ECT 0.00% 0.1¢ environmental clean technologies limited.

esi--open briefing

  1. 5,609 Posts.
    Record of interview :


    corporatefile.com.au
    Environmental Solutions International Limited recently announced $20 million of new contracts and its “preferred contractor” status on further new work of up to $30 million. But, you have also advised that the company will report a loss in the second half similar to the $1.17 million recorded in the first half. What level of work on hand will you have in 2004 and what do you need to achieve a return to consistent profit performance?

    CEO Denis Glennon
    Obviously the new contracts place us in a very strong starting position for the year ending June 2004. Given our preferred tenderer status on an additional $30 million of work, I’d expect our work on hand position at July 1 2003 to exceed $50 million. Work on hand is over $12 million before adding the new contracts. Work on hand required to sustain a consistent profit performance is about $30 million, inclusive of current expenditure on ENERSLUDGE.

    corporatefile.com.au
    What is the nature of the new business you have won?

    CEO Denis Glennon
    Within the $20 million of new work are two waste water treatment plant projects in South Australia and Queensland and three drinking water contracts in Tasmania, Victoria and Queensland. The drinking water contract in Queensland is particularly significant as it’s a new customer type for ESI, the Australian Department of Defence.

    corporatefile.com.au
    Can you outline the market potential or opportunity for ESI in the water market and wastewater market?

    CEO Denis Glennon
    The immediate potential goes well beyond the $30 million of our preferred tenderer status work, which is largely based in Australia and New Zealand. We are also bidding for larger projects, in some cases with joint venture partners, in New South Wales, Queensland and Malaysia exceeding a value of $100 million.

    corporatefile.com.au
    Do you currently have enough tendering and marketing resources to sustain a strong level of work on hand and to deliver projects?

    CEO Denis Glennon
    We have the requisite tendering and marketing resources. The recent results evidence that. We’ve just recruited additional project managers to ensure we deliver the new projects.

    corporatefile.com.au
    What industries and countries are driving demand in your wastewater and water business?

    CEO Denis Glennon
    In Australia and New Zealand, municipalities have been the traditional drivers. But new drivers are emerging in water re-use and water recycling. For example, specific technical solutions to water shortages in Western Australia and Victoria are required as a matter of urgency.

    In Victoria, Premier Bracks has positioned water as a key issue and is working closely with leading private sector businesses.

    In Western Australia, the state government recently announced a water re-use target of 20 percent. The first significant water re-use project is the water recycle plant at Kwinana where wastewater is treated to supply a separate non-potable stream to industry.

    I understand Sydney Water has also commissioned a number of feasibility studies on water re-use.

    corporatefile.com.au
    The new drivers relate to macro public policy. Are they here to stay?

    CEO Denis Glennon
    It will depend on the extent and duration of drought conditions. If for example, Western Australia experienced two years of maximum rain fall and all dams were full, prospective demand in the water re-use market would obviously decline. But, weather patterns over the last 25 years strongly suggest otherwise, and the water quantity and quality problems in areas such as the Murray Darling basin are deep-seated and require long-term sustainable solutions. My guess is that the current political drivers will increase rather than decrease in the next couple of years.

    corporatefile.com.au
    In July 2002, you announced that ESI had signed an exclusive license agreement for the ENERSLUDGE technology in France with ONDEO-Degrémont. When is the ONDEO-Degrémont arrangement likely to generate revenue from the development of ENERSLUDGE projects in France?

    CEO Denis Glennon
    We signed that agreement in July 2002 and there have been some changes to important personnel within ONDEO Degrémont, Paris that have slowed progress. But, two bids have been lodged in France and another is in progress in Ireland. Unquestionably, progress has been slower than the market anticipated.

    corporatefile.com.au
    Why has the take-up of the ENERSLUDGE technology not been faster in overseas markets?

    CEO Denis Glennon
    Adoption of thermal technologies for treatment of sludge have been slow in all European countries, as has the cessation of historic sludge disposal routes such as land fill and land application as a fertilizer supplement. The reality is that no pyrolysis or gasification contracts have been awarded in the EU for the processing of sludge in the last three years.

    The ENERSLUDGE technology is still a leader in the sludge treatment market but in the current scenario, it may be a little ahead of its time in some countries. Switzerland is the first EU country to totally ban the use of sludges on land as fertilizer and this only occurred in the last six months. Other countries will unquestionably follow.

    corporatefile.com.au
    In the last ten months you spent about $1.5 million on commercialising and marketing the ENERSLUDGE technology. Will you maintain this level of spending?

    CEO Denis Glennon
    Unless we see some significant progress such as new licensees or new projects commencing over the next six months, we will seriously review the current expenditure levels.

    corporatefile.com.au
    What progress are you making with ENERSLUDGE in Japan and the US?

    CEO Denis Glennon
    The original exclusive licence with Mitsubishi has been amended to a non-exclusive agreement. As a result of the market research undertaken in conjunction with Deloitte Touche Tohmatsu, Osaka, 13 Japanese companies have been identified. We’ll be advancing discussions with those companies in June and July.

    In the US, six large companies currently active in the water business have also expressed interest and ESI will be meeting with these companies this month.

    corporatefile.com.au
    Can the development of the ENERSLUDGE technology by ESI alone be self funding?

    CEO Denis Glennon
    It hasn’t been in the past, and clearly that’s an outcome we’re seeking. We are reviewing our options, including the possibility of introducing a larger corporate partner.

    corporatefile.com.au
    What is the outlook for ESI and what will be your priorities?

    CEO Denis Glennon
    With the company’s current activity in the water and wastewater treatment sector and the anticipated growth in the water re-use market, we are well positioned to play an increasing role in these sectors and generate significant new business.

    The priorities are:

    Maintain the new business development “push”.

    Deliver the increased project load on time and at or below budget.

    Seek a complementary business with a steady cash flow to assist even out the cyclical revenue flow associated with contracting.

    Resolve the best direction forward for ENERSLUDGE in the light of outcomes from the forthcoming meetings in US, Japan and Europe.

    Return to profitability in 2003/2004 and if possible, return to the payment of dividends to shareholders.

    corporatefile.com.au
    Thank you Denis.


 
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