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UPDATE - Active Energy soars on confirmation of Canada forestry bids

Shares in Active Energy shot up as it confirmed its Canadian forestry joint venture, KAQUO, had received three offers to develop its assets in Alberta, Western Canada.

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Shares in Active Energy (LON:AEG) more than doubled as it confirmed its Canadian forestry joint venture, KAQUO, had received three offers to develop its assets in Alberta, Western Canada.

Active Energy owns 45% of KAQUO, which was formed in July last year to commercialise the assets that were owned at the time by the three indigenous aboriginal groups (the Métis settlements of Peavine, Paddle Prairie and East Prairie in Alberta).

At a meeting of the Métis Settlements Economic Development Summit yesterday, KAQUO confirmed it had received three non-binding, conditional offers that in aggregate were worth around US$300mln (£197mln).

The offers followed a road-show to market a non-controlling equity stake in a yet to be incorporated subsidiary of KAQUO that will commercialise the 108,000 hectares of forests.

Active Energy said it understands KAQUO will accept one of the offers and then enter into detailed negotiations to tie up the legal agreements with the successful bidder.

The Canadian forestry project is just one of the strings the company has to its bow; it is engaged in wood-chip production and supply, plus it is developing its biomass business.

Shares closed up 144% at 9.5p in London, at which price Active was valued at £54mln.

Speaking to Proactive Investors, chief executive officer Richard Spinks cautioned investors not to get carried away too soon.

“It is very important to note that they [the offers] are conditional; they are subject to further due diligence, obviously, which you’d expect; they may or may not be accepted by the KAQUO shareholders,” he said.

“We will wait and see where we are at the end of the process,” Spinks said, adding in Churchillian fashion that the latest development “marks the end of the beginning” of what has been a long drawn-out process lasting several years.

“In the next several months, we should be able to announce something more concrete,” he speculated.

Confidentiality agreements prevented Spinks from revealing the identity of the bidders, while the size of the stake that potentially could be sold off is still up for discussion.

Spinks emphasised the unusual nature of the assets owned by KAQUO; in a country where 90% of forestry land is owned by the state, the KAQUO joint venture has, in UK terms, a “freehold” over the assets in Alberta.

“The forestry itself is almost entirely mature … so it is commercial already,” Spinks said.

Furthermore, commercialising the assets brings environmental benefits, and adds value to the existing forestry, while it will also provide copious employment to the Métis people, “who are traditionally great loggers”, Spinks declared.

Quick facts: Active Energy Group PLC

Price: 0.55 GBX

LSE:AEG
Market: LSE
Market Cap: £8.47 m
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