NewsTrading Update, Interim Results Dublin, Ireland – 5 September 2006
With regard to its business model, the roll out of sites is proceeding at a rapid and escalating rate. This is demonstrated by the following Key Performance Indicators: |
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Based on a combination of current construction plans and planned regulatory submissions, revised customer deliveries and hedging practices, the Company reaffirms its ability to meet all delivery obligations. The market drivers continue to be strong as the World moves towards implementation of the Kyoto Protocol in 2008. At present there is a supply/demand imbalance which, the Company's research indicates, will result in a cumulative shortfall of some 2.4 billon tonnes for the period covered by the Protocol i.e. 2008 to 2012. This provides a substantial market opportunity for AgCert. As a now well established leader among CDM project developers, AgCert is expanding its network of operations into new geographies and CDM opportunities beyond those already under development in Brazil and Mexico. The partnership with AES, one of the world's largest global power companies, complements AgCert's leading position in this rapidly developing market. AgCert's initial stake in the offsets output from AES AgriVerde is 20% but AgCert has the ability under the terms of the transaction to receive an additional 30% if it also makes a cash capital contribution to the venture. In order best to exploit the Company's position as a first mover, AgCert has further strengthened and developed its infrastructure at all levels. As announced in June, senior management appointments have been made and the total number of staff has expanded to 293 from 208 at the start of the year. In addition, the Company made significant investment in operational and IT systems to enable the business to scale up and build even stronger foundations for the future. The regulatory environment, which impacts the whole industry, continues to evolve. In general, the CDM Executive Board has revised previously approved methodologies across all sectors of the industry lower which has resulted in a reduction in allowed CER yields for Offset producers. The Company has demonstrated significant flexibility in adjusting the business model to the regulatory changes and has made good progress in managing and executing its business, resulting in an annual run rate of 2.6 million offsets at the end of August 2006 and a total credit reserve of 26 million offsets. In line with the group's long term business plan, the management have put in place short term funding arrangements, including a pre-payment arrangement of €60 million with The AES Corporation, €20 million of which has been drawn down,and are now actively considering how best to finance the next stage of the company's development to enable the roll out of the company's strategy. The Board expects that the business will be generating significant cash flows within eighteen months time. There remains an on-going need for better understanding of the CER market by all stakeholders, an education role that AgCert is well positioned to assume. The Company believes that pricing volatility witnessed in relation to European Allowances has subsided and current expectations are that the market has found a new, more stable level. The rapid fall off in prices has dissipated much of the speculative interest which had built up in CER trading allowing long-term operators such as AgCert to plan and trade in a normalised environment. The present price level is considerably higher than that assumed by AgCert at the time of its IPO in 2005. Commenting on today's announcement, Bill Haskell, AgCert's Chief Executive said: 'I am pleased to report further strong progress at AgCert in terms of both operations and regulatory approvals. The market for Carbon Emission trading is developing well in advance of the start of the Kyoto protocol compliance period in 2008. We continue to be very excited about the AES AgriVerde joint venture as the benefits derived are incremental to the AgCert business plan as is the wider interest in our activities following the agreement's announcement. The Company has made a strong start to the year enhanced by the excellent progress achieved thus far in the first two months of the second half. We are building scale and momentum in the business, which substantiates our market position and secures our platform for growth in a market with an unusually high level of potential growth. The company remains on course to deliver our ambitious targets in this exciting market place.' Contacts::
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About AgCert AgCert International plc was founded in 2002 to produce and sell reductions in greenhouse gas emissions (referred to as "offsets") from agricultural sources on an industrial scale. These offsets are intended to satisfy the requirements of the Kyoto Protocol and be capable of being traded on the European cap and trade system, the European Union Emissions Trading Scheme ("EU-ETS"). AgCert has identified agriculture as one of the largest commercial opportunities for Offset production and expects to be a leading supplier of Offsets from this sector. Agriculture is responsible for around 20 per cent of the world's annual greenhouse gas emissions. Under the Kyoto Protocol, any reductions in greenhouse gas emissions derived from this sector qualify as CERs provided they are derived from projects that have been validated by a DOE and Registered by the UN Executive Board and are properly verified and certified according to the stringent requirements laid down by the UN. The Group's strategy is to expand rapidly its Offset