Hydrodec INVESTOR PPT October 2013

8/12/2019 Hydrodec INVESTOR PPT October 2013

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Hydrodec Group plca unique renewable oil proposition

Ian Smale, Chief ExecutiveChris Ellis, Chief Financial Officer


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Hydrodec Group plc

Precautionary StatementBy attending the meeting where this presentation is made, or by reading thepresentation slides, you agree to be bound by the following instructions.

This information in this document has been prepared by Hydrodec Group plc(Hydrodec or the Company) solely for use at presentations to held in connectionwith the proposed placing of ordinary shares in Hydrodec (the Placing) and ispersonal to the recipient.

This document and its contents are confidential and may not be reproduced, distributedor published in whole or in part, or disclosed or made available by the recipients, forany purpose without the prior written consent of Hydrodec.

No offering document or prospectus has been or will be submitted to be approved byFCA (or other authority) in relation to the Placing and any placee's commitment will bemade solely on the basis of information contained in an announcement to be publishedby the Company in connection with the Placing. Each placee, by accepting aparticipation in the Placing, will confirm that it has neither received nor relied on anyother information, representation, warranty, or statement made by or on behalf of theCompany or Peel Hunt LLP or any other person (including but not limited to thisdocument) and neither the Company nor any other person will be liable for anyplacee's decision to participate in the Placing based on any other information,representation, warranty or statement which the placees may have obtained or

received. Nothing in this paragraph shall exclude the liability of any person forfraudulent misrepresentation.

This presentation is being made and this document is being distributed in the UnitedKingdom only to and is directed at persons who have professional experience inmatters relating to investments who fall within the definition of investmentprofessionals in Article 19(5) of, or a person falling within Article 49(2) (High Net WorthCompanies, etc.) of, the Financial Services and Markets Act 2000 (FinancialPromotion) Order 2005 of the United Kingdom and persons who are otherwisepermitted by law to receive it (all such persons being referred to as relevant persons).

Any person who is not a relevant person should not act or rely on this presentation orthis document or any of its contents.

The information given in this presentation is given in confidence and the recipients ofthis presentation should not engage in any behaviour in relation to qualifyinginvestments or related investments (as defined in the Financial Services and MarketsAct 2000 (FSMA) and the Code of Market Conduct made pursuant to FSMA) whichwould or might amount to market abuse for the purposes of FSMA.

Peel Hunt LLP is acting for Hydrodec in connection with the proposed Placing and forno-one else and will not be responsible to anyone other than Hydrodec for providingthe protections afforded to its clients nor for providing advice in relation to the proposedPlacing or any other matter referred to herein. Peel Hunt LLP has not authorised thecontents of any part of this document.

No representation or warranty, express or implied, is made as to, and no relianceshould be placed on, the fairness, accuracy, completeness or correctness of theinformation, or opinions contained herein. Neither the Company, nor any of theCompany's advisers or representatives, including Peel Hunt LLP, shall have any

responsibility or liability whatsoever (for negligence or otherwise) for any loss

howsoever arising from any use of this document or its contents or otherwise arising inconnection with this document. The information set out herein may be subject toupdating, completion, revision, verification and amendment and such information maychange materially. Neither the Company nor any other person is under an obligation tokeep current the information contained in this document.

This document has not been approved by the UK Financial Services Authority or anyother regulator. This document does not constitute or form part of, and should not beconstrued as, an offer, invitation or inducement to purchase or subscribe for anysecurities nor shall it or any part of it form the basis of, or be relied upon in connectionwith, any contract or commitment whatsoever. This document does not constitute arecommendation regarding the securities of the Company.

The information communicated in this document contains certain statements that are ormay be forward looking. These statements typically contain words such as "expects"and "anticipates" and words of similar import. By their nature forward lookingstatements involve risk and uncertainty because they relate to events and depend oncircumstances that will occur in the future. An investment in the Company will involvecertain risks. In particular, certain figures provided in this presentation are derived fromfinancial models; there is a risk that errors may be made in the assumptions ormethodology used in a financial model. A summary of the material risks relating to theCompany and an investment in the securities of Company will be set out in the section

headed "Risk Factors" in the Circular.

