hydrodec group update on strategy

21 October 2013

Hydrodec Group is a research client of Edison Investment Research Limited

Hydrodec has completed two transformative transactions during FY13. It has formed a strategic partnership in the US that enables it to more than double US capacity in the medium term without recourse to external finance. It has acquired OSS Group, which gives a secure source of used industrial oil in the UK and provides a platform in the UK for re-refining both used transformer oil and used industrial oil. The proposed private placing and open offer raising up to £24.2m (gross) and associated £12.5m debt/equity swap will provide long-term financing for the OSS purchase and capital to develop the industrial oils process, support construction of re-refining facilities in the UK and virtually eliminate debt from the balance sheet. We issue revised estimates reflecting the OSS acquisition and financing activities. We now see fair value at £139m, equivalent to 18.9p/share compared with £58.3m (13.8p/share) previously.

Year end Revenue (US$m)

PBT* (US$m)

EPS* (c)

DPS (c)

P/E (x)

Yield (%)

12/12 26.1 (10.8) (2.6) 0.0 N/A N/A 12/13e 43.0 (8.8) (2.2) 0.0 N/A N/A 12/14e 81.4 (2.9) (0.6) 0.0 N/A N/A 12/15e 108.1 3.2 (0.0) 0.0 N/A N/A

Note: *PBT and EPS are normalised to exclude exceptional items, non-cash interest charges and share-based payments. EPS is calculated assuming 60% take-up of the open offer.

Platform for growth in the US In April management completed the strategic partnership agreement with G&S Technologies Group. This significantly de-risks Hydrodec’s plans for expansion in the US by giving access to long-term, stable supplies of used transformer oil feedstock and a mechanism for funding a proposed 140% increase in capacity.

Platform for growth in the UK In September Hydrodec acquired OSS Group, the UK’s largest collector, consolidator and processor of used lubricant oil. The transaction is expected to double revenues and be earnings enhancing from 2014 onwards. Strategically it gives a base for collecting used transformer oil from the UK and overseas, accelerating Hydrodec’s programme for re-refining used transformer oil in the UK. It is also a major step towards entering the larger industrial oils market as it provides a secure source of used industrial oil feedstock for a future UK re-refining facility.

Valuation: Ascribing value for long-term projects Our valuation is based on the sum of discounted cash flows from programmes in which Hydrodec is engaged, including both operational activities and those at the planning stage. We currently see fair value at £139m, equivalent to 18.9p/share (post-dilutive impact of current fund-raising activities). This rises to £180m (24.6p/share) as the programmes at the planning stage go live and the discount for executional risk is therefore reduced. This valuation excludes upside potential from further expansion in the US, mainland Europe, Australia and Japan.

Hydrodec Group Update on strategy

Strategic acquisition and fund-raising

Price 12.38p Market cap £52m

US$1.55/£ Net debt (US$m) end June 2013 18.0

Shares in issue (prior to private placing, open offer and debt/equity swap)

422.5m

Free float (prior to private placing, open offer and debt/equity swap)

60%

Code HYR

Primary exchange AIM

Secondary exchange N/A

Share price performance

% 1m 3m 12m

Abs 5.3 28.6 39.4

Rel (local) 4.1 27.8 21.9

52-week high/low 13.87p 8.10p

Business description

Hydrodec has proprietary technology for re-refining used oils with strong sustainability credentials. This has been proven commercially by re-refining used transformer oil, including that contaminated with polychlorinated biphenyls (PCBs).

Next events

Prelims March 2014

Analysts

Anne Margaret Crow +44 (0)20 3077 5700

Roger Johnston +44 (0)20 3077 5722

[email protected]

Edison profile page

Oil & gas

http://www.edisoninvestmentresearch.com/research/company/hydrodec-group

Hydrodec Group | 21 October 2013 2

Investment summary: Clean-tech oil-refining

Company description: New oil for old Hydrodec has a proven proprietary technology for re-refining used oils, which has strong sustainability credentials. This has been proven commercially by re-refining used transformer oil and has the potential to achieve higher margins than existing commercial processes for re-refining used industrial oil. Management is generating an improved performance from existing facilities in the US and Australia, achieving positive EBITDA in September 2013. The strategic partnership with G&S Technologies Group, completed in Q213, creates a structure for more than doubling capacity in the US within two years. With the acquisition of OSS Group, the UK’s largest collector, consolidator and processor of used lubricant oil in Q313 for £4.65m, Hydrodec took a major step towards re-refining used transformer oil in the UK and entering the larger global market for re-refining industrial oils. It is likely that these strategic goals will also be progressed by working with an established industry partner. Re-refining OSS’s used lubricant oil into “good-as-new” lubricant oil will generate significantly higher gross margin than that currently produced.

Financials: FY13 a transformative year Exhibit 1: Summary of revisions to estimates FY12a FY13e FY14e FY15e Old New Old New Old New Revenues (US$m) 26.1 29.2 43.0 33.9 81.4 57.5 108.1 EBITDA (US$m) (5.2) (1.5) (2.3) 1.9 4.1 9.5 11.1 PBT* (US$m) (10.8) (6.7) (8.8) (4.5) (2.9) (0.2) 3.2 EPS* (c) (2.6) (1.6) (2.2) (1.1) (0.6) (0.0) (0.0) Net (cash)/debt (US$m) 15.9 24.4 (22.1) 28.7 (22.1) 23.4 (29.5) Source: Edison Investment Research. Note: *PBT and EPS are normalised to exclude exceptional items, non-cash interest charges and share-based payments.

Our revised estimates show the impact of the OSS acquisition, which is expected to double revenues and be earnings enhancing from FY14 onwards, and the proposed private placing, open offer and debt/equity swap, which should eliminate most of the borrowings from the balance sheet.

Sensitivities: Oil spreads key Oil spreads: Theoretically Hydrodec’s margins are dependent on the difference in price

between naphthenic base oils (ICIS Pale 60) and diesel, a marker for alternative use of used transformer oil. In practice these prices move in similar directions, so the risk is related only to timing. The profitability of OSS’s existing activity and any future industrial oils re-refining activity is also affected by the spread between feedstock purchase prices and PFO selling prices.

Conservative industry: In the past, utilities have been reluctant to accept that a re-refined oil can exhibit equal or superior characteristics to new oil, although this attitude is changing.

