Pre-Closing Update & Significant Contract Development
Dublin, Ireland – 21 December 2006
The Board of AgCert International Plc is pleased to announce that the company has met the target set out last September for emission reductions ('ER') submissions to the UN Executive Board and, that following successful contract re-negotiations, the profitability and risk profile of the business have been significantly improved.
- Economics and risk profile improved
The company's principal fixed contracts have been re-negotiated, releasing significant capacity for sale at full market prices, adding an estimated €53m - €95m to company gross revenues whilst, at the same time, improving the risk profile, through substantially reducing the company's potential exposure to mark to market damages.
- ER production in line with guidance
442,000 monitored ER's posted for approval to date, in the mid range of the 400,000 to 500,000 indicated by the company in September 2006. Delivery expected early in 2007.
- Funding proceeding apace
Negotiations, to cover further funding in 2007, are progressing well with executed term sheets in place for €70 million in new loans. Completion, subject to final agreement, expected early in 2007.
- Positive outlook for 2007 and beyond
Expanding to new geographies and verticals to meet production targets. Management reaffirms that the business is on track to be cash flow positive the end of 2007.
AgCert has renegotiated the existing fixed price contracts with customers. This will free up significant capacity, for sale at full market prices, benefiting future profitability. The company's commitment to sell Certified Emission Reductions ('CERs') for 22.9 million tonnes has been reduced to 12.5 million tonnes over the three years 2007 - 09. Of the over 10 million tonne reduced delivery commitment approximately 60% of the reduction occurs in 2007. The incremental cost of the transaction was €20m and the incremental net benefit at current market prices (€15 - €19) is estimated to be €33m - €75m over the period.
Substantial improvements have been achieved in site efficiency as the result of the implementation of enhanced diagnostic and monitoring systems, with overall site production rising to in excess of 50% of available theoretical yield versus 37% in June. With many sites now producing at yields in excess of 100% of the company's expected yield the Board anticipates further gains in overall site performance in 2007 and beyond.
The company continues to expand the number of sites under development, with the constructed run rate reaching 3.0 million tonnes at the end of November. Based on our accumulated experience, we shifted our attention to more stringent site selection criteria, a strengthening of our processes and controls, and improvements in design. At the same time, we added the equivalent of over 400,000 ER's in constructed capacity during Q4. The new site construction and operation will benefit at once from the improvements now being achieved through enhanced processes and systems.
New site development, together with the significant latent capacity for improved performance from existing sites, will continue to drive the company's production output towards reaching its goal of an additional 5.0 million tonnes of capacity in situ by the end of 2007.
The company continues to make progress on its key performance indicators. The company continues to make strong progress on the regulatory front as demonstrated by the table below.
AgCert International PLC
Chart for December 2006 Trading Update |
LOAs
Registered Projects
Completed Sites |
31 Dec 2005
16
3
260 |
20 June 2006
57
19
486 |
8 December 2006
114
53
621 |
YOY % Change
613%
1667%
139% |
The joint venture, AES AgriVerde, a Bermuda-based company, has become operational with offices in Melbourne (Florida), Singapore, Moscow and Bermuda. Agreement has been reached for its first site in Malaysia, a 20,000 tonne palm oil facility with groundbreaking on track by January 2007. Overall management is pleased with initial progress and market potential throughout Asia, Russia, Poland and Ukraine.
Funding negotiations have progressed well. We have already signed term sheets to raise €70m in debt on which we expect to reach completion, subject to formal agreement, early in 2007. It is anticipated that additional funding will be raised in the first half of next year to finance further new investment, ensuring that the operational business can deliver the goal of becoming cash flow positive by the end of 2007.
AgCert continues to invest resources in exploring the potential of new technologies, agricultural sectors and supply sources which will provide the opportunity to further enhance operational performance.
The Carbon Emission trading market continues to evolve rapidly. The volume of credits brokered and traded on the European Exchange, under the EU's pre-Kyoto scheme, is now considerably ahead of earlier market expectations. In 2005 a volume of 262M tonnes was traded. In 2006 this is estimated to have grown to 795M tonnes. (Source: Point Carbon). Forecasts for 2007 and for 2008, when Kyoto comes in to force, are for substantial further growth. Agriculture, AgCert's specialist market segment, accounts for 20% of global carbon emissions.
The Board is pleased with the progress that the company has made towards meeting its objectives, remains on target to meet all the remaining delivery obligations and looks forward to the future with confidence.
Bill Haskell, Chief Executive, commented:
'2006 has been a year of substantial growth for AgCert. We are proving the efficacy of our business model and have established AgCert as a dominant player in the origination of emission reduction credits, by laying down a significant global footprint, in the emerging climate change market place.'
'We are building on our accumulated experience, creating powerful business tools through which we continuously improve our performance enabling us to maintain our industry leading position going forward.' - 21 December 2006
The company's senior management team will host an analyst conference call at 12.00pm today. Please contact Claire Dilley at College Hill on the number below for details.
ENQUIRIES:
| AgCert International |
| Bill Haskell, CEO, AgCert International |
+ 353 1 245 7400 |
| Paul D'Alton, CFO, AgCert International |
+ 353 1 245 7400 |
| |
| College Hill |
| Mark Garraway/Anthony Parker |
+44 (0)207 4572020 |
The shares of AgCert International plc (the “Shares”) have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act"). The Shares may not be offered or sold in the United States, or to, or for the account or benefit of, U.S. persons as such term is defined in Regulation S under the Securities Act except (1) in a transaction meeting the requirements of Regulation S under the Securities Act, (2) pursuant to an effective registration statement under the Securities Act, or (3) pursuant to an available exemption from the registration requirements of the Securities Act, in each case in accordance with all applicable securities laws, including applicable state securities laws of the United States. |
