CHAIRMAN’S REVIEW

It has been a very busy quarter for 1414 Degrees with the launch of the IPO, broker roadshows and investor presentations across Eastern Australia, and significant engineering advances. All components required to complete and commission the 10MWh TESS-IND arrived at our Lonsdale factory and the insulating refractory lining was installed by expert contractors. The heat store has also been assembled and heated for the first time.

Last week the mechanical installation was completed on the 10MWh TESS-IND (pictured below) and the coming weeks will see completion of the electrical connections and pre-commissioning checks prior to the methodical commissioning of the entire system.

We continue to use the original prototype for component testing, including running the 30kW gas turbine on hot air generated from the latent heat storage. We believe this is the first time that a gas turbine has generated electricity using hot air stored in a latent heat storage device. It is an important milestone for the technology because, when the company began to develop the device, the conventional engineering view was it would not be possible because of the very high temperatures.

The 10MWh device has a much more powerful turbine driven by hot air. In this configuration the TESS-IND is capable of supplying up to 1MW of energy. Commissioning is under way and we expect to spin up this turbine in early August. This would not have been possible without our seed shareholders, who have provided over $10 million to design and build the TESS-IND and – another world first – the GAS-TESS, which is to be trialled at the Glenelg Waste Water Treatment Plant. Several million dollars in matching grant funding continues to be provided by the Federal Government through AusIndustry, and the SA Government through its Renewable Technology Fund.

Our engineering team has continued technical studies on the TESS installations for the Pepe’s Ducks and Austcor projects. The Pepe’s Ducks project will use a smaller TESS device for their hatchery as a first step. This will enable us to prove the TESS technology in commercial environments at a lower cost to the Company than originally anticipated.

We are continuing to evaluate sites for the 200MWh TESS-GRID. As with the industrial applications for the TESS-IND, each site has unique characteristics that will inform the design process. Some sites will involve power regeneration while others require only heat. The latter will be lower cost installations since they will not require a turbine. Potential sites range from large combined heat and power plants that provide significant amounts of steam to industry in addition to electricity for the grid, to waste treatment facilities seeking to generate and to store power. Greenhouse developments are also under evaluation because of their heat requirements.

In the previous quarter we surveyed our very large number of pre-registrants for the IPO. The feedback suggested a very strong demand and we structured the Offer accordingly, reserving at least $20 million for pre-registrants. Although support was very strong – with over 1600 applicants for over $15 million – the subscriptions fell short of the required minimum. We have therefore restructured the Offer, including bonus options to reward applicants for their continuing loyalty to the Company. Due to the mandatory four week open period we now expect to list on the ASX on 29 August.

Sales interest continues from potential customers, ranging from large corporations to smaller communities and industries. Our team is looking forward to meeting the expectations of these customers with our versatile devices. As we complete the first TESS-IND and GAS-TESS devices, our team continues to develop ideas to drive down the costs and innovate the designs of the TESS technology. The TESS-STEAM device, in particular, offers a low-cost future solution for many applications.