UnspectacularAGM yesterday, despite the bubbling optimism/concern that something wasbrewing.Very much business as usual.I definitely noticed a subtle change in tone from last year though.The directors were calmer, appeared very confident, and very assured that they’d reached a point where everything was well on track.
@djglossopI didn’t speak with you but I think you must have been the gent who wasspeaking with Adam when Phil and I joined the chat.Don’t know if Phil is a HC user, but if so, good to meet you again this year Phil!
Ispoke very briefly with Richard Irving before Ross K called him to start themeeting.Richard talked about the Ivory Coast deal as a bit of a gamechanger for the company in terms of the revenue base it has provided.The stability in forward revenues for the next couple of years has provided breathing space for them to focus on Smart Products Solutions growth.I asked about financial close, and whether there was any doubt there.He was confident that it’s just a formality, and assured us that unlike San Quintin there was no political risk here.I mentioned that I’d grown confident after seeing Lauder photographed with the ministers and he gave a knowing nod and smile.I’m maybe setting myself up for a fall, but I’m genuinely quite confident that ASHRA and the Israel Discount Bank won’t pose any problems and this will all get done.
Imade a recording of the formal presentations.It’s available on my soundcloud:https://soundcloud.com/dungiven/fluence-agm-2019
Nothingstartling, mostly Henry’s short presentation, but I left in the ‘pitches’ fromthe directors to be re-elected.I quite liked Richard’s little speech about his decades in venture capitalism and the 100’s of water companies which they ran the rule over – but that Emefcy were the clear standout. I also like his little Dennis Denuto “it’s the vibe” piece about having a gut feeling when you’re onto a winner - and that that’s how he feels about Fluence.
Allthe resolutions passed easily with 97% - 99%+ majorities in favour.Surprisingly, they didn’t take questions from the floor at the end of the presentation and instead invited everyone to join them for refreshments and a chat.To be fair to them, every single director was keen to speak to attendees and made themselves available for questions and insights.
I’mafraid I didn’t wrangle anything from them that I feel with cause any readersexcitement to bubble.If you were expecting fireworks you’d have been disappointed.It just wasn’t that kind of day.
Idid want to speak with Adam Hinkley and can definitely endorse what both @selland @djglossop have said.Kid is impressive, knows his onions.He says he wouldn’t have taken this job if he didn’t feel there was scope for the company to be valued much higher than it currently is.He knows that it is currently being valued as an EPC company, and that the broader market is not aware of the proprietary technology range or recurring revenue component, and the growth potential of this side of the business.Ultimately he blames this on Australian analysts having little or no experience in terms of water companies, whereas those in North America who have covered the likes of Evoqua and Xylem for many years and have a much better understanding of the water sector and would help communicate a better “sum of the parts valuation of the company”.He thinks a lot of US investors are following the story waiting for a US listing.It’s not happening this year, but it could genuinely be on the cards for 2020 although there are challenges.It depends on a lot of things, from the IPO landscape to practicalities around US Elections. The timing is everything. He thinks the company want to reach sustainable profitability, and build out recurring revenue so that they have a really strong story to take with them towards any US listing.As mentioned, he would like to see a free float where $1m per day is being traded.This way you attract sell-side analysts and avoid any orphaned IPO.This is just his personal opinion, and he’s not aware of the consensus in the company on a minimum market cap prior to a US-listing.
Iasked him about the Generate Capital facility as personally I had expectedthere to be much more ‘low hanging fruit’ where financing had been the stickingpoint.However, like anything it takes time, analysis, paperwork for each opportunity.The drawdowns are based on EPC milestones, so can be intermittent/chunky. The first drawdown was for Bimini, and next will be Peru.
Ialso asked about Zhejiang Tiandi and QSY to see if he had any inkling of wherethings stand (subsequent to the marvellous detective work on this site from@Relax1 @nequalsone @WillChang405 @chord.He was apologetic of not knowing the up-to-date info on all partners (he’s only 4 weeks into the gig) but seemed open to the idea that shareholders would really love to hear an update on our China strategy, and where we stand with our multiple partners, ideally from Wong-Jin Yong if that was a possibility.iTest actual orders to date make up just under $10m so far, but everything is on track for the minimum of $45m as guided.What they are really looking for now is to get more of the partners to the same bulk-order stage.He said there’s a ton of excitement internally just in general, in regards to what the partners in China could bring to us but that it’s still very difficult for them to make predictions.
