eResearch | On May 5, Adelaide Capital hosted a webinar with five CleanTech companies. Among the participants were:
- Audrey Mascarenhas – President and CEO of Questor Technology (TSXV: QST), and
- Barry Po – President of Connected Solutions and Chief Marketing Officer of mCloud (TSXV: MCLD) ,
- Bill Crossland – President and CEO of Thermal Energy International (TSXV: TMG).
- Dan Blondell – CEO of Nano One Materials (TSXV: NNO),
- Ron Hozjan – VP Finance and Chief Financial Officer of Aureus Energy (private),
According to the EDC, estimates indicate that by 2022, the global CleanTech industry will be a $2.5 trillion industry. The time is right for Canadian companies to seize these opportunities.
In this session, one misconception addressed was that people associate CleanTech with additional costs that could reduce profit margins. McKinsey & Company have produced various studies quantifying the cost of carbon across various industries including a recent McKinsey & Company study on the oil & gas industry that pegged the cost of carbon in the $6 to $120 per ton of CO2 emissions. Often the higher cost of carbon numbers scare CEO’s into inaction.
However, most of the participants illustrated that the opposite was the case as their solutions provide environmental benefits and result in savings that outweigh the cost to implement.
Selective takeaways from the webinar are summarized below.
1. Questor
Questor designs, manufactures, and services waste gas combustion systems. Their patented solutions address air quality and greenhouse gas emission issues by providing a safe, reliable and regulatory-compliant waste gas combustion system that processes waste gases, methane, Volatile Organic Compounds (VOCs), Hazardous Air Pollutants (HAPs) and carcinogenic compounds, such as Benzene.
By implementing a Questor solution, oil companies can meet environmental emission standards mandated by State governments and increase oil production & revenue.
Revenue (2019) of $30.2 million and 3-year revenue Compounded Annual Growth Rate (CAGR) of 62% with Net Income (2019) of $7.4 million.
Government Regulations and the $750 million Emission Reduction Fund
According to Audrey Mascarenhas, the company is trying to be very proactive with the Canadian government’s $750 million methane reduction plan. Questor is well positioned to benefit as their solutions can help with emissions from the time the well is drilled, all the way to its processing, gathering, transportation, delivery to the consumer, and the final abandonment.
Questor sees a big client focus on Environmental, Social, and Governance (ESG). All its clients have targets or goals that they are setting around ESG. They see the Federal government’s $750 million fund as an example of ESG policies.
“It is really a move to push more adoption that actually helps us demonstrate, as Canada, that we are reducing emissions”, said Audrey Mascarenhas, CEO.
Digital Platform and COVID-19
Questor is developing a digital platform focused on emissions that will quantify emission reductions for their clients and guarantee a zero emissions site. Development is in partnership with industry participants and one of its partners, the Southern Alberta Institute, is very strong on utilizing drone technology for monitoring. As for COVID-19, Audrey affirmed, “It hasn’t slowed us down. If anything, the work is actually accelerating.”
2. mCloud
mCloud helps businesses reduce energy waste, maximize energy production and get the most out of critical energy infrastructure. The company focuses on using Artificial Intelligence (AI) to curb energy waste in buildings, maximize the energy production of wind turbines and extend the lifespan of critical energy infrastructure in a variety of different industries.
mCloud connects buildings and infrastructure to the internet (cloud) via remote sensors and currently has 7,000 buildings around the world connected to its Software-as-a-Service (SaaS) platform. Clients include Bank of America (3,300 branches) and Starbucks.
By signing up clients to multi-year subscriptions, mCloud can amortize the cost of an implementation over the same time period and this method reduces the upfront capital outlay.
Revenue (LTM to Sept. 30/2019) of $8.8 million and 1-year revenue Annual Growth Rate of 322% with EBITDA loss (LTM to Sept. 30/2019) of $14.8 million.
Continued Growth Across Various Industries
mCloud has seen a consistent uptake of its solutions across various industries. On April 28, mCloud announced that in the first quarter of this year, there was an 18% growth in total connected assets to over 48,000 from 41,000. The continued growth, quarter over quarter, illustrates how quickly mCloud can implement their solutions and connect buildings into their SaaS offering.
