6 February 2023
("EQTEC", the "Company" or the "Group")
2022 Trading Update
EQTEC plc (AIM: EQT), a global technology innovator powering distributed, decarbonised, new energy infrastructure through its waste-to-value solutions for hydrogen, biofuels, and energy generation is pleased to provide an update on its 2022 unaudited results and its progress in 2023.
· 2022 revenues expected to meet guidance
· Business plan adapted to meet changing market conditions
· Three Market Development Centres progress steadily
· Technology innovation and application reinforce EQTEC leadership
· Strategic focus on Deeside and delegated approach to other projects
2022 unaudited results
The Company is pleased to report successful achievement of 2022 revenues in line with its guidance published on 01 December 2022. The Company is undertaking its annual audit imminently and expects to report its fully audited 2022 results in Q2 2023.
Strategic focus and business continuity
In response to changing market conditions in early 2022, the Company updated its business plan to: focus its portfolio of active projects on the strategically most important; reduce its project development liabilities; and engage project developers and owner-operators in actively leading development activities (the "Focus Plan").
To ensure business continuity in the face of the economic downturn and tighter capital markets, the Company agreed two loan facilities, one as a convertible loan facility with the Company's largest shareholder, Altair Group Investment Limited. The Company also raised £3.75 million (before expenses) through the placing of new ordinary shares, with the majority of the Board participating.
Market Development Centres (MDCs)
The Company continued to prioritise development of its MDCs as live, profitable reference plants that demonstrate a range of EQTEC solutions for different business models for waste conversion and syngas application. Three priority plants will demonstrate EQTEC capabilities for Agricultural, Industrial and Utility business models.
In Italy, the Company completed construction and started final commissioning toward commercial operation of its Italy MDC. The Company expects full operation of the plant imminently and already has prospective, strategic partners and investors scheduling visits to the plant.
In Croatia, the Group confirmed completion of manufacturing for key components and continued progress with investors in and operators of the recommissioned plant. The Company expects financial close, commissioning and live operation of the plant in 2023.
In France, the Group confirmed the French state's approval of its acquisition of an existing waste-to-energy facility with a previously failed gasification technology and its intention to retrofit the plant with its own technology. Since late 2022, the Company has been making progress with a large infrastructure investor and owner-operator toward acquiring the project and recommissioning the facility. The Company expects live operation of the plant in 2024.
Technology innovation and application
The Company made strong progress advancing the capabilities and application of EQTEC technology, making three major announcements in 2022.
First, the Company upgraded its R&D facility housed at the Université de Lorraine ("UL") for steam-oxygen gasification, which will allow trials for advanced applications such as hydrogen, renewable natural gas ("RNG") and liquid biofuels. This gives the Company a unique, applied R&D capability and will support its growth into these new applications, with trials for prospective customers and partners already planned for 2023.
Second, the Company received third-party validation of EQTEC technology's suitability for clean conversion of contaminated plastic waste into synthesis gas ("syngas"), resulting in a formal agreement with a French industrial waste management company for joint pursuit of contaminated waste-to-energy projects in France, starting with an initial project already secured by the partner company.
Third, the Company announced a formal collaboration with a gas-to-liquids technology company, for joint development of an integrated low-carbon waste-to-liquid fuels solution, with a synthetic aviation fuels (SAF) reference plant already targeted by the two companies for development.
Strategic project at Deeside, UK
At its Deeside, Flintshire, UK project, the Company progressed design work through to completion of front-end engineering design by EQTEC, with global engineering company Black & Veatch. EQTEC and technology partner Anaergia, Inc. are together reviewing design options for simplification and refinement of the financial model. In parallel, the Company and its partners, including landowners Logik Developments, are pursuing investors in the project. The Company intends to sell the SPV and ensure the project secures full funding in 2023.
Negotiations with the first prospective investor did not reach mutually acceptable terms and on this basis the Company was forced to adjust its revenue expectations for 2022 and issue new guidance. Discussions with and pursuit of other investors continue, with both owner-operators and financial investors expressing interest.