Dependence on strategic partner and individual customers: Expansion in the US is largely dependent on G&S Technologies, the strategic partner. In FY12, prior to the acquisition of OSS, one customer in the US accounted for 50% of revenues, a second for 17%. OSS has two customers who account for an estimated 22% and 18% of revenues.

Valuation: Upside as progress made on programmes Our valuation is based on the sum of discounted cash flows from programmes in which Hydrodec is engaged including both operational activities and those at the planning stage. We currently see fair value at £139m, equivalent to 18.9p/share (post-dilutive impact of subscription and open offer). This rises to £180m (24.6p/share) as the discount for executional risk is reduced.


Company description: Green tech oil re-refining

Hydrodec was formed in 2001 to commercialise a technology that was originally developed to remove harmful PCB additives from used transformer oil, the output of which was found to yield an oil with equivalent or superior performance to new oil. This created an opportunity not only to remove harmful PCBs but also to sell re-refined oil with strong sustainability credentials. Hydrodec was listed on AIM in 2004.

Hydrodec has established two facilities that re-refine used transformer oil, the smaller in New South Wales and the larger in Ohio. The Australian facility was established in 2006 and has a single processing train capable of generating up to 6.5m litres of transformer oil annually. The Ohio facility was commissioned in 2008 and currently has four processing trains capable of outputting up to 27m litres of transformer oil annually. The strategic partnership with G&S Technologies Group, which was completed in April 2013, gives finance and feedstock to more than double existing capacity in the US. The acquisition of OSS Group in September 2013 for £4.65m gives a base for collecting used transformer oil from the UK and overseas and re-refining it in the UK. Management is also exploring opportunities for entering the mainland European and Japanese transformer oil markets through licensing and royalty arrangements.

While there is significant scope for expansion in the transformer oil market, which is worth an estimated US$1.5bn per year, there are greater potential opportunities presented by larger global markets for re-refining other types of used oil. Unlike the processes currently in use, Hydrodec’s process has the potential to recover up to 90% of the used oil feedstock, with higher quality output, significantly improving profitability. While the testing phase of the industrial oils programme is ongoing, following successful proof of concept in Q412, Hydrodec took a major step towards entering this market with the acquisition of OSS Group. OSS is the UK’s largest collector, consolidator and processor of used lubricant oil. It currently processes the used lubricant oil into PFO (processed fuel oil), a low-margin, lower-grade product. Following the injection of working capital subsequent to the acquisition, management intends to return OSS to profitability, generating an estimated US$2.1m EBIT by 2015. However, re-refining OSS’s used lubricant oil into “good-as-new” lubricant oil has the potential to generate significantly higher profits. It is likely that a UK facility to re-refine this used lubricant oil and one to re-refine used transformer oil in the UK would be constructed jointly with an industry partner.

The proposed private placing and open offer, raising up to £24.2m (gross), and associated £12.5m debt/equity swap are expected to provide long-term funding for the OSS transaction and associated working capital requirement, finance to continue developing the industrial oils process and to help with the construction of re-refining operations in the UK. This financing activity is also expected move the group into a net cash position, removing any concerns investors or potential partners may have had regarding the strength of the balance sheet.

Strategy to maximise value of IP

During 2012 Hydrodec was transformed under the direction of the new management, headed by CEO Ian Smale. It is now on a more secure footing with regards to feedstock supply and funding for both the industrial oils and transformer oil programmes. Management is addressing the large potential market through a bi-partite business model. The aim is for Hydrodec to have at least one operation re-refining transformer oil and one re-refining industrial oil in which it has an equity stake and is therefore able to have full control over the re-refining process. The profits from these operations will be supplemented by licensing fees and royalty revenues from the deployment of Hydrodec’s proprietary process. Management notes that the G&S and OSS deals are blueprints for similar transactions in the future.


Exhibit 2: Road map

Source: Hydrodec October 2013

Strategic partnership with G&S Technologies Hydrodec has been present in the US since 2008 when it commissioned its four-train re-refining operation in Ohio. Since then it has gradually built up utilisation levels to 72% by FY12 through developing relations with numerous individual utilities, OEMs and businesses recycling old electrical transformers. The facility was able to process 27m litres per annum, an estimated 7% of the US market. The situation was then transformed through a strategic partnership with G&S Technologies Group (G&S), which provides funding to increase capacity by 140% and a dependable supply of feedstock able to support up to 10 processing trains in the US, collectively capable of processing up to 65m litres of oil a year, which represents US$59m revenues at current prices.

Under the terms of the agreement, completed in April 2013, Hydrodec’s existing re-refining facility in Ohio is now owned by a new entity, Hydrodec of North America LLC. G&S has taken an initial stake of 25% in the new entity and will build this up to 49.9% as the processing capacity in the US is increased. The initial consideration for the 25% stake, paid to the group in H113, was US$1.7m. This will be followed by two further cash payments on completion of additional capacity, with the final payment in 2015. The total consideration is dependent on the future performance of the entity during 2013 and is estimated to be US$7.1m, which is equivalent to half the book value of the Ohio facility as at April 2013.

G&S is a privately owned conglomerate with a 50-year track record in the recovery and disposal of decommissioned transformers, treatment and handling of waste or contaminated transformer oils and associated asset recovery services, serving customers throughout the US. Historically it has sold the used transformer oil it collects to third parties as it has not had its own re-refining capability. In the short term, the additional feedstock from G&S is expected to significantly raise the utilisation of the existing US facility above the 72% achieved in 2012. Longer-term, the availability of feedstock underpins the US expansion programme. Following a detailed market review, Hydrodec and G&S have decided to add two trains (13.5m litres/year) at the existing site in Ohio, and are considering constructing a facility at an existing G&S site. We expect this will be four processing trains (27m litres/year). The cost of each phase of expansion will be shared 50% with G&S. Hydrodec’s share, which is expected to total US$7.75m, will be funded from cash flow, effectively funded by the consideration from G&S together with the royalties paid by the US operation (see

US strategic partnership (G&S Technologies)

European licence

New market license (Japan)

New technology designPartial Full

Value chain (partnership or acquisition)

Commission licenced plant (new market/Europe)

License Phase 2 technology

Potential extension, in USA +4 trains

Commission licenced plant (new market/Japan)

Carbon certif ication

Commission 2nd plant +4 trains US

Commission European plant

Staggered/full commission Phase 2 technology

New market entry (partnership/acquisition)

H1 2013

H2 2013

H1 2014

H2 2014

H1 2015

H2 2015

2016

Transformer oil

Lubricant oil

FinancialResolve balance sheet

Commission Canton expansion (+2 trains)

Pilot plant construction

Target positive EBITDA

Value chain (OSS acquisition)

Delivered

EnabledProtectable IP, patent process

Q3’13


below). We estimate that the 10 trains will generate US$8.7m EBITA by 2016 (excluding share of central costs), shared equally between Hydrodec and G&S. This is included in both our estimates and valuation. There may in the future also be a third facility to serve customers that are difficult to access from the other two US sites.

