Proposed acquisition of Pyromex Holding, AG
3 August 2011
PowerHouse Energy Group plc
("The Company" or "PowerHouse")
Proposed acquisition of Pyromex Holding, AG
PowerHouse (AIM: PHE), an alternative energy company specialising in the manufacture and sale of zero emission waste-to-energy equipment systems, is pleased to announce its planned acquisition of the remaining 70 per cent. interest in Pyromex Holding, AG ("Pyromex") for an initial consideration of £2.5 million in cash over the 18 months following completion and a maximum potential further consideration of £30.5 million dependent on the achievement of certain market capitalisation or profit targets of the enlarged Group.
Pyromex is the developer and owner of zero emission, ultra-high temperature waste-to-energy gasification technology which PowerHouse has under licence from Pyromex and upon which PowerHouse's manufacturing and sales business is based.
The Directors believe that PowerHouse will significantly expand its sales pipeline by acquiring its technology licensor. Pyromex has, during its technology development phase, generated a global following of potential customers now representing a valuable sales pipeline of future contracts to be delivered through the PowerHouse Group.
Highlights
· Conditional agreement for PowerHouse to acquire the remaining 70% of the shares in Pyromex
· Consideration is payable in tranches:
- £625,000 on completion of the sale and purchase agreement ("Completion Date");
- three tranches of £625,000 each, payable at 6, 12 and 18 months after the Completion Date; and
- two further tranches of £15.25 million each when certain market capitalisation and after tax profit criteria milestones are reached and payable in PowerHouse's shares or cash, at PowerHouse's option. Financing options including a proportion of debt will be explored to fund these stages of the transaction
· Control of Pyromex on Completion Date will enhance PowerHouse's commercial standing in the market and add considerable IP asset value to PowerHouse's balance sheet
· Royalties payable under the existing licence agreement would be effectively eliminated, thus improving profit margins for PowerHouse
· Significant and immediate new business opportunities in markets which include the EU and eastern Europe, the Middle East, GCC, UAE, SE Asia, China and South Africa where PowerHouse does not have rights to operate
· Ownership of Pyromex's intellectual property and unification of global marketing, manufacturing and servicewould allow PowerHouse to scale up and fully exploit the IP for the greater benefit of its shareholders
· Agreement is conditional upon PowerHouse completing due diligence to its satisfaction and final approval by PowerHouse's Board of Directors. PowerHouse's right to complete the transaction expires on 31 December 2011
Details of the proposed acquisition
PowerHouse is pleased to announce that it has entered into a conditional agreement with Pyromex's majority shareholder under which the Company has the right to acquire the remaining 70 per cent of the shares in Pyromex for a maximum consideration of £33 million.
PowerHouse will gain access to a significantly expanded sales pipeline by acquiring its technology licensor. Pyromex has, during its many years of technology development, generated a global following of potential customers who, having tracked the company's progress, now represent a valuable sales pipeline of future contracts to be delivered through the PowerHouse Group. PowerHouse's existing opportunities will also benefit financially from technology royalties remaining within the enlarged Group.
Pyromex is the developer and owner of a ultra-high temperature thermal reactor technology (patent pending) used for converting a wide range of waste materials to energy without any emissions or toxic residual by-products. PowerHouse announced the successful generation of synthesized gas ("syngas") from the 25 ton per day Pyromex zero emission, ultra-high temperature gasification (UHTG) plant in Munich, Germany on 27 July 2011. The Pyromex system uses feedstock from municipal waste (refuse derived fuel) and converts the waste to syngas with no emissions or harmful residues. Syngas can be used as fuel to drive an engine or turbine for electrical power generation, or through a subsequent process, it can be reformed as a cleaner diesel or jet fuel. When the plant is fully commissioned, the syngas will be used for generating approximately 1.3 MW of electricity and supplying it to the electricity grid.
PowerHouse has a technology licence agreement with Pyromex under which it has a sole and exclusive licence to manufacture, market, use own and operate ultra-high temperature thermal reactorsin North America, Central America, the Surrounding Islands, Nigeria, Australia and New Zealand and a non-exclusive licence in the Middle East and North Africa (but excluding Nigeria), the Gulf Co-operation Council (made up of Kuwait, Bahrain, Saudi Arabia, Qatar, United Arab Emirates and Oman), French Polynesia, South Pacific, Asia (but excluding India) and United States Territories. PowerHouse's technology licence will be superseded by this acquisition.
The maximum consideration of £33 million comprises four payments of £625,000 each, the first being payable on Completion and the remainder at six-monthly intervals thereafter, a further £15.25 million in cash or shares, at PowerHouse's option, when PowerHouse's market capitalisation exceeds £92 million or the enlarged Group achieves an annual net profit after tax of £6.1 million (whichever occurs first). Similarly, a further payment of £15.25 million will be payable in cash or shares, at PowerHouse's option, when PowerHouse's market capitalisation exceeds £168 million or the enlarged Group achieves an annual net profit after tax of £12.2 million (whichever occurs first). In the event that the latter two payments become payable, the Directors intend to explore various financing options, including a proportion of debt, to fund these stages of the transaction.
The agreement is conditional upon the Company completing its due diligence to its satisfaction and final approval of the PowerHouse Board. PowerHouse's right to complete the transaction must be exercised by 31 December 2011.
PowerHouse's Board is delighted to have secured the right to acquire the remaining shares in Pyromex that it does not already own and believes that absolute control of Pyromex and a consolidation of the global operations will add considerable IP asset value and significant business opportunities in new markets it does not have and allow the Company to more fully exploit Pyromex's intellectual property to the greater benefit of its shareholders.
A further announcement will be made in due course.
Ross Lyndon-James, Executive Chairman of PowerHouse Energy Group plc, commented:
"This proposed acquisition replaces the existing option PowerHouse has to increase its holding in Pyromex to 51% and will enable PowerHouse to fully develop its long term strategic plan to become a market leader in high tech equipment manufacturing for waste and coal gasification, and ultimately, to develop major operating projects based on the clean conversion of waste and coal to electricity, diesel and jet fuels."
Peter Jeney, Founder and majority owner of Pyromex Holding AG, who will join the Company on Completion, commented:
"This transaction recognises the progress Pyromex has achieved in developing its gasification technology to date and will accelerate its development through to full scale commercial operations. I look forward to joining the PowerHouse team and working to position our product as a market leading solution in a rapidly developing market on a global scale".
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For additional information please contact:
PowerHouse Energy Group plc
Ross Lyndon-James
Ph: +44 (0) 20 7887 1362
Merchant Securities Limited (NOMAD and Broker)
David Worlidge/Simon Clements
+44 (0) 20 7628 2200
Paterson Securities Limited (Australian Broker)
Emmanuel Duvnjak
+61 (0) 412 734 200
Pelham Bell Pottinger
Nick Lambert / Jenny Renton
+44 (0) 20 7861 3232
Notes to Editors:
· PowerHouse is a leading provider of economically proven, on-site, clean energy systems that use traditional and renewable forms of fuel to generate electric and thermal energy in an environmentally responsible way. PowerHouse's forward development strategy includes the conversion of waste and coal and coal waste to cleaner liquid fuels including diesel and jet fuels
· PowerHouse offers a complete turnkey waste/biomass to energy equipment solution either by: direct sale or energy supply under long term power purchase agreements
· PowerHouse's shares trade on the Alternative Investment Market under the ticker (PHE)
This information is provided by RNS
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