I also attended the EGM/AGM yesterday. Following is some of my notes and is my recollection only (not verbatim unless indicated as such):
Present were Shaun Scott (Chairman), Les Capelli (Non-Ex Director), David Lymburn (Managing Director & CEO), Tim Hinton (Secretary), auditors and approximately 25-30 others.
Introduction
Mr Scott opened proceedings with a short introduction on what had been happening recently:
AnaeCo has been focused on finishing off the WMRC project and using what they learned to create a future for the company. They have been looking for parties which AanaeCo could ‘partner with’ to further that, particularly overseas. AnaeCo also had to resolve financial issues (debt, etc).
Sometime over the last year to 18 months, AnaeCo identified Xiaoqing Group as fitting the bill for what we were looking for. Most recently, Messrs Scott and Lymburn were in China a few weeks ago meeting up with them, viewing some of their projects (although only ‘a very small section of what XEPT currently have active in China’) and discussing the future for the business (allowing for the fact that this was before the vote). AnaeCo came away from the meeting(s) ‘pretty excited’ about the future for the company, both in China & South East Asia, as well as how the parties will combine here in Australia. AnaeCo consider XEPT to offer ‘suites of opportunities’.
Similar concept regarding the Bouygues ES MoU – BES will provide capability in terms of engineering / EPC and they are active in the waste sector throughout Europe (although MoU is for UK). AnaeCo feel this also presents an ‘exciting future’, although it is still in the early stages.
Mr Scott stated that the directors have always had a ‘strong belief’ in the technology and the potential. He further noted that the “opportunities are significant” and suggested that if anyone was able to visit China (particularly rural China) they will see that the waste issues we are dealing with here in Australia are a mere ‘drop in the ocean’. In concluding he acknowledged that whilst they’ve asked shareholders to be patient numerous times in the past “hopefully we are now on the cusp of something great for the company”.
Formal EGM
Formal EGM voting was carried out and all resolutions passed.
Formal EGM closed.
Formal AGM
Formal AGM voting was carried out and both resolutions passed.
Formal AGM closed.
Managing Director’s Presentation
Mr Lymburn proceeded to run through the Managing Director’s Presentation (same one released to the market yesterday afternoon).
The presentation obviously confirmed that Shoalhaven, SA and EMRC are active propositions, in addition to the XEPT and BES opportunities. Mr Lymburn advised that the EMRC tender has a number of options and subsequently isn’t necessarily an ‘easy tender’. Historical MoUs are expired.
A lot of lessons were learned from the WMRC project and AnaeCo’s engineers are utilising this to improve the technology. (This improvement was further reinforced later in the meeting by Mr Capelli).
XEPT is a private owned company with about 30 shareholders and about 500 ‘engineers’, although Mr Scott clarified that they are more specifically ~500 technicians, lab operators, plant operators, environmental scientists and actual engineers,(probably includes around 50-100 actual engineers). The directors also stated that the quality and experience of AnaeCo’s engineers were a driving factor in attracting XEPT to AnaeCo. Prior to this transaction being proposed, XEPT made numerous trips to Perth, read every CV and interviewed every AnaeCo engineer one on one. The AnaeCo team is considered to be a ‘significant addition’. This is a huge tick of approval in my opinion.
It was mentioned that XEPT’s preferred business model is BOT (similar to BOOT models in Australia, with the tenure period being the main difference). AnaeCo’s directors indicated that they expect AnaeCo to be steered towards the BOT contract model, which will result in ownership of plants.
To complete the XEPT transaction there are two final pieces of paper that must be obtained from two different departments, and settlement procedures (similar to buying a house). All remaining actions are with XEPT and the transaction is expected to be completed by the end of November.
Bouygues is a very large French group with market cap, revenue, etc in the “billions of Euros” and has been around for a long time (largest civil engineering project in Australia was a Bouygues contract). BES (with whom ANQ have the MoU) is a result of acquisitions made by the group over the last few decades.
