targeting global leadership in decentralized water & wastewater … · 2019-10-02 · 2...
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Fluence Corporation (ASX: FLC) Corporate Overview
August 2019
Targeting Global Leadership in Decentralized Water & Wastewater Treatment Solutions
www.fluencecorp.com
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Executive Summary
• A leading water and wastewater treatment solutions provider focused exclusively on the decentralizedmarket
– Over 7,000 installations in over 70 countries
• Global water scarcity and contamination is real and growing, with large centralized solutions not always being viable
• Our decentralized solutions are CapEx efficient and deploy rapidly – US$22B market by 2021(1) (one of the fastest growing segments)
• 2018 Revenue of US$101.1M (+74% vs. 2017(2)) and Gross Profit US$34.5M(3)
• Backlog at the end of June 2019 of US$278M
• Targeting sustainably positive EBITDA by Q4 2019
(1) Source: Global Water Intelligence, Global Water Market 2017 Volume 1(2) 2017 pro-forma (consolidation of 12 months of RWL water)(3) Q4 and Full Year Audited Gross Profit include a $6.5M benefit of reversal of an onerous contract provision from prior years
US$M
US$M
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Water Shortages: Widespread & Growing
Water shortages affect 2.7B people now
2.4B people lack proper wastewater treatment now
An additional 2.1B people need upgraded treatment
Population growth from 7.4B in 2016 to 9.1B by 2050
60% increase in global food production by 2050
Manufacturing water demand will grow 400% by 2050
Global water consumption to double by 2050
Results in 40% water deficit by 2030
Sources: WWF, Water Scarcity, 2014; US Geological Survey, 2015; UN World Water Development Report, 2017; Water for Food, UNCTAD, 2011.
Global Population
Experiencing Water Shortages
Sufficient Water Supply
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Major Milestones and Growth Momentum Q2 2019
• Largest booking in Brazil for $10M desalination project with a repeat customer
• First NIROBOX™ order in the US
Q1 2018
• Received award for Decentralized Water & Wastewater Company of the Year
• First NIROBOX™ orders in Argentina and Philippines
Q3 2018
• First MABR sale to Hubei ITEST
• First NIROBOX™ BOT signed in Philippines
• First commercial Aspiral™ sales in US and Philippines
Q3 2017
Emefcy and RWL Water merged to form Fluence Corporation (ASX:FLC)
Q4 2017
Opening of first MABR manufacturing plant in Changzhou, China
Q1 2019
• Record quarterly bookings of $223M
• Awarded €165M landmark Ivory Coast contract
• Largest individual order of 40 Aspiral™ units in China
• Official launch of SUBRE and first commercial orders secured
• Total backlog of $267M, up 181% YoY
Q2 2018
• San Quintin project reaches Financial Close
• Aspiral™ product suite launch
Q4 2018
• Commencement of San Quintin Project
• Largest NIROBOX™ order ever from Egypt (12 units)
• Announcement of $50M Generate Capital debt facility
FY 2018
• Achieved organic revenue growth of 74%
• >200% increase in Gross Profit
• Reduced G&A by 30%
FY 2019E
✓ Targeting ~20% YoY revenue growth of Smart Products
✓ Increasing backlog of projects with Recurring Revenue
✓Goal to achieve sustainably positive EBITDA
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Complete Suite of Water & Wastewater Treatment Solutions
✓ ✓
✓✓ ✓
✓ ✓
Custom Engineered Solutions
Water Treatment
Desalination ReuseWastewater Treatment
Wastewater-to-Energy
Food & Beverage Processing
✓✓ ✓ ✓✓ ✓
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Focus on Decentralized Systems
Centralized Decentralized
vs.
