Active Energy Group (LSE:AEG) — AGM Proceedings 2022

0:00 Good morning, and welcome to the ACTIVE ENERGY GROUP PLC AGM proceedings twenty twenty two. Throughout this recorded presentation, attendees will be in listen only mode. Questions are encouraged. It can be submitted at any time via the q and a tab situated on the right hand corner of your screen. Simply click Q and A, scroll to the bottom, type your question and press send. The company may not be in a position to answer every question submitted today. Have all questions be reviewed with responses published on the Investor Me company platform where appropriate to do so. I'd now like to hand you over to James Leahy, Non Executive Chairman. Good morning. Good morning and welcome everybody,

0:30 ladies and gentlemen. As stated, my name is James Leahy. I'm the Chairman and I'd like to welcome you to the twenty twenty two Annual General Meeting for ACTIVE ENERGY GROUP. Before we move on to the formal business of the meeting, it might be useful and indeed it is my pleasure to introduce the other directors with me: Michael Rowan, CEO Andrew Diamond, CFO and fellow non exec Max Aitken. Before the formal part of the business, I will read a statement which was published this morning. In the last twelve months, it's been the most transformative in the history of ACTIVE ENERGY.

1:16 For the first time, the company was able to produce its next generation coal switch fuel in industrial quantities, deliver coal switch and demonstrate prospective customers worldwide its competitive and environmental advantages. In 2022, the company has been working closely with Player Design International Inc, our strategic partner, to complete a redesign of both the manufacturing process and the process reactors to enable production of industrial volumes of cold switch. This redesign work has now been completed. PDI, as a significant investor in AEG, shares AEG's focus to develop the significant economic opportunities for Coltswitch and its recent commitment towards the redesign of the Coltswitch plant further demonstrates this.

2:07 In order to accelerate the supply of production volumes of coal switch, PDI has now committed to take full responsibility for permitting, financing and constructing the first coal switch production plant in Ashland, Maine, the Ashland facility, which PDI will own and operate. PDI has already ordered the parts required for the completion of the Ashland facility and has confirmed that first production volumes of coal switch will commence during the first quarter of twenty twenty three. ACTIVE ENERGY will sell these volumes of coal switch once produced to prospective customers. ACTIVE ENERGY has granted relevant licenses in respect of some of the existing intellectual portfolio, IP, to PDI to facilitate construction of the Ashland facility.

2:59 ACTIVE ENERGY may seek to purchase the Ashland facility from PDI at some time in the future. And any purchase would be subject to separate agreement and separately funded. Last week we announced the completion of the sale of our Lumberton site in North Carolina. And this has provided the company with $3,920,000 of net cash proceeds. This transaction has provided the company with sufficient working capital for the near term. In addition to the sale of the Lumberton site, we also sold some additional ancillary equipment from the Lumberton site for a minimum of $50,000 and agreed with PDI for the transfer of all existing coal switch manufacturing equipment from the Lumberton site to the Ashland facility.

3:48 This equipment remains the property of AEG and will be used in the future expansion of coal switch production during 2023. We will deploy some of the funds from the sale of the Lumberton site toward the ongoing sales and marketing program for coal switch in North America, Europe, Japan and South Africa. Our focus for the remainder of 2022 will be upon converting the numerous commercial discussions which we are currently having with potential customers and converting them into firm orders for Coleswitch. To this end, we are now recruiting additional personnel to coordinate the sales functions both in North America and Europe. Based on feedback, the provision of definitive delivery schedules for Coleswitch will materially assist AEG in all its current sales negotiations and provide greater confidence to prospective customers of AEG's long term commitment to supply large scale volumes of coal switch.

4:51 The next nine months are a period of enormous opportunity for AEG. The production process is proven and in PDI we have an excellent partner in building, financing and operating the first coal switch facility at Ashland. During 2022, Coleswitch has achieved increasing recognition as a proven next generation biomass fuel with strong environmental credentials and improved heating performance. We have considerable customer interest for Coleswitch and now have the working capital headroom to drive forward our current sales negotiations into orders. That was what we announced earlier today.

