environmental Law Center ("SELC") based in North Carolina during
2021 regarding alleged operational permit breaches from an existing
wastewater treatment plant located within the facility. The alleged
action correlates to the period when the Group first assumed
ownership of the property. Throughout the time of ownership of
Lumberton, the Company has complied with all federal and state
environmental regulations imposed at the facility and ensured that
all reporting obligations and records have been correctly
maintained. Accordingly, the Directors are confident that the Group
has fully complied with its environmental and permit obligations
and wholly refutes SELC's claims. Based on the legal advice that it
has received the Company strongly believes that there is no merit
in any of the SELC's claims and allegations and will continue to
vigorously defend its position.
In late 2021, the Board reviewed the options for Lumberton. Our
operational experience at Ashland had demonstrated the exact site
requirements any future CoalSwitch(R) facility may require and it
was agreed that other options should be considered given the
existing circumstances. As part of the options, Lumberton was
placed on the market during Q4 2021, either to sell or for lease to
third parties. On 31 March 2022, AEG announced that it had entered
into a sale and purchase agreement with Phoenix LLC for the sale of
the Lumberton Site for gross cash proceeds of US$4.65 million. The
sale is subject to a 75-day due diligence and closing period, with
closing of the transaction and receipt of sale proceeds expected in
June 2022. At present, the sale and due diligence process continue
as expected.
As part of this process, all production equipment acquired in
2020 and 2021 for future CoalSwitch(R) manufacture will be
transferred to the Ashland facility for use in the new scaled
manufacturing plant including the former proprietary CoalSwitch(R)
reactors which may continue to be used for further product
development activities.
Intellectual property and registered trademarks
During 2021, AEG continued to develop its intellectual property
portfolio and production know-how regarding CoalSwitch(R) and its
manufacture. The award of the patent in the USA in December 2020
(Patent No: 10,858,607) has accelerated additional patent
applications in the USA. Complimentary patent applications
surrounding the beneficiation process have been submitted in the
USA to further protect the manufacture process during 2021.
On 4 June 2021, AEG was notified by the Canadian Intellectual
Property Office of the grant of notice of allowance confirming the
award of the Canadian patent. On 1 November 2021, AEG announced the
formal award of the Canadian patent (Canadian Patent No.
2,999,447). These patents follow in substance the patents already
issued in the USA. The Company continues to file further patent
applications around the world with complementary patent
applications currently in progress in South-East Asia and the
EU.
Production data and the future manufacturing plans for larger
scale reactors necessitate the development of additional activities
for CoalSwitch(R) intellectual property program within North
America and internationally.
Post year end, in April 2022, AEG was awarded the registered
trademark of CoalSwitch(R) for use on all future black pellet
production created by AEG or its authorised licencees in the USA.
This approval process has taken over 18 months to complete.
Additional trademark applications have commenced for registration
of the trademark in international markets.
Technology licensing
Finally, throughout the year, AEG has continued to focus on
opportunities for production joint ventures and partners for
production licensing, using AEG's proprietary intellectual property
and manufacturing know how. Ongoing conversations continue with
prospective partners in South-East Asia and South Africa.
Completion and operation of the first manufacturing plant in
Ashland will demonstrate the opportunities that CoalSwitch(R) and
its production technologies represent
Going concern
The Directors have given careful consideration to the
appropriateness of the going concern basis in the preparation of
the Annual Report and Account for the year ended 31 December 2021.
Further details of our current financial position and material
uncertainties which may affect the Company's ability to continue
operating as a going concern are to be found in the Financial
Review and in Note 1 of the Financial Statements.
At the time of completion of the equity fundraise in December,
shareholders were advised that the funding required to complete the
production facility in Ashland was more than the proceeds raised.
The net proceeds from the sale of the Lumberton Site, will allow
the Company to further the development of the Ashland Facility, but
additional sources of funding will be required for its
completion.
Whilst there can be no guarantee that funding will be available
on terms that will be acceptable to the Company, or at all, the
directors are confident that the funding required for the Group to
continue as a going concern will be secured within a period of 12
months from the date of approval of the financial statements and
have therefore prepared the financial statements on a going concern
basis.
