Looks like they have reverted to a wait and see outlook, based on the new financial data and are ignoring the accelerated growth path of the company. But even then the worst take away from the updated financials is the $567,497 of higher than expected costs regarding energy purchases. They addressed this in the update.
"In relation to Delorean Corporation’s CleanTech’s cost of energy, the Company is putting in placefurther measures for procurement of energy outside the wholesale energy market. This willoccur through fixed contracts, power purchase agreements and establishment of its owngeneration assets through CleanTech’s District Energy Resource strategy."
"CleanTech’s FY2022 strategic plan therefore includes a Distributed Energy Resource strategy thatwill create simple, long term price certainty for customers by utilising hybrid (PV and BESS) assetsthat are connected to energy and ancillary markets."
I like the focus on fixed contracts but I'd really like more information on the PV/BESS generation assest, developing Solar and Battery storage assets could mean any number of different things, some much more expensive than others. Either way it shows they are not just standing by and hoping prices go back down and are looking towards additional growth beyond what was in the prospectus.
As for the updated financials, on paper they are looking at a $3,387,147 loss for the 21FY but $3,263,103 of that is either just delayed payments from the EPC contracts moved into this FY or delayed LGC credits, these will just make the balance sheet fatter in future years. Then throw in the $1,656,545 of accounting for non-cash share based performance and things look much better.
The companies grow path has been speed up by the new plans in the update, which has me excited. DESAO is looking to be built out faster than I was expecting, and they are bidding on a new EPC contract in Victoria which shows they are getting more confident in their ability to scale up. Previously they had said they didn't have time for any 3rd party contracting work as they focus on their own plans, but they also mentioned feasibility studies of other 3rd party projects so its possible they are also earning consulting fees again.
They will now be building 3-4 plants in parallel which also explains the shift in direction to bringing in Planum Partners. Previously the were going to use an expanded Commonwealth Bank credit line which has been used for the current EPC contracts, but that was clearly going to be a bottle neck to the rate at which they could build out projects (and probably wasn't the best interest rate). Having better access to capital is what likely also has them looking into Solar/Battery assets.
Part of the reason for the new confidence in building out more projects faster is likely also to do with their mitigation strategy for dealing with some of the causes to COVID delays on the EPC contracted plants. Specifically that they have hired more staff.
"These include recruitment of project-related personnel that are local to project sites, in order to mitigate travel impacts of COVID.Equipment will also be pre-ordered in anticipation of international shipping delays and to protectagainst escalating freight costs due to COVID."
People have raised concerns about the time its taken to complete BlueLake so its again good to see they are proactively addressing these issues. These delays also account for $377,145 in extra costs to the BlueLake contract.
There were also a number of positive signs sprinkled throughout the update which I missed on my fist pass. Probably the most notable is:
"DEL can already deliver biomethane at prices competitive with non-renewable gas in today’sburgeoning renewable gas market. In 2021, Delorean has received commitment and qualifiedenquiries for biomethane from pipeline operators and large-scale gas end -user customers, whichhas outstripped DEL’s current project pipeline production capacity."
This perhaps suggests part of the reason to suddenly want to accelerate their pipeline. In the eureka interview Hamish specifically mentioned they could seek out capital and build faster but they were happy going with a slower approach for the first 4 plants. This is also very interesting when considered with the new information in regards to possible upgrades to DEVO and DESAO, specifically the mention of biomethane production from DEVO rather than electricity.
DEVO (bit less than double the size):
"In Stage 2 (future expansion), there is the potential for expansionto 71,000 tonne per annum with the opportunity to either generate further electrical energy orupgrade to green biomethane, generating further revenues from a lifting energy price both gasand power and further creation of large-scale generation certificates (LGC’s)."
DESAO (slightly more than doubles the size):
"In Stage 2 (future expansion), there is the potential for expansion to125,000 tonnes per annum increasing further revenues from carbon credits, LGC’s and increasedenergy and gate fee production on site."
The mention specific mention of hydrogen is also interesting, mostly for its ability to attract government handouts.
"DEL is exploring partnerships and license agreements to add hydrogen production at commercialscale, with CleanTech Energy positioned as a potential hydrogen retailer."
Finally the heading of the update is very telling "PLANUM PARTNERS MANDATED FOR $200m PROJECT PIPELINE" the $200m is a reference to the self own projects 5-8 which are briefly mentioned in some pre IPO presentation they made. It shows they are thinking 4-5 years ahead and getting their ducks in a row.
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