PowerHouse Energy Group — Fuelling the hydrogen economy

Company description: Distributed modular generation

PowerHouse Energy owns an innovative waste-to-hydrogen DMG reactor technology. This technology provides a mechanism to dispose of a wide range of waste streams including unrecyclable plastic by converting them to a carbon-neutral product which may be used to power fuel cell electric vehicles (FCEVs) or to generate electricity. Unlike competitive techniques for converting municipal waste to energy, the reactors do not produce toxic dioxins and furans and have a small footprint. This makes them suitable for deployment at enterprise or community level, producing hydrogen or electricity close to the point of consumption.

Financials: Sufficient funding until end June 2020

Operating losses widened by 38% year-on-year during FY18 to £2.5m, reflecting higher R&D and staff costs and higher share-based payments. Losses before tax (adjusted for share-based payments) rose more slowly, by 16% to £1.9m, following the settlement of a substantial loan from former investor Hillgrove. The company started and finished FY18 with £0.8m cash. Three equity raises, all at 0.5p/share, with total net proceeds of £3.4m were balanced by £1.9m cash consumed in operations and repayment of the £1.4m Hillgrove loan. The notes to the FY18 accounts state that the directors have prepared working capital projections, which show that the cash balance at end FY18 (there is no debt) is sufficient to enable the company to continue operations for the foreseeable future. This conclusion is based on signed agreements from all the directors and certain contractors to waive future remuneration or fees and a letter of support from one of its shareholders, who is also a director of the company, that he intends to make up to £300k available for at least 12 months from the end of June 2019. Since cash consumption depends on how long it takes for Peel and W2T to secure funding for the first DMG deployment and the level of revenues PowerHouse can derive from providing engineering services, there remains a risk, in our opinion, that it will need to raise more finance.

Valuation: Defined route to profitability

The company’s revised business model positions it as a technology provider, receiving licence income when DMG units are deployed, supplemented by fees for providing engineering services and operational support. This provides a platform to establish the company as a sustainable and profitable business. We estimate that the company would reach break-even on only two DMG deployments per year, with fees from engineering contracts, the first of which was received in April, mitigating cash burn until that point is reached.

Sensitivities: Risk will reduce with commercialisation

While the DMG reactor has undergone more than a year of testing, thus reducing technical risk, risk remains regarding operation in a commercial environment. Importantly, while the purity of the hydrogen produced has been confirmed in third-party tests, the gas output has not been fed into a working fuel cell. While there remains risk associated with scaling up from the 1–3tpd demonstration reactor to a 25tpd commercial project, work with DNV GL has reduced this. There is significant uncertainty about PowerHouse’s ability to convert the high level of interest in the technology into revenues and the timing of that, as well as risk associated with scaling up operations to support commercial activities. Demand for hydrogen from PowerHouse’s reactors will be determined by the roll-out of fuel cells for e-transport and stationary energy generation applications. In common with all companies offering waste-to-energy technologies, PowerHouse will be affected by macroeconomic factors and environmental legislation.

PowerHouse Energy Group is commercialising an innovative waste-to-hydrogen, distributed modular generation (DMG) reactor technology. This reactor converts hydrocarbon waste streams, including unrecyclable plastic, into syngas or hydrogen. Syngas can be used to generate electricity for export to the grid or for use in an enterprise. Since the technology operates at a higher temperature than conventional gasification techniques and incorporates gas processing and clean-up, it produces no char or oil residue or toxic dioxins and furans. The syngas should therefore be sufficiently clean to power FCEVs and gas engines. Powering a gas engine is a more efficient route than using the syngas or the burning waste to produce steam to power a turbine. Longer term, the conversion of plastic to gas will permit storage of energy in the syngas until it is needed to make up shortfall from renewable generation sources. Importantly, the conversion provides a route for diverting plastic from disposal in landfill. The technology is carbon emission neutral when operating in power generation mode, and carbon emission negative when generating hydrogen.

The small footprint, modular design of the reactor means that, once commercialised, PowerHouse will offer waste-to-energy systems based on one or more reactors, each capable of handling 25 tonnes of waste per day, which is equivalent to the refuse from a small town of 6,000 homes. A 25tpd (tonnes of waste per day) DMG reactor would potentially generate up to 2,000kg of hydrogen each day, sufficient to drive 2,000 FCEVs an average of 57 miles each. Alternatively, it could generate c 1.6MW electricity (equivalent to a medium-sized wind turbine), sufficient to power around 3,000 homes. This means the DMG reactors can be located close to where the waste material is produced and collected, and generate electricity or hydrogen or electricity fuel close to where it is required, thus cutting down on the costs and energy used in transportation.

