Targeting Global Leadership in Decentralized Water & Wastewater Treatment Solutions - Fluence Corporation (ASX: FLC) Corporate Overview August 2019
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www.fluencecorp.com
Targeting Global Leadership in Decentralized
Water & Wastewater Treatment Solutions
Fluence Corporation (ASX: FLC)
Corporate Overview
August 2019
Executive Summary
• A leading water and wastewater treatment solutions
provider focused exclusively on the decentralized US$M
market
– Over 7,000 installations in over 70 countries
• Global water scarcity and contamination is real and
growing, with large centralized solutions not always
being viable
• Our decentralized solutions are CapEx efficient and
deploy rapidly – US$22B market by 2021(1) (one of US$M
the fastest growing segments)
• 2018 Revenue of US$101.1M (+74% vs. 2017(2)) and
Gross Profit US$34.5M(3)
• Backlog at the end of June 2019 of US$278M
• Targeting sustainably positive EBITDA by Q4 2019
(1) Source: Global Water Intelligence, Global Water Market 2017 Volume 1
(2) 2017 pro-forma (consolidation of 12 months of RWL water) 2
(3) Q4 and Full Year Audited Gross Profit include a $6.5M benefit of reversal of an onerous contract provision from prior years
Water Shortages: Widespread & Growing
Global Population
Water shortages affect 2.7B people now
2.4B people lack proper wastewater treatment now
An additional 2.1B people need upgraded treatment
Population growth from 7.4B in 2016 to 9.1B by 2050
60% increase in global food production by 2050
Manufacturing water demand will grow 400% by 2050
Experiencing Water Shortages
Sufficient Water Supply
Global water consumption to double by 2050
Results in 40% water deficit by 2030
Sources: WWF, Water Scarcity, 2014; US Geological Survey, 2015; UN World Water Development Report, 2017; Water for Food, UNCTAD, 2011. 3
Major Milestones and Growth
Momentum Q2 2019
FY 2018 • Largest booking in Brazil for
• Achieved organic $10M desalination project
revenue growth of with a repeat customer
Q3 2018 74% • First NIROBOX™ order in the
• First MABR sale to • >200% increase in US
Hubei ITEST Gross Profit
• First NIROBOX™ • Reduced G&A by
BOT signed in 30%
Q1 2018
Philippines
• Received award for
Decentralized • First commercial
Water & Aspiral™ sales in
Wastewater US and Philippines
Company of the FY 2019E
Q3 2017 Year ✓ Targeting ~20% YoY
• First NIROBOX™ Q1 2019 revenue growth of
Emefcy and
orders in Argentina Smart Products
RWL Water • Record quarterly
merged to form and Philippines bookings of $223M ✓ Increasing backlog of
projects with
Fluence • Awarded €165M
Q4 2018 Recurring Revenue
Corporation landmark Ivory Coast
(ASX:FLC) • Commencement of contract
✓ Goal to achieve
San Quintin Project sustainably positive
• Largest individual order EBITDA
Q2 2018 • Largest NIROBOX™ of 40 Aspiral™ units in
order ever from Egypt
• San Quintin China
(12 units)
project reaches • Official launch of SUBRE
Q4 2017 Financial Close • Announcement of
and first commercial
Opening of first $50M Generate
• Aspiral™ orders secured
MABR Capital debt facility
product suite • Total backlog of $267M,
manufacturing plant launch up 181% YoY 4
in Changzhou, China
Complete Suite of Water & Wastewater
Treatment Solutions
Water Wastewater Wastewater-to- Food & Beverage
Desalination Reuse
Treatment Treatment Energy Processing
✓ ✓
✓ ✓ ✓
✓ ✓
Custom
Engineered
Solutions
✓ ✓ ✓ ✓ ✓ ✓
5
Focus on Decentralized Systems
Urgent Need For Affordable, Fast-to-Deploy Solutions
Centralized Decentralized
The
vs.