production and resultant sales capacity by commencing the modification of Animal Waste Management Systems ('AWMS') on farms where it has already entered into arrangements with farmers and by rolling out its turnkey AWMS modification methods both geographically and across additional livestock species beyond its current focus on swine through the entry into contracts with additional farms. More information about AgCert's Greenhouse Gas Reduction projects can be found at www.agcert.com ############################################################### AgCert International plc Chairman's Letter to Consolidated Interim Financial Statements Period From 1 January 2006 to 30 June 2006 The first six months of 2006 have both reaffirmed the business opportunity forAgCert to produce greenhouse gas emissions offsets, and further defined the Company's ongoing operating and regulatory challenges in reaching its goals. In advancing the business during this period, the Company was issued and sold its first CERs from projects in Brazil and Mexico, and has expanded both the geographic scope and host sectors for biodigester-related CDM projects. The challenges include managing a rapidly growing enterprise in a new industry and navigating the evolving regulatory environment. AgCert has continued to develop rapidly and, at 30 June 2006, had over 460 completed sites in Mexico, Brazil and Chile, as compared to 262 at year end 2005. The Company had obtained 57 Letters of Approval from the Authorities in Mexico and Brazil and had 17 Registered projects, as compared to 15 and 3, respectively at year end 2005. The estimated annual run rate for the Company's completed and operating sites was approximately 1.9 million offsets. The Company has completed its program to repair and remediate sites, primarily located in Brazil, and has established an ongoing programme to better monitor and to optimize the operating parameters of all sites. Using new and improved technical designs, AgCert is extending its activities to new jurisdictions and also exploring agricultural sectors beyond modified animal waste systems. AgCert has secured advance sales contracts of approximately €114 million, and sees an abundance of potential future customers. The Company has been working with its customers to match its revised and updated regulatory and production schedule with the customers' delivery requirements. As previously disclosed, AgCert has negotiated a net price increase of €30m (€60m additional revenue and €30m cost). As announced on 31st May 2006, AgCert has entered into a joint venture called AES AgriVerde Limited, with The AES Corporation to develop new offset creating agricultural projects in selected countries in Asia, Europe and North America. The AES Corporation has announced its intention to invest approximately $300 million in the joint venture over the next five years to produce offsets. For its participation, AgCert is entitled to receive offsets representing 20 per cent of AES AgriVerde's production up to a target annual production rate of 20 million offsets. AgCert is eligible to receive a higher percentage of offsets by investing in the joint venture. As anticipated, with more sites to contract, build and operate in more locations, the Company has strengthened the number of employees from just over 200 at year end 2005 to nearly 300 today to meet the needs of our business. We have restructured some operations in Brazil and have greatly bolstered the senior management ranks by hiring a Chief Operating Officer, a Chief Legal Officer and a Senior Vice President of Global Operations. The regulatory framework continues to be challenging, increasing uncertainty in the market. In general, the CDM Executive Board ('EB') has continued to revise previously approved methodologies across all sectors of the industry which has caused a reduction in allowed CER yields. Most significantly from the Company's perspective, the EB's recent deliberations may have a negative impact on the quantity of CERs to be delivered from future projects. Notwithstanding these challenges, the company has demonstrated significant progress in managing and executing its business resulting in an annual run rate of 2.6 million offsets at the end of August 2006. Based on a combination of the current run rate, construction and regulatory plans, revised customer deliveries and hedging practices, the Company expects to meet all delivery obligations. The six month financial statements reflect a net loss of €45.7m (EBITDA), with an EBITDA of (€15.7m) after excluding the one time contract restructuring cost of €30 million referred to above. Capital expenditure of €14.3 million in the period reflected the construction of bio-digesters in Mexico, Brazil and Chile. To maintain the momentum now achieved, the Company has and is engaged in raising additional funds for capital and operating expenditures over the coming periods. In the first six months of 2006, the company has:
The Company has identified the capital and operating resources required to continue to expand its business, and will work to secure sources of CER supply, construct biodigesters on time and within budget and operate and maintain facilities for the long term, all the while satisfying significant regulatory requirements. Progress in the two months since the period end had been very strong with runrate improving to 2.6 million at the end of August 2006. With this continued progress in the core business and the incremental contribution from the AES AgriVerde joint venture, AgCert has an excellent foundation for achieving its operational and financial goals. Merrick G. Andlinger Click here to view the Condensed Consolidated Interim Financial Statements 5 September 06 |