The share of operating profits from Hydrodec of North America LLC, distributed according to equity participation, will be complemented by a 5% royalty on the revenues generated from licensing the IP. We estimate that the value of the royalty stream at current prices, with 10 processing trains outputting a total of 55m litres of re-refined oil annually, will be around US$2.5m. The potential contribution from this single revenue stream is significantly higher than the annual payment of US$2.1m on amortisation of IP.

Acquisition of OSS We note from our analysis of companies already operating in the industrial oil re-refining segment that the ability to collect feedstock gives a key competitive advantage. In September 2013, Hydrodec accelerated its programme for re-refining used industrial oils by acquiring the business and assets of OSS Group, the UK’s largest collector, consolidator and processor of used lubricant oil. The total consideration was £4.65m, payable in cash on completion.

OSS processes around 60m litres of used motor oil each year. In 2012 it produced 47m litres of processed fuel oil (PFO) and 12m litres of recycled fuel oil (RFO). PFO is produced at the OSS plant near Birmingham. RFO is produced at OSS’s Nottingham site. Over 50m litres of used oil are sourced from OSS’s own national network of oil storage and transfer depots, supported by a fleet collecting waste material from around 31,000 customers. This is supplemented by bulk purchases from other collectors when economic.

OSS carries out a sequence of filtration and sludge removal processes to remove some of the oxidation products from used industrial oil. The primary output is PFO, a low grade fuel oil. PFO is sold to aggregates companies to make asphalt for road surfaces, coal fired power stations to increase the calorific value of coal, cement and lime plants, glass manufacturers, brewers and food processors. OSS also sells a by-product of the process, RFO. Since RFO is classified as a waste by the Environment Agency, it can only be used as a fuel by customers that are compliant with the Waste Incineration Directive standards and is therefore sold at a discount to PFO.

We expect the transaction to be earnings enhancing from 2014 onwards. In 2012 OSS generated £28.5m revenues and normalised EBITDA of c £1m. We expect EBITDA to rise to US$3.4m by FY14, then to US$4.6m in FY15, as current working capital constraints are removed with upside potential from offering a full portfolio of waste collection services across all of OSS’s sites (see Financials section on page 13). We note that the transaction multiple of 4.65x EBITDA for FY12, falling to 2.1x EBITDA for FY14 compares very favourably with the 7.8x prospective EBITDA multiple Clean Harbors paid for Safety-Kleen in December 2012.

Andrew Black, one of Hydrodec’s major shareholders, provided a revolving credit facility of £7.5m for up to six months to cover the cost of the transaction and working capital requirements. This facility is part of the debt being converted to equity.

The transaction is beneficial in other regards as well. The UK and mainland Europe combined are the second-largest market for transformer oil, which sells for a higher price in the UK than the US. Currently there are no UK-based re-refiners of high-grade transformer oil. As OSS has a nationwide collection capability and import permits, it provides a base for collecting used transformer oil from the UK and overseas to feed a UK facility re-refining transformer oil. Such a facility is likely to be jointly funded by Hydrodec and an industry partner. We model the potential transformer oil refinery as two trains initially, with a capacity of 13.5m litres/year, coming online in H214, with an expansion to four trains with a total capacity of 27m litres, coming online in H215. The total cost of


construction, shared with a potential partner, is modelled at US$15m, though this may be less if facilities such as storage tanks and depots are shared with those of a potential partner. Hydrodec will receive royalty revenues, modelled at 5%, reaching an estimated US$1.5m in 2016. This is in addition to an estimated US$14.5m EBITA (excluding share of central costs) shared between Hydrodec and a potential partner. We have included the potential net value (after costs) of this in our base case group valuation (see page 11).

PFO typically sells for 32-35p/litre compared with 65-90p/litre for virgin base oil. Converting the used oil collected by OSS (effective cost 14-17p/litre) to “good-as-new” industrial oil rather than PFO would substantially improve the gross margin. Hydrodec intends to construct a re-refining facility in the UK for used industrial oil, for which OSS will provide the feedstock. It is likely that this facility will be also be constructed jointly with an industry partner, which could potentially provide an outlet for the “good-as-new” lubricant oil that is created. We model the industrial oil refinery as 100m litre capacity, part of which is commissioned during 2015, the remainder early 2016, with a total construction cost of US$28m, shared equally between Hydrodec and an industry partner. As with the transformer oil processing facility, it is possible that the construction costs will be less if the refinery shares the partner’s depots and tanking facilities. We estimate that this facility will generate US$15.0m EBITA (shared between Hydrodec and a potential partner and excluding a share of central costs) from 2017 onwards. Ideally Hydrodec would deploy its proprietary technology in the proposed full-scale UK facility, as this would give a higher yield. We therefore model royalties to Hydrodec at 5% of revenues, reaching an estimated US$5.3m in 2017. If this proprietary technology is not sufficiently developed, Hydrodec will commence operations using a standard commercial hydrogenation technology. Our model assumes that 60% of Hydrodec’s share of construction costs is funded from asset finance, the remainder from cash. The potential value of this programme (including associated costs) is included in our valuation (see page 11).

Extracting value of IP in other geographies Management has indicated the possibility of a third-party re-refining facility in mainland Europe. It is likely that a licensing model will be adopted to address this market, which we treat as upside to our estimates and valuation.

As part of the initial development of the industrial oil process, Hydrodec commenced discussions with potential partners in Australia to secure feedstock supply and a route to market for the re-refined industrial oils produced. Discussions are ongoing. A licensing model is likely to be adopted to address this market, which we treat as upside to our estimates and valuation.

