Innovative Renewable Energy Specialist to Grow

Innovative Renewable Energy Specialist Fuelled for Growth

2009–10 Highlights
• Revenue, earnings and profits increase
• Greenlane Biogas growth accelerates with strong sales of patented, standardised biogas upgrading units that produce high quality bio-methane to fuel vehicle fleets, communities, pipeline natural gas and power grids
• Core upgrading technology delivered to the world’s single largest biogas digester plant in Güstrow, Germany, five times bigger than projects undertaken by any competitor in Europe
• Patent Co-operation Treaty (PCT) status attained, underpinning the disruptive technology developed for Manuka and Kanuka class biogas upgrading units
• North America office opens with contract to build Canada’s first agricultural biogas upgrading plant
• Greenlane commands 33% share of the biogas market in Europe, 31% globally and has a 20-year track record in the sector with successful projects operating in Spain, France, Japan, Korea, Sweden, UK, Germany, Canada and elsewhere
• Creditable performance in gas compression systems with huge Amazon project and quick to market solutions available
• Growth in contribution from AfterCare service, remote monitoring and maintenance offering
• Moving from project to product business model with the focus on standardisation

International renewable energy specialist, Flotech, is solidly positioned for continuing profitable growth after an outstanding 2009-10, highlighted by strong sales of its unique standardised biogas upgrading units, expansion into North America and delivery of a huge compression project in the Amazon.

In the year to March 31 2010 the company grew pre-tax earnings by 80% on higher revenues and almost doubled its profitability. The result reflects a highly creditable performance across its wholly owned Greenlane Biogas, Gas Compression, Kallt Heat Exchange and AfterCare trading divisions as well as healthier margins, lower component costs from the push towards modularisation, prudent financial management and favourable foreign exchange.

“Flotech is an international business with world-class energy technology solutions that are in demand as nations move to conserve and protect the environment against the ravages of man and impacts of climate change,” said Managing Director, Steve Broadbent. “As a successful, long experienced solutions provider with a credible reputation built over 20 years, we’re focused on extending our influence, competitive advantage and market share in chosen niches as governments and private entities rapidly step up their energy investments.”

Greenlane Biogas
In the 2009-10 financial year Greenlane Biogas extended its leadership in the small and medium sized biogas sector with orders for 14 of its patented, off the shelf biogas upgrading units that produce high quality bio-methane to fuel vehicle fleets, communities, pipeline natural gas and power grids. Five of the new plants are installed in Sweden, an early adopter of renewable energy technologies and currently Greenlane’s most important market.

Another milestone was delivery of core upgrading technology to the world’s single largest biogas digester plant in Güstrow, Germany, a project five times bigger than any undertaken by a competitor in Europe. The facility transforms biogas generated from biomass digesters into pipeline quality bio-methane, which is then delivered to the natural gas grid.

Greenlane is planning to establish its own office in Germany later in 2010 with sales, service and engineering support on hand to win work from increasing demand for biogas generation. Forecasts suggest that there will be a need to build 200-300 plants in the next decade.

“We intend to be at the forefront of the expansion opportunity with an offer that includes industrial, agricultural and municipal customers,” Mr Broadbent said.

In the past year Greenlane has opened a North American base in Vancouver, Canada, with the first projects already being implemented, including the installation and commissioning of Canada’s first agricultural biogas upgrading plant. Four new projects are targeted to start in 2010, with many more in 2011.

“Greenlane has an established reputation as a proven solution provider in the renewable energy sector, particularly in Europe, although the technology is less well known in North America,” Mr Broadbent said. “However, we can demonstrate that our medium sized or larger sized units can deliver customers an excellent return on investment with attractive capital, installation, operational and maintenance costs.”

Greenlane now commands 33% of the biogas upgrading market in Europe and 31% globally. It has designed, manufactured and installed the equivalent of 100 million litres of petrol per year using its proprietary water scrubbing technology which is carbon neutral.

In 2010 –11 Greenlane will continue to seek suitable partners, preferred supplier arrangements and additional licensing agreements to build market share and leverage its first mover advantage in providing standard modules that are dependable and affordable.

Gas Compression Systems
While a strategic priority is to build the Greenlane business, Flotech’s gas compression division continued to perform well despite the overall slowdown in the oil and gas sector in the year under review.

