ENVIRONMENTAL CLEAN TECHNOLOGIES LIMITED. — Investor Presentation 2014

May 29, 2014

EGM – General Update

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30
May
2014

Disclaimer

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Environmental
Clean
Technologies
Limited
has
taken
all
reasonable
care
in compiling
and
producing
the
informaAon
contained
in
this
presentaAon.
The Company
will
not
be
responsible
for
any
loss
or
damage
arising
from
the
use of
the
informaAon
contained
in
this
presentaAon.
The
informaAon
provided should
not
be
used
as
a
subsAtute
for
seeking
independent
professional advice
in
making
an
investment
decision
involving
Environmental
Clean Technologies
Limited.
Environmental
Clean
Technologies
Limited
makes
no representaAon
or
warranty,
express
or
implied,
as
to
the
accuracy,
reliability, or
completeness
of
the
informaAon
provided.
Environmental
Clean Technologies
Limited
and
its
respecAve
directors,
employees,
agents
and consultants
shall
have
no
liability
(including
liability
to
any
person
by
reason of
negligence
or
negligent
misstatement)
for
any
statements,
opinions, informaAon,
or
maHers,
express
or
implied
arising
out
of,
contained
in
or derived
from,
or
any
omissions
from
this
presentaAon.

Agenda

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� India
update

– Strategy
overview – Manufacturing
&
Engineering
update – Commercial
DemonstraAon
Plant
status

� Year
in
review

• PresentaAon
  from
  YES
  Bank

Why India? Why now?

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� PopulaAon 1.22
bn
(July
2013
est)

[Jul’14 est 1.24bn – growth ~20m people] � Energy 880
bn.kwh
(vs
Aus
242
bn.kwh)
2010
est [985.4 bn.kwh in 2011]

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� Coal
imports

Increasing
shorSalls may
strand
over
20GW of
new
generaAon capacity
in
India
in
the coming
year. (>$20bn
worth
of capital
assets
lying
idle)

EXTRACT from EGM, August 2013:

India update -­‐ Strategic overview

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STEEL
ENERGY CriAcal
DomesAc
India’s
Needs
Missing
ShorSall
Ingredient
Coldry Matmor
India’s
Advantages
Low
Cost
FabricaAon
&
Suitable
Quality
Engineering
Delivery
to
the
World
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� Coldry
DemonstraAon ObjecAve;
Twin Strategies

• India
  Deployment

• Pressing
  commercial
  need

• Suitable
  logisAcs

• Lower
  cost
  pathway

• Manufacturing

• Very capable
  engineering base

• Low
  cost

• PotenAal
  “Supplier
  to
  the world”

Manufacturing & Engineering update

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� ECT
ran
a
selecAon
process
to
determine
the
best
EPC
partner to
support
Coldry
demonstraAon
in
India – IniAally
a
wide
selecAon
of
top
Aer
EPC
firms

– Progressive
narrowing

• Culminated
  in
  appointment
  of
  Thermax

• Announced
19May

• Thermax
  are:

– An
Engineering
firm,
specialising
in
CombusAon,
Power
generaAon, Waste
heat
recovery,
etc – A
Manufacturing
company,
capable
of
fabricaAng
or
sourcing
all equipment
needed
for
a
wide
range
of
plants,
including
Coldry – A
ConstrucAon
management
company
for
all
their
projects

Commercial DemonstraHon Plant status

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• Core
  designs
  complete

• Lead
  candidate
  work
  in
  advanced
  stage
  (NLC)

– Technology
assessments
complete

• EPC
  selected
  (Thermax)

• IntegraAon
  engineering
  underway

• Project
  Feasibility
  study
  report
  in
  progress

• AddiAonal
  project
  candidates
  in
  development – Upgrading
  at
  mine
  mouth
  power
  projects
  in
  India

• – Review
  of
  commercial
  potenAal
  in
  Australia
  with
  newly demonstrated
  Coldry
  capital
  cost
  structure

The year so far

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• Your
  company
  has

• Overcome
  the
  largest
  challenge
  of
  Coldry
  technology
  demonstraAon and
  deployment
  through
  capital
  cost
  reducAon

  • Latrobe
    CDP
    was
    esAmated
    to
    cost
    ~$A60m

  • Current
    India
    CDP
    projecAons
    are
    ~25%
    of
    that
    -­‐
    $45m
    reducAon

– Established
a
global
Coldry
plant
manufacturing
basis
to
deliver
low
cost equipment
to
our
Indian
CDP,
and
for
future
global
rollout – Determined
means
to
increase
the
range
of
Coldry
product
hardness
(fit for
purpose) – Expanded
market
reach
with
a
strategic
partnership
for
forward integraAon
into
power
generaAon

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Presentation to ECT Shareholders Date: 30[th] May 2014 Presented by: Rajnesh Trivedi, Senior Director, Investment Banking, YES BANK

