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elleburra

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24/03/19

13:38

Post #: 37866086
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Originally posted by Relax1: ↑

Obviously from a quality perspective the S1 should be able to handle the scope of the smaller projects. MABR reaches level 1A where the requirements in rural areas are sometimes much lower depending on the ecological sensitivity.
However, I believe the biggest point to remember is that Fluence are not the ones bidding for the work.

Does Zhejiang Tiandi want to send teams of workers and equipment 3 hours round-trip from base for 3 week projects that net low profit margins?

I would say that for projects under 30 m3/d, MABR solutions would have the most expensive upfront equipment costs versus their competitors, where the savings are the low energy to quality of effluent, ease of operation, plus life of equipment. Most of these small bids may only consider upfront costs plus install costs. I am simply not sure that Zhejiang Tiandi will bid individually for sub 30 m3/d upgrade projects. They probably will if they can win 200 of the projects in one go. Zhejiang Tiandi as the local partner has to make money from engineering and construction costs, an upgrade project likely has most of the required piping and fittings in place, so there is a reduction in overall scope for them to make money on a small upgrade only project.

Chinese companies have in the past had reputation for taking shortcuts in order to maximise their profit margins. I think that is why we see that there are so many upgrades required - 3000 upgrade projects out of 8869 total installed projects have been scheduled for just this year. It is likely that in the past, sub-par equipment has been installed with no real thought of suitability and long term viability for the specific situation. For these new upgrades quality of effluent and ease of O&M may be considered rather than initial pricing, as the Hangzhou Government appears to be looking to increase the quality of solutions and standardise the O&M and management of rural sites.

The only way to know for sure is to be patient and wait for announcements or media releases.
Trying to forecast that Fluence will definitely win $26 million of MABR sales from this opportunity is setting yourself up for disappointment, as you do not know the full extent of Zhejiang Tiandi's business plan, how the project bidding is structured, what the specific competitor solution costs and treatment types are, or what exactly the government officials want.

What we do know, is that for a small young international company, Fluence has MABR projects that are increasingly being noticed at a government level in China, which is quite a rare feat and a dream for many companies around the world. The recent release of SUBRE should give Fluence another push into the spotlight, as I believe there will be many suitable projects in China that are looking for this type of solution.

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Many thanks Relax,
that's a great rundown of the pros and cons, a great help I'm sure for many of us trying to get our heads around the incredible opportunity in China. May those goldfish lead long and prosperous lives.

Of big interest recently is the tendency now to see MABR specified in many tenders, as you say it is a sign of increasing interest and knowledge of MABR. The Kaitian Yiyang City tripartite agreement was a great win, others in a similar vein really would build a great base for much recurring business.
Thanks for the heads up with the new hires, the sales leads and deals under negotiation should set Fluence up for a bumper second half.

That $36 million was really tongue in cheek, what really fascinates me is all the potential deals out there in China (and elsewhere) that we do not know about.

regards, EB

FLC Price at posting: 45.5¢ Sentiment: Buy Disclosure: Held
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