Waste treatment firm New Earth Solutions is likely to enter administration unless it successfully negotiates a takeover by a European combined heat and power (CHP) developer.
New Earth Recycling & Renewables (Nerr), the infrastructure fund that finances the company, has released around £45m of the company’s debt to shareholders to allow the acquisition.
New Earth interim chief executive Gerben Nijland told MRW he was “optimistic” the deal would go ahead. The parties involved have set a deadline of 31 May for the acquisition, but Nijland indicated this could “slip a few days”.
Details of negotiations were outlined in annual reports filed to the Channel Islands Securities Exchange for New Earth Solutions Group Limited (NESGL) and New Earth Solutions Facilities Management (NESFM).
The reports said Nerr had agreed to release £18.2m worth of shareholder loans owed by NESGL and £27.5 from NESFM to facilitate a deal.
They indicated that a “developer of large CHP plants in Europe” would take full ownership of both NESGL and NESFM on acquisition of the senior debt – the level of which has not been announced. The senior debt is provided by the Co-Operative Bank and Norddeutsche Landesbank Griozentrale.
The reports added that company directors “may have no option” but to appoint administrators if the deal does not go through.
Nijland said the company, which sold its Avonmouth energy recovery facilility for just £2 last year in order to minimise its losses, has been seeking an investor for some time.
“It’s a big transaction, it really takes time to get this together,” he added. “Negotiations have been between our bankers and the third-party investor.
“At this moment I can’t give the name [of the investor]. I am optimistic the deal will be done.”
The annual reports, which cover the year to 31 January 2015, revealed a consolidated loss of £29.7m for NESGL and £27.1m for NESFM. New Earth Solutions’ overall liabilities exceeded total assets by £4.9m. The company’s woes have continued since then.
The Avonmouth plant was sold to Avonmouth Bio Power, but NESGL was retained on a 30-month contract to supply refuse-derived fuel (RDF). In December last year a fire at the facility caused problems for the supply of RDF.
Following an accident at NESGL’s Blaise Composting Facility in 2014, in which an employee died, NESGL is also facing a potentially large fine.
The Health and Safety Executive is prosecuting the company, and the case has been referred to Maidstone Crown Court for plea and sentencing hearings. In March this year NESGL indicated it would plead guilty, but details of the charges have not been made available.
The annual reports said the company was “unable to quantify this claim” and said that disclosing a value “would be seriously prejudicial to the interests of the company”.
Nijland said a date had not been yet been set for the court hearing.