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Norske Skog's Xynergo to cease operations failing to find new owners with capital to finance further development

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Norske Skog's Xynergo to cease operations failing to find new owners with capital to finance further development

November 04, 2010 - 22:02
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OXENOEN, Norway, Nov. 5, 2010 (Press Release) -The Board of Xynergo AS has decided to initiate a process to cease operations in the company within a two-week period. Despite increased political support for developing second-generation biofuels from woody biomass, it has not been possible to find new owners with capital to finance the next phase of development of the company.

"Xynergo is in need of substantial risk capital. Despite a government subsidy program earmarked for second-generation biofuels, which was adopted this fall, it has not been possible to find investors willing to contribute with the necessary risk capital at this point," said Gaute H. Andreassen, chairman of Xynergo's board of directors.

Earlier this year, Norske Skog, which owns Xynergo together with several Norwegian forest owners, raised new capital to secure operations of the company while Norske Skog and Xynergo tried to find new owners for the biofuel initiative. Norske Skog made it clear earlier this year that the Group needs to prioritise debt and cost reduction, and would not be able to invest additional capital in Xynergo. Norske Skog and the other owners - Viken Skog, Allskog, Mjøsen Skog and Statskog - agree that there is no basis for continued operations of Xynergo.

The knowledge gained in Xynergo will be leveraged by Norske Skog and the other owners, which hope to use it in relation to other bioenergy projects in Norway and abroad.

Xynergo was established in 2008, with the objective of establishing production of renewable biodiesel and bio-jetfuel based on low quality woody biomass. "The goal has been to establish industrial production of high-quality biofuels, based on sustainable forest management," said Rasmussen. -The project would have provided significant economic and environmental gains. We have cooperated closely with a number of organizations within the research and environmental fields. We have also been in close dialog with a number of stakeholders, including the automotive and airline industry, who have shown great interest in our plans. The challenge is that the development process is both time- and capital-intensive."

Xynergo needs an estimated NOK 150 million in new capital over the next three years, and another NOK 150 million to the final investment decision for full-scale production facilities. The final investment decision could be made in 2014 at the earliest, due to continued technological development and the need for thorough and comprehensive planning efforts.

Xynergo has evaluated different technologies for biofuels production, and has contributed with funding to various research projects in collaboration with Norwegian academic institutions. Xynergo will withdraw all submitted applications for public funding.