Outlook
In the current economic and geopolitical environment, the role
of biomass has increased in importance as an alternative renewable
fuel in recent months. The sharp spikes in the pricing for biomass
fuel in recent weeks may prove to be short term, but the tragic
events in Ukraine have highlighted energy security concerns across
Europe, US and Asia. Biomass, sourced from North America, has clear
advantages in terms of energy security and this fact is proving an
important consideration for our potential customers.
To add to this, the questions surrounding sustainability,
particularly amongst industrial companies, continue to gather
momentum. The consumption of coal continues but the legislative
pressure increases to seek immediate solutions towards reduction in
coal usage and corresponding reduction in emissions. With this
backdrop, accelerating level of enquiries from prospective
customers worldwide continue to seek volumes of CoalSwitch(R) fuel
as soon as possible. In spite of the current disruption, global
conditions have never been better for a next generation biomass
fuel with the capacity to be co-fired in coal operations without
the need for additional capital expenditure.
The priority for AEG is to begin commercial production of
CoalSwitch(R) at the earliest opportunity. Technical design for the
new production facility has been completed, encapsulating the
current requests from the State of Maine and AEG is currently
negotiating equipment and plant delivery schedules. By re-deploying
the equipment formerly at Lumberton and reinvesting the proceeds
from the sale of the Lumberton site, AEG is examining all optimum
ways to accelerate toward that first date of commercial
production.
The medium-term strategic focus will subsequently evolve to
locating and developing additional production sites in the US and
Canada to meet future customer offtake commitments. Current
discussions with prospective customers are proving invaluable in
planning this strategy.
We look forward to delivering CoalSwitch(R) to customers in
North America and worldwide.
Michael Rowan
Chief Executive Officer
FINANCE REVIEW
FOR THE YEARED 31 DECEMBER 2021
The Consolidated Financial Statements for the year ended 31
December 2021 ("current year") is compared to the year ended 31
December 2020 ("prior year").
Positioning to move forward - a restructured balance sheet
In January 2021, Advanced Biomass Solutions Plc ("ABS"), a
subsidiary of the Company, agreed a debt facility up to GBP1
million and drew down GBP550,000. The loan allowed the Company to
manage its working capital requirements in advance of the February
fundraising. The debt was repayable within twelve months with
monthly capital repayments following a four-month repayment
holiday. Initiation fees of 7% were payable, and interest was
charged at 10% per annum payable quarterly in arrears. The Company
provided a corporate guarantee as security. ABS had fully repaid
the obligation at 31 December 2021, and the securities had been
released. Following that, in February 2021, the CLN holders agreed
to either convert their CLN's or have them redeemed and agreed to a
release of the corporate debenture previously held over the Group's
assets by the CLN holders.
These actions restructured the Group's balance sheet,
positioning it to advance CoalSwitch(R) production. The group
reports a net cash position at 31 December 2021 of US$1.8 million
(2020: net debt position of US$21.5 million). In addition to this
improvement, the Group's balance sheet was unencumbered at year
end, as opposed to the stringent securities in place in the prior
year. As the Group looks forward to developing CoalSwitch(R), after
completion of the first production facility in Ashland, it will
have the option to debt finance future developments.
Fundraising activities through 2021
At the same time as the CLN conversion, the Company raised
GBP7.0 million (gross) in an equity fundraising. The proceeds
received by the Company, after certain CLN redemptions, were used
to progress the construction of the reference plants at Lumberton
and Ashland.
In December 2021, the Company raised a further GBP3.0 million
(gross) in an equity fundraising. The proceeds of this fundraise
have been used to:
-- Complete engineering and design work required for the Ashland Facility;
-- Complete the application for the necessary operational and
construction permits for the Ashland Facility;
-- Order additional engineering equipment with long lead-times
required for the construction of the Ashland Facility; and
-- To accommodate the Company's general working capital requirements.