2/3 of CAPEX before the plant (piping, pumping)
Expensive to maintain and upgrade
No flexibility and scalability
Mainly for well developed urban areas
✓ 1/3 of time-to-complete and lower, just-in-time CAPEX
✓ Capturing more value
✓ Scalable and customized to fit current needs
✓ Easy to upgrade and relocate
The
Rationale
Why
Fluence
Wins
Pre-engineered plug and play
solutions
• High margins
• Fast delivery and installation
• Scalability
Proprietary smart technologies
and modular approach
• High quality effluents
• Lower energy and OPEX
• Low maintenance needs
Urgent Need For Affordable, Fast-to-Deploy Solutions
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Fluence Growth Areas
Water and wastewater treatment solutions for customers across the
industrial, commercial and municipal sectors
Smart Products Solutions
Recurring Revenue and
Aftermarket Services
Custom-Engineered Solutions
Aspiral, SUBRE, NIROBOX
BOOT
Complete range of O&M and
Aftermarket offerings
Waste-to-Energy, Large projects, EPC
Reporting Segment Products
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Growth Strategy
• Leading suite of Smart Products Solutions for underserved
decentralized water and wastewater markets worldwide
• Leverage global Custom Engineered Projects reputation on
decentralized plant sales enabling more repeat orders, faster delivery,
higher margin
• Growing BOOT pipeline funded by non-dilutive debt finance increases
recurring revenue
• Target China’s wastewater treatment market with MABR-based Aspiral™ Smart Packaged plants to drive rapid growth
• Leverage partners to accelerate pipeline, bookings and revenue growth
• Maintain healthy top-line growth
• Increase total gross margin blend
• Target sustainably positive EBITDA by Q4 2019
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Smart Products Solutions
Packaged MABR wastewater treatment solutions
Packaged potable water treatment solutions
MABR wastewater treatment solutions for existing or new plants
Market Drivers:
Stricter regulationsDecentralization, Energy efficiencyIncreased urbanization, New-build
infrastructure
Water shortagesDecentralization, Energy-efficiencyIncreased urbanization, New-build
infrastructure
Stricter regulationsProcess intensification
Outdated infrastructureEnergy efficiency
5,000-200,000 GPD raw municipal sewage
130,000-400,000 GPD Seawater, Fresh water, Brackish water
0.15-25 MGD raw municipal sewage
Market Adoption:
Plants USVI, Stanford (Title 22 validated), Oregon, Texas, Argentina,
Ecuador, China, Philippines, Israel
Plants globally including Egypt, South Africa, Philippines, Caribbean,
Mexico, South America
Ma’ayan Zvi, IsraelSignificant and growing pipeline
Commercial launch Q1 2019 and first commercial contract in Jamaica
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Largest individual order of 40 Aspiral™
units from ITEST
Additional Aspiral™ plants
in Hebei and Zhejiang
Provinces
Feb 2019
Established local manufacturing
Reference sites in multiple provinces
Experienced local sales teams
Network of strategic partners
Smart Products Solutions: Accelerating Activity in China
26 Partnerships covering 16 Provinces and 26 Installations
Mar 2018
Repeat order through Jinzifor the Local Government of Zhenfeng
County
Oct 2018
Exclusive partnership
agreement with ITEST in Hubei
Province
Dec 2018
Bulk order of 35 Aspiral™ units under exclusive partnership agreement with ITEST
in Hubei Province
Sep 2017
First production of Aspiral™ modules in
China
Nov 2017
First Aspiral™ plant in Henan
Province via partner QSY
Framework agreement for 6
Aspiral™ units via partner Jinzi
May 2018
First Aspiral™ Plant in
Beijing area via partner Glory Land
Jun 2018
First Aspiral™ Plant in Hunan
Provincevia partner
Hunan Kaitian
Tripartite framework
agreement for Aspiral™ in 3
districts in Yiyang City
Jul 2018
Jinzi secures third contract
in Guizhou Province
First sale via partner Hubei
ITEST. Shipped,
delivered and installed in 6
weeks
Nov 2018
Sale of 6 Aspiral™ units
via partner Zhongzi Huazein Jilin Province
Mar 2019
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Recurring Revenue: Build Own Operate and Transfer (BOOT)
Wastewater TreatmentWater Treatment
Complete Water and Wastewater Solutions Recurring High Margin Revenue
Capex
Multi-year
Recurring Revenue
• Fluence’s Aspiral™ and NIROBOX™ products are
ideal for BOOT projects
→ Footprint, energy efficiency, reliability, low
maintenance and quality output
→ Using in-house proprietary technologies
enhances margin
• Uses Fluence’s equity to inject its own equipment
• Ability to offer complete water/wastewater reuse
solutions
• BOOT agreements offer lucrative, recurring
revenue for many years with higher valuations
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Recurring Revenue: BOOT Financing Facility in Place
• Combination of equity and debt:
– 70% non-recourse financing
– 30% equity, and optional minority
partners
– Fluence as EPC and O&M Contractor
• Secured a US$50M non-recourse debt
facility from Generate Capital in 2018
– First drawdown of $2m in March 2019
• Secured backlog of US$14.7 million of run-
rate annual billings after construction of 3
projects is completed
Project Company
(SPV)
Equity Partner
(Fluence)
Client