Following the expiry of a strategic alliance agreement with Kobelco Eco Solutions, part of Kobe Steel, at the end of March 2013, it is likely that a licensing model will now be applied in Japan. Hydrodec continues to work with Kobelco, but through a more flexible engagement model based on licensing the technology. As Hydrodec has resumed exclusive control and ownership of the technology, Japanese patent and wider IP rights, including development rights across Japan and the wider East Asian market, it has greater control over the process and pace of market entry in these key territories and has a wider choice of potential partners. Tokyo’s successful Olympic bid moves getting rid of its stockpile of PCB contaminated oil higher up the country’s agenda. We treat any benefit from this activity as upside to our estimates and valuation.

Technology

Hydrodec’s re-refining process As oil is used it gradually oxidises. Eventually the proportion of oxidised oil is so high that the oil no longer functions properly so it must be replaced. Hydrodec’s proprietary re-refining process, which


is based on established hydrogenation techniques, restores the structure of the oil molecules to their original condition. The result is oil with the same lifetime and characteristics as the original oil. In fact, since virgin oil has variable qualities, the output, which is of a precisely controlled quality, may be better than the original. Hydrodec is currently using this process at its sites in New South Wales and Ohio to re-refine used transformer oil. Following successful proof of concept in Q412, management intends to apply the process to industrial oils as well.

Applying Hydrodec’s process to the used transformer oil market The treatment of oil used as an insulator in electrical transformers is more complicated and more heavily regulated than engine lubricant oil. This is because historically polychlorinated bi-phenyls (PCBs) were added to transformer oil as a flame retardant. This additive was banned throughout the world in the 1970s following the linkage of PCBs with cancer. Although many older transformers have been scrapped, or the PCB-containing oil replaced, the PCB-contaminated oil has not generally been destroyed, only stored while awaiting treatment. As well as re-refining the used oil, Hydrodec’s process removes any PCBs present, converting them to a harmless material. The process has been endorsed by authorities in the US, Australia and Japan. It is the only non-destructive technology approved in Japan.

Exhibit 3: Hydrodec’s process for re-refining transformer oil

Source: Hydrodec

The feedstock used is aggregated in bulk from maintenance or decommissioning programmes. The SUPERFINE oil produced is either sold as transformer oil or as a base oil for blending purposes. In Australia over 50% of the oil output is sold as base oil. In the US the proportion is much less, representing an opportunity to sell the output to a much wider customer-base.

As over 99% of the used oil is recovered, and the process can be repeated an indefinite number of times, SUPERFINE has the potential to be designated a sustainable oil product. The re-refining process is very energy efficient and produces minimal greenhouse gas emissions, so Hydrodec has applied for carbon accreditation. The methodology has been approved, so now Hydrodec is developing detailed documentation for submission. Once completed, Hydrodec will be able to apply the method through various country-specific programmes and claim any associated credit. Management estimates that if Hydrodec were to double its total production capacity in line with the schedule agreed with G&S, and the credits were available to be claimed at current Australian carbon prices, this would be worth up to A$3.0m a year. In the short term, UNFCCC approval may help improve margins. Since consumers have not yet fully accepted the concept of re-refined oil, it continues to sell at a discount to virgin oil, though this discount is decreasing (see page 13). Once UNFCCC approval is obtained, Hydrodec will be able to promote SUPERFINE as the first carbon-


neutral oil, enhancing the sales proposition and potentially commanding a premium price to virgin oil because of its “green” credentials.

Hydrodec’s IP is only partially protected by patents, as they expire over the next one to two years. However, management believes the length of time it would take to replicate the technology and then make it commercial, which is estimated to be between five and 10 years, is likely to deter competitors from entering the market.

Competitive technologies for treating used transformer oil There are several alternatives for treating transformer oil contaminated with PCBs. As shown in Exhibit 4, incineration, chemical waste landfill and reaction with sodium or catalysts destroy harmful PCBs but, unlike Hydrodec’s process, do not output a usable high-grade transformer oil. Instead the decontaminated oil output by Technology A and B is sold on the residual fuel oil market, where it is burnt as a fuel for cement kilns and steel mills or possibly purchased as feedstock by Hydrodec. The alternative treatment for oil that is not contaminated with PCBs uses Fullers Earth or special clay to regenerate the used transformer oil. Typically around 70% of the oil is recovered and used again, so it is not very efficient.

Exhibit 4: Competitive techniques for treating used transformer oil

Source: Hydrodec

Most operations that have approval to handle contaminated oil from the US government’s Environment Protection Agency (EPA) do not produce a high-value output. Incineration is offered by Clean Harbors, Veolia Environmental Services, Axiall Corp at its PPG Industries site, Occidental Chemical at its Vulcan Chemicals site, Perma-Fix at its Diversified Scientific Services site and the Dow Chemical Company. Clean Harbors also operates a chemical waste landfill authorised to accept PCB contaminated oil. Operators with EPA approval for treatment with sodium or other catalysts are Environmental Protection Services Inc. (EPS), Transformer Disposal Specialist Inc., Clean Harbors at its sites in Georgia, Kansas and Ohio, and its Safety-Kleen site in Indiana. Clean Harbors also offers a mobile dechlorination service. EPS carries out additional refining steps to produce an oil suitable for re-use in transformers. It processes over 2m gallons of transformer oil each year.

Applying Hydrodec’s process to the industrial oils market In Q412 Hydrodec proved that it is able to apply its proprietary hydrogenation process to a wide range of used industrial oils, outputting high-quality Group II base oil, and made further progress

PCB Oxidation Products Oil Purity PRODUCT RECOVERY WASTE

Traditional Incineration N/A – Oil is lost N/A – Oil is lost N/A – Oil is lost 0%

Technology A

Base catalysed ChemicalProcess

N/A – Oil is lost N/A – Oil is lost Fuel 0% YES

Technology B

Metal (Na) Catalysed Chemical Process

N/A – Oil is lost N/A – Oil is lost Fuel 0% YES

Hydrodec One Step Catalytic HydrogenationNew

Transformer Oil

99%+ NO

No PCB Oxidation Products Oil Purity PRODUCT RECOVERY WASTE

Technology C N/A Filtration Regeneration

Filtration Regeneration

Recycled Transformer Oil <90% YES

HydrodecOne Step Catalytic Hydrogenation

New Transformer

Oil99%+ NO


towards a process for re-refining used crank case motor oil. A pilot plant for the industrial oils process will be constructed towards the end of 2013 or early 2014. This process will ultimately be deployed in commercial scale facilities as discussed above.