The December fundraise included a subscription of US$1.0 million
by Tyler Player, owner of PDI, the Company's technology partner for
construction and design of CoalSwitch(R) plants. The Group is very
pleased to have Tyler Player as a significant shareholder of the
Company, and PDI as its technology partner as it readies itself for
CoalSwitch(R) commercialisation and production expansion. As at 31
December 2021, Tyler Player held 6.64% of the Company's ordinary
share capital.
We thank the new shareholders who participated in the two
fundraisings for their confidence in the Group, and our existing
shareholders for their ongoing support.
Going concern
The Financial Statements have been prepared on a going concern
basis. Note 1 of the Financial Statements lays out the material
uncertainties relating to the Company's ability to continue as a
going concern.
At the time of the December fundraise, shareholders were advised
that the funding required to complete the production facility in
Ashland was considerably more than the amount raised.
The nature of the Company's strategy, which is focussed on
delivery of the first CoalSwitch(R) production facility in Ashland,
means that the precise timing of milestones and funds generated
during the early years of development projects are difficult to
predict. The Directors have prepared financial forecasts to
estimate the likely cash requirements of the Group over the next
twelve months from the date of approval of the financial
statements. The forecasts show that the Group requires the
near-term disposal of the Lumberton facility to be successful as
well as additional external funding within the 12-month forecast
period to be able to continue as a going concern. At the date of
approval of the financial statements the buyer is in the due
diligence phase prior to completion and no additional funding is as
yet committed.
Whilst there can be no guarantee that funding will be available
on terms that will be acceptable to the Company, or at all, the
directors are confident that the funding required for the Group to
continue as a going concern will be secured within a period of 12
months from the date of approval of the financial statements and
have therefore prepared the financial statements on a going concern
basis. The Directors are considering a number of options for
securing the additional funding including via the sale of assets,
the raising of debt or equity or a combination of both. The
directors have also identified alternative options which could be
pursued to provide additional working capital to enable the Group
to meet its liabilities as they fall due over the next 12-month
period.
The financial statements do not include any adjustments that
would arise if the Group were unable to continue as a going
concern.
CoalSwitch(R) development
Having suspended construction activities for a CoalSwitch(R)
reference plant in Lumberton, on 20 May 2021, the Company announced
its 50/50 joint venture arrangement with PDI. Under this joint
venture, AEG and PDI jointly owned a CoalSwitch(R) plant in
Ashland, Maine. This reference plant construction was completed and
production commenced in May 2021 under a temporary production
permit obtained by PDI and AEG.
On 5 August 2021, a monitoring component failure resulted in an
unexpected interruption in production cycles. As a result of this
failure, both reactors at the Ashland Facility were rendered
inoperable, resulting in an impairment charge of US$2.0 million
(see Note 4). All other equipment remains operable and will be
incorporated in the Ashland CoalSwitch(R) production facility along
with other plant and equipment currently located in Lumberton.
Subsequent events
The Company announced the sale of the Lumberton site in March
2022 for gross cash proceeds of US$4.65 million. The sale is
subject to a 75-day due diligence and closing period, with the
closing of the transaction and receipt of sale proceeds expected in
June 2022.
During 2021, the Southern Environmental Law Center has commenced
a legal action against the Group for alleged permit breaches in
operational activities at the Lumberton Site. Upon receipt of legal
advice, the Directors are confident that the Group has fully
complied with its environmental and permit obligations since
ownership of the Site and strongly believes that there is no merit
in any of the SELC's claims and allegations and will continue to
vigorously defend its position.
Performance
In the first half of 2021, the Board reassessed AEG's strategy
and determined that the saw log export business, which involved
loading saw logs into containers to be shipped to South-East Asia,
did not align with AEG's environmental strategy to focus on the use
of residual and waste forestry products from the lumber industry.
In addition, the Company was not able to operate the saw log export
business at a scale to produce profitable returns. Furthermore, the
equipment operated by the sawmill business restricted production
expansion, and the business struggled to operate profitably. The
level of capital investment required to scale up and operate both
businesses profitably, to the detriment of CoalSwitch(R)
development, was deemed unacceptable and the Board decided it was
in the best interests of the Company to cease the operations of
these businesses. In accordance with IFRS 5, the results for these
businesses have been accounted for as discontinued operations.
