14D Confirms Capital Adequacy

14D Confirms Capital Adequacy

  • – Budget review confirms 14D has sufficient funds to maintain technology and project development
  • – GAS-TESS business case continuing
  • – Strong interest in the Aurora Project
  • – Staff and Board cuts

1414 Degrees is pleased to advise that it has reviewed its budgets and can confirm the Company has sufficient funds to maintain its technology and project development. 

Our business case modelling with SA Water for the GAS-TESS integrated into the Glenelg Wastewater Treatment Plant will continue until mid-year after which we are expecting a commercial decision.

Our commercial team has also been working with utilities and financial entities attracted by the TESS-GRID as an energy solution for renewable farms. There is strong interest to develop the Aurora Project in the near term. They have also continued studies with large industrial sites to evaluate emissions reduction strategies with the TESS. 

The Company is adapting to the capital market and business constraints by reducing hours, effecting redundancies and deferring the upgrade of the silicon storage in the GAS-TESS. The board and senior management have participated by agreeing to between 25% to 75% cut in fees and salaries, with the Executive Chairman taking a 50% pay cut. The board will consider issuing shares to key employees to compensate for the reduction in cash salary. 

Although we are anticipating commercial decisions within six months, these measures, if carried forward, would reduce cash outflows by about $2m to support operations into second half 2021.  

Cancellation of proposed SPP Offer

Cancellation of proposed SPP Offer

1414 Degrees Limited (ASX:14D) announced on Monday 24 February an offer of discounted shares to shareholders so they could support the next phase of its technology roll-out centred on solar generation and storage at the Aurora Project.

However, global economic and market conditions have significantly deteriorated this week and the Company is not going to proceed with the offer. Directors will continue to monitor conditions and note that there is adequate working capital that will be boosted by a $2.748m R&D refund next week.

The SiliconAurora acquisition and plans for 1414 Degrees’ Silicon Power Plant as a heat and power supply solution for industry has prompted major finance and industrial entities to engage with its commercial and business team to study the benefits and applications. At the same time the SiliconAurora team are advancing power and heat offtake sales to drive the project financing.

Management have been undertaking a number of measures that will reduce recurrent expenditure. The Company has leased new premises that will allow it to combine the corporate and engineering teams at one site to ensure common focus on the development and commercialisation of its technology, with the benefit of reducing accommodation costs.

1414 Degrees announces Share Purchase Plan

1414 Degrees announces Share Purchase Plan

L to R: Dr Kevin Moriarty, CEO of 1414 Degrees and Marie Pavlik, CEO of SiliconAurora Pty Ltd

 

1414 Degrees Limited (ASX:14D) (Company) is pleased to offer shareholders an opportunity to participate in a Share Purchase Plan (SPP) targeted to raise approximately $3.0 million. 

Under the SPP, eligible shareholders will be invited to subscribe for up to $30,000 of new fully paid ordinary shares in the Company (Shares) at an issue price of $0.16 (16 cents) per new Share, free of all brokerage and commissions. 

 

Rationale and Use of Proceeds 

The SPP allows eligible shareholders to participate in the Company‘s capital raising program at an integral stage in its development.  

The funds raised in our IPO have been used for the successful demonstration of our electrically charged pilot TESS and the commissioning of the pilot biogas TESS at SA Water‘s Glenelg Wastewater Treatment Plant. Our prospectus plan to develop a grid scale TESS storage solution with the ability to stabilise electricity supply has attracted the interest of industries seeking to reduce their energy costs and carbon emissions. Industry is recognising the benefits of accessing a combination of heat and electricity to maximise the financial value of our technology in their operations. 

The proceeds of the SPP will enable your Company to advance its emissions reduction and grid stability strategy by advancing the development of a silicon power plant, pairing our TESS technology with the large solar PV generation capacity of the recently acquired Aurora Solar Energy Project in Port Augusta, South Australia (Aurora Project). The Aurora Project, to be operated by the Company’s wholly owned subsidiary SiliconAurora Pty Ltd, is planning to electrify heat energy, otherwise produced by fossil fuels, to reduce industrial emissions in the Upper Spencer Gulf region, while simultaneously firming power.   

