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At 100 tpd per site, cash flow after debt service cost is slightly positive. When you hit 250 tod at a site, you make a noticeable return on investment as long as you don't have high cost VC investors involved. The sweet spot begins at 500 tpd as you run full out and can absorb the cost of a indirect and maintenance overhead staff. To go much above this level, in plant handling becomes an issue which warrants automation.
Morocco is not big on tax breaks.
If we assume that the company will buy pyrolysis equipment ex China as they did in India, the maintenance costs will be higher. Further, it will require more capital investment. Should we grow beyond mere pyrolysis oil to LCFS fuels or hydrogen, the capital cost and operating costs grow substantially. It costs about 200k for each ton per day of capacity to build a pyrolysis oil system only that has a robust lifespan. To go to LCFS or hydrogen, look at 250k per ton per day of capacity. Now, if you want to put the plant into a new building, provide for permits, site engineering, contingencies, working capital, etc the dollars add up. Hydrogen for example requires either pressurization to feed into a pipeline. If you want to ship gas by truck that is an added cost. Now, to liquefy the hydrogen, specialty railcars or trailers are needed. You cannot buy them off the shelf.
Revenue is one thing. After tax profit less principal reduction is another. Seven million in revenue should yield about three million EBITDA. Morocco does levy a corporate tax - it is not a tax haven country. The net cash flow likely would not be sufficient to pay any dividends up to the parent company or to reinvest in a meaningful way.
BTW, one US firm has delivered credible funding terms to a WTE developer using plastics for multiple US sites. They have commitments for feedstock. This is on top of the major oil.companies expanding into plastic based pyrolysis along the Gulf Coast.
I was using the 10 tpd that they used.
If I use the 417 per ton of revenue, this would suggest a fair price for pyrolysis oil and not any LCFS tank ready fuel or hydrogen. The upgrading does require added money.
Ignoring that, what about the question of operating costs, taxes and debt service cost.
The press release suggests 10 tpd but I will let that pass.
Now, what about the question of the cost to produce that revenue, the taxes and whatever debt service cost may be involved.
Now, has anyone been following what other waste to energy producers are doing with waste plastics? They are larger scale and have very been pockets.
We already have a number of Clean Seas - insert name of country here - subsidiaries many of which are inactive. We should overplay the hand dealt.
At 10 TPD and 25k in revenue per month, this works out to $ 80 per ton in revenue. So, at 120 TPD or 3600 tons per month, this works out to approx 280k in gross revenue. When you back out operating costs and local taxes, what is left to repay the investment in the equipment?
I can use your help.
In one of my daily news feeds, there was a story about the seven North-Eastern states pushing the NE hydrogen hub. Various websites have mentioned the companies that have joined in the 1.25 billion dollar ask from the 8 billion dollar Biden fund. I did not see CLNV on that list. I thought we have projects in Cape Cod and CT.
So, are we missing something?
Most companies will wait until the close of the market so that the news can be orderly disseminated over the wire services and social media. Otherwise, there can be false claims of insider knowledge.
The Great Pacific Garbage Patch is now about twice the size of Texas. From a volume perspective, it is estimated at only 80000 NT of plastics which is a mere drop n the bucker. A more detailed analysis of the content of the patch is that part is from the 2011 Tohoku earthquake. The other large element relates to fishing nets. There are firms already chipping away at the patch as well as others are installing plastic nets at various river mouths and storm drain outfalls.
The biggest waterborne plastic issue comes from eight rivers which are found in Africa and Asia. With these river systems, we can readily see poor environmental concerns as the rivers are natural sewers. Also, many local dumps are built adjacent to rivers so when storms hit the plastics just wash away. Problem solved according to the locals.
If our focus is on the environment then our plants should be located in coastal India, Vietnam, China and Nigeria. These are all high population countries with a need for power.
SPAC companies are used to roll out a private, well established firms as a public company without the IPO process. Most have not done well in the after market over that past 2 years. Occasionally, they will look at concept funding like Trump's Truth Social. Hypothetically, suppose there was a SPAC with 50 million to spend. How does CLNV stack up against other WTE firms, cannabis firms, energy storage firms and the like? If I am bringing 50 million to the table, what does our company bring to the table? The SPAC would likely hold 85 pct of the business. That is a lot of dilution.
We have changed our story from a synthetic fuel from used plastics operator in Ecuador, Cameroons, DRC, Sri Lanka and India to a hydrogen producer in Morocco. The connection to fuel cells is not as well developed. Also, we need to consider that the other large value fuel cell companies have cash in the till to do development and manufacturing. We have yet to demonstrate that we can raise any material amount of capital to realize on the vision.
Unless Dan says that it is funded then we should not assume anything on funding. Morocco is a slow build out with 20 tpd then adds another 50 tpd then a further 50 tod. There is still no word on funding for any other plants.
