Xebec Adsorption Inc. - Investor Relations

Corporate Presentation May 2012Forward looking statements Certain information regarding Xebec Adsorption Inc. (“XBC" or the "Company") set forth in this Presentation contains forward -looking statements. The use of any of the words "plan", "expect", "project", "intend", "believe", "should", "anticipate", "estimate" or other similar words, or statements that certain events or conditions "may" or "will" occur are typically intended to identify forward-looking statements. Forward-looking statements are not based on historical facts, but rather on XBC's internal projections, estimates or beliefs concerning, among other things, future growth, results of operations, product offerings, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, plans for and results of sales activities, business prospects and opportunities. These statements are only predictions, not guarantees, and actual events or results may differ materially. In particular, forward-looking statements included in this document include, but are not limited to, statements with respect to: XBC's growth strategy, technology development and growth plans. The forward-looking statements contained herein are subject to numerous known and unknown risks and uncertainties that may cause actual results to vary, including but not limited to risks associated with: the impact of general economic conditions in Canada, Australia, the US and the UK as well as certain other countries in which XBC operates; industry conditions including changes in laws and regulations, and changes in how they are interpreted and enforced, in Canada, Australia, the US and the UK as well as certain other countries in which XBC operates; changes in both corporate and governmental budgets, as well as changes in personnel of the Company's current and prospective customers, competition; lack of availability of qualified personnel; the results of sales and related activities; negotiating with foreign governments as well as country risk associated with conducting international activities; fluctuations in foreign exchange or interest rates; changes in income tax laws or changes in tax laws; ability to access sufficient capital from internal and external sources; and other factors, many of which are beyond the control of the Company. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect XBC's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). With respect to forward-looking statements contained in this document, XBC has made assumptions regarding: availability of skilled labour; timing and amount of capital expenditures; future exchange rates; the impact of increasing competition; conditions in general economic and financial markets; effects of regulation by governmental agencies; future operating costs; and other matters. Although the forward-looking statements contained in this document are based upon assumptions which Management believes to be reasonable, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. Management has included the above summary of assumptions and risks related to forward-looking information provided in this document in order to provide readers with a more complete perspective on XBC's current and future operations and such information may not be appropriate for other purposes. XBC's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that XBC will derive therefrom. The forward looking statements or information contained in this Presentation are made as of the date hereof and the Company undertakes no obligation to update or revise any forward looking statements or information, whether as a result of new information, future events or otherwise unless required by applicable securities laws. The forward looking statements or information contained in this Presentation are expressly qualified by this cautionary statement. The past performance of XBC presented herein, including the case studies referred to in the Presentation, do not guarantee future results for the Company. The historical performance of XBC, including the case studies referred to in the Presentation, are shown for illustrative purposes