'Kedco's finances were in dire straits until FBD arrived on the scene'

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Kedco manag<strong>in</strong>g <strong>dire</strong>ctor Donal Buckley (left) and f<strong>in</strong>ance <strong>dire</strong>ctor Gerry Madden model calls for Kedco establish<strong>in</strong>g partnerships with these customers, to own and operate electrical generation plants, with the aim of benefit<strong>in</strong>g from recurr<strong>in</strong>g revenue streams generated by the sale of the electricity. Accord<strong>in</strong>g to Kedco, the company has identified 25 specific opportunities for Kedco Power, of which seven have signed, non-b<strong>in</strong>d<strong>in</strong>g letters of <strong>in</strong>tent. However the firm cautions: “Whether the identified projects become operational depends upon a number of factors, <strong>in</strong>clud<strong>in</strong>g enter<strong>in</strong>g <strong>in</strong>to commercially acceptable agreements with jo<strong>in</strong>t venture partners, secur<strong>in</strong>g satisfactory <strong>in</strong>vestment and f<strong>in</strong>anc<strong>in</strong>g terms and receiv<strong>in</strong>g the appropriate plann<strong>in</strong>g consents.” The bus<strong>in</strong>ess model is challeng<strong>in</strong>g. For <strong>in</strong>stance, Kedco Power says it is currently <strong>in</strong> discussions with a waste operator <strong>in</strong> London to develop a 4MW gasification plant with the capability of process<strong>in</strong>g 18,000 tonnes of wood waste per annum. For that project to get off the ground, Kedco has to source the appropriate technology, arrange the necessary debt f<strong>in</strong>ance, manage construction of the plant, provide its share of the equity f<strong>in</strong>ance and strike a supply deal with a power company. Multiply that by 25 times and there’s a lot of legwork and legal agreements <strong>in</strong>volved. So much rests on the cont<strong>in</strong>ued on page 38 Bus<strong>in</strong>ess Plus January 2009 37
ENTREPRENEURS shoulders of Donal Buckley, a native of Castletownshend. He po<strong>in</strong>ts out that regulatory requirements to reduce landfill waste and boost green energy will <strong>in</strong>crease demand for the type of small power plants be<strong>in</strong>g promoted by Kedco Power. Buckley’s ma<strong>in</strong> sales focus is on the UK, where there are better <strong>in</strong>centives than <strong>in</strong> Ireland to produce electricity from waste. Buckley believes Kedco enjoys “early mover advantage” <strong>in</strong> the UK. While there is no shortage of technology providers try<strong>in</strong>g to sell green plants to waste operators, companies such as Kedco that want to partner with them and operate on a jo<strong>in</strong>t venture basis are th<strong>in</strong> on the ground, he said. Such is Kedco’s vision. But br<strong>in</strong>g<strong>in</strong>g it to life will require capital fund<strong>in</strong>g. Each plant costs <strong>in</strong> the region of €8m to build, and <strong>in</strong> a jo<strong>in</strong>t venture Kedco would have to source debt f<strong>in</strong>ance and pony up some cash itself. That’s money that Kedco doesn’t have, which is where the AIM list<strong>in</strong>g comes <strong>in</strong>. Accord<strong>in</strong>g to Kealan Doyle of Lewis Charles, the stockbroker which <strong>in</strong>troduced Kedco to AIM, there is considerable <strong>in</strong>vestor appetite for renewable energy projects given the long-term momentum beh<strong>in</strong>d the sector. He said: “With Kedco, you’re talk<strong>in</strong>g about a bus<strong>in</strong>ess that can grow <strong>in</strong>credibly quickly <strong>in</strong> the next few years. So I do th<strong>in</strong>k there will be money available for someth<strong>in</strong>g like that, barr<strong>in</strong>g some extreme event,” he said. Ian Hunter, equity analyst <strong>in</strong> renewable energy at Goodbody Stockbrokers, agreed that there are specialist <strong>in</strong>vestors who take a longterm view of the renewable energy sector and are will<strong>in</strong>g to <strong>in</strong>vest <strong>in</strong> green energy projects. Accord<strong>in</strong>g to Hunter: “You’re look<strong>in</strong>g at long lead-<strong>in</strong> times before revenues start to accrue. Ord<strong>in</strong>ary <strong>in</strong>vestors wouldn’t be <strong>in</strong>cl<strong>in</strong>ed to <strong>in</strong>vest <strong>in</strong> that type of company, especially at the moment. But there are specialist funds that would