WMRC Meeting Agenda Notes, page-6

A couple of comments after looking further at the WMRC Meeting Agenda from yesterday, the WMRC annual budgets and the email I received from the Company (David Lymburn) on 10 April:

Rectification of Defects and Optimisation of Ancillary Services

The WMRC agenda states: “In March and April and the first weeks of May, the Plant conducted five week-long shutdowns to address issues and carry out operational improvements.”

In David’s email, he stated that “The HVL conveyor, process water storage tanks and other defective equipment have been rectified. Ramp up is continuing. There are a few items of equipment being adjusted and optimised as we progress through commissioning, and these are in areas that we term ancillary or support services.”

Assuming what David has stated on 10 April is true, the rectification must have been completed in the March/early April shutdown(s). Shutdowns after 10 April must have been for “equipment being adjusted and optimised…in areas that we term ancillary or support services.”

Fees Payable to ‘DiCOM’

From WMRC 2015 Budget: “The Final Service Charge payable to DiCOM is still to be negotiated; however this budget has set the service charge payable at the current disposal cost plus a margin of 10% as per the Waste Supply Agreement.” “WMRC is required to pay [DiCOM] for the processing of 33,000 tonnes of waste at DiCOM each year regardless of whether the waste is supplied.”

From WMRC Meeting Agenda: (as at 30 April 2015) “Fees and Charges…YTD Budget $7,299,659. YTD Actual $4,832,051. Difference $2,467,608.. Comment – DiCOM plant not yet operating to budget.”

“The original 2014/15 budget forecast the DiCOM plant to begin operation in a limited way starting in November 2014 and then quickly ramping up in the following months. This has not happened with the additional costs of payment to DiCOM therefore not being relevant to the end of April 2015.”

This implies that had the plant been operating fees and charges for the period from Nov 14 to Apr 15 would = ~$2.47m.”
$2.47m for 6 months can be extrapolated to $4.94m for the year.

If we took the 33,000 tonnes per annum WMRC are required to pay ‘DiCOM’ as the figure used in their budget valuation, that would equate to ~$150/tonne.

Given current disposal fees at the time of the report for “Commercial waste – to DiCOM” were $235.95 per tonne, this evaluation seems reasonable, and if anything, potentially a little low. Note that the $235.95/tonne fee was increased to $262.95/tonne from 1 Jan 2015.

Considering “DiCOM now indicates it will commence partial capacity operation in July 2015”, this will mean (finally) income for AnaeCo.

Dependent on AnaeCo’s share of the fees payable to ‘DiCOM’ (as per the joint venture agreement I would assume) and utilising the assumption that “This budget has been formulated on the premise that DiCOM will process 36,000 tonnes in the 2015/2016 year” (from Agenda Notes yesterday) with the price of $180/tonne above, we could be looking at the following income for AnaeCo for FY2016 (I’ve included various SP valuations at different PEs):

@33% of the fees payable to ‘DiCOM’: $1,782,000 (@PE 15, SP=1.0c, @PE 20, SP=1.4c, @PE 25, SP=1.7c)
@40% of the fees payable to ‘DiCOM’: $2,160,000 (@PE 15, SP=1.3c, @PE 20, SP=1.7c, @PE 25, SP=2.1c)
@50% of the fees payable to ‘DiCOM’: $2,700,000 (@PE 15, SP=1.6c, @PE 20, SP=2.1c, @PE 25, SP=2.6c)

SP vals don’t include future income/work except as incorporated in the PE ratio and also don’t include the forecast ramp up to 55,000 tonnes.

Cheers