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Quadrise Fuels International on track to deliver net-zero fuel

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Quadrise Fuels International Plc AIM:QFI the London-headquartered synthetic emulsion fuels developer published its audited final results for the year ended 30 June 2022 on 4th October.

The company made a loss after tax of GBP2.6m compared to a loss of GBP4.3m for the corresponding period in 2021, of which of GBP1.5m was attributable to production and development costs and GBP1.4m related to administrative and corporate expenses. The company has GBP8m of assets, down from GBP10.7m in 2021. Cash balances also fell from GBP7m in 2021 to GBP4.4m as at 30th June 2022. Reported revenues increased year-on-year from GBP17,000 to GBP75,000.

Cumulative tax losses increased to GBP60m against GBP58.4m previously, though Jason Miles, chief executive said that these losses could potentially be available for set-off against future profits.

Quadrise, which debuted on AIM in April 2006, opened trading at 1.37p today (5th October 2022), up from 1.35p at the close of the previous day. The company has offered a year-to-date return of -46.3% and a one-year return of -63.2% with its shares ranging between 1.1p and 4.3p over a 52-week period, giving the company a market capitalisation of GBP19m.

The company’s share price has been near to an all-time low, partly due to Quadrise missing project milestones and moving them from one quarter to the next quarter for over a year, which has raised questions of credibility.

Andy Morrison, non-executive chairman addressed this issue in a call yesterday: “We’re not alone in that situation as a small-cap company – and investor confidence is at an all-time low across the board. We’re turning things around with regards to our own situation by hitting project milestones – however at the beginning of the year we were still coming out of Covid and there remains a backlog in the shipping sector. Some of our customers are quite big corporations, so a month [delay] here and there to them is nothing, but as a small company it’s very important.

Quadrise Fuels International turns a corner

He continued: “All these things mean it’s very hard to be entirely in control of every item on our agenda. We have turned a corner this year, stress-tested all the projects at the beginning of the year and they’ve come out positively. Our counterparties want to go ahead now and we’re past the planning period and into the doing period. We now have other types of problems operationally – on our counterparties side – for example MSC had to buy a ship for the trial. We’re symbolically on the right track – we’re in the real world, we’re doing business with real companies and we’re going to be getting revenues. Yes, it’s painful, but it’s not only about delivery and the mood music around the company is positive which we should see in the share price soon.”

The company licenses residual oil technology that provides lower cost and lower carbon alternatives to heavy fuel oil (HFO).

Miles said in the call yesterday: “There’s really been an acceleration over the last six months and a sustained push for new green fuels – notably methanol in the shipping sector – so the fact that we have some drop-in solutions as transition fuels has been extremely important.”

He continued: “We’re on-track to deliver a net-zero fuel by 2030 – and that has been a focus of our R&D – that can compete with the other green fuels in the market.”

Quadrise has two primary products: MSAR and bioMSAR. MSAR is a low viscosity oil-in-water emulsified synthetic HFO. It is manufactured using proprietary technology to mix heavy residual oils with small amounts of specialist chemicals and water to a bespoke formulation. The resulting emulsion contains approximately 30% water and less than 1% chemicals. The emulsion is a low viscosity liquid at room temperature, which makes it easier to handle and reduces the heating costs for storing, transportation and use in comparison to HFOs.


Green fuels to improve the environment today

bioMSAR combines MSAR technology with renewable glycerine to produce a low carbon, environmentally friendly alternative to HFO and biofuels. As with MSAR, Quadrise’s proven proprietary technology is used to mix heavy residual oils and glycerine with small amounts of specialist chemicals and water to produce bioMSAR, a synthetic biofuel with lower emissions, including over 25% less carbon dioxide.

Miles said: “The new quest for green fuels – for example green methanol, ammonia and hydrogen – has created an industry space race for a net-zero dream that may not be feasible in the medium term […] Meanwhile, back on planet earth, technologies that could improve the environment today are being overlooked […] We are changing this narrative.”

Quadrise is working with a number of third parties to develop more sustainable fuel technology, including Vetoro, the Dutch chemical company developing biofuels from woody residues and Mediterranean Shipping Company (MSC), the world’s largest container shipping company.

In July, Quadrise signed a Framework Agreement with MSC to initiate proof-of-concept tests and operational trials using both bioMSAR and MSAR fuel on one or more commercial container vessels, as essential precursor steps to the intended commercial supply of these fuels to MSC’s global fleet.

Later in the year, in September, Quadrise signed a joint development agreement with Vetoro to test the Dutch company’s wood and agri-waste lignin-based bio-methanol as an alternative to glycerine in Quadrise’s fuel products for use in diesel/HFO applications in the global shipping sector.

Miles said: “Lignin-based fuels are potentially the most price competitive net-zero biofuel solutions and this joint collaboration fits well with our plans to commercialise bioMSAR with MSC and others, as well as advancing our programme to supply net-zero bioMSAR by 2030.”

During the period, Quadrise also secured a Material Transfer and Cooperation Agreement with an international chemicals and mining client in Morocco to undertake a combustion trial of MSAR as a replacement for the client’s HFO. The company will also carry out a smaller parallel bioMSAR trial with the client. The main trial will conclude 3Q22, said the company.

Key decarbonisation solutions provider

In the presentation, the company also highlighted discussions with potential clients in Honduras and Panama to trial MSAR and bioMSAR as an input to power plants in those jurisdictions, with a view to commercial supply. The company emphasized that with the Covid-19 pandemic and the war in Ukraine affecting global energy supplies that the economic value of refinery residuals as an energy source was a boon for MSAR and bioMSAR.

The company has cash reserves  of GBP4.4m at 30 June 2022, sufficient to reach revenue generation in 1H23 subject to the conclusion of agreements. Miles said that that current cash reserves will carry the company through to 4Q23.

“Our technology and products are á la mode at the moment in terms of cost and environmental benefits,” said Miles, “…we have a broad pipeline, but need to deliver and need to get the projects to revenue-generation in the next few months. The transition, sustainability and ESG is something the company has traditionally been very strong on and we’re looking to enhance the sustainability benefits of what we offer. The more we can do to get that message out to the world through platforms like MSC and others, the better. That’s a real focus for us going forwards.”

Tom Fraine, an analyst for Shore Capital, which has Quadrise under coverage said: “Quadrise has positioned itself as a key decarbonisation solutions provider in the global energy market and [we] see a significant opportunity for the company’s innovative fuel and biofuel technologies to reduce client energy costs and emissions – both very important benefits derived from the company’s proprietary fuels.”

Fraine continued: “The successful achievement of commercial revenues in the current financial year would offer strong scope for a significant re-rating catalyst, in our opinion, and we continue to highlight the important environmental benefits offered by Quadrise’s proprietary fuel technologies.”

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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