Wind Tech Strategic Business Plan July 2021
Preliminary Information DOCUMENT CONTACT Name:
Charles Selda
Company:
WindTurbine Technology Pty. Ltd.
Phone:
61 3453 4344
Email:
c.selda@windtech.com
Mail:
12 Balma Rd, Indresa, Australia, 9032
DISCLAIMER AND INTELLECTUAL PROPERTY This document is issued by WindTurbine Technology Pty. Ltd., US Registration No: 323 455 4332. (“Wind Tech”). It is intended only for those persons to whom it is delivered personally by or on behalf of Wind Tech. It must not be copied or distributed to other persons without the prior written consent of Wind Tech. While Wind Tech has taken due care to ensure that the information contained in this business plan is true and correct and is not misleading or deceptive, neither Wind Tech nor any of its officers, employees or agents make any representations or warranties, express or implied, as to the accuracy of the information contained herein. Wind Tech does not warrant that this business plan is complete or that it contains all material information related to Wind Tech. Wind Tech has not carried out any due diligence investigations in connection with the preparation of this business plan or any associated offer. Any investor making an assessment of Wind Tech and the risks relevant to an investment in Wind Tech should make its own independent investigation. Information in this business plan (“Confidential Information”) is confidential. The Confidential Information is provided to you solely for the purpose of evaluating the merits of Wind Tech. You must not use the Confidential Information for any other purpose. You must not copy or reproduce the Confidential Information or give it to another person without the prior written approval of Wind Tech.
July 2016
Confidential Business Plan
Page |2
BUSINESS SNAPSHOT
A private company focused on delivering tangible growth in the wind turbine electricity generation market
Estimated annual Net Operating Cash Inflows of $24,994,802 by the end of year 5
The business solves a key problem for customers in the turbine control modules niche
A series of products and services designed specifically to meet researched customer needs
A clear market entry and growth strategy
Currently regarded as the world leader in high velocity turbine technology
The granted patent position ensures we have a monopoly position for the next 18 years
A team with a clear vision be the leading supplier of turbine technology to the world market
Our business model enables us to scale rapidly whilst maintaining sustainable cash flow
Our sustainable competitive advantage is derived from our world leading expertise in turbine design dynamics
Our focus on building a unique technology platform enables us to strongly capture the forecast operating cash flows.
July 2016
Confidential Business Plan
Page |3
Contents Document Contact ................................................................................................................ 2 Disclaimer and Intellectual Property ...................................................................................... 2 Business Snapshot ................................................................................................................. 3 Executive Summary ............................................................................................................... 6 Overview ............................................................................................................................ 6 Founders and Team ........................................................................................................... 6 Business Objective ............................................................................................................. 6 Our products and services ................................................................................................. 6 Competitors ....................................................................................................................... 7 The Customer .................................................................................................................... 7 The Market ........................................................................................................................ 7 Financial ............................................................................................................................ 7 The Business Opportunity ..................................................................................................... 8 The Value Statement .......................................................................................................... 8 The Window of Opportunity. .............................................................................................. 8 Stage of Development ........................................................................................................ 9 Marketing ............................................................................................................................ 10 Market Size and focus ...................................................................................................... 10 The Customer .................................................................................................................. 12 Positioning ....................................................................................................................... 13 products and services ...................................................................................................... 13 Distribution ..................................................................................................................... 13 The Operational Business Model ...................................................................................... 14 Summary ......................................................................................................................... 18 Operations .......................................................................................................................... 19 Team – Executive Capability............................................................................................. 19 Business Development Schedule ...................................................................................... 20 SWOTM Analysis .................................................................................................................. 23 Strengths ......................................................................................................................... 23
July 2016
Confidential Business Plan
Page |4
Weaknesses ..................................................................................................................... 23 Opportunities .................................................................................................................. 23 Threats and Mitigation ..................................................................................................... 24 Governance and Ownership ................................................................................................. 25 Owners ............................................................................................................................ 25 Board of Directors ............................................................................................................ 25 Assets .............................................................................................................................. 26 Financials ............................................................................................................................ 27 Investment ....................................................................................................................... 27 Cash Flow Projections ...................................................................................................... 28 Analysis of the Base Case Scenario .................................................................................. 29 Analysis of the Best Case Scenario ................................................................................... 34 Analysis of the Worst Case Scenario ................................................................................. 36 Summary ............................................................................................................................. 38
July 2016
Confidential Business Plan
Page |5
EXECUTIVE SUMMARY OVERVIEW
OUR PRODUCTS AND SERVICES
Wind Tech develops new and emerging
Wind Tech’s secret ingredient is its world
wind turbine technology focused on better
leading
managing extreme high stress conditions.
dynamics.
expertise
in
turbine
design
Our goal is to be the leading supplier of turbine technology to the world market. Wind Tech’s current products and services are targeted at the Wind Turbine Electricity Generators marketplace. To date, our achievements include the following; achieved grant stage for our first
US
patent
and;
been
provided
development funding by the US Cleantech Fund as a non-repayable grant.
