Aggregated Micro Power Holdings (AMPH) is on a roll. Revenues for the year to March 2017 were £19.7 million, up hugely from £1.3m for the 15 months to March 2016, with profit before tax at £0.9m compared to a loss of £7.6m.

And there is more to come. Most of the revenue (£15.8m) comes from the Forest Fuels division, which was assembled from wood fuel supplier businesses purchased in 2016. In 2015/16 these did not contribute for a full year, but they will in 2017/18 to give a predicted revenue of £20m. Furthermore in late June the company bought 50.1 per cent of Highland Wood Energy Ltd (HWE) who had sales around £7m in 2016.

The Project Development division has also increased revenues to £3.9m from £1.2m. This division is involved in planning, financing, supplying and maintaining biomass boilers and CHP (combined heat and power) projects for commercial customers. Projects are owned and financed by the associate company AMPIL, who in May raised a further £29m through 8 per cent loan notes.

This division has also entered the grid balancing market, planning and arranging finance in the last year for four gas peaking plants (gas-fuelled engines that can be turned on very quickly to provide the National Grid with electricity at peak times).  Further grid balancing projects and battery storage projects are planned.

The dramatic improvement in AMPH’s financial position is impressive. The business model, with its focus on long-term contracts for financing, supply and maintenance, looks sound. The future of both the biomass and grid balancing markets looks promising.  The biomass market is helped by the Renewable Heat Incentive, which currently pays 4.28p per kWh for biomass boilers and CHP systems. It is likely to continue as the UK is far behind its goals for converting heating to renewable energy.

However there are risks. Government policy can change and competition may increase. Wood chips and pellets may become more expensive. These currently come from Europe because they are cheaper than in the UK. The cost is already rising with the fall in the pound, while there is also the uncertainty over tariffs after Brexit.

There are also some organisational risks. AMPH has assembled its Forest Fuels division from several existing companies. These offered a range of services from the basic supply of wood chips and pellets for biomass boilers to boiler service and maintenance.

Integrating acquisitions can be painful. Most of the suppliers were small, which makes it easier, but HWE is a well-established business operating mainly in Scotland.  It seems HWE will remain a separately managed business, but at the same time it will take over all existing service and maintenance contracts in England and Wales.  Such an overlapping management structure is likely source of confusion.

Interestingly, AMPH have recently invested £0.8m for a 29 per cent share in Incubex, a private company that designs new financial products for the power, energy and environmental markets. Neil Eckert is the chairman of both AMPH and Incubex.

There is a feeling that AMPH’s main interest is finance, as might be expected when all three executive directors have insurance and property backgrounds. However the main source of revenue is now a service business, which requires a different approach. The other source is project development, albeit fairly low-tech (as AMPH are fond of saying they are “agnostic about technology”).  Will they be able to manage these different demands successfully?