The publication and distribution of this document, attendance at the presentation andthe placing and sale of the shares may be restricted by law in certain jurisdictions andtherefore persons into whose possession this document comes or who attend thepresentation should inform themselves about and observe any such restrictions. Anyfailure to comply with these restrictions could result in a violation of the laws of suchjurisdiction. In particular, this document and the information contained herein, are notfor publication or distribution, directly or indirectly, to persons in the United States(within the meaning of Regulation S under the US Securities Act of 1933, as amended(the "Securities Act")) or to entities in Canada, Australia, South Africa or Japan. Neitherthese slides nor any copy of them may be taken or transmitted into or distributed in theUnited States, Canada, Australia, South Africa, Japan or any other jurisdiction whichprohibits the same except in compliance with applicable securities laws. The securities

of the Company have not been and will not be registered under the Securities Act orwith any securities regulatory authority of any state or other jurisdiction of the UnitedStates, and may not be offered, sold, pledged or otherwise transferred directly orindirectly in or into the United States, or to or for the account or benefit of any USperson within the meaning of Regulation S (Regulation S) under the Securities Act,except that the shares may be offered and sold: (a) in the United States to certainqualified institutional buyers as defined in, and in reliance on, Rule 144A under theSecurities Act who are qualified purchasers as defined in Section 2(a)(51) of theUnited States Investment Company Act of 1940, as amended; and (b) outside theUnited States only in offshore transactions to persons that are not US persons asdefined in, and in reliance on, Regulation S.

Slide 2


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Hydrodec Group plc

We produce new, renewable transformer & base oils as good or better quality thanoriginal oil

Unique industry-leading clean-technology is proprietary, proven and efficientTwo commercial operations in USA and Australia generate positive cash flow

Eight consecutive years of revenue growth, now poised for expansion & positive EBITDA

Planned build-out in US underpinned by feedstock from Strategic Partnership

Technology development underway offering access to a step change in opportunity

Newly acquired UK business creates platform for technology-led growth

The basic propositionbased in proven transformer oil re-refining with real potential fortechnology-led growth

Slide 3


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Hydrodec Group plc

Transformer oilglobal market opportunitya unique competitive technology to treat used and contaminated T-oil

COMPETITIVEADVANTAGE

ENVIRONMENT

SOURCES OFUSED OIL

USES

Global market 2012: 1.35bn litres, growing atestimated 5% cagr to 2017*

Valued at US$1.6bn, growing at estimated 9% cagr to2017*

Demand driven by ASPAC*

Technology approved in US, Australia & Japan fortreating PCB contaminated oil

Re-used as new transformer oil

Virtual closed-loop with utilities

OEMs: ca. 40% demand

Base oil markets in inks, agriculture, mining & explosives

> 99% as new oil, no waste

Tests as better than new oil

Single-step re-refining processNegligible emissions, carbon neutral oil

OECD: 75% rule new oil displacing old oil**

Direct from utilities: ca. 25%

Indirect channels in highly fragmented marketAlternatives: incineration, fuel additives, regeneration, recycling

Sales price:Feedstock:

Gross margin:

Existing

capacity:

ca. US$1.00/litre*ca. US$0.40-0.50/l

25% +

6.75m litres pertrain4 in US**,

1 in Australia

Rules of thumb:

*ICIS pricing

**planned expansion to 10

trains in US

Slide 4

* Source: Markets and Markets: Transformer oil market, Global Industry Trends & Forecast to 2017** Source: Hydrodec estimates


