Investor FAQs

Can you explain Quadrise’s business model?
Quadrise has developed a new technology solution that produces MSAR® fuel, which can be used as an alternative to heavy fuel oil (HFO). HFO is one of the world’s largest fuel markets with over 450m tonnes used per annum.

MSAR® is, with the appropriate residual stream, cheaper to produce than HFO, with lower emissions, providing advantages both to the producer and to the consumer of the fuel. Consequently, MSAR® has the potential to disrupt all sectors currently using HFO with initial projects focussing on the marine and power markets.

Quadrise derives revenue from technology license fees, sale of chemicals, engineering and technical support services, and associated sales or leasing of equipment used for the manufacture of MSAR®.
Where do you see the company in 5 years’ time?
Within this timeframe we expect to see Quadrise working with a large number of partners to create significant worldwide commercial markets for MSAR® in the marine fuel, power and industrial markets.

Our model benefits from being operationally geared, so relatively small MSAR® volumes will create strong revenue and provide a clear path to self-sustaining growth. The bunker fuel market is over 450 million tons per annum (of which over 200 million tons is for marine use), so capturing even a small part of that market will make QFI very successful.
How and when will the company generate sustainable revenue?
Our focus is on seeking long-term commercial contracts for the supply and use of our technology to manufacture significant volumes of MSAR® for a variety of marine, power and industrial applications. The recent decision by Maersk to opt for a low-sulphur fuel solution to incoming emissions regulations in 2020 has meant that we have accelerated our plans to engage with other operators in the marine fuel sector. However, given the early stage of these discussions, this will take longer to implement than was the case with our original base plan of rolling out commercially within Maersk’s fleet. The issue of the interim inspection report and interim LONO for Wärtsilä 2-stroke engines will be a significant boost to these efforts and we will use this information, along with positive results with Wärtsilä 4-stroke engines, to progress our plans for developing the marine MSAR® with other shipping operators.

Alongside this, our plans for the power MSAR® trial in the Kingdom of Saudi Arabia (KSA) remain on-track to commence this year and we would, on successful completion, be looking to move this to a commercial basis at the earliest possible opportunity as the market potential is in excess of 25 million tons of HFO per year.

In addition, we will continue to look for further opportunities to develop relationships with other businesses in the power generation and refining sectors in order to maximise the commercial opportunity for QFI.
What are the key risks between now and commercialisation?
We have already come a long way. We have been through almost a decade of laboratory, pilot and commercial-scale trials which have successfully tested MSAR® fuel in a wide range of scenarios including boilers and large marine diesel engines. There is no doubt the technology works. The risks, pre-commercialisation, have therefore been reduced significantly as a result of the hard work undertaken by the Company and associated stakeholders.

As recently indicated, the feedback from both Maersk and Wärtsilä indicates that the recently discontinued operational marine trial has been successful to date. However, as with other companies in the HFO sector, we are not immune to changes to environmental fuel standards and resulting strategic changes to client’s policy for fuelling as experienced by Maersk’s recent position of using low-sulphur fuel to comply with the IMO 2020 sulphur regulations rather than invest at this stage in exhaust gas cleaning equipment to enable use of lower cost HFO and MSAR®.

The company believes that IMO 2020 implementation will widen the spread between high sulphur HFO and low-sulphur distillates – this further enhances the benefit of utilising MSAR® technology in suitable refineries.

