Christchurch hydro turbine innovator looks to 2016 ASX listing

Tuesday 10th November 2015

HydroWorks, a Christchurch based hydro-electricity turbine innovator, is crowd-funding through the newly launched trans-Tasman Equitise platform ahead of a planned float on the Australian Securities Exchange next year as it pursues exponential growth between now and 2020.

The company is seeking $2.4 million from private investors at a price of $57 per share for a minimum parcel of 88 shares, valued at $5,016, with a minimum raising of $750,000. The offer has already attracted $644,043 of new capital, with more 23 days to run before it closes what it's describing as a "pre-IPO round".

In business since 2001, HydroWorks claims its use of a turbine design based on proprietary fluid dynamics algorithms allows it to produce increased output from existing hydro generation plant, with gains of as much as 15 percent achieved in some cases.

The company is 23.2 percent owned by Powerhouse Ventures, a venture capitalist firm chaired by former aluminium smelter boss and professional director Kerry McDonald, which announced last December it was considering a $40 million initial public offering to fund growth and first became involved with HydroWorks in 2010.

Other HydroWorks shareholders are its founder, Rik Hothersall, with 33.8 percent, the government-backed New Zealand Venture Investment Fund, with 18.5 percent, and a group of private individuals. The company also receives support from Callaghan Innovation. The company merged last year with MACE Engineering, a 40 year-old Christchurch firm that lends production to HydroWorks's design capabilities and is a prime driver of the company's bullish revenue growth projections.

HydroWorks turned over $2.3 million last financial year, prior to the MACE acquisition, which adds more than $5 million in annual revenues immediately. Its short form investment statement on the Equitise site projects revenue of $12.6 million in the current financial year, generating a projected operating loss of $533,000, rising to $18.6 million revenue in 2016/17 and projected earnings before interest, tax, depreciation and amortisation of $1.28 million.

Revenue projections were based on confirmed and highly prospective orders to rebuild turbines for the recommissioning of the Somerset Dam hydro scheme in Queensland, and preferred tenderer status for "a significant hydro opportunity in Melbourne," as well as work already on the books.

"Hydroworks' intention is to achieve growth of 50 percent per annum, taking revenue above $75 million by 2020."

Chief executive Dean Johnson told BusinessDesk the company was confident it could manage that level of growth because it was following plan formulated in 2013 first to buy MACE and then to appoint an experienced new executive team.

The company has extensive commercial relationships with New Zealand hydro-generators, including Meridian Energy, Contact Energy and Trustpower, as well as a suite of Australian and Pacific clients, and ambitions to grow in Asia, where new hydro capacity is expected to be sought in coming years.

Its current sweet spot is the rebuilding of turbines for existing hydro schemes, many of which are reaching replacement age in both Australia and New Zealand, after development spurts that peaked in both countries in the 1950s and 1980s respectively.

"The refurbishment cycle is just beginning and set to continue for a further 30 years," the investment statement says.

Other significant opportunities include the ability to add small hydro plant to municipal water and rural irrigation schemes, using technology that its client, Trustpower, has described as "rocket ships in terms of the turbine world."

BusinessDesk.co.nz

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