In line with its Focus Plan, the Company packaged up two other UK projects for funding, and delegated projects in USA and Greece to development partners in those markets. The Group's partners in the USA are pursuing COD in 2023 for the North Fork Community Power (NFCP) plant in North Fork, California and financial close on the Blue Mountain Electric Company (BMEC) project in Wilseyville, California. The Group's joint venture in Greece, Synergy Projects Limited, is pursuing financial close of a project in Livadia, Boeotia.
Engaging strategic investors
To support acceleration of EQTEC's growth and addressing the strong market demand for its solutions, the Company has launched a project for engaging large-scale, strategic investors. The Company has engaged a top-tier investment bank and is approaching large owner-operators and other infrastructure investors toward securing strategic investment at the project level for a pipeline of projects with strategic priority.
The Company has in recent weeks led two visits with prospective investors to the EQTEC installation at Mostos, Vinos y Alcoholes, S.A. ("Movialsa") in Spain and other investors have expressed interest in visiting the Italy MDC.
David Palumbo, CEO of EQTEC, commented:
"At a time when the world is finally accepting the challenges of securing energy supply and handling a wide variety of waste types cleanly and sustainably, we recognise the need to meet market headwinds with even greater determination and dexterity than before. EQTEC's technology is one of the best solutions for both challenges. It addresses the baseload challenge, it supports energy security and independence, and it is clean, proven and scalable. The market opportunity is vast, our technology is at the core of new energy infrastructure that can produce decarbonised power, heat and fuels and it is ready to be deployed, profitably, now. The challenges of 2022 have strengthened our resolve to deliver EQTEC solutions to the world, and we are engaging bigger, more capable, better financed businesses who are now driving the demand. In many ways, 2022 was a catalyst for us in accelerating our strategy toward working with stronger partners for development of projects and plants that run on EQTEC solutions, and the progress we unlocked in the second half of 2022 suggest that will bear fruit for us in 2023."
This announcement contains inside information as defined in Article 7 of the EU Market Abuse Regulation No 596/2014, as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018, as amended, and has been announced in accordance with the Company's obligations under Article 17 of that Regulation.
David Palumbo / Nauman Babar
+44 20 3883 7009
Strand Hanson - Nomad & Financial Adviser
James Harris / Richard Johnson
+44 20 7409 3494
Panmure Gordon - Broker
John Prior / Hugh Rich
+44 20 7886 2500
Instinctif - Media & investor relations enquiries
Guy Scarborough / Tim Field
+44 791 717 8920 / +44 788 788 4794
2022 performance and EQTEC's response
2022 revenues declined versus the prior year due to a slowdown in project progress driven by the dramatically reduced capital available to fund them. Geopolitical and post-pandemic economic challenges combined to restrict both the number of prospective investors and the size of their investments. Importantly, several of the Company's projects require only project finance to proceed, with many of them fully permitted, designed and otherwise packaged for financial close.
The Company responded to these pressures by implementing a Focus Plan, which reduced its portfolio of active projects to a small number of near-term, strategically important projects including Market Development Centres ("MDCs") in Italy, France and Croatia and the Deeside project in the UK ("Focus Plan"). In addition to reducing its workforce of external contractors supporting projects, the Company redeployed several of its permanent staff, including Company directors, onto critical projects. As part of the Focus Plan, the Company also renegotiated key contracts, which released it from large capital commitments. This reduced the Company's liabilities and accelerated its business strategy toward becoming exclusively a technology innovator and licensor by moving it away from project development obligations.
Additionally, the Company undertook a number of actions in 2022 to ensure business continuity in light of the economic downturn and tighter capital markets. On 29 March 2022, the Company announced that it had agreed provision of a new unsecured loan facility for up to £10 million with an initial advance of £5 million. On 14 July 2022, the Company announced that it had successfully raised £3.75 million (before expenses) through the placing of shares. This included subscriptions by five of six directors on the Board of Directors and followed investment in shares earlier in the year by CEO David Palumbo and COO Jeffrey Vander Linden. On 09 December 2022, the Company announced that it had entered into a loan facility with Altair Group Investment Ltd., the Company's largest shareholder. The facility provides the Company with an up to £2.0 million unsecured loan that may be paid back for all or part in shares, at the Company's own discretion.
