In a financial statement released by TEG yesterday (November 25), the company claimed that ongoing costs associated with the conclusion of its Greater Manchester waste contract meant that provision of equity financing for the Group now looked ‘extremely unlikely’.
It comes as yet another blow for TEG, after the organics recycling firm posted losses of £2.5 million after tax, and announced that it was unable to reach financial close on its proposed anaerobic digestion (AD) and in-vessel composting (IVC) project at Gaydon in Warwickshire (see letsrecycle.com story).
Manchester
And in October, TEG requested for its shares to be suspended after failing to negotiate with construction company Costain for the release of £2.8 million in retentions held under the Manchester contract (see letsrecycle.com story).
The firm signed a £38 million deal to provide four Silo Cage in-vessel composting facilities under the Manchester PFI contract in 2009. The facilities were to provide 175,000 tonnes capacity for green and food waste recycling in Rochdale, Bredbury, Bolton, and Trafford Park.
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TEG had been working with Costain to secure the release of the retentions for over two years while undertaking remedial works for the construction firm as part of a programme to manage the conclusion of the contract. However, it was unable to negotiate an exit.
Following the announcement last month, the Board said that despite the suspension of shares it remained ‘confident’ that TEG would be able to continue a ‘normal course of affairs’ in relation to its operating division.
But despite sealing a new three-year local authority recycling contract, TEG said that the Board was considering the sale of certain parts of the Group – including the operating division.
Provision
The company statement reads: “The company continues to trade and the Board continues to pursue options to preserve the value of the Group and remains in discussions with its existing providers of finance regarding the on-going provision of facilities.
“At the same time, the Board is exploring the sale of certain parts of the Group, principally the disposal of its operating division as a going concern. The operating division continues to operate satisfactorily and indeed a new three-year waste recycling contract has recently been secured with a Local Authority customer which has the potential to generate revenues between £1.5m and £2m over the term of the contract.”
It adds: “The Board continues to explore all financing and strategic options for the Group but it does not believe that further funding will be secured to allow for the future working capital needs of the Group. Regrettably, under the likely structures that can be achieved, the Board believes that there may be little or no value remaining in the equity of the Group.”
TEG has said that further announcements will be made in due course.
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