Operation and
Maintenance
(Fluence)
EPC
(Fluence + contractors)
Lender
(finance partner + Fluence)
EquityDividend
Payments
Water
Principal & interest
Loan
Payments
ServicesPayments
Construction
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Custom-Engineered Solutions: Solving Water and Wastewater Challenges
Industrial Water Treatment
Wastewater-to-EnergyPackaged Wastewater
TreatmentAeration
EPC ProjectsIndustrial Wastewater
TreatmentFood & Beverage
ProcessingIndustrial Process Water
Bespoke solutions designed and built for customers worldwide
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Custom-Engineered Solutions: Landmark Project Win in Ivory Coast• €165M commercial agreement with Federal
Government of Ivory Coast, signed on February 26th, 2019
• Turnkey supply of custom-engineered solution for 150,000 m3/day surface-water treatment plant
• The plant will treat freshwater from the naturally contaminated Lagune Aghien and provide potable water to the city of Abidjan (4.7M population)
• Fluence’s scope: water intake and treatment, bulk water piping, water towers and infrastructure
• Project finance guaranteed through Export Credit Agency (ASHRA, Israel) and financed through Israel Discount Bank
• Financial Close and project commencement expected later 2019
• Contract revenue expectations: US$20M in 2019, US$80M in 2020, remainder in 2021; all subject to achievement of Financial Close by Q3 2019
Water from Lagune Aghien will be treated to supply potable water for Abidjan
CAD depiction of plant location and layout
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Fluence Growth Areas: Targeted Revenue Growth
Custom-Engineered SolutionsLarge projectsWastewater-to-energyWater purification
Smart Products Solutions Aspiral, NIROBOX, SUBRE2018: $22M2019 target: $26M
Recurring Revenue BOOT projects, Aftermarket
2018 Future Target
Revenue Mix
2017
Shift towards higher margin proprietary solutions and recurring revenues
…
$58M
$101M
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Fluence Growth Areas: Target Growing Gross Margin
IncreasingGross Margin
LargeProject
SmartPackaged
Plant
ProprietarySmart Packaged
Plant
ProprietaryProduct
>EUR165M (Ivory Coast
project)
NIROBOX™ Aspiral™ SUBREExample:
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Outlook for Continued Growth in 2019
• ~20% year over year growth of
Smart Products from $22M to $26M
• Increase backlog of projects with
Recurring Revenue
• Achieve sustainable positive
EBITDA by Q4 2019SUBRE installation, Ma’ayan Zvi, Israel
Fluence MABR manufacturing plant, Changzhou, China
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KEY CONTACTSKey Contacts
Ronn BechlerMarket Eye
+61 400 009 [email protected]
Adam HinckleyVP Investor Relations
+1 914 998 [email protected]
Appendix
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Corporate Overview
Capital Structure as at 31 July 2019 ASX: FLC
Ordinary Shares on Issue 537.4M
Options on issue 44.6M
Share Price A$0.47
Undiluted Market Capitalization A$252.6M
Cash at 30 June 2019 $15.6M
External debt (except non-recourse project debt)
$0.8M
Liquidity (average shares traded per day for the 3 months to 31 July 2019)
650,377
Top Holders ASX: FLC 31 July 2019 Shares (M) % of FLC
RSL Investments Corporation and RSL Capital, LLC
157.2 29.3
Watermark Services, LLC 47.8 8.9
Pond Ventures Nominees and Richard Irving
37.3 6.9
Plan B Ventures 20.5 3.8
Other top 20 108.6 20.2
Top 20 total 371.4 69.1
Notes:• Over 58% of Fluence shares held by US entities (1)
• Generate Capital $50M non-recourse debt facility, of which, only $2M has been drawn
1) As of April 1, 2019
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Management Team
World-Class Board and Leadership
Board of Directors
• 35 years’ tech and Venture Capital experience
• US$3B value created
Richard IrvingChairman
• Former CTO of GE Water
• 30 years’ operating, acquisition and tech experience
Rengarajan RameshNon-executive Director
• 30 years’ tech and Venture Capitalexperience
• US$4B value created
Ross HaghighatNon-executive Director
• 30 years’ capital markets experience
Peter MarksNon-executive Director
• Over 30 years’ international financial services experience
Paul DonnellyNon-executive Director
• Over 30 years’ industrial experience
Arnon GoldfarbNon-executive Director
Henry J. CharrabéManaging Director & CEO
• Former CEO of RWL Water
• Over 15 years’ water industry experience
Henry J. CharrabéManaging Director & CEO
• 20 years’ finance experience in renewable energy and water treatment
Francesco FragassoCFO
• Over 15 years’ marketing strategy experience
Erik ArfalkCMO
• 15 years’ as an investor, advisor and sell-side analyst
Adam HinckleyVP Investor Relations & Project Finance
• Over 22 years’ water industry experience
• Former VP Sales of Emefcy
Ilan WilfGlobal VP Sales
• Co-Founder of Emefcy
• Over 25 years’ water technology experience
Ronen SchechterCTO
Tony HargraveCOO
• Over 30 years’ water industry management experience
• Former CEO of RWL Water
• Over 15 years’ water industry experience
• Over 15 years of corporate law and M&A experience
• Former GC of RWL Water
Spencer D. SmithCLO
• Over 30 years’ experience as Company Secretary
Ross KennedyCompany Secretary & Advisor to the Board
