Environmental Clean Technologies Limited (ASX: ECT) (ECT or Company) is pleased to provide the following update on the progress of its project in India and local activities.

Key points

India

Local Activities

Research Collaboration Agreement (RCA)

Over the past 2 weeks, ECT Chairman, Glenn Fozard, together with CMD ECT India, Mr Ashley Moore, and Chief Operating Officer, Jim Blackburn have been in India to attend meetings with NLC India Limited (NLCIL), NMDC Limited (NMDC) and Indian Government representatives and to oversee the conclusion of the final compliance and legal review of the Research Collaboration Agreement (RCA) as outlined in the Company’s 1 October 2018 announcement.

The CMD’s of both NLCIL and NMDC continue to express clear, strong commitment to the project, acknowledging that the prospect of the project being the largest ever research and development (R&D) collaboration between Australia and India has the eyes of Government keenly directed towards them, driving the complexity of internal requirements and need to undertake rigorous review.

Importantly, ECT has supported this recent review process through the additional support and analysis work provided by ECT’s advisers Corrs Chambers Westgarth (Legal advisers, Australia), Grant Thornton (Tax and Accounting, Mumbai) and Induslaw (Legal and Compliance, Mumbai).

ECT understands that the RCA review report from external consultant Lakshmikumaran & Sridharan (L&S) has been completed, and the three companies (NLCIL, NMDC and ECT) will be meeting in Chennai today, October 16 to finalise discussions and agree on an updated RCA ahead of Board approvals.

Commenting from Neyveli, ECT Chief Operating Officer, Jim Blackburn said “As our shareholders are very much aware, this further round of review for finalisation of the RCA has been an important and detailed process, necessary to clear the way for seeking Board approvals from each of the partners scheduled for early in November. While we are aware that NLCIL conducted an earlier Board meeting last Tuesday (9 October 2018) in Delhi to attend to internal compliance matters, we have been told NLCIL will hold an additional Board meeting in the first week of November, seeking approval to proceed. While this is later than the target date previously set by both NLCIL and NMDC (30th October 2018), the parties have agreed that no further extension is required and that the MOU remains on-foot and effective.

“The Board and Executive of ECT are keenly aware that as we approach these final stages of the contracting process, there is increased attention given by our shareholders and the broader market to each detailed step in reaching financial close for the India project. This is to be expected yet does not detract from the need for management to focus on the project implementation as a whole, as it is this approach which will ultimately drive growth in shareholder value. Each of the parallel processes outlined previously including contracting and governance, financing, engineering, resource planning and the like each play a part in the successful delivery of the Pilot plant project and lay the foundation for our progress into commercialisation.”

ECT COO, Jim Blackburn remains in India this week, and together with ECT India CMD Ashley Moore and Chairman Glenn Fozard, will ensure on-the-ground representation by ECT through to signing to provide any further support necessary to facilitate the consideration and approval of the RCA by the Boards of NLCIL and NMDC.

Prior to, and immediately following the expected partner Board approvals, key processes and milestones for the project will include:

Senior delegates from NLCIL have expressed a desire to attend the ECT AGM on November 30, and both NLCIL and NMDC will be invited to attend to jointly present the project to ECT shareholders.

Project Promotion

As previously reported (1 October 2018), in the lead up to financial close of the India project, ECT has been active in a number of global forums in response to growing industry and media interest in the project and its Coldry and Matmor technologies.

These forums provide an important opportunity to develop key strategic links between the R&D stage of the India project and a future pathway for commercial projects.

In addition to media briefings, the following events have recently been completed.

Following the Chairman’s meeting with the Additional Secretary for Ministry of Steel, Rasika Chaube, she presented to the conference in her closing remarks that, “Indian companies are encouraged to JV with foreign companies, particularly those foreign companies that are able to support technology transfer to India in its pursuit of the country’s improving competitive position as the nation seeks to deliver an additional 200 million tonnes of steel output through to 2030.”

Chairman Glenn Fozard commented, “not only does our collaborative project with NLCIL and NMDC meet 8 out of 10 objectives of the Ministry of Steel’s Steel Development Fund’s strategic R&D targets, it’s also structured under preferred arrangements, as expressed by Ms Chaube, of the Government of India’s policy for technology transfer.”

This outcome is a testament to the collaborative approach ECT has taken in listening to its partners’ needs and then converting that into strong commercial structures backed by comprehensive legal and tax planning.