Hydrodec’s process has the potential to substantially recover the constituents in used industrial oil. In contrast, the processes used by companies already re-refining oil involve more steps than Hydrodec’s single-step catalytic hydrogenation process and recover less of the oil. Hydrodec’s process is therefore potentially higher margin than existing commercial processes. There are already companies active in this segment but none in the UK, making this a favourable geography for the group’s first industrial oil re-refining facility. Moreover the procurement cost of used industrial oil in the UK is less than half that in mainland Europe.

Exhibit 4: Competitive techniques for treating used industrial oils

Source: Hydrodec

The largest re-refining operator in the US, Safety-Kleen, which was acquired by Clean Harbors in December 2012, collects and processes more than 200m gallons of used industrial and automotive oil each year, returning more than 140m gallons to the marketplace as clean re-refined oil. It blends some of the base oil output to create a higher-margin product. The second largest, Heritage Crystal Clean, has capacity to annually re-refine up to 50m gallons of used oil and produce up to 30m gallons of lubricating base oil and is running at over 90% nameplate capacity. It does not yet have the ability to blend the base oil it outputs into higher-margin products. Heritage Crystal Clean and Safety-Kleen both use hydrogenation processes to re-refine oils that are not contaminated with PCBs. Neither process a material amount of transformer oil, which they try to avoid.

AVISTA Oil has five refinery sites in mainland Europe and the US with capacity to recycle around 700,000 tons of used industrial oil annually. It collects used oil from a network of 70,000 customers. and uses a solvent to remove dirt from the used oil. AVISTA uses the base oil produced to create its own range of high-quality lubricants. Puralube operates two recycling plants with a total throughput of 150,000 tons a year. These are located south of Leipzig in Germany. They use a proprietary hydrogenation process to produce high-quality Group II base oils from used lubricating oil. Around 90,000 tons of base oil and 50,000 tons of by-product are produced each year. It is interesting to note that Puralube has pursued the same strategy as Hydrodec. It acquired exclusive rights to a hydrogenation technology, constructed a large-scale production facility to prove the process commercially, acquired a used oil sourcing and environmental service group to ensure feedstock supply and is now intending to build additional refineries in new geographies.

LEGENDFULLY RECOVERED TO BASE OILPARTIALLY RECOVERED TO BASE OILFULLY RECOVERED TO FUELPARTIALLY RECOVERED TO FUELWASTED

CURRENT BEST AVAILABLE TECHNOLOGYHYDRODECPROPOSED Company A Company B Company C Company D Company E

TYPICAL CONSTITUENTS(Gp II/III) (Gp I/II) (Gp I/II) (Gp I/II) (Gp I/II) (Gp I/II)

To Asphalt To Asphalt To Asphalt To Asphalt To Asphalt

To Asphalt To Asphalt To Asphalt To Asphalt To Asphalt

Water, Coolants

Light Hydrocarbon, fuels

Detergents, Dispersants

Oxidised Base Oils

Unoxidised Base Oils

Pyrolysis products , heavy base oils

Asphaltenes

Solids, Inorganic AdditivesDRUM OF

WASTE OIL


Market

Transformer oil Statistics from market research company MarketsandMarkets note that the global transformer oil market is growing at between 5% and 9% a year. The naphthenic base oil market is materially larger than that for transformer oil. Demand for substitutes for virgin oil is increasing because naphthenic oil supply is in relative decline as a percentage of oil extracted.

Industrial oil The market for industrial oils is larger than that for transformer oil. It is an estimated US$30bn globally compared with US$1.5bn for transformer oil.

Processed fuel oil Exhibit 5: UK producers of processed fuel oil (PFO)

Source: OSS Group

Management estimates that the annual industrial domestic requirement, ie cement and lime plants, brick manufacturers, food processors and aggregates businesses, for PFO is over 150m litres, of which 80m is attributable to aggregates. Over 350m litres is used in power generation. Some PFO is exported to fuel oil blenders in the Netherlands for marine bunkering requirements. Approximately 170m litres of PFO are produced in the UK each year, which we estimate is worth over £41m at current prices. OSS is the largest domestic producer.

Sensitivities

Oil spreads: Hydrodec’s margins are affected by the difference in price between naphthenic base oils (ICIS Pale 60) and feedstock. In practice these prices move in similar directions, so the risk is related only to timing. Counter-intuitively, lower oil prices are not necessarily problematic for Hydrodec, as they reduce competition for feedstock. The margin structure in the US is secure because a pricing agreement with G&S that ensures feedstock prices does not adversely impact re-refining margin for prolonged periods. The profitability of OSS’s existing activity and any future industrial oils re-refining activity is also affected by the spread between feedstock purchase prices and PFO selling prices.

Conservative industry: Utilities have historically been reluctant to accept that a re-refined oil can exhibit equal or superior characteristics to new oil. Recent work in the US on increasing the customer base shows this caution can be overcome.

OSS Group29%

Oakwood Fuels21%

Eco Oil15%

Oil Salvage10%

M210%

ReGroup9%

Acumen6%


Dependence on strategic partners and individual customers: Expansion in the US is entirely dependent on the success of the relationship with the strategic partner G&S Technologies. Encouragingly, in the interim statement management noted that the partnership was “exceeding expectations.” In FY12, before the acquisition of OSS, one customer in the US accounted for 50% of revenues, a second 17%. The actions taken to strengthen the feedstock supply base have not materially changed this concentration. OSS has two customers that account for an estimated 22% and 18% of revenues.

Valuation

DCF We adopt a DCF model for our valuation since this gives a methodology for attributing value to a mix of programmes, some of which have been generating commercial revenues for several years and are cash-generative at plant level, while others are still at different stages of the planning phase. Our valuation is based on the sum of discounted cash flows from programmes in which Hydrodec is engaged, applying different discounts for risk to each. Programmes at the early planning stage have not been included in our formal estimates because of the uncertainty regarding programme timing. However, the benefits and costs associated with these programmes are included in our DCF model in order to assess the potential value of these activities. When included with the programmes already in our estimates, they give a total EBITDA of US$38.9m (after deducting central costs) in 2016. The additional programmes, which are at a very early stage of discussion, represent upside to this valuation. We model cash flows through to 2022, by which stage we assume all of the potential facilities to be operating at optimum capacity, giving a terminal growth rate of 0%.