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Global Footprint Diversifies Revenue
Leverages an optimal mix of sales channels (integrators, operators,
representatives, distributors, financial partners) across the key water markets
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Large Diversified Customer Base
Historical and Existing Customers and Partners
Water and wastewater treatment solutions for customers across the
industrial, commercial and municipal sectors
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How MABR Works
3. Blood (with oxygen) flows out
1. Air breathed in
2. Oxygen dissolved naturally into blood through lung material
MABR - Inspired by Nature
1. Air passes through
2. Oxygen dissolves naturally into wastewater through membrane
3. Wastewater picks up oxygen to digest waste
O2
Semi-permeable membrane
Biofilm
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Fluence’s MABR validated for California Water Recycling Standard by CR2C at Stanford
• Fluence MABR demonstration unit installed since January 2018 at the Codiga Resource Recovery Center (CR2C) at Stanford University
• CR2C’s research validates compliance of Fluence’s MABR technology with California’s Title 22 water recycling legislation
• Title 22 is among the strictest water and wastewater treatment standards for water and wastewater recycling and reuse in the United States. Additional testing parameters included enhanced nutrient removal in the form of “Total Nitrogen”.
• Successful tests conducted on higher concentration of nitrogen and phosphorous than typical wastewater
Fluence MABR plant at CR2C in Stanford
“… the system achieved the objectives of mean Total Nitrogen concentrations below 10mg/L and met T22
requirements as measured by Turbidity and Total Coliform in the Tertiary Effluent”
- CR2C Research ReportResearch report available at: https://cr2c.stanford.edu/resources/software
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Disclaimer
This presentation has been prepared by Fluence Corporation Limited (ASX: FLC). All currencies quoted as “$” are US$ unless otherwise specified.
This presentation may contain forward-looking statements which are identified by words such as ‘may’, ‘could’, ‘believes’, ‘estimates’, ‘targets’, ‘expects’, or
‘intends’ and other similar words that involve risks and uncertainties. These statements are based on an assessment of past and present economic and operating
conditions, and on a number of assumptions regarding future events and actions that, as at the date of this presentation, are expected to take place. Such
forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and other important
factors many of which are beyond the control of the Company, its Directors and management. Although the Company believes that the expectations reflected in
and the assumptions underlying the forward looking statements included in this presentation are reasonable, readers are cautioned not to place undue reliance
on them, as the Company cannot give any assurance that the results, performance or achievements covered by the forward-looking statements will actually
occur.
This presentation should not be considered as an offer or invitation to subscribe for or purchase any shares in FLC or as an inducement to make an offer or
invitation to subscribe for or purchase any shares in FLC. No agreement to subscribe for securities in the FLC will be entered into on the basis of this presentation
or any information, opinions or conclusions expressed in the course of this presentation. This presentation is not a prospectus, product disclosure document or
other offering document under Australian law or under the law of any other jurisdiction. It has been prepared for information purposes only and does not
constitute an offer or invitation to apply for any securities, including in any jurisdiction where, or to any person to whom, such an offer or invitation would be
unlawful.
To the maximum extent permitted by law, the Company and its professional advisors and their related bodies corporate, affiliates and each of their respective
directors, officers, management, employees, advisers and agents and any other person involved in the preparation of this presentation disclaim all liability and
responsibility (including without limitation and liability arising from fault or negligence) for any direct or indirect loss or damage which may arise or be suffered
through use of or reliance on anything contained in, or omitted from, this presentation. Neither the Company nor its advisors have any responsibility or
obligation to update this presentation or inform the reader of any matter arising or coming to their notice after the date of this presentation document which
may affect any matter referred to in the presentation. Readers should make their own independent assessment of the information and take their own
independent professional advice in relation to the information and any proposed action to be taken on the basis of the information.
2018 consolidated financial figures presented on IFRS basis are audited, and after reclassifications for non-cash foreign currency adjustment relating to
hyperinflation accounting in Argentina (IAS29).