Scirocco Energy PLC (AIM:SCIR) has completed its deal to buy into Energy Acquisitions Group Ltd (EAG), the vehicle that aims to build opportunities within the anaerobic digestion (AD) and biogas market.
The AIM-quoted firm now owns 50% of the EAG joint venture which is set to acquire Greenan Generation Limited (GGL), a cash-generating AD operation in Northern Ireland.
EAG is forecast to generate GBP1.1mln of annual turnover and its new owner expects to optimise operations to lift earnings margins. It is expected to be the first in a series of deals, as Scirocco noted that EAG has opportunities to invest in a pipeline of AD plants in the UK, with the slate said to be worth GBP30mln in total.
Scirocco chief executive Tom Reynolds, who joins the EAG board, described the transaction as an important milestone in Scirocco Energy’s new strategy. “The initial investment provides an entry point into the rapidly growing UK Biogas market, and provides a platform that will allow us to capitalise on the significant pipeline of opportunities,” he said.
“While the initial acquisition of GGL – which is expected to complete very soon – is relatively small in size, it is strategically important in terms of delivering immediate cash flow which can be re-invested into a compelling pipeline of complementary opportunities alongside our new partner,” Reynolds said.
“We also believe that the addition of activities, which benefit the UK’s net zero target, will make Scirocco’s investment proposition more attractive for investors due to the growing importance of ESG considerations, and will ultimately lead to a re-rating of the company over time.”
EAG managing director Chris Kerr, meanwhile, added: “Our extensive experience and understanding of the AD market, and pipeline of near-term opportunities uniquely position this joint venture to take advantage of the growing Biogas market and contribute positively to the de-carbonisation of challenging sectors in industry such as heating, transport and agriculture where demand is growing strongly.
“Our initial acquisition of GGL provides the template of the opportunities that we will be targeting given its proven operational status and material scope to enhance free cash flow and EBITDA margins through plant optimisation techniques.”