FOUNDERS AND TEAM Wind Tech was founded in January 2011 by, Chuck Selda, President, Simon Rafte, Turbine Technologist and James South, Intellectual Property Licensing Manager to address a specific, identified opportunity in the Turbine Control Modules market. This unique capability has been used to
BUSINESS OBJECTIVE We
aim
to
entrench
develop our portfolio of products and the
WindBlast
technology in new wind farm applications, positioning the business for an IPO (Initial Public Offering) within 18 months. Our strategy for demonstrating near term business
viability
is
to
commence
commercial application of the technology in the Nevada desert.
July 2016
services.
Following in depth market
research and testing, product range will incorporate 3 major products.
One for
1kw turbines, one for 2kw turbines and one for 5-10kw units All of our products and services have been developed to meet the needs of identified customers.
Confidential Business Plan
Page |6
COMPETITORS
FINANCIAL
Our competitors do not have patents
We are seeking an investment of USD
protecting unique technology platforms.
$700,000 in the next 12 months, with a milestone based further injection of USD $20 million.
We consider our key competitors to be:
We
In year 1 we expect to generate average
West Set Modules
monthly
Crane Turbine Division
$356,405.
Asea Brown Boveri
$4,055,670 by year 5 with net operating
General Electric. are
aware
strengths
and
of
cash
receipts This
from
figure
sales
of
rise
to
will
income of $2,082,900 per month.
our
competitor’s
weaknesses
and
have
developed a comprehensive strategy to capitalise on this knowledge.
We aim to achieve a return on investment of
1320%,
achieving
a
valuation
of
$123,741,963 in year 5. A discounted cash flow analysis reveals a current
THE CUSTOMER
valuation
of
the
business
of
$9,373,838.
Wind Tech’s target customers are wind farm developers and wind farm operators. The key issue experienced by our targeted customer group is to utlise a turbine that does not have to dump wind in 20+ knot situations due to turbine loads. substantially range
and
increases profitability
the of
This
operating our
target
customer groups.
THE MARKET We estimate that market for Wind Turbine Electricity Generators in Arizona USD $1.2 Billion P.A. and growing at a rate of 14% annually. We have selected the high growth Turbine Control Modules segment of the market for our initial market entry strategy.
We
believe that this segment is growing at 16% PA and currently represents a value of about 5% of the overall market.
It is a
critical high value element of the overall market.
July 2016
Confidential Business Plan
Page |7
THE BUSINESS OPPORTUNITY THE VALUE STATEMENT Wind Tech has been developed with a core focus on our customer.
Before developing our products and
services, we focused on identifying the key value drivers for the Turbine Control Modules customer
“To enable wind farm operators to generate
segment.
electricity in a wider
To succinctly state how we provide value to our
variety
customers, we have developed a value statement that
velocity situations.�
takes into account our positioning and broader
of
wind
business strategy within the marketplace:
THE WINDOW OF OPPORTUNITY. The time is right for Wind Tech to deliver on its value statement. The opportunity represented in this business plan is time limited. We are strongly positioned to take advantage of the window of opportunity as they have not had the technology required to broaden the operating range of wind farms.
We have spent several years developing
this technology in anticipating that the limited sites for wind farms would create the requirement for greater operating ranges. The window of opportunity has emerged because with a lack of new wind farm sites that are within tight operating parameters, operators are looking for a solution to enable them to operate in higher winds been emerging over the past 5 years. The population of wind farms has been growing at 20% compound each year.
This means that high velocity sites not
previously not considered are now being considered.. Whilst others have made early attempts to exploit the opportunity, they have failed to achieve our expected success, as the mainstream wind farm sites have embraced early turbine control modules; our unique technology enables us to offer a significantly greater operating range. We expect that entering the initial window of opportunity will open up other additional business opportunities. New opportunities would also be created: once established in the wind sector, additional opportunities will emerge in Wave and Tidal Technologies
July 2016
Confidential Business Plan
Page |8
STAGE OF DEVELOPMENT The Wind Tech business has been in development over the past 6 Months. Whilst we have made some substantial progress, we would expect the next 12 months to be critical to our commercial success. We are proud of our success in delivering two significant achievements on time and budget to date: 
achieved grant stage for our first US patent

been provided development funding by the US Cleantech Fund as a non-repayable grant
These activities were delivered within the anticipated time and budget. A project plan of the further development of Wind Tech will be provided later in this document. It will outline key milestones and is tightly integrated with the financials and financial scenario analysis. The next key steps in our development schedule include: Initial Development - to build the best possible business planning solution to enable novice users to build an investor grade business plan Roll-Out - to ensure the customer experience is smooth and all activity is strongly supported Maturity - to drive ownership of core keywords
July 2016
Confidential Business Plan
Page |9
MARKETING MARKET SIZE AND FOCUS Our analysis of the market has focused on a two tiered approach. 1. To understand the broad market in which the business will operate 2. To clearly identify our niche of focus Using this approach to clearly understand the market in which our business will operate has enabled us to clearly focus our positioning, distribution, promotional strategy and pricing.
