Now that CCE have put out their prospectus (being their chance to state their case), I want to challenge some of it as is my Right.
My first comment: John Davidson has 149M shares. For him to take his full entitlement he needs to buy 594M shares at $0.001 which is $594,000. I’m sure Davo’s good for it right Davo? Will you be ponying up Davo? I mean, you obviously believed in the CCE dream since you took so many shares. You flogged a pile over the last year – single-handedly shafting the other shareholders as you sent the share price crashing (to where it belongs so no foul).
It does make me cringe to hear Terry Stinson tell shareholders how lucky they are to be given this opportunity to invest at such an “attractive price” in the new, revitalised, totally resources, Carnegie. Yeah – well done CCE, you’ve driven the price down to an attractive one to buy at. No doubt the Remuneration Committee will reward you achieving that KPI.1. It is my opinion, supported by the benefit of hindsight, and also reviewing the very carefully worded announcements CCE put out over the last 2-3 years, that CCE have known for a couple of years they wouldn’t actually build anything (at Albany for example). They needed to “plan” to build to get grants from the WA government (poor Alannah was duped!) and from ARENA (also duped!). The reality is, they just wanted the $5M to $10M before they changed/updated etc the plan and begged forgiveness citing any number of factors for their failure to deliver anything physical. Event the prospectus highlights how long ago they started to realise they didn’t have the capital needed.
2. I note their website still maintains their IP Protection line which is their fallback line for why they can’t publish any facts whatsoever about what they are doing. They just fall back to ‘protecting out IP’ and the biggest laugh of all “Commercially sensitive” (which it absolutely is – because the commercials are probably pathetic!).
3. Jonathan Fievez saying recently he doesn’t know the results of the CETO 5 project is either an outright falsehood or the CTO/CEO doesn’t know how their most-recent flagship project performed?!
Fievez was the CTO and part of their executive team the entire time. This is his baby! He absolutely knows everything about the performance of those bouys and the only reason we could presume he isn’t telling anyone is because it was clearly an abject failure (hence why they found the EMC diversion!). If they had any genuine success they’d have shouted it from the rooftops (given the way they announce ‘nothing’ events in time for capital raisings). The now-CEO has a long history of not telling shareholders any bad technical news. If he published everything about the performance of CETO5 (its 4+ years ago now since it was pulled out of the water?) eg whole of system and individual unit availability, actual generation results (kWh and efficiency), faults, capital and forecast maintenance costs etc etc etc he might very slightly redeem himself. Come on Jonathan – tell us how CETO 5 performed.
4. “Carnegie was unable to achieve the desired level of financial performance from the EMC Business due to a combination of factors, including EMC Co’s array of challenging projects, onerous joint venture arrangements and legacy contracts”
They continue to blame EMC for their fall. This is somewhat of a moot point now since its been well-established that Michael Ottaviano and Aidan Flynn were commercially and managerially incompetent (oh, thats right – they resigned before the Administration) but, CCE were already 35% shareholders and on the board of EMC for around 9 months before deciding to buy 100% (John Davidson sold them a massive bunny!). They then went out for a $6M capital raise and got $18M (because they had bought EMC) – enough to have built Notham Solar Farm with 100% cash according to their November 2017 announcement.
They found a project partner and announced in October 2018 they had also raised $7.5M (debt) from Asymmetric Credit Partners Pty Ltd. ~$12M left over in cash from the capital raise in early 2017. Then they raised $5.3M a year later. That’s more than $35M raised in debt and equity in ~20 months. They must also have had revenue from ARENA, WA Govt and EMC customers. Where did it go? How badly did CCE mismanage everything? They had DD before the 35% purchase then a further 9 months before they bought the other 65%. It is not someone else’s fault! How will these guys commercialise anything?!
5. I have no doubt CCE’s technology has advanced ‘our’ understanding of wave energy and harnessing it. I am convinced it is not economically viable to do so (at least using anything CCE is working on and not on this planet!). I’m also convinced that unfortunately for CCE shareholders other technologies are leaving it well behind. Proven tech like on and offshore wind, solver PV, biogas and waste-to-energy, and soon batteries and probably loads of things I don’t even know about. CCE is working on something possibly never going to be commercialised or profitable. Time to hand over whatever IP they have to a university and stop pretending shareholders will make a return on this.
6. There will likely be a minimum of 11.5BILLION shares on issue, plus the convertible notes and each note had an option… if you are a Mum and Dad shareholder you are being diluted to NOTHING by all of this. You are just funding Fievez and the Board’s lifestyle (and yes, some employees as well – who I hold blameless for all of this) with your after-tax savings. I believe the prospect of recovering money from this entity are negligible and putting more in is less beneficial than almost anything else you could do with your money. Could it be that you will effectively be giving your cash to bail out (yet again) certain Director’s and Asymmetric?
7. From the Prospectus:
“Following completion of the Recapitalisation Proposal (which includes effectuation of the DOCA and completion of the Offers) and assuming the Minimum Subscription is achieved, the Company will have cash on hand of approximately $3,850,000 and a liability position of $2,825,000, being the total face value of the 2021 Notes”. => Which means they have a net $1M cash position… after all of this… every month the gap will reduce until they owe the full $2.85M and have no cash and minimal revenue.
“There is a risk that the Company may not be able to meet the requirements of the ASX for re-quotation of its Shares on ASX.” => Which means you may not even be able to sell your shares, after paying your money, even if you just want to cash out and claim your losses!
“There is no guarantee that the research and development will produce a commercially effective, successful or competitive technology.” => Finally – I agree with something CCE have published.