Wethen went to speak with Henry who was already in conversation with someone andthe first thing I heard was him talking about his excitement around thePhilippines specifically.We’ve sold Nirobox and Aspiral there already, we are quoting SUBRE’s there, they have an office there, and the Global VP of Sales (Ilan) is flying there a lot apparently. Perhaps an interesting one to watch.Rengarajan Ramesh was also there, and spoke to the global plague of poisonous algae blooms.He says that the first thing which happens is that fish die, the second thing that happens is that people die.He said no one in the world has attacked the problem of algae blooms with a larger single project than our plant in Ivory Coast. That’s worth thinking about.These algae blooms are a symptom of industrial pollution and run-off.The Delaware River which flows to Chesapeake Bay is a highly visible example of this. The crux of the Ivory Coast win was that we were able to bring financing (no collection risk), and that there was no political risk because it was already signed off collectively by the relevant ministers. He said they wouldn’t touch a $200m project in Africa without the funding and all guarantees in place.The only other companies who go to Africa for projects of this scale are the Chinese, and they bring the financing themselves. Financing, and relationships in the right places (no doubt via Lauder) really is the key to our large CES opportunity. The tender for Chesapeake Bay is in.They have submitted.The Codiga plant is still running to prove that Aspiral can match a variety of even more stringent parameters than those required for Title 22 compliance.Chesapeake Bay has faced some delays as is common with municipal projects. SUEZ have also thrown their hat in the ring – but interestingly with MBR, rather than their Zeelung MABR.Henry thinks this could give us capex but mostly opex advantage over them.Sorry to put a dampener on this project, but sadly the revenue does not appear to be massive from our role (should we be part of it).There is a main contractor who will be responsible for the civil works etc.The entire bid is around $7m, and our part may only be around $1.2m.However, it is huge for us if MABR wins a competitive municipal tender in the US ahead of other established techs.It opens up many other opportunities along the Delaware River to treat nitrates and phosphates running off from industry and agriculture.
Interms of SUBRE, China is where they are seeing the major burgeoning interest.I asked if it is from the same partners, and Henry said yes and n
ur partners know of it and some have sought quotes, some haven’t.Also other interest from utilities and existing plants outside our partner-base.No exclusivity (save for iTest’s highway deal) in China so they welcome all interest and have been quoting regularly.US is a huge market but slow to adopt new tech in infrastructure.I asked Henry about Zhejiang Tiandi and QSY in terms of Aspiral.He had more info. They didn’t announce the last Tiandi plant because now that the company has grown they are only going to make China Aspiral announcements if they are over $3m in revenue (roughly), or strategic (in a new geography, or with a new partner).QSY have submitted for a number of tenders but priced our technology too high, lost several bids, and are now coming down and reassessing their approach.We are still working with Tiandi on a couple of fronts, Aspiral and river remediation.Tony Hargrave has been in China all week with GM Wong-Jin Yong, and has apparently been incredibly busy.Henry says it’s amazing what is happening there, and we are negotiating larger “cluster” orders with other partners currently and if/when they come through he told me “you will recognise the names”.Roughly 55 staff currently in China, on the path to 100.Most of that is manufacturing staff, with 10-12 sales working with the partners.Management sign partners, sales staff execute on those then-established partnership pipelines.Too big a country to have our own salespeople everywhere.
Philasked the question about Ronald Lauder, and Henry says he spoke with himyesterday (Tues) morning because they have a board meeting in Egypt(interestingly) with the local partners who know Ronald well.He’s happy with the progress of the company, asks Henry a lot about China, and he would like the share price to be much, much higher.Pushed by Phil on whether or not that is the reason for a US-listing push, Henry echoed Adam’s sentiments that sophisticated water and wastewater investors happen to be in Europe and North America (no offence @ywtoh !), but Henry admits that when he goes on Asian/Australian investor roadshows he often has to explain the water business.This doesn’t happen in Europe and the US, they understand the sector, they understand the decentralisation trend in the sector and so they go straight to talking about the economics of the business.Ultimately, he says, that is why we need the dual-listing. He wants to create “a gangbusters company”. I cajoled him about Lauder’s shares coming out of escrow in July but of course he couldn’t give me anything about his intentions.The earlier noises were that Lauder is very supportive of management, pleased with progress, but eager for much more.Henry did joke he is a great ambassador for the company because “he still says it’s his”.Hopefully we can read accurately between the lines here.
Brazil,we have lots of Portuguese-speaking engineering and sales capability in SouthAmerica and we are seeing lots of opportunities in this region.The recent desalination win is what he was pointing towards in the last webcast, but it’s not all.Hopefully lots more to come over time.
Idon’t know if it was a slip but he referred to the Chesapeake Bay tender as the“Cecil County, Maryland” opportunity.There may be something there for the deep-diving researchers.His last message was on the risk-averse nature of the sector, the difficulty to bring new technologies to market, and that in many ways the progress has been unprecedented for MABR.
That’sall folks.
