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A message from our Acting Chief Executive Officer, Keith Riley
Welcome to this mid-year newsletter. In this edition we have an update on Protos, a welcome to Engsolve from Paul Emmitt, a guest article from our colleagues at Petrofac, and news on our annual report which was just published. Make sure you read them all.
The second quarter of 2023 has seen some major developments for the company – not least the acquisition of the remaining shareholding in Engsolve Ltd, making it a wholly owned subsidiary of
the Group, and the taking over of the plastics to hydrogen project at Protos from Peel. That’s not to mention the launch of a new website, which I hope conveys what PHE is all about more clearly than the old one did.
I visualise PHE as being on a journey that takes it to becoming a profitable business that makes a major impact in the markets for treatment of wastes, chemical recycling, and low carbon energy production. The road has twists and turns and bumps as well as potholes. If we pick the right vehicle, it will handle the bends, take the bumps without too much discomfort, and deal with the potholes. The road is not a smoothly surfaced autobahn – but that means we can avoid the devastation of high-speed crashes. The share price maybe in a pothole at time of writing, but if we can create a robust organisation that has confidence and resilience in what it is doing, we will soon climb out and get on our way.
Compared to some, PHE has reached a fairly advanced point in the development of its product without spending large sums on equipment, buildings or technical development. Take for example, Recycling Technologies Ltd, to name but one. RT received over £75 million through various grants and deals, but still fell over and went into administration last year. PHE is not very far away in its technical development from where RT was when it went into administration but has spent nothing like that getting there. In my view, PHE had not spent enough. It must invest in itself and has started to do this with the Powerhouse Technology Centre. The cost will be a couple of million pounds, but we are setting it up to be a source of income as well a more enhanced R&D capability than we had at Thornton. We do not relish RT’s passing, and I use it as an example just to put into context that despite progress being slower than people expected, PHE is good value for money and shareholders can be assured that we are spending their funds wisely. The building in Bridgend will be ready for occupation next month and the Feedstock Testing Unit is well into its manufacture and should be installed in the autumn. We are also advertising for staff to form the team under Dr Andy Physick, PHE’s Head of Technology Development.
The Engsolve acquisition is another example of investment. Bringing the Engsolve team into the Powerhouse Group will provide the company with an engineering capability it is not had until now, and an ability to bring in early revenues. PHE and Engsolve have worked closely together for several years, but this latest move will allow Engsolve to align entirely with the goals and objectives of the Group. We think it has an exciting future and it is a pleasure to welcome the team to PHE. Paul Emmitt, who is PHE’s COO, but has led Engsolve since its inception, gives his own welcome below.
Of course, the big news of the year is PHE taking over the development of the Protos project from Peel. Peel will keep a keen interest in progress on the project but will no longer be actively involved in its development. Whilst on the surface this appears to be a major shift, PHE has been heavily involved in the project management and all aspects of the project for well over a year and is well placed to pick up the reigns. The task of bringing finance into the project is not significantly different from what it was previously and essentially comes down to getting the various parts of the financing jigsaw puzzle in place. A more detailed description of how we intend to go about that is given in the Annual Report and well worth a read.
So we continue on the journey and we will communicate progress as it occurs. Most of it, however, is about the team continuing to do their work to put things in place and it is not possible for commercial – and sometimes for stock market regulatory – reasons to report the details. Just because a few weeks go by without breaking news does not mean we are not doing anything. I assure everyone, we are pushing forward on all fronts. It is a journey, and as the kids commonly ask “are we there yet?” Not yet – but if we keep going, we will be.
Keith Riley, Acting Chief Executive Officer
Annual results
Powerhouse Energy Group Plc has published its Annual Report for year-end 2022. You can read it on our website here.
Whilst the company made a profit at the day-to-day operating level, it was reduced from last year as most of the revenue arose from providing owner engineer support to Peel’s Protos project. Early in the year, Peel issued tender enquiries for the construction of the plant and whilst the tenderers were preparing their submissions, there was not much for Powerhouse to do other than wait. There were no other sources of revenue for the company This exemplified the weakness in the then business structure of the Company. There was no additional revenue stream that Powerhouse could tap into other than a profit share coming in from Engsolve. No income could be received from licence sales until the project(s) incorporating the technology were up and running.
As a result, Powerhouse launched a major change in its business strategy from just licencing technology to becoming actively involved in the development of projects using Powerhouse technology, marked by the publication of this Annual Report. The Company has also integrated the whole of Engsolve into the Powerhouse Group to give a continuous income stream that can be developed and grown year on year.
Read about the Company’s new approach to its business in the Strategic Report section of the Annual Report and read below more about Engsolve. We are now working on three capital projects but are not ready yet to say when these will happen. Once we can be definitive about events, we promise to let you know.