Rationale
2/3 of CAPEX before the plant (piping, pumping) ✓ 1/3 of time-to-complete and lower, just-in-time CAPEX
Expensive to maintain and upgrade ✓ Capturing more value
No flexibility and scalability ✓ Scalable and customized to fit current needs
Mainly for well developed urban areas ✓ Easy to upgrade and relocate
Pre-engineered plug and play • High margins
solutions • Fast delivery and installation
• Scalability
Why
Fluence
Wins Proprietary smart technologies • High quality effluents
and modular approach • Lower energy and OPEX
• Low maintenance needs 6
Fluence Growth Areas
Reporting Segment Products
Smart Products Solutions Aspiral, SUBRE, NIROBOX
BOOT
Recurring Revenue and
Complete range of O&M and
Aftermarket Services
Aftermarket offerings
Custom-Engineered Solutions Waste-to-Energy, Large projects, EPC
Water and wastewater treatment solutions for customers across the
industrial, commercial and municipal sectors
7
Growth Strategy
• Leading suite of Smart Products Solutions for underserved
decentralized water and wastewater markets worldwide
• Leverage global Custom Engineered Projects reputation on
decentralized plant sales enabling more repeat orders, faster delivery,
higher margin
• Growing BOOT pipeline funded by non-dilutive debt finance increases
recurring revenue
• Target China’s wastewater treatment market with MABR-based
Aspiral™ Smart Packaged plants to drive rapid growth
• Leverage partners to accelerate pipeline, bookings and revenue growth
• Maintain healthy top-line growth
• Increase total gross margin blend
• Target sustainably positive EBITDA by Q4 2019
8
Smart Products Solutions
Packaged MABR wastewater treatment Packaged potable water MABR wastewater treatment solutions
solutions treatment solutions for existing or new plants
5,000-200,000 GPD raw municipal 130,000-400,000 GPD Seawater, Fresh 0.15-25 MGD raw municipal sewage
sewage water, Brackish water
Stricter regulations Water shortages Stricter regulations
Market Decentralization, Energy efficiency Decentralization, Energy-efficiency Process intensification
Drivers: Increased urbanization, New-build Increased urbanization, New-build Outdated infrastructure
infrastructure infrastructure Energy efficiency
Plants USVI, Stanford (Title 22 Plants globally including Egypt, South Ma’ayan Zvi, Israel
Market
validated), Oregon, Texas, Argentina, Africa, Philippines, Caribbean, Significant and growing pipeline
Adoption: Ecuador, China, Philippines, Israel Mexico, South America Commercial launch Q1 2019 and first
commercial contract in Jamaica
9
Smart Products Solutions:
Accelerating Activity in China
Experienced local Network of Established local Reference sites in
sales teams strategic partners manufacturing multiple provinces
First Aspiral™
Repeat order Plant in
through Jinzi Hunan Exclusive Bulk order of 35 Largest
First Aspiral™ for the Local Province Jinzi secures partnership Aspiral™ units under individual order
plant in Henan Government via partner third contract agreement with exclusive partnership of 40 Aspiral™
Province via of Zhenfeng Hunan in Guizhou ITEST in Hubei agreement with ITEST units from
partner QSY County Kaitian Province Province in Hubei Province ITEST
Sep Nov Mar May Jun Jul Oct Nov Dec Feb Mar
2017 2017 2018 2018 2018 2018 2018 2018 2018 2019 2019
First Framework First Aspiral™ Tripartite First sale via Sale of 6 Additional
production agreement for 6 Plant in framework partner Hubei Aspiral™ units Aspiral™ plants
of Aspiral™ Aspiral™ units via Beijing area agreement for ITEST. via partner in Hebei and
modules in partner Jinzi via partner Aspiral™ in 3 Shipped, Zhongzi Huaze Zhejiang
China Glory Land districts in delivered and in Jilin Province Provinces
Yiyang City installed in 6
weeks
26 Partnerships covering 16 Provinces and 26 Installations
10Recurring Revenue:
Build Own Operate and Transfer (BOOT)
Complete Water and Wastewater Solutions Recurring High Margin Revenue
• Fluence’s Aspiral™ and NIROBOX™ products are
ideal for BOOT projects
→ Footprint, energy efficiency, reliability, low
maintenance and quality output
→ Using in-house proprietary technologies
enhances margin
• Uses Fluence’s equity to inject its own equipment
• Ability to offer complete water/wastewater reuse
solutions
• BOOT agreements offer lucrative, recurring
revenue for many years with higher valuations
Multi-year
Recurring Revenue
Water Treatment Wastewater Treatment Capex
11Recurring Revenue:
BOOT Financing Facility in Place
• Combination of equity and debt: Equity
Partner
– 70% non-recourse financing (Fluence)
– 30% equity, and optional minority Dividend Equity
Lender
partners
(finance Water Client
Loan
partner +
– Fluence as EPC and O&M Contractor Fluence) Project
Principal & Company Payments
• Secured a US$50M non-recourse debt interest
facility from Generate Capital in 2018 (SPV)
Construction Payments
– First drawdown of $2m in March 2019 Payments
Services
Operation
EPC