Continuing operations
Gross loss in the current year of US$517,238 (2020: US$nil)
reflects the non-capitalised expenses of the Ashland reference
plant during the period of production.
Impairment charges of US$2,000,000 (2020: US$4,758,707) account
for the two reactors which were damaged following the component
failure at Ashland.
Administrative costs were US$3,191,554 (2020: US$1,644,480). The
increase reflects the non-cash share-based payment charge of
US$639,746 (2020: US$56,382) arising from LTIP and warrant awards.
Certain administrative costs previously transferred to operating
entities and reflected in cost of goods sold are now fully
reflected within administrative costs.
Other income of US$361,237 (2020: US$96,405) reflects the
forgiveness of CLN indebtedness.
Finance costs reflects the impact of the CLN conversion and
redemption, as well as the foreign exchange impacts on funds raised
during the year.
Discontinuing operations
The termination of the saw log and sawmill businesses is
disclosed in the loss from discontinued operations of US$919,211
(2020: US$1,923,593). The losses reflect the difficult trading
conditions and the impact of operating below optimal scale
operations. Costs associated with the closure of the saw log and
sawmill businesses have been fully accounted for. The Group does
not currently have any revenue generating operations.
Loss for the year was US$5,881,768 (2020: US$8,757,919), and
total basic and diluted loss per share was 0.16 cents (2020: 0.65
cents).
Financial position
Non-current assets
As part of the December fundraising, AEG acquired the remaining
50% of the joint venture from PDI. Know-how of US$400,000, acquired
during the CoalSwitch(R) production period, was recognised. Going
forward with the construction of the CoalSwitch(R) facility in
Ashland, AEG will own 100% of the assets and operations of the
facility.
Additions to plant and production equipment of US$3,957,944
(2020: US$1,323,499) relate to the development of the Lumberton and
Ashland CoalSwitch(R) plants. The termination of leases following
the cessation of the sawmill business resulted in a deemed disposal
of US$253,788 of plant and equipment.
Current assets
Trade and other receivables of US$1,628,959 (2020: US$270,755)
consist mainly of US$1,190,315 of project advances to PDI for the
development of the Ashland Facility.
Current liabilities
Trade and other payables were US$1,222,030 (2020: US$2,241,657).
An accrual of approximately US$700,000 for Lumberton and Ashland
construction costs was included in 2020 with the remaining
reduction owing largely to the cessation of timber trading
activities and stringent cost management.
Non-current liabilities
Loans and borrowings of US$143,931 (2020: US$22,105,551)
reflects the impact of the removal of the CLN obligation. The
removal of all securities accompanied the CLN removal.
Cashflow
Operating cash outflows were US$5,618,404 (2020: US$1,302,560).
The increased outflow of US$4,315,844 comprises US$2,236,562
relating to operating performance, and US$2,079,282 attributable to
working capital reduction.
Investing outflows of US$4,375,624 (2020: US$1,400,932) relate
to the purchase of relevant equipment related to the CoalSwitch(R)
facilities in Lumberton and Ashland.
Financing activities included US$12,722,200 of net equity raised
in the fundraisings in February 2021 and December 2021, less
US$1,571,222 of CLNs redeemed as part of the balance sheet
restructuring process.
US$1,940,871 of cash and cash equivalents was on hand at year
end (2020: US$999,631).
Section 172 Statement
The Directors are well aware of their duty under Section 172 of
the Companies Act 2006 to act in the way which they consider, in
good faith, would be most likely to promote the success of the
Company for the benefit of its members as a whole and, in doing so,
to have regard (amongst other matters) to:
-- The likely consequences of any decision in the long term;
-- The interests of the Company's employees;
-- The need to foster the Company's business relationships with
suppliers, customers and others;
-- The impact of the Company's operations on the community and the environment;
-- The desirability of the company maintaining a reputation for
high standards of business conduct; and
-- The need to act fairly between members of the Company.