The major change in the accounts was the reduction in goodwill by £40.6 million, resulting from a re-evaluation of the number of projects that could be developed over a 5-year period, based on the status of the business on 31st December 2022. This is, of course, a reduction in balance sheet value, but has no influence on cash or future profits. The Company also wrote off debts owed by Peel NRE Ltd, which came about as a result of the acquisition by Powerhouse of the Protos SPV, Protos Plastics to Hydrogen No1 Ltd. The added value to the project is represented by the sums owed transferred with the SPV and will be re-evaluated and included in next year’s accounts of the SPV company.
So 2022 was a transition year for Powerhouse, with 2023 seeing a new board of directors and a new business strategy. We look forward to further developments in 2023 and in the years to come.
A date is not yet set for the AGM, but it is likely to be in September. We will keep you posted.
Update on Protos SPV
Last month it was announced that PHE has assumed full ownership and control of the Protos plastics to hydrogen project at the Protos site near Chester in the UK. After extensive discussions between the two companies on all aspects of the development – which included consideration of PHE taking a 50% shareholding in the SPV – it was felt that the optimal arrangement was for PHE to take full responsibility for all the engineering, project management and commercial supply and offtake arrangements associated with development, construction, and operation of the facility.
This was achieved by PHE completing the acquisition of the entire shareholding in Protos Plastics to Hydrogen No 1 Ltd from Peel NRE Ltd, the special purpose vehicle (SPV) Peel had established to develop the project, for a nominal payment of £1. Of course, it does not mean that that’s all the company is worth. It came with an option to lease the site at Protos, which has an implemented planning permission; a draft operating permit from Cheshire West and Chester Council; Inconel steel plates that had been purchased for the fabrication of the Thermal Conversion Chamber; and the benefit of all the development work carried out to date on behalf of the SPV. Most of these assets had been funded by PHE through the loan facility to Peel, so it could be regarded as a repayment of the loan in kind rather than cash – and will add to the balance sheet value of the SPV.
Ending Peel’s responsibility to develop the project also had other implications. It also ended the option Peel had regarding an exclusive right to develop PHE’s DMG™ technology in the United Kingdom (which included Northern Ireland), meaning that PHE is now free to develop other projects around the country. In line with PHE’s strategy of moving away from just licencing its technology, PHE agreed a variation of the IP Licence Agreement signed with Peel on 30 June 2021 giving the SPV the right to deploy and use the technology. This does not mean an end to PHE licencing its technology, but from now own, licences will only be granted for specifically identified projects.
This change in the relationship between PHE and Peel does not mean that collaboration between the two companies is over. The lease option between Peel and the SPV that enables the SPV to lease the site remains in place and has been amended to enable the project to be more financeable than was previously the case. This means that Peel will still be the landlord of the Protos project and will continue to take an interest in its development.
The next step for PHE is to carry out some more engineering working with Petrofac to ensure the design provides maximum value for the project, and then to seek commercial agreements for the offtakes, whether this be electricity, heat, hydrogen or other products, prior to seeking to raise finance for the construction. This work is already underway.
Welcome to Powerhouse Engsolve
Paul Emmitt,
Chief Operating Officer and Executive Director
Powerhouse Energy Group has acquired 100% of the shareholding in Engsolve Ltd – and a New Chapter Begins.
As part of strengthening and enhancing the Group offering, Powerhouse has acquired the remaining shares in Engsolve Ltd, making it a wholly owned subsidiary of the Group, and ushering in a new era of innovation, growth, and expanded capabilities. This milestone event marks the first step into not only gaining more control over its developments, but also allows the growth of engineering expertise within the Group.
This acquisition of Engsolve is a strategic decision that underlines a shared vision for the future. The collaboration brings together the strengths, expertise, and resources of both entities, creating a “Powerhouse” poised to disrupt the industry and address the most pressing challenges of our time.
The driving force behind this acquisition is the recognition of Engsolve’s excellent track record, experience of cutting-edge technologies, and multi-disciplinary talented workforce. By this incorporation into the Powerhouse group, Engsolve gains access to a broader network, increased investment capabilities, and expanded global reach. This will fuel accelerated growth, allowing the combined entity to lead the charge in pioneering technology breakthroughs and the ability to design engineer and deliver innovative solutions to clients worldwide.
Importantly, this acquisition also bolsters Powerhouse Energy Group portfolio, enhancing its expertise in key areas of engineering allowing a wider service provision to be developed. The expanded capabilities provide a competitive edge, enabling the company to take on more complex projects, diversify its offerings, and deliver comprehensive solutions to clients across diverse sectors.
