Flow Group, the listed Chester company which provides a range of innovative energy technologies, has said it is in the advanced stages of preparing a ‘significant’ capital fundraising as an alternative to selling its Flow Energy business.
Flow Group said that any agreed investment will be made in the form of convertible securities and new equity.
In March, the company entered into an exclusivity agreement for the sale of its energy supply business.
It has now said that whilst discussions with the preferred bidder for the Flow Energy business continue, it is also in advanced discussions over a £20m-plus capital injection, which it says would be necessary should the proposed disposal of the Flow Energy business not take place.
The group is also in discussions with its manufacturing partner to downsize and reduce its exposure to its environmentally-friendly domestic micro combined heat and power boiler business.
Flow Energy has customer fuel accounts either on supply or processing through the switching cycle of over 270,000, with annualised revenues of more than £135m.
But the group has admitted that gross margins for Flow Energy have come under pressure as it priced to compete with new entrants offering reduced tariffs to customers to gain market share.
Flow Group was originally considering the sale of its microCHP business. Its Flow boiler product is a gas-fired domestic boiler that generates electricity at the same time as it uses gas to heat a home, at less than 36% of the cost of electricity from the grid.
However, a long drawn-out Government review of feed-in-tariffs could have dramatically affected its commercial potential in the UK.
In February the Department for Business, Energy and Industrial Strategy published its long-awaited review of support for the microCHP Feed-in-Tariff (FiT), which concluded that the feed-in tariff rate would remain the same at 13.61p/kWh, while the proposed reduction in the number of units supported by the FiT from 30,000 units to 3,500 has been amended to a reduction to 15,000 over the remaining period of the to April 2019.
The company’s own review concluded that the microCHP business has the potential to be market-leading and that the work and investment that has been made in it should be preserved within the group.
Meanwhile, having received approaches, it decided that the sale of Flow Energy could provide sufficient funding for the microCHP business through to the point at which the technology is commercialised in Europe.