Chairman Glenn Fozard commented further in relation to the India project, “The development of this project has been a long and challenging process, and we acknowledge the patience and, often at times, frustration our shareholders have experienced along this journey. But this is not without reason and reflects the nature of our project as being the largest ever R&D collaboration between Indian and Australian companies. Make no mistake, this is not a throwaway comment, and all shareholders should be proud of the company’s ability to persist and progress such a watershed project, where the recognition of this achievement, and what it means for our company, should only improve. The enormity of effort and work needed to complete a deal like this is difficult to appreciate and accounts for why no other company has achieved the size of R&D collaboration we are aiming to close on soon. We are acutely aware that there is no second prize in the pursuit of such lofty goals and much of the effort will be wasted if we were not able to finalise the project, but the Company and its Board and executive are confident that this will not be the case.”

The Company looks forward to providing further updates as the above activities progress.

Local Activities

Steam Package Contracts - Update

Further to the Company’s announcement of 9 August 2018 highlighting the signing of a $1.3 million, 5-year deal for the provision of a turnkey solution for steam services to a customer in Victoria, Australia, the Company is pleased to advise the first stage of the contract has been completed.

The contract entails:

A key requirement identified during the scoping phase was the need to maximise the operational efficiency of the customer’s boiler system, which was originally designed to run on low-grade biomass such as wood chips and briquetted rice husks, rather than higher-energy solid fuel such as Coldry.

As such, the first phase of the contract entailed the design, fabrication, installation and commissioning of an automated solid fuel feed system designed to optimise Coldry consumption.

Scoping estimates indicate the system will use around half as much Coldry solid fuel compared to biomass. This efficiency is due to Coldry’s lower moisture content, and significantly higher energy value and combustion temperature.

The feed system (shown below) consists of a variable feed-rate hopper and incline screw conveyor, controlled via a computer-automated program.

Commissioning of the system will commence this week, with the provision of ‘process steam’ anticipated to commence under contract in late October.

Boiler Package Contracts - Update

ECT COO Mr Jim Blackburn commented “The Victorian energy market has changed dramatically in the past three years, with wholesale electricity prices trebling since 2015[1] and gas prices doubling[2] over the same period. This has driven many businesses, reliant on industrial scale process heat, to seek alternatives.

“Unfortunately, this has put pressure on local biomass supplies, resulting in shortages and price increases, in addition to existing issues regarding the security of consistent supply. Consumers are turning to expensive stop-gap measures such as diesel. Economically, this is unsustainable, driving business to seek alternative long-term solutions.

“This problem has created an opportunity to sell product from our Coldry R&D facility. Further, following extensive consultation with consumers, it’s clear they want someone to provide a solution that delivers steam, and saves money, allowing them to focus on their core business. This has created an opportunity for ECT, together with leading boiler operator Mecrus, to deliver a turnkey solution tailored to the end user’s equipment and needs.”

Building Strong Relationships with Boiler Manufacturers and Service Providers

ECT is pleased to advise that in support of its strategic boiler and steam package offering to the Victorian and Tasmanian markets, the Company has teamed up with Hi-Tech QLD and John Thompson boilers in addition to Mecrus to provide a complete turnkey solution for biomass boiler systems, specifically designed to accept multi-feedstock fuel, including wood waste, crop stubble and municipal green waste, underpinned by Coldry as the baseload fuel.

This has led to ECT’s first joint tender submission, along with Hi-Tech and John Thompson for the provision a 10MW(th) boiler system to a customer in Tasmania.

ECT is also working closely with these partners to undertake feasibility and pricing for a biomass boiler system on-site at its Bacchus Marsh test facility to replace the current waste oil boiler system.

The market for industrial steam and the boilers required to produce this steam are at a significant cross-road.  Most users have turned away from 100% coal-based boiler systems, and gas-fired systems have become prohibitively expensive. This has seen the next wave of migration towards biomass fuel solutions.

There are still great challenges ahead for users of industrial steam when considering a pure biomass boiler system, including lower efficiency, single fuel dependency, transport and storage issues and shorter equipment lifetime.

ECT aims to solve some of these problems by offering a high-quality boiler system that can utilise variable biomass inputs while also using Coldry.

The intent behind this approach is to be able to deliver a steam solution that allows users the flexibility to choose the biomass that is most suitable (on the basis of cost, quality and supply), while being underpinned by a fuel stock (Coldry) that serves as a consistent, cost-effective base-load.

