Shareholder Update - Local Activity
Environmental Clean Technologies Limited (ASX: ECT) (ECT or Company) is pleased to announce the launch of its steam and boiler package division with a focus on providing integrated solutions to the steam, hot water and process heating industry.
- Attractive target markets with long term scale and demand dynamics
- Leverage current production assets through the Coldry High Volume Test Facility (HVTF)
- Growth opportunities through vertical integration of fuel supply, plant & equipment, finance and service offerings.
Following extended commercial trials with multiple businesses in Victoria and Tasmania, ECT has confirmed its commitment to a long-term business model which aims to deliver:
- An integrated approach to the production of steam, hot water and process heat requirements
- Installation of new multi-feedstock biomass boilers
- Operation & maintenance of new and old boiler systems.
ECT Chairman Glenn Fozard commented, “It is apparent that the market for utility-scale steam and hot water is in desperate need of a solution that can deliver capital upgrades and fuel solutions that are reliable and economical. At present, no other companies are offering fully integrated steam and boiler solutions to Victorian and Tasmanian customers.
“Local businesses reliant on steam, hot water and process heat generation have been suffering terribly from skyrocketing gas prices and a shortage of efficient alternative fuels, resulting in an energy affordability and reliability crisis. This uncertainty is impacting the viability of many businesses. It also means ageing infrastructure is not being replaced as companies are reluctant to outlay capital on new equipment without long term access to viable fuel alternatives. ECT solves the problem of fuel price volatility, fuel reliability and capital outlay concerns and allows these companies to focus on their core business while we take care of their utility energy needs.”
The below investor presentation outlines the target market and the opportunity for the Company’s steam and boiler package division, driven by its Coldry solid fuel product and associated services.
Leverage Current Assets
The new ‘steam services’ division aims to expand the client base, leveraging the current output of the Company’s Coldry HVTF northwest of Melbourne, and underpinning anticipated expansion to 35,000 tpa.
The estimated investment required to lift capacity from ~15,000 tpa to 35,000 tpa is $1.5M to $2.0M, with anticipated recurring revenue of up to $13M pa and potential once-off revenue of $10M to $20M for new boiler system installations.
Given the level of interest received to date and the successful rollout of the steam services business model to its first client (see announcement 9 August 2018), the Company is confident a sustainable commercial program exists based on its Coldry solid fuel product to supply energy-intensive industries impacted by rising energy costs.
In support of ongoing R&D for the Company’s flagship India project and future projects like the previously announced Latrobe Valley Coldry demonstration plant (currently at feasibility study stage), the HVTF is targeting an increase to capacity of up to ~35,000 tonnes per annum.
The HVTF is solely an R&D facility and continuous production up to ~35,000 tonnes per annum will continue to add to the testing of critical features of both Coldry and Matmor in areas such as:
- Pellet integrity and product quality determinants
- Composite pellet and additives trials
- Conditioning and drying profile optimisation (management of temperatures, flow rates and residence times)
- Packed bed dryer design development for airflow management and optimisation
- Overall system process improvements and equipment design review.
Importantly, all product sales form the HVTF will remain under the “Feedstock Rules” of the R&D tax incentive legislation.
In parallel to the activity at the HVTF, the Company continues to develop its feasibility study for the establishment of a large-scale Coldry demonstration plant in Victoria’s Latrobe Valley.
It is envisaged that the Victorian demonstration plant will be designed to an output capacity of between 170,000 tpa and 300,000 tpa and will feature a zero CO2 footprint, having no direct emissions.
At the minimum scale of 170,000 tpa, the Company believes there is ~70,000 tpa of initial demand from the steam, hot water and process boiler industry, making the balance of ~100,000 tpa available to emerging high-value downstream applications.
About steam, hot water and process heating
Steam, hot water and process heating are critical inputs for many industries. They are intended to provide convenient, reliable and cost-effective energy essential to business processes.
Being such an indispensable part of a business requires these systems be run at their optimum efficiency, providing the best performance, safety and energy efficiency possible.
The chart (below) highlights that the cost of fuel consumption in a steam system accounts for most of the lifetime cost of ownership. It makes good business sense, therefore, to run an energy-efficient system and to ensure a thorough lifetime cost of ownership analysis when deciding whether to upgrade existing or invest in new plant.
The benefit of investing in a new boiler system with multi-feedstock capability is the ability to substitute Coldry solid fuel for expensive natural gas or LPG, significantly lowering the lifetime cost of ownership.
New equipment requires a substantial capital outlay to realise the fuel cost savings over time, so ECT has partnered with finance firm BE Power to deliver a zero upfront cost solution for new systems and upgrades, factored into one monthly contract fee that aims to deliver savings of 15% per annum or more on business as usual.
About the solid fuel market
The Victorian industrial energy market is defined by the price and availability of appropriate energy sources. Until 2014, brown coal briquettes dominated the local market, followed by gas and biomass. The closure of the Morwell brown coal briquette plant in 2014 saw many businesses switch to gas and biomass. The price of gas has since doubled or tripled for many companies. Availability of biomass is variable, reducing the reliability of supply. Biomass typically has a lower energy density, and its ash contains elements that foul boiler systems, resulting in lower efficiency and increased downtime for maintenance.
Coldry solid fuel is an ideal fuel for businesses requiring large volumes of process heat.
Further, Coldry 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, the Company is competing directly with the availability and 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 energy-intensive industries such as agriculture, the Company sees potential to grow its Coldry capacity in Victoria over time to support several potentially high-value applications, including:
- High-efficiency, low-emission (HELE) power generation to deliver reliable, affordable electricity
- Hydrogen production
- Upgraded coal products such as activated carbon, PCI (pulverised coal injection) coal, and hydrocarbon liquids and gases.
- Integration with ‘Waste to energy’ solutions that require a stable baseload fuel source.
These higher-value applications can generate jobs and improve productivity while reducing the emissions intensity of Victoria’s world-class brown coal resource.
Coldry is the ideal solid fuel
Coldry is a lower cost, lower emission, brown coal-based solid fuel with high energy and volatile rating.
Coldry performs well as a high performance standalone solid fuel or in a blend to improve the efficiency of other biomass fuels such as woodchip, pyrethrum, sawdust, crop stubble and bagasse.
Coldry can also be infused with anti-fouling agents to counteract some of the boiler performance issues experienced when using certain biomass feedstock (like pyrethrum, crop stubble and bagasse).
Coldry can be tailored specifically to suit the application, from highly dense briquettes to our higher-porosity ‘baseline’ pellet. The objective is to expend as little energy as required to produce the right product for the application. This benefit is passed on to the customer in the form of improved fuel combustion and increased boiler efficiency.
Coldry is sourced from local, abundant brown coal supplies and features a consistent specification. Supply agreements in place with Energy Australia (Yallourn) and Maddingley Brown Coal (Bacchus Marsh) ensure long-term access to supply.
Over the coming months, the Company aims to establish further steam service contracts while developing capacity at its HVTF northwest of Melbourne.
As sales are achieved and contracts are implemented, the intent is to drive the development of the Latrobe Valley project to support further scale and revenue opportunities in the local market.
For further information, contact:
Glenn Fozard – Chairman [email protected]