Fluence Corporation Limited · ASX:FLC
Fluence — Emefcy Group — Merger or Acquisition (May 2017)
62 slides from Fluence's merger presentation, May 2017
Slide 1: Introducing Fluence: A Business Combination Between Emefcy Group and RWL Water
+ = INTRODUCING FLUENCE: A BUSINESS COMBINATION BETWEEN EMEFCY GROUP AND RWL WATER May 2017
Slide 2: Disclaimer (1/2)
DISCLAIMER (1/2) This presentation has been prepared by Emefcy Group Limited (ASX: EMC) (“EMC” or the “Company”) in order to provide a high level overview of the potential business combination of the Company and RWL Water LLC ("RWL Water"). It is only an introduction to the matters covered by the pr
Slide 3: Disclaimer (2/2)
DISCLAIMER (2/2) 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 pas
Slide 4: Contents
CONTENTS 1 Executive Summary 2 Overview of RWL Water 3 Strategic Rationale 4 Fluence = The Combined Group 5 Fluence Strategy 6 Merger Terms and Timetable 7 Appendix 4
Slide 5: (1) Executive Summary
(1) Executive Summary 5
Slide 6: Executive Summary
EXECUTIVE SUMMARY § Emefcy Group Limited (ASX: EMC) (“Emefcy” or the “Company”) is to merge with RWL Water LLC (“RWL Water” and together with Emefcy, the “Parties”), to create a global provider of water, wastewater and reuse solutions (the “Transaction”) § RWL Water's shareholder will receive 100.5
Slide 7: Executive Summary
EXECUTIVE SUMMARY § Approximately 100.5 million Emefcy shares will be issued to the RWL Water shareholder and a cash payment of US$10,000, implying an enterprise value for RWL Water of approximately A$85m1 (“Consideration Shares”) § The Consideration Shares are subject to a voluntary lock-up that pr
Slide 8: Fluence = Emefcy + RWL Water
FLUENCE = EMEFCY + RWL WATER Combination to create a leading, full service, decentralised water & wastewater solutions player Merged group will be renamed Entity ü Highly differentiated, high margin ü Proven execution capability with ü A global provider for decentralised potential products 7,000 ref
Slide 9: Pro Forma Capital Structure
PRO FORMA CAPITAL STRUCTURE MergeCo ownership outcomes MergeCo Shareholdings MergeCo Shareholdings (%) Existing Emefcy Shares MergeCo Pro-forma Shares Outstanding % of IC Shareholders (m) RWL Water Shareholder 8.2% (transaction consideration) Existing Emefcy Shares Outstanding1 257.1 66.0% Scrip Con
Slide 10: (2) Overview of RWL Water
(2) Overview of RWL Water 10
Slide 11: Overview of RWL Water
OVERVIEW OF RWL WATER Founded by Ronald S. Lauder in 2010, RWL Water is a private New York-based water, wastewater and reuse solutions company with more than 7,000 references with customers in more than 70 countries Overview of RWL Water § Founded by Mr Ronald S. Lauder in 2010, RWL Water is global
Slide 12: RWL Water Financials
RWL WATER FINANCIALS RWL Water is expected to generate US$90m in revenue in CY17 and is expected to improve gross margins as it continues to sell higher margin products US$'000 CY15 (Audited) CY16 (Audited) CY17 Forecast Revenue 54,879 60,932 90,000 Cost of sales (50,986) (49,307) Gross profit 3,893
Slide 13: RWL Water 2017 Revenue Guidance
RWL WATER 2017 REVENUE GUIDANCE RWL Water expected to grow revenue by ~47% to US$90m in 2017, with ~71% already secured under backlog and revenue as at end of April Guidance overview 2017 Revenue guidance build-up (US$m) § US$90m of total 2017 revenue guidance underpinned by quantity of % of Total 2
Slide 14: (3) Strategic Rationale
(3) Strategic Rationale ; ae zs bat
Slide 15: Compelling Strategic Rationale (1/2)
COMPELLING STRATEGIC RATIONALE (1/2) Fluence will combine Emefcy, a company adept at turning its breakthrough wastewater treatment innovations into field-proven products, with RWL Water, a company achieving high revenue growth by delivering competitive, optimised and timely solutions to customers gl
Slide 16: Compelling Strategic Rationale (2/2)
COMPELLING STRATEGIC RATIONALE (2/2) Combined group’s enhanced scale, platform, sales network, broad market reach and compelling differentiated product offering is expected to offer increased opportunities to drive growth initiatives ü The merger combines two highly complementary and culturally alig
Slide 17: (4) Fluence = The Combined Group
(4) Fluence = The Combined Group 17
Slide 18: Fluence = Emefcy + RWL Water
FLUENCE = EMEFCY + RWL WATER Combination to create a leading, full service, decentralised water & wastewater solutions player Merged group will be renamed Entity ü Highly differentiated, high margin ü Proven execution capability with ü A global provider for decentralised potential products 7,000 ref