The Board recognises that the long-term success of Active Energy
Group requires positive interaction with its stakeholders,
including customers, suppliers, governmental and regulatory
authorities. The Directors seek to actively identify and positively
engage with key stakeholders in an open and constructive manner.
The Board believes that this strategy enables our stakeholders to
better understand the activities, needs and challenges of the
business and enables the Board to better understand and address
relevant stakeholder views which will assist the Board in its
decision making and to discharge its duties under Section 172 of
the Companies Act 2006.
Andrew Diamond
Finance Director
CONSOLIDATED STATEMENT OF INCOME AND OTHER COMPREHENSIVE
INCOME
FOR THE YEARED 31 DECEMBER 2021
2021 2020
US$ US$
CONTINUING OPERATIONS
REVENUE - -
------------ ------------
GROSS LOSS (517,238) -
Impairment charges (2,000,000) (4,191,039)
Administrative expenses (3,191,554) (1,644,480)
Other income 361,237 96,405
------------ ------------
OPERATING LOSS (5,347,555) (5,739,114)
Net finance costs 382,208 (1,309,388)
LOSS BEFORE TAXATION (4,965,347) (7,048,502)
Taxation 2,790 214,176
LOSS FROM CONTINUING OPERATIONS (4,962,557) (6,834,326)
LOSS FROM DISCONTINUED OPERATIONS (919,211) (1,923,593)
LOSS FOR THE YEAR - ATTRIBUTABLE
TO THE PARENT COMPANY (5,881,768) (8,757,919)
============ ============
Basic and Diluted loss per share
(US cent) - Continuing operations (0.13) (0.51)
Basic and Diluted loss per share
(US cent) - Discontinued operations (0.03) (0.14)
Basic and Diluted loss per share
(US cent) - Total operations (0.16) (0.65)
OTHER COMPREHENSIVE LOSS
Items that may be subsequently reclassified
to profit or loss
Exchange differences on translation
of operations (2,239,354) (117,701)
Revaluation of other financial
assets - (539,327)
------------ ------------
Total other comprehensive loss (2,239,354) (657,028)
------------ ------------
TOTAL COMPREHENSIVE LOSS FOR
THE YEAR (8,121,122) (9,414,947)
============ ============
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
Group Group Company Company
2021 2020 2021 2020
US$ US$ US$ US$
NON-CURRENT ASSETS
Intangible assets 5,659,024 5,259,024 - -
Property, plant & equipment 11,512,953 10,443,641 2,573 900
Investment in subsidiaries - - 6,417,741 1,495,943
Long term loans - - 25,296,460 23,204,528
Other financial assets 922,275 931,312 922,275 931,312
-------------
18,094,252 16,633,977 32,639,049 25,632,683
------------- ------------- ------------- -------------
CURRENT ASSETS
Inventory 27,250 237,506 - -
Trade and other receivables 1,628,959 270,755 432,041 -
Cash and cash equivalents 1,940,871 999,631 1,915,571 811,901
------------- -------------
3,597,080 1,507,892 2,347,612 811,901
TOTAL ASSETS 21,691,332 18,141,869 34,986,661 26,444,584
============= ============= ============= =============
CURRENT LIABILITIES
Trade and other payables 1,222,030 2,241,657 602,062 1,183,827
Lease liabilities - 136,891 - -
Loans and borrowings 14,013 21,772 13,015 21,772
1,236,043 2,400,320 615,077 1,205,599
------------- ------------- ------------- -------------
NON-CURRENT LIABILITIES
Deferred taxation 147,349 150,139 - -
Lease liabilities - 202,417 - -
Loans and borrowings 143,931 22,105,551 47,029 21,961,104
------------- ------------- ------------- -------------
291,280 22,458,107 47,029 21,961,104
------------- ------------- ------------- -------------
TOTAL LIABILITIES 1,527,323 24,858,427 662,106 23,166,703
------------- ------------- ------------- -------------
NET ASSETS/(LIABILITIES) 20,164,009 (6,716,558) 34,324,555 3,277,881
============= ============= ============= =============
EQUITY
Share capital - Ordinary
shares 786,867 219,436 786,867 219,436