5:34 So I'll now go on to the next part of the meeting. As there are sufficient members present, either in person, by corporate representative, or by proxy to constitute a quorum, we can now deal with the business of the meeting. You will have received the annual report and accounts for the year ended 12/31/2021, together with the notice of the meeting. With your permission, I would like to take the notice as read. Does anyone have any objection?

6:07 Thank you. Just to note that I'd like to suggest during the formal business of the meeting questions be restricted to points relating to each resolution as it is proposed. Once the formal business of the meeting is over, there will be an opportunity to ask further questions. Thank you. Going on to Resolution one. The first resolution which is set out in the notice calling this meeting is to receive the annual report and accounts of the company for the financial year 12/31/2021. I shall be pleased to deal with any questions on the report and accounts. It would be helpful if any shareholder asking a question to give their name and state whether they are a shareholder, a proxy or a corporate representative.

7:01 If there are no questions, I put the resolution to the meeting. But before I put the resolution to the meeting, I can report that valid proxy votes have been received in relation to this resolution in respect of 2,599,413,620 ordinary shares as follows. $42,591,397,004 against 4,052,147. A total of 3,964,469 votes were withheld. So I now propose as an orderly resolution to receive the annual report and accounts of the company for the financial year ended 12/31/2021.

7:51 Those in favor?

7:55 Those against?

7:59 Anyone abstaining? Thank you. I declare the resolution carried as an ordinary resolution. Resolution two, reelection of director. This next item is a resolution relating to the reelection of Michael Rowan who is retiring in accordance with the company's articles of association and being eligible offers himself for reappointment. Are there any questions?

8:37 So before I put the resolution to the meeting, I can report that valid proxy votes have been received in relation to this resolution in respect of 2,599,413,620 ordinary shares as follows: $42,585,093,665 against 13,573,779. A total of 746,176 votes were withheld. I now propose as an ordinary resolution to re elect Michael Rohn as the Director of the company who retires in accordance with the company's Articles of Association and being eligible, offers himself for reappointment. Those in favor?

9:25 Those against?

9:29 Any abstentions? Thank you. I declare the resolution carried. Resolution three is the resolution for the reappointment of the company's auditors and the setting of their remuneration. Are there any questions?

9:54 If there are no questions, before I put the resolution to the meeting, I can report that valid proxy votes have been received in relation to this resolution in respect of 2,599,413,620 ordinary shares as follows. $42,593,059,027 against 5,291,647 and a total of 1,062,946 votes were withheld. I now propose to reappoint Jeffries Henry LLP as the company's auditors until the next Annual General Meeting and to authorize directors to fix their remuneration. Those in favor? Those against?

10:43 Any abstentions? Thank you. I declare the resolution carried. Onto resolution four, which relates to the consolidation of every 35 ordinary shares of 0.0001p each in the capital of the company in issue at 6PM, 07/04/2022 into one ordinary share of 0.0035p each, the new ordinary share. Are there any questions?

11:26 In the absence of any questions, before I put the resolution to the meeting, I can report that valid proxy votes have been received in relation to this resolution in respect of 2,718,902,785 ordinary shares as follows. $42,582,978,334 against 135,159,924. A total of 764,527 votes were withheld. So I now propose as an ordinary resolution that every 35 ordinary shares of 0.0001 each in the capital of the company be consolidated into one ordinary share of 0.0035p each as specified in the notice of the Annual General Meeting.

12:17 Those in favor? Those against? Any abstentions? Thank you. I declare the resolution carried. Resolution five relates to the director's authority to allot shares and grant other rights and shares in accordance with Section five fifty one of the Companies Act 2006 up to an aggregate nominal amount of £186,952 Are there any questions?

12:57 In the absence of any questions and before I put the resolution to the meeting, I can report that valid proxy votes have been received in relation to this resolution in respect of 2,599,413,620 ordinary shares as follows. For 2,581,878,659 against 16,773,989 and a total of 760,970 votes were withheld. I now propose as an ordinary resolution that the directors are hereby generally and unconditionally authorized to allot relevant securities up to an aggregate nominal amount of £186,952 as specified in the notice of the Annual General Meeting. Those in favor?

