Business Overview

 

ReEnergy Group has entered into arrangements with Pirelli Ambiente (a division of the Pirelli Group) for a licence to exploit Pirelli Ambiente's patents and know-how related to the manufacture, use or sale of high-grade refuse derived fuel (RDF) in the UK.

Technology Description

 

Pirelli Ambiente's processes produce a high-grade fuel that is almost entirely derived from the dry fraction of municipal solid waste with the addition of highly calorific components such as chlorine free plastics and granulated rubber.

 

The resultant fuel is then used in partial substitution of coal in already existing industrial facilities such as thermoelectric power plants and cement kilns.

 

In Italy, Pirelli Group's technology has been used for over two years in Cuneo, in the North-West of the country, where the proportion of energy recovery from waste (approximately 32%) is higher than both the Italian average (8%) and the European average (25%).

 

In providing an effective solution to the problem of waste disposal, the use of Pirelli Ambiente high-grade RDF in partial substitution of coal in existing plants reduces the emissions of nitrogen oxide and carbon dioxide.

 

In addition to the environmental advantages, it also offers economic benefits.  According to a study by the Institute of Economy and Politics of Energy and Environment at Milan's Bocconi University, electricity produced with Pirelli Ambiente�s high-grade RDF has the lowest production cost among all renewable energy sources. Pirelli Ambiente estimates that the high-grade RDF produced by this technology can be used for co-firing in conventional coal-fired power stations and cement kilns, replacing fossil fuel by 10% and 40% respectively.

 

View more at the Pirelli Ambiente web site.

Target Market

 

The market for high-grade RDF in the UK is significant. Fuel buyers within the UK's power sector have confirmed to ReEnergy Group that a consistent and sustainable supply of high grade RDF would be welcomed.

 

Subject to the reclassification of high-grade RDF as a non-waste fuel, or its exemption from the Waste Incineration Directive, ReEnergy Group believes that fuel buyers at coal-fired power stations would be interested in high-grade RDF as a supply of fuel for reasons of security of fuel supply, its competitive cost compared with coal and the fact that it produces fewer NOx and SOx emissions. The Directors believe that such a reclassification or exemption is probable in the near to medium term.

 

The cement kiln industry is a core and immediate target for high-grade RDF. The cement kiln industry currently burns 1,500,000 tonnes of coal per annum. No exemption or reclassification is required to allow this industry to replace 40% of the coal used with high-grade RDF.

Market Drivers

 

The primary market drivers for this business unit are below. However, there are many other market drivers in play. Click here to view the full list.

The Large Combustion Plant Directive

 

Under the LCP Directive, strict limits are to be placed on the SOx, NOx and particulate emissions of power stations from 2008. Qualifying plants have the right to opt into or out of the LCP Directive. Those plants that opt out will be restricted to 20,000 hours of operation in total from 2008, with enforced closure by the end of 2015.

 

Click here to view the Large Combustion Plant Directive

 

UK coal supply

 

Forecasts show that coal will remain a major fuel source for the generation of electricity in the UK to 2011 and beyond. However, ReEnergy Group believes that the UK�s domestic coal industry has been in steady decline for the last 30 years. There are currently only 83 coal mines in active operation, producing approximately 23 million tonnes per year, compared with some 1,000 coal mines in 1945 producing approximately 100 million tonnes per year. ReEnergy Group further believes that a stable and secure source of high-grade refuse derived fuel, in volume, will be of interest to coal powered power stations. This belief is founded upon the assumption that, whilst coal can be imported from various international and domestic suppliers, sustainable competitive alternatives are desirable. The availability of domestic supply is diminishing and imports are subject to infrastructure constraints and other demands on fuel transport.

 

Business Model

 

As with ReEnergy's wider business model, ReEnergy will use the licensed Pirelli technology to secure long term “build own operate” (BOO) investment opportunities.  With a focus on the UK waste market, ReEnergy is intending to bid for and negotiate long term waste management contracts from local authorities and /or other waste management companies.

 

The waste management contract will then be used to underpin the development and construction of new, purpose built waste treatment facilities which will process the municipal solid waste into the licensed, high-grade refuse derived fuel.   ReEnergy will also market and sell the high-grade refuse derived fuel into the cement and power generation markets as a clean and sustainable replacement to coal.

 

Securitised through long term contracts for waste and fuel sales, it is proposed that each waste treatment facility will be established and managed as an independent SPV, benefiting from debt / equity leveraging available through project finance.