Proceeds will also be used to fund further upgrades to the GAS-TESS in support of first commercial sales, and for general working capital purposes. 

I encourage all shareholders to take up an allocation under the SPP to enable your Company to realise the potential of its strategy.  

Participation in the SPP is entirely voluntary. 

 

Share Purchase Plan 

The offer of Shares under the SPP (SPP Offer) is being made exclusively to shareholders who were registered as holders of Shares at 7.00pm (AEDT) on 21 February 2020 (Record Date) and whose registered address is in Australia or New Zealand (Eligible Shareholders).   

The SPP Offer is targeting to raise approximately $3.0 million by way of the issue of 18,750,000 Shares (New Shares) and entitles Eligible Shareholders, irrespective of the size of their shareholding, to purchase up to $30,000 worth of New Shares at an issue price of $0.16 per New Share. The Company may elect to either scale back applications or increase the amount to be raised under the SPP Offer, subject to compliance with applicable regulatory requirements. 

You may apply for parcels of New Shares in $1,000 increments with a minimum investment amount of $1,000, up to a maximum investment of $30,000, without incurring brokerage costs. The issue price of $0.16 per New Share represents a discount of 12% to the volume weighted average price (VWAP) of Shares on the Australian Securities Exchange (ASX) during the 5 trading days immediately prior to the announcement of the SPP Offer on 24 February. 

Full details of the offer will be contained in an offer booklet which is anticipated to be dispatched to Eligible Shareholders on 2 March 2020. 

 

Key Dates 

The proposed timetable for the SPP Offer is set out below. The Directors reserve the right to vary the dates and times without notice. 

 

Event 

Date * 

Record Date (date for determining shareholders’ entitlements to participate in SPP Offer) 

Friday, 21 February 2020 

Announcement of SPP Offer 

Monday, 24 February 2020 

Despatch of SPP Offer documentation to Eligible Shareholders 

Monday, 2 March 2020 

Opening Date for SPP Offer 

Monday, 2 March 2020 

Closing Date for SPP Offer 

Monday, 16 March 2020 

Issue of New Shares under the SPP Offer 

Wednesday, 25 March 2020 

Quotation of New Shares on ASX 

Thursday, 26 March 2020 

 

* These dates are indicative only. The Company may vary the dates and times of the SPP Offer without notice by lodging a revised notice with ASX. Eligible Shareholders are encouraged to submit their applications early as the Directors reserve the right to close the SPP Offer early if oversubscribed.  

Fourth Quarter 2019 Update

Fourth Quarter 2019 Update

  • • GAS-TESS business case driven by value not efficiency

  • • GAS-TESS pilot lessons being used for commercial Mark II model

  • • Aurora Solar Energy Project in Port Augusta will be clean power station with TESS-GRID

  • • Technology development focus on scaling silicon storage to meet needs of new projects

  • • Cash position $3.9m at end quarter and circa $2m R&D refund in process

1414 Degrees is pleased to provide its December 2019 quarterly update.

The quarter saw the maturing of your Company’s strategy of obtaining commercial pilot sites for its devices. As many shareholders would be aware, the industrial scale of the Company’s storage devices means we need to trial them in operating plants that can use both heat and electricity outputs:

  • • GAS-TESS: SA Water provided us with the opportunity to trial our prototype GAS-TESS unit at its Glenelg Wastewater Treatment Plant (WWTP), allowing us to determine the operating specifications, and perhaps even more importantly, providing the basis to design and demonstrate a commercial product that can be sold with confidence into the very large wastewater utility market.
  • • TESS-GRID: To fulfil our prospectus objective of grid scale storage, we acquired the Aurora Project near Port Augusta and two other solar projects in NSW through the purchase of Solar Reserve’s Australian subsidiary, now renamed SiliconAurora Pty Ltd.
  • • TESS-STEAM: In December we delivered the technical feasibility study for a TESS-STEAM pilot at the Stone & Wood brewery in northern New South Wales (originally intended for Pepe’s Ducks).