13:50 Those against? Any abstentions? Thank you. I declare the resolution carried. And resolution six, the dis application of preemption provisions. So this relates to the dis application of the preemption provision set out in section five sixty one brackets one of the Companies Act 2006 relation to the allotment of equity securities for cash up to an aggregate nominal amount of 140,141 thousand £630. Are there any questions?

14:32 In the absence of any questions, before I put the resolution to the meeting, I can report that valid proxy votes have been received in relation to this resolution in respect of 2,599,413,620 ordinary shares as follows. For 2,579,036,887 against 19,632,531. A total of 744,202, I'll say that again, a total of 744,202 votes were withheld. So I now propose as a special resolution that the directors are hereby generally and unconditionally authorized to allot equity securities under section five fifty one up to an aggregate nominal amount of £141,630 as in section five sixty one brackets one of the act did not apply to any such allotment as specified in the notice of the annual general meeting. Those in favor?

15:41 Are those against? Any abstentions? Thank you. So I declare the resolution carried. That is all the resolutions that therefore concludes the formal business of the meeting. Does anyone have any general questions relating to any of the aforementioned resolutions?

16:08 On that note, I will thank you for your attendance for this section and declare the meeting closed. There will now follow a presentation led by Michael Rowan. Okay, good morning everybody. I'd like to thank everyone once again for attending and this obviously now will give us a brief summary and update on the activities for ACTIVE ENERGY GROUP. In the room, I think you can see a presentation behind me and I believe on the investor to meet you can also see the slides themselves. I'll make a few words and obviously supported by both Andrew and Max as required, so you'll hear the various presentations. So the focus for ACTIVE ENERGY GROUP has always remained transforming biomass material into next generation fuels, of which obviously that prime opportunity arises with Coleswitch.

17:01 And I want to just run through where we are with Coleswitch and what we've done in the last twelve months and what we're looking to do between now and over the next six to nine months, as we've indicated in the AGM statement. I'd also point out just at the outset, if you do have questions, could we put them towards the end and then I can address them then as appropriate. The second page obviously a disclaimer as issued with the authority of Allenby. So now I'll just go into cost switch itself. So as a reminder, the company has focused exclusively on the manufacturing cost switch over the last twelve to eighteen months. We do remain increasingly confident that biomass has a very important future in the renewable energy supply and also with energy security which has become very more important over the last few months. You may not remember, but in COP26 in Glasgow in November last year, there we did set out sustainable bioenergy targets, which do run out to 2,050.

17:56 They are looking to reduce net global emissions by up to 600,000,000 tonnes of CO2 annually by 2030. But the key thing to all of this is that while white pellet is obviously the pro form a fuel at the moment, it's probably an old technology and it's not really focused or provide enough of the sufficient environmental targets that we're looking to do.

18:17 We've always maintained that there will be a future for a black pellet and coal switch is probably the prime example of a fuel that can achieve that. As I think people are aware and just as a reminder of its key properties, it does exclusively focus on using waste biomass residuals feedstock. That's what we use when we produce the first fuel up in Maine last summer. It produces a pellet which will meet all the standard industry requirements and industry sizes. And it has met all the initial hydrophobic testing which has been carried out both on-site and with various universities that we partnered with over the last year. We do know that it has an increasing heat value on its own, let alone when it cofires with coal, but also has an increasing bulk density which means it's a better energy fuel than existing white pellet.

19:05 And we have proven that it can successfully co fire with coal which I'll go on to demonstrate in a minute.

19:11 So the feeling from AEG is very much one that we have proven the industrial process of it now. We've created a proven product and we've had an ability to be able to talk to the market and show that product to attain customers. And that is a significant step forward for the company over the last twelve to eighteen months.

19:31 The next slide, I think gives you a little more detail of some of those goals as we've achieved it. And as a reminder, again, this information is all data that we've really acquired over the last nine to twelve months of continual testing. We did produce a pellet as we said using waste wood that was using local hardwood from the state of Maine on the environs of Ashland itself when we made the first fuel using those first reference reactors that operated through last spring and through last summer. We produced a fuel that has a higher heating value than a white pellet. We've shown that through the testing at University of New Brunswick and we've shown that also with the University of Utah and the STEP programme. That STEP programme was very vital to getting the first samples of fuel to them and allowing them to co do the co firing testing which was completed in the autumn of last year. It provided the critical data to show what Coleswitch can achieve both on its own and both co firing with coal.

