CALIX LIMITED — Capital/Financing Update 2020

Mar 29, 2020

30 March, 2020

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ASX Announcement

Calix-led Consortium Executes Final Project Agreements for “LEILAC-2” CO2 Capture Facility

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Highlights:

• Calix’s Low Emissions Intensity Lime And Cement (“LEILAC”) technology to be scaled-up to Demonstration capacity in “LEILAC-2” project in Europe

• LEILAC-2 Project Consortium includes HeidelbergCement, Cimpor, Engie, IKN and Lhoist

• In December 2019, the LEILAC-2 Project achieved €16m in funding from the EU’s Horizon 2020 Grant Scheme, subject to finalisation of project agreements

• As of 30[th] March, 2020, all project agreements have now been executed between the parties

• The Project will be launched April 7[th] , will run to end 2024, and will involve the design, construction and operational testing of a 100kTpa CO2 capture facility at a working cement plant in Europe

• Calix has recruited an experienced Project Management Executive into the Calix Executive Management Team to run the LEILAC-2 Project

• More CO2 is emitted from cement production than any other industry. Many countries, regions, and companies are now pledging net-zero CO2 emissions by 2050, increasing the need to accelerate the deployment of CO2 mitigation technologies such as LEILAC.

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Sydney, Australia | March 30, 2019 – Multi-award-winning Australian technology company Calix Limited (ASX: CXL) (“Calix” or “the Company) is pleased to announce that final project agreements have been executed for the scaleup of its Low Emissions Intensity Lime and Cement (“LEILAC”) technology for capturing unavoidable CO2 process emissions during the production of lime and cement. Calix is also pleased to announce the appointment of an experienced Project Management Executive, Emma Bowring, to lead LEILAC-2, as part of the Calix Executive Management Team.

The execution of the project agreements between Calix, the project consortium partners, and the European Commission releases the first tranche of some €16m in grant funding for the project. An additional €18m in cash and in-kind has been pledged from the consortium’s industrial partners to complete the €34m project budget.

The LEILAC-2 Demonstration plant will be a 4-fold scale-up of the LEILAC-1 Pilot plant, currently undergoing operational testing at HeidelbergCement’s Lixhe cement production facility in Belgium. Early results from the pilot have proven the technology concept, and work continues on the gradual increase in operational throughputs, temperatures and durability testing in a test program that will run to end 2020. The latest results are outlined below.

Very importantly, all IP, both existing and developed as part of LEILAC-2, associated with Calix’s core Direct CO2 Separation technology, will continue to be owned by Calix.

Jan Theulen, Director Alternative Resources for HeidelbergCement, Calix’s key industrial partner in the consortium, said “ As we need techno-economical improvements in Carbon Capture technologies to enable the path towards Carbon Neutrality by 2050 which we as HeidelbergCement are committed to, projects such as LEILAC are mandatory to make this happen. Therefore we are keen to take our part of the responsibility in the LEILAC consortium to bring LEILAC-2 to a success!”

LEILAC-2 will be officially launched on April 7[th] , 2020. Further details on the project, its participants and objectives are also outlined below.

A Renewed Focus on CO2 Mitigation in Europe, and Globally

In 2018, the price of a European Emissions Trading Scheme (“ETS”) CO2 Allowance jumped from around €5 per tonne, where it had been trading for about 6 years, to around €20 per tonne, in response to the European Union’s commitment to an “ETS Phase 4” emissions cap reduction of 2.2% year-on-year from 2021.

During 2019, this step-change in price was confirmed as the new normal, with sustained trading in CO2 emissions averaging around €25 per tonne throughout the year. On top of this “cornerstone” CO2 mitigation mechanism (which during 2019 caused many industries to take CO2 emissions seriously for the first time) many EU countries, and ultimately the EU itself, began legislating net zero CO2 emissions with target dates ranging from 2050 (the majority) to as early as 2030 (Norway).

Furthermore, in May 2019, HeidelbergCement also committed to net zero CO2 emissions by 2050, the first cement company to do so.

The finance industry has also started to shift, with firstly “Green” institutional funds calling on similar commitments, and then perhaps most tellingly mainstream Managed Funds, such as BlackRock in early 2020, placing environmental sustainability at the core of its future investment decisions, as well as announcing the divestment of $500m in coal investments. For the first time in its 15-year history, the World Economic Forum’s 2020 annual risks report found that

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the environment filled the top five global risks (in terms of likelihood and severity of impact) as concerns that are likely to have a major impact over the next decade.