For the power market, there is a significant body of evidence to show the successful use of emulsion fuels over extended periods so the performance of the fuel is not, in our opinion, in doubt. The major risks relate to the innately conservative nature of the industry, but we believe the material economic benefits are well understood and will help to drive commercialisation following a successful trial in KSA.
Is there a risk of a potential buy-out of the business before commercialisation?
For any public company there is always the risk of an offer being made. However, the role of the Quadrise management team is to deliver shareholder value growth through the advancement of the Company’s active programmes and in driving the company into commercialisation and we are continuing to do that.
What are the next major catalysts for the company?
We have already shown that the technology works. So the next critical catalyst, post the issue of the Interim Inspection Report and Interim LONO is the progression of commercial discussions with marine operators that are installing, or are evaluating the installation of exhaust gas cleaning systems to meet 2020 in the most economic way, leveraging the positive Maersk trial, and in parallel commencing the 400MWe boiler trial to offer a lower cost solution for KSA.
Can you explain why Quadrise has experienced delays with its projects?
The inherent issue is that we are introducing what is perceived by some to be a disruptive new fuel product into a high value market with deeply conservative industrial producers and consumers. So that itself takes time and patience to deliver. It is also important to understand the challenges of making an oil in water emulsion fuel which is able to be manufactured from a variety of crude oils and subsequent refinery processes. MSAR® is then transported and stored over a long period without degrading such that it is stable when used. We have proved, through commercial scale trials, that MSAR® technology and fuel works, but this has taken time due to the value of assets involved in the trials and the associated due diligence required in advance.

The scale of the companies we are working with are significantly larger than Quadrise. Our approach to this has been to select our partners carefully. With Akzo Nobel as our technology partner we have been able to give comfort to both potential and current customers regarding the viability of our fuel solution and our ability to enable its manufacture on an industrial scale.

The scale and importance of our partners in the industries we operate in provide a significant endorsement of our model, and we believe we have the team and the technology to deliver real value.
Will Quadrise be affected by the UK’s decision to leave the EU?
We do not believe there will be a significant impact on our business; any currency exposures can be hedged if required, and many of our costs are shared with our partners.
How is the company affected by low oil prices?
Quadrise’s value offer is driven by the difference in prices, or spread, between Heavy Fuel Oil (HFO) and distillate (premium fuel) products. Our technology means that distillate that would be used to produce HFO, and therefore effectively sold at a significant discount, can instead be sold at full value by the refiner. Whilst this spread also reduces with crude oil prices – it has not been as significant as the oil price reductions, and our offer remains competitive and attractive. The recent IMO 2020 decision for 0.5% marine sulphur fuels, and resulting demand for higher cost distillate fuels, further strengthens the economic case for MSAR® at low oil prices.

There are two other effects that impact the company however. The first is that significant volatility in oil prices can have an initial “shock” effect on the industry, and so the decision making processes within our customers can lengthen significantly and we saw this during the oil price reductions in 2008 and 2014. The second is that the share prices of quoted companies linked to the oil industry, such as Quadrise, tend to be strongly correlated with the oil price – regardless of the underlying fundamentals.
What are the other projects QFI is involved in, and how will they create value for the Company in the coming years?
We are working on a variety of projects – all aimed at creating or broadening the markets for MSAR® in the marine fuels, power generation and industrial markets. We believe that having a range of markets and customers for MSAR® significantly de-risks the opportunity for refiners who will produce the fuel using our technology and know-how. This will also support the acceleration of commercial roll-out in major refining hubs in Europe, Asia and the Middle East initially.
What feedback have you received from Maersk following the release of the interim LONO and inspection report?
As recently indicated, the feedback from both Maersk and Wärtsilä indicates that the operational trial has been successful to date and we expect that this was reflected in the interim inspection report and the successful issuance of the interim LONO. A precis of the inspection report has been released on our website. Maersk confirmed again that their decision to terminate the trial was in no way related to the performance of MSAR® but it related solely to their decision to opt for compliant fuel with regards to the IMO 2020 decision and not to use abatement technology to comply with the emissions regulations.
How many hours were accumulated before the suspension of the marine trial?
The interim inspection was carried out after 1,370 hours and subsequently the vessel continued to use up the remaining MSAR® that had been manufactured at the Cepsa “Gibraltar-San Roque” Refinery and loaded onto the vessel.
Has the target for commercial revenues in 2017 been set back given the trial ending prematurely?
We are driving hard to receive commercial revenues at the earliest possible opportunity.

Commercialisation of Marine MSAR® was originally envisaged to commence with Maersk later this year. However, as noted in the company’s announcement of 7 April 2017, the commercialisation of Marine MSAR® will now be focused on other operators/industries and the company is actively achieved in seeking to achieve this. However, development of these opportunities will have a longer lead-time than the originally envisioned plans with Maersk.