Heads of Terms toward Sale of Deeside Project

26 September 2022

EQTEC plc

("EQTEC", the "Company" or the "Group")

Heads of Terms toward Sale of Deeside Project

EQTEC plc (AIM: EQT), a world-leading technology innovation company enabling the Net Zero Future through advanced solutions for hydrogen, biofuels, SNG and other energy production is pleased to announce that, further to its announcements on 30 June 2022 and 1 September 2022, the Company, Deeside WTV Limited ("Deeside WTV") and Logik Developments Limited ("Logik") have signed non-binding Heads of Terms ("HoTs") for the acquisition by a publicly quoted corporate investor ("Investor") of the project at Deeside, Flintshire, UK that comprises a waste reception plant, anaerobic digestion facility and EQTEC Advanced Gasification Technology facility (the "Project").

To facilitate this transaction, Deeside WTV and Logik have agreed to further extend the longstop date specified in the share purchase agreement they signed on 7 December 2020 (as amended on 6 December 2021, 1 April 2022 and 30 June 2022) (the "SPA"), to 28 February 2023 (the "Long Stop Date").

The agreement of the HoTs is in line with the Company's stated strategy to focus its efforts on high-margin technology and innovation services, engaging partners and customers to develop and fund the capital projects that will deploy EQTEC's technologies. This announcement follows a similar announcement on 21 September 2022 about the Company's Southport, UK project, whereby the Company signed new agreements that would release it from the requirement to purchase the project company, whilst ensuring it receives outstanding development fees and future technology sales and engineering services fees.

Summary of the Heads of Terms

·    The Investor will acquire 100% equity in project development company Deeside WTV, a wholly owned subsidiary of the Company; and be granted an option (the "Option") to acquire 100% equity in land company Logik WTE Limited ("Logik WTE" and together with Deeside WTV, the "SPVs"), a wholly owned subsidiary of Logik; for a total consideration of £15 million.

·    The Company will charge Deeside WTV for up to £5.5 million in development services fees (such fees to be largely settled from the consideration being applied to Deeside WTV as further described below), payable to the Company in instalments between completion of the SPA ("Completion") and the Project reaching financial close ("Financial Close"), expected to occur in H1 2023.

·    Consideration will be paid by the Investor in two tranches: the first of £6 million upon the parties entering into Definitive Documents (as defined below); and the second tranche of £9 million upon Completion (assuming the Investor exercises the Option).

·    The initial £6 million payment by the Investor will be applied as follows:

o  £500,000 to the Company for 100% of its equity in Deeside WTV;

o  £1.5 million paid to Deeside WTV to cover all outstanding budgeted development costs to Financial Close (less any costs which the Investor shall settle on behalf of the SPVs, as referred to below); and

o  £4 million paid to Deeside WTV to fund its payment of the Option fee to Logik under the amended and restated SPA.

·    The further £9 million payment by the Investor will be applied as follows:

o  £6 million to Logik to acquire Logik WTE (and accordingly the Project land); and

o  £3 million paid to Deeside WTV to fund its partial payment of EQTEC's development service fee (with the balance of £2.5 million payable at Financial Close). The total consideration to be received by EQTEC for the development of the project is £6.0 million.

·    The non-binding elements of the HoTs, which include summary terms set out above, will be incorporated into definitive and binding documentation (the "Definitive Documents"). It is intended that the Definitive Documents will be entered into as soon as reasonably practicable, and in any event by 30 November 2022, with Completion to occur by the Long Stop Date, although there can be no guarantee that the transaction will proceed to completion

·    The Investor will pay for all agreed development costs until execution of the Definitive Documents and in turn will be granted exclusivity until 30 November 2022 to complete the transaction.

·    In the event the Investor does not exercise the Option by the Long Stop Date, Logik will retain the land company and the Investor, through Deeside WTV, will have the option to enter into a lease with Logik WTE; the full £5.5 million development service fee due to the Company by Deeside WTV will remain outstanding until Financial Close and payment will be guaranteed by the Investor for £4.5 million.

Project progress

The Company is in the final stages of discussion with Toyota Motor Manufacturing (UK) Limited ("Toyota") toward agreement of heads of terms for the supply of gas and electricity from the Project to Toyota's neighbouring Deeside Engine Plant.

