ECT 33.3% 0.1¢ environmental clean technologies limited.

Ann: Shareholder Update - Coldry Upgrade Project Commences, page-2

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    Return to normal operations and commencement of Coldry upgrades project
    18 June 2020: Environmental Clean Technologies Limited (ASX: ECT) (ECT or Company) is pleased to provide
    the following update regarding the Company’s operations.
    Key points:
    • Return to normal operations
    • Overview of COVID-19 impact
    • Commencement of the Coldry upgrade project:
    o Two-phase approach to better manage technical and financial risks
    § Phase 1 Coldry plant scale up targeted for completion by April 2021
    § Phase 2 Char plant construction and commissioning to follow
    • Government support & grants
    • Issue of shares as announced 18 May 2020
    Return to normal operations
    The Company is pleased to advise the return to normal operations and recommencement of the Coldry
    upgrade project, effective immediately.
    On 26 March 2020, ECT announced, due to the COVID-19 restrictions and State Government of Victoria’s
    state of emergency, a wind-down of operations and the activation of the business continuity plan (BCP).
    The BCP was aimed at preserving as much cash as possible and allowing time to better understand the
    effect on ECT of the risks and head-winds associated with the COVID-19 pandemic.
    Whilst the state of emergency has been extended through to 21 June 2020, restrictions have been
    gradually eased and will continue to ease unless infections spike.
    Chairman, Glenn Fozard commented, “The Company has been acting prudently over this 13-week period,
    firstly to ensure that the health and safety of staff is prioritised, and secondly to preserve cash for the
    commencement of the all-important Coldry upgrade project. COVID-19 has driven business to understand
    the requirements of the ‘new normal’, both socially and economically.
    “Our staff, shareholders and stakeholders have been very patient, and we now look forward to the launch
    of the Coldry upgrade project with regular updates of its progress along the way.”
    COVID-19 impact
    Following the successful close of the non-renounceable entitlement issue on 10 February 2020, the
    Company, along with the rest of the world, was hit with a ‘black swan’ event in the form of the COVID-19
    pandemic, resulting in significant disruption.
    Mr Fozard commented, “The past few months have been incredibly challenging. Winding our business
    activities down by approximately 50% during the lockdown achieved the targeted cash savings but also
    placed a lot of pressure on our staff and stakeholders. We thank everyone for their patience, especially our
    shareholders. We are pleased to report that our team managed to stay healthy and are ready to deliver our
    key priority for the remainder of the year, being the commencement of the Coldry upgrade project in
    support of our strategy to generate future positive earnings.”
    The BCP period has necessitated additional analysis of the risks and challenges presented by the pandemic,
    leading to the refinement of the project execution plan and budget for the Coldry upgrade project.
    Despite avoiding significant operational costs due to the implementation of the BCP, this period has not
    been without cost and impact on our project and operations, including:
    1. Staff and contractors significantly reduced in both hours and headcount
    2. Leases at both South Yarra and Bacchus Marsh renegotiated (with the new Bacchus Marsh lease yet
    to be signed), to better reflect COVID-19 impact and support the long-term nature of our
    commitment to the Coldry upgrade at Bacchus Marsh
    3. ~$360,000 in costs were incurred between February and June that were not directly attributable to
    the Coldry upgrade but were related to continued statutory compliance and fixed costs
    4. ~$250,000 in capex cost increases due to factors such as delays in overseas procurement, foreign
    exchange volatility and use of Australian based equipment suppliers and fabrication experts, to
    name a few
    5. A stretch of the build phase timeline estimated to add ~$600,000 to the original budget.
    Overall, the budget for the full implementation of the upgrade project has increased by ~$1.2m and it is
    anticipated that this will be financed by a number of non-dilutive solutions including, project and
    equipment finance, government grants, R&D tax initiatives and reduced or deferred capital expenditure.
    The Company has spent considerable time developing potential ways to finance this increased capital
    requirement using a mix of funding solutions which do not require the raising of further funds through the
    issuance of shares.
    The Company is satisfied with the budget measures in place and financing options available and will
    continue to provide regular updates should material changes or significant developments occur.
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