Exhibit 7: Summary of programmes in which Hydrodec is engaged Programme Timescale Utilisation Capacity

(million litres) Cost to

Hydrodec Discount rate

base case Ongoing programmes included in estimates Australian operation Ongoing 89% by end 2014 6.5 N/A 10% Existing Ohio operation Ongoing 89% by end 2013 27 N/A 10% Expansion in Ohio End Q314 70% first quarter, then 90% 13.5 2.75 10% Transformer oil facility at G&S site in US End Q115 70% first three quarters, then 90% 27 5 10% OSS Ongoing N/A N/A N/A 10% Programmes at early planning stage Transformer oil facility in UK H214 50% first quarter, 70% next quarter, then 90% 27 7.5 15% Industrial oil facility in UK End Q215 85% from 2017 onwards 100 14 15% Industrial oil facility in Australia H216 85% from 2018 onwards 60 0 15% Additional programmes Transformer oil facility in mainland Europe End Q115 85% from 2017 onwards 27 0 Upside Transformer oil facility in Japan with Kobelco End 2015 85% from 2019 onwards 13 0 Upside Transformer oil facility in Japan with another third party

H214 85% from 2016 onwards 18 0 Upside

Transformer oil facility at third US site End Q415 50% year 1, 70% year 2, then 85% 27 0 Upside Source: Edison Investment Research

Using the discount rates listed above, and including the potential net value of the ‘Programmes at early planning stage’ (as per Exhibit 7), we derive a base case fair value of £139m. This is equivalent to 18.9p/share if we assume a 60% take-up of the open offer, with new shares issued at the Placing price of 11.25p. This compares with a base case fair value of £58.3m (13.8p/share) prior to the acquisition of OSS and ongoing financing activities. If we reduce the discount for executional risk for the industrial oil, UK and mainland European operations to 10%, we derive a higher value of £180m (24.6p/share). The value per share is not affected significantly by the take-up of the open offer. The base case varies from 19.1p (0% take-up) to 18.7p (100% take-up); the value with reduced discount for risk varies from 25.0p to 24.3p. Key triggers for share price improvement are announcements


about construction of additional capacity in the US and the UK. We see upside beyond the higher valuation if a third processing facility is commissioned in the US or a facility in mainland Europe, if there is material progress in Japan, if a licencing arrangement is secured for the industrial oils process in Australia or if the process is accredited for claiming carbon credits.

Exhibit 8: DCF summary

Base case 10% discount for risk

Australian operations (US$m)

19.2 26.0 US operations (US$m)

44.3 44.3 UK operations (US$m)

129.4 187.0 DCF valuation total (US$m)

192.9 257.2 Net debt end FY12 (US$m)

(15.9) Net fund-raising activities during FY13 *(US$m) 38.0 Net cash end FY12 if fund-raising activities completed at that point (US$m) 22.1 Implied value for shareholders (US$m) 215.0 279.3 Implied value for shareholders (£m) 138.7 180.2 Number of shares after fund-raising (m) 733.8 Implied share price (p)

18.9 24.6 Source: Edison Investment Research. Note: *Private placing, open offer, debt/equity swap and additional £2.5m and £7.5m loans from Andrew Black. Assumed 60% uptake of proposed open offer.

Financials

Exhibit 9: Segmental analysis US$m 2011 2012 2013e 2014e 2015e Re-refining segment Revenues 22.4 26.1 29.2 35.9 58.2 Gross profit 5.0 5.4 7.3 9.0 14.6 Gross margin 22.2% 20.6% 25.0% 25.0% 25.0% EBIT excluding royalties from G&S 1.7 1.8 3.5 5.4 8.9 Royalties from G&S 0.0 0.0 0.7 1.2 2.1 OSS Revenues 38.9 44.1 42.6 45.5 49.9 Gross profit 13.4 9.7 10.4 11.4 13.0 Gross margin 34.5% 22.0% 24.4% 25.0% 26.0% EBIT 4.1 (0.7) (0.1) 1.0 2.2 Source: Hydrodec, Edison Investment Research. Note: OSS is pro-forma as though the business was part of the group for the period.

Re-refining segment Revenues are a function of sales price and volumes processed, which is related to plant utilisation. The price customers pay for Hydrodec’s re-refined oil is related to the price payable for virgin oil, which is given in the ICIS benchmark data. The discount for buying Hydrodec’s refined oil compared with virgin oil has decreased over the years as Hydrodec’s proposition has gained acceptance. This narrowing of the discount to the ICIS benchmark continued during H113 when the benchmark dropped by 14% (Exhibit 10), but Hydrodec’s average sales prices declined by 8% year-on-year. Our model assumes that the average sales price for FY13 will be around 7% lower than the FY12 average and remain at this level throughout the forecast period. The strategic partnership agreement with G&S gives greater availability of feedstock for the Ohio plant, so we model US plant utilisation of 83% for 2013, an uplift on the 72% achieved during H113. This gives 12% revenue growth in the current year to US$29.2m. As capacity is expanded in the US, with two additional trains at the existing Ohio facility predicted to come online in H214 and a four-train facility at a G&S Technologies site under consideration for commissioning in H115, total revenues are expected to almost double to US$58.2m by 2015.


The price Hydrodec pays for feedstock is related to the price of ultra-low sulphur diesel because an alternative for feedstock vendors would be to sell used oil (not contaminated with PCBs) as a fuel or a material for surfacing roads. (Note: Used transformer oil with less than 50ppm of PCBs is not considered a hazardous material in the US and regarded as not containing PCBs.)

Exhibit 10: Benchmark pricing Exhibit 11: Spreads per litre

Source: Hydrodec Source: Hydrodec

During H113, Hydrodec had tight controls on the price paid for feedstock. This action, together with the reduced discount to the ICIS benchmark for re-refined oil sales resulted in the pricing spread Hydrodec achieved between feedstock costs and re-refined oil sales prices being consistently better than the spread between the ICIS and diesel prices, and significantly less volatile (Exhibit 11.) There was also some benefit from processing a greater proportion of PCB contaminated oil (11% of feedstock), which is available at nil cost. Tighter spreads meant that H113 gross unit margins were marginally higher year-on-year despite lower average sales prices. We model spreads remaining at H113 levels throughout our forecast period.

Segmental EBIT is expected to double in FY13 to US$3.5m, driven by an improvement in gross margin and volumes processed. It is expected to more than double again by FY15 to US$8.9m as capacity is expanded. This excludes royalties from the strategic partnership, Hydrodec of North America LLC, estimated at US$0.7m in 2013, rising to US$2.1m in 2015 as the volume of oil processed more than doubles.