We expect that at most times, these boiler systems would use <50% Coldry to retain the biomass status, but where quality biomass becomes unavailable, Coldry would ensure continuity of steam production and operations.

Chairman Glenn Fozard commented that “there is an absence of a complete turnkey solution in the Victorian and Tasmanian markets that offers ‘steam over the fence’ to industrial users, while also delivering new equipment and often cheaper monthly operational costs. This requires assembling a high-quality team of end-to-end service providers, covering boiler plant and equipment, installation, operations and maintenance, fuel supply and management and financing. ECT now has that capability.

“The steam and boiler package approach, coupled with equipment financing solutions via our subsidiary, ECT Finance Limited, looks to deliver reliability and affordability, striking a chord in the local market.

“Following the successful rollout of our first contract, and the demonstration of our capability to deliver these packages we will continue to market our turnkey solution across Victoria and Tasmania.”

The Company will provide further updates on its local market activity as projects progress.

 

For further information, contact:

Glenn Fozard – Chairman           [email protected]

 

[1] Source: Australian Energy Market Operator (AEMO) - https://www.aemo.com.au/Electricity/National-Electricity-Market-NEM/Data-dashboard#average-price-table

[2] Source: Australian Energy Market Regulator (AER) - https://www.aer.gov.au/wholesale-markets/wholesale-statistics/victorian-gas-market-average-daily-weighted-prices-by-quarter

 

Environmental Clean Technologies Limited (ASX: ESI) (ECT or Company) is pleased to provide the following update on the progress of Coldry solid fuel commercial trial activities in the Victorian and Tasmanian markets.

Key points:

Further to the Company's previous updates on its local market business development activities (1 & 15 Nov 2017), several trial participants have indicated their intention to enter supply contracts for Coldry solid fuel volumes if further solid fuel trials also prove successful. Confirmation of these contracts are expected to justify the next stage of upgrades at the Bacchus Marsh High Volume Test Facility.

The Company’s maiden shipment of test product for a Tasmanian solid fuel trial customer has just been loaded, ready to transport.

ECT Chief Operating Officer, Jim Blackburn commented "The prospects for generation of revenues from our HVTF is an important element to our broader commercialisation strategy that wouldn't have been possible a few years ago. The local market pricing would not have supported test product sales, due to the higher cost of production associated with an R&D scale facility, which are typically non-commercial.

"However, the local market dynamics, inclusive of high gas prices, combined with the Stage 1 and Stage 2 upgrades at our Bacchus Marsh facility which have reduced our average production costs, present a strong opportunity for test product sales.

"Our team have worked in conjunction with logistics support partner Jebsens to develop leads. Several leads have progressed through testing, boiler system assessment and cost-benefit analysis, resulting in orders for live trials. We're now in the process of preparing to gear up production to service these customers.

"We have also partnered with independent boiler system specialist Paul Hoffman to assess and configure customers' existing systems for use with Coldry, in addition to helping end users specify, source, install and commission new boiler systems.

"Rounding off the turnkey approach is the ability to offer equipment finance through our subsidiary, ECT Finance Ltd."

Potential customers include large abattoirs as well as hydroponic and aeroponic facilities.

ECT currently plans to limit upgrades to the HVTF to a maximum 30,000-35,000 tonnes per annum capacity. Given the level of interest received to date, the Company is confident a sustainable market exists for a solid fuel here in Victoria and interstate, to supply energy-intensive industries currently having to manage increasing gas prices and/or limited or irregular supply of alternative solid fuels. As such the Company continues to develop its feasibility study for the establishment of a large-scale Coldry demonstration plant in Victoria's Latrobe Valley, the scoping study component of which is anticipated to conclude in February 2018.

Importantly, the proposed large-scale Coldry demonstration plant will leverage existing resources and infrastructure, with site selection at Yallourn power station announced on 15 November 2017.

The Victorian demonstration plant will be designed to an output capacity of ~170,000 tonnes per annum and will feature a zero CO2 footprint, having no direct emissions itself.

ECT Chairman Glenn Fozard commented, "Coldry solid fuel is an ideal solution to industries requiring large volumes of process heat.

"Further, it doesn't conflict with the Victorian government's renewable energy target, as neither wind nor solar are suitable for generating reliable, affordable process heat to such industries.

"In this respect, we are competing directly with the prices of natural gas and biomass alternatives, which given the current supply-demand profile, look like remaining high, and possibly escalating, well into the future.