Funding from US sources will be pricey. Even EU based Green Bonds are getting up there in required yields courtesy of the central banks trying to starve out inflation through rate hikes.
Assuming that the Inflation Reduction Act grants survive the GOP, they are still half a year out for announcing awards amongst a competitive demand for grants. Many grant programs want to see promoters cash on the table first. This is something that we have yet been able to prove or deliver. How many funding agents have we gone through in the past two years?
A VC looking at funding CLNV will want a lot of shares plus senior debt. A PE fund will not likely look at CLNV as they tend to look in the rear view mirror, ie, past after tax profits. Unrated or non investment grade debt runs about 9 percent from existing revenue producers.
Feedstock is good bit where is the announcement of the cash needed to buy the equipment?
Show me the money.
Alas, the agreements call for each party to help find the capital. Do, you have a definitive contract but without capital it will become a void contract.
According to the press release, the parties will work together to find the capital to build the plant. This is the common thread with all of the announcements. We have the site. We have the feedstock. No mention of hard agreements to sell the output but the market will likely take it. Never any mention of cash commitments to buy the machinery.
With no capital to buy the equipment renders the LOI's questionable.
There is also the underlying question of the competition of clean plastic waste. Most wastes are not clean which reduces their productivity.
She'll in Europe is already processing 350k of waste plastics per year and plans to triple this by the end of the decade. How much have we done thus far?
ExxonMobil announced that their Baton Rouge complex will be taking in plastics to produce synthetic oil for future plastics. The plant is expected to have a capacity of 40k tons per year. Exxon already has a similar sized plant at Baytown. Exxon plans to have 600k TPY in used plastics processing facilities in place within 3 years. All of these plants use pyrolysis. Does this mean a supply squeeze for plastic feedstocks in the US?
Interesting. I heard that two coal mine operators are looking into coal gasification in WV and KY. They would supplement the ups and downs of productions with shredded tires. The jury is still out if they will make fuel or hydrogen. Between the two plants, it is about 1200 tpd.
As a CPA, if the income was earned in November it should be recorded in that quarter and fiscal year. You can earn it in one period and collect the receivables in another but it is still reported when it is earned. To say is is earned in November and would be reported in Q1 2023 is contrary to GAAP.
If.you look at the share issuance and debt with warrants issued on each side of the 84.5 cent warrants, you are a lot closer to the value of a long term warrant. What would be the rationale for an investor to accept such an absurd price when other current warrant pricing was 75 percent lower?
As I said previously, to spread my investment risk within the cleantech sector. Plastics to fuel or hydrogen via pyrolysis is not new. Hydrogen fuel cells are not new. What makes some sense with CLNV is the integration of the manufacture of hydrogen and fuelling at the same site. Great cost savings if this is the case. If you need to transport and store hydrogen the costs explode. No pun intended.
Some posters have been salivating over the 10 billion in government funding for infrastructure. The sad reality is that the amount of money needed to handle the transition to a hydrogen economy is far greater than what the government grants will provide. The annual report mentions the degree of competition for plastics conversion. There are a long of big named and deep pocket players already in the major markets. One announced a major expansion yesterday.
Have you ever asked yourself what can the $ 10 B actually purchase?
Consider this for a moment. The Biden Plan looked at funding between six and ten hydrogen hubs within a universe of 18 hydrogen hubs. A DOE map shows the proposed hubs and none are located on the eastern seaboard. The closest ones to cities like Boston, New York, Philadelphia and Washington, DC is in Allegheny County (Pittsburgh), PA. The nearest hubs to Atlanta, Tampa, Miami and Jacksonville is in Mobile, AL. Clearly, the market needs to move product to those large metropolitan areas.
One possible solution is to insert hydrogen into the nearly 305000 miles of existing natural gas lines. Given the density of hydrogen relative to methane, you have a practical limit of about 20% hydrogen before you need to modify compressors and valves. Since hydrogen has a lower BTU value to methane, this means than the practical limit is closer to 7% by volume. So, why don’t we increase the number of natural gas pipelines and insert hydrogen? While environmentalists say natural gas is bad, it is better than coal and home heating fuel. In 21-22, the average cost to build a natural gas pipeline in the Great Lakes states and in the North East was $ 8.5 million per mile. Adjusting for inflation to 23-24 time period, $ 10 million per mile sounds about right. So, the $ 10 B would pay for about 1000 miles of new pipe or about 55 miles per hub. That is slightly longer than the distance from Baltimore to Washington, DC.
If we were to build a new hydrogen only line, what would it look like? There are currently 1600 miles of hydrogen only pipelines in the US virtually all in the Houston area going through Lake Charles. The DOE has estimated that a new gaseous hydrogen line would cost about 10 percent more than a new natural gas line. This would imply that some 900 miles of new pipe could be built or 50 miles per hub.