OSS 82% of FY12 revenues was attributable to OSS’s Fuel division, which collects waste industrial oil and processes it for sale as lower-grade fuel oil. The remainder was attributable to its Waste Solutions division, which collects other waste materials such as used oil filters, anti-freeze, lead acid batteries and plastic containers and recycles them. It also hires out washers for cleaning automotive parts and recycles the solvent.

Revenues rose in FY12 because higher volumes of oil were collected and processed. Gross margin dropped by 12.5pp as feedstock costs rose because of increased competition for feedstock from new market entrants, while average sales prices fell because of the global reduction in oil prices, exacerbated by reduced demand for PFO from UK power stations, pushing the business into an operating loss and creating cash constraints. During FY13 demand from UK power stations for PFO returned, resulting in higher average PFO sales prices, and feedstock costs stabilised in FY13, improving potential gross margins. However, cash constraints prior to the acquisition by Hydrodec meant that the business was not able to supplement the used industrial oil collected by its depot network with bulk purchases from third parties, so the volumes available for sale were lower. Moreover, since the business secured more favourable payment terms by selling PFO at lower prices to fuel oil blenders in mainland Europe, average sales prices were low.

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

Jan/11 May/11 Sep/11 Jan/12 May/12 Sep/12 Jan/13 May/13

ICIS (Avg $/Lit) NYH Ultra Low Sulfur No. 2 Diesel ($/Lit)

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

Jan/11 May/11 Sep/11 Jan/12 May/12 Sep/12 Jan/13 May/13

Hydrodec Industry


Following the acquisition, these working capital constraints have been removed. Our estimates assume that the volumes sold and average sales prices will improve during FY14 and FY15 and OSS is able to offer a secure source of PFO to UK power stations. This is expected to return the business to profitability in FY14 (US$1.0m EBIT) and deliver further growth (US$2.2m EBIT) in FY14. There is potential for upside to this by offering a full portfolio of services, including parts washing, across all the depots and selling them more actively to its 31,000 customers, only one third of which receive these services at present. OSS has already invested in the staff to support this. We model US$0.1m in cost-savings related to items such as audit fees and insurance. Management is currently targeting other cost-savings.

Group earnings Our revised estimates show the impact of two major changes. The acquisition of OSS is expected to double revenues and be earnings enhancing from FY14 onwards. The proposed private placing, open offer and debt/equity swap takes out most of the borrowings from the balance sheet, thus removing interest charges on loans and the non-cash charges associated with the change in value of the loan equivalent part of the former convertible unsecured loan notes (CULs, shown as “Other” in our cash flow). The combined impact takes Hydrodec to a healthy US$3.2m pre-tax profit in FY15 rather than a small loss. Note: We currently exclude any potential benefits arising from carbon accreditation, industrial oils activities in Australia, and transformer re-refining in the UK, mainland Europe, Japan or a third site in the US as upside to our estimates. We assume that the proposed private placing, open offer and conversion of £12.5m debt to equity will increase the number of shares from 422.5m to 733.8m (at 60% uptake of the open offer).

Exhibit 12: Summary of revision to estimates FY12 FY13 FY14 FY15 Old New Old New Old New Revenues (US$m) 26.1 29.2 43.0 33.9 81.4 57.5 108.1 EBITDA (US$m) (5.2) (1.5) (2.3) 1.9 4.1 9.5 11.1 PBT* (US$m) (10.8) (6.7) (8.8) (4.5) (2.9) (0.2) 3.2 EPS* (c) (2.6) (1.6) (2.2) (1.1) (0.6) (0.0) (0.0) Net (cash)/debt (US$m) 15.9 24.4 (22.1) 28.7 (22.1) 23.4 (29.5) Source: Edison Investment Research. Note: *PBT and EPS are normalised to exclude exceptional items, non-cash interest charges and share-based payments

Group cash flow Operating cash outflow is expected to narrow to US$3.0m during FY13 as the group approaches operating cash break-even towards the year end, then turn to a net cash inflow for FY14 and beyond. (This positive movement would have occurred without the OSS acquisition.) The most significant item in capital expenditure going forwards is Hydrodec’s share of expanding capacity in the US, estimated at US$7.8m, which is effectively funded by the total consideration from G&S for its stake in Hydrodec of North America LLC, which is expected to be US$7.1m, paid in stages to 2015. The US$1.7m payable in FY13 is netted against the US$5.3m consideration paid for OSS. With regards to the proposed open offer, we take a conservative view and assume that 60% of the open offer is taken up, raising US$34.1m (net). Together with the £12.5m debt/equity swap, this will fund the OSS transaction and provide working capital to grow the business as described above, support development of the industrial oils process and construction of re-refining facilities for both transfer oil and industrial oil in the UK and repay the £12.8m former CULs.

Group balance sheet The balance sheet is transformed by the proposed placing and open offer. As discussed above, part of the funds raised will be used to repay the £12.8m former CULs. The remaining loans, £5m negotiated with Andrew Black and others in Q412 and a £7.5m short-term revolving credit facility


provided by Andrew Black to enable Hydrodec to move quickly on the OSS transaction, will be converted to equity. This financing programme is expected to give Hydrodec net cash totalling US$22.1m at the end of December 2013 compared with US$15.9m net debt end FY12.