BES annual turnover is around GBP100-200m. They’ve worked on 2 gasification plants and subsequently have presence in the waste to energy market. They’ve been drawn to WtE by their expertise in energy. They are now looking to expand that to enable waste disposal as well as energy generation. BES understands the drivers in the waste market (waste disposal and cost of disposal). They are also aware that gasification is a limited type of waste disposal and that subsequently there are opportunities for mechanical/biological treatment of waste (AnaeCo). BES wants this string in their bow, which is why BES was attracted to AnaeCo. BES are an EPC company (they use other’s designs - the plan is to use AnaeCo’s design to build plants). Any engagement would be in the form of AnaeCo subcontracting to BES as a supplier of design and technology services. The joint business development plan being worked on will provide BES the tools to go out and win work.
Mr Lymburn mentioned that this type of engagement is what AnaeCo were chasing for a long time (around about the same length of time as they have been looking for a transaction like the one with XEPT). XEPT actually gave their ‘blessing’ re the BES MoU and were happy for AnaeCo to proceed with this.
Question Time
Q: “The future looks good then?”
A: “Well we have opportunities. Absolutely.” No debt, out of Shenton Park, cash in bank, two significant relationships, one locked in (our new parent company), the other we still need to ‘make work’.
There were a number of questions about Shenton Park
The project was handed over in April and accepted by the owners and council. Not AnaeCo project anymore. Some limited contact with the plant as required since handover (less than 50 hours - all paid). Plant not running as owner and council are in ‘deadlock’ over commercial matters (price of waste and type & volume of waste to be delivered). While they are in deadlock they cannot deliver waste to be processed (as the terms of waste delivery are not agreed).
Re Shenton Park, XEPT and BES both made their decisions over the last 12 months.
XEPT were in Perth Oct 15, Apr 16 and Aug 16. They were kept fully informed about the status of the plant and in fact preferred that AnaeCo were ‘not exposed’ to any future problems from the D&C contract for that plant. They view WMRC as the past.
BES relationship emerged around November last year. They were sent information and sent one of their process engineers to Perth in April to inspect the plant. He spent two days there and “crawled all over the plant”. They were probably shown more in terms of due diligence than AnaeCo have ever showed anybody. AnaeCo advised BES that the plant had taken twice as long as planned and cost more than planned, showed them the lessons learned and basically put our tech ‘to the test’ to see how peers would evaluate it. BES is satisfied that AnaeCo have got enough, and have done enough, to be viable for their prospects in the UK.
Q: Old MoUs status?
A: Expired. Not being chased up.
An old MoU with an entity in Canada could be revisited, however new MoUs would need to be in line with the future strategy of the board (i.e. BOT model rather than licensing)
Q: What’s happened with the Richgro MoU/Contract?
A: That contract is between WMRC plant owner and Richgro (not applicable to AnaeCo anymore – though still active by AnaeCo’s understanding)
Q: What revenues do ANQ get from WMRC plant?
A: None. That was part of the handover agreement as trade off because of the delay
Q: When does ANQ expect revenue producing work to start?
A: I certainly hope this financial year. Nothing actually signed on the books yet.
Q: Nothing (revenue wise) that XEPT will bring to the table for immediate start?
A: “There is nothing which is so definite that we can say it’s inked in”. XEPT have already discussed using AnaeCo’s people on their projects but until it’s signed, it’s discussion.
Q: What’s AnaeCo’s view on the competition, how’s ANQ competing?
A: There are different industries within the same sector (e.g. gasification, mechanical/biological, etc). Some of the local large scale gasification projects have been ‘announced’ several times and are still a long way off from sourcing sufficient waste to make them viable. AnaeCo’s understanding is that until they can obtain sufficient waste and sufficient funding, they will not start. The costs of processing these types are higher than AnaeCo’s mechanical/biological model.
Q: Would AnaeCo consider buying back the WMRC plant?
A: Possible under the right terms and conditions, but not a focus point at all.
Q: Was the change in the mix of waste the complicating factor at WMRC?