So, what happens if we move it by truck or rail. The cost of a trailer or rail car handling pressurized hydrogen gas or refrigerated liquid hydrogen is not cheap. The average between the two types is about half a million dollars.
Suppose we ignore the transmission issue altogether and focus on local distribution, what does $ 10 B purchase? According to the DOE’s 2021 report, the cost to construct a retail level filling station using compressed hydrogen is $ 1.5 million. The cost for a single liquid filling station ranges from $ 1.9 million to $ 2.4 million. If you use a standard $ 1.75 million as an average, you end up with about 5700 filling stations. The US current has about 145000 filling stations.
Now, these numbers assumed that the grants covered the entire cost of a project. If we said that the project owners paid 75% and the grant made up the difference, it only increases the coverage by four. We are still short on pipelines and your local gas stations.
This line of thinking was purely restricted on using hydrogen to support cars. No consideration was given to competing demands from the demands for fast charging BEV outlets.
I had a conversation yesterday with a Green Bond financier who report that he already has about $ 6 B in projects going in for funding requests. He was told by the DOE that they have 4 persons who will be processing some $ 300 B in capital projects fighting over the $ 10 B.
The clear takeaways should be that the amount of support for the infrastructure grants is not sufficient to meet the ambitious goals set out by Biden. Further, the amount available to project developers is not assured given the competition. Also, we should keep in mind that the roll out, if it is not scuppered by the GOP’ Freedom Caucus, will take longer than anticipated.
Food for thought.
Firstly, the post was a factual event which affects the green industry but it is not certain to what extent.
Secondly, the Bill goes to the lengths that the Freedom Caucus within the GOP will drive the agenda to roll back the IRA. A realistic battle will be a tradeoff of gutting the IRA in exchange for a larger debt limit.
HR 1 passes the House 225 to 204.
The Republican Bill promotes domestic oil and gas product and repeals part of the Inflation Reduction Act. Specific legislative changes include repealing methane fees, repealing increases in oil and gas royalties, repealing the $ 27 B allocated to a new Green Bank, limiting the time frame for environmental reviews and other administrative actions.
The Bill will not likely pass the Senate and most assuredly will get vetoed by Biden.
Reading between the lines, it is not a far reach for the Freedom Caucus of the GOP to promote the introduction of legislation attaching an increase in the debt ceiling to a substantive overhaul of the Inflation Reduction Act.
The company had hired brokers before to find money without any success. If Dan has cash in the bank or even a deal from a solid funder, he would have announced it as it would be in his interest to get the share price up under massive volume. More than likely, the company is shopping around for any deal. The challenge is that no reputable funder will do any work until a retainer deposit is made.
Without any cash from any financing, there will be any equipment purchased and by extension any revenue.
Governments do not finance 100 pct. So, where does our contribution come from?
Agreed. It will take time to raise the capital, construct the plants and generate revenue. It is a lot farther out that people think. There has been no mention of competition for capital and feedstock. While the future demand for hydrogen seems rosey, there is scant distribution and storage capacity in place today or even announced.
You need LOI's to support any financing requests. Without funding, the LOI's cannot be reduced to firm contracts. The focus now should not be on getting new sites announced but on hard cash in the till to pay for the equipment, building and working capital.
I had the opportunity to review the Newsmax coverage of the paid promotion update.
I took some careful notes and I wish to highlight some of the takeaways:
- the often promoted first plant in India has been relegated to an R + D plant
- the Moroccan plant is currently running at 20 TPD and will be increased by 100 TPD in 50 ton increments
- Dan said that they have a 1 million tons per year plastic supply agreement for Morocco yet you need nearly 3000 TPD to match the supply contract - is there a material imbalance or is it a mis-statement?
- most of the sites were planned sites
- this was the first time in months where Sri Lanka was mentioned in a country that is still in a period of civil unrest
- the ASU connection with the Walton named facility was mentioned yet there is no evidence of the Walton's or the University funding the project - no mention of the access to scientists and technicians from ASU
- with the 2600 TPD of announced capacity being a world leader with the closest one being 100 TPD being the closest competitor is not entirely accurate - I am personally aware of announced sites which are being constructed now that exceed that amount
- speaking of funding - nothing at all was mentioned in the presentation - not one word
- Dan was positive but the absence of full, fair and plain disclosure is troublesome
It will be interesting to see what is disclosed in the annual financial statements and notes.
It all comes down to the the financing.
It is more efficient to convert plastics to a syngas then reduce it to LCFS or hydrogen than to make an intermediate oil then reheat it to break it down. The conversion process to LCFS or hydrogen adds about 20 pct to the plant cost. Also, has the company said if it is selling gaseous or liquid hydrogen?