Shareholders often don't seem to appreciate the sheer length of sales cycles. Especially with brand new, relatively unproven tech.
We have seen decent progress in China in a traditionally glacial sector. If anything, considering Emefcy/Fluence only had the first Israeli manufactured demo plant at Wuxi commissioned in December 2016, some of the progress has been remarkably fast. Former management had the foresight to risk an entry into the Chinese market while their central government was implementing a one time only, 5 year plan with attached budget spend. Without China, Emefcy would currently be struggling for RoW sales, with possibly no merger with RWL either.
The stages can be described as follows:
For a new technology to be considered it must have advantages over traditional treatment processes. These can include lower capital and operations and maintenance costs, higher efficiency, easier operation, better effluent water quality, and lower waste production. Nevertheless, for a water treatment technology to be accepted and implemented at large municipal scale, it must be demonstrated in stages. Understanding this process is necessary in order to properly plan and introduce a new technology to municipal water treatment. A typical sequence of these stages might be summarized as follows:
Stage 1: Successful demonstration in another field.
Stage 2: Testing and development at bench- and pilot-scale levels (1 to 50 gpm).
Stage 3: Verification at demonstration-scale level (>100 gpm).
Stage 4: Multiple successful installations and operations at small full-scale level (0.5 to 5 MGD).
Stage 5: Implementation at a large-scale municipal water treatment plant.
Two important milestones must be achieved in parallel with the above stages: obtaining regulatory approval and reducing costs to competitive levels. Commonly, regulatory approval is necessary by the end of the demonstration-scale Verification stage (stage 3) and prior to installation at small full-scale plants (stage 4). However, for a new technology to reach full acceptance (stage 5), its cost must be competitive with that of other more conventional processes that achieve the same objective.
The time duration for each of the above stages can vary greatly depending on the technology being considered, how urgent it is to have it implemented, how long it takes for its cost to reach competitive levels, and the significance of its role in the overall water treatment train. The last factor is different from the others in that it recognizes the difference between a technology that is proposed as an alternative to filtration, for example, which is an essential component of water treatment, versus a technology that is proposed to replace a less important component such as a pump, automation, chemical feed, taste-and-odor control, or preoxidation.
Emefcy had first discussions with potential Chinese interests in 2015 and 2016.
Emefcy entered China between Dec 2016 and 2017 with Stage 3 (demo plants). So approx 18 months to get the first demo plant in place.
1st Chinese produced C-MABR (Aspiral) container was in Sept-October 2017.
We are now seeing bulk small orders (Stage 4) from Jinzi in Guizhou and ITEST in Hubei (+ possibly Kaitian in Hunan).
So 18-24 months to move from the first demo plant in China of Stage 3 to the start of Stage 4.
Commercial release of SUBRE is slated for Q2, 2019 - so 36 to 42 months (from start of Stage 3) before we see SUBRE at scale in municipal plants (Stage 5).
We have seen some of the early distribution partners with demo plants not make any purchases. Are they waiting for SUBRE? Verifying data first from 12 month demo plant performance? Risk and financial aversion? Waiting to see how MABR is used and performs for other partners first?
Our competitors Oxymem and Suez/GE Zeelung are ONLY going after the larger retrofit municipal (SUBRE) market. The haven't shown much progress, despite SUEZ being a global behemoth with French government support included. I prefer our decentralized MABR sized model to get the scale and technology seeded across China in many examples, making it much easier to prove that the same MABR module tech will work at municipal scale. If anything, Fluence now possibly has more individual examples of MABR tech installed globally than our competitors combined (or will by next year).
The analysts (traditionalists) also didn't see the relative success of Fluence that will be coming over the next few years. The ITEST deal alone has blown their forecasts out of the water.
https://www.techsciresearch.com/report/global-membrane-aerated-biofilm-reactor-mabr-market-by-application-bod-removal-tss-removal-etc-by-end-use-sector-municipal-industrial-and-package-plants-by-region-competition-forecast-opportunities/1179.html
https://www.techsciresearch.com/news/2954-membrane-aerated-bioreactors-mabr-market-to-grow-at-34-till-2022.html
Global MABR market stood at $ 3.71 million in 2016, andis projected to reach $ 22.08 million by 2022, exhibiting a CAGR of 34.70%, invalue terms, during 2017 – 2022. Growth in the market is anticipated on accountof growing demand from municipal wastewater industry, increasing focus on wastewatermanagement system of public as well as private entities and favorablegovernment policies. MABRs are capable of efficiently removing nitrates fromthe wastewater. In addition, their operating as well as maintenance costs arelow. MABRs have a low footprint, and thus don’t require new aeration tanks andsludge storages. All these factors are expected to propel the demand for MABRtechnology across the globe in the coming years.
Compare MABR progress in China to our large Mexican desal plant which has just started construction. I believe that sales process started in 2012. Incredibly long process, and construction won't finish until 2020. If we were only relying on those sorts of deals then we would go out of business very quickly. No wonder many smaller and mid market companies have either failed or allowed themselves to be bought out.
Small scale MABR plants allow quicker sales and construction cycles, cover more opportunities and allow greater market penetration to leverage more opportunities with a greater range of partners. SUBRE will be interesting to watch next year as even $3 million USD retrofits are a relatively low cost alternative to upgrade to class 1A and increase capacity than building a new plant. We are in the commercialization phase now so should see an acceleration of sales and opportunities, especially once SUBRE is released.
(20min delay)