20:30 We've shown the fact that in terms of on a co firing basis, you end up with a small reduction in heating value and that's one the most attractive things to prospective customers who are looking at it now. We've also shown the significant improvement of heating value over white pellet. It's critical that you can demonstrate those elements to it. At the same time, we've obviously focused on reducing emissions And those reductions in emissions are proven fact now. What we've achieved with the University of Utah again has shown a significant reduction in ash, which was much to their surprise and a very positive one. We obviously have the reduction reduction in CO2 in the production of the fuel which you've recently seen from the life cycle report that was produced last week. And you've seen relevant reduction emissions of both SOX and NOX at the same time.

21:18 The fact is this is a cleaner fuel and the fact is if you can co fire it with coal, you're going to have net energy benefits and emissions benefits, which is what is attracting customers in that exercise. As we've mentioned, the fuel can be co fired with existing power stations and existing heavy industrial plants. And the fact that we went through a full bowl mill testing again with the University of Utah last autumn demonstrated the fact that you can quickly co fire. Coal Switch has genuinely achieved the targets that it wanted to do. And that I think is very important to realize that the fuel is there and ready to go. So the goal therefore has to be on getting this fuel into the market and accepted by customers as quickly as possible. On the next page, I just really want to go through and run through the work that's been done to date, particularly over this year, as we've made sure that the company and the fuel can be ready to deliver.

22:17 We've obviously had an active testing program going on for the fuel, not just with the STEP programme that was in Utah, or with the University of New Brunswick, who were actually the first to test the fuel last summer, when it came off the site from Ashland itself. But also we've been testing it with potential customers, both in The US, in Canada, in Japan, in South Africa, and they've all and currently in Europe. There are various customers right now testing this fuel, they will have samples of the fuel, they've had it continually delivered to them over the last few months, and they can continue to run through that process. It's a critical first stage of getting acceptance of the fuel and more importantly, allowing you to get those future customers to come through.

22:59 There's been a lot of work in Japan, which I'm going to let Max outline in a minute. And you should have seen last week, we've also done a great analysis of the entire process of production to show that under the lifecycle analysis, we are definitely achieving greenhouse gas emissions positive efforts. All of that work has been done over the last six to nine months. And we have always had samples of fuel available to us to deliver to those customers.

23:23 In terms of the marketing side and talking to prospective customers, there has been an increased focus. We have obviously looked at the power generators, they are the first people to talk to. But actually the level of interest, most recent level of interest has come from heavy industrial users of coal, the cement business, the concrete businesses. We are in active conversations with parties with those industries all looking for a better fuel instead of coal. But they're looking for fuel that will give them an equivalent to coal and that's obviously where we've managed to develop. They want and do want a process of receiving test volumes of the fuel from us as quickly as we can and that is why it has been so important today to provide out a first delivery date. It will allow those customers, now potential customers, to come through and hopefully get through with orders from here.

24:09 We've also seen a change in sentiment as well looking at black pellet of itself. Japan is obviously openly looking at black pellet now as an alternative to white pellet. And in recent months, with the developments in Europe, we've also seen increasing interest there as well. So with all of that work already done, therefore the focus has taken us on to get the plant built as quickly as possible to allow for industrial scale volumes. And that is where working with PDI has allowed us to quickly work out that Ashland provides that immediate platform. We have completed a complete redesign of the reactors and the production process. Those new reactors are now started in their construction phase and as we mentioned in the AGM statement, the relevant parts have already had to be ordered ahead of this meeting in order to achieve a goal of getting production going by first quarter of next year.

25:00 A new design process will obviously allow us a number of things, not only fuel to be coming into the market, but also will create for us a definitive design process, which of itself can be licensed out to potential partners. And that remains as an important focus for the company as selling the fuel itself. In terms of Ashland itself, turning to the next page on page six, obviously we've mentioned that that is the focus. It's a facility that's been owned by PDI and it's been an operational production facility for various wood products over recent months. It's where we put up the first reactors and you can see photographs of that at the bottom of the slide and you will see obviously there samples of the fuel that was produced at the time. The reality is that that proved out the process and we did that under current and then temporary permitting as required.