Share capital - Deferred
shares 18,148,898 18,148,898 18,148,898 18,148,898
Share premium 55,349,883 18,711,637 55,349,883 18,711,637
Merger reserve 2,350,175 2,350,175 2,350,175 2,350,175
Foreign exchange reserve (2,424,329) (184,975) (2,004,424) (124,920)
Own shares held reserve (268,442) (268,442) (268,442) (268,442)
Convertible debt/warrant
reserve 1,165,911 3,701,803 1,165,911 3,701,803
Retained earnings (55,449,600) (49,899,736) (41,204,313) (39,460,706)
Revaluation reserve 504,646 504,646 - -
------------- ------------- ------------- -------------
TOTAL EQUITY 20,164,009 (6,716,558) 34,324,555 3,277,881
============= ============= ============= =============
GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2021
Own Convertible
Foreign shares debt and
Share Share Merger exchange held warrant Retained Revaluation Total
capital premium reserve reserve reserve reserve earnings Reserve equity
US$ US$ US$ US$ US$ US$ US$ US$ US$
At 31 December
2019 17,265,379 17,303,159 2,350,175 (67,274) (268,442) 3,490,621 (40,206,405) 504,646 371,859
Loss for the
year - - - - - - (8,757,919) - (8,757,919)
Other
comprehensive
income - - - (117,701) - - (539,327) - (657,028)
----------- ----------- ---------- ------------ ---------- ------------ ------------- ------------ ------------
Total
comprehensive
income - - - (117,701) - - (9,297,246) - (9,414,947)
----------- ----------- ---------- ------------ ---------- ------------ ------------- ------------ ------------
Issue of share
capital 835,801 1,381,401 - - - - (452,467) - 1,764,735
Conversion of
CLN 267,154 27,077 - - - - - - 294,231
Embedded
derivative on
CLN issue - - - - - 211,182 - - 211,182
Share based
payments - - - - - - 56,382 - 56,382
----------- ----------- ---------- ------------ ---------- ------------ ------------- ------------ ------------
At 31 December
2020 18,368,334 18,711,637 2,350,175 (184,975) (268,442) 3,701,803 (49,899,736) 504,646 (6,716,558)
=========== =========== ========== ============ ========== ============ ============= ============ ============
Loss for the
year - - - - - - (5,881,768) - (5,881,768)
Other
comprehensive
income - - - (2,239,354) - - - - (2,239,354)
----------- ----------- ---------- ------------ ---------- ------------ ------------- ------------ ------------
Total
comprehensive
income - - - (2,239,354) - - (5,881,768) - (8,121,122)
----------- ----------- ---------- ------------ ---------- ------------ ------------- ------------ ------------
Issue of share
capital 334,391 13,087,809 - - - - - - 13,422,200
Conversion of
CLN 233,040 23,550,437 - - - (2,843,734) - - 20,939,743
Share based
payments - - - - - 307,842 331,904 - 639,746
At 31 December
2021 18,935,765 55,349,883 2,350,175 (2,424,329) (268,442) 1,165,911 (55,449,600) 504,646 20,164,009
=========== =========== ========== ============ ========== ============ ============= ============ ============
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2021
Own Convertible
Foreign shares debt and
Share Share Merger exchange held warrant Retained Total
capital premium reserve reserve reserve reserve earnings equity
US$ US$ US$ US$ US$ US$ US$ US$
At 31 December
2019 17,265,379 17,303,159 2,350,175 (468,793) (268,442) 3,490,621 (31,791,515) 7,880,584
Loss for the
year - - - - - - (6,733,779) (6,733,779)
Other
comprehensive
income - - - 343,873 - - (539,327) (195,454)
----------- ----------- ---------- ------------ ---------- ------------ ------------- ------------
Total
comprehensive
income - - - 343,873 - - (7,273,106) (6,929,233)
----------- ----------- ---------- ------------ ---------- ------------ ------------- ------------
Issue of share
capital 835,801 1,381,401 - - - - (452,467) 1,764,735
Conversion of
CLN 267,154 27,077 - - - - - 294,231