In making this strategic move, the company is committed to developing the talent within it and providing career advancement. Powerhouse Technology development and commercial expertise, combined with the Engsolve technical and engineering expertise, will create opportunities for professional growth foster an environment that attracts top talent. The Engsolve staff are the key to its success to date. All personnel will be retained and form the foundation for the future growth. The influx of fresh perspectives and expertise will provide fresh opportunities to what is already a highly motivated team, helping them to drive innovation and deliver unparalleled results. Ensgolve will continue to deliver the same reliable service it always has, but with the backing of Powerhouse, the plan is to grow its service offering.
I am pleased to be part of this evolution of Powerhouse group. The acquisition has garnered significant attention and enthusiasm within the industry. As it embarks on this new chapter, the entity remains steadfast in its commitment to providing exceptional service, maintaining the highest standards of quality, and delivering cutting-edge engineering solutions that meet the evolving needs of existing and future clients.
I firmly believe that the acquisition of the Engsolve represents a transformative moment and will open up a world of possibilities for innovation, growth, and collaboration. It signifies a resolute commitment to shaping the future of the Powerhouse Energy Group, tackling complex challenges, and driving technological progress.
Petrofac
In early 2023, Powerhouse Energy signed a services framework agreement with Petrofac, a leading international service provider to the energy industry. Under the agreement, Petrofac’s Engineering and Consultancy Services business, in Woking UK, has delivered engineering design, technical support, and supply chain development services to Powerhouse’s project pipeline, including the Protos Plastic to Hydrogen facility project near Chester.
To date, Petrofac has begun scopes of work in support of Powerhouse’s commercial-scale gasification plant. This includes procurement services to drive engagement with the supply chain and ensure seamless interaction with new and existing package vendors. Prior to this, the team completed a value engineering (VE) exercise considering development options for a commercially viable process plant using Powerhouse Energy’s waste-to-hydrogen technology.
Addressing the detail
The purpose of this value engineering activity was to determine cost certainty in advance of the project progressing to the execution stages. Collaborating with Powerhouse Energy and its partners, Petrofac’s team facilitated a series of workshops to consider options to optimise costs, the impacts and the ease or complexity of implementing them.
Value engineering is a proven method of managing eventual project cost. The planning and design stages of the project lifecycle are the two phases where this type of analysis creates the most value to the project in terms of financial gain.
A multi-faceted approach
These collaborative workshops considered package equipment, to design capacity, process simplification to waste minimisation, plot plan optimisation to constructability reviews. Addressing this level of detail helps identify areas of uncertainty at the earliest engineering phases and brings huge benefit to eventual project outcomes.
Petrofac deployed experts from across various engineering disciplines – project management, process design, mechanical, piping and layout, electrical, control and instrumentation and technical safety. Each deployed their skills and expertise to consider options for modularised approaches versus stick-built solutions and utilities requirements, to develop a conceptual study for the plant running in the scenario of power only, including gas clean up and gas engine generators optimisation.
Petrofac has a growing record in deploying its engineering, project management and project delivery expertise and entering strategic alliances to support early-stage renewables projects across the hydrogen, waste-to-value, carbon capture, utilisation, and storage (CCUS) sectors. This builds on its considerable experience in designing and building transmission assets for the wind sector and a 40-year history in safely designing, building, managing, and maintaining mega-scale oil and gas infrastructure for clients globally.
Julian Trystram,
Project Manager, Petrofac
Julien Trystram, Project Manager, Petrofac said: “With many transferable skills and capabilities and a growing record in the waste-to-value and hydrogen sectors, we are perfectly suited to supporting Powerhouse Energy’s projects. We consider gasification of waste as a key enabler for a net zero future and look forward to continuing our support of Powerhouse Energy’s portfolio of projects.”
A new-look website for Powerhouse Energy
We’re very pleased to announce that Powerhouse has entered a new digital era. Over the past several months, we have been working behind the scenes, and we were thrilled to officially announce the launch of our brand-new website last month.
The site now presents what Powerhouse is really about and gives a much broader picture than was previously the case. Plastics to hydrogen remain an important aspect of our work, but that is not all we do. We have now been able to incorporate Engsolve into the company and the website will form a platform for the launch of the services Powerhouse can now offer. Our previous website served us well, but website technology continues to evolve and as a business, so do we. We felt it was time to retire our old site and replace it with a new one. The site is not flashy, but is intended to inform.
Please take a moment to explore the new site. Scroll down the opening page to get an overview of the company and links to all the other pages on the site and don’t forget to bookmark us. The new site will still carry all the investor information and news bulletins but will be easy to update, so it means we can more easily keep followers up to date with what’s going on.
Feedstock Testing Unit in manufacture
Feedstock Testing Kiln in final assembly, awaiting end shrouds and seals.
Computer model of Feedstock Testing Kiln as it will be installed, with feed system and residue removal units attached.
3D Computer model of the Feedstock Testing unit in PHE Technical Centre showing basic equipment layout.