cce -where to from here !, page-96

Hey everyone,
Here is an email I sent to CCE. Sorry about formatting it has stuffed up in copying to hotcopper. The response I will post in a separate post.

Good Afternoon,

I have sent many emails over my 10 years being a shareholder of this company and they have rarely involved a reply. I cannot express my disappointment strongly enough in the direction the company has taken over the last three years. As a shareholder and a participant in the recent SPP, I feel totally mislead by the company and Michael. From thinking I was pretty clear on the direction the company was going in I can now say I have no idea at all. If someone could take the time to answer the following it may go some way to clear up this matter.

1.a. How is it that a company we paid $13 million dollars for EMC, approximately 18 months ago, and it is now worth a mere $4million?
b. Who is taking responsibility for the failure of due diligence on EMC that resulted in a valuation of 13 million dollars and if that is considered a reasonable figure for the purchase, who is taking the responsibility for the sale price of 4 million?

2 . At the Melbourne Investor Presentation MO stated that the “company took a position three years ago to diversity” and that “the final stage of that process is upon us and that is to obtain financial stability.” He then stated that we had 30 million dollars worth of work in the pipeline.
a. How much of that $30 million dollars worth of work in the pipeline is associated with EMC?
b. How does the sale of EMC affect the financial stability of the company CCE?
c. If the sale of EMC helps the financial stability of CCE why was it not stated at the investor presentation that EMC was being a drag on the finances?

1. MO stated that we had a competitive advantage being under one company and that we will be become profitable by doing what we do well. He also stated that:

• EMC Focussed on 2 to 20 million projects - 20 million is too small for bigger companies so this could be our niche
• BOO is like an annuities stream of revenue and in order to do that we need a healthy balance sheet. Our competitive advantage is that we can finance internally

Clearly MO knew of the financial situation at this stage and was well aware that the company had no intent on keeping EMC. This was a situation that deliberately mislead the investors. How does MO reconcile this obvious contradiction between the idea that we would become profitable and selling the business two months later?

1. In answering a question that was focussed on Lend Lease MO clearly stated that “the pipeline is very healthy” This was clearly a misleading statement. Did MO know at the time that he was asking investors for more funds that EMC was nowhere near turning a profit?
2. MO outlined the potential of the EMC/CCE/Lend Lease partnership. He stated that for EPC projects - EMC is the brain and lend lease is the brawn. He stated that Delaware was the 3rd defence project that CCE have done. Department of Defence have only ordered three and Carnegie/EMC has done them all. All defence bases moving towards this model. Long lead times obviously but the opportunity is “self evident.”
3. If that opportunity was so self evident why has EMC not progressed this further?
4.   Why did MO not mention that these projects would not bring about financial stability in the near term?
5. MO spent a great deal of time speaking about the stand alone power systems. Including stating that:

• in wa western power and horizon cce has done them all
• CCE - do operation maintenance which is another source of ongoing funding and keeps clients in contact with us.
• Next 60 for western out for tender soon they want 15000 next decade
• 20 for horizon which will be out soon”

How is this not misleading the investors? Clearly a pipeline of work was presented that EMC was incapable of completing and given the short time frame between this presentation and the announcement of the sale of EMC MO must have known this at the time of presenting.
7 In reference to BOO projects MO stated the advantages of this and specifically stated that we are building a pipeline, north of 200 MW of projects. How is it that these projects are not financially viable and if they are how is it possible to sell EMC for such a small amount?

1. MO stated that “This half record revenue double what we have ever done.” And that we would achieve profitability in the FY19.

1. How is it that a business that is seem as profitably in the next financial year is all of a sudden not viable just a month later and therefore sold?
2. MO stated clearly that “Our niche is the Defence/CSIRO market “ and that we only had 3 or 4 competitors in the microgrid sector. Further to this none of them winning more work than us. How is this statement true if in fact we need to sell the EMC business?
3. MO stated that EMC purchase was 15 months ago. That we had opportunities in Mining and being a niche player. That all the biggest shareholders are on the board and are all supportive of the direction of the company. How did this change in under two months?

1. When questioned on the lend lease arrangement MO clearly stated that there was a “global opportunity” and that both Lend Lease and EMC feel like they are just “hitting the straps.” That in only the last two months a specific lend lease consultant was in place to deal with EMC. How is it that this situation changed in two months? Is it not misleading to state this information and then sell EMC?

1. In the share purchase plan the following was clearly stated as one of the reasons for the capital: “working capital to support delivery of recent EMC project contract awards, to further develop and convert its contract pipeline, and to pursue opportunities to expand EMC’s reach nationally either organically or through further corporate transactions.”

By the terms of the TAG/EMC acquisition no capital seems to have been spent by CCE. It is a purely share based transaction.

1. How has the capital raised been used to these ends?
2. Is it not misleading to investors to have the aforementioned aim and then not use the capital?
3. Why was it not clearly stated that EMC was to be sold?
4. If the opportunity for the transaction came up after the SPP how is it possible that appropriate due diligence was conducted?

1. How is CCE going to be able to drive revenues from this point forward?

1. With 2.5 billion shares on offer when is a share consolidation likely to happen?

1. I have been a long-term share holder. What business case is there that CCE will be able to survive through to CETO 6 becoming commercial (still many years away)?

Thank you for taking the time