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Hydrodec Group plc

Commits feedstock to the partnership,de-risks expansion

Trades Hydrodec NA for 50.1% ofbusiness 240% of the size

Cash proceeds to be re-investedin expansion

Growth in capacity from 27 million litrespa. to 65 million litres pa; capex ca.US$15m

Attractive IRR for Canton expansioninexcess of 25%

Establishes new recurring royalty fortechnology licence

US partnershipgrowing the core businessestablishes a strategic business and revenue blueprint for growth

HYDRODECOF NA

HYDRODEC NA

50.1%*Assets/Technology

G&S TECHNOLOGIES

49.9%*Feedstock/Customers

Strategic partnership, largesttransformer oil re-refiner in US

Slide 5

*Ultimate ownership following expansioncurrently 75% (Hydrodec):25% (G&S)


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Hydrodec Group plc

Acquired principal business & assets of OSS Group for 4.65m in Sep 2013

UKs largest collector, consolidator and processor of used lubricant oil and seller ofprocessed fuel oil (PFO) - sold c. 60m litres of oil in 2012

National network serviced by > 90 vehicles collects used oil and other garageworkshop waste; > 30,000 customers

Used oil converted into PFO - sold principally to UK power and industrial sectors

Senior management team led by Iain Lees joined Hydrodec together with 180employees

OSS generated revenues of 28.5m and normalised EBITDA* of c. 1m in 2012Expect EBITDA accretive to Hydrodec Group this year (after transaction costs) andaccretive to earnings overall in 2014

*adjusted to exclude exceptional and one-off items

UK acquisitiona new market and businessa platform to build on a leading market position

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Hydrodec Group plc

Delivering strategytargeting outstanding growth and profitability

Clean-technology model with two core revenue streams:

Equity participation where advantaged

Royalty income through licencing

Delivering growth and profitability through transformer oil

Expansion through transformational US strategic partnership

Access new geographies via partnership, license or acquisitionDeleverage balance sheet & target positive EBITDA

Creating material future optionality through technology

Expand proven technology platform; proof of concept achieved

Extend proven business model; partnership or acquisition to securefeedstock; invest and licence when proven

Re-defining a sector through technology and consolidation

Ground breaking recovery and quality from technology can transform sectorprofitability and competitiveness

Fragmented market offers material options for consolidation

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Hydrodec Group plc

Aiming to deliver outstanding growth and profitability

Creates leading re-refiner of waste andPCB contaminated oil in North America

Secures feedstock for material growththrough value-chain integration

Alliance of best in class technology andservice provision creates compelling,sustainable one-stop offer for customers

De-risks expansion to 65m litres p.a.(increase of 140%), from 4 processing

trains to 10 by 2015

Establishes a recurring royalty for thetechnology at 5% of revenues andbusiness model for growth

Access to Europe and key UK marketthrough a leading position in used oilcollection and processing

Access to value-chain and capabilitycreates a platform for SUPERFINETMre-refining and sales

Accelerates development andcommercialisation of Hydrodecsnewlubricant technology

Secures feedstock for lubricant re-refiningin UK

Creates options for consolidation intoEurope

Slide 9

execution of strategy delivered through a common transaction blueprint

Hydrodec ofNorth America

Q2 2013 Q3 2013


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Hydrodec Group plc

European licence

New market license (Japan)

New technology design

Part ial Full

Value chain

(partnership or acquisition)

Commission licenced plant(new market/Europe)

License Phase 2 technology

Potential extension, in USA

+4 trains

Commission licenced plant(new market/Japan)

Carbon certification

Commission 2nd plant

+4 trains US

Commission European plant

Staggered/full commission

Phase 2 technology

New market entry(partnership/acquisition)

Developing a clear roadmap to value

H1 2013

H2 2013

H1 2014

H2 2014

H1 2015

H2 2015

2016

Transformer oil

Lubricant oil

Financial

US strategic partnership(G&S Technologies)

Resolve balance sheet

Commission Cantonexpansion (+2 trains)

