MO gave an overview of where the company has been over the past 12 months and where it is going in the next 12 months.
He discussed the chaos of the political spectrum as it currently sits with Renewable Energy and Climate Change.
He referred to the Finkel report and now the NEG which he thinks are just thought bubbles which will get tossed aside.
We continue to live in uncertain times politically and we often hear demands that we need certainty but MO is not too concerned with certainty as he is confident CCE is a small, innovative, nimble company that has its advantages in having uncertainty.
It’s typically the big utilities that need certainty as they invest over 10-20 years, they have legacy assets that were built 20-30-40 years ago that need certainty.
For CCE we are moving as fast as we can to build our business and deal with the increasing complexity of the power space.
I will go through the slides as they were presented.
Slide 1 Carnegie overview
Point 3
We are increasingly seeing complex systems integration which is needed and CCE are specialising in this area and this is needed in the power space.
Microgrids are generally combinations of solar, battery and diesel which are complex to integrate into existing systems.
Solar on its own is easy to build, as is a diesel power station, but bringing them all together in one Microgrid is very complex. There are a lot of players who can build these standalone systems but few who can bring them all together in a dynamic sense and match the load to the generation.
If CCE can be really good at this complexity in the market place, you are not competing on price you are competing on value and you can charge a premium for that and maintain that margin going forward, which means you can sustain that business and that is where CCE are focussed today.
CCE is focussing on being the best at complex systems but it works just as well as with financial complex systems.
Northam is an example of a project that is not that challenging as it is just a utility scale solar system but the complexity is in the financing of the project which presents challenges.
We want to be really good at things that are really hard and we want to go through the full value chain through design, development, finance, construction, operation & maintenance and some of that we want to keep very close in house and some of that we will partner with others where often the complexity is less.
So particularly with construction we don’t need to have a whole construction workforce. There are groups out there that we can partner with such as LLC as in point 4.
Lendlease can’t do the complex things that we can do.
The difference between CCE now and where it was 12 months ago is that we owned EMC for only about 11 months.
What we saw in EMC was as much about capability as it was about EMC having this outstanding track record in the integration of complex systems. They are a leader in Microgrid solutions and were one of the pioneers of Microgrids in WA. Our focus here is on the complexity that we wanted to integrate into our company.
They were still a young company growing up, not a profitable company, but with a unique capability.
We have re-organised internally recently and have taken out some costs, some multi-million dollar costs and continue to work on being very lean.
We have also invested in the business as well in the engineering & design teams and the bidding teams. These jobs are won and lost at the bid stage and our customers are highly demanding customers.
We don’t deal in the residential space. Our customers are DoD, utilities, local, state & federal governments, they have very, very high demands but we want to be dealing with these customers because:
They are blue chip and they pay their bills &
If we can be good at dealing with complex customers it makes it much harder for others to compete with what we do.
We are growing the business of EMC, reinvesting in the capability of EMC and looking very closely at expanding the capability of EMC nationally. We have built a strong brand and capability in WA & have just won our first job in Northern Territory this year as well.
We are shortlisted for jobs at the moment in SA, Vic & NSW and we are continuing to focus on going national as well.
If you look at the numbers only 10% of the population lives in WA so 90% of the market is outside of WA.
Some of the hard work we started back in January still hasn’t paid off.
The sales side of things is not quick & easy for these larger customers though. For a customer to say I want a Microgrid power station, like the ones we are targeting, this can take anywhere from 12-18 months to sign a Purchase Order (PO) agreement. 18 months is pretty typical. For the DoD 18 months is fast.
We are always aware of trying to do things as fast as possible but we are limited by the sales cycle of some of those larger customers. But those customers can order a project that is a $10 million dollar project. For CCE a project this size is a really good size project.
2018 should be the year we see some payoff and reward for what we have been doing this year. MO thinks they are approx. 50% of the way through the major transformation of the business.
The Next few slides are nothing we don’t know already and MO chatted on about these facts & figures which are published by scientists not politicians.
Although MO did say that 6 years ago the Northam project would have cost in the vicinity of $60 -$80 million to build whereas today it is $15 odd million.
Only approx. 2% of the world is powered by Renewable Energy at the moment so there is a huge marketplace.
MO said that CCE are not in the residential space but we will put batteries in communities, towns and the utility scale installations.
Slide 9 – Macro Drivers for Carnegie
MO said there is a huge market in the regional off grid marketplace. Much much more than 1,000 MW of off grid/regional market to capitalise on, that is currently met by diesel around Australia on its own. To say nothing of Asia.
CCE knows it can build solar/battery/diesel systems (Microgrids) cheaper than standalone diesel systems and give 24x7 power security when you go off grid. It’s cheaper, its cleaner and it’s more reliable. There is no compromise when you go off grid, contrary to what politicians will tell you about cost, security etc.
The early adopters of microgrids are Utilities & DoD.
We have or are delivering 3 projects for DoD now on Garden Island, Bathurst Island & now we have won the Delamere Air Force base Micrgrid contract in NT.
These projects are the DoD finding their feet in the new world of Microgrids. CCE have an incredible position of incumbency with a very important customer.
The DoD have just called for another 15MW or so of tenders for Microgrids in the NT alone and CCE will be responding to that process in the coming months. There are plenty of drivers for what we do.
CCE Price at posting:
4.0¢ Sentiment: Buy Disclosure: Held