These projects are critical to your company realising the revenue potential of its technology worldwide. For example, considering the GAS-TESS as a replacement for gas engines used by global wastewater utilities suggests a market potential of billions of dollars. The market for the TESS-GRID is potentially even larger, as the worldwide energy market transitions to increasing amounts of intermittent renewable generation requiring energy storage for reliability.

The basis for this earnings potential, which will be demonstrated through the Aurora Project, is the large number of revenue sources available through its versatility of operation. For example, the TESS-GRID is largely unique in its ability to tap into both recurrent and opportunistic revenue sources, ranging from the sale of heat and electricity under PPA’s to current and future proposed grid stability payments. The latter include robust grid stability services that can only be supplied by turbine generators or synchronous condensers. However, in contrast to turbine generation, the condensers have no ability to provide recurrent income, indeed they are a passive cost of renewable generation.

The TESS-GRID will also be able to charge from the grid at high current flows sourced at times of excess generation – therefore low priced – and regenerate at high rates for longer periods than batteries, while also supplying heat to displace gas and reduce emissions. The Aurora Project will allow us to demonstrate and confirm our product’s potential to a global market.

SA Water Glenelg Wastewater Treatment Project

During the quarter the pilot GAS-TESS Mark 1 (Mk I) at the Glenelg WWTP provided important data and operating specifications to drive its business case. Importantly the lessons learnt from this unit are also being used to define the specifications for the production model of the GAS-TESS Mark II (Mk II). A planned series of capability upgrades commenced with installation and commissioning of a co-firing burner to increase the temperature delivered to the turbine. This new burner system is fully functional with first tests showing an increase in temperature of the gas stream consistent with engineering predictions. This will significantly increase both the power output and efficiency of the turbine. Testing has been suspended while our engineers and the manufacturer resolve a leak in the external heat exchanger. Further improvements of the Mk I are planned, however, some will be best implemented with the optimised Mk II device.

GAS-TESS Business Case: We are expecting that the business case will be ready in time for a midyear decision point for the Mk 1 device. We are progressing with the design of a larger Mk II device, optimised for the plant, for delivery within 12 months of order.

The current pilot device at the Glenelg plant was the result of an invitation from SA Water to trial a TESS at minimal cost to compare with gas engines. The focus is on how to deliver value from biogas, with the added benefit of timeshifting to increase the energy value inherent in the biogas.

We do not yet know the operating efficiency of the gas engines for direct comparison to the TESS in the context of the Glenelg WWTP. The rated electrical efficiency of the engines is not attainable because the biogas has low methane content compared to natural gas. The use of the gas engines is further complicated by the presence of hydrogen sulphide (H2S) and silicones (also known as siloxanes) in the gas. The H2S degrades the gas engine oils, while the silicones oxidise to abrasive silica, causing wear. By contrast, the TESS burners fully combust the biogas without moving parts or lubricants that could be contaminated, and so do not incur the high maintenance costs of the gas engines.

Therefore, the performance of the GAS-TESS should not be measured against the CHP efficiency of the gas engines, but by its ability to timeshift the value of the biogas and reduce operating and maintenance costs compared to engines. The average electricity price profile on the National Electricity Market (NEM) means that the ability to timeshift electricity generation can result in a substantial uplift in value compared to continuous output from engines without energy storage.

I believe this point is not well understood by commentators who focus only on efficiency when comparing our devices to batteries or gas engines. These devices and the TESS have advantages and disadvantages that go beyond just their efficiency as machines. They must be compared in terms of their value in transforming input fuel to output energy. It should be noted that this value is dependent on the operational situation and the timing of energy imports and exports to the electricity market or behind the meter considerations. The graphs below illustrate this principle. Illustration available at https://1414degrees.com.au/gas-tess-illustration/ 

A further complication is that SA Water’s current gas engines are fully integrated into the WWTP whereas the TESS is not. The Glenelg WWTP has also recently installed solar PV generation, further complicating the value calculation – the biogas must be burnt even while the solar PV is generating, and the GAS-TESS will do this and store the energy for regeneration when the sun sets. These considerations explain why the business case is a complicated exercise and how, even though the electrical efficiency of the TESS (like any storage) is less than direct generation in engines, the TESS can generate more revenue. I hope this clarifies that the preparation of the business case must take into account many matters, not the least being maintenance cost. On these considerations we estimate that our business case will be very competitive.