Slide 19: Fluence = Emefcy + RWL Water
FLUENCE = EMEFCY + RWL WATER Today = + § Wastewater, water, desalination, waste-to energy, reuse & Water Markets § Wastewater recovery, food & beverage § Municipalities, hotels, resorts, off-grid § Municipalities, industrial, mining, oil & gas, power, food & Client Sector Base communities and golf c
Slide 20: Fluence = Differentiated Water Player
FLUENCE = DIFFERENTIATED WATER PLAYER Global Water Solutions for Decentralised Applications Wastewater, Desalination, Water Treatment Systems, Industrial, Food & Beverage, Oil & Gas, Waste-to-Energy Headquarters New York, USA Operating Entities Padova, Italy Mar del Plata, Argentina Jundíai, Brazil
Slide 21: Fluence = Integrated Range of Services
FLUENCE = INTEGRATED RANGE OF SERVICES Fluence to offer global clients an integrated range of services, from early stage evaluation, through design and delivery to ongoing support and optimisation of water related assets Fluence Services Capital Investment Asset Management Project Finance Assess Del
Slide 22: Fluence = Full Water Cycle Value Chain Access
FLUENCE = FULL WATER CYCLE VALUE CHAIN ACCESS Fluence to offer an integrated range of services across the complete water cycle, with the ability to offer clients a highly differentiated set of water solution products Source Water § Global water market represents a US$700 billion addressable opportun
Slide 23: Fluence = Leverage to Water Market Growth
FLUENCE = LEVERAGE TO WATER MARKET GROWTH Global packaged water and wastewater treatment market is estimated at US$13.31 billion in 2016 and is projected to grow at 10.4% between 2016 and 2021 to reach US$21.83 billion. Water Sectors: Global Market Size (US$ billion) ü Infrastructure (pipes, pumps,
Slide 24: Fluence = Experienced Multi-Sector Provider
FLUENCE = EXPERIENCED MULTI-SECTOR PROVIDER Fluence will be a differentiated, global provider of solutions in the areas of desalination, water, wastewater, waste-to-energy, reuse & recovery and food & beverage processing Client Sector Base Industrial Municipal Mining Oil & Gas Power Food & Beverage
Slide 25: Fluence = Differentiated Water Solutions Play
FLUENCE = DIFFERENTIATED WATER SOLUTIONS PLAY Fluence will be a water treatment solutions provider serving the distributed market that is able to provide custom and standard solutions using a variety of different delivery systems (packaged, containerised, mobile) Water Markets Served Desalination Wa
Slide 26: Fluence = Large Diversified Client Base
FLUENCE = LARGE DIVERSIFIED CLIENT BASE Fluence will be focused on decentralised, standardised water solutions for clients in the industrial, municipal, power, oil & gas, agriculture, mining and food & beverage sectors Details Historical and Existing Partners § Focused on decentralised solutions for
Slide 27: Fluence = World-Class Board and Leadership
FLUENCE = WORLD-CLASS BOARD AND LEADERSHIP Proposed Fluence Board of Directors and Leadership Team: Proposed Board of Directors Richard Irving Executive Chairman Robert Wale Rengarajan Ramesh Henry J. Charrabé Ross Haghighat Peter Marks Eytan Levy Non-Executive Non-Executive Managing Director & Non-
Slide 28: Fluence Board of Directors (1/2)
FLUENCE BOARD OF DIRECTORS (1/2) Merger combines Emefcy’s and RWL Water’s world-class board and management team expertise and technical, industry, commercial, development and operating skills, to implement Fluence’s strategy § US$3 billion in shareholder value created Richard Irving § Multiple start
Slide 29: Fluence Board of Directors (2/2)
FLUENCE BOARD OF DIRECTORS (2/2) In addition to adding Henry Charrabé to the merged board, RWL Water has the right to nominate one director to the board of the merged group. RWL Water is proposing to nominate Dr. Rengarajan Ramesh, the former Chief Technology Officer of GE Water & Process Technologi
Slide 30: Fluence Management Team
FLUENCE MANAGEMENT TEAM The merger combines two highly complementary management teams. Emefcy’s world-class product development team will work alongside RWL Water’s experienced execution and delivery team § Has over 25 years of building significant cross functional and international capabilities in
Slide 31: Fluence Pro Forma Balance Sheet
FLUENCE PRO FORMA BALANCE SHEET Emefcy Group Limited (IFRS) RWL Water LLC (US GAAP) Pro-forma Consolidated US$ Adjustments 31 December 2016 - Audited 31 December 2016 - Audited balance sheet (IFRS) Assets Cash and cash equivalents 22,870,848 10,867,809 - 33,738,657 Short term investments / deposits