Embedded
derivative on
CLN
issue - - - - - 211,182 - 211,182
Share based
payments - - - - - - 56,382 56,382
----------- ----------- ---------- ------------ ---------- ------------ ------------- ------------
At 31 December
2020 18,368,334 18,711,637 2,350,175 (124,920) (268,442) 3,701,803 (39,460,706) 3,277,881
=========== =========== ========== ============ ========== ============ ============= ============
Loss for the
year - - - - - - (2,075,511) (2,075,511)
Other
comprehensive
income - - - (1,879,504) - - - (1,879,504)
----------- ----------- ---------- ------------ ---------- ------------ ------------- ------------
Total
comprehensive
income - - - (1,879,504) - - (2,075,511) (3,955,015)
----------- ----------- ---------- ------------ ---------- ------------ ------------- ------------
Issue of share
capital 334,391 13,087,809 - - - - - 13,422,200
Conversion of
CLN 233,040 23,550,437 - - - (2,843,734) - 20,939,743
Share based
payments - - - - - 307,842 331,904 639,746
At 31 December
2021 18,935,765 55,349,883 2,350,175 (2,004,424) (268,442) 1,165,911 (41,204,313) 34,324,555
=========== =========== ========== ============ ========== ============ ============= ============
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2021
Group Group Company Company
2021 2020 2021 2020
US$ US$ US$ US$
Cash (outflow)/inflow
from operations (5,618,404) (1,302,560) (3,416,684) (1,761,243)
Income tax paid - - - -
------------ ------------ ------------ ------------
Net cash (outflow)/inflow
from operating activities (5,618,404) (1,302,560) (3,416,684) (1,761,243)
Cash flows from investing
activities
Purchase of intangible - (661,939) - -
assets
Advances to acquire (800,000) - - -
property, plant and
equipment
Purchase of property,
plant and equipment (3,957,944) (738,993) (2,979) (1,222)
Sale of property, 382,320 - - -
plant and equipment
------------ ------------ ------------ ------------
Net cash outflow
from investing activities (4,375,624) (1,400,932) (2,979) (1,222)
Cash flows from financing
activities
Issue of equity share
capital, net of share
issue costs 12,722,200 1,754,489 12,722,200 1,754,489
Issue of CLN - 1,467,778 - 1,467,778
Redemption of CLN (1,571,222) (1,571,222)
Intercompany loans
advanced - - (6,617,719) (1,076,176)
Unsecured debt repaid (1,040,400) - (8,547) -
Unsecured debt proceeds 885,234 212,600 - 68,153
Principal elements
of lease payments (57,900) (95,758) - -
Finance expenses (37,842) - -
------------ ------------ ------------ ------------
Net cash inflow from
financing activities 10,937,912 3,301,267 4,524,712 2,214,244
------------ ------------ ------------ ------------
Net increase in cash
and cash equivalents 943,884 597,775 1,105,049 451,779
Cash and cash equivalents
at beginning of the
year 999,631 397,323 811,901 360,622
Exchange losses on
cash and cash equivalents (2,644) 4,533 (1,379) (500)
------------ ------------ ------------ ------------
Cash and cash equivalents
at end of the year 1,940,871 999,631 1,915,571 811,901
============ ============ ============ ============
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2021
1. PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information, for the year ended 31 December 2021,
set out in this announcement does not constitute statutory
accounts. This information has been extracted from the Group's 31
December 2021 statutory financial statements upon which the
auditors' opinion is unqualified. However, the auditors' report
highlights material uncertainty relating to going concern and
includes the following additional key audit matters:
-- Carrying value of intangible assets;
-- Carrying value of property, plant and equipment; and
-- Carrying value of investments and intercompany loans (Company only).