Pilot plant construction

Target positive EBITDA

Value chain

(OSS acquisition)

has the potential for compelling double digit growth and returns

Delivered

EnabledProtectable IP,patent process

Slide 10

Q213

Q313


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Hydrodec Group plc

Growth projectsa pipeline of further potential

Partnership opportunity in UK; providing infrastructure and capability todevelop transformer oil business by 2015, lubricant oil business by 2016

Scaling Australia for efficiency, with potential for lubricant oil partnership

Continue to seek partnership or consolidation options in Europe

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Hydrodec Group plc

2010 2011 2012 H1 2013

Volume (litres m) 20.2 20.3 22.5 12.5

Revenue (US$m) 17.8 22.4 26.1 13.9

Gross margin 21.3% 22.2% 20.6% 25.2%

Operating EBITDA* (US$m) (3.3) (2.2) (3.0) (0.2)Net debt (US$m) (19.2) (16.8) (22.6) (23.6)

* Before growth costs and share based payment costs

Hydrodec Groupeight years of revenue growth, poised for acceleration and positiveoperating EBITDA

Strong trading in Q3 continuing momentum of H1

Operations in Australia and US both generating positive cash flow2012 operating EBITDA reflects investment in strengthening business & management team

Investment in growth and technology development; new lubricant technology proof ofconcept in Dec 2012

Strategic partnership in US announced in April 2013 creates a blueprint for growth

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Hydrodec Group plc

OSS Grouptransaction EBITDA expected to be accretive by year end,earnings accretive 2014

FY12 financial performance impacted by margin squeeze

Reduced demand domestically led to increased export sales at reduced margins to

maintain cash flowFocus on increased domestic demand offers potential for margin recovery

Strong growth potential in fuel sales and new product development & cross-sellingacross the customer base

Creates a platform for further consolidation in the UK and into Europe

2010 2011 2012*

Volume** (litres m) 56.0 48.5 59.7

Revenue ( m) 24.9 25.1 28.5

Gross margin 31.8% 33.0% 22.0%

EBITDA ( m) 3.6 4.2 1.0*per management accounts

**PFO, RFO and Black Gas Oil

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Hydrodec Group plc

Objectives of the fund-raise

Slide 14

Reposition Hydrodec for the next stage of development

Enhance credibility with all stakeholders (customers, suppliers, shareholders)

Provide flexibility to finance assets appropriately at business, operating or asset

level

Sort out the balance sheet and capital structure

Raise additional capital for specific identified growth opportunities

Introduce a small number of new institutions onto the register


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Hydrodec Group plc

Placing and open offer

Placing 20mOpen offer Up to 4.25m

7.5m revolving credit facility and 5m secured loan notes redeemedthrough issue of new shares at placing price

Slide 15

deleveraging balance sheet and expansion capital

Use of Placing Proceeds

Repayment of ULS 13m

Expansion capital Lubricant technology development 2m

Reposition technology to UK 0.5m

Growth projects 1m

Expanded UK business, with T-oil re-refining 3.5m US expansion self-funded through strategic partnership 0m

20m


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Hydrodec Group plc

Expected Timetable

w/c 7thOctober Road-show

14thOctober Placing letters sent out

15thOctober Placing letters returned

17thOctober Placing and Open Offer announced and shareholder circular posted

5thNovember Announcement of Open Offer take-up

General Meeting

6thNovember New shares admitted

Placing monies in

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Hydrodec Group plc

Conclusionstrategy being delivered - repositioning for profitability and growth

Management with proven track record in oil industry; now delivering at Hydrodec

Established renewable transformer oil business with proven technology; EBITDApositive at operating plant level

Strategic partnership in US; catalyst for growth, blueprint for future

Transformational new market entry in UK through acquisition of OSS, creates scale

and cash generation; platform for new technology & European consolidationStrong drive to deliver positive EBITDA run-rate later this year (aided by accretiveOSS acquisition)