Although PowerHouse listed in 2011, it is still at a relatively early stage of corporate development, as any significant commercial progress was precluded until DNV GL completed its independent validation of the full-scale design in October 2018. The company’s 1–3tpd demonstration reactor situated near Ellesmere Port in the UK has been in operation for over a year and provided electricity to the local micro-grid. Based on results from these trials, the company has finalised designs for a 25tpd commercial reactor that have been independently verified. It intends to generate revenues from operating licence fees and operational support once DMG plants developed by third parties have been commissioned, as well as less substantial fees for tests on potential feedstock for proposed installations and customisation of the generic design for specific feedstocks. This business model, which was adopted in November 2018, removes the need for PowerHouse to finance the construction of plants, eliminating a major dilution risk for shareholders. It also enables the company to qualify for EIS investment status.

PowerHouse currently has two full-time employees, although this number will increase as the company progresses towards commercialisation. PowerHouse is currently partnering with Peel Environmental and Waste2Tricity (W2T). PowerHouse supplies the technology, while its partners secure sites for the reactors, negotiate planning and operating permits and contracts for sourcing feedstock and supplying electricity or hydrogen, and will either operate the reactors themselves or sell them to third parties once operational. In H119 the partners secured a site for the first DMG operation, which is on Peel Environmental’s £700m Protos energy hub near Ellesmere Port in England, and signed up a customer on the Protos estate for the electricity and hot water generated, as well as a primary feedstock and back-up supply. UK engineering consultancy, Engsolve, which has worked on numerous gasification projects, provides supplementary design support. PowerHouse has pre-qualified five potential contractors to undertake design and execution, enabling it to support projects on multiple sites in parallel.

PowerHouse’s DMG technology is an innovative, patentable process that has been developed over the last 20 years. The DMG unit uses a process in which complex organic molecules are broken down into their constituent elements through indirect heat in an oxygen-starved environment. The reactor is based on a thermal conversion chamber, which is an established technology and uses standard components. Installation is simplified and de-risked through the use of prefabricated components, off-the-shelf skids, pre-assembled piping and structures and limited hook-up demands.

The company’s IP lies in its understanding of the details of the thermal conversion chamber design and the operating parameters. The IP is protected by automating control of the process so that operators do not need access to the details. In addition, PowerHouse has started to protect the IP by filing for the first of a family of patents.

PowerHouse’s DMG technology potentially has numerous advantages compared with other waste-to-energy techniques. Crucially, since it operates at a much higher temperature than pyrolysis, standard gasification or incineration processes, it vaporises the waste material, controlling conditions in the chamber to break down the longer chains of hydrocarbon materials. There is no combustion of the waste to create dioxins. As the syngas is not contaminated with tar it can potentially be used to generate hydrogen for use in fuel cells or used in a combined-cycle gas turbine engine. A gas engine gives an electrical conversion efficiency of up to 40% compared with 14–27% for steam boiler and turbine systems associated with incinerators. Greater efficiencies may be achievable if the heat produced is harnessed effectively. A higher electrical efficiency may be realised if the output gas is optimised for hydrogen content and used to power fuel cells.

Importantly, as the DMG process generates electricity from material that would otherwise incur a tipping fee on disposal, this improves the economics of adoption. DMG operators will receive a fee from the third party whose waste they are destroying, effectively subsidising the energy generation and making smaller modular generation based in the community economically viable. Modelling £15.0m capital costs for a single DMG unit, hydrogen prices of £7/kg, electricity prices of £80/MWh and waste disposal fees of £100/tonne, management calculates that the potential IRR for investors in individual projects is over 30%.

We note that there are dozens of companies globally developing waste-to-energy gasification equipment, some of which use plasma arc technology to achieve the high temperatures required. Exhibit 3, which is not intended to be exhaustive, lists those companies which appear to have operational projects. We note that some projects have failed because of issues securing large volumes of waste and transporting it over a long distance to supply a single large-scale plant. Unlike many companies developing gasification equipment, PowerHouse’s solution is small scale, so it can be located close to a source of waste, circumventing this problem. Its solution is also relatively unusual in using unrecyclable waste plastic such as film, food trays and rigid plastics as a primary feedstock to generate hydrogen. Other gasification companies typically use different feedstocks. For example, the Bioenergy Infrastructure Group’s plant at Protos uses waste wood and Progressive Energy’s proposed plant at Protos will use waste wood and RDF. Other waste-to-energy technologies using waste plastic deploy pyrolysis techniques to convert the waste to liquid fuel. Management notes that DMG offers potentially lower waste sorting and cleaning costs compared with other energy-from-waste processes and is less sensitive to the calorific range of the feedstock.

