TIDMHYR
RNS Number : 9172N
HydroDec Group plc
03 February 2021
3 February 2021
Hydrodec Group plc
("Hydrodec", the "Company" or the "Group")
Financing update
Proposed joint venture
Litigation of discontinued business
18 months results update
Hydrodec Group plc (AIM: HYR), the cleantech industrial oil
re-refining group, today provides the following update:
Financing update
The Company has continued to work on a refinancing package in
respect of the Canton plant and assets in order to replace the
existing equipment lease, which is over-collateralised, with an
extended facility to provide additional funds for feedstock,
approved capital expenditure and growth opportunities .
Despite delays, due in part to the global pandemic, progress
continues to be made. The Company has an agreement in principle
with one party to provide funding of up to US$6.75 million and is
in advanced stage negotiations with its existing US bank to
conclude arrangements.
In recent months Hydrodec has been reliant on the support of its
major shareholder, Andrew Black, who has lent approximately US$0.2
million further in cash since 1 October 2020, the date of the
Company's previous update.
If there are further delays in completing the refinancing, the
Company's cash and working capital positions could be impacted
accordingly.
Proposed joint venture
Further to its announcement on 1 October 2020 of having signed
non-binding heads of terms for a proposed joint venture (JV) in the
US, the Board is pleased to announce that the Group expects,
subject to the resolution of its funding position, to sign the
operating agreement in respect of the JV. The JV with the proposed
new partner (a US industrial recycling company) will utilise part
of the Group's existing site in Canton, Ohio and establish a
facility for the purpose of dismantling and recycling pole and
pad-mount electrical transformers. The JV will combine the
partner's proven access to the utilities with Hydrodec of North
America's (HoNA) proven ability to produce re-usable transformer
oil and generate carbon credits. By so combining, the parties
expect to create a market-leading re-refining business in the
US.
The JV will transfer all used transformer oil extracted at the
facility to HoNA at no cost, and the Group's JV partner will sell
all the used oil it secures outside of the JV's activities to HoNA
at cost. It is expected that the volumes of oil will be material in
the context of HoNA's existing capacity (c. 25% of its nameplate
capacity of 12 million US gallons). In return, the JV partner will
be entitled to receive 10% of the annual net profits of HoNA. The
partner will also be appointed as HoNA's strategic collection
partner in respect of the sourcing of used oil and the associated
carbon credit programme, leveraging its established relationships
with US utilities.
Litigation of discontinued business
Following the closure of its Australian business in 2018,
Hydrodec terminated its tolling contract with Southern Oil Refining
("SOR") and subsequently sold its plant located at SOR's facility
in Bomen to Greenbottle Re-refining (UK) Limited, a company
controlled by Andrew Black, a non-executive Director and a
substantial shareholder of the Company. Upon termination of that
contract, SOR sought to recover monies it claimed were due under
its terms, primarily in respect of the capital works carried out to
host the Hydrodec plant of approximately US$1.25 million. Whilst
this claim has always been robustly challenged by Hydrodec, which
itself had counter-claimed against SOR, judgement in the Australian
courts has now been made in favour of SOR against Hydrodec's
dormant Australian subsidiary and Hydrodec Group plc. The Board is
reviewing the options available to it in respect of this judgement
including its rights of appeal.
Financial statements update
The Directors regret that, due to the ongoing impact of the
pandemic and the Company's financial constraints, the Group has
been unable to conclude its audit in respect of the 18-month period
to 30 June 2020.
The Board remains committed to publishing these audited accounts
at the earliest opportunity. However, the Board has been advised by
its auditors that in the Company's current circumstances there is
no guarantee that they would be in a position to conclude the audit
of the financial results for the 18-month period ending 30 June
2020 by the end of March 2021 (being 9 months from the end of the
financial period). The Company's shares remain suspended from
trading on AIM pending the publication of these financial
statements and resolution of the current financial difficulties
and, in the event that the deadline of 31 March 2021 is not met,
then under the AIM Rules the Company's shares will be cancelled
from trading on AIM. Should this occur the Board will communicate
further with shareholders as to the implications and the way
forward as an unlisted company, and would seek to offer some form
of matched bargain facility that matches buyers and sellers, as is
common for companies in similar circumstances.
Chris Ellis, Chief Executive Officer, and Interim Executive
Chairman, commented:
"Hydrodec continues to make progress, despite the unique
challenges presented to our operating environment by COVID-19.
Working capital constraints, by necessity, have had a material
impact on our ability to source feedstock, which in turn drives
volume, margin and overall financial performance.
We continue to pursue our strategy of targeting US utilities
highlighted in previous updates, and the progress made to refinance
the Company together with the JV agreement with a transformer
recycling company will, if and when consummated, position the
Company strongly to build on the encouraging signs for its
sustainability strategy."
For further information, please contact:
Hydrodec Group plc hydrodec@vigocomms.com
Chris Ellis, Chief Executive Officer
and Interim Executive Chairman
Arden Partners plc (Nominated Adviser
and Broker) 0207 614 5900
Corporate Finance: Paul Shackleton
Corporate Broking: Simon Johnson
Vigo Communications (PR adviser to
Hydrodec) 020 7390 0240
Patrick d'Ancona
Chris McMahon
Charlie Neish
Notes to Editors:
Hydrodec's technology is a proven, highly efficient, oil
re-refining and chemical process principally targeted at the
multi-billion US$ market for transformer oil used by the world's
electricity industry. The global transformer oil market is
projected to reach USD 3.0 billion by 2025 from an estimated market
size of USD 2.2 billion in 2020, at a CAGR of 6.9% during the
forecast period (source: Markets and Markets). Used transformer oil
is processed with distinct competitive advantage delivered through
very high recoveries (near 100%), producing 'as new' high quality
oils at competitive cost and without environmentally harmful
emissions. The process also completely eliminates PCBs, a toxic
additive banned under international regulations.
In 2016 Hydrodec received carbon credit approval from the
American Carbon Registry ("ACR"), enabling its product to be sold
with a carbon offset and creating an incremental revenue stream.
The Group is now generating carbon offsets through the re-refining
of used transformer oil, which would otherwise ordinarily be
incinerated or disposed of in an unsustainable manner. This is a
highly distinctive feature for the Group, confirming (as far as the
Board is aware) Hydrodec as the only oil re-refining business in
the world to receive carbon credits for its output. This is a
significant endorsement of the Group's proprietary technology and
standing as a leader in its field.
Hydrodec's operating plant is located at Canton, Ohio, US.
Hydrodec's shares are listed on the AIM Market of the London
Stock Exchange. For further information, please visit
www.hydrodec.com.
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END
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