Biomasa Italia Italian Biopower producer has made contract with Active energy for wood chips import from Ukraine
Biomasa Italia Italian Biopower producer has made contract with Active energy for wood chips import from Ukraine

London listed Active energy owner of Niki Wood an Ukrainian producer signs Italian wood chip deal

Biomass producer Active Energy (LON:AEG)  has signed a contract with Italian generator Biomasse Italia to supply at least 240,000t of wood chip over a two-year period.

The wood chip will be loaded from Active Energy’s deepwater port in the Black Sea in 15,000t shipments from January. Biomasse Italia runs two retrofitted power stations in southern Italy that produce up to 500 GWh/yr, burning 700,000 t/yr of wood chip.

Active Energy has been running successful test shipments to Biomasse Italia over the past two months and is now targeting other emerging wood chip consumption regions in the power generation market. The producer is the largest supplier of biomass in the Ukraine and believes the higher calorific value of its wood chip and proximity to the European market give it a competitive edge over international exporters. A lack of reliable suppliers in the region has resulted in high levels of interest for its product.

“The energy industry is experiencing great pressure, across Europe, with tightening supply of wood chip and forestry products in general,” Active Energy chief executive Richard Spinks told Argus. “We have the expertise and advantageous geographic locations to procure, process and ship quickly and efficiently, and this will form a stable and profitable base upon which we can build.”

Active Energy has access to substantial forestry resources in Ukraine and believes the country could become a major supplier to several key chip markets such as Italy and Turkey because of its existing rail and port infrastructure.

London-listed Active Energy Group PLC with operations in Ukraine announced on June 4 that it had entered into a conditional agreement to acquire 100 percent of Cypriot-registered Nikofeso Holdings, a Cypriot-registered trading and holding company with its principal subsidiary company, Nikwood, which specializes in exporting high quality wood chip for biomass power generation and medium density fireboard manufacturing in Ukraine, for €4.4 million (about $5.75 million).

Active Energy Ukraine is a wholly owned subsidiary of London listed Active Energy Group. Although the company has its registered office in the UK, the place of central management and control of the Company is currently located in the Ukraine.  A Ukrainian acquisition formed in October 2011 to address the opportunity provided by the immense timberlands in the Ukraine and the European growing demand for biomass. The company assets are all situated along the EU; Polish-Ukrainian border.

The company also said it has conditionally raised a total of €3.6 million ($4.7 million) in order to provide working capital for the enlarged group and to pay for costs associated with the acquisition.

“This marks the start of the new Active Energy Group,” said Englishman Richard Spinks, chief executive at Active Energy. “The demand for wood chip/biomass is strong and expected to increase. We have the expertise and advantageous geographic locations to procure, process and ship quickly and efficiently and this will form a stable and profitable base upon which we can build.”

The company’s report said the deal also will strengthen and supplement the company’s existing forestry and associated exploitation rights in western Ukraine, establishing it not only as a fully integrated provider of wood chips, but as the chief operator in the Black Sea and Balkan regions.

Specifically, expanding in Ukraine provides Active Energy with rail access to Belarus and Russia, sea access to the Middle East and Mediterranean countries, as well as lower logistic costs and financial exposure, according to the company.

Nikwood has wood processing facilities located in two deep-water ports in Mykolaiv region. In 2012, the company processed 39,000 tons of wood.

Active Energy Ukraine has 10-year contracts for the purchase of wood, which it processes into chip fuel in Ukraine and uses to replenish its supply to power facilities in Poland.

In particular, under the contract, Liuboml Forestry in Volyn region will deliver up to 100,000 tons of wood per year at a fixed price, while Volyninvestbud will process raw materials into chip fuel at a fixed rate, delivering up to 80,000 tons of finished products per year.