Eddie Stobart enters biomass market
Transport and logistics firm Stobart Group has teamed up with a leading biomass provider in a new venture that looks to capitalise on the growing renewables marketNext time you see an Eddie Stobart truck on the motorway, it may well be a driving force for biomass. The well-known logistics provider has stepped up a gear and entered the renewable energy market by forming a joint venture, Stobart Biomass Products, together with AW Jenkinson Forest Products, supplier of wood-related biomass.
The new company has been created to source and distribute supplies of biomass fuel to the UK renewable energy sector on a long-term contractual basis. As part of the deal, Eddie Stobart has secured a major transport contract with AW Jenkinson for 10 years, which is expected to generate a pre-tax profit of £19.25M over the first five years.
In addition, Stobart Group hopes to benefit from £30M transport revenues per annum from the joint venture within three years. Under the terms of the deal, Stobart will take a controlling interest in the new venture for £30M comprised of £15M cash and the remainder by issuing shares.
Stobart Biomass Products has already secured a significant contract to supply up to 750,000 tonnes of biomass fuel per year to ten potential sites over the next 20 years. The company has also received contract enquiries for a further 14M tonnes of biomass fuel over the next five years. Based on current identifiable projects, the board estimates that the market could potentially increase ten-fold in the next three to four years to 15M tonnes annually.
AW Jenkinson claims to be the market leader in the UK for wood-related biomass, handling over 2.5M tonnes of wood products every year. Access to Stobart's logistics network and brand strength will enable both parties to double deliveries from 1,000 to 2,000 a day and further enhance their reputation among the large utility providers, which require long-term secure supply contracts.
Stobart's expertise will also bring improved efficiency to the complex biomass logistics and supply chain, which is a major component of the cost base for renewable fuels. Finite UK supply and infrastructure means that imported wood and other biomass products are likely to become a significant source of raw material going forward, which would lead to further synergies with Stobart's port and rail divisions.
"This investment and transport contract together are a strategic building block for the Stobart Group on many levels," says Andrew Tinkler, CEO for Stobart Group. "Firstly, it is expected to be earnings enhancing from day one with an expected £19M net profit for the core business in the next five years. It also offers potential to further leverage our multimodal offering through Stobart ports and rail going forward.
"Secondly, it gives us access to, and income from, the higher margin renewable energy market, which has the potential to grow ten-fold in the next five years, driven by governmental and societal pressures for the green agenda. Partnering with the market leader will enable us to exert greater control and move up and down the supply chain as this market diversifies."
Allan Jenkinson, sole proprietor of AW Jenkinson, adds: "This is the perfect partnership to take the business to the next level and capitalise on the huge growth in energy generation from renewable sources. This deal gives us access to Stobart Group's multimodal logistics strength and expertise in the UK, which is a critical part of the biomass business, as well as giving us increased scale and credibility with the large energy producers."
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