COVID-19
mCloud said that there is an opportunity for them because there are a lot of companies, restaurants and retailers who are concerned about reassuring their customers or employees that their establishments are safe to be in. This situation is an intersection between health & safety and CleanTech, as indoor air quality is important.
“It turns out that the same sensors that you’re using for indoor air quality measurement for energy efficiency will also be the same sensors that help make sure that you’ve got clean air and proper ventilation in your building to avoid people being infected by viruses like Covid-19”, said Barry Po.
This translates to potentially a big opportunity for mCloud because they can help these businesses make sure that they are reassuring their customer bases and at the same time providing them with better energy efficiency as a result.
3. Thermal Energy International
Thermal Energy International Inc is an established global supplier of proprietary water treatment, pollution control, energy efficiency and emission reduction solutions to the industrial and institutional sectors.
Their customers are large multi-nationals, primarily in Food & Beverage, Pharmaceutical and Healthcare. They help their customers save money and reduce costs by designing and implementing energy efficient solutions with payback in the 2-5 years range.
Revenue (F2019) of $21.1 million and 3-year revenue Compounded Annual Growth Rate (CAGR) of 19% with Net Income loss (F2019) of $0.4 million.
Backlog of Orders
When asked about backlog, Bill Crossland stated that the company does not hold a long backlog, as the solution delivery is usually within 6 months, and backlogs oscillate from 6 months to 18 months. Currently, backlog orders are around $8 million.
COVID-19
The company highlighted that two-thirds of its business is on-site designing and implementing turnkey solutions. Although that part of the business has slowed down, the other part continues to grow. At this time, the company is keeping its staff very engaged on project work and feels fortunate to have strong cash flows, cash balances and none of its clients have cancelled any of the projects, although some delays have happened.
4. Nano One Materials
Nano One Materials is a technology company with a patented and scalable industrial process for the production of low cost, high performance cathode materials used in lithium ion batteries.
The company is pre-revenue but working with partners, such as Volkswagen, to reduce the cost of materials but increase the longevity of lithium ion batteries. As Nano One progresses with its Research & Development, it continues to file patents, currently at 16.
Nano One is well funded; in February 2020, it completed a C$11 million equity financing.
Sustainability and Lithium
The company stated that industrial “clean” technologies require some materials in it. Moreover, lithium is quite a plentiful source on Earth, but the ability to convert lithium into a usable chemical is limited to a few sources.
“One of the key things to remember here is that lithium is not getting consumed in the battery but simply moving back and forth, you charge the battery and it is completely recyclable”, said the CEO, Dan Blondell.
Currently the company’s focus is on improving the overall performance of the battery as well as manufacturing cost reductions, such as the capital cost of equipment and reducing the manufacturing costs, including all of the inputs, such as power.
Post COVID-19 World
Dan Blondell, CEO, mentioned that there is an overall trend towards electrifying transportation and he believes this trend will continue even during the current health crisis.
All of these electric vehicles require energy, which would lead to more demand for batteries. He believes that everything is going in the right direction for the company. If the market continues to shift to more electric personal vehicles, it will result in more batteries being deployed, so good for business, but sitting idle in driveways.
“But from a sustainability point of view, I’d rather see those batteries being used more efficiently on a day-to-day basis”, pondered the CEO.
5. Aureus Energy Services
Aureus Energy is a private company that provides Water Management Solutions for the oil and gas Industries. It provides proprietary technology solutions that help clients reduce costs, enhance energy efficiencies, reduce emissions and conserve water. The technology allows for the treatment of 90% of the water through the process and reduce the need for chemicals.
One example given, referenced a 10-well fracking operation utilizing 500,000 barrels of water and Aureus reduced the customer’s cost by 30-40% percent by reusing the water repeatedly.
Aureus is a private company but mentioned that Revenue (2019) was over $40 million and raised $5 million in Q1/2020 for growth capital with no plans in the short term to go public.
Near-term Growth Potential
The company says the U.S. is behind Canada on water regulations and currently in various U.S. states, there is a water shortage. Ron Hozjan said that any kind of regulatory changes in the U.S. could significantly increase its revenue stream and that is why the company took their technology into the Permian a few months ago.
Aureus is a low-cost water treatment option in the Permian and New Mexico area. Aureus believes when oil & gas companies are operating in a low-price oil environment, companies focus more on reducing costs and, in some cases, they become interested in trying new technologies that might help.
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