25:52 The PDI owns the site and the fastest way in order for us to get the fuel running is to allow PDI to lead that construction phase for the next for the first production volumes. So over the recent last months, as I said, the design has already been done and appropriate changes to the site are now going to be underway. Remember that the site has a number of advantages over, for example, Lumberton. There's a railway line next door, which will take us and allow us to deliver fuel down through into the East Coast infrastructure without any hassles or problems. There is already infrastructure on the site, there is already utilities on the site, and most importantly, there is a number of local forestry partners who are already prepared to supply us the waste feedstock that we require in order to build out the commercial volumes. This site can be developed quickly and efficiently and that's where using PDI has been absolutely the way forward to run through.

26:45 Just by way for my purposes, obviously from a map side, you can obviously see there on the left hand side where Ashland is. It is in the half far corner of the state of Maine. And I do mention there that we're looking at potentially exports. And I've also mentioned, for the first time ever that we actually are looking at some serious interest out of Europe for the fuel itself, particularly in the recent times. On the right hand side, I'll probably just summarize a little bit of the process and how it would work, whether it's going through the reactors, going through the dryer, the cyclone, into the pelletizer, and then creating a fuel that you can then deliver going forward. The reality is that quite a bit of that kit is already on-site. Some additional obviously equipment will be provided by this stuff moving from Lumberton up to Maine.

27:32 But most importantly that we will have a pro form a design process, which as I mentioned before can be used for future joint ventures or for licensing agreements going forward. The reality is that we have to get the fuel process manufactured as quickly as possible and into the marketplace. Is what customers want to see from us. And that's exactly what the goal has to be. On page eight, you'll just see some of the sales opportunities that we're focusing on right now. Now on left hand side, you'll see a map of The United States with the major lumber centers involved. This was provided to us by the US Department of Energy. And it shows obviously where the major lumber producing centers are in North America today.

28:17 Appalachia and the Gulf Coast are probably the two traditional areas that you would expect to see people making, but you also see an increasing growth in Pacific Northwest and New England. I mentioned the fact that obviously from New England, we would look potentially to deliver fuel not only in The United States, but also across to Europe. There is obviously the infrastructure they're able to supply it. And then of course, there's the focus towards Japan. Max, do you want to say a couple of words about Japan? Yes, thank you Michael. So Japan is one of the most exciting territories for bioenergy in the world with a forecast demand of up to 14,000,000 tons through this decade. There is an increasing focus in the Japanese market on black pellets over white pellets for the reasons that we all understand and have presented. Our focus in in Japan is is running through, I guess, five phases.

29:07 One is to establish the credibility of the fuel, which we've done through our testing program in North America, as well as the FSC certification, which is very important to prove the sustainability of the fuel through independent analysis. We've completed that. The second is to work with a sales team in Japan, which we established over the last twelve months. The third is to establish relationships with end users and intermediaries, trading companies, which we have done, and we're in a number of live conversations. The fourth is to deliver test volumes, which I think falls into, two buckets. One is initial test volumes, which we have delivered and are continuing to deliver to Japan for independent testing by potential customers, which has confirmed the test results that we have been seeing in The United States.

30:02 We will then move on to test orders in significant volumes, and we have live commercial discussions with both end user generators and trading houses. And then finally, when we have commercial volumes available, we'll be ongoing commercial delivery to Japan. Thank you, Ax. And then finally, I wanted to run through the goals for the company over the next twenty four months. We obviously do have to get production volumes up fairly significantly And I mentioned on the left hand side of this slide that the goal has got to be at least towards half a million tonnes as quickly as possible. That would come in part from obviously development of the site of Ashland, both presently and going forward into the future, but also looking at other production centers in The United States in particular, both down and as I mentioned in Appalachia and potentially Pacific Northwest and elsewhere internationally as well.

