Hydrodec Group

www.hydrodec.com TICKER: HYR     EXCHANGE: L

Hydrodec's technology was patented in 2001, with a first demonstration refining facility commencing construction in 2002. Successful start up of the demonstration facility accelerated the growth of Hydrodec, and resulted in the formation of Hydrodec Group plc, which listed on AIM in late 2004. Hydrodec's technology is a proven highly efficient oil re-refining and chemical process which is being initially targeted at the multi-billion US$ market for transformer oil used by the world's electricity industry. The Group takes spent oil, including polychlorinated biphenyl (PCB) contaminated oil as the primary feedstock which is then processed at its two plants enabling 99 per cent or greater recovery of oil for reuse while also eliminating PCBs a toxic additive banned under international regulations without environmentally harmful emissions. The group sees the USA Japan and East Asia as the gateway to early exploitation of the full potential of Hydrodec's technology.


Published: Feb 24 2009

The announcements of February 10th and 17th outlined that conditions in the US market regarding the selling prices of transformer oil falling more rapidly than oil feedstock prices (as a result of oversupply rather than lack of demand), which has resulted in margin pressure , together with lower production than planned in December 2008 at Canton, have resulted in the company not being in a position to agree terms on the debt financing of the proposed Laurel, Mississippi plant, and that the company had a working capital shortfall of £450k on 17 February 2009.

On 23 February 2009 Hydrodec announced that it has raised approximately £1.9m before expenses from the placing of 19,230,114 new ordinary shares of 0.5p. This will be used to provide additional working capital and should cover the current working capital shortfall and allow the company to report an operating profit in the current year.

Since the earlier announcements, there are signs of stabilisation in the market price of SUPERfine in the US, and that feedstock prices are beginning to decline. With Canton expected to reach full capacity in the second half of the year, margins can be expected to recover and trading in the US will be profitable.

These issues have not occurred in the Australian market where trading remains profitable and cash generating.
Meanwhile, Hydrodec attained certification in Australia for its process to be used in treating extremely toxic, concentrated PCBs with effective zero air emission. This potentially opens up a highly lucrative market for treating PCB-contaminated transformer oils which can be sold as SUPERfine, but with a dramatic reduction in feedstock cost. Hydrodec will continue its application in the US for a PCB treatment licence that should allow Canton to generate fees for the treatment of contaminated transformer oils as well as enjoy good margins.

Although the market conditions and holding the Laurel plant in abeyance are not welcome news, the announced funding should allow Hydrodec to continue to develop its US business and to move into larger and highly profitable areas in the future.

We will be updating our forecasts in March.

Addressing huge market to re-refine oil
Published: Jul 07 2008

Patented process for re-refining transformer oil

US plant being commissioned

Base case DCF shows fair value 108p / share, versus 51p now