2. BASIS OF PREPARATION
The financial information, for the year ended 31 December 2021,
set out in this announcement, has been:
-- presented in accordance with International Financial
Reporting Standards ("IFRSs"), however this preliminary
announcement does not contain sufficient information to comply with
IFRSs. The IFRS compliant Consolidated Financial Statements is
published in the Annual Report and Accounts for the year ended 31
December 2021, available on the Company's website;
-- prepared on the going concern basis, however the Directors
have highlighted a number of material uncertainties which may
affect the Company's ability to continue operating as a going
concern; and
-- prepared on the basis of the accounting policies as stated in
the Report and Accounts for the year ended 31 December 2020, with
the exception of those changes required in the application of new
and revised IFRSs, none of which has a material impact on the
Group.
3. GOING CONCERN
The Directors are required to give careful consideration to the
appropriateness of the going concern basis in the preparation of
the Financial Statements.
In February 2021, the Company restructured its balance sheet by
securing the conversion and redemption of the entire convertible
loan note obligation ("CLN"). Furthermore, the securities in place
for the CLN holders were revoked. The Group had loans of US$0.2
million at 31 December 2021, consisting of government support loans
on favourable terms, with a low annual repayment burden. The
balance sheet is entirely unencumbered.
At the same time as the balance sheet restructuring, the Company
recapitalised the business by raising equity of GBP7.0 million
(gross) and in December 2021 it raised a further GBP3.0 million
(gross). The earlier fundraise proceeds were used for the
construction of the Lumberton and Ashland CoalSwitch(R) reference
plants, certain CLN redemptions and improvement of the working
capital position. The December proceeds were used principally to
enhance the CoalSwitch(R) reactor design and engineering and
initiation of the permitting process in Ashland for the
construction of a production facility.
At the time of the December fundraise, shareholders were advised
that the funding required to complete the production facility in
Ashland was considerably more than the amount raised.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
The nature of the Company's strategy, which is focussed on
delivery of the first CoalSwitch(R) production facility in Ashland,
means that the precise timing of milestones and funds generated
during the early years of development projects are difficult to
predict. The directors have prepared financial forecasts to
estimate the likely cash requirements of the Group over the next
twelve months from the date of approval of the financial
statements.
The cash forecast includes the following assumptions:
-- the requisite permits are obtained to commence with
construction of the Ashland facility. At the time of reporting an
application for air and construction permits has been submitted to
the State of Maine;
-- the near-term disposal of the Lumberton facility. As
announced on 31 March 2022, the sale of the property has been
agreed and the buyer is in the due diligence phase prior to
completion. The sale will provide funding for the Ashland facility
and reduce overhead costs at Lumberton;
-- a suitable long-term off-take agreement for CoalSwitch(R)
will be secured enhancing the Company's ability to secure investors
to provide development funding for completion of the Ashland
facility; and
-- the current overhead cost run rate.
The forecasts show that the Group requires the near-term
disposal of the Lumberton facility to be successful as well as
additional external funding within the 12-month forecast period to
be able to continue as a going concern. However, as stated above,
at the date of approval of these financial statements the buyer is
in the due diligence phase prior to completion and no additional
funding is as yet committed.
Whilst there can be no guarantee that funding will be available
on terms that will be acceptable to the Company, or at all, the
directors are confident that the funding required for the Group to
continue as a going concern will be secured within a period of 12
months from the date of approval of the financial statements and
have therefore prepared the financial statements on a going concern
basis. The directors are considering a number of options for
securing the additional funding including via the sale of assets,
the raising of debt or equity or a combination of these. The
directors have also identified alternative options which could be
pursued to provide additional working capital to enable the Group
to meet its liabilities as they fall due over the next 12-month
period.
Should additional funding not be secured within 12 months from
the date of approval of these financial statements, the Group would
not be a going concern. As such, these conditions indicate the
existence of a material uncertainty that may cast significant doubt
on the Group's ability to continue as a going concern.
The financial statements do not include any adjustments that
would arise if the Group were unable to continue as a going
concern.
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END
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