PowerHouse Energy is positioned to take advantage of the increasingly onerous restrictions regarding the disposal of waste, of rising demand globally for energy, especially energy generated close to the point of consumption and energy to balance the variable output from wind and solar power, and the small but rising demand for pure hydrogen to power FCEVs. PowerHouse’s technology provides a way of not only disposing of waste in an environmentally responsible manner but also extracting financial value from it.

Addressing the issue of plastic waste

According to the PlasticsEurope Market Research Group, the amount of post-consumer plastic waste collected in Europe rose from 24.5m tonnes in 2006 to 27.1m tonnes in 2016, a CAGR of 1.0%. In 2016, 42% was used to generate energy (4.9% CAGR), 31% was recycled (6.0% CAGR) and the remaining 27% (-5.4% CAGR) sent to landfill, with recycling overtaking landfill for the first time. Of the 8.4m tonnes recycled, 63% was processed in Europe, with the remainder exported for treatment. The proportion of plastic waste recycled varies according to the regulatory environment. In Germany, where the regulatory environment virtually prohibits landfill, 38.6% of the 5.1m tonnes of plastic waste collected was recycled, 60.6% converted to energy and only 0.8% consigned to landfill. For the UK’s 3.8m tonnes of plastic waste collected, the respective proportions were 32.1%, 38.3% and 29.6%. Management estimates that if all of the plastic waste currently collected in the UK was gasified, it would support 500 25tpd DMG units. We note that while plastic waste is currently receiving most media attention, this is not the only type of waste that can be gasified by PowerHouse’s DMG technology. In 2017, UK household waste totalled 26.9m tonnes (2016: 27.3m), 45.0% (2016: 44.7%) of which was recycled.

The regulatory environment is moving in favour of recycling. In January 2018, the EU announced its Plastic Waste strategy, under which all plastic packaging on the EU market would be recyclable by 2030, the consumption of single-use plastics would be reduced and the intentional use of microplastics would be restricted. In response to this, the European Association of Plastic Manufacturers issued its Plastics 2030 – Voluntary Commitment, which contains a set of initiatives to achieve high rates of re-use and recycling, with the ambition to reach 60% for plastics packaging by 2030 and 100% re-use, recycling and/or recovery of all plastics packaging in the EU-28, Norway and Switzerland by 2040. In December 2018, the UK government announced its new Resources and Waste Strategy, which will extend producer responsibility for packaging, ensuring that producers pay the full costs of disposal for packaging they place on the market, stimulate demand for recycled plastic by introducing a tax on plastic packaging with less than 30% recycled plastic, ban plastic products where there is a clear case for it and alternatives exist, and improve recycling rates by ensuring that a consistent set of dry recyclable materials is collected from all households and businesses. While this government initiative primarily promotes plastic recycling, which theoretically reduces the amount of plastic available for gasification, we view this initiative as positive for PowerHouse as it will increase the amount of plastic waste collected from homes, a significant proportion of which (PowerHouse estimates around 30%) is not recyclable. In addition, the new Resources and Waste Strategy includes the objective to ‘encourage innovative waste treatment technologies that create transport fuels through the Renewable Transport Fuels Obligation’, which is directly applicable to PowerHouse’s technology.

Fuelling the hydrogen economy

An exciting opportunity for PowerHouse longer term is the ability to generate hydrogen at a local level for use in FCEVs, demand for which is being driven by concerns about the air pollution caused by petrol and diesel vehicles and the potential to reduce the carbon emissions from vehicles The International Energy Authority (IEA) notes that at the end of 2018 there were around 11,200 FCEVs globally, with sales of around 4,000 during the year, which was 80% more than 2017. Most of the sales were in California, where the Zero Emission Vehicle (ZEV) program has driven demand. While up to 2,000 small trucks powered by fuel cells were manufactured in China, only 400 were registered for road use because of the lack of refuelling infrastructure. Targets for FCEV adoption require a sharp rise in the hydrogen infrastructure required to fuel the vehicles (see Exhibit 4).