• Secured backlog of US$14.7 million of run- and
(Fluence + Maintenance
rate annual billings after construction of 3 contractors)
(Fluence)
projects is completed
12Custom-Engineered Solutions:
Solving Water and Wastewater Challenges
Industrial Water Packaged Wastewater
Wastewater-to-Energy Aeration
Treatment Treatment
Industrial Wastewater Food & Beverage
EPC Projects Industrial Process Water
Treatment Processing
Bespoke solutions designed and built for customers worldwide
13Custom-Engineered Solutions:
Landmark Project Win in Ivory Coast
• €165M commercial agreement with Federal
Government of Ivory Coast, signed on February
26th, 2019
• Turnkey supply of custom-engineered solution for
150,000 m3/day surface-water treatment plant
Water from Lagune Aghien will be treated to supply
• The plant will treat freshwater from the naturally potable water for Abidjan
contaminated Lagune Aghien and provide potable
water to the city of Abidjan (4.7M population)
• Fluence’s scope: water intake and treatment, bulk
water piping, water towers and infrastructure
• Project finance guaranteed through Export Credit
Agency (ASHRA, Israel) and financed through Israel
Discount Bank
• Financial Close and project commencement
expected later 2019
• Contract revenue expectations: US$20M in 2019,
US$80M in 2020, remainder in 2021; all subject to CAD depiction of plant location and layout
achievement of Financial Close by Q3 2019
14Fluence Growth Areas:
Targeted Revenue Growth
Smart Products Solutions
Aspiral, NIROBOX, SUBRE
2018: $22M
2019 target: $26M
$101M Recurring Revenue
… BOOT projects, Aftermarket
$58M Custom-Engineered Solutions
Large projects
Wastewater-to-energy
Water purification
2017 2018 Future
Target
Revenue
Mix
Shift towards higher margin proprietary solutions and recurring revenues
15Fluence Growth Areas:
Target Growing Gross Margin
Increasing
Gross
Margin
Large Smart Proprietary Proprietary
Project Packaged Smart Packaged Product
Plant Plant
Example: >EUR165M NIROBOX™ Aspiral™ SUBRE
(Ivory Coast
project)
16Outlook for Continued Growth in 2019
• ~20% year over year growth of
Smart Products from $22M to $26M
• Increase backlog of projects with
Recurring Revenue
• Achieve sustainable positive
SUBRE installation, Ma’ayan Zvi, Israel
EBITDA by Q4 2019
Fluence MABR manufacturing plant, Changzhou, China
17KEY CONTACTS
Key Contacts
Adam Hinckley
VP Investor Relations
+1 914 998 3304
ahinckley@fluencecorp.com
Ronn Bechler
Market Eye
+61 400 009 774
Ronn.Bechler@marketeye.com.au
18Appendix
Corporate Overview
Capital Structure as at 31 July 2019 ASX: FLC Top Holders ASX: FLC 31 July 2019 Shares (M) % of FLC
Ordinary Shares on Issue 537.4M RSL Investments Corporation and
157.2 29.3
RSL Capital, LLC
Options on issue 44.6M
Share Price A$0.47 Watermark Services, LLC 47.8 8.9
Undiluted Market Capitalization A$252.6M Pond Ventures Nominees and
37.3 6.9
Richard Irving
Cash at 30 June 2019 $15.6M
Plan B Ventures 20.5 3.8
External debt (except non-recourse
$0.8M
project debt) Other top 20 108.6 20.2
Liquidity (average shares traded per day
650,377 Top 20 total 371.4 69.1
for the 3 months to 31 July 2019)
Notes:
• Over 58% of Fluence shares held by US entities (1)
• Generate Capital $50M non-recourse debt facility,
of which, only $2M has been drawn
1) As of April 1, 2019 20World-Class Board and Leadership
Management Team Board of Directors
Henry J. Charrabé Tony Hargrave Richard Irving Henry J. Charrabé
Managing Director & COO Chairman Managing Director &
CEO • Over 30 years’ water • 35 years’ tech and CEO
• Former CEO of RWL Venture Capital • Former CEO of RWL
industry
Water experience Water
management
• Over 15 years’ water • US$3B value • Over 15 years’ water
experience
industry experience created industry experience
Francesco Fragasso Erik Arfalk Rengarajan Ramesh Ross Haghighat
CFO CMO Non-executive Director Non-executive Director
• 20 years’ finance • Over 15 years’ • Former CTO of • 30 years’ tech and
experience in marketing strategy GE Water Venture Capital
renewable energy experience • 30 years’ operating, experience
and water acquisition and tech • US$4B value created
treatment experience
Ronen Schechter Ilan Wilf Arnon Goldfarb Paul Donnelly
CTO Global VP Sales Non-executive Director Non-executive Director
• Co-Founder of
• Over 22 years’ water • Over 30 years’ • Over 30 years’
Emefcy
industry experience industrial international
• Over 25 years’
• Former VP Sales of experience financial services
water technology
Emefcy experience
experience
Adam Hinckley Spencer D. Smith Peter Marks Ross Kennedy
VP Investor Relations & CLO Non-executive Director Company Secretary &
Project Finance • Over 15 years of Advisor to the Board
• 15 years’ as an corporate law and • 30 years’ capital • Over 30 years’
investor, advisor M&A experience markets experience experience as
and sell-side • Former GC of RWL Company Secretary
analyst Water
21Global Footprint Diversifies Revenue
Leverages an optimal mix of sales channels (integrators, operators,