Into this space, carbon capture and storage (CCS) has been again recognised as a key mitigation strategy, given the pace of change required, and especially for the “hard to de-carbonise” industries such as lime and cement. The EU Green Deal aims to make Europe the first climate-neutral continent by 2050. Its industrial strategy to drive this green transformation requires the decarbonisation and modernisation of energy-intensive industries such as cement, and it has been acknowledged that CCS is the only method of addressing unavoidable industrial process emissions at the scale required. The LEILAC technology may be critical in helping achieve this goal.

The last two years has thus seen CO2 emissions move from a vague potential liability into a significant real liability, CO2 mitigation move from a nice-to-have marketing piece to a must-have business strategy, and the owners of businesses (either directly as shareholders or via managed funds) demand appropriate risk management of CO2 by those business.

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 Calix MD, Phil Hodgson addressing The Innovation in Industrial Carbon Capture Conference in Maastricht which gathered nearly 200 experts from industry, research and government to discuss the role in CCUS in a content of climate emergency – January 2020.

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Update on LEILAC-1 Pilot Plant

The latest results from the LEILAC-1 Pilot Project were shared with the European Commission, Industry, University and Research Institutes, other CO2 mitigation projects and other stakeholder groups at the recent invitation-only Innovation in Industrial Carbon Capture Conference in Maastricht, The Netherlands.

The conference was attended by over 200 delegates and was organised and hosted by the LEILAC project, and included a plant tour of the LEILAC-1 facility located nearby at HeidelbergCement’s Lixhe Cement plant.

Calix CEO and MD Phil Hodgson opened the conference and hosted Day 1, and with the Calix LEILAC team shared and discussed the latest LEILAC-1 results during various workshops.

Since commissioning during mid-2019, experimental runs have proven the LEILAC-1 technology concept with lime and cement meal produced and successfully separated from a high purity CO2 stream. The latest LEILAC-1 results are:

• Throughputs have now been gradually increased to 70 % of design capacity

• “Calcination” (extent of the reaction of limestone to lime) of around 75% was achieved at this throughput (working towards an end project target of around 80% for cement, 95% for lime)

• Early testing on the surface area and component properties of the cement and lime have indicated suitability for downstream processing into clinker and quicklime

• No issues have emerged yet with the reactor tube in terms of fouling, loss of performance etc

The LEILAC-1 engineering team continue to refine the process with modifications to improve powder transport and gas separation at the base of the reactor, which will help as the reactor is pushed to its design operating parameters.

The next steps of the testing phase are:

• Continue the careful increase in operating temperature runs to increase throughput and calcination levels to design

• Continue the testing of cement and lime produced by LEILAC-1 to confirm suitability in downstream processes to produce clinker and quicklime

• Gradually increase the run-times to continue to prove operational robustness over weeks and months of operation

The LEILAC-1 pilot was scheduled to run until the end of 2020, but with LEILAC-2 it is planned to be retrofitted with electrical elements to investigate the electrification and load-balancing potential of the technology.

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 LEILAC-1 Project at HeidelbergCement’s Lixhe Cement Plant in Belgium

LEILAC-2 Commercial Demonstration Project

The Consortium: The LEILAC-2 Commercial Demonstration Project consortium consists of industrial partners, universities, research institutes and various statutory organisation, and will be led by Calix, co-ordinated through our Calix-Europe subsidiary in France.

Participant	Participant organisation name	Country
1 (Coordinator)	Calix (Calix – Europe)	France
2	HeidelbergCement AG	Germany
3	IKN (IKN GMBH INGENIEURBURO-KUHLERBAU-NEUSTADT)	Germany
4	CERTH (ETHNIKO KENTRO EREVNAS KAI TECHNOLOGIKIS ANAPTYXIS)	Greece
5	BGR (BUNDESANSTALT FUER GEOWISSENSCHAFTEN UND ROHSTOFFE)	Germany
6	Polimi (POLITECNICO DI MILANO)	Italy
7	Royal Belgian Institute of Natural Sciences - Geological Survey of Belgium	Belgium
8	ENGIE Laborelec (BELGISCH LABORATORIUM VAN DE ELEKTRICITEITSINDUSTRIE LABORELEC CVBA)	Belgium
9	Port of Rotterdam (representing PORTHOS) (HAVENBEDRIJF ROTTERDAM NV) (not receiving funding)	Netherlands
10	Calix Limited (not receiving funding)	Australia
11	CIMPOR-INDUSTRIA DE CIMENTOS SA	Portugal
12	LHOIST RECHERCHE ET DEVELOPPEMENT SA (not receiving funding)	Belgium

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Key Objectives:

The LEILAC-2 Project key objectives are:

• Construction of a Demonstration plant that will aim to capture around 20% of a full-scale cement plant’s process CO2 emissions (100,000 TPA of CO2), equivalent to 100% of a large lime kiln’s process emissions, for minimal energy penalty other than compressing the CO2.

