London group to acquire Ukrainian wood chip exporter

By Erin Voegele | June 05, 2013

On June 4, London-based Active Energy Group plc announced it has entered into a conditional agreement to acquire Nikofeso Holdings and its principal subsidiary Nikwood, a Ukrainian wood chip exporter, for a total consideration of £3.75 million ($5.74 million). AEG also released its financial results for 2012 on the same day.

Regarding the acquisition, information released by AEG states Nikwood exports wood chips for use in the biomass power generation industry and the manufacture of medium-density fiberboard (MDF). The Nikofeso Group is already the largest Ukrainian supplier for wood chips for Turkish MDF. With the support of AEG, the group also aims to become a leading supplier of feedstock for the European biomass power sector. According to AEG, the Nikofeso Group recently signed a contract to supply feedstock to a new wood chip-fueled power plant in southern Italy.

In a statement announcing the proposed acquisition, AEG described several advantages associated with supplying European biomass power plants with feedstock from hubs in the Ukraine and the Balkan states, including substantially faster shipping times. While feedstock shipments from the Americas can take 15 to 20 days to reach European ports, AEG stressed that the Nikofeso Group’s high volume processing resources situated in two Mykolaiv, Ukraine-based deep water ports can deliver shipments across the Black Sea within 24 to 30 hours. AEG also cited the group’s access to long-term sustainable feedstocks resources from the Ukraine’s Agency for State Forestry Resources.

The Nikofeso Group traded approximately 39,000 metric tons of wood chips last year. However, information released by AEG notes that the group has previously supplied processed wood chips at volumes greater than 300,000 metric tons per year.

"This marks the start of the new Active Energy Group. I am confident that we have identified a very exciting and growing market around which to continue to build a significant business. AEG shareholders have had to be patient but having spent the last 10 months working alongside the Nikofeso Group team, the last six months of which in a joint funded partnership, operationally, I believe there is a great opportunity in front of the new Enlarged Group now,” said Richard Spinks, CEO of AEG. “The demand for wood chip/biomass is strong and expected to increase. We have the expertise and advantageous geographic locations to procure, process and ship quickly and efficiently and this will form a stable and profitable base upon which we can build."

In its financial report, AEG addressed the sales contract with the Italian power plant. According to the company, it has identified potential to rapidly expand the revenue channel through better sourcing and price arrangements, as the partnership with AEG will allow the Nikofeso Group to source and fund the increasing demand for feedstock as the power station builds to full operating capacity. Additional opportunity could be realized as additional European biomass power plants come online over the next several years.

In connection with the proposed acquisition, AEG also announced it plans to raise £3.07 million pursuant to the subscription for 165,780,000 ordinary shares and £1 million nominal of convertible loan notes. This will provide working capital for the newly formed business group and pay for the costs associated with the acquisition.

Regarding financial results for 2012, AEG reported a total consolidated comprehensive loss of nearly £1.43 million, of which £685,567 is attributed to discontinued operations. Group revenues of £230,710 were derived from activities in the Ukraine associated with wood processing and export activities.