A: Yes the waste mix changed (city of Stirling changed from 1 bin to 3 bins), but also the volume of waste WMRC contracted for was 2/3 of the capacity (the WMRC themselves were only going to supply less than a ¼ of the capacity and get the rest from the market). The only place they could get it from (feasibly) was the City of Stirling, which compounded the issue caused by the bin system change. The issue became very contractual and has (in part at least) led to the ‘deadlock’ issue at the moment.
At this point Mr Scott added that XEPT have a significant suite of technologies that they deliver across “a thousand projects” (not all municipal waste) and these include complementary technologies, personnel, factories, R&D facilities, etc., which could be combined with AnaeCo’s resources to provide a much better solution at a much better cost. Significant opportunities exist for both parties. While Messrs Scott and Lymburn were in China, XEPT’s head of Business Development returned from a trip outside of China where they’d just signed off on a contract they’d won, and indicated that this is something that AnaeCo could contribute to and XEPT would like to get AnaeCo involved in the project. Nothing is firm or committed however it is the type of thing AnaeCo could add a lot of value to. This indicates that XEPT are not simply coming on board as a major shareholder but will be the catalyst for expanding AnaeCo’s opportunities and how they can pursue them.
Q: What is the prospect of AnaeCo winning the tenders we have?
A: Currently only 1 tender being worked on (EMRC) Probability is no higher than 20% [My comment: Not sure if this is because there are only 5 tenderers perhaps?]
Q: Who runs WMRC Plant?
A: Palisade (via subsidiary company)
Q: Where’s the immediate income going to come from?
A: A final drawdown is made from the loan, plus R&D payment. AnaeCo end up with $4.8m after the ‘XEPT transaction’. Future revenue to come from winning work
Q: Will the ‘lack of disclosure’ be improved in the future?
This discussion went on for some time from memory. The company indicated they disagree that there is a lack of disclosure. They tell what they can, when they can, and there are many parties involved which need to be considered before announcements can be made. Since handover, AnaeCo cannot really make announcements about the WMRC Project as they are no longer involved.
Q: In future, would AnaeCo look to ‘keep their finger in the pie’ in projects so that they could maintain sufficient involvement, rather than ‘not our problem anymore’?
A: Need to keep WMRC in context – fairly unique situation. Acknowledged that it is fundamental to AnaeCo’s success that they can demonstrate the technology is working. (Mr Scott also noted that despite the issues between Palisade and the WMRC the fundamental technology all works and AnaeCo got ‘good ticks’ from those parties). AnaeCo will have the benefit of XEPT’s track record when bidding for work in conjunction with them.
Q: Do Palisade want to build more plants [with AnaeCo]?
A: To Palisade, Shenton Park wasn’t a good project as it took too long. AnaeCo’s relationship with Palisade is…’cool’
Q: Are Palisade invested in WtE?
A: They have a share in another mechanical/biological plant in NSW (AnaeCo not aware of any Palisade involvement in gasification)
Company comment: Across the various factors of the WMRC Project (commercial, engineering, etc) there are things that AnaeCo would do differently if they could have their time again. (Mr Capelli noted that the engineers have spent months going through all the lessons learned and consolidated all the good ideas that have come from it to improve the design).
Q: Why wasn’t the BES evaluation of the WMRC plant announced as an effective third party validation?
A: AnaeCo were in middle of commercial negotiations with BES and an announcement could have jeopardised the deal. AnaeCo tried to explain in the MoU announcement that BES had done due diligence.
So that’s my recollection of events (hopefully this aligns with the recollections of others that were there). As mentioned, please don’t take it as gospel as there was a lot of information to digest in relatively quick time. Overall, I would summarise my view of the EGM/AGM as follows:
Directors seemed genuinely positive about the future of the company;
Directors showed some sense of empathy for the delays and frustrations experienced by shareholders;
Directors want to ‘move on’ from the WMRC Project;
A number of risks of the past (financial, commercial and technical) have now been removed or significantly mitigated;
The technology has real value, as recognised by two large international companies, one of which will now become our parent company; and
Revenue producing projects are coming (though not this week)..
Cheers
Freighter
ANQ Price at posting:
0.5¢ Sentiment: Buy Disclosure: Held