31:01 We feel like we're at a point where if we can deliver the fuel early into the New Year, we get the customer endorsement and we'll be able to expand from there. And those the timelines in terms of building our plants takes at least probably a period of nine to fifteen months at the moment currently, and it does depend on supply chain mechanisms. But we do have an outright growth here to take us up to this. This would make us a significant small scale supplier of pellet and particularly a black pellet where there is very few competitors in that marketplace. So from where we are today, we've obviously I think transitioned coal switch into a provable pellet that can work and operate properly. We do believe that there's significant market interest for that pellet and I do think the partnership with PDI that we've announced today is critical in the pros of dealing with production and going forward.

31:51 So with that, I'd like to close the presentation and then obviously address some of the questions that have been addressed on the Q and A. One of the key questions we've been asked is about what can future orders look like and what the payment cycles look like in that exercise. I mean, clearly what we would make the point to you is that the process is one of delivering initial trial amounts of fuel and on the back of that you're working with partners who identify individual sites that would then like to burn Colswitch in some form of scale. When they order the fuel, make a long term order, they make a long term order for that fuel and usually it's a payment upon delivery. We do focus very much on an FOB style trading, we deliver effectively from our factory gate and then it's dealt with and delivered to the customer. They pay obviously when they take the fuel off-site.

32:39 So I think that answers that question. There's been an additional question around making sure that we can update the market on a regular basis. Clearly we will be doing now that the construction phase will be underway and we'll be looking to do what we achieved a little bit when we were going in the way at Lumberton to make sure there is regular communication showing people the developments that are occurring and obviously giving as much detail as we can both around future orders and future delivery time schedules, etc. Is there one more after that on that No, those have just been submitted. And we have the previously submitted. Yes, and then we've got a couple of previously submitted questions we'd also spend a couple of minutes on. We've been asked the question about well actually it was asked in the context of if Lumberton didn't complete, how would you finance the company? Well obviously as you're all aware, we did complete Lumberton and monies are now with the company.

33:36 The focus right now is getting PDI at the first instance to build the first plant, which I think we're all aware of. That will give us the platform to move forward. Clearly as we then want to go to expand into the future and obviously this is with sales of the fuel into the marketplace, we'll then look to expand production capacity. That will occur and that financing of that can occur in various different forms, be it both project finance, debt or maybe equity into the future. But at this point I think people should just be aware that obviously there will be moves forward on that, but not right now. That's obviously the near term we need to get to. We just need to get the fuel delivered into customers' hands. Andrew, ask that question. Yeah, so one of the questions we were asked was whether we've reduced staff costs, having missed targets.

34:26 I think I would respond to that question by saying that we raised money in December of last year at the time we announced the market that the money that we raised was not sufficient to complete the build of the Ashland plant. And from that point onwards as a company we've been very careful with our cash. We've managed both on an employment basis but also just generally across our cost categories. There's been very tight control of how we spend our money. That's been a process that is ongoing and will continue to do. Okay, thank you Andrew. And then finally we were asked a question about the permit which obviously has slightly changed on today's news but to be very clear there's been an ongoing iterative process on the permit over the last four months, both by involving AEG but led by PDI. As we've mentioned already, they've already had the conversations with the state authorities of Maine and are all very comfortable with the process that's going on right now. So, obviously we look forward to having there the fully permitted facility which will allow for production, which is what PDI is happy to commit to us going forward.

35:27 Finally, were asked a question about AEG's holding in Alpha prospects and whether there would be any changes or looks out there. The answer to that is we always look at opportunities potentially if we can look at the future there with Alpha. It is a private company. Obviously, if an opportunity monetised came to light that would suit the interest of the company and the board, we'll look to exploit that at the time. And that really closes those questions as asked. Thank you very much. Ladies and gentlemen, thank you very much for attending today's AGM and subsequent presentation. That is the end of the presentation. Clearly, you are now free to go, but if anyone wants to stick around and ask further questions, you are free to do so.

36:13 But some of us have to be off elsewhere. So I will thank you for coming. Thank you very much. James, thank you and the board for updating attendees today. Could I please ask attendees not to close the session to be automatically redirected to provide your feedback in order the board can better understand your views and expectations? It's showing take a few moments to complete and is greatly valued by the company. On behalf of the board of ACTIVE ENERGY GROUP PLC, we'd like to thank you for attending today's annual general meeting proceedings. That concludes today's session. Thank you, and good morning to you all.