“We managed to sell the assets of the business which is now traded through the acquiring entity."Find out more
We were asked to help a struggling Hereford-based biomass company which was unable to solvently continue trading. The business suffered a perfect storm of two closures during lockdown, financial reassessments and a Company Voluntary Agreement (CVA).
Marco Piacquadio and Alan Coleman were appointed in July 2023. And thanks to their expertise and experience in the biomass industry, were able to sell the assets to a unconnected competitor in the biomass industry, which is now traded through the acquiring entity, and save some of the jobs. FTS’s insight into the business model, competitors and industry proved to be key.
The principle activity for the business was to generate renewable energy from dried woodchip, which powered the industrial estate on which it was located. The biomass company sold surplus electricity to the National Grid and utilised its biomass boilers to dry the woodchips for its operations, selling any surplus wood chips to other biomass users in the area. Unfortunately, the multiple unforeseen issues suffered by the once-viable business ultimately led to the company’ collapse.
The company was set up by raising £3.9m, which included the installation of specialist biomass boilers and the infrastructure. The boilers, which powered the business, allowed it to claim discounts via the Government’s Renewable Heat Incentive Scheme (RHI).
However, following significant delays in receiving the RHI accreditation from OFGEM, the company was forced to suspend operations in 2018 while it awaited the outcome. A further £650,000 was required to start operations again following accreditation in 2019, which was fortunately raised.
Fortunes began to improve. The company started to generate income and was on the road to profitability while fulfilling business projections. But that all came to a sudden halt when operations were forced to cease during the 2020 lockdown. The biomass producer closed in March and reopened in July.
Unfortunately, further generation interruptions were experienced in both November 2020 and February 2021. Both were caused by issues through the processing of claims via the OFGEM schemes. Although these issues were dealt with by April 2021, the damage had been done, with some customers lost due to a lack of consistent woodchip supply.
In April 2021 the business sought restructuring advice and entered a formal insolvency arrangement of a CVA with its creditors. The CVA was launched shortly after, and the supervisors managed to obtain a third-party investor and spit the business three ways (33.33% each) between:
- the new investor
- the current financer (secured lender)
- the management.
The supervisors also regulated the relationship between OFGEM and the business and it was set to continue.
However, the final blow came earlier this year. The energy regulator blocked the biomass facility from receiving RHI benefits, which made the buisness unable to gain income from the heat generator. As a result, investors’ capital was at risk – which is where we came in. Although the business was sold to a competitor, our work resulted in some jobs being saved.