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Private & Confidential

Overview of Thermal Coal Industry in India Huge demand Supply Gap

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Introduction

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Coal Demand
10%
Power
5%
4%
Captive Power
8%
Cement
73%
Sponge Iron
Others
1,200
1,000
800
600
400
200
0
FY FY FY FY FY FY FY FY FY FY FY
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '17 E
Demand Output Import
MT
----- End of picture text -----

• Coal
  is
  the
  most
  important
  source
  of
  energy
  for
  India,
  fuelling
  53%
  of
  the
  country’s
  energy needs.
  Total
  demand
  of
  702
  MT
  in
  FY

• The
  power
  sector
  alone
  (including
  capAve
  plants)
  accounts
  for
  nearly
  81%
  of
  the
  total
  coal demand
  in
  2012-­‐13.
  Cement,
  texAles,
  chemicals,
  sponge
  iron,
  paper
  etc.
  Account
  for
  balance demand.

• Coal
  mining
  in
  India
  is
  highly
  regulated

in
India,
with
bulk
of
the
mines
controlled
by
public

sector
units.
Government
has
now
started
allocaAng
mines
to
private
sector
for
capAve
usage.

Demand Supply Mismatch – Imports fuelling the gap

• In-­‐spite
  of
  having
  one
  of
  the
  largest
  reserves
  of
  coal
  in
  the
  world
  (294
  bn

• tonnes),
  India
  has
  a
  large
  demand
  supply
  mismatch
  of
  thermal
  coal
  which
  is likely
  to
  exacerbate
  further
  given
  the
  regulatory
  challenges
  for
  new
  coal
  mining and
  limited
  output
  increase
  from
  exisAng
  mines.

• India’s
  coal
  demand
  has
  grown
  at
  a
  CAGR
  of
  6%
  between
  2003
  and
  2012,
  while coal
  producAon
  has
  only
  grown
  by
  4.5%
  in
  the
  same
  period

• Per
  the
  working
  group
  report
  on
  12[th] plan,
  the
  government
  has
  esAmated
  a shorSall
  of
  266
  MT
  by
  FY

• This
  massive
  demand
  supply
  gap
  has
  fuelled
  the
  import
  of
  coal
  making
  India the
  third
  largest
  importer
  of
  coal
  in
  the
  world.
  In
  FY
  13,
  India
  saw
  a
  total
  coal import
  of
  140.6
  tonnes
  of
  which
  78%
  was
  thermal
  coal.
  The
  total
  import
  bill
  for coal
  in
  India
  was
  USD
  15
  bn
  in
  FY
  13
  which
  is
  likely
  to
  double
  by
  FY

Huge Demand Supply gap poses a large threat to development of India

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Impact of Coal Shortage

• Given
  the
  heavy
  dependence
  of
  the
  power
  and
  cement
  sector
  on
  coal,
  the
  increasing
  shortage
  of
  coal
  is
  affecAng
  the
  growth
  of
  the
  naAon.
  Some
  of
  the
  key indicators
  are
  highlighted
  below

• ExisHng Thermal Power Plant –
  The
  average
  PLF
  of
  exisAng
  power
  plants
  reduced
  from
  75%
  in
  FY
  11
  to
  69.9%
  in
  FY
  13,
  primarily
  due
  to
  shortage
  of
  coal.

• New CapHve Power Plants -­‐
  According
  to
  a
  proposal
  framed
  by
  the
  Power
  Ministry,
  only
  capAve
  power
  plants
  that
  were
  operaAonal
  by
  2015
  will
  be considered
  for
  domesAc
  coal
  fuel
  linkage
  allocaAons.
  This
  will
  lead
  to
  nearly
  5
  GW
  of
  capAve
  power
  plants
  without
  domesAc
  coal
  linkages.

• New UHlity Power Plants -­‐
  The
  Coal
  Ministry
  is
  of
  the
  view
  that
  due
  to
  coal
  shortages
  it
  may
  not
  be
  able
  to
  provide
  linkages
  to
  approx.
  16
  GW
  of
  power plants
  which
  are
  in
  advance
  stage
  of
  commissioning.

Challenges with imported coal

• While
  imported
  coal
  can
  meet
  the
  demand
  supply
  gap,
  apart
  from
  energy
  security
  it
  poses
  several
  threats
  which
  affect
  the
  viability
  of
  projects
  dependent
  on imported
  coal

• Price –
  Imported
  coal
  is
  expensive
  viz-­‐a-­‐viz
  domesAc
  coal,
  making
  it
  tough
  for
  large
  UMPP
  projects
  to
  import
  coal
  without
  PPA
  price
  increases.
  Further, imported
  coal
  becomes
  unviable
  for
  projects
  situated
  far
  away
  from
  the
  port,
  given
  the
  high
  transportaAon
  charges.