R&D and innovation
On 30 May 2022, the Company announced that the Université de Lorraine ("UL") had released a report verifying that EQTEC's Advanced Gasification Technology successfully converts contaminated plastic waste into synthesis gas ("syngas") cleanly, stably and efficiently. The tests were a final step for the Company in formalising its collaboration with SEPS SAS ("SEPS"), a French company specialising in the management and recycling of industrial waste. The Company and SEPS will combine their technologies to pursue a pipeline of projects, starting with an on-premises, industrial facility in Haute-Garonne, France.
On 07 July 2022, the Company announced that it had signed a collaboration framework agreement with CompactGTL Limited ("CompactGTL"), another technology innovator that specialises in the production of synthetic fuels from gases, including syngas. The Company and CompactGTL agreed to collaborate on design, development, construction, and operation of waste-to-fuel projects and to share commercial opportunities, starting with a reference-demonstration project already identified by the parties.
On 31 October 2022, the Company announced the successful completion of steam-oxygen gasification tests that confirm the suitability of EQTEC's syngas technology for advanced biofuels production. The tests were performed following an upgrade by EQTEC to the Laboratoire d'Etudes et de Recherche sur le Matériau Bois ("LERMAB") facility at UL that houses EQTEC's R&D technology. The upgraded R&D capabilities are commercially significant for the Company, as steam-oxygen gasification enables hydrogen, renewable natural gas ("RNG") and other advanced biofuel applications.
Additionally, the Company announced on 30 June 2022 that it had selected global technology and engineering company Wood and its VESTA technology as the technology partner for design and deployment of a clean, waste-to-hydrogen solution at Southport Hybrid Energy Park, Merseyside.
Market Development Centres
MDCs are live, profitable plants that demonstrate EQTEC solutions, attract investment and incubate new demand. The Company is working on at least three MDCs: in Italy, Croatia and France.
On 22 December 2022, the Company confirmed mechanical and electrical completion at its Italy MDC in Castiglione d'Orcia, Italy, indicating closure of construction and start of commissioning of the plant, including enhancements to the original plant design that will further improve the profitability and resilience of its business model. In mid-January 2023, the Company and plant operations team ran the full gasification process on manual controls and is now setting it up for automatic mode. As part of its tests, the Company also produced biochar from the plant.
On 08 September 2022, the Group confirmed that it had received final approval from France's Ministère de l'économie, des finances et de l'industrie ("MINEFI") to acquire an existing, 6.5MWe waste-to-energy gasification plant in Villers-sous-Montrond, France. The Company intends to retrofit the failed technology with its own and position it as its France MDC. Once recommissioned, the Plant is expected to be France's largest ever combined heat and power ("CHP") gasification project, transforming c. 45,000 tonnes of mixed and contaminated wood waste and refuse-derived fuel ("RDF") for export of clean electricity to the national grid, with the option of increasing its production capacity in future. The Company is making good progress with a large infrastructure investor and owner-operator toward acquiring the project and recommissioning the facility with EQTEC solutions and engineering. The Company expects the France MDC to be operational in 2024.
On 29 September 2022, the Group confirmed that key components had been manufactured to support upgrade of the Croatia MDC in Belišće, Croatia to 1.5MWe from the original 1.2MWe. It further confirmed that discussions with investors and operators for the sale of the project were continuing productively. Those discussions continued through to the end of the year and the prospective investors have confirmed that they intend to visit the Italy MDC as part of finalising their interest in the project. The Company expects financial close, construction and commissioning of the Croatia MDC in 2023.
Deeside, UK project
On 01 April 2022, the Company announced its appointment of Black & Veatch ("B&V") to review its project at Deeside Industrial Estate, Deeside, Flintshire, with a particular focus on integration risks in light of the multiple technologies for the plant, provided by EQTEC and technology partner Anaergia, Inc. ("Anaergia"). The proposed plant, aimed primarily at supplying energy to Toyota Motor Company's ("Toyota") neighbouring Deeside engine plant, would house a 2MW anaerobic digestion facility built around Anaergia technology and a 9.9MWe syngas production facility built around EQTEC technology.
