Active Energy Studies Burning Own Biomass to Boost Profit

Active Energy Group Plc, a Ukrainian supplier of wood chips to power stations, is studying a plan to increase profit by burning its own biomass.

The company may burn its wood at a plant in Italy rather than selling to the site, Chief Executive Officer Richard Spinks said, without identifying the facility. That would enable it to receive government subsidies for clean-power generation while paying the plant’s owners a percentage of the profit, he said.

“We might earn significantly more per ton burning it,” Spinks said in an interview in London. “It would be a great flagship for our company to become a bigger company.”

Governments are promoting biomass as a cleaner alternative to fossil fuels as they strive to curb carbon emissions and increase energy security. Unlike other renewable-power plants such as solar and wind farms, biomass facilities don’t depend on the weather and can produce electricity around the clock.

Active Energy, which produces wood chips from forests in Ukraine, won a contract from Biomasse Italia SpA in August to deliver the material to two power stations. The London-based supplier is now in talks with a “well-known” company in Italy about burning wood at its plant, according to Spinks.

“The model is interesting because it turns the equation upside down,” the CEO said. “We are the small startup and they’re the big conglomerate and they want to work with us. It has never happened before.”

Expansion Abroad

Active Energy may consider replicating the model in the future, according to Spinks, who said the current facility being considered is “perfect” because it isn’t too big.

The company also may expand to other countries where it can find suitable forests near ports “within two days’ sailing of Italy,” he said. While many European plants buy North American wood -- increasing emissions from shipping the fuel -- Active Energy uses wood from Ukraine, limiting costs and carbon output.

“As we’re closer, the customer can order later -- it’s more convenient and they can buy smaller loads at shorter notice,” Spinks said. “The shorter the delivery time means our wood is fresher and the quality is better.”

To contact the reporter on this story: Louise Downing in London at ldowning4@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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