competitors, page-7

Hi Kiril

Good question. Let me clarify.

It would have been challenging for INT to win major contracts on its own considering its market cap hence the PRI JV. Essentially INT are more a technology business than a hardware business with no manufacturing facility of its own. The previous attempted cap raising of 39 mill would have been partially used for a down payment for a manufacturer of interval meters. I would assume previous management had their heads in the clouds with unrealistic ideas, wanting to do it all. In a submission to the Essential Services Commission Issues Paper INT quotes cost per residential meter to be in the range of $150-180 "inclusive" of installation with a data collection cost via the Utiligy system of $25 p.a.
Let’s assume a "gross" margin of 50% on the upper range of $180 for each installation, leaving $90 from which a contractor will need to be paid etc, leaving a modest net return. Keep in mind this is not a recurring revenue stream but a one off. With the remote data collection fee of $25 a percentage will be paid by PRI to INT where INT install its technology on existing PRI meters globally which number in the millions, and is a recurring revenue stream which is the HOLY GRAIL of all business. And once installed the technology ( Utiligy) is there for the life of the meter.
The installation of meters is labour intensive, data from the meter which is remotely collected via the net is not. As a consequence INT formed the JV with PRI (PRI/UTILIGY) to offset manufacturing/installation costs of future contracts and further develop its technology.
PRI specialise in the hardware, INT have expertise in software technology. A perfect fit. For INT the real money will be in the licensing. INT have not bundled their technology into the PRI/INT JV but licensed it out to PRI, leaving INT to pursue other metering providers not competing directly in PRI's markets. In my previous post I stated existing metering providers and that includes PRI. It will take time for PRI/UTILIGY JV to build scale comparable to what PRI currently have. Bayard have a strong presence in the US, PRI do not. INT could license Utiligy to them for the US market and other markets where PRI are not established.

Analogy:
Telstra is reluctant to build a Fibre to the node network without a guaranteed rate of return from the ACCC. All ISP's would have access to the network for a fixed fee.
So Telstra spends billions to build its own network and then is compelled to share it with others. Doesn’t sound very fair but that’s another matter altogether.
Imagine the millions of meters installed by PRI globally as being the same as Telstra’s fibre network. PRI has spent, most likely, $billions over the years installing this network and along comes a minnow in INT with exclusive access!!! No competition!! And install their technology and receive revenue ....that’s akin to Telstra saying to a small ISP..." Come on you little bugger lets share in all the revenue earned from my network". Or put it another way. Microsoft didn’t have to build millions of PC’s to sell their software which is where the money is.
Rest assured the projected earnings of $10.5 million is very very conservative.

To quote from the ASX release of the PRI/INT strategic alliance

"The Intermoco Board is excited by the prospects and opportunities that the strategic alliance with
PRI will bring and looks forward to the effective commercialisation and distribution of the Intermoco
technology through the new arrangements".

Another revenue stream being overlooked is Carbon Trading/Credits. The Stern report has set the cat amongst the pigeons, increasing awareness of environmental concerns. Currently, carbon offsets are trading between $15-$17 per tonne and the global market predicted to be worth up to 2.3 trillion by 2012.
http://www.globalenergy.com/index.asp
http://www.europeanclimateexchange.com/index_flash.php

INT/PRI meters indicate in real time the amount of carbon being emitted by the end user and the potential for INT to earn Carbon Credits 24/7 is enormous.
Let’s not forget the cashed up Ethical/Green Investment funds looking for genuine investments in their field. I’m sure INT is appearing on their radar.

It’s getting late.
Cheers
RBA