Quadrise Fuels International — Taking to the high seas again

Quadrise (AIM: QED)

Last close As at 04/11/2024

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Research: Industrials

Quadrise Fuels International — Taking to the high seas again

Quadrise has signed a Joint Development Agreement with MSC Shipmanagement to carry out a trial of MSAR, its synthetic heavy fuel oil substitute, on representative commercial vessels in MSC’s global fleet. The 4,000-hour trial is scheduled to start in calendar Q421. If successful, the trial may potentially be followed by commercial roll-out of MSAR across MSC’s global fleet. The trial may also include testing of Quadrise’s bioMSAR biofuel with a view to potential commercial roll-out of the new low-carbon variant as well.

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Industrials

Quadrise Fuels International

Taking to the high seas again

Technology update

Alternative energy

21 January 2021

Price

2.12p

Market cap

£23m

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

1,105.2m

Free float

75.7%

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 signed a Joint Development Agreement with MSC Shipmanagement to carry out a trial of MSAR, its synthetic heavy fuel oil substitute, on representative commercial vessels in MSC's global fleet. The 4,000-hour trial is scheduled to start in calendar Q421. If successful, the trial may potentially be followed by commercial roll-out of MSAR across MSC’s global fleet. The trial may also include testing of Quadrise’s bioMSAR biofuel with a view to potential commercial roll-out of the new low-carbon variant as well.

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.

The two parties will start by carrying out high-level scoping and feasibility activities, which they expect to complete within three months. Assuming these activities go well, the partners will define the project roadmap during calendar Q221 ahead of one or more on-vessel trials commencing in calendar Q421. The 4,000-hour trial period will include testing of MSAR in a large MAN ME and/or a Wärtsilä/WinGD Flex 2-stroke engine to obtain Letter of No Objection (LONO) approvals from the respective engine manufacturers. The trials may also include testing of bioMSAR.

MSC Shipmanagement is part of the world's second largest shipping line, operating both cargo and cruise ships. It has already equipped almost half of its container ships with exhaust gas cleaning systems (scrubbers) so it can continue to burn high-sulphur fuel while being compliant with the International Maritime Organisation’s (IMO’s) 0.5% sulphur cap, which came into force in January 2020. Using MSAR, which is a lower cost alternative to conventional heavy fuel oil, represents a route for MSC to offset the costs of installing and operating scrubbers, estimated at around $2m/large vessel. MSC is also keen to adopt more environmentally friendly fuels such as bioMSAR where practical.

MSAR is already proven for use in marine applications because Quadrise has an interim LONO for MSAR for Wärtsilä RT-flex96C-B engines dating back to the on-vessel trials with Maersk, which took place during 2016 and 2017. The MSAR fuel performed well during these trials, and feedback from both engine manufacturer Wärtsilä and from Maersk was very positive. However, in 2017 Maersk decided to use very low sulphur fuel oil instead of scrubbers plus MSAR to meet the IMO regulations, although it has since started fitting scrubbers to some of its fleet. MSC is much more committed to the scrubber option.

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