representatives, distributors, financial partners) across the key water markets
22Large Diversified Customer Base
Historical and Existing Customers and Partners
Water and wastewater treatment solutions for customers across the
industrial, commercial and municipal sectors
23How MABR Works
MABR - Inspired by Nature
1. Air breathed in
1. Air passes through
O2
2. Oxygen
Semi-permeable membrane dissolves naturally
Biofilm into wastewater
through
membrane
2. Oxygen dissolved
naturally into blood 3. Blood (with
through lung material oxygen) flows out
3. Wastewater picks up
oxygen to digest waste 24Fluence’s MABR validated for California Water
Recycling Standard by CR2C at Stanford
• Fluence MABR demonstration unit installed Fluence MABR plant at CR2C in Stanford
since January 2018 at the Codiga Resource
Recovery Center (CR2C) at Stanford University
• CR2C’s research validates compliance of
Fluence’s MABR technology with California’s
Title 22 water recycling legislation
• Title 22 is among the strictest water and
wastewater treatment standards for water and
wastewater recycling and reuse in the United
States. Additional testing parameters included
enhanced nutrient removal in the form of “Total
Nitrogen”.
• Successful tests conducted on higher “… the system achieved the objectives of mean Total
concentration of nitrogen and phosphorous Nitrogen concentrations below 10mg/L and met T22
than typical wastewater requirements as measured by Turbidity and Total
Coliform in the Tertiary Effluent”
- CR2C Research Report
Research report available at: https://cr2c.stanford.edu/resources/software 25Disclaimer This presentation has been prepared by Fluence Corporation Limited (ASX: FLC). All currencies quoted as “$” are US$ unless otherwise specified. This presentation may contain forward-looking statements which are identified by words such as ‘may’, ‘could’, ‘believes’, ‘estimates’, ‘targets’, ‘expects’, or ‘intends’ and other similar words that involve risks and uncertainties. These statements are based on an assessment of past and present economic and operating conditions, and on a number of assumptions regarding future events and actions that, as at the date of this presentation, are expected to take place. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and other important factors many of which are beyond the control of the Company, its Directors and management. Although the Company believes that the expectations reflected in and the assumptions underlying the forward looking statements included in this presentation are reasonable, readers are cautioned not to place undue reliance on them, as the Company cannot give any assurance that the results, performance or achievements covered by the forward-looking statements will actually occur. This presentation should not be considered as an offer or invitation to subscribe for or purchase any shares in FLC or as an inducement to make an offer or invitation to subscribe for or purchase any shares in FLC. No agreement to subscribe for securities in the FLC will be entered into on the basis of this presentation or any information, opinions or conclusions expressed in the course of this presentation. This presentation is not a prospectus, product disclosure document or other offering document under Australian law or under the law of any other jurisdiction. It has been prepared for information purposes only and does not constitute an offer or invitation to apply for any securities, including in any jurisdiction where, or to any person to whom, such an offer or invitation would be unlawful. To the maximum extent permitted by law, the Company and its professional advisors and their related bodies corporate, affiliates and each of their respective directors, officers, management, employees, advisers and agents and any other person involved in the preparation of this presentation disclaim all liability and responsibility (including without limitation and liability arising from fault or negligence) for any direct or indirect loss or damage which may arise or be suffered through use of or reliance on anything contained in, or omitted from, this presentation. Neither the Company nor its advisors have any responsibility or obligation to update this presentation or inform the reader of any matter arising or coming to their notice after the date of this presentation document which may affect any matter referred to in the presentation. Readers should make their own independent assessment of the information and take their own independent professional advice in relation to the information and any proposed action to be taken on the basis of the information. 2018 consolidated financial figures presented on IFRS basis are audited, and after reclassifications for non-cash foreign currency adjustment relating to hyperinflation accounting in Argentina (IAS29). 26
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