The Company further confirmed on 01 April 2022 that, based on successful completion of feasibility work for hydrogen production from syngas expected in future phases of development, EQTEC had received proposals from prospective partners for provision of syngas-to-hydrogen technology.
On 11 July 2022, the Company announced its appointment of B&V as front-end engineering and design ("FEED") partner with the added remit of preparing an engineering, procurement and construction ("EPC") cost estimate for power generation equipment and systems. FEED work has now completed, and the Company is working closely with Anaergia and other project partners to consider its options for proceeding at the site, including appointment of an EPC partner.
On 07 October 2022, Company executives joined Toyota's celebration of 30 years of operation of their engine production facility at Deeside. In addition to having the opportunity to participate in celebration of the facility's performance and contributions to the local communities, the Company heard reiterated Toyota's expectations for the Deeside waste-to-energy facility through the words of its President and CEO of Toyota Europe, Matt Harrison, who said to the Deeside Toyota team, "On top of your efforts for biodiversity and onsite renewable energy, you are contributing to a new circular economy through your collaboration with EQTEC….These efforts firmly place Deeside as the front runner to be our first global carbon neutral plant globally by 2025."
On 01 December 2022, the Company revealed that discussions with a prospective, corporate investor had not reached mutually acceptable commercial terms. This concluded a process and commitment by the investor to the Company and development partners Logik Developments Limited that had commenced in September 2022. The Company further confirmed that it is responding to additional interest in the Project from other, prospective investors.
As indicated in the Company's interim results published on 29 September 2022, the Deeside project would have been the single, largest contributor to the Company's 2022 revenues. Given that, stoppage of initial negotiations resulted in the greatest single impact on the Company's revenue pursuits for the year and resulted in the final update to its revenue guidance on 01 December 2022.
The Company announced on 24 June 2022 that Anaergia, also a technology partner at the Company's project at Southport Hybrid Energy Park in Southport, Merseyside, had agreed to be the EPC partner for construction of the facility housing its technology and to be the operations & maintenance ("O&M") partner for the resulting plant running its technology.
On 21 September 2022, the Company announced that it had agreed with Rotunda Group Limited ("Rotunda") a new agreement under which Rotunda would retain the Anaerobic Digestion (AD) Project and deploy Anaergia technology, releasing the Company from liabilities for acquisition of project scope deploying non-EQTEC technology, whilst securing all development services fees due to the Company for the development of the AD plant in the form of a secured Convertible Loan Note (CLN) with Shankley Biogas Limited. The Company also entered into an Option to Lease with Form of Lease agreed with Rotunda for the development of UK's first waste-to-hydrogen plant, deploying EQTEC technology. The Company is now working with Wood plc on the integrated technical solution whilst seeking investment for the development of the project.
The Company also confirmed on 15 February 2022 that it had a fully consented scheme for advanced thermal conversion at its Haverton Hill, Billingham, Teesside site and that it was exploring a range of additional solutions on the 17-acre site. The Company has since finalised its strategy for a multi-technology, waste-to-energy park with a complete review and renewal of the financial model and business case for the up to 25 MWe / 34 MWth RDF-to-electric power and thermal energy plant that would occupy just under half of the land at the site. Following its confirmation at its May AGM that it was developing financial models for a variety of scenarios at the site, the Company can confirm that additional uses considered for the site include a waste-to-hydrogen facility, a battery storage park, a battery disposal facility and a hydrogen refuelling station for lorries and buses in Teesside.
On 18 July 2022, the Company announced its selection of Petrofac Limited ("Petrofac") as FEED contractor and potential EPC partner. With multiple feedstock term sheets at attractive gate fees, established grid connection and highly favourable power purchase agreement, the Company is now pursuing investment into the site, with optionality around its configuration around the anchor plant with EQTEC technology. Once funded, the project is expected to move quickly into FEED work with Petrofac. Petrofac has confirmed it will support the Company's efforts with engagement of funding candidates toward that end.