Exhibit 13: Financial summary US$m 2011 2012 2013e 2014e 2015e Year end 31 December IFRS IFRS IFRS IFRS IFRS PROFIT & LOSS Revenue 22.4 26.1 43.0 81.4 108.1 Cost of Sales (17.4) (20.7) (32.5) (61.0) (80.6) Gross Profit 5.0 5.4 10.5 20.3 27.5 EBITDA (3.1) (5.2) (2.3) 4.1 11.1 Operating Profit (before g/w amort and except) (6.7) (8.8) (6.6) (2.7) 3.4 Goodwill Amortisation 0.0 0.0 0.0 0.0 0.0 Forex and exceptional costs (1.1) 0.1 (0.3) (0.1) 0.0 Share based payments (0.3) (0.5) (0.5) (0.5) (0.5) Operating Profit (8.0) (9.2) (7.4) (3.4) 2.9 Net Interest excluding non-cash charge (1.8) (2.0) (2.2) (0.2) (0.2) Profit on asset sales and non-cash interest charges (2.0) (3.4) (3.5) 0.0 0.0 Profit Before Tax (norm) (8.5) (10.8) (8.8) (2.9) 3.2 Profit Before Tax (FRS 3) (11.9) (14.5) (13.1) (3.6) 2.7 Tax 0.4 0.4 0.0 0.0 0.0 Profit After Tax (norm) (8.5) (10.8) (8.8) (2.9) 3.2 Profit after tax (FRS 3) (11.5) (14.2) (13.1) (3.6) 2.7 Adjustments for normalised earnings (0.4) (0.4) 0.0 0.0 0.0 Share of (profit)/loss to US partner 0.0 0.0 (0.4) (1.1) (3.4) Net income (norm) (8.5) (10.8) (9.2) (4.0) (0.2) Net income (FRS) (11.5) (14.2) (13.4) (4.7) (0.7) Average Number of Shares Outstanding (m) 358.3 407.9 422.5* 733.8 733.8 EPS - normalised (c) (2.4) (2.6) (2.2) (0.6) (0.0) EPS - diluted normalised (c) (2.3) (2.6) (2.1) (0.5) (0.0) EPS - (IFRS) (c) (3.2) (3.5) (3.2) (0.6) (0.1) Dividend per share (c) 0.00 0.00 0.00 0.00 0.00 Gross Margin (%) 22.2 20.6 24.4 25.0 25.5 EBITDA Margin (%) N/A N/A N/A 5.0 10.3 Operating Margin (before GW and except) (%) N/A N/A N/A N/A 3.2 BALANCE SHEET Fixed Assets 46.1 44.7 47.3 49.5 50.0 Intangible Assets 22.8 21.6 19.5 17.4 15.3 Tangible Assets 23.2 23.0 27.7 32.0 34.6 Other investments 0.1 0.1 0.1 0.1 0.1 Current Assets 10.0 5.1 31.2 34.6 50.3 Stocks 0.6 1.4 2.6 4.2 8.1 Debtors 2.5 2.1 5.2 6.9 11.4 Cash and cash receivable 7.0 1.6 23.3 23.4 30.8 Current Liabilities (4.1) (5.2) (7.8) (9.9) (16.2) Creditors (3.9) (4.7) (7.2) (9.4) (15.7) Short term borrowings (0.2) (0.5) (0.5) (0.5) (0.5) Long Term Liabilities (16.1) (19.1) (2.9) (2.9) (2.9) Long term borrowings (13.5) (17.0) (0.7) (0.7) (0.7) Other long term liabilities (2.6) (2.1) (2.1) (2.1) (2.1) Net Assets including minority interests 35.9 25.5 67.8 71.2 81.3 CASH FLOW Operating Cash Flow (3.5) (4.8) (3.0) 2.9 9.0 Net Interest (1.8) (2.0) (2.2) (0.2) (0.2) Tax 0.0 0.0 0.0 0.0 0.0 Capex (0.2) (1.1) (3.2) (6.2) (3.3) Acquisitions/disposals (0.1) 0.0 (3.6) 3.6 1.8 Financing including debt/equity swap 8.3 0.0 53.5 0.0 0.0 Dividends 0.0 0.0 0.0 0.0 0.0 Forex 0.0 0.1 0.0 0.0 0.0 Net Cash Flow 2.7 (7.8) 41.4 0.0 7.4 Opening net debt/(cash) 7.3 6.7 15.9 (22.1) (22.1) HP finance leases initiated (0.4) 0.0 0.0 0.0 0.0 Other (1.8) (1.3) (3.5) 0.0 0.0 Closing net debt/(cash) 6.7 15.9 (22.1) (22.1) (29.5) Source: Edison Investment Research, Hydrodec accounts. Note: *Assuming fund-raising activities complete at end FY13.


Contact details Revenue by geography 50 Curzon Street London W1J 7UW UK +44 (0)207 907 9220 www.hydrodec.com

CAGR metrics Profitability metrics Balance sheet metrics Sensitivities evaluation EPS 09-15e N/A EPS 12-15e N/A EBITDA 09-15e N/A EBITDA 12-15e N/A Sales 09-15e 47.7% Sales 12-15e 60.6%

ROCE 12 N/A Avg ROCE 12-15e N/A ROE 12 N/A Gross margin 12 20.6% Operating margin 12 N/A Gr mgn / Op mgn 12 N/A

Gearing 12 62% Interest cover 12 N/A CA/CL 12 98% Stock days 12 20 Debtor days 12 29 Creditor days 12 64

Litigation/regulatory Pensions Currency Stock overhang Interest rates Oil/commodity prices

Management team CEO: Ian Smale Non-Executive Chairman: Colin Moynihan Before becoming CEO in January 2012, Ian spent his entire career with BP. During his career there, which spanned 30 years, he was group head of strategy and policy, business unit leader for commercial marketing and distribution in South Africa, global head of mergers and acquisitions and president and chief executive of BP North Africa.

Lord Moynihan is a director of Rowan Companies plc (offshore drilling). From July 2000 until October 2003 he was executive chairman and chief executive of Consort Resources Limited and from 2003 until 2007 he was executive chairman of Clipper Windpower Europe Ltd. Colin stood down as chairman of the British Olympic Association in 2012 after seven years. He joined the board as chairman in October 2012.

CFO: Chris Ellis Non-Executive Director: Andrew Black Chris joined in July 2012. He has 20 years’ board-level finance and management experience, including a significant period with GE Capital. From 2009 to 2012, he served as global chief financial officer of PPC Worldwide, a global healthcare business within UnitedHealth Group Inc, a New York Stock Exchange listed company with a market capitalisation of approximately US$60bn.

Andrew is the co-founder of Betfair, the world's leading online betting exchange and FTSE 250 constituent, having devised its unique betting exchange model. He was a director of the Betfair Group from 1999 to 2010. He joined the board in July 2011.

Principal shareholders (prior to Private Placing, Open Offer and debt/equity swap) (%) Andrew Black (Non-Executive Director) 20.0 AVIVA plc 20.0 JM Finn & Co (including DV Penman holding) 5.0 Thesis Asset Management 4.9 Royal London Asset Management 4.8 Mr DV Penman 3.4 Ludgate Environmental Fund 3.3

Companies named in this report Axiall Corp (AXLL:US), Clean Harbors (CLH:US), Crystal Clean(HCCI:US), Dow Chemical Company (DOW:US), Kobe Steel (5406:JP); PPG Industries (PPG:US); Perma-Fix Environmental Services (PESI:US), Veolia Environnement (VIE:FP)

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