Hydrodec Group plc Investor Presentation September 2012 Ian Smale , Chief Executive Chris Ellis , Chief Financial Officer 1
PRECAUTIONARY STATEMENT This presentation has been issued by Hydrodec Group plc (“Hydrodec”) and is personal to the recipient. This presentation and these slides may not be reproduced or published in whole or in part for any purpose. This presentation and associated discussion includes forward-looking statements. Certain information contained in this presentation relating to Hydrodec has been compiled from public sources. All statements other than statements of historical fact included in this presentation, including without limitation those regarding the plans, objectives and expected performance of Hydrodec, are forward-looking statements. Hydrodec has based these forward-looking statements on its current expectations and projections about future events, including numerous assumptions regarding its present and future business strategies, operations, and the environment in which it will operate in the future. Forward-looking statements generally can be identified by the use of forward-looking terminology such as 'ambition', 'may', 'will', 'could', 'would', 'expect', 'intend', 'estimate', 'anticipate', 'believe', 'plan', 'seek' or 'continue', or negative forms or variations of similar terminology. Such forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors related to Hydrodec. By their nature, forward-looking statements involve risks, uncertainties and assumptions and many relate to factors which are beyond the control of Hydrodec, such as future market and economic conditions, external factors affecting operations and the behaviour of other market participants. Actual results may differ materially from those expressed in forward-looking statements. Given these risks, uncertainties, and assumptions, you are cautioned not to put undue reliance on any forward-looking statements. In addition, the inclusion of such forward-looking statements should under no circumstances be regarded as a representation by Hydrodec that Hydrodec will achieve any results set out in such statements or that the underlying assumptions used will in fact be the case. Other than as required by applicable law or the applicable rules of any exchange on which securities of Hydrodec may be listed, Hydrodec has no intention or obligation to update or revise any forward-looking statements included in this presentation. This presentation is for information only and does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase, any shares in Hydrodec or any other securities, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied upon in connection with, any contract or investment decision related thereto.
Contents Our Business 4 H1 2012 Interim Highlights 16 Our Strategy 23 Summary and Q&A 29 3
Our Business 4
Who w e are • We produce new, high quality oil from globally distributed waste streams; • Our unique clean-technology is proven, proprietary, sustainable and industry-leading; • The core business is a virtual “closed-loop” re-useable transformer oil offer for the electrical utility industry; • It is the most competitive, non-destructive technology to treat PCB (polychlorinated biphenyl) contamination in oil; • New, re-usable oil will come with a carbon credit or offset as a source of value and a unique sales proposition. 5
Where w e are • We are approved by the regulatory authorities in the US, Japan and Australia, with product sales in North America, Latin America, Australasia; • We are growing; we have commercial-scale operations in New South Wales, Australia and Ohio, USA; both cash generative at plant level; SUPER FINE TM transformer oil is endorsed by leading • OEMs including ABB and Coopers; • We have identified opportunities to grow key OECD markets, including Japan, and to diversify into multiple new products; • Annual turnover has increased every year since 2004, with strong momentum maintained into 2012. 6
The team Ian Smale, Chris Ellis, Chief Executive Chief Financial Officer 30 year career with BP plc. [Insert photo] 20 years’ board level finance and Leadership positions including Group Head of management experience running large, Strategy & Policy, Global Head of Mergers and complex international businesses as well as Acquisitions, and as President and Chief Executive of small and medium sized ventures, including BP Exploration North Africa significant period with GE Capital Joined Hydrodec as CEO in January 2012 Qualified chartered accountant Joined Hydrodec as CFO in July 2012 Mark McNamara, David Robertson, Head of Technology and International Projects Chief Operating Officer 10 years with Clough Engineering responsible for the 30 years at BP plc., with executive level roles in environmental technology and engineering division BP Chemicals and Technology Joined Hydrodec in 2004 originally as Chief Operating Recently COO at a US based technology start- Officer, assumed the role of CEO in 2005 up business in the energy / waste sectors. Has Became Head of Technology and International worked in the US for the past 13 years Projects in January 2012 Joined Hydrodec as Chief Operating Officer in January 2012 Lee Taylor, Takuichi Murachi, Head of Corporate Development President, Hydrodec Japan Corporate partner at Linklaters for 15 years including 30 year career at Mitsui & Co, concluding as as Global Head of the Energy and Utilities sector Senior VP and COO of Plant and Project Division Structured several ground-breaking BP transactions, Subsequent senior positions at Toyo Engineering including the Amoco merger, the Burmah Castrol Corporation and Veolia Water Japan takeover and the BP / TNK joint venture Joined Hydrodec as President and Representative Joined Hydrodec as Head of Corporate Development Director of Hydrodec Japan in January 2012 in January 2012 More than 150 years of oil, technology and business-based experience… 7
Our technology “simple chemistry and smart process engineering” • Developed in Australia to treat PCB (polychlorinated biphenyl) contamination – the technology is ‘simple’ chemistry and ‘smart’ process engineering; • IP protected; operational know-how increasingly important; • Hydrogenation cleans and restores the hydrocarbon molecule, creating “new” re- usable oil less susceptible to future oxidation with semi-synthetic properties – ‘as good if not better than new mineral oil’; • The process is extremely efficient, rendering PCB contamination into an inert residue and recovering more than 99% of the original oil with negligible emissions; • A sustainable methodology has been submitted for UNFCCC approval to qualify as genuinely ‘carbon neutral oil’. 8
The value chain Fragmented and lacking transparency; weighting and influence is strongly Salvage, Repair associated with ownership of the oil. Scrappers Other markets e.g. - blending - fuel - explosives Used- oil collectors & traders Oil Treatment UTILITY e.g. e.g. - Hydrodec - Duke Service companies - EPS - Dominion e.g. Moran - EMI - NextEra - Clean Harbours - Veolia Transformer Oil The Hydrodec process is the most efficient, Used Oil cost-effective and produces the highest Oil Filled Transformers quality oil, as good if not better than new. 9
Our core business model Transformer oil Core Offer Business Model CUSTOMER Safe alternative to Owner – operator incineration (potential JV) PCB elimination Equity/debt funded Full-cycle margin Re-usable oil (including royalty) Sustainable Cost effective - carbon neutral not reliant on subsidy Variable logistic and Oil service offer market channels • First commercial plant and R&D facility in Young, Australia (2006), 6.5m litre p.a. capacity • 27m litre p.a. capacity plant in Canton, Ohio (2008) 10
Our global market • The global market for new transformer oil is estimated at 1.2 billion litres per annum, about $1.5 billion; – Global market has grown by an average of 2% p.a. for 10 years driven by power markets; – Hydrodec currently supplies less than 30 million litres per annum; • North American demand is 400 million litres p.a. growing at 6% p.a. over the last two years – Hydrodec market share ca. 5%; Source: PFC Energy • Annual transformer oil market value in Australia is ca. $25 million – Hydrodec value share up to 20%; Source: Data from Australian Government, Hydrodec • In Japan, highly regulated market provides 560m litres of PCB contaminated oil requiring treatment, up to 2 billion litres of T-oil in service; Source: Kline Report 2010 • Industrial oil markets are materially larger, global value ca. $8bn p.a.; market structure can be more international and concentrated. 11
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