Re: Contract Award

RNS Number : 2901L

TEG Group (The) PLC

03 September 2012

 

 

For release

0700

Date: 3 September 2012

The TEG GROUP Plc (AIM:TEG/L)

("TEG" or "the Company")

Contract Award

Dagenham Project Reaches Financial Close

The TEG Group Plc ("TEG"), the AIM listed cutting edge green technology company, which develops and operates organic composting and energy plants, is pleased to announce that Financial Close has been achieved for the Dagenham project, the combined in-vessel composting ("IVC") and anaerobic digestion ("AD") facility to be constructed in London.  The Foresight Group ("Foresight"), the specialist recycling and green energy investor, has raised the full capital required to fund the facility and all contracts have been signed.

A special purpose vehicle ("SPV") has been created called TEG Biogas (London) Limited.  TEG has taken approximately 24.5% shareholding in the SPV, with the balance of equity being held by Foresight and its co-funders.  TEG will hold a seat on the board of the SPV.

TEG has been awarded an Engineering, Procurement and Construction Contract ("EPC Contract") by the SPV to construct the facility.  The EPC Contract will generate approximately £16 million in revenues for TEG over the period of construction, which will commence in September 2012 and is scheduled to be completed in Quarter 1 of 2014.

In addition, TEG has been awarded an Operating and Maintenance Contract ("O&M Contract") to operate the facility on behalf of the SPV.  The O&M contract is for a 15-year term with annual revenue of approximately £1.3m per annum, escalated annually.

The total project investment in the SPV is approximately £21m. Foresight Group funds have committed £11 million into the SPV to allow for the construction and operation of the new processing plant of which the Foresight Environmental Fund ("FEF") has led the project with a £9m investment.  The FEF was cornerstoned by the London Green Fund ("LGF"), and has attracted investment from a number of private sector investors. The LGF was launched in March 2011 by the Mayor of London, Boris Johnson as part of London's drive to encourage investment into waste and energy efficient infrastructure to create economic growth and jobs. 

Foresight's UK Waste Resources and Energy Investments Fund ("UKWREI") has invested £2m in the project.  UKWREI secured an additional £2m in matching private sector funding from Quercus Assets Selection SCA SICAV-SIF (an institutional fund), raising the equity investment to £13m.  UKWREI is managed by Foresight who have been appointed to invest £50m on behalf of UK Green Investments - the team established within the Department for Business, Innovation and Skills to drive investment in low carbon infrastructure in preparation for the UK Green Investment Bank.

Alongside the equity investment, senior debt of £7.9m is being provided by London Waste and Recycling Board ("LWARB") and Investec Bank plc. TEG's introduction to the LGF, in which LWARB originally invested £18m, came through LWARB when the project first applied to the Board's Waste Infrastructure Fund for investment.

The new facility will be capable of processing 49,000 tonnes per annum of food and green waste via both AD and IVC technologies on a 4.7 acre site which forms part of the London Sustainable Industries Park (SIP) owned by Greater London Authority ("GLA") and is the centrepiece of the Mayor of London's new Green Enterprise District.

This will be the first AD plant in central London and will generate approximately 1.4MW of electricity, sufficient to power approximately 2,000 homes.  It will also produce over 36,000 tonnes p.a. in AD digestate and 14,000 tonnes p.a. of compost for agricultural use.   The feedstock will come from source segregated food waste and mixed food and green waste produced by local households, commercial and manufacturing enterprises.

Planning permission for the facility has already been obtained and the Section 106 planning agreement has also been completed.  The planning permission allows for future expansion of the facility with a further 20,000 tonnes per annum of AD capacity.

Commenting, Mick Fishwick, Chief Executive, said:

"We are delighted to have achieved Financial Close for the AD and IVC project in Dagenham. This will be the first AD plant in London and we expect it to be a flagship plant for the Company, making a significant contribution to London becoming a model European city for recycling.  We look forward to working closely with the Foresight Group and our other partners in TEG Biogas (London) Limited, and we hope this will be the first of a number of ventures together.

This project not only secures £16 million of revenue under the EPC contract but in addition we can look forward to the benefit of substantial recurring revenues through the 15-year Operating and Maintenance Contract.  These contracts are important milestones in the development of TEG and further endorse our technology and expertise in the sector".