"Beyond supplying these energy-intensive industries, we see potential to grow our Coldry capacity in Victoria over time to support any number of high value applications, including high-efficiency, low-emission (HELE) power generation to deliver reliable, affordable electricity, through to hydrogen production, and upgraded coal products such as activated carbon, PCI (pulverised coal injection) coal, and hydrocarbon liquids and gases.

"All these high-value applications can generate jobs while bringing down the emissions intensity of Victoria's world-class brown coal resource."

The Company will continue to provide further updates on the above activities as they progress.

 

For further information, contact:

Glenn Fozard – Chairman          [email protected]

Environmental Clean Technologies Limited (ASX:ESI) (ECT or Company) is pleased to provide the following update on its research, development and commercialisation activities in Victoria.

Key points

Boiler trials completed

The Company previously announced (21 July 2017) research and development (R&D) trial activities with a large consumer of solid fuel in southwestern Victoria as part of its broader Coldry commercialisation strategy.

This activity, pursued with AKD Softwoods in Colac, is now complete, having delivered valuable outcomes.

Coldry Commercialisation Strategy

Through FY2017 and into the first quarter of FY2018, ECT has continued to develop its strategy for offering a cost-effective solid fuel (i.e. Coldry pellets) for use in steam and hot water boiler systems across Victoria, and potentially to markets interstate and overseas.

The cost-effectiveness of the Company’s solid fuel sits in contrast to the rising costs and falling security of supply of other energy sources, including:

Coldry solid fuel pellets using lignite sourced from the Yallourn open-cut mine, have a distinct cost advantage against all the above options.

ECT Chairman, Glenn Fozard commented, “This advantage is not surprising given the readily available abundance of lignite inside the pre-existing infrastructure. Economies of scale already exist in the natural resource and the relatively low-cost means of extraction.

“The rapidly changing face of Victoria’s fuel supply mix, resulting in increased reliance on higher-priced gas, will continue to place pressure on local industries reliant on reasonably priced fuel inputs to remain competitive. Without a choice of fuel that helps maintain Victorian industry’s competitive advantage, the state may continue to see an accelerated contraction of important sectors such as manufacturing, food processing and other energy-intensive employers.

“Our proposition for commercialisation, therefore, remains clear and concise.

“And while these market opportunities are a clear signal for commercialisation, on their own they don’t make a commercial ready proposition certain. As such, we continue to improve this certainty through effective R&D programming to test and refine variables expected at a larger scale, under a continuous processing environment. This is consistent with our commercialisation strategy where a broad range of demand factors result in market ‘Pull’ as we ‘Push’ with R&D programs that increase technology options (see diagram, below).

 

“Our goal in Victoria is to deliver a zero-emissions gateway fuel plant. We believe this will help ‘future-proof’ Victoria’s energy prices while establishing a scalable access point for the improved utilisation of Victoria’s brown coal reserves, including high efficiency, low emission (HELE) power stations, hydrogen production and fertiliser production, to name but a few.”

Over this last 12 months, the Company has set its strategy, which comprises three targeted programs aimed at testing our alternative solid fuel, produced using our Coldry technology, under commercial conditions. These programs include:

800-tonne Boiler trial – AKD Softwoods, Colac

With planning taking place through May and early June 2017, ECT undertook an extensive trial of Coldry solid fuel produced at the Bacchus Marsh High Volume Test Facility (HVTF) in a 4.2MW (thermal) fluidised bed steam boiler system located in Colac, Western Victoria.

This trial was undertaken in parallel with the stage 2 upgrades at the HVTF, which targeted improvements to storage, drying efficiency, inventory and logistics management and product handling.

After three months, the trial has now been completed and the data processed, ahead of moving into the next phase of a drying simulation program at Bacchus Marsh. The boiler trial, conducted in collaboration with industry partners, AKD, Mecrus, Calleja Transport and Geelong Boiler Systems, assessed all points of the commercial supply chain in producing, transporting and combusting Coldry solid fuel pellets.

Outcomes and learnings from the trials include the following:

Product specification is critical to efficient performance outcomes

Logistics and inventory management are critical elements of a solid fuel business

Identified opportunity for product enhancements through targeted research and development

Support for the commercialisation pathway and test product sales

As mentioned, the data generated via the trial with AKD has proved highly valuable, both in what it has confirmed and in highlighting remaining challenges.