“…the development of the CETO Technology may require additional financing in the future in order for research, development and commercialisation of the technology to progress at a competitive rate. … the Company may be required to undertake additional equity financing, which would be potentially dilutive to Shareholders depending on their participation in any equity raising.” => Translation: Set aside some more of your money for next years capital raise (after the share consolidation of course).
“The maximum number of New Shares that will be issued under the Entitlement Offer and Shortfall Offer is 11,525,809,800 New Shares.” => *blink* That is staggering. The minimum total number of shares on issue after the capital raise is 11.5 Billion and the maximum is 17.5 Billion… not including the convertible notes in 2021
8. Garden Island
Firstly – is it “microgrid”? Isn’t it actually just a solar farm with some battery smoothing? Do they have to keep calling it a “microgrid” to keep ARENA happy?
DoD energy supply: “The agreement provides for an option to extend by two further terms of five years each. However, there is a risk that the DoD may not extend the contract with the Company.” => DoD may not extend the energy supply agreement after May 2022?! So the assets economic future is firm, maybe until the teething problems identified are resolved, and then may not be renewed?!
“Typical annual revenue from the sale of electricity is expected to be approximately $380,000 with annual operating expenses of approximately $100,000.” => So at 100% availability and production we should expect to see approx.. 3,700MWh per annum from this facility? Therefore, DoD is paying about $100 per MWh. CCE are forecasting $280,000 net revenue a year. CCE are estimating about $375,000 in one off costs for the system initially. Ie. They are problems they already know about! At best the first 2 years of net revenue is mostly spoken for.
Always so careful to cover the behinds with statements like, “The profitability of Garden Island Microgrid may be influenced by numerous factors and events that are beyond the control of the Company, and the Company cannot provide any assurance as to the cash flows that it will derived from Garden Island Microgrid.” => This is not random statement – this is covering something they know is likely to have the impact described!
And then, if the above were to happen (just.. you know.. if it might happen…) “If Garden Island Microgrid fails to generate revenues in line with expectations, this will have an adverse effect on the financial performance of the Company, and the Company may be required to raise additional funding.” => we’d need to ask you for more money – but hey, we did tell you this was a possibility. Well we know its not cash-flow positive for the first 18 months because of anticipated one-off expenses…
9. “The Board considers the ongoing development and improvement of its own performance as critical input to effective governance. The Board will undertake an annual evaluation of its effectiveness as a whole. The Chairman will review the individual performance of each Board member annually.” => What can you say to this? I hope Anthony Shields is ready to call out their BS! Fitzpatrick and Mooney in particular have been incompetent – not just on one matter, but in an ongoing and broad manner! Stinson is fairly new to the table but the underlying issue here is the CETO technology. What is it’s LCEO, what scale can it be deployed at, and where?! If CETO LCEO is still >$500/MWh and they actually haven’t even moved to developing a commercial product then they know there is no prospect of a two-year commercialisation plan that has any chance of getting close! If Stinson knows that but takes the ‘incredibly optimistic’ line, CCE has Ottaviano MkII and they will be spinning BS to Shields for his consumption! We know Mooney and Fitzpatrick couldn’t tell what the truth is in a one-story line-up.
On the topic of governance:
“(g) Non-executive Directors Remuneration … the total fees paid to Non-Executive Directors, including fees paid for participation on Board Committees, are kept within the total amount approved by shareholders. At present the maximum aggregate remuneration of Non-Executive Directors is $500,000 per annum. … The Remuneration Committee shall review and make recommendations to the main Board on remuneration packages and policies applicable to senior executives and directors themselves … It may be appropriate in the circumstances for the Remuneration Committee to consist of non-executive Directors so as to be seen to be independent. … {WTF?!}
“ (h) Remuneration Committee … The Company will established a separate Remuneration Committee to consider the remuneration of directors, senior executives, management and staff. … The Committee will comprise non-executive directors Grant Mooney, Mike Fitzpatrick and Anthony Shields. Where remuneration of non-executive Directors is involved, independent external advice will be sought.”
Cutting to the chase: the non-executive Directors are paid up to $500k/annum, as determined by the independent Remuneration Committee, which is made up of the THREE NON-EXECUTIVE DIRECTORS. Don’t worry though, they will seek “external advice” when setting their own remunerations! At a guess they’ll ask Mooney’s consultancy what they should be paid.
Shareholders – can you see the possibility of this being abused (because it is terrible governance – it is the opposite of good governance!
I had a slight giggle reading Mooney’s bio: Mooney’s consultancy is “ … specialising in corporate compliance administration to public companies…” => but certainly not good governance or commercial acumen! At least this incarnation of CCE doesn’t have a Managing Director (because aside from also being the opposite of good governance we know they need to be paid twice – once for each role - don’t they Michael Ottaviano?)
Fievez: “Formerly Carnegie’s CTO, Mr Fiévez has served the company for 11 years as part of the executive team and has extensive knowledge about the CETO technology, the wave energy industry and the broader renewables sector.” => but has no idea how CETO 5 performed…
Well – that’s my take on all of this. I had a look at the financials at the back of the prospectus but since I have a novel here I don’t want to write any more.
Suffice to say I just don’t believe with the book value of CETO or Garden Island Solar Farm … errr Microgrid. Based on the absolute most optimistic scenario Fievez et al could contrive I have no doubt!
In my opinion, being as much ion the dark about the truth of CETO as everyone else, I cannot see how this would make a good use of funds regardless of how much anyone already has put down the drain. Time to wind this up and donate the IP to UWA's engineering department!
I will now sit back and enjoy the train ride…