Most industrial hydrogen is made in steam methane reformers, which generate significant volumes of carbon dioxide, so using hydrogen made this way in refuelling stations goes against the premise of reducing carbon dioxide emission and the use of fossil fuels. Instead of using hydrogen that has been manufactured in this way and transported over a considerable distance, most of the refuelling stations currently deploy on-site electrolysis technology from Hydrogenics or ITM Power. This technology uses electricity, potentially but not necessarily from renewable sources, to split water into oxygen and a hydrogen that is sufficiently pure for fuel cell operation. The cost of conversion per kilogram of hydrogen produced this way is significant. The small footprint of the DMG unit means it could be used as an alternative mechanism for producing hydrogen on site, which is net negative with regards to carbon dioxide emissions. Moreover, as the waste can be processed close to where it was originally produced, as for example in local community DMC deployments, the carbon footprint associated with transporting it is significantly reduced, especially if the alternative is shipping the waste overseas.

Providing balance in the renewable energy mix

UK government statistics show that renewables have increased from 3% of electricity generation capacity in 1996 to 39% in 2017.This increase in renewable sources means the power generation industry will need to invest in improved transmission networks to move the energy to where it is required, in storage (the government study estimates 3GW of battery storage by 2030) and in intermittent generation systems to address the variability in output from wind turbines. While energy derived from waste is currently a very small proportion of all energy generated in the UK, with municipal waste combustion accounting for only 6% of all renewable energy used in 2017, in the future it could provide a mechanism for addressing imbalances between energy demand and supply. While this is not an immediate opportunity for PowerHouse, we believe that it merits attention.

This is because less than half of the UK’s energy-from-waste plants are accredited as ‘recovery operations rather than ‘disposal’. Most of those classified as recovery operations are incineration plants, generating electricity during the time that the waste material is being burnt. In contrast, the syngas produced by PowerHouse’s DMG technology may be stored until additional generation capacity needs to be brought online to offset a drop in output from wind or solar sources, making it a better addition to the renewables mix. Moreover, the PowerHouse technology is scaled to be appropriate for disposing of waste close to where it is produced and generating electricity close to where it will be consumed, reducing the financial and energy cost of transporting both waste and electricity. This is in contrast to centralised power generation systems, where around 8% of the initial energy content in the gas is dissipated as the electricity is distributed over the grid to household or business premises.

Refining the technology

During FY17 and FY18, PowerHouse focused on improving the performance of its third-generation 1–3tpd demo DMG unit at Thornton Science Park on Merseyside. This demonstration unit was used as the basis for the front-end engineering design for a full-scale unit. While this has not been constructed, the independent validation by DNV GL confirmed that this design can process 25tpd of high calorific waste, generating electricity and, in conjunction with other equipment, produce up to two tonnes of hydrogen per day. The design incorporates pre-fabricated components and pre-assembled piping and structures to make it easy to install. The components have been sourced from manufacturers with proven design, manufacturing and operating experience who will provide guarantees for the component operation in the DMG system.

The demonstration unit has also been used to conduct tests on many different forms of plastic feedstock for recyclers, including a number of internationally recognised waste companies, which may potentially host DMG units at their sites. Feedstocks included shred tyres, mixed automotive plastic, cable insulation, shredded labels and mixed plastics, shredded beach waste, solid recovered fuel (SRF) and biomass. Successful execution at the Protos site should help convert this interest into more widespread adoption of the technology.

Forming partnerships to commercialise the technology

Now that the design is complete, PowerHouse can offer proposals for the deployment of DMG at waste management sites. As noted above, it is working with partners to accelerate commercial engagement. Once the first commercial site in the UK is operational, PowerHouse intends to target multiple sites in the UK and overseas. As well as the pipeline of opportunities on Peel sites, it has received interest from internationally recognised waste companies, from major industrial complexes wanting to provide energy for their sites with net zero carbon dioxide emissions and from local councils.

PowerHouse intends to adopt the licencing and partner engagement model to penetrate international markets, focusing initially on Spain, Japan, Korea and other parts of Asia. Japan is a key market because the government is keen to reduce its reliance on fuel imports. After the shut-down of many nuclear power plants in the wake of the Fukushima disaster in 2011, imported fossil fuel now accounts for over 90% of Japan’s primary energy supply. A third of this fuel is petrol from the Middle East, the supply of which is subject to geopolitical risks. In addition, the government has set targets of a 26% reduction in greenhouse gas emissions between 2013 and 2030 and an 80% reduction of current levels by 2050. Widespread adoption of DMG would provide a stable, secure supply of carbon dioxide-neutral hydrogen generated from plastic waste produced within Japan.