Slide 32: Fluence Pro Forma Balance Sheet (continued)
FLUENCE PRO FORMA BALANCE SHEET (continued) Notes: The December 31, 2016 consolidated balance sheet pro-forma is based on the combined balance sheets of Emefcy, audited and accounted in accordance with IFRS (Column A) and RWL, audited and accounted in accordance with US GAAP (Column B), as if the me
Slide 33: Fluence Pro Forma Balance Sheet (continued)
FLUENCE PRO FORMA BALANCE SHEET (continued) Notes on RWL Water LLC's Balance Sheet: Short term investments / deposits During 2015, RWL Water Argentina received the Argentine peso (ARS) equivalent of US$95.5 million as an upfront payment on a contract with a customer in Venezuela. Certain transaction
Slide 34: (5) Fluence Strategy
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Slide 35: Fluence Strategy
FLUENCE STRATEGY To Gain Leadership Position in Decentralised Treatment Market § Focus on capitalising on the enormous US$15 billion China rural wastewater market Focus and expedite § Integrate Emefcy's and RWL Water's experience to expedite development of complete, standardised packaged treatment p
Slide 36: China Market Opportunity
1 CHINA MARKET OPPORTUNITY China represents an enormous US$15 billion opportunity over the next 5-7 years as the Government plans to increase proportion of remote Chinese villages with wastewater treatment from 10% to 70% § In February 2016, the Chinese Central Government released Most rural China’s
Slide 37: China Market Opportunity
1 CHINA MARKET OPPORTUNITY China Progress To Date Key Milestones1 § Local leadership and corporate structure in place Wuxi demo plant commissioned Done § Eight strong Chinese distribution partners signed CGGC, Jinzi, Sinorichen demo plants Q2/Q3 CY17 — Wuxi Guolian, CGGC, Jinzi, Sinorichen, Tianjin,
Slide 38: Sell Emefcy Products via RWL Water Channels
2 SELL EMEFCY PRODUCTS VIA RWL WATER CHANNELS § RWL Water has well-known innovators and strong wastewater treatment sales channels in the USA – largest market for Emefcy’s MABR & SUBRE products after China § RWL Water is strong in Latin America – teams on the ground in Argentina and Brazil, deployme
Slide 39: Cross Sell RWL Water Solutions
3 CROSS SELL RWL WATER SOLUTIONS § RWL Water’s anaerobic digestion technology is highly complementary to Emefcy’s MABR and SUBRE – in many cases the same customer could buy both § Often wastewater treatment plants also need reverse osmosis tertiary treatment to bring treated effluent to the highest
Slide 40: Grow Recurring Revenue Business Model
4 GROW RECURRING REVENUE BUSINESS MODEL § RWL Water has already won BOT projects – by standardising solutions such as Nirobox these achieve attractive IRR on recurring revenue Caribbean resorts: US$90 million/yr § RWL Water also has experience in operating long-term operation and opportunity mainten
Slide 41: (6) Merger Terms and Timetable
(6) Merger Terms and Timetable 41
Slide 42: Merger Terms (1/2)
MERGER TERMS (1/2) § Emefcy to merge by acquisition with RWL Water and will issue ~100.5m new Emefcy shares to RWL Water's existing shareholder (“Consideration Shares”) and a cash payment of US$10,000, implying an enterprise value of ~A$85m1 § The Consideration Shares are subject to a voluntary lock
Slide 43: Merger Terms (2/2)
MERGER TERMS (2/2) RWL Water § RWL Water is a privately held company: Shareholder § Entity(ies) affiliated with Mr Ronald S. Lauder controls 100% of the issued capital of RWL Water § President & CEO of RWL Water, Henry Charrabé to become the Managing Director & CEO of the combined group and will joi
Slide 44: Timetable
TIMETABLE Key Event Date Announcement of Transaction Friday, 26th May 2017 Despatch of Shareholders Explanatory Memorandum, Notice of meeting and Late May / early June 2017 Independent Expert’s Report Emefcy Shareholder Extraordinary General Meeting Late June / early July 2017 Transaction Completion
Slide 45: (7) Appendix
(7) Appendix 45
Slide 46: Appendix: Overview of Emefcy
Appendix: Overview of Emefcy 46
Slide 47: Overview of Emefcy
OVERVIEW OF EMEFCY Listed on the Australian Securities Exchange, Emefcy (ASX: EMC) is a world-class provider of innovative wastewater treatment solutions with a global reach Overview of Emefcy Market Data1,2,3 § Founded in 2008, Emefcy is an innovative wastewater Exchange Listing Details Ticker ASX:
Slide 48: Emefcy Solution (1/3)
