After seeing the results yesterday I find myself sitting...

After seeing the results yesterday I find myself sitting somewhere between Dabozza and EmptyTrolley's views. Here are my thoughts.

The lack of communication -- particularly with the Stanhope site -- has been troubling. The EBITDA loss was a surprise, so was the increase in revenue from WA retail. Strange, because I can't find any information online about their retail business. Today's announcement regarding the renewable gas certificate for SA is the type of thing I am looking to see more of (signs of progress). It is very tempting to buy another small parcel at 9 cents today. As Dabozza said, risk seems to be increasing and I understand his cautious outlook.

I still can't understand why DEL is embarking on a country-wide roll out of plants and taking on world-first projects using a single type of feed -- untried in Europe or elsewhere. It feels like going to the highest diving board and attempting a triple backflip, triple twist dive when something simpler would have been entirely suitable. I don't understand why staff are travelling to / staying in places like NZ, Bordertown (BLM) and rural Victoria when there are opportunities in one or two states that would involve less travel and developing deep contacts within a couple of local governments.

The organisational knowledge from surving Covid, solving the Blue Lake feedstock issue, solving the tank construction issue in NZ, and overcoming the finance hurdle will hold DEL in good stead. If it's this difficult for us, it would be as difficult for another company following behind us. However I too am troubled by LongCleanEnergy's concern of complications and cost increases with the Yarra Valley project. I read in an interview that Joe has built ten plants in the UK. That is reassuring, although there is a lack of local staff in Australia with knowledge and experience building these plants (unlike, say, the mining industry) because almost nobody has built them in Australia before. As for Delorean's experience, despite the big plans and colourful PPT presentations showing a country-wide roll out, we only really have the RichGrow site in WA under our belt as being successfully completed. Bordertown and NZ are still in progress. SA1 and VIC1 are yet to commence.

Field Trip to SA1

I personally travelled to the SA1 site last week and walked the perimeter. It currently has temporary fencing around the land. I could not see any evidence of pre-FID work having been done unless it was something unnoticable, like connection to the gas mains. No "Delorean Energy" corflute or metal signs are at the site either.

My impression was the site was far bigger than I had imagined. It seems to be a double block in a huge industrial estate yet it's only about 20-25 minutes drive from the CBD. It is a totally greenfield site with trees still on the land. It's geographically close to the growers of vegetables in glasshouses and other primary industries in the north-west of Adelaide. Next door is the council rubbish and recycling depot site. Garbage trucks were coming and going regularly. No neighbours nearby either. If you were going to build a bioenergy plant somewhere, this is the perfect place to put it.



SA1 planning application documents

As part of my efforts to fully understand this company and industry, I found the original application documents for SA1. The two documents overlap slightly with many of the original pages put into the second document, so there's about 500 unique pages (don't worry -- no need to read all 762 pages!). Allow for at least a full afternoon and/or evening to get through it. It's an eye-opening read to see just how complex the application process is and what is required. Delorean is asked to consider (amongst other things) noise pollution, light pollution, air pollution, parking, vehicle access, colours used on the buildings, stormwater, chemical composition of the gas being produced, longevity of equipment installed, hazard plans, trees on the site, the exact dimensions of the plant, etc. Many areas of contention require expert reports to be compiled (which are included in the appendix). And there's responses to many questions posed by the SA government. The dates are interesting too. SA1 has been going through the approval (and finance) stage for a long time. If you have the time and inclination, I recommend downloading and reading these documents to fully understand what DEL needs to do in order simply submit an application document. Hundreds, if not thousands of manhours, and considerable expense. I was suprised to see that 8 employees will work there upon completion.



My take-away from reading these documents and visiting the site was if this is the process for each proposed pipeline site, Delorean has a significant interest in seeing the pipeline sites through to completion. A "pipeline project" is far more serious and tantible than I had imagined. A lot is invested in getting a site approval-ready and FID-ready. DEL must have learnt a lot as an organisation in streamling this process and know exactly what is involved for planning and building future sites. They would have come a long way along the learning curve and made contacts in government to help with future applications. I am putting some value in what I assume has been learnt by DEL during the SA1 project application, NZ and BLM build, and the Planum finance phases. Renewable gas is something Australia is in need of and there's a case to be made that DEL is making progress in climbing a learning curve that is steeper than I had imagined. After reading these documents you will pity any company trying to establish itself as a new entrant in this industry from a standing start.

I see Delorean as a risky, speculative buy. My experience with Tassal (TGR) says the market does not initially like companies with high capex in advance to build infrastructure for future revenue streams. The market can only see 12-18 months ahead. Then there's the risk of not getting finance, and the execution risk. I can see the share price dropping lower from here, but it will be interesting to see what happens to the share price on the day financing is (hopefully) announced. At 9 cents, if we succeed, there's an excellent return to be made but the downside is just as substantial.

One final point, DEL responded to someone on their LinkedIn page last night to confirm a financing approval decision will be made THIS quarter (this month).