An emerging Hull manufacturing facility for a wonder construction product has been put on hold.
The Tricoya plant at Saltend has suffered significant delays and escalating costs in its build-out. Now a buy-out of consortium partners by the major shareholder, Accsys, has led to the decision.
The pause - for at least six months, but not indefinite - comes as it revealed a further £30 million is required to take it to commercial operations, on top of an already inflated £89 million investment at the Saltend site. A figure of £120 million is now being eyed, with £500,000 further for every month passing in the holding period. It is double the figure outlined at project outset.
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Rob Harris, chief executive of Accsys, broke the news in an update to the City on the ownership. It followed an announcement two months ago citing difficulties in agreeing the financial steps forward, with short term viability flagged due to feedstock volatility on top of the widened capital expenditure. What has emerged is described as a “solvent solution”.
Instead of holding the balance of the 38.2 per cent in Tricoya UK and IP vehicle Tricoya Technologies Limited, a transaction valued at £8.4 million has seen Ineos, Medite, BGF and Volantis take a 5.7 per cent stake in Accsys, 11 million shares.
Mr Harris said: “Accsys is pleased to take over 100 per cent of the Tricoya project. This provides us certainty over the project, gives us full control and the ability to complete the construction on our terms, at the right time. Whilst that time is not right now, the validation work undertaken has demonstrated that the opportunity to produce Tricoya at attractive margins in the future remains strong. We are also pleased to move ahead with the continued support of Ineos and Medite as supply and offtake partners.
“As we look ahead, with full ownership of the Tricoya entities, Accsys can now benefit from the full upside of the Hull plant and from any future facilities or licences created globally where Accsys continues to see a compelling global market opportunity for Tricoya. The Tricoya project remains synergistic with the Accoya market proposition which is building positive momentum following the successful commissioning of the fourth reactor in Arnhem and with the advancing construction of our facility in the USA.”
Accsys combines chemistry and technology to create high performance, sustainable wood-based building products.
Further cost reviews are to be undertaken, though the business expects to achieve gross margins of 40 per cent at “normalised acetyls prices” when working to targeted capacity.
Rising plant costs have been partly attributed to Covid-19, as well as the loss of a principal contractor, with the continuing volatility in energy and acetyls prices bringing significant concern. The hold - which will see already reduced on-site activity stopped - is described by Accsys as a measure to “mitigate the risk of weaker economics on start-up due to current high and volatile acetyls raw material prices in Europe”.
The board has set measurable parameters for a return to final construction and commissioning, with two specialist firms engaged to validate what is required on a first-of-a-kind project. A total of 30 jobs are anticipated to be created on completion.
Ineos was part of the consortium as a legacy of BP’s interest, having bought its specialist chemical business of which Hull was a significant focus. Medite is a leading European MDF brand, with BGF and Volantis both investment entities. Ineos and Medite will retain supply and offtake agreements “as committed commercial partners”.
Accsys said in the immediate term, it will focus on increasing Accoya production at its Dutch plant - a procedure that is less acetic anhydride intensive and naturally hedged through by-product sale - from which revenues “will also support future financing options for the Tricoya Hull project”. NatWest has also agreed to restructure its debt facility, lowering the principal amount by approximately £7.8 million to £5.2 million under a new seven year term.
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