Biomass-to-energy plants developer Kedco has decided to focus on its core activities.
Ireland-based Kedco has secured the finance for its Newry plant. RBS subsidiary Ulster Bank is providing up to £9.44m to complete the development of the 4MW biomass electricity and heat generating plant in Northern Ireland. The first 2MW should be up and running by the middle of 2012.
Farmer Business Developments, which owns 22.1% of Kedco, has become its partner in the Newry plant.
Planning permission has been gained for a £45m wood gasification plant in Enfield. It could generate 12MW of electricity generation, as well as 10MW of heat.
Kedco has 30MW of potential UK generation in development – including Newry and Enfield. There are also three potential sites in the Republic of Ireland but the initial focus will be on the UK and this is where Kedco will prove itself. RBS is a potential funder of the other plants. Biomass plants remain economically attractive even after recent changes to government policy on renewables, with only minor reductions in future incentives. Biomass plants get two Renewables Obligations Certificates (ROCs) up until 2015-16, falling to 1.9 in 2016-17 and 1.8 the following year.
Anaerobic digestion is another area where Kedco will become involved if appropriate but wood chip fuelled biomass energy plants are the focus.
Revenues of €11.1m in the year to June 2011 were from non-core activities. Around €10m came from a Latvian wood processing business and the rest from domestic energy operations which have been closed down.
Kedco will undoubtedly need more cash because the €616,000 in the bank at the end of June 2011 will not last long even if the 2010-11 cash outflow from operations of €2.77m is reduced. Although the borrowings for individual facilities will finance their construction and development, the holding company has its own overheads that will need to be funded. Chief executive Gerry Madden says that shareholders understand Kedco’s cash requirements.
There are borrowings of €12.3m – some of which are convertible into shares at the average mid market price 10 days prior to conversion.
The sale of the Latvian wood processing business could raise significant funds and is an alternative to a share issue or more shareholder loans.
At 2.38p a share, Kedco is valued at £6.1m.
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