An energy project in Co Down will not go ahead after the waste-to-energy firm involved incurred significant costs relating to it.

Cork-based company Kedco said it remained ‘confident’ it could secure additional investment after incurring significant costs related to the planned £15m gasification project in Newry.

AIM-listed Kedco said in a trading update yesterday that debt financing for the project could not be obtained on suitable terms. Gasification is a process whereby materials such as fossil fuels or wood pellets are converted into carbon monoxide and hydrogen, which are subsequently used to generate electricity.

Kedco, which was established by Donal Buckley, William Kingston and Eddie Barrett in 2003, signed a 50-50 joint venture deal last December to build the four megawatt gasification scheme in Newry.

Kedco was to provide £5m of the projected £15m in project financing. Kedco had expended most of that £5m by the time the venture was disclosed. The joint venture partner was to provide a 20-year lease on the site. The project was due to be commissioned in late 2009, but that deadline was extended to early 2010.

Kedco had expected to book a profit from the sale of the project in the first half of this year. Yesterday Kedco said that because debt had not been secured, its board did not now expect to commission the plant before the end of the current financial year.

It is in discussions with a number of parties around the potential investment of equity and, or, debt finance into the company.