Aurora Solar Energy Project

Your Company acquired the Aurora Solar Energy Project through the acquisition of Solar Reserve Australia II Pty Ltd (renamed to SiliconAurora Pty Ltd) in December. It is approved for a 150MW concentrated solar plant (CSP) plus 70 MW of solar PV. As stage 1, 1414 Degrees is planning to progress with 70MW of Solar PV and then proposes a lower risk staged development of up to 400 MW of solar PV charging several GWh of TESS-GRID modules distributed on the transmission grid. This TESS-GRID storage could also be charged from third party solar and wind farms under PPA, or through electricity purchased on the NEM at times of low demand. Our analysts have been undertaking financial modelling showing positive earnings from multiple sources including network stability revenues, adjusted for current and future trends in the NEM.

The pairing of solar PV generation with 1414 Degrees’ TESS-GRID is a new clean Silicon Power Plant technology offering increased reliability through firmed electricity and heat supply that can be distributed through the network. The ability to timeshift the power supply will mitigate future issues with margin loss factors (MLFs) that are affecting investment in solar projects. The TESS-GRID can also generate revenues from grid stability services in support of new solar PV projects.

1414 Degrees appointed Marie Pavlik as CEO of its subsidiary company, SiliconAurora Pty Ltd, to deliver the Aurora Solar Energy Project. Marie has been working closely with our Business Development Manager, Maretta Layton, meeting with key stakeholders in Port Augusta, including the Council and community.

The Aurora Project is positioned in the “Iron Triangle” industrial area as shown in the illustration below. Over the past two years, our business development team has been contacted by industries seeking to replace gas consumption with emissions free heat from our TESS-GRID. This Project will facilitate our ability to generate recurrent revenue from long term heat contracts with these customers. While there is currently no direct value in emissions reduction in Australia, industries are becoming increasingly aware of the need to address emissions reduction, and we expect that this will lead to new value streams from carbon offsets and air quality measures in the future. We also expect that regulators will move toward providing a charge for storage as a service for grid reliability and security, replacing very substantial government subsidies for construction of pumped hydro and batteries. This will encourage investment in lower cost and environmentally responsible grid stability solutions, such as the TESS-GRID.

Stone & Wood brewery project

During the quarter a feasibility study was prepared and sent to the Stone & Wood brewery management. The study recommended replacing the current LPG heat supply with a TESS-STEAM generating steam into the existing accumulator. Electricity generation would follow in a later stage. Although the efficiency of the device is high, the pricing structure for electricity supply in the New South Wales Government’s distribution grid is not conducive to timeshifting of renewable generation, because the utility charges by the amount of electricity transmitted rather than a connection charge based on the maximum as, for example, is the case in South Australia. Our business development team have contacted the utility to seek an arrangement that encourages offpeak energy storage. This demonstrates the complexity of current business cases based on geographical location, both within Australia and globally for all storage technologies. As part of the transition to renewables, and the recognised need for storage, we expect such market mechanisms will evolve.

Technology

The imminent requirement to deploy large TESS units for the two proposed commercial pilot projects, in addition to the GAS-TESS at Glenelg, has provided further impetus to our core technology team developing larger scale silicon energy storage solutions. To protect our IP, we do not comment in detail on the nature of these exciting initiatives, but they include containment of molten silicon phase change materials (PCMs) in combustion environments from 1000°C to 1500°C, supported by advanced research laboratories in Europe. The scalable storage solution will facilitate higher electrical efficiency and heat output, suitable for both the biogas and the electrically charged versions. The aim is to achieve a rated electrical efficiency of up to 44% from a co-generation turbine system, substantially increasing the competitive position of our CHP solutions.

Finance

During the quarter the Company reviewed its R&D tax structuring with KPMG prior to lodging its FY19 tax return. This review resulted in a decision to recognise R&D assets for tax purposes and consequently depreciate assets over life of the projects. This will change the timing of claims with a likely revision to prior year tax returns and the deferral of some rebates into future years, but is not expected to have a material effect on the total amount of rebates paid to the Company over the project life.