only. www.xebecinc.com 2 Mission Statement Provide utilities, municipalities and industry with innovative, end-to-end gas upgrading and conditioning solutions that transform raw gases into marketable sources of clean energy. www.xebecinc.com 3 Capital Markets Profile  Exchange and Ticker Info:  Shares Outstanding:  Shares Fully Diluted:  Stock Price (June 18, 2012): XBC on TSX 39.3 M 53.4 M $0.38  52 Week High / Low:  Approx Market Cap (June 18, 2012):  2011 Revenues: $0.45 / $0.09 $15 M $14.2 M  2012 - 3 Month Revenues:  2012 - 3 Month Net Income:*  Inside Ownership %:  Institutional Ownership %: *Resulted from Patent Sale to Air Products www.xebecinc.com $1.5 M $3.2 M 25% 46% 4  Total estimated revenue over 4 years .5M.xebecinc.$45M www.com 5 .Investment Considerations  Leading global technology Company offering end-to-end gas upgrading and purification  Global distribution strategy in markets that are experiencing significant near term and long term growth  Growing list of customers both new and recurring  Proprietary set of products with significant advantages over competition  Completed restructuring and recap in 2011 … platform built for growth and profitability for 2012 and beyond  Strong balance sheet and working capital in place to grow business  Solid backlog of $15M and growing  Key Customer agreements in place including exclusive distribution agreement for 15 biogas plants with Golden Green in China  Plants range from $1.7M to $5. manufacturer and operator of natural and renewable gas systems and hydrogen purification Strategy • Leverage key technological advantages into incremental sales through direct and indirect channels www. Canada Toronto Stock Exchange (TSX: XBC) Markets Focus •Biogas for pipeline injection •Natural Gas Vehicles(NGV) for transportation • Associated gas purification in the Oil & Gas industry •Hydrogen purification for transportation and industrial use adjkhdajksdhakdja Who we are Leading designer.Natural and Renewable Gas Focus Global presence. with headquarters in Montreal.xebecinc.com 6 . International Presence Vancouver (BC) Blainville (QC) Shanghai Singapore Headquarters in Blainville (QC) Manufacturing and Sales R&D in Blainville (QC) Sales and customer support Office in Vancouver (BC) Manufacturing and Sales in Shanghai Sales Office in Singapore Ability to gain business and service customers worldwide www.com 7 .xebecinc. com 8 . Iwatani www. Terasen Gas Hydrogen purifiers for hydrogen recovery  Evolving market segment  Market-leading performance for smallcapacity hydrogen purifiers  Syngas purification Associated Gas (Oil & Gas industry)  Evolving market segment  Market-leading performance for associated gas purification  Key Customer:  Venocco.Business Segments Natural gas dryers for NGV refueling stations  Growing market  Cost leadership through Chinese manufacturing  Key Customers: Clean Energy. Air Liquide. Montauk Energy. Sinopec. Warren   Key Customers: HydroChem.xebecinc. high purity. Halla Engineering. Linde. Petrochina. Shell Biogas upgrading plants  Rapidly growing market  High recovery. low energy plants  Key Customers: SEMPRA. Technology . com 10 . develop and test gas separation technologies in line with market and customer requirements  Ongoing development of next generation biogas upgrading technology  Same PSA technology is applicable to all products Pure Innovation™ www.xebecinc. structured adsorbent and Rapid cycle PSA  Sale and license back from Air products of 130 patents or applications in 39 patent families worldwide (March 2012) Xebec unit installed at ExxonMobil refinery in 2007  Exclusivity for 2 years  Ability to simulate.Xebec Technology Proprietary Products and IP Assets  15 years of dedicated development in gas purification & separation and over $60M invested prior to current management  Xebec owns the IP related to its products design  Complete proprietary product line with respect to rotary valves. xebecinc.Products Biogas (BGX) Natural Gas (NGX) Hydrogen (H2X) Associated Gas (AGX) www.com 11 . xebecinc.com 12 .Key Customers & Partner Biogas (BGX) Natural Gas (NGX) Hydrogen (H2X) Associated Gas (AGX) 20 customers 500+ customers 60 customers 4 customers 1 Partner 2 installations in the USA 1 in Indonesia 1 in India 5000+ installations in 40 countries 175 installations in 15 countries www. Market Summary: Natural Gas as Transportation Fuel . Switzerland.Natural Gas Market – Global Focus Average % NGV growth 2000 to present by region 60%  Asia has been growing at 51%  The EU has seen growth in the NGV market space and is planning for accelerated growth in Germany. Spain and others  The U.xebecinc. Africa www. Sweden.A. L.A. which will lead to significant future growth in the NGV sector – Economics are driving growth currently  Latin America is continuing to grow its NGV fleets  Africa is seeing good growth 50% 40% 30% 20% 10% 0% Asia Europe N. Italy.com 14 . Austria. and Canada are in the process of introducing favorable legislation.S. www.Projected US NGV Refueling Requirements 2012 2013 Total Number of Natural Gas Stations 2014 2015 253 449 704 1220 School Bus Refueling Station Total Number of Liquid Natural Gas Stations 102 196 322 479 Total Number of Liquid Natural Gas Plants 27 40 53 66 © NGVAmerica Projections to 2015 The trend towards the adoption of natural gas vehicles will require as much as 6B$ investment in infrastructure.com 15 .xebecinc. from which Xebec will benefit. Market Opportunity: BIOGAS . Fit in the Renewable and Natural Gas Value Chain www.com 17 .xebecinc. 3 million in 2010  Growth to $338.9 million in 2016 www.xebecinc.com 18 . and Asia  The global market for biogas upgrading equipment was $52.A.8% compound annual growth rate to reach nearly $83.1 million in 2011 and is expected to increase at a 22.Biogas Market: Focus on N.5 million by 2016  5-year compound annual growth rate (CAGR) of 22%  The Asia-Pacific market is estimated to reach nearly $30. S.1 Million order for a biogas upgrading plant for Heilongjiang Loonggas Investment Co.Biogas Segment: Key Business Highlights  Started and commissioned Xebec’s first two biogas plants: Halla (Korea) and Sempra (U.xebecinc.)  Received a RMB 7. Ltd.5M  Total estimated revenue over 4 years ..com 19 .7M to $5.$45M www.5 Million for landfill gas upgrading system from Golden Green Hal Snyder (Sempra). Mayor Sam Abed (Escondido) and Kurt Sorschak at press event in February 2011  Key agreements in place including exclusive distribution agreement for 15 biogas plants with Golden Green in China  Plants range from $1. in China  Received order for RMB 11. xebecinc. US Seoul. Korea Austria Landfill Digester CNG/LNG CNG CA. US Austria Switzerland Switzerland CA.com 20 . US Digester Landfill Digester Digester Landfill Digester Digester Digester Digester Pipeline Pipeline Pipeline Pipeline Turbine CNG Pipeline Pipeline CNG Location Biogas Source End-Use Daesung SKS 2010 . US OH.Xebec Biogas Installations Project 2006 .2009 Scenic View Dairy Rumpke Landfill Widnau Lavigny Farm UNH SKS Swiss Farmer STEP Hilarides Dairy MI. US Switzerland Switzerland NH.YTD Sempra Energy Halla Engineering SKS SKS SKS Verdemobil WELtec Huimiing Terasen Gas PT Indo Raya Seoul. Korea Austria Austria Austria France China China Canada Indonesia Waste Water Digester MSW MSW Waste Water MSW Agricultural Digester Landfill Landfill Chemical Plant Pipeline CNG Pipeline Pipeline CNG CNG CNG CNG Pipeline Pipeline Extensive experience in the biogas segment gained through the successful completion of multiple international projects 70% of all upgrading projects are for renewable gas to transportation fuel www. 200$* (per scfm per year) 1.200$ (per scfm) based on Xebec’s technological advantage 21 .1B$ market per year for renewable gas www.xebecinc.Market Analysis – Landfill Sites North America Available Sites 300 to 350 landfills • Accepting waste or have been closed for less then five years At least 1.8 mm tons of waste in place Minimum Flow of 800 SCFM • • Addressable market based on flow 461 342 SCFM X 2.com * 2. 20 MGD Minimum Flow 350 SCFM Addressable market based on flow 100 000* SCFM X 2.200$* (per scfm per year) 220M$ market per year for renewable gas www.Market Analysis – Waste Water Treatment Plants Available Sites 70 to 100 WWTP • • • Operational AD Influent of min.com * 2.200$ (per scfm) based on Xebec’s technological advantage 22 .xebecinc. Market Summary: Hydrogen Purification . 