Quadrise Fuels International — Pilot trial in Morocco completed

Quadrise (AIM: QED)

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Research: Industrials

Quadrise Fuels International — Pilot trial in Morocco completed

Quadrise has successfully completed the pilot plant trial with an international chemicals and mining group headquartered in Morocco which is a material consumer of fuel oil. This leads the way to completion of larger-scale trials in calendar H121, potentially resulting in the first commercial shipments of MSAR in calendar H221.

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Industrials

Quadrise Fuels International

Pilot trial in Morocco completed

Morocco trial update

Alternative energy

26 October 2020

Price

2.35p

Market cap

£25m

Net cash (£m) at end June 2020 excluding £2.0m convertible securities and potential £2m from second tranche of Bergen convertible

2.4

Shares in issue

1.08bn

Free float

72.9%

Code

QFI

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

Business description

Quadrise Fuels International is the innovator, supplier and global licensor of disruptive residual oil technology that produces a synthetic, enhanced heavy fuel oil called MSAR. The technology enables refiners to produce MSAR for use as a low-cost substitute for heavy fuel oil.

Analyst

Anne Margaret Crow

+44 (0)20 3077 5700

Quadrise Fuels International is a research client of Edison Investment Research Limited

Quadrise has successfully completed the pilot plant trial with an international chemicals and mining group headquartered in Morocco which is a material consumer of fuel oil. This leads the way to completion of larger-scale trials in calendar H121, potentially resulting in the first commercial shipments of MSAR in calendar H221.

Year end

Revenue (£m)

EBITDA
(£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

06/17

0.1

(3.9)

(4.1)

(0.45)

0.0

N/A

06/18

0.0

(3.3)

(3.5)

(0.37)

0.0

N/A

06/19

0.0

(2.8)

(3.0)

(0.32)

0.0

N/A

06/20

0.0

(3.1)

(3.4)

(0.32)

0.0

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Quadrise had hoped to conduct a pilot trial with an international chemicals and mining group headquartered in Morocco in March this year. Unfortunately, it was prevented from doing so by COVID-19 restrictions. Earlier this month, management confirmed that it expected its personnel would be able to get into the facility later in the month once local COVID-19 lockdowns were lifted, having shipped equipment and fuel for the trial to the customer site in early spring. Today, it announced that its personnel had been able to gain access to the site and the combined Quadrise and client project team had successfully completed the Phase 1 pilot trial.

Preparations for Phase 2 of the trials are already underway as, with the approval of the client, in order to keep the MSAR validation programme with this client broadly on track, Quadrise started work on the front-end engineering and design study earlier this year, even though the pilot trial had not yet taken place. In addition, Quadrise and the client are currently working on detailed studies for a larger, industrial-scale MSAR trial at one of the client’s other sites. This industrial scale trial is planned for early calendar Q121 ahead of commercial scale Phase 2 trials, de-risking the validation programme and extending the potential for deployment across the client’s facilities. This industrial scale trial was not included in the original agreement signed in calendar Q419. The client is paying Quadrise a total of £100k, in agreed stages, for the Phase 2 work. Management is confident that this programme will enable it to validate the economic and environmental benefits of MSAR at an industrial scale, potentially leading to the first commercial supply of MSAR in calendar H221. We note that management estimates it has sufficient cash to continue its business activities to mid-calendar Q221. A further tranche of up to £2.0m convertible loan from Bergen may be available during FY21 if certain precedent conditions are met.

Progress with this client is particularly important because the pilot trial in Morocco is Quadrise’s first commercial opportunity to reach this stage since calendar 2017. It is also the first trial to take place since Quadrise adopted its strategy of broadening and deepening the range of project opportunities through a network of partners in major global markets.

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