Business Secretary, Vince Cable said:

"This project represents the first waste investment in the run up to the establishment of the UK Green Investment Bank and sends a clear message to the market and to potential co-investors that we are committed to investing in the UK's green infrastructure".

The Mayor of London, Boris Johnson, said:

"This £21million investment into Dagenham is fantastic news providing new employment opportunities. TEG is also the first to start building at our new industrial park, which I have committed £10million to transform from brownfield land into an attractive space for businesses. We want the London Sustainable Industries Park to become a magnet for energy and environmental enterprises to support hundreds of new jobs.

"It is also good news that TEG becomes London's first anaerobic digestion plant providing an innovative, environmentally friendly way to manage the city's waste, helping to cut down on costly landfill. Through the London Green Fund and Foresight, my team has worked closely with TEG to secure the finance for this plant and we are set to support more facilities of this nature across the capital working with boroughs and the London Waste and Recycling Board."

ENDS

Contact:
The TEG Group Plc	Tel: [phone]
Michael Fishwick, Chief Executive	www.theteggroup.plc.uk
N+1 Brewin (Nomad & Broker)	Tel : [phone]
Andrew Craig/Ben Wright
Peckwater PR	Tel: [phone]
Tarquin Edwards	[e-mail]

Editor's Notes:

TEG

TEG provides state of the art technology for handling organic wastes.  Its in-vessel composting (IVC) system is one of the few approved technologies capable of treating animal by-product (ABP) waste and it is now providing an anaerobic digestion (AD) technology to produce power from food waste.  Plant economics are predominantly driven by the gate fees charged, rather than the value of the end product (compost).  The AD plants also benefit from power sales and Renewable Obligations Certificates ("ROCS") or Feed-in Tariffs ("FITs").  TEG owns its composting technology, the TEG Silo Cage System, and has an agreement with UTS Biogastechnik GmbH ("UTS") for the provision of AD technology into the UK waste markets.  The TEG processes are an economic and sustainable alternative to landfill.

The TEG Silo Cage System

The Silo Cage system, one of the few technologies capable of treating this waste, is a natural process producing compost as an end product.  The compost is an excellent soil conditioner that fertilises, retains moisture, provides structure and reduces the incidence of plant disease.  TEG's Silo-Cages are housed in self-contained buildings, suitable for urban environments, are not unsightly and are environmentally friendly.

General

Customers include local authorities, waste management companies, food processors, farmers and landowners.  The Company's expanding market is driven by increasingly stringent EU and UK legislation regulating the treatment and disposal of organic waste.  Statutory targets for the diversion of waste from landfill increase annually through to 2020, increasing TEG's market opportunity year on year. 

About the UK Waste Resources and Energy Investments Fund

Earlier this year, UK Green Investments (UKGI), the specialist team within the Department for Business, Innovation & Skills (BIS), appointed Foresight to manage £50 million of investment by Government into small-scale waste infrastructure projects across the UK. This £2m commitment from UKWREI is the first investment made by Foresight.

About the Mayor's London Green Fund

The London Green Fund is a £100million fund comprising of £50 million from the London 2007-13 European Regional Development Fund programme, £32 million from the former London Development Agency and £18 million from the London Waste and Recycling Board. It has been designed to promote the development of a thriving low carbon economy in the capital in line with the Mayor of London, Boris Johnson's environmental and economic priorities. It consists of two smaller funds to support waste infrastructure development (launched in March 2011 managed by Foresight Group with a start-up investment of £35m from the London Green Fund) and public sector building energy efficiency projects (the London Energy Efficiency Fund led by Amber Infrastructure Limited launched in September 2011 with a start-up investment of £50m from the London Green Fund). Repayments back to the fund will be effectively recycled to support even more projects. The fund managers appointed to manage the waste and energy efficiency funds will also be required to leverage in additional money of at least £55million more. The London Green Fund has set up under the Joint European Support for Sustainable Investment in City Areas (JESSICA) initiative that was developed by the European Commission and European Investment Bank. It was launched by the Mayor of London October in 2009 and is managed by the European Investment Bank on behalf of the London Development Agency. The waste and energy efficiency funds will be managed by independent, professional managers who will take sound commercial decisions on which projects are viable for funding.