4 billion in 2015  Largest segment .2 billion in 2010  expected to increase to $5.3 billion to $3.1 billion in 2015 www.xebecinc.com 24 Xebec unit installed at ExxonMobil refinery in 2007 . to $1.Energy Conversion expected to increase from $1.7 billion by 2015  Second-largest segment – Hydrogen Production expected to increase from $650 million in 2010.Hydrogen Purification Market  Global investment in plants and equipment  estimated to be worth $2. Continued relationship +10 years) with solid orders in 2011 www. the leading hydrogen supplier in South Korea H-3100 in Japan for the HydroEdge project  Iwatani .xebecinc..05 Million for a H-3200 hydrogen purification unit from Deok-Yang Company Ltd.Hydrogen Segment: Recent Highlights  Delivered an H-3200 to Grasys (Russia)  Received an order $2.com 25 . com 26 .xebecinc. together with H2 gas scrubbing. as a solution. have a promising growth in the the Syngas markets www.Market Overview – H2 and Syngas Gasification Past Present Future Biofuels Gasification Plant Steam power Syngas clean-up Hydrogen separation Fuell cells Refinery Vehicles Xebec PSAs. Market Summary: Associated Gas . com 28 .  This is more than the potential yearly emission reductions from projects currently submitted under the Kyoto mechanisms.  Xebec’s PSA technology can help clean associated gas and make it available as a replacement for diesel.Market Summary: Associated Gas  Burning and/or flaring.3 trillion cubic feet) of natural gas are being flared and vented annually. wastes a valuable clean energy resource and emits carbon dioxide.  Flaring gas adds about 350 million tons of CO2 in annual emissions. www.xebecinc.  Xebec has entered into a co-marketing agreement with Primoris.  The World Bank estimates that over 150 billion cubic meters (or 5. a greenhouse gas. Associated Gas : Recent Highlights  Delivered an M-3200 system ($1.xebecinc. a leading producer of Viscose Stable Fiber ("VSF") in Asia. India. Gujarat State.2M) to PT Indo Raya Kimia in Indonesia. Xebec's PSA was purchased by Grasim Industries Limited. PXP associated gas project for pipeline injection www.  The total value of the contract was approximately CAD2.3 million. a leading producer of carbon disulphide in Asia Pacific  Received an order for an M-3200 system to upgrade natural gas at a greenfield chemical plant to be constructed in Valayat.com 29 . Sales . Competition.Growth Strategy. Backlog. Improve Margins  Tightly Control SG&A  Focus on higher margin recurring revenue opportunities (aftermarket & gas conversion/BOO)  Grow Revenues Growth  Launch new Associated Gas product applications  Integrate current product offerings into end-to-end solutions  Focus on North American NGV market  Capitalize on upcoming Quebec Biogas opportunities  Expand the sales distribution network in Asia-Pacific.xebecinc. Africa and in South America  Integrate other profitable companies in order to increase its critical mass through M&A activities  Carry on its R&D efforts in Blainville and through partnerships with universities www.Return to Profit and Growth Profit  Leverage Chinese Supply Chain .com 31 . Plants range from $1.Backlog and Revenue Model  The current backlog as of June 2012 is $15M  The Golden Green agreement stands for 15 biogas plants.7M to $5. the Company intends to move from being solely an equipment manufacturer to being an owner and operator of biogas plants  Partnership agreement with Primoris Service Corporation in order to expand offering in the associated gas market to the oil & gas industry www. Total estimated revenue over 4 years: $45M  In the Biogas market. for which one PO has been received.com 32 .xebecinc.5M. Linde and Iwatani www. •Zander Aufbereitungstechnik GmbH • Tecno Project Industriale s. Technologies Corp. •Air Liquide.. •Ros Roca Group.Competitors Biogas (BGX) •Acrion Technologies Inc.. • PSB Industries Inc. • Haase Energietechnik AG. •Guild Associates Inc. • Flotech/Greenlane. • Aircel Corp. •Lackeby Water Group (PURAC). •MT-Biomethan GMBH. Natural Gas (NGX) Hydrogen (H2X) •SPX Corp. •Cirmac International BV.l. •MalmBerg Water AB • A.com 33 .xebecinc.. •Xi’An Unionfilter Purification Equipment Co.C. Ltd.. •Air Liquide. HydroChem. • Yit Vatten Och Misjoteknik.r. •Carbotech AC GmbH.R. Parker-Hannifin Corporation.. xebecinc.com 34 .Competitive advantage  Lower capex and opex than any competing process  Higher recovery  Proven reliability and simple to maintain  Higher purification rate in one single process  Removes N2 and O2 in one single process  Lower foot print www. Financial Information FY 2011 and Q1 2012 . xebecinc.5 M 2011 2010 Natural gas dryers 32% 41% Aftermarket & Service 11% 23% Air dryers (industrial) 1% 3% Gas purification 35% 33% Engineering services 11% 1% Licensing 11% 0% www.Diversified Product Lines (% of revenues) 2011 – $14.2 M 2010 – $13.com 36 . xebecinc.Diversified Geographic Reach (% of revenues) 2011 2010 Middle North others Europe Asia East 2011 2010 0% 1% America 72% 53% 6% 10% 1% 11% 20% 20% www.com 37 . 950) 2010 13.2011 Selected Financial Information (in C$ unless indicated otherwise) For the twelve months ended Dec 31 Revenue Gross margin (%) EBITDA Net loss 2011 14.5M  Reflects a better revenue recognition policy www.000 (1.211 2% (12.456.203.000) (13.463 29% 100.000.475.592.com 38 . this improves in 2012  Reflects a non-recurring licenses revenue of $1.711)  Reflects the effect of the cost control measure and the restructuring of the company  Lack of working capital slowed the growth.xebecinc. in the UK and Canada. he was the General Manager of the Canadian division of Domnick Hunter’s air dryer manufacturing facility.  Graham Robson. From 2004 to 2007. CFO of Positron Networks PNI Inc. he was a partner of NanoVenture LLP.Management  Kurt Sorschak. Director. he was Vice-President and Chief Financial Officer of Eloda Corporation.xebecinc. From September 2008 to May 2011. Toyota South Africa. program management and supply chain. Mr. Sorschak also worked in different managerial capacities in Europe.. Favreau is Vice-President and Chief Financial Officer of Xebec since June 2011. Philips Electronics and Rolls Royce. From September 2006 to September 2008. operations improvement. Ford South Africa. with General Motors South Africa. after Parker-Hannifin Corporation bought Domnick Hunter Ltd. Robson held positions in manufacturing. he became the General Manager for the Xebec division of Parker-Hannifin Corporation. in 1982. He obtained an Associate Degree from the American University in Paris. Robson held the positions of VP Business Development and Director Supply Chain. www. Prior to joining Xebec. Germany. In 2005. He is a Mechanical Engineering graduate from the Durban University of Technology. Vice-president & CFO: ► Mr. Robson held middle and senior management positions with Toyota. Mr. in 1988. France.  Eric Favreau. President & CEO. from November 2005 to September 2006. Philips Electronics UK and Rolls Royce plc. of Xebec since 2007. Mr. and from March 2005 to November 2005. at that time the largest adsorption dryer plant in North America. he was Chief Financial Officer of Noveko International Inc. and a Masters of Law Degree from the University of Munich. Atlantis Diesel Engines. an investment fund. Founder ► Kurt Sorschak is the President and the Chief Executive Officer. Vice-president Asia-Pacific ► Since joining Xebec in November 2004.com 39 . Mr.  Total estimated revenue over 4 years .7M to $5.xebecinc.com 40 .Investment Considerations  Leading global technology Company offering end-to-end gas upgrading and purification  Global distribution strategy in markets that are experiencing significant near term and long term growth  Growing list of customers both new and recurring  Proprietary set of products with significant advantages over competition  Completed restructuring and recap in 2011 … platform built for growth and profitability for 2012 and beyond  Strong balance sheet and working capital in place to grow business  Solid backlog of $15M and growing  Key Customer agreements in place including exclusive distribution agreement for 15 biogas plants with Golden Green in China  Plants range from $1.5M.$45M www.