Ann: Fluence March 2019 Quarterly Report Business Update, page-29

Hi @Relax1

I contacted the company about how BOOT is shown in their 4C and reporting and they confirmed that any drawdowns from the NADB or any other BOOT structure will come through as financing. The cash paid out of Fluence will be investing outflows (into the SPV).

The drawdowns from the NADB are actually Fluence billing the customer through the NADB, but it is done in arrears so the costs would have already been incurred by Fluence upfront. You can see the initial invested capital into the SPV (approx. US$1.8mall back in the Mar18 Qtr) and some spent this quarter (see Mar19 4C for US$867k of construction of concession assets under investing cash flows).

Look below to see the BOOT structure represented visually, the SPV is consolidated by Fluence, so the cash out of Fluence is in the form of equity invested into the SPV.. and the cash in is are the payments from the SPV which come from the Lender (NADB). Because the SPV is consolidated (part of the same entity of Fluence), the proceeds received from directly from the NADB as such it is classed as financing inflow (arguably it could be a return of investment, to offset the investment... but either way it is no operating).



To further demonstrate this, the Q1 quarterly updated stated that US$3.5m was expected in Q1 but will be recieved in Q2. This was not flagged as operating cash inflow.

It then goes on to talk about how there was a difference between the estimated US$10.1m net operating outflow, and the actual US$14.7m net operating outflow was due to US$5.0m of debtors which were originally expected to be received in Q1 will now be in Q2.

What to take out of this is that we need to take the full picture of Fluence, the operating net cash flow is a key focus .. however financing inflows are also offset by investing outflows, which going forward will only grow. So US$3m cash outflow next quarter is probably not accurate given there will be investing outflow, which will be offset by a financing inflow sometime in the future.

Management have a clear view of their finances and pipeline.. they came out and told us many times over that sustainable Q4 profitability is their objective and they are on target. They have recently just told us they are funded to profitability, barring a significant order that will require short term equity funding to fulfill.

And great work explaining the significance of BOOT, and managing the BOOT book will be a huge task given they will all be structured differently. Having a few to manage is easy, but they are looking to grow this significantly... so having a separate entity to house all this ensures it is as clean as possible and doesn't get mixed up with other parts of the business.