Your company has sufficient cash reserves at present as it awaits payment of its FY19 rebate from the tax office. The magnitude of our tax rebates underscores the fact that our capital requirement on an annual basis is 43% less than the cash expended. Nevertheless, the one-off purchase of the SolarReserve assets depleted cash reserves and working capital is required to advance the Aurora Project to financing and prepare the GAS-TESS business case for decision mid-year. It is therefore appropriate to review the financial outlook for the company.

Capital requirements:

The GAS-TESS project has been funded in partnership with the SA Government Renewable Technology Fund grants scheme with a final grant remittance expected. As part of the business case modelling, our operations team is evaluating the relative merits of expending an additional $1m to substantially upgrade the capability of the current device or preserving capital toward building the optimised Mark II model.

The financial plan for the Aurora Solar Energy Project includes $110 million of loan funding allocated by the federal government for the Port Augusta based CSP project. Our case is that the modularity of the TESS-GRID, and its ability to charge from grid as an alternative power source, provides more reliability and flexibility than the CSP alternative. Moreover, our revised development plan calls for less upfront capital and performance risk compared to the CSP because capital funding is spread over several stages of generation and TESS storage construction. The first stage includes a TESS-GRID pilot to provide confidence for investment in the following stages.

Earnings outlook:

GAS-TESS earnings outlook: Management are confident that the company faces a large uplift in value from the commercialisation of its products. According to the World Biogas Association investment in the Australian global biogas industry was estimated at $3.5 – $5 billion in the five years to 2020. We expect the GAS-TESS to demonstrate commercial readiness early in the next financial year through the sale of the current unit and/or an optimised Mark II version, thereby opening a potential billions of dollars a year global market over coming decades.

TESS-GRID earnings outlook: The TESS-GRID is aimed at a potentially larger worldwide market than the GAS-TESS, as intermittent renewable generation grows and emissions reduction measures include the substantial gas heat market. Further, our technology is likely to be recognised as preferable when the less desirable aspects of current grid stability technologies start to be realised, for example, the environmental costs of mining increasing quantities of battery components and disposal of vast numbers of exhausted batteries. We expect to deploy the TESS-GRID in infrastructure-funded vehicles supported by revenue from heat and electricity sales with additional revenues from grid stability services. SiliconAurora Pty Ltd is the first of these special purpose vehicles (SPVs), and we are working on the business case to present to institutions and shareholders who wish to directly participate in this income stream. The intention is for 1414 Degrees to own the projects through the SPVs, which will be financed by underlying investment vehicles. Solar Reserve used this scheme, registering a financing subsidiary we will rename SiliconAurora Finco.

We are working hard to realise value for shareholders and I look forward to reporting further progress.

Dr Kevin Moriarty

Executive Chairman

 

 

14D closes deal on Aurora Project

14D closes deal on Aurora Project

  • – Aurora Solar Energy Project near Port Augusta now fully owned by 1414 Degrees 
  • – SolarReserve Australia II Pty Ltd to be renamed SiliconAurora Pty Ltd 
  • – Capital servicing requirements to be staged with progressive generation and storage 
  • – Marie Pavlik appointed CEO of SiliconAurora

1414 Degrees (ASX:14D) “The Company” is pleased to announce it has completed the purchase of SolarReserve Australia II Pty Ltd, with the intention to rename it SiliconAurora Pty Ltd (“SiliconAurora”) with a new board.  

SiliconAurora owns the advanced Aurora Solar Energy Project (“Aurora Project”) near Port Augusta in South Australia and two early stage solar sites in New South Wales. 

The Company has been meeting with key stakeholders while progressing technical and economic modelling for the Aurora Project. 1414 Degrees’ Executive Chairman, Dr Kevin Moriarty said that its modelling showed positive revenues from using its TESS-GRID silicon storage technology with the proposed solar PV generation. “Our plan is to progressively increase the generation at the Aurora Project. This will limit capital servicing requirements while our technology is proved at increasing scale to more than 1,000 MWh.”   