EMEFCY SOLUTION (1/3) Emefcy’s proprietary treatment technology, Membrane Aerated Biofilm Reactors (“MABR”) MABR MABR Module Overview § MABR is Emefcy’s flagship product. It provides an off grid, scalable, low Holding tank (module) capex, low opex, odourless, decentralised wastewater treatment solut
Slide 49: Emefcy Solution (2/3)
EMEFCY SOLUTION (2/3) Emefcy’s proprietary treatment technology, Membrane Aerated Biofilm Reactors (“MABR”) 49
Slide 50: Emefcy Solution (3/3)
EMEFCY SOLUTION (3/3) Emefcy’s MABR solution uses 90% less energy than previous state-of-the-art treatment solutions § Emefcy's MABR plant has a 60% lower capital cost than a comparable MBR plant and enables just-in-time capex § MABR Operational & Maintenance costs are 65% less per annum than a comp
Slide 51: Manufacturing Capacity in Israel and China
MANUFACTURING CAPACITY IN ISRAEL AND CHINA Emefcy has a fully-functional manufacturing facility in Israel that has been in operation since 2015 and is due to commission its China manufacturing facility in H2 2017 Facility Status Throughput Other Highlights Image § Demonstrated solid operating perfor
Slide 52: New Products and Additional Markets
NEW PRODUCTS AND ADDITIONAL MARKETS Emefcy has several additional products in the pipeline which have been optimised to target specific end markets Product Market Need Status and Next Steps Target End Markets § Triples capacity, doubles margin potential for Available now § Resorts, midsize treatment
Slide 53: Emefcy Reference Sites (1/2)
EMEFCY REFERENCE SITES (1/2) Growing global reference sites continue to validate Emefcy’s low capex, low opex distributed wastewater treatment solutions across a range of different geographies and sectors Plant Status Need & Benefit Capacity Other Highlights Image Location § Proven long term Israel
Slide 54: Emefcy Reference Sites (2/2)
EMEFCY REFERENCE SITES (2/2) Further sites under construction in Africa to serve as important reference sites for customers throughout the developing world. Entry in to China market well advanced with China MoU parties at various stages Plant Status Need & Benefit Capacity Other Highlights Image Loc
Slide 55: Emefcy Chinese Distribution Partners
EMEFCY CHINESE DISTRIBUTION PARTNERS Emefcy's strategic partnerships cover an estimated 74% of the target rural market § (“CGGC”), Wuhan, Hubei province. CGGC is one of China's largest construction and engineering companies, which operates in over 100 China Gezhouba Group countries, with over 4,000
Slide 56: Emefcy Containerised Demo Plants
EMEFCY CONTAINERISED DEMO PLANTS Emefcy is focused on deploying and optimising its demo packaged plants in China and attaining the relevant municipal certifications Target Partner Location Commission Date Developments China Gezhouba Hubei, Hebei, Group Jingmen, Hubei Q2 2017 Corporation Guangdong Wu
Slide 57: Appendix: RWL Water Case Studies
Appendix: RWL Water Case Studies 57
Slide 58: RWL Water Case Study: Cyprus, Desalination
RWL WATER CASE STUDY: CYPRUS, DESALINATION Service Location Client Challenge Solution Technology Scale Project Value Timing Provided Cyprus Water City was Development experiencing an Ultrafiltration 8 months from Cyprus Seawater 22,000 m3 EPC Department increasingly and reverse EPC + O&M order to su
Slide 59: RWL Water Case Study: Chile, On-Site Water Treatment
RWL WATER CASE STUDY: CHILE, ON-SITE WATER TREATMENT Service Location Client Challenge Solution Technology Scale Project Value Timing Provided Treatment Multi-stage on- Chile Can system that site water 11 months from Rural Northern Collahuasi Water accommodate Chile (60km would enable treatment with
Slide 60: RWL Water Case Study: Italy, Waste-to-Energy
RWL WATER CASE STUDY: ITALY, WASTE-TO-ENERGY Service Location Client Challenge Solution Technology Scale Project Value Timing Provided EFC reactor, Order Aug Peroni facility Expanded biogas SABMiller 2010: required Granular Sludge desulphurisatio Italy Group Waste-to- 2,500 m3 Commissioning enhancem
Slide 61: RWL Water Case Study: Argentina, Wastewater & Reuse
RWL WATER CASE STUDY: ARGENTINA, WASTEWATER & REUSE Service Location Client Challenge Solution Technology Scale Project Value Timing Provided Offered a MBR External MBR 6-8 months to Plant needed to with the form Pentair receive PO, 4-6 increase possibility of Install and (Airlift) and months Coca-C
Slide 62: Key Contacts
KEY CONTACTS Richard Irving Eytan Levy Ross Haghighat Emefcy Group Limited Emefcy Group Limited Emefcy Group Limited Executive Chairman Managing Director & CEO Non-Executive Director +1 408 382 9790 +972 52 243 1921 +1 978 375 0085 richard@emefcygroup.com eytan@emefcygroup.com ross@emefcygroup.com H