Stobart Group closes financing for 20.2MW Widnes CHP biomass plant

Stobart Group Limited has achieved financial close on a project to construct a £110 million (US$171.5 million), 20.2MWe/ 7.8MWth combined heat and power biomass plant (CHP Plant) at the group's site in Widnes, UK.

In conjunction with the project the group has signed a 16 year index-linked fuel supply agreement.

Stobart Infrastructure is making an equity investment of £7.5 million for a 40% interest in the biomass plant holding company, Mersey Bioenergy Ltd (MBL).

The Green Investment Bank (GIB) will provide 49% of the equity (via its Foresight-managed fund) and Burmeister & Wain Scandinavian Contractor A/S (BWSC), the project's engineering, procurement and construction contractor, will take an 11% stake

Stobart and BWSC have been working together on the development of the CHP Plant for a period of almost two years. BWSC will manage the facility under a long-term operation and maintenance contract.

Investec Bank plc and Eksport Kredit Fonden are providing a senior debt facility of £42.5 million to MBL for the development of the plant. Mezzanine finance of £41.9 million will be provided to MBL by GIB and Gravis Capital Partners.

Stobart Energy will supply the CHP Plant with 146,000 tonnes of waste wood material p.a. over a 16-year contractual period, with initial revenue of £5.7 million p.a., index-linked, equating to a revenue stream of £108 million over the life of the contract.

The plant will also produce 7.8 MWth of heat, which Stobart Energy has contracted to use in an adjacent wood drying facility. This facility will be constructed by Stobart Rail at a cost of £5 million, and will receive 140,000 tonnes p.a. of virgin wood material and dry this material to produce an output of 90,000 tonnes p.a. Stobart Energy intends to sell this material into the rapidly-expanding small scale wood chip and pellet market. The expected revenue from drying facility operation will be over £200 million over the life of the agreement.

Stobart Infrastructure will own the Group's investment in MBL. The plant will be built on 4 acres of Stobart Infrastructure's 90-acre logistics hub in Widnes. The 4-acre site will be sold by Stobart Infrastructure to MBL for £2 million.

Stobart Rail, which has a proven track record in construction and engineering, will construct the dryer facility, procure the equipment and install it. Stobart Rail also expects to generate revenue as a civil works sub-contractor to BWSC for the construction of the CHP Plant. The value of these two civil construction contracts will be approximately £15 million.

Richard Butcher, CEO Stobart Energy & Infrastructure commented,

This agreement secures an attractive energy investment for the Group and will contribute 24% of the growth we need to achieve our target of supplying 2m tonnes of fuel per annum into the UK biomass market by 2017/18 from 1m tonnes per annum at present . It also demonstrates the strength of our integrated infrastructure, energy and engineering capabilities.