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Hydrodec Group releases AGM Statement

Published by
Hydrocarbon Engineering,

At Hydrodec Group’s Annual General Meeting, Lord Moynihan, Chairman of the Company, made the following statement:

"In the last three months, Hydrodec has commissioned the rebuilt, improved and expanded facility in Canton, Ohio, commenced tolling under outsourcing arrangements with Southern Oil in Australia and has consolidated feedstock collection for its proposed lubricant re-refinery in the UK through the acquisition of Eco-Oil. The company has also taken the next steps to register technology patents and is close to agreement for a lease for the proposed re-refinery in the North West of England, subject to the Nationally Significant Infrastructure Projects (NSIP) regime with formal application expected before year end.

This is all consistent with your company re-emerging stronger from a necessary period of rebuilding, reinvestment and preparation to resume delivery of the strategy originally proposed by management in 2013; updated, reviewed and endorsed by the Board. Our goal remains to deliver significant growth, profitability and long term shareholder value through re-refining used oil sustainably and fit for its original purpose.

The company's priorities are clear, and the Board endorses a focused and comprehensive six point plan, the key elements of which are already in train. The Board firmly believe the delivery of this plan will drive the company to profitability:

  1. Delivering the rebuild and expansion of our US market position through our Canton re-refinery: The US business is expected to be cash generative by the end of 2015 and to process c.19 million litres of transformer oil by the year end. The plant has the potential to operate at least 10% more efficiently per unit of capacity and to produce the best quality transformer oil available in the US.
  2. Embedding the outsourcing relationship with Southern Oil in Australia: The Australian business is expected to be cash generative by the end of 2015. Our product has achieved '500 hr' oil status within a week of start up, certifying the oil to be high quality transformer oil.
  3. Delivering the leading oil and associated waste management business in the UK: Realising significant efficiencies through the transition of the OSS and Eco-Oil businesses under a combined Hydrodec (UK) operating structure and brand; the combined business is expected to effectively underpin supply into the proposed 75 million litre first phase re-refinery whilst delivering a positive cash run rate by the end of 2015 as a stand alone business (excluding transaction costs and costs of restructuring). Early indications are that revenue, scale and efficiency savings will amount to more than £1.5 million on an annualised basis.
  4. Securing the technology: The company has recently filed the European Regional Phase of an International (PCT) application to protect the know how and operating developments in the transformer oil technology for a further 20 years as well as the potential technology innovations, which we have developed to upgrade yield and quality in re-refining lubricant oils. The merits of relocating the technology programme to the UK are under consideration with suitable locations and partners being sought. The formation of the Safety and Technology Committee last year also demonstrates Hydrodec's ongoing commitment to safety and good governance. Under Dame Mary's leadership, the Committee provides rigorous oversight of health, safety, environmental and quality matters and a robust challenge for Hydrodec's technology programme.
  5. Building out into the large lubricant oil re-refining market to be value accretive to Hydrodec shareholders: The Board remain focused on developing the UK's first purpose built used lubricant oil re-refinery producing Group II/II+ base oils by the end of 2017. The exclusive CEP technology licence de-risks the re-refining project and has been developed into a detailed front-end engineering design for a re-refinery complex in three phases: a 75 million litre lubricant oil re-refinery (2017); a 15 million litre transformer oil re-refinery (2018); and a second 75 million litre lubricant re-refinery expansion (2019). Associated technology and growth costs will be reviewed and managed as part of the project with a detailed business case, risk management and financing plan being developed with a significant portion of any financing of the project likely to be through external debt financing and/or third party participation. The Board will be reviewing detailed financing options during the next two quarters, which we will update shareholders on at the appropriate time.
  6. The company continues to review a number of other growth options in the core transformer oil business: This includes adopting the Australian business model in Europe or the US and continuing to de-risk any expansion through partnership, collaboration or integration along the value chain.

Adapted from press release by Rosalie Starling

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