Australian bioenergy company Delorean Corporation (ASX: DEL) has just hit the ASX on Monday after raising $14 million through an oversubscribed initial public offering (IPO).
The Perth-based corporation comprises a group of four vertically-integrated companies involved in the infrastructure, generation and retail of renewable energy.
Its IPO was led by RM Corporate Finance and Morgans Financial and closed “multiple times oversubscribed” with strong support from institutional investors plus more than 800 retail shareholders.
The company issued 70 million shares priced at $0.20 each, giving it a market capitalisation of $35.9 million (undiluted) upon listing.
Delorean managing director Joe Oliver said the company is “really pleased” with the support it has received from existing shareholders and the wider market.
“As large shareholders ourselves, we share Delorean’s vision to capture a large share of the growing bioenergy market going forward,” he added.
Four companies combine to cover full life cycle of renewable energy
Delorean Corporation encompasses the 2019 merger of Delorean Energy, Biogass Renewables, CleanTech Energy and Tekpro.
Delorean Energy is an infrastructure development and management company, Tekpro is a fabrication contractor and Biogass designs and constructs bioenergy plants in Australia and New Zealand.
Meanwhile, CleanTech was established to hold retail licences with both the Wholesale Electricity Market and the National Electric Market in Australia.
The four vertically-integrated businesses now all work together to deliver bioenergy projects across the full life cycle – from project conception to completion, processing organic waste, generating renewable energy and the monetisation of electricity, heat and gas.
Renewable energy development projects
Delorean’s operations divert organic waste from landfill to convert into electricity and gas through a process known as ‘anaerobic digestion’, which Mr Oliver described as essentially working like a mechanical cow stomach to break down waste into biogas.
Its first bioenergy plant has been operational in Western Australia since 2015.
The Blue Lake Milling bioenergy plant in South Australia and Ecogas bioenergy plant in New Zealand are both under construction for third parties.
The company also has two “shovel ready” projects in SA and Victoria lined up for investment and construction.
In addition, Delorean’s plans over the next 12 months include the active development of a further two projects In Victoria and Queensland.
IPO funds to develop DEVO project
Delorean said it plans to use the IPO proceeds to “continue developing renewable energy infrastructure as it focuses on being a sustainable player in Australia and New Zealand and pursuing new opportunities for growth”.
“Importantly, the receipt of IPO funds will be a key enabler for the near-term FIDs (final investment decisions) expected on the two ‘shovel ready’ projects,” it stated in today’s announcement.
The funds will particularly be allocated toward the development of the Delorean Energy Victoria One (DEVO) project in Stanhope, Victoria. The 90%-owned project will involve the construction of a bioenergy facility designed to collect an estimated 40,000 tonnes of waste per annum to produce about 1.2 megawatts of electricity.
“We look forward to deploying the IPO capital into our infrastructure project pipeline to realise the vision of direct bioenergy asset ownership and operation as a national renewable ‘gentailer’, creating shareholder value through our vertical integrated platform,” Mr Oliver added.
Company already posting profits
In the financial year ended June 2020, Delorean posted revenue of $31.2 million, net profit after tax of $2.6 million and earnings before interest, tax, depreciation and amortisation of $3.6 million.
The company has adopted a unique business model with revenue generated from both suppliers and customers. It charges gate fees for the acceptance of organic products and waste, then sells the converted electricity, heat and gas to wholesale and retail clients.
Landfill levies are considered a key regulatory tool to improve recycling and fund environmental liabilities from waste generation. In most states of Australia, these levies continue to trend upward, giving companies a good incentive to divert their waste from landfill to bioenergy plants.
This supports the assumption that the more landfill levies increase, the higher the potential for Delorean to get paid for organic waste disposal.
Delorean also makes money from power purchase deals secured with third parties via CleanTech, contracts to design, construct, commission and operate renewable energy infrastructure, as well as the design, fabrication and installation of tanks, pipework and processing infrastructure for third parties.
Delorean’s board includes co-founders Hamish Jolly and Joe Oliver as executive chairman and managing director, respectively, as well as former Tox Free Solutions managing director Steve Gostlow as a non-executive director. (Tox Free was bought out by $5.1 billion Cleanaway Waste Management (ASX: CWY) in 2017 for $831 million.)