Listed firm gears up to sell alternative energy division for £11.1m

Listed specialist engineering group Pressure Technologies is gearing up to sell its alternative energy division for £11.1m to a firm listed on the Toronto Venture Exchange. 

The Sheffield-based firm announced this morning that it had entered into a binding letter of intent with Creation Capital, a capital pool company which is listed on the Toronto Venture Exchange (TSX-V),  to sell its wholly-owned subsidiary, PT Biogas Holdings – which trades under Greenlane Biogas –  the holding company for the Group’s Alternative Energy Division.

In June, Pressure Technologies issued a profit warning, stating that its Alternative Energy Division had been impacted. For the full year ended 30 September 2017, the AE Division had revenues of £15.8m and was breakeven at the operating profit level. In the six months to 31 March 2018, it had revenues of £2.8m and an operating loss of £800,000. Net assets at 30 September 2017 were £14.7 million.

Chris Walters, Chief Executive of Pressure Technologies, this morning said: “The global outlook for renewable natural gas (RNG) has improved again throughout the year with governments and energy majors increasing their commitment to renewables in the global energy mix, with RNG playing a significant role, particularly in the US and Europe. 

“In June 2018, due to its significant potential, we announced that strategic options would be evaluated for our AE Division that would increase market opportunities and help unlock shareholder value. Our strategic option review also considered refocusing the Group on core specialist manufacturing activities in the defence and oil and gas markets.

“As a result of this strategic review and following the appraisal of outright sale and merger options, we have commenced a process to spin out Greenlane and list it on the TSX Venture Exchange, which will be accomplished by selling it to Creation Capital. We will remain a supportive minority shareholder and anticipate retaining our holding for the medium term.”

Creation Capital joined TSX-V on 29 October 2018 with the aim of acquiring a business in the energy sector.   Creation Capital intends to raise C$12m  by way of a private placement to fund the purchase of Greenlane and to fund its ongoing working capital requirements. 

Trading in the common shares of Creation Capital will be suspended on TSX-V with effect from today, 10 December 2018, and are expected to remain halted until the completion of the acquisition of Greenlane and the Private Placement, which is expected in late January 2019.

The sale will consist of £5m payable in cash on completion; £2m payable in common shares of Creation Capital on completion, to be issued at a price per share equal to the Private Placement price; and £4.1m by way of a promissory note to be issued by Creation Capital to Pressure Technologies on completion.  

A Pressure Technologies nominee will be appointed as an observer of all Creation Capital board meetings and activities until such time as the Promissory Note, together with all accrued and unpaid interest, is paid in full and retired.

The Sheffield firm said that the cash to be received by the Group on Completion will be used to pay down the Group’s debt and the strengthened balance sheet will enable the Group to focus investment on its core specialist engineering businesses.  As at 31 March 2018, the Group’s net debt was £9.3m.

Greenlane is a world leader in technology used to upgrade biogas generated from landfills, waste water treatment plants, and agricultural and food waste into a clean and marketable renewable natural gas product. Greenlane has been in operation for over 30 years and has supplied over 100 biogas upgrading units in 18 countries worldwide, including the first upgrading systems in 11 countries and the world’s first and second largest biogas upgrading facilities in Germany and Canada.

Greenlane designs and supplies the equipment used to upgrade biogas produced by the anaerobic digestion of organic waste to a high-quality methane product suitable for either injection into the natural gas grid or direct use as vehicle fuel. Greenlane, headquartered in Vancouver, British Columbia, is the operating entity of the AE Division of Pressure Technologies.

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