Ann: December 2022 Quarterly Activities and Cash Flow Report, page-35

I thought I'd wait a while for others to reply before continuing to make a nuisance of myself on this forum with long, repetitive posts. I hope Long Clean Energy replies to your points -- he usually does, and always has an excellent grasp on the financial side of the business. Myself, not so much. Not much at all, really! So please ignore anything I write which looks like financial analysis as I haven't got much idea about it. I stick to long term fundamental analysis, and do a lot of reading to try to cover for my short-comings!

The renewable energy theme -- yes, I am a big fan of the narrative too. Not on idealogical grounds. For me, it is purely an investment in the future's high demand, high growth industries.

USP -- There are very few, if any, anaerobic digestion plant makers in Australia. There's the original plant at Yarra Valley (I don't know who built that or if they're still operating), the plant we built at Rich Gro in WA, BLM in SA, and if you go to the AEMO web site you'll see in QLD there's a sliver of a line representing less than 1% of energy from some type of anaerobic digestion plant (A.D.) there. From memory, less than 0.5%. Sure, there are lots of renewable energy companies on Google. But they seem to be focusing on wind, solar, hydrogen, ammonia, and other weird and wonderful, experimental types of energy. There's a newly-listed ASX company capturing methane from landfill, which seems to be making money with much smaller-scale projects than ours. I'm not aware of other companies doing what we're doing. In Europe, some countries have upwards of 10% of energy coming from A.D., with nuclear an option as well. We have zero per cent from both in Australia. So there is a large, unfilfilled market to be potentially filled. We need all types of new energy in Australia to avert a national crisis of our politicians' making, and I suspect politicians on all sides know that there needs to be a proliferation of A.D. plants along with wind, solar, and just about everything else in the next few years. A.D. also operates as a baseload, firming power because it's 24/7, whether the wind is blowing and sun shining, or not.

Moat -- I bought this up. Perhaps a bit cheekily and it's a bit of a stretch. I argued that the massive complexity and time involved in starting this business/industry from scratch, time delays, knowing what works technically and what doesn't, 1+ year to get finance, etc. means that you'd have to be stark raving mad to try to follow along behind and compete. There is low-hanging fruit in other industries. However, it would almost be a good thing to have some competition, because increased awareness of A.D. could benefit DEL. At the moment we seem to be trying to be the trailblazer and almost create the industry in Australia single-handedly. The Eagles don't begrudge the Dockers their existence, nor, I am sure, do the Crows think the Power cannibalise its sales. It's extra attention, marketing and success for all.

The technology is mature in Europe -- Absolutely. It works and is proven to work -- unlike the various types of experimental energy that is being touted at the moment. Penetration in the Austalian market is virtually zero. Again, I'm not aware of other, unlisted companies making these plants. Each state could theoretically support a dozen plants. Outside of this H.C. board, who has even heard of A.D.? Let a few plants spring up around major capital cities and perhaps they will become more mainstream. Another point is that in Europe the A.D. industry seems to grow crops specifically as feed stock for the A.D., whereas in Australia, the model is on using waste that would have otherwise gone to landfill. I imagine greenhouse gasses are emitted in the composting process. I'm not sure about this.

Competing for feedstock -- Maybe. DEL IPO material, from memory, claimed that gate fees for taking waste were increasing year-after-year, very consistently, and rising fees were almost assured. I share your scepticism. Apparently the financial viability of plants, in part, depends on gate fees, and that would play a part in determining which states were the main focus of DEL's pipeline immediate development attention. Australia wastes around 30 million tonnes of food and agricultural organics per year so presumably it has to go somewhere. There is only so much that can be mulched or composted. I remember seeing DEL graphs of those gate fees rising each year.

If this was so good, why aren't others doing it? I don't know. Although I've used this argument myself many times. Why invest in X small cap company, because if they were really doing so well, X mega cap company surely would have bought them by now. I used this excuse last year to not buy OZ Mineral shares and a few weeks later BHP put in a take-over offer. If Xero really made good accounting software, surely Microsoft would have taken over the company by now and incorporated it into Office. Tassal share were unloved and under-valued for years, then a large Canadian company put in an opportunistic take-over bid. It is a valid point though regarding Cleanaway and Suez and I don't have an answer for you. Lots of things seem to fail in Australia which work overseas. Burger King and Starbucks come to mind. Perhaps the regulatory environment has been unfavourable until now. Perhaps it's the distances between cities, or our culture. In Europe and the US, the oil super-majors are starting to buy companies like DEL aspires to be, at rich valuations. This argument is really beyond the scope of my financial understanding. Perhaps ignorance on my part. I choose to ignore it, perhaps at my peril!

The Palisade deal -- Yeah, you're spot on. The risk is we become their private, personal EPC builder. We do all the hard work, and their investors collect their 11 or 12% annuities for the next 25 years. Who knows what is in the contracts between Palisade and DEL, and what land mines are there or what Hamish has promised them. Management of DEL has not been very transparent and they've made a lot of questionable financial decisions over the past couple of years. You're also correct about EPC being a graveyard. I note that Monodelphous, which constructs mines, reported poorly a few days ago too (although Lycopodium had a great result). The supposed advantage for DEL is the vertically-integrated part. We design, build, and maintain the sites, and sell the energy through our (now defunct) energy re-sale division. We do everything. I've argued before that DEL took on way too much, way too soon, and in too many different states. I am also concerned about how beholden DEL is to Palisade now. It's great that we have the financing but I suspect Palisade has a lot more control over DEL than the other way around. If we somehow lose that financing deal we're dead meat. I hope our contracts are as air-tight as the A.D. tanks we build. I will be happier once those trees at SA1 are gone and guys in hi-viz vests are walking around the site. Without the WA Retail / re-sale revenue, we sink or swim on the ability to get these plants built, operating, and generating revenue. It's a gamble, but that's why Delorean Corporation listed in the first place. I have argued here often that the one thing we've done right as a company has been to build excellent A.D. sites which work as indended.

If/when the plants are built, we should be: 1. collecting gate fee for the organics, 2. selling the gas/electricity, 3. selling the digestate as fertilizer, 5. receiving money for carbon credits, and 5. getting paid by Palisade for maintaining the sites for 25 years. We'll own half of each site, so a 50% share of each. It's not an altogether bad deal considering our $14 million market cap, and that we have put up no money for the sites. Whether or not a built site will be profitable despite these multiple revenue streams (I'm no finance guy) I have no idea, and defer to the likes of Long Clean Energy. Despite all of this, I am still not sure if DEL shares are a good investment or not! They could either 10x or go bankrupt, which makes them a small, speculative investment for me. Although it is a company which seems to hold my interest and attention a lot more than, larger companies, say CBA, CSL, Harvey Norman, etc.

On an unrelated issue, I notice on LinkedIn that we have hired an experienced project manager to be based in Victoria. A lot of the 'likes' on the post seem to be from folks related to the Yarra Valley EPC build, so there is progress being made with that site.