1414 Degrees has appointed its Commercial Development Manager, Marie Pavlik, as CEO of SiliconAurora to drive the development of the Project. Marie will commence in January after finishing her senior role with ComAp, a global leader in generator controllers and demand management systems. Marie has been in the leadership team developing ComAp in the Asia Pacific Region for six years, after relocating from Prague where she served an additional eight years with the company. Marie brings extensive experience in renewable energy, market development and commercial growth. She has a Master of Business Administration, Master of Electrical Engineering and is a graduate of the Australian Institute of Company Directors.

“This is a key appointment for a milestone project for 1414 Degrees. We will demonstrate our grid scale thermal storage by systematically building a power station with firmed renewable generation,” Dr Kevin Moriarty said. 

1414 Degrees acquiring Aurora Project near Port Augusta

1414 Degrees acquiring Aurora Project near Port Augusta

  • – 14D acquiring SolarReserve Australia II Pty Ltd
  • – TESS-GRID to provide electricity firming services
  • – Refocus to 400MW solar farm with progressive storage capacity to several thousand MWh
  • – To be developed and financed in 14D subsidiary company

1414 Degrees (ASX:14D) is set to acquire SolarReserve Australia II Pty Ltd, which owns the Aurora Solar Energy Project near Port Augusta in South Australia and two solar sites in New South Wales.

The Aurora Solar Energy Project has SA Government development approval for a 70 MW solar PV farm and 150 MW of generation from a concentrated solar thermal plant (CST). South Australian company, 1414 Degrees proposes to use the site to pilot its world leading TESS-GRID technology. The electricity firming services will be developed to similar scale as the previous project.

“We will be using South Australian technology to create a large-scale, thermal energy storage plant near Port Augusta able to supply reliable power on demand to the national grid,” 1414 Degrees Executive Chairman Dr Kevin Moriarty said.

Government and stakeholder approvals will be sought to vary or submit a new development application to provide up to 400MW of solar PV together with the installation of the TESS-GRID technology. 1414 Degrees aims to progressively scale up the storage capacity to several thousand MWh. A TESS-GRID at this scale would be able to supply many hours of dispatchable electricity with spinning reserve from its turbines and a range of frequency control ancillary services (FCAS) to support grid stability.

1414 Degrees’ electrically charged TESS-GRID could also buy and store electricity generated by other renewable farms on the high voltage transmission network in the region, strengthening firming services and earnings from market arbitrage.


Image: 1414 Degrees concept for Aurora Solar Energy Project with TESS-GRID

Heat from the TESS-GRID can power Smartfarms, protected cropping greenhouses and industry, and 1414 Degrees is investigating production of hydrogen using the excess heat from its turbines. Progressing the development will create jobs during construction, then long term jobs for operators of the generation and storage plant and industries using the heat energy.

1414 Degrees Executive Chairman, Dr Kevin Moriarty said that the site had several clear advantages for the development of the TESS-GRID solution.

“The unregulated high-voltage transmission line to the OZ Minerals Carrapateena and Prominent Hill mines is being constructed along the boundary of the Aurora Solar Energy Project, and provision has been made for a substation at the existing Aurora site with direct connection to the Davenport substation in Port Augusta. Davenport is part of the major transmission networks to Eyre Peninsula, Adelaide and the new interconnector to New South Wales. This project is currently not impacted by marginal loss factors (MLF) that have constrained output from renewable farms in remoter parts of the national grid,” he said. “We will reopen negotiations with OzMinerals and ElectraNet as soon as the acquisition is complete” he added.

Dr Moriarty said that the Aurora Solar Energy Project will be developed and financed in the subsidiary company, and 1414 Degrees will control and manage the Project. “We’ve had a lot of interest from infrastructure and investment funds seeking to invest in the potential of our technology and this large solar farm will generate significant revenues while supporting the staged development of our large-scale energy storage technology. The advanced status of this project is expected to result in early revenues from energy sales. We will avoid high capital requirements by staging the development.” He said that the Company proposed to offer its more than 3,000 shareholders an entitlement to directly invest in units of the Aurora Solar Energy Project alongside the institutional funds.

The $2m acquisition will be funded by the Company’s cash reserves.