Global market potential in transformer oil and major opportunities with next stagetechnology - robust potential for new protectable IP based on proven technologyplatform

Proven economic and business model; attractive returns in transformer oil re-refining,replicable in used lubricant oil market (>15x larger) with significant upside optionvalue

Continue to target value chain integration (feedstock) and capability - follow-onpipeline of opportunities currently under consideration

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Hydrodec Group plc

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Hydrodec Group plc

Appendices

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Hydrodec Group plc

Hydrodec Group plc - management team

20 years board levelfinance andmanagementexperience runninglarge, complexinternational businessesas well as small andmedium-sized ventures,including a significantperiod with GE Capital

Qualified charteredaccountant

Joined Hydrodec asCFO in July 2012

Chris Ellis

Chief Financial Officer

30-year career withBP plc

Leadership positionsincluding Group Head ofStrategy & Policy,Global Head of Mergersand Acquisitions, andPresident and ChiefExecutive of BP

Exploration North Africa Joined Hydrodec as

CEO in January 2012

Ian Smale

Chief Executive

30 years at BP plc, withexecutive level roles inBP Chemicals andTechnology

Previously COO at aUS-based technologystart-up business in theenergy/waste sectors.

Joined Hydrodec asCOO in January 2012

David Robertson

Chief Operating Officer

10 years with CloughEngineering responsiblefor the environmentaltechnology andengineering division

Joined Hydrodec in2004 originally as ChiefOperating Officer,assumed the role of

CEO in 2005 Became Head of

Technology andInternational Projectsin January 2012

Mark McNamara

Head of Technology &International Projects

Corporate partner atLinklaters for 15 yearsincluding as GlobalHead of the Energyand Utilities sector

Structured severalground-breaking BPtransactions, includingthe Amoco merger,

the Burmah Castroltakeover and theBP/TNK joint venture

Joined Hydrodec asHead of CorporateDevelopment inJanuary 2012

Lee Taylor

Head of CorporateDevelopment

more than 125 years of collective experience

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Hydrodec Group plc

Non-executive directors

Andrew is the co-founder ofBetfair, the worlds leading onlinebetting exchange and FTSE 250constituent, having devised itsunique betting exchange model.He was a director of the BetfairGroup from 1999 to 2010.

Andrew Black

Non-executive Director

Lord Moynihan was previouslyExecutive Chairman and ChiefExecutive of Consort ResourcesLimited and Executive Chairmanof Clipper Windpower EuropeLimited. Colin was a Memberof Parliament in the UK for 10years, serving as Minister forEnergy from 1990 to 1992. Colinwas Chairman of the British

Olympic Association from20052012.

Lord Moynihan

Chairman

Alan has 27 years exper ience inthe financial markets and from2003 to 2010 he was GlobalHead of Equities at Cazenove.During this time he wasappointed a main board directorand was a member of both theexecutive and operationscommittees. He helpedspearhead the joint venture with

J.P.Morgan in 2005 and spent ayear as Head of EMEA CashEquities at J.P.MorganCazenove, following the buyoutof Cazenove in January 2011.

Alan Carruthers


Gill brings with her a wealthof public market experience,having spent eight years atSchroder InvestmentManagement as an analyst andfund manager and later servingas Investment Director on themain board of MajedieInvestments PLC. She alsoserved as a non-executive

director of Majedie AssetManagement Limited whereshe played a key role in settingup the UK pension fundmanagement business in 2002.