First full-scale DMG project in Ellesmere Port

The most commercially advanced project so far will be located at Peel Environmental’s 54-acre Protos energy hub site near Ellesmere Port in Cheshire. Electricity from this project will be supplied under a Memorandum of Understanding (MoU) to recycling company Advanced Sustainable Developments (ASD), which intends to open a PET (polyethylene terephthalate) plastics recycling facility at Protos. Under the terms of the MoU, the electricity generated by the DMG system will be fed into a private grid on the Protos site and supplied at a discount (no information on the magnitude of this discount is available at the moment) to current power market prices to ASD. In addition, ASD has agreed to supply the DMG unit with unrecyclable plastic for use as feedstock, paying a price for disposal that is significantly below current landfill prices.

Development partners Peel and W2T now have a site for the first DMG operation, a customer for the electricity and hot water generated, and a primary feedstock as well as a back-up supply. In April, PowerHouse was engaged to carry out tests on the proposed PET feedstock and provide a front-end engineering design for a commercial-scale DMG unit using this particular feedstock. This engineering work is preparatory to the developers securing planning and operating permits. The first stage of the engineering work, modelling noise and emissions has been completed, confirming that there are no emission regulation issues. The results have been shared with the local community and councils as part of a consultation process prior to applying for planning permission. This will be submitted at the same time as an operating permit is applied for. Peel and W2T continue to seek financing for the plant. These discussions should be supported by the announcement of the formal collaboration with Peel at another 10 sites (see below), which is a strong endorsement of DMG. Moreover Peel, which is leading engagement with potential hydrogen customers, intends to become actively involved in the financing discussions. When these steps are completed, the developers can proceed to the construction and commissioning phase, triggering the payment of operating licence fees to PowerHouse post commissioning.

Collaboration with Peel Environmental extends pipeline

PowerHouse has recently signed a collaboration agreement with Peel Environmental. This seeks to develop 11 DMG facilities at sites in the UK, primarily on Peel’s land, including Protos. The collaboration is part of Peel’s strategy to develop ‘Plastic Parks’ where waste plastics that cannot be recycled are used to generate electric power and hydrogen rather than being sent to landfill. W2T will act as project developer for each facility. Peel will provide suitable sites on industrial parks, fit the infrastructure, identify sources of waste plastic and purchasers of power and hydrogen and help W2T secure funding from investors for each site. As with the Protos site, PHE will receive fees for each project for carrying out tests on the proposed feedstock and providing a customised front-end engineering design. Additionally, once each plant is commissioned, PHE will receive operating licence fees. Peel estimates that the development costs for this enlarged pipeline of 11 sites would be at least £130m.

Next steps

PowerHouse is currently focused on completing the front-end engineering design for the DMG unit at the Protos site. This information will be included when W2T applies for planning and operating permits for the plant in September in anticipation of receiving planning permission in October. We note that PowerHouse is in further negotiations for contracts for DMG applications at a number of other UK sites as well. This includes testing feedstocks and using data from the demonstration equipment to assess the feasibility of DMG installation at potential host sites. These activities should help W2T secure additional development projects when the Protos project is operational, as well as generating revenues in the short term.

In February 2019 the former CEO and MD of Thyssenkrupp Industrial Solutions’ Oil & Gas business unit for the UK, David Ryan, became CEO, having been in charge of PowerHouse’s programme development since February 2017. Prior to his employment with Thyssenkrupp, he founded and built a successful engineering consulting organisation, Energy & Power, which was acquired by Thyssenkrupp in 2012. Until February 2019, David was also a director of W2T, acting as a director of PowerHouse under a director swap. He relinquished the W2T role on becoming PowerHouse’s CEO. The leadership change reflects the company’s move closer to commercialisation, with technical engagement now being a crucial part of the sales and delivery process. The other members of the executive team are Bruce Nicholson and Christopher Vanezis. Bruce was appointed commercial operations manager in April 2018. He previously worked for an independent project management company, where he was involved with a wide range of organisations including multi-nationals, such as Thyssenkrupp, EDF, Tullow Oil and BHP, as well as smaller independents. Christopher became CFO in March 2017. He is a chartered accountant with c 30 years’ experience in the energy sector, including major infrastructure projects both in the UK and internationally, and is also Waste2Tricity’s finance manager.