As part of the London Green Fund, the Foresight Environmental Fund will provide investment for projects that will help utilise the massive value of London's waste through infrastructure such as power plants to convert waste biomass to clean energy and facilities for recycling waste products such as food and plastics. For example, London produces 2.6m tons of organic waste a year, which could generate revenues of around £170 million a year. The city produces an estimated 280,000 tons of plastics, much of which has ended up in landfill. But many forms of plastic are of high commercial value which could be worth £140 million a year. This represents a solid and sustainable investment opportunity to also help the city become energy efficient and cut carbon output. It is estimated that the fund's investment into waste infrastructure could generate at least 100 low carbon jobs, save 28,000 tons of carbon and divert 245,000 tons of waste from increasingly costly landfill sites.

About the London Sustainable Industries Park

Located in Dagenham, the London Sustainable Industries Park is a flagship project funded by the Mayor of London which aims to become the UK's largest concentration of environmental industries and technology companies, attracting up to 750 jobs and up to 500 construction jobs. It is bringing new life and opportunities to a former industrial brownfield site, providing an attractive destination for businesses delivering waste to energy projects, combined heat & power schemes, recycling & reprocessing facilities and renewable energy technologies. The Mayor is committing over £10million to complete infrastructure works for the 670,000 sq ft development including roads, pedestrian and cycleways, utilities, sustainable drainage and landscaping. The site is also expected to include a decentralised heat network. The activity on the Park will also support the Mayor's climate change, waste and energy policies helping to deliver low carbon infrastructure and 'green-collar' jobs.

About Foresight

Foresight is an independent specialist private equity, infrastructure and environmental investor, which focuses primarily on investments in unquoted UK and European companies or projects.

Foresight has in excess of £670 million assets under management across a number of funds, including Institutional Limited Partnerships, Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs).

FEF, a £60 million fund, cornerstonedby the London Green Fund, was launched in March 2011 by the Mayor of London, Boris Johnson, and is part of London's drive towards becoming a world leading low carbon city. FEF seeks to finance waste management and recycling facilities to support sustainable and carbon neutral economic growth. The Fund's investment programme has the potential to divert over 1.4 million tonnes of municipal, commercial and other waste from landfill each year, reducing annual greenhouse gas emissions by nearly 1 million tonnes CO₂ and creating new jobs in London.

Foresight has had a strategic focus on the waste and environmental sector since 2006 and in that time has assembled one of the most experienced technical and commercial teams in the market. 

www.foresightgroup.eu

About LWARB

The London Waste and Recycling Board (LWARB), chaired by Richard Tracey, Assembly Member, working in conjunction with the Mayor of London and London Councils, has a budget made up of money from the Department for Environment, Food and Rural Affairs (DEFRA) to improve waste management in the capital. For more information on LWARB visit www.lwarb.gov.uk

About Investec Bank plc

Investec is an international, specialist banking group providing a diverse range of financial products and services to a client base in three principal markets, the United Kingdom, South Africa and Australia, as well as certain other geographies.  For more information visit www.investec.com.

Investec Project and Infrastructure Finance advises, structures, arranges and provides financing options across a wide range of specialist infrastructure sectors. A global team of over 50 dedicated staff specialises in PPP and PFI projects in the transport and social infrastructure sectors, as well as power and telecoms transactions. The team is part of Investec's Capital Markets division.

About Quercus Assets Selection SCA SICAV-SIF

Quercus Assets Selection is a Luxembourg based management company specialized in Private Equity investments. The company was founded in 2010 by Simone Borla and Diego Biasi in partnership with Giuseppe Stefanel, the controlling shareholder of Milan listed Stefanel Group. Quercus manages different Luxembourg based SICAV-SIFs regulated by the CSSF whose core business is to invest in renewable energy projects across Europe. The Funds currently have an interest in 15 Solar plants for circa 100MW of power representing a total investment of approximately Eur 300Mn and has a pipeline of over 50MW of projects to be completed before year end. Quercus Assets Selection is part of a larger group including London based Quercus Investment Partners LLP, an FSA regulated firm offering amongst other things advisory services to Institutional clients.

 

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