A significant contract for nine giant fuel gas booster compressors, designed and built by Flotech to operate under extreme high pressure, have travelled across the world to Manaus, in the heart of the Amazon, ready to be used at three different power plants to convert diesel engines to natural gas.

The NZD26 million Brazilian project, the biggest and most challenging undertaken by Flotech Compression to date, and the result of a customer referral, won the prestigious Deal of the Year in the 2010 New Zealand Trade and Enterprises Export Awards – the second time the company has received the prestigious title – and two new projects to supply similar compression equipment to Turkey.

“We beat competitors on price and also innovation with special control, engine interfacing and load sharing systems as well as a long and valued relationship with our customer, Wärtsila,” Mr Broadbent said. “We’ve worked together for over 15 years on developing unique solutions for their gas/diesel engine conversions as well as our own.”

Flotech is well positioned as a vertically integrated compressor packager to meet emerging market opportunities in the gas compression sector and maintain momentum with quick to market solutions geared to a solid international customer base. Forward orders for smaller units remain positive though at this point the FPSO market is sluggish, reflective of the current state of the exploration market.

In March 2010 Flotech formed a 50:50 joint venture (JV) company with VME Process, a US-Malaysian firm, similar in size to Flotech. The JV will target larger FPSO compression opportunities. Flotech will provide full package design and major procurement services while VME brings fabrication expertise and an offshore client base to the new operation.

Kallt Heat Exchange
The Kallt Heat Exchange equipment and solutions division extended its Australasian market leadership in 2009-10 as the main supplier of ammonia industrial refrigeration coolers. Electric power utilities, especially in the hydro sector, also continued to rely on both new and replacement Kallt equipment for efficient cooling and uninterrupted generation.

“We achieved a good result because customers have a sense of security knowing that Flotech is trusted by New Zealand’s largest generators such as Manapouri and Benmore, and that Kallt equipment has kept those plants operating safely and reliably for many years,” Mr Broadbent said.

AfterCare
The AfterCare division, supplying parts, back up, maintenance and remote management services to clients performed beyond expectations in 2009-10 and has quickly become an important contributor and driver of growth.

”It is increasingly proving to be a point of difference for us with more and more customers realising the value of our AfterCare service and rewarding us with increasing levels of work,” Mr Broadbent said.

In the past year, the AfterCare team has doubled in size with quality staff brought on board to cope with increased activity from Greenlane customers in both Europe and the Americas and more spare parts sales worldwide. Permanent staff are based in Singapore, Sweden, Canada and New Zealand.
AfterCare is now a truly international arm of the Group, set to grow further in the coming year.

Growth Strategy
The key driver is to transform the business model from project based to a supplier and marketer of standardised products that can be delivered fast and efficiently to market. A range of biogas upgrading models has been established with a number of options customers can select – a model akin to the automobile industry.

“The historic, one off, man-hour intensive jobs meant that revenue growth has been piecemeal, albeit that the company has continued to sustain strong increases in revenue, earnings and profitability year on year,” Mr Broadbent said. “We recognised the need to move from relying on large single contract projects to a smoother and more manageable production oriented approach, especially for biogas systems construction. Standardisation to mass produce systems of varying sizes is integral to our strategy to build a pipeline of products, accelerate sales and gain efficiencies in operations from cost savings to faster delivery times to continually enhance customer satisfaction. We’re making good progress, but much more lies ahead.”

The company has been organised with the design, testing and prototyping hub for the Group’s products, software, instrumentation and services, in New Zealand at a new, custom-built global headquarters and assembly plant at Wiri, south of Auckland. Regional sales, service support and parts supply hubs are located in key markets to position expertise close to the customer while a virtual team monitors emerging bio-methane sector opportunities in Sweden and other advanced markets.

Investment is continuing in lifting core competencies, particularly in research and development, sales, aftercare, quality and support services as well as upgrading financial management and information and reporting systems to meet the needs of an international business with customers in more than 30 countries, Mr Broadbent said.

“Flotech is confident about its future prospects, particularly in the biogas upgrading sector. The company is in a strong position with an international reputation as an innovator and an enviable track record of success. We have an offering that is attractive to energy saving customers as well as potential partners who wish to work with us.”

ENDS

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