On 20 December 2022, the Group announced that it had executed with Billingham site landowners Scott Bros. Enterprises Limited ("Scott Bros") an option for the grant of a lease in respect of the project land, releasing the Company from liabilities for acquisition of the project land and enabling it to focus on funding, detailed design and financial close of the project.
The Company is, with development partner Phoenix Biomass Energy Inc. ("Phoenix") pursuing commissioning and start-up of the North Fork Community Power LLC ("NFCP") plant and business, and financial close of the Blue Mountain Energy Company LLC ("BMEC") project.
On 12 October 2022, the Company announced that, following many months of delay due to a combination of local forest fires, pandemic-related challenges in labour and supply chain and the ensuing need to re-finance the project to address delays, NFCP had entered into an agreement for financial restructuring with the project lenders towards full funding of the project up to the commercial operations date ("COD") of the North Fork, California plant. It further revealed that the third-party funding had been agreed through pre-negotiated, Chapter 11 bankruptcy arrangements. The restructure project finance has enabled work to restart at the site and the Company anticipates that NFCP will reach COD later in 2023. Three of the Company's executive directors will be on site there in February, toward development of the plan for both technical and business readiness of the plant.
Phoenix is also pursuing development of the BMEC project in Wilseyville, California. In its interim results on 29 September 2022, the Company revealed that development funding had been secured to support concept design work toward application for a large, federal loan to support construction of the plant and that additional term sheets had been received from both equity investors and lenders. The Company understands that the concept design work was completed, and the federal loan application submitted in January 2023 and that a response is expected by early April 2023. Subject to achievement of full funding by Phoenix, the Company is told to expect by May 2023 a contract for detailed design and technology sales.
The Company's joint venture Synergy Projects Limited ("Synergy Projects Greece") is pursuing a project in Livadia, Boeotia. The Company announced on 21 June 2022 that its partners ewerGy GmbH and ECO Hellas M IKE had confirmed a new debt facility with Optima Bank S.A ("Optima") to support construction of the plant, making it 80 per cent funded. The Optima facility is backed in part by the Recovery and Resilience Facility for Greece. Since that time, due diligence work has been completed by the appointed third parties and Synergy Project Greece is pushing for release of funding, while advancing with equity investors to provide the following 20% of funding. The Company expects to start detailed design work on the Livadia project later in 2023 with construction to start in the second half of the year and COD in early 2024.
About EQTEC plc
As one of the world's most experienced thermochemical conversion technology and engineering companies, EQTEC delivers waste management and new energy solutions through best-in-class innovation and infrastructure engineering and value-added services to owner-operators. EQTEC is one of only a few technology providers directly addressing the challenge of replacing fossil fuels for reliable, baseload energy. EQTEC's proven, proprietary and patented technology is at the centre of clean energy projects, sourcing local waste, championing local businesses, creating local jobs and supporting the transition to localised, decentralised and resilient energy systems.
EQTEC designs, specifies and delivers clean, syngas production solutions in the USA, EU and UK, with highly efficient equipment that is modular and scalable from 1MW to 30MW. EQTEC's versatile solutions process 60 varieties of feedstock, including forestry waste, agricultural waste, industrial waste and municipal waste, all with no hazardous or toxic emissions. EQTEC's solutions produce a pure, high-quality synthesis gas ("syngas") that can be used for the widest range of applications, including the generation of electricity and heat, production of renewable natural gas (through methanation) or biofuels (through Fischer-Tropsch, gas-to-liquid processing) and reforming of hydrogen.
EQTEC's technology integration capabilities enable the Group to lead collaborative ecosystems of qualified partners and to build sustainable waste reduction and green energy infrastructure around the world.
The Company is quoted on AIM (ticker: EQT) and the London Stock Exchange has awarded EQTEC the Green Economy Mark, which recognises listed companies with 50% or more of revenues from environmental/green solutions.
Further information on the Company can be found at www.eqtec.com.