• Successful demonstration of up to a four-times scale-up of the technology for around twice the capital cost of the LEILAC-1 facility, confirming cost-efficient CO2 capture for the lime and cement industries.

• Prove the effective retrofit and full integration of the technology into a cement plant’s operations.

• Demonstrate the efficiency and stability of the complete cement-kiln process and high-quality clinker output when integrating Calix’s CO2 separation technology.

• Showcase a modular, replicable, retrofit design for accelerated commercial deployment that delivers flexible scalability for varying operation size and configurations, agility to adopt the technology and decrease emissions progressively, and a broad range of options for captured CO2 utilisation and sequestration. These factors can eliminate the need for large capital expenditure and significant asset write-downs and accelerate the adoption of the technology.

• Demonstrate the operation of direct separation kilns for lime and cement using renewable sources of energy such biomass and renewable sources of electricity, bringing the running of the plant to net zero CO2 emissions and enabling a move away from high-carbon emitting gas or coal-fired plants.

• Enable lime and cement kiln processing plants with a cost-efficient solution to effectively use intermittent renewable energy sources, with rapid ramp up/down rates leveraging electricity and load balancing techniques for grid stability.

Commercialisation Strategy

Calix’s commercialisation strategy for its LEILAC technology involves proof of Demonstration at the LEILAC-2 scale by 2025, after which license or royalty arrangements will be sought from those wishing to utillise the technology, delivered via engineering and technology partners. If fully proven at Demonstration scale, LEILAC-2 should have significant cost and operating advantages over competing technologies such as amine CO2 capture (currently being proven at similar scale to LEILAC-1) and oxyfuel (has not yet been piloted).

If the entire cement and lime industries were to de-carbonise using LEILAC technology, the total addressable market (TAM) associated with a 2% royalty on wholesale clinker or lime prices has been estimated[(1)] at $10.8b pa. We acknowledge TAM is a theoretical concept, nonetheless the opportunity appears to be substantial.

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Calix Appoints Experienced Project Manager to Lead LEILAC-2 Project

Calix is also very pleased to announce the appointment of Emma Bowring to the role of LEILAC-2 Project Manager, as well as joining the Calix Executive Management Team.

Emma has over 15 years’ experience in project management and business development with Sinclair Knight Merz / Jacobs Engineering Group, having worked across a number of industries including international development, infrastructure, oil and gas, health, justice and commercial sectors.

Originally from Australia, Emma has lived and worked around Australia, the Pacific Islands, Asia, Russia and now the United Kingdom. Notably, as project manager, Emma successfully delivered a complex AUD50m Engineering, Procurement, Construction Management (EPCM) project involving construction and capacity building programmes in the Solomon Islands. Teams managed included a PMO (Project Management Office) support team in Malaysia, the partner organisation

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in Melbourne, head office team in Sydney, various design / engineering teams in Australia and a large-in country delivery team in the Solomon Islands.

Emma admits to loving the challenge of working virtually with a focus on developing capability and enhancing team performance. As a mother of two children, ages eight and 12, Emma says life is busy! In her free time Emma likes to keep active either in the gym, on the rugby pitch, snowboarding or entering obstacle races.

On joining Calix, Emma said "I love working on projects that make a difference and contribute socially and environmentally. This, combined with the challenge of managing remote teams and complex international projects, is what brought me into Calix."

Authorised for release to the ASX by:-

Darren Charles Company Secretary Calix Limited 9-11 Bridge Street Pymble NSW 2073 Ph +61 2 8199 7400

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About Calix

Calix is a team of dedicated people developing a unique, patented technology to provide industrial solutions that address global sustainability challenges.

The core technology is being used to develop more environmentally friendly solutions for advanced batteries, crop protection, aquaculture, wastewater and carbon reduction.

Calix develops its technology via a global network of research and development collaborations, including governments, research institutes and universities, some of world’s largest companies, and a growing customer base and distributor network for its commercialised products and processes.

Because there’s only one Earth – Mars is for Quitters.

Website: https://www.calix.global/ Twitter: @CalixLimited Youtube: CalixLimited

For more information:

Phil Hodgson Managing Director and CEO phodgson@calix.com.au +61 2 8199 7400

Darren Charles CFO and Company Secretary dcharles@calix.com.au +61 2 8199 7400

Simon Hinsley Investor Relations simon@nwrcommunications.com.au +61 401 809 653

Michelle Taylor

Media

Michelle_Taylor@recognition.com.au +61 2 9252 2266

1. All Total Addressable Market data are theoretical estimates from Frost and Sullivan as per Calix Limited Prospectus 19/7/2018 https://www.asx.com.au/asxpdf/20180719/pdf/43wmn3h1znxnsz.pdf

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