Kier establishes a 50/50 joint venture in UK’s leading food waste to energy business
Kier has completed its investment in Biogen (UK) Limited, establishing a 50/50 joint venture in the UK’s leading food waste to energy business with its parent company Bedfordia Group plc.
Headquartered in Bedfordshire, Biogen designs, builds and operates large-scale anaerobic digestion (AD) plants to process food waste and produce renewable energy.
Kier's maximum total investment is GBP24.375m (comprising a mixture of preferred and ordinary equity), of which GBP5.375m was invested on completion. A further GBP2.5m of equity will be invested in December 2012 and another GBP2.5m in July 2013. The remaining GBP14m is scheduled to be invested in instalments over the next four years to finance new AD plants.
Biogen, which was established by Bedfordia in 2005, currently owns and operates two large commercial AD plants in the UK (both of which are included in the joint venture) and, in conjunction with Kier, plans to build a number of further plants in strategic locations to serve the requirements of local authorities, food retailers, food manufacturers and commercial waste providers to the food and retail industries.
The joint venture will enhance Kier's environmental business by providing intelligent solutions for the treatment of food waste and complements the Pure recycling business that Kier acquired in 2010.
Biogen's existing management and operational team, including its chief executive, will remain with the business. The management team has been granted options over Biogen's shares, which is intended to ensure their continued long-term involvement in the business.
As at 30 June 2012, Biogen had gross assets of GBP15m. For the year ended 31 December 2011, Biogen made a loss before tax of GBP1.7m following significant investment in business development and R&D. Biogen's EBITDA for the year was GBP0.1m. There is significant demand for new AD plants across the UK, with 7 million tonnes of food waste being produced per annum and current AD capacity of only 2.5 million tonnes, resulting in a need for a further 100 plants. Following an initial investment phase, Kier expects the return on capital to exceed 15 per cent and for the business to be operating nine plants by 2017.
Paul Sheffield, Kier Group chief executive, commented: "We are delighted to have made the investment in Biogen, which again demonstrates Kier's strategy of developing intelligent solutions for our clients and also our commitment to the green agenda. We see significant potential in an attractive market for the development of the business in the coming years."
John Ibbett, Bedfordia Group chairman, commented: "We are very happy to be working with Kier, which shares Biogen's strong company values. Part of Biogen's long-term strategy has been to identify a partner with which we can develop the proven commercial viability of our own AD technology. The joint venture will now be able to expand its network of plants across the UK, making clean green energy from food waste available to more end-users."
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