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2019 Annual Report For personal use only Annual Report 2018-19 2 2019 Annual Report Corporate Directory Directors Glenn Fozard Barry Richards (resigned 11 September 2019) David Smith James Blackburn (appointed 11 September 2019) Ashley Moore (appointed 11 September 2019) Company secretary Martin Hill Registered office 388 Punt Rd South Yarra VIC 3141 Australia Principal place of business 388 Punt Rd South Yarra VIC 3141 Australia Share register Automic Pty Ltd Level 3, 50 Holt Street Surry Hills NSW 2010 Phone 1300 288 664 (within Australia); +61 2 9698 5414 (outside Australia) www.automic.com.au Auditor BDO East Coast Partnership Tower 4, Level 18 727 Collins Street Melbourne VIC 3008 Bankers National Australia Bank Limited 3/330 Collins Street Melbourne VIC 3000 Stock exchange listing Environmental Clean Technologies Limited shares are listed on the Australian Securities Exchange (ASX code: ECT) Website www.ectltd.com.au For personal use only Corporate Governance The Corporate Governance Statement of the Company can Statement be found at http://www.ectltd.com.au/about-us/corporate- governance/ This statement has been approved by the Board and is current as at 30 August 2019. 2019 Annual Report 3 Contents Corporate Directory ......................................................................................................2 Contents ........................................................................................................................3 Chairman’s Message .....................................................................................................5 Executive Committee’s Message ..................................................................................6 Corporate Strategy ........................................................................................................6 Board ...........................................................................................................................16 Key Personnel ..............................................................................................................17 Technologies ..............................................................................................................18 Coldry Technology.......................................................................................................19 Hydromor Technology ................................................................................................24 CDP-WTE Technology ..................................................................................................28 COHgen .......................................................................................................................34 Commercialisation Strategy ........................................................................................36 Financial Report ..........................................................................................................37 For personal use only Vision ECTCorporate Strategy Tier Description Target Outcome Target Benefit Bacchus Marsh plant; Organic char, syngas and Finance basic $3M EBITDA 1 steam fuel operating costs Growth production Proposed acquisition Finance ongoing targets where ECT project and technology can be $3M+ EBITDA technology 2 Acquisition leveraged for better development value Corporate restructuring to 1020x earnings Drive return to 3 Structure improve market multiples shareholders rating For personal use only 2019 Annual Report 5 Chairman’s Message Dear fellow shareholder, Following unexpected delays in India and the rapid advancement of our domestic activities, we’ve needed to regroup and refocus. As a result, we’ve developed a 3-tiered strategy aimed at reaching a positive cashflow position within a year. Redefining the Direction Ahead Stepping back for a moment, it’s helpful to restate what we do, so we of businesses with complementary processes, similar products and may better frame our strategy for both present and future investors. established earnings. These target businesses will be evaluated for synergies with our existing suite of technologies and, where appropriate We’re in the business of researching, developing and commercialising benefit from their deployment or integration post-acquisition can be leading edge technologies for upgrading low-rank and waste resources identified, leverage the existing business value. that can deliver both economic and environmental benefits. Finally, in building earnings with the first two tiers, we’re also considering The nature of research, development and commercialisation requires a corporate transactions and structures that improve market ratings for clear long-term vision and considerable investment. Developing capital- our asset class. At the core of our business model is the development intensive first-of-a-kind technologies and processes is challenging. of technology which beneficiates low-rank and waste resources. Our Crucial to meeting this long term challenge is establishing operational technology suite utilises a diverse set of waste feedstocks to produce cashflows which evidence the commercialisation of our technology suite. higher value products with low to zero emissions profiles. Over the past 8 months, ECT has been advancing a strategy aimed at We believe that this approach will allow the market to better categorise developing near-term operational cash-flows in parallel to proposed and rate its value according to earnings multiples commensurate with its projects in India, the Latrobe Valley and other regions. market peers. This current corporate strategy aligns with our 5-year stated purpose Three-Tiered Approach where we, “bridge the gap between today’s use of resources and To deliver positive cashflows sufficient to continue the broader research, tomorrow’s zero emission future.” development and commercialisation objectives over and above basic As we drive our corporate strategy over the coming year and advance operating expenses, we’re adopting the following three-tiered approach. local market opportunities, we look forward to providing ongoing updates To improve group cashflows, we’re aiming to maximise revenues from during 2020 and on behalf of the board of directors, executive and staff, our existing facility at Bacchus Marsh. Further, this will support ongoing we thank you, our shareholders for your continued, invaluable support. market and application testing of Coldry products to underpin the offtake Sincerely, from larger capacity Coldry plants, including our proposed Latrobe Valley For personal use only project. Additionally, the we believe there are significant upside opportunities for technology-leveraged business acquisitions. Through increased Glenn Fozard economies of scale, and supported by organic revenue growth, we’re Executive Chairman aiming to consolidate our market position through the acquisition 6 2019 Annual Report Executive Committee’s Message We are very pleased to provide this report on your Company for the 2019 financial year as we step forward into a new and exciting phase. In the coming pages, we focus on areas of key interest to shareholders, aligned with important themes from the Director’s Report (page 38 of this Annual Report) and take a look at the year ahead. Corporate Strategy As touched upon in our Chairman’s message, having embraced the need for change and a refocus Tier 1 - Organic Growth to growing operational income, we’ve embarked on an ambitious but achievable mission to deliver The first tier of the strategy aims to leverage our existing Coldry high volume test facility (HVTF) net positive cashflows by this time next year. northwest of Melbourne to build upon the demand in the local market for solid fuel and char Following is an outline of the plan to deliver this objective. products. Following the successful signing last year (9 August 2018) of a 5-year deal for the provision of Three-Tiered Approach fuel and steam services to a Victorian customer, we subsequently announced (12 April 2019) the launch of our steam and boiler package division. Tier Description Targeted Outcome Targeted Benefit This division offers turnkey solutions to industrial-scale steam and hot water users, encompassing the upgrade of existing equipment, installation of new equipment, new equipment financing, Organic Growth Bacchus Marsh plant; $3m EBITDA Finance basic char, syngas and steam operational costs operations, maintenance and fuel supply with the unique proposition of offering significant savings fuel production to customers on their total cost of ownership. Acquisition Proposed acquisition $3M+ EBITDA Finance ongoing The launch of this new business initiative was made following upgrades to our Coldry HVTF which targets where ECT project and technology increased the testing capacity of the plant, making higher volumes of Coldry solid fuel available for technology can be development sale. leveraged for better In parallel, we’ve been assessing other markets for potential Coldry sales. This has led to value consideration of the char market. Structure Corporate restructuring 10-20x earnings Drive return to to improve market multiples shareholders We see three key applications within the market: rating 1. Smokeless fuel (e.g. BBQ fuel); For personal use only 2. Carburiser, used in specialty metallurgical applications, and; 3. Agricultural char, used as a soil enhancer. 2019 Annual Report 7 The next phase of development at the HVTF aims to increase capacity to 25,000 tonnes per annum, with the following sales and revenue targets: Volume Revenue Target
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