Active Energy finds second chance in Poland
Active Energy Group, a European biomass provider, announced plans to close its two U.K. biomass businesses, Active Energy Ltd. and Redline Engineering, but the company isn’t exiting the industry.
After purchasing Polish bioenergy resource company Bioenerho in November 2011 and renaming it Active Energy Ukraine, the company now believes the Polish business will generate roughly $4 million per year.
Gavin Little, executive chairman for Active Energy Group, noted low margins for AEL and a failure by Redline to acquire significant orders of biomass feedstock as the reasons for the business closures. With only $1.3 million worth of cash resources remaining at the end of 2011, the company decided to put all available resources into Active Energy Ukraine. The company has already secured a 10-year contract to supply 80,000 metric tons (88,100 tons) of processed wood chips per year to power stations in Poland.
“These decisions are not easy to take,” Little said in a financial update report. “We have to be mindful of the lack of revenue visibility in the voltage optimization market and the fact that the performance of Redline is not acceptable.” Little added that, although the company has put forth numerous efforts through a lead generation process to acquire new biomass orders, the outlook lacks true visibility.
But, based on several factors that include the geographic location of the new business on the border between the Ukraine and Poland, the company believes the new opportunity will make up for the lack of production from the other two businesses. According to Active Energy, the biomass market in Poland and the surrounding region will benefit the new company because biomass consumption in Polish power plants created the need for 4 million metric tons of woody biomass since 2009, and another 1.7 million metric tons used for combined-heat-and-power (CHP) applications at paper mills, furniture factories and sawmills.
In addition to the Polish power station supply contract, the company also has access to 100,000 metric tons of timber annually for a 10 year period with the Ukrainian state enterprise Lyuboml Forestry. Partners of Active Energy Group include Volyninvestbud, a Ukrainian biomass supply company, and Pellet Zone Ltd. out of Europe.