• VolaHlity –
  Imported
  coal
  prices
  are
  highly
  volaAle.
  The
  volaAlity
  is
  further
  exacerbated
  by
  the
  fluctuaAon
  in
  currency
  prices.
  Hence
  building
  long
  term infrastructure
  projects
  based
  on
  floaAng
  price
  of
  imported
  coal
  is
  not
  financially
  aHracAve.

• Policy threats –
  Change
  in
  policies/regulaAons
  in
  coal
  exporAng
  naAon
  can
  substanAally
  impact
  the
  supply
  and
  pricing
  of
  imported
  coal.
  This
  is
  exemplified by
  severe
  issue
  faced
  by
  Indian
  coal
  importers
  when
  Indonesia
  changed
  its
  policies
  in
  2011
  to
  benchmark
  coal
  export
  prices
  to
  internaAonal
  market
  even
  in case
  of
  capAve
  mines.

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Lignite in India – Challenges to replace thermal coal

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Lignite a Solution to meet the Coal Demand Gap??

• India
has
42
BT
reserves
of
lignite.
The
reserves
are
primarily
concentrated
in Tamil
Nadu
and
balance
distributed
across
Rajasthan
and
Gujarat
.
Nearly
75% of
the
lignite
is
uAlized
to
fuel
mine
mouth
power
staAons
(current
installed capacity
of
5,211
MW).

• In-­‐spite
  of
  large
  lignite
  reserves,
  the
  physical
  properAes
  of
  lignite
  make
  it challenging
  to
  replace
  coal.

• Difficult to transport –
  Given
  the
  high
  moisture
  content,
  it
  is
  difficult
  to economically
  transport
  lignite
  over
  large
  distances.
  This
  has
  curtailed
  the usage
  of
  lignite
  to
  mine
  mouth
  power
  staAon/closely
  located
  industries.

• Low thermal efficiency–The low
  calorific
  value
  of
  high
  moisture
  fuel
  does not
  allow
  to
  achieve
  high
  thermal
  efficiencies
  due
  to
  lower
  combusAon temperatures.

• Environmental Issues –
  Low
  thermal
  efficiency
  means
  more
  CO2 emissions,
  a
  significant
  greenhouse
  gas.

• High capital costs –
  Due
  to
  the
  nature
  of
  the
  high
  moisture
  fuel,
  large combusAon
  chambers
  and
  other
  criAcal
  flue
  gas
  handling
  infrastructure are
  typically
  required,
  increasing
  costs
  per
  MW
  of
  capacity.

State-wise distribution of lignite resources in India

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----- Start of picture text -----

1%
6%
13%
79%
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Tamil Nadu Rajasthan Gujarat Others

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Cost effective technologies that can improve calorific value of lignite thereby improving thermal efficiency have significant scope in India

Coldry an efficient solution to utilize Indian lignite resource to meet the huge thermal coal demand in India

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Coldry has a large market potential in India offering substantial benefits to lignite mine operators as well as to the overall energy security of the nation

• Coldry
  offers
  a
  unique
  and
  cost
  effecAve
  soluAon
  to
  convert
  lignite
  into
  a
  storable,
  transportable,
  energy
  rich
  fuel ideal
  for
  thermal
  coal
  market.
  Coldry
  can
  offer
  substanAal
  benefit
  for
  the
  energy
  security
  of
  the
  naAon
  and
  provides lucraAve
  commercial
  opportuniAes
  to
  lignite
  mine
  operators

• Energy Security –
  Coldry
  can
  enable
  India
  to
  more
  effecAvely
  use
  its
  large
  domesAc
  lignite
  resources
  to reduce
  dependence
  on
  imported
  coal
  and
  also
  help
  to
  preserve
  its
  limited
  reserves.

• AlternaHve to expensive imported coal –
  Coldry
  can
  provide
  a
  financially
  viable
  alternaAve
  to
  expensive imported
  coal.
  This
  could
  be
  a
  game
  changer
  for
  the
  Indian
  power
  sector
  and
  industries
  enabling
  financial feasibility
  for
  several
  thermal
  power
  plants
  which
  are
  stalled
  or
  unuAlized
  due
  to
  expensive
  feedstock.

• Geographical spread of lignite, an advantage -­‐
  Availability
  of
  lignite
  in
  India
  is
  confined
  largely
  in
  the
  States of
  Tamil
  Nadu,
  Gujarat
  and
  Rajasthan
  where
  higher
  grades
  of
  coal
  are
  almost
  completely
  absent.
  Coldry could
  therefore
  be
  a
  cost
  effecAve
  feedstock
  to
  power
  plants/industries
  in
  these
  region.