The Project has received updated heads of terms (subject to contract) for gas and power offtake with new tariffs that significantly improve project economics, from TotalEnergies, a company producing and marketing a variety of energies on a global scale.

David Palumbo, CEO of EQTEC, commented:

"The Deeside Project has gathered significant momentum and once funded should progress steadily toward financial close. We have top-tier partners working with us, strong support from local stakeholders and our feedstock and offtake arrangements ready to contract. In addition to being an exciting, multi-technology plant, Deeside will also be one of our first RDF plants and we believe the most efficient RDF-to-energy plants we know. We are also happy to formally focus EQTEC's role on our core capabilities of technology development and engineering, with a degree of broader project development as required to support the Project. Not only does this release us from capital investment commitments that come with sustained SPV ownership, but it accelerates progress with our business strategy, toward becoming exclusively a technology innovator and licensor."

Further information about the Project

The Project comprises 6.27 hectares of land off Weighbridge Road on Deeside Industrial Estate and adjacent to the Toyota Deeside Engine Plant, in Flintshire, north Wales, UK, on a site that was formerly a Gaz de France power station.

The prospective, multi-technology plant would include a material recovery facility ("MRF") and anaerobic digestion ("AD") facility that would deploy technologies from Anaergia, Inc. ("Anaergia"), with an advanced thermal conversion ("ATC") facility that would deploy EQTEC's syngas technology.

The MRF would process 182,000 tonnes per year of municipal solid waste ("MSW"), separating recyclables and sending them off site for processing, separating biogenic materials for processing at the AD facility and producing refused-derived fuel ("RDF") from the remaining materials, including plastics, for processing by the EQTEC ATC facility. The 2.0 MW AD facility would produce 5.5 million NM³ per year of biomethane, with 17,000 MWh of the gas (c. 29%) exported to Toyota and the remainder exported to the national grid. The 9.9 MW ATC facility would receive 77,000 tonnes per year of RDF from the MRF and produce 77 - 87,000 MWh of electricity per year, of which 27,000 MWh (c. 35%) would be exported to Toyota, with the remainder exported to the national grid. There is additional potential to apply the ATC facility to production of hydrogen, for which initial feasibility work has been undertaken.

At present, the Company is lead developer for the Project, in partnership with Logik, which owns the land on which the Project is being developed. As announced on 28 October 2021, Flintshire County Council's Planning Committee resolved to grant planning permission for the proposed plant. The planning authority's decision follows its prior approval of the site for the original plan of a recycling and AD facility.

The Project is one of three waste-to-energy/fuel projects the Group is developing in the UK, including others at Billingham, Teesside and Southport, Merseyside.

This announcement contains inside information as defined in Article 7 of the EU Market Abuse Regulation No 596/2014, as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018, as amended, and has been announced in accordance with the Company's obligations under Article 17 of that Regulation.

ENQUIRIES

About EQTEC plc

As one of the world's most experienced gasification technology and engineering companies, with a growing track record of delivering operational and commercial success for transforming waste-to-energy through best-in-class technology innovation, engineering and project development, EQTEC brings together design innovation, project delivery discipline and solid commercial experience to add momentum to the global energy transition. EQTEC's proven, proprietary and patented technology is at the centre of clean energy projects, sourcing local waste, championing local businesses, creating local jobs and supporting the transition to localised, decentralised and resilient energy systems.

EQTEC designs, supplies and builds advanced gasification facilities in the UK, EU and US, with highly efficient equipment that is modular and scalable from 1MW to 30MW. EQTEC's versatile solutions process over 50 varieties of feedstock, including forestry wood waste, vegetation and other agricultural waste from farmers, industrial waste and sludge from factories and municipal waste, all with no hazardous or toxic emissions. EQTEC's solutions produce a pure, high-quality synthesis gas ("syngas") that can be used for the widest range of applications, including the generation of electricity and heat, production of synthetic natural gas (through methanation) or biofuels (through Fischer-Tropsch, gas-to-liquid processing) and reforming of hydrogen.

EQTEC's technology integration capabilities enable the Group to lead collaborative ecosystems of qualified partners and to build sustainable waste reduction and green energy infrastructure around the world.

The Company is quoted on AIM (ticker: EQT) and the London Stock Exchange has awarded EQTEC the Green Economy Mark, which recognises listed companies with 50% or more of revenues from environmental/green solutions.

Further information on the Company can be found at www.eqtec.com.