Kier looks to embrace green technology with JV investment
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Construction, services and property group Kier has established a joint venture with its parent company Bedfordia Group to launch cleantech company Biogen.
Kier has committed £24.4 million as part of a project to enhance its environmental business following its acquisition of recycling business Pure in 2010.
Bedfordshire-headquartered Biogen was formed in 2005 by Bedfordia and currently owns and operates two commercial anaerobic digestion plants in the UK. On the back of the deal the business now plans to build a number of further plants in specific locations to accommodate local authorities and food retailers.
The terms of the deal see Kier provide an initial £5.4 million, with a further £2.5 million of equity to be invested in December 2012 and an additional tranche of £2.5 million in July 2013.
The balance amount of £14 million is to be committed in installments over the next four years to help with the financing of the anaerobic digestion plants.
The existing management team of Biogen will remain with the business and has now been given options over Biogen's shares to ensure long-term commitment to the business.
In February Kier appointed Nicola Peake as managing director of its environmental business.
Paul Sheffield, chief executive of Kier, comments, '[The deal] demonstrates Kier's strategy of developing intelligent solutions for our clients and also our commitment to the green agenda.
'We see significant potential in an attractive market for the development of the business in the coming years.'
For the year to date 31 December 2012, Biogen made a lost before tax of £1.7 million after it had a year of 'significant investment' in development and research and development, and an EBITDA of £100,000.
Kier expects its return on capital over the initial investment phase to exceed 15 per cent and for Biogen to have nine plants by 2017.
John Ibbett, chairman of Bedfordia Group, says that part of Biogen's long-term strategy has been a desire to identify a partner which it can develop the 'proven commercial viability' of its own technology.
He adds, 'The joint venture will now be bale to expand its network of plants across the UK, making clean green energy from food waste available to more end-users.'