• Increases the market reach for lignite mine operators –
  Given
  the
  high
  moisture
  content,
  lignite transportaAon
  beyond
  ~200km
  is
  not
  economic.
  This
  constrains
  the
  market
  reach
  of
  lignite
  to
  pit
  head power
  plants/nearby
  industries.
  By
  reducing
  the
  moisture
  content,
  Coldry
  can
  be
  transported
  to
  longer distances.

• Improved energy profile enables higher realizaHon -­‐
  Market
  prices
  of
  coal
  increase
  non
  linearly
  compared to
  the
  increase
  in
  calorific
  value.
  By
  improving
  the
  calorific
  value,
  Coldry
  offers
  the
  ability
  to
  improve
  the realizaAon
  for
  lignite
  mine
  resource
  companies

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Current Status of India Operations

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• ECT is in advance stage of setting up its first Commercial Development Plant (CDP) with NLC.

• Thermax, a USD 1.8 bn, Indian engineering conglomerate has been finalized as the EPC partner for the project and strategic partner for global rollout of Coldry technology.

• Thermax
  finalized
  as
  EPC
  partner
  for
  ECT’s
  Coldry
  Commercial
  Development
  Plant
  (CDP)
  in
  India and
  strategic
  partner
  for
  roll-­‐out
  of
  Coldry
  technology.

• Selected
  as
  part
  of
  a
  detailed
  evaluaAon
  process
  involving
  top
  Indian
  EPC
  players;

• HoA
  entered
  between
  the
  top
  management
  of
  Thermax
  &
  ECT;

• Detailed
  cost
  esAmaAon
  exercise
  being
  undertaken
  to
  arrive
  at
  a
  firm
  cosAng
  for
  NLC project;

• In
  advance
  stage
  with
  NLC
  for
  seung
  up
  CDP
  at
  their
  pit-­‐head
  locaAon
  in
  Neyveli.

• ECT’s
  Coldry
  technology
  has
  been
  selected
  based
  on
  a
  tender/EOI
  floated
  by
  NLC
  in January
  2013;

• Undertook
  a
  joint
  site
  visit
  along
  with
  EPC
  partner
  to
  study
  technical
  and
  site
  specific parameters
  addressed
  in
  the
  feasibility
  report
  to
  NLC;

• EsAmated
  to
  submit
  Feasibility
  report
  to
  NLC
  in
  July
  2014
  which
  shall
  be
  followed
  with discussions
  to
  sign
  a
  binding
  ‘Agreement
  to
  proceed’
  for
  seung
  up
  the
  CDP;

• SubstanAal
  break-­‐through
  with
  other
  private
  sector
  project
  developers
  for
  seung-­‐up
  of
  Coldry projects;

• JSW;

• Thriveni
  Mining;

• Discussion
  ongoing
  with
  other
  large
  private/public
  conglomerates;

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• EvaluaAng
  seung
  up
  ECT
  India
  which
  will
  be
  the
  operaAng
  company
  of
  ECT
  in
  India.

Next Steps & Indicative Timelines

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� With bulk of the key time consuming issues of setting up an infrastructure project already addressed, ECT is well poised to get contracted for CDP.

• It is expected that by Q4 of calendar year 2014, ECT may be in a position to enter into a binding contract for execution of CDP.

==> picture [524 x 193] intentionally omitted <==

----- Start of picture text -----

DescripHon June July August September Q4
IndigenizaAon
&
firm
cost
esAmate
Finalizing
funding
structure
Submission
of
feasibility
report
to
NLC
Establishment
of
ECT
India
DefiniAve
EPC
contract
with
Thermax
‘Agreement
to
Proceed’
with
NLC
Statutory
approvals
and
authorizaAon
DefiniAve
Contract
with
NLC
Project
ExecuAon*
----- End of picture text -----**

• *12 to 18 months from start of construcEon to commissioning

• ** Signing of Technology Licensing Agreement to ECT India

• Typically
  infrastructure
  projects
  in
  India
  take
  24-­‐36
  months
  to
  begin
  construcAon.
  Key
  acAviAes
  that
  take
  substanAal Ame
  to
  complete
  include
  tendering
  process,
  land
  acquisiAon,
  regulatory
  approvals
  and
  rehabilitaAon.

• The
  Coldry
  project
  with
  NLC
  has
  inherent
  advantages
  and
  most
  of
  the
  Ame
  consuming
  acAviAes
  have
  already
  been completed/adequately
  addressed.

• Tendering
  –
  Already
  completed;
  Coldry
  has
  been
  qualified
  for
  the
  CDP
  project
  for
  treaAng
  low
  grade
  lignite.

• Land
  AcquisiAon
  &
  rehabilitaAon
  –
  Land
  is
  already
  available
  with
  NLC
  and
  will
  be
  provided
  for
  the
  project; No
  rehabilitaAon
  is
  required.

==> picture [77 x 42] intentionally omitted <==

• Regulatory
  Approval
  –
  NLC
  to
  arrange
  for
  necessary
  regulatory
  approvals.