The former chief executive of Alkane Energy, Dr Cameron Davies, has been non-executive chairman since October 2017. As chief executive of Alkane Energy, he led the business from its formation in 1994, through venture capital funding and IPO to become a profitable operator of c 160MW of gas to power generation plants. He resigned as director in 2015 when Alkane was acquired by Balfour Beatty Infrastructure Partners for £60m.

PowerHouse did not generate any revenue during FY18 and as yet there is insufficient information on future performance to construct estimates. This precludes the use of either peer-based multiples or a DCF to conduct a formal valuation analysis. Management notes that the price of a DMG unit would be in the high single-digit millions of pounds per site and expects to realise a gross profit of c 10–12%, representing a gross profit of c £0.8–0.9m per DMG unit deployed.

The company has a pipeline of opportunities on over 30 sites where it is already in meaningful dialogue, for example discussing the suitability of feedstock. If we assume that operating costs increase to c £2m to support commercial operation, we calculate that the company will reach break-even on sales of two units per year and generate c £6m operating profit on annual sales of 10 units.

Cost-base increases during FY18 in preparation for commercialisation

In February 2018, management expected that it would have the first commercial 25tpd unit built, installed and commissioned by the end of that year. However, in September 2018, management noted that although it was in active negotiations with a number of early adopter customers, commercial deployment had been pushed out to H219 because of delays in securing financing and reliable sources of waste material for processing. As a result, there were no revenues reported for FY18. Administrative costs grew by £0.7m year-on-year to £2.5m. R&D expenses (27% of total costs), which included fees to Engsolve, DNV GL and Nayr Consultants, increased by £146k reflecting work on the front-end engineering design. Staff costs, which were primarily directors’ fees (14% of total), rose by £135k. Share-based payments (22% of total) grew by £359k. These include £168k arising from the issue of options to directors (FY17: £0k) and £352k shares issued in payment to some of the company’s services providers. In addition, £116k was spent on share issue fees (FY17: £0k). Operating losses widened by 38% to £2.5m. Finance costs reduced from £70k to a minimal £0.2k, reflecting the settlement of a substantial loan from former investor Hillgrove in February 2017. Losses before tax (adjusted for share-based payments) widened by 16% to £1.9m.

Balance sheet significantly strengthened during FY18

The company started FY18 with £0.8m cash. In February and March 2018, it issued 280.4m shares (at 0.5p or £1.4m) as part of the settlement of the Hillgrove loan (£2m cash payout in 2017 and £1.4m shares conversion in 2018). These were originally shown as a loan on the balance sheet because they were subject to a lock-in. Cash was back at £0.8m at end-December and the Hillgrove loan eliminated. The £1.9m cash used in operations and loan repayment was balanced by three fund-raising exercises, all at 0.5p/share, collectively generating £3.4m (net). The number of shares in issue increased by 719.6m during the year to 1,856.4m at the year end.

Sufficient funding until at least end June 2020

The notes to the FY18 accounts state that the directors have prepared working capital projections which show that the cash balance at end FY18 is sufficient to enable PowerHouse to continue operations for the foreseeable future. This conclusion is based on signed agreements from all the directors and certain contractors to waive future remuneration or fees and a letter of support from one of its shareholders, who is also a director of the company, that he intends to make up to £300k available for at least 12 months from the end of June 2019. By mid-FY21, the company expects to be generating substantial revenues from licences as multiple DMG plants are deployed. Since cash consumption depends on how long it takes for Peel and W2T to secure funding for the first DMG deployment and the level of revenues PowerHouse can derive from providing engineering services, there remains a risk, in our opinion, that the company will need to raise more finance. The directors believe they will be able to raise further funds as and when required and would consider either issuing new equity capital or other sources

The company is using a variety of measures to keep costs down. As well as getting directors and certain contractors to waive fees, it has undertaken an operational review to reduce monthly overhead by over 25%. This review focuses resources on the first commercial site. During FY18, it upgraded the demonstration apparatus and acquired laboratory equipment for a minimal amount so it can generate revenues from conducting trials on potential feedstocks. This will help the company achieve its objective of starting to generate cash in FY19 from the delivery of engineering and consulting support to customers for feasibility and development services, and of becoming cash positive at an operational level during FY20. Waiving fees does not appear materially dilutive. In April, the company issued 24.1m shares to various service providers, 1.8m shares to the CEO and 3.2m shares to the CFO in lieu of fees.