In this respect, and as can be anticipated in a commercialisation program of this scale, the trial presented several key learning opportunities, which provided important feedback to the research team and have driven a number of fundamental changes to the Coldry development program including:

  1. Coal Feedstock:
    1. The trial identified the requirement to switch feedstock coal from Maddingley (Bacchus Marsh) to Yallourn (Latrobe Valley) to deliver solid fuel with lower sulphur and ash.
    2. In the first instance, this change required sourcing of coal and associated transport and logistics management from the Latrobe Valley to the HVTF in Bacchus Marsh.
    3. This change necessitated the reprogramming of production metrics at Bacchus Marsh across the entire processing line, extending the trial program by 3
  1. Product Variability:

The completion of stage 2 upgrades to the HVTF has provided some significant changes to plant operations, which in turn provided unexpected challenges under high volume production. These included:

Having settled the Latrobe Valley logistics arrangements and progressed the next stage of drying simulation trials, the majority of these issues have been addressed.

Notwithstanding the R&D nature of this project, the Company generated $162,000 in revenues from the project.

Jim Blackburn, ECT Chief Operating Officer and executive sponsor of the R&D trial commented, “The trial was an important next step in commercialising Coldry. We had previously shown success in small boiler systems and to take on a system with substantial daily consumption volumes, allowed us to test our operational capability as well as the technical capability of Coldry.”

“We will now incorporate our substantial learnings from this trial into the next phase of our strategy. The interim aim here is to provide a sound basis for stage 3 upgrades at the High-Volume Test Facility and deliver a facility readily able to support ongoing large trials and sales of Coldry pellets.”

One of the key outcomes of the AKD trial was to identify areas of improvement and efficiencies within the logistics chain as well as support further sales and distribution of our Coldry product.

Next Coldry Trial Program – 3000 tonnes

Upon completion of the Drying Simulation Program at Bacchus Marsh, ECT intends to undertake a trial of Coldry solid fuel pellets which will incorporate the benefits of the improvements realised through prior trials and R&D programs.

In addition to its R&D focus, the next trial intends to support the identification and development of contracts for off-take to help underpin the feasibility of the Latrobe Valley Coldry project as well as other commercial sales.

Given the synergies between the Latrobe Valley project and the 3000-tonne trial, the Company has prioritised site selection and market analysis within the feasibility plan. Early determination of a site partner, which will also drive coal feedstock selection, is important to ensure the greatest alignment between the next trial program and the feasibility study for the Latrobe Valley Coldry project.

Further updates will be provided as they become available.

Logistics, Yard Management and Sales Agreement - Jebsens

ECT is pleased to announce it has entered an agreement with Jebsens, for logistics and yard management at its Bacchus Marsh High-Volume Test Facility.

Jebsens are well experienced with the logistical challenges presented by the storage and transport of solid fuel having been the logistics manager for IEPL (the “Morwell Briquette Factory”).

The agreement will see Jebsens manage the logistics chain, including yard management, at Bacchus Marsh and into other plants that are built across Victoria, including the Latrobe Valley Coldry project currently under feasibility.

Jebsens also has strong existing relationships with solid fuel users in Victoria and Tasmania. As a result, ECT has agreed to offer them an exclusive sales services and distribution agreement for the capacity of Bacchus Marsh as well as a further 100,000 tonnes.

Jebsens' role will be to originate and support sales leads, utilising their extensive network of relationships with end users.

The agreement allows ECT to develop sales leads ahead of incurring the costs of the yard management and third-party logistics services. These obligations will only come into effect if the business case is approved by ECT's Board, with sales being a major influence on the approval.

ECT Chairman, Glenn Fozard commented “As a key outcome of the recently completed trial program, we are delighted to add Jebsens to our list of strategic partners. With their knowledge of key markets and customers for this type of fuel, we have been able to establish an agreement which provides both the critical logistics management services, and access to Jebsens' customer relationships. This underpins our Coldry commercialisation strategy in providing potential sales for the full future capacity of the Bacchus Marsh facility (up to 35,000 tonnes per annum) as well as scope for a further 100,000 tonnes per annum from the Latrobe Valley plant, which is currently the subject of feasibility planning.”

“Having an experienced logistics expert who also supports sales of Coldry solid fuel will now allow ECT to focus on technical improvements of the product and operational rigour in running the plant.”

For further information, contact:

Glenn Fozard – Chairman [email protected]