Stobart’s £30m green energy drive

NORTH West transport giant Stobart is investing £30m in a new joint venture which will see it drive into the renewable energy supply market.

It has formed Stobart Biomass Products with Penrith-based AW Jenkinson Forest Products, which is the largest supplier of wood-related biomass in the UK.

Stobart’s distribution arm Eddie Stobart has also won a major transportation contract with from AWJFP for the next 10 years. It is expected to generate an additional profit of £19.25m over the first five years.

Under the terms of the deal Warrington-based Stobart will take a controlling interest in the new venture for £30m comprised of £15m cash and the remainder by the issue of 11,278,195 new  shares in Stobart Group, 

The new venture has been created to source and distribute supplies of biomass fuel to the UK renewable energy market, which has the potential to grow 10-fold in the next three to four years.

The investment and new contract together will provide substantial strategic synergies across the Stobart Group.

Separately, Stobart expects to benefit from £30m per annum transport revenues from SBPL within three years.

The Stobart board believes that the joint venture transaction will be earnings enhancing for from day one.

Stobart Biomass Products already has its first significant contract to supply up to 750,000 tonnes of biomass fuel per year to 10 potential sites over the next 20 years. 

In addition it has received contract enquiries for a further 14 million tonnes of biomass fuel over the next five years with all new contracts going through SBPL.

Based on current identifiable projects, the Board estimates that the market could potentially increase ten-fold in the next three to four years to 15 million tonnes annually.

Andrew Tinkler, chief executive of  Stobart Group, said: “This investment and transport contract together are a strategic building block for the Stobart Group on many levels. 
“Firstly it is expected to be earnings enhancing from day one with an expected £19m net profit for the core business in the next five years and an additional benefit of £30m revenue per annum for the new company within three years. 

“Secondly, it gives us access to, and income from, the higher margin renewable energy market, which has the potential to grow 10-fold in the next five years, driven by governmental and societal pressures for the green agenda. 

“Partnering with the market leader will enable us to exert greater control and move up and down the supply chain as this market diversifies.

“And thirdly, just as we have proven with other recent investments, SBPL will become a strategic asset and platform for the development and growth of the Stobart business.”

Allan Jenkinson, owner of A.W. Jenkinson Forest Products, said: “This is the perfect partnership to take the business to the next level and capitalise on the huge growth in energy generation from renewable sources. 

“This deal gives us access to Stobart Group’s multimodal logistics strength and expertise in the UK, which is a critical part of the biomass business as well as giving us increased scale and credibility with the large energy producers who need long term secure supply of biomass products. 

“That, coupled with the strong cultural fit, creates a solid foundation for the future success of the new company.”