Gillian Leates


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Hydrodec Group plc

World-leading clean technology

Developed to treat PCBs(polychlorinated biphenyls)

IP protected; secured by operationalknow-how

Hydrogenation cleans and restores

the hydrocarbon molecule

New renewable oil withsemi-synthetic properties

Approved by regulatory authoritiesin US, Australia and Japan

Proof of concept achieved inlubricant oil application

simple chemistry and smart process engineering

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Hydrodec Group plc

hjmgvbmbnmnmb

nmn

Transformer oil treatment and processingApplying Hydrodecsunique, proven transformer technology is efficient,eliminates PCBs and produces high quality oil with no waste

PCB OxidationProducts

Oil Purity PRODUCT RECOVERY WASTE

Traditional Incineration N/AOil is lost N/AOil is lostN/AOil is lost

0%

Technology A

BasecatalysedChemical

Process

N/AOil is lost N/AOil is lostFuel 0% YES

Technology B

Metal (Na)CatalysedChemicalProcess

N/AOil is lost N/AOil is lostFuel 0% YES

One Step Catalytic HydrogenationNew

Transformer

Oil

99%+ NO

No PCBOxidation

ProductsOil Purity PRODUCT RECOVERY WASTE

Technology C N/AFiltration

RegenerationFiltration

RegenerationRecycled

Transformer Oil


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Hydrodec Group plc

Industrial oil treatment and processingapplying Hydrodecs proven technology offers potential for materialefficiency improvements over existing best in class technology

MetalsPhosphate

detergents

Product

separationOil oxidation Oil purity

TraditionalChemicalpre treat

Chemical pretreat and solventwith losses

Distillation -Solvent washingwith losses

Company AChemical

pre treat

Solvent with

lossesDistillation -

Solvent washing

with losses

Company BChemicalpre treat

Chemical withthin film

Distillation Hydrogenation

Company CChemicalpre treat

Sacrificial catalyst Distillation Hydrogenation

Company DChemicalpre treat

SacrificialCatalyst

Distillation Hydrogenation

POTENTIALChemical pretreat

One Step Catalytic Hydrogenation

NOTE: All systems contain fractionation processes

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Hydrodec Group plc

Comparison of Hydrodec technology applicationa differentiated quality and recovery opportunity

LEGEND

FULLY RECOVERED TO BASE OIL

PARTIALLY RECOVERED TO BASE OIL

FULLY RECOVERED TO FUEL

PARTIALLY RECOVERED TO FUEL

WASTED

Slide 25

CURRENT BEST AVAILABLE TECHNOLOGYHYDRODEC

PROPOSED Company A Company B Company C Company D Company E

TYPICAL CONSTITUENTS

(Gp II/III) (Gp I/II) (Gp I/II) (Gp I/II) (Gp I/II) (Gp I/II)

To Asphalt To Asphalt To Asphalt To Asphalt To Asphalt

To Asphalt To Asphalt To Asphalt To Asphalt To Asphalt

Water, Coolants

LightHydrocarbon, fuels

Detergents, Dispersants

Oxidised Base Oils

Unoxidised Base Oils

Pyrolysis products , heavy base oils

Asphaltenes

Solids, Inorganic AdditivesDRUM OF

WASTEOIL


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Hydrodec Group plc

Specialises in collection andrecycling of hazardousworkshop waste andprovision of associatedwaste management services

Collects c. 60 million litres of

waste oil per year c. 40 million litres of PFO

produced annuallyalsoRFO and Black Gas oil

Operates national servicemanaged through network ofwaste transfer stations,

depots and processingplants

> 95% of hazardous wastehandled is recycled orrecovered

OSS Groupwaste solutions - refined

fuel division

workshop waste

parts washers

industrial services

turnover: 23.5m

total turnover (2012): 28.5m

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Hydrodec Group plc

Locational Maps

Processing Plant/Depot

OSS Transfer Station

Call centre

Hydrodec, Canton Plant

G&S Technologies Plant

Slide 27


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Ian SmaleChief [email protected]

Chris EllisChief Financial [email protected]

London Office:50 Curzon StreetLondon, W1J 7UW

Main: +44 (0)20 7907 9220

www.hydrodec.com

Hydrodec Group plc

Please visit the Interview & Webcasts section of ourwebsite to view our Corporate Overview video andinterviews with the management team.

Documents

Hydrodec INVESTOR PPT October 2013