take the view that alternative energy is on a growth curve.” Buckley, who has an 8% stake <strong>in</strong> Kedco and is on a salary of €200,000, Kedco Pr<strong>in</strong>cipals ● William K<strong>in</strong>gston, 37, nonexecutive chairman. One of the four orig<strong>in</strong>al founders. His Cork dairy farm is one of the largest <strong>in</strong> Ireland. Owns 8% of Kedco. ● Diarmuid Lynch, 43, non-executive <strong>dire</strong>ctor. Co-founder who also has a big dairy farm <strong>in</strong> Cork. Owns 10%. ● Donal Buckley, 33, chief executive. He was also <strong>in</strong> at the start <strong>in</strong> March 2005. Buckley was a divisional manager with SWS Farm Services, a w<strong>in</strong>d energy firm. Graduated from UCD 1997 with a degree <strong>in</strong> Agricultural Science. Owns 8%. ● Gerry Madden, 49, f<strong>in</strong>ance <strong>dire</strong>ctor. Chartered accountant who jo<strong>in</strong>ed Kedco <strong>in</strong> May 2007. ● Edward Barrett, 41, non-executive <strong>dire</strong>ctor. Co-founder of Kedco. His firm International Livestock Genetics distributes bov<strong>in</strong>e genetics and Barrett is also a <strong>dire</strong>ctor of Plat<strong>in</strong>um Asset Management. Owns 6%. ● Donal O’Sullivan, 64, nonexecutive <strong>dire</strong>ctor. Jo<strong>in</strong>ed the board <strong>in</strong> August 2007. He was the chairman of Esso Ireland <strong>until</strong> 2001 and then manag<strong>in</strong>g <strong>dire</strong>ctor of Hoyer. ● Alf Smiddy, 46, non-executive <strong>dire</strong>ctor. Jo<strong>in</strong>ed the board <strong>in</strong> May 2007. Smiddy was <strong>in</strong> charge of Cork brewer Beamish & Crawford for 20 years <strong>until</strong> its recent takeover by He<strong>in</strong>eken. observed: “People always ask me if green is go<strong>in</strong>g to be like the dot com bubble - is it go<strong>in</strong>g to burst The difference is that with green there is someth<strong>in</strong>g very tangible, renewable energy replac<strong>in</strong>g oil imports. This is someth<strong>in</strong>g that even the average punter can understand.” The green energy sector is young, and so is Buckley, but he’s not fazed by his relative youth. “It’s someth<strong>in</strong>g I don’t th<strong>in</strong>k about it too much to be honest,” he said. “The only way to ga<strong>in</strong> credibility is to deliver. The one th<strong>in</strong>g you can’t be when you’re young is cocky, because if you’re young and arrogant you’ll get pulled to the ground very fast.” Kedco’s other executive <strong>dire</strong>ctor is longer <strong>in</strong> the tooth. F<strong>in</strong>ance <strong>dire</strong>ctor Gerry Madden, 49, jo<strong>in</strong>ed Kedco last year on a salary of €250,000 per annum. Madden previously operated his own consultancy practice advis<strong>in</strong>g companies on mergers and acquisitions, and he is a non-executive <strong>dire</strong>ctor of Ecom Interaction Services, a ‘There’s a lot of legwork and legal agreement <strong>in</strong>volved’ subsidiary of Newcourt plc. Kedco’s admission price on AIM was 17.5 cents per share, giv<strong>in</strong>g the company a notional value of €35m. The list<strong>in</strong>g process began last June and Kedco put together a heavy-weight professional services team to make the list<strong>in</strong>g happen: Arthur Cox <strong>in</strong> Dubl<strong>in</strong> to handle the legal side, Deloitte <strong>in</strong> Cork for the full f<strong>in</strong>ancial audit and then Deloitte Corporate F<strong>in</strong>ance <strong>in</strong> London as its nom<strong>in</strong>ated adviser. Despite the punish<strong>in</strong>g due diligence, Buckley feels that Kedco has benefited greatly from the process. He said: “List<strong>in</strong>g is very good for a bus<strong>in</strong>ess. You have to go through everyth<strong>in</strong>g <strong>in</strong> great detail. You’re asked the same th<strong>in</strong>g five different times by five different people. I’m glad it’s f<strong>in</strong>ished but it was well worth do<strong>in</strong>g.” However all that hard work, and the large expense <strong>in</strong>volved, will only be worthwhile if Buckley, Madden and chairman Bill K<strong>in</strong>gston can persuade <strong>in</strong>stitutions that Kedco has the ability to deliver on its ambitious bus<strong>in</strong>ess model. 38 Bus<strong>in</strong>ess Plus January 2009
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'Kedco's finances were in dire straits until FBD arrived on the scene'

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