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ENE Strategic Review Update - UK/Europe Businesses
23 Mar 2009
New Electricity Pricing Arrangements for 12MW of UK Landfill Projects
Energy Developments Limited (ASX: ENE or the “Company”) announces that it has terminated extensive discussions in relation to the potential sale of its UK/Europe landfill gas businesses which have been ongoing on an exclusive basis since late 2008.
In making this decision, the Company took account of a range of factors including the Company’s view of the future cash flows from its continuing ownership of the businesses and the context of the deteriorating financial market conditions prevailing in Europe, which add considerably to the uncertainty and conditionality of any sale proceeding to conclusion.
ENE currently considers it likely that these conditions will persist for some time, and therefore it will continue to focus on the ongoing profitable growth of its strongly performing UK/Europe businesses.
Managing Director Mr Greg Pritchard said “A clean sale of the UK/Europe landfill gas businesses at an acceptable price has not been forthcoming to date, and at this point our efforts will focus on the continuing strong performance of this business under ongoing ENE ownership”.
Consistent with this approach, the Company also advises it has received two favourable “economic termination” approvals from the UK Office of Gas and Electricity Markets in relation to approximately 12MW of contracted capacity.
This contracted capacity was previously subject to the UK Non-Fossil Fuel Obligation power purchase agreements drawn up when the relevant projects were originally developed. The favourable “economic termination” approvals mean that the Company will be able to sell electricity and green credit benefits (known as ROCs or UK Renewable Obligation Certificates) at more favourable pricing.
Whilst the financial impact of the revised pricing arrangements will ultimately depend on electricity generation from the contracted capacity and newly enhanced pricing achieved, the estimated impact in a full financial year should result in an increase in the Company’s gross revenues of approximately £5.0m million (A$11 million) and net profit before tax of approximately £4.0 million (A$8 million).
The new pricing arrangements are estimated to take effect from 1 May 2009.