1. THE MARKET FOR WIND TURBINE ELECTRICITY GENERATORS
PRODUCTS AND SERVICES
The broader market has been identified as large and growing.
It is currently occupied by several key
industry players including:
West Set Modules
Crane Turbine Division
Asea Brown Boveri
General Electric
Our preliminary research shows that the broad market size is USD $1.2 Billion P.A.. The market size provided relates to only. It is expected that over time the Windtech organisation will also service markets in Spain and Portucal in the coming years. This research has been compiled from a variety of sources including the Roy Morgan Research report on Annual industry growth in the Cleantech Sector. Given industry information we accessed, we estimate that the market will continue its growth at 14% for the next 3-5 years. Further to our research, the market is currently going through a period of consolidation with several generation companies unable to raise capital for expansion. The Wind and Other Electricity Generation industry uses a range of renewable inputs to generate electricity. Over the five years through 2013-14, the industry has flourished, with capacity growth supported by multiple government incentives designed to promote renewable energy generation. In the past five years, the industry has expanded at an estimated compound annual rate of 17.3%, to be worth $705.4 million. In 2013-14, revenue is forecast to grow by 4.7%. A critical factor in industry growth has been the Renewable Energy Target (RET), which has been present in various forms since 2001.
July 2016
Confidential Business Plan
P a g e | 10
2. OUR SELECTED MARKET NICHE There are a number of niches that exist
within
the
overall
marketplace. Attempting to enter the market with a broad based product
would
not
provide
sufficient focus to achieve the desired market penetration. Following in depth analysis of the market,
we
believe
that
an
opportunity exists to focus on developing the Turbine Control Modules niche. We estimate that to
represent
about 5% of the overall market. It is a critical element of the overall market. We believe that our technology is well suited to high stress turbine environments that are common in wind turbines The niche has emerged early wind turbines being controlled by mechanical devices. Recent developments in semi-conductor durability have enabled computer chips to be used in these highly corrosive environments the mainstream wind farm sites have embraced early turbine control modules, our unique technology enables us to offer a significantly greater operating range Our competitive advantage in this niche will be derived from the fact that due to our experience in the market and established brand, we are well placed to succeed where others have been unable to. Our products and services have been selected specifically to appeal to this address the needs of this niche. Our entry into the niche will be to conduct a small direct marketing campaign towards key potential clients. We will conduct a large scale demonstration at the Cleantech Fair in Boston later this year to gather customer interest and feedback.
July 2016
Confidential Business Plan
P a g e | 11
THE CUSTOMER To better explain who our customer is and how they might use our products and services, we have developed a brief customer scenario: George Westlake is a potential customer of Wind Tech.
He is in the process of
obtaining funding for a marginal wind farm site in Arizona.
This site is in a high
velocity wind zone. making
his
He is having trouble
numbers
demonstrate
substantial return on investment.
a
In part
the return on investment issues is caused by dumping of excess wind velocity. He is keen
to
technology.
hear
about
the
windblast
On investigation he finds he
can achieve a 20% greater return on investment by using the technology.
He
builds licensing costs into his investment proposal.
He receives the funding and
employs WindBlast on his site.
July 2016
Confidential Business Plan
P a g e | 12
POSITIONING
Our position within the market place has been developed to ensure that we offer a premium product. As our product is expected to generate an additional $80,000 per turbine, per year, we will be looking to obtain some of this capacity gain.
As a reflection, will be at a significant premium to current market players. We intend to charge in the vicinity of $30,000 per turbine.
PRODUCTS AND SERVICES Our product list has been developed to address the identified customer need of a turbine that does not have to dump wind in 20+ knot situations due to turbine loads. To meet this need product range will incorporate 3 major products. One for 1kw turbines, one for 2kw turbines and one for 5-10kw units.
DISTRIBUTION To connect our products and services with customers, the following distribution strategy will be employed: “directly to customers.
We believe it is critical for us to have control over the
relationship with our customers to ensure that each implementation goes smoothly�
July 2016
Confidential Business Plan
P a g e | 13
THE OPERATIONAL BUSINESS MODEL Throughout the development stage of this business, we assessed alternate business models for this opportunity using a structured 9 element approach.
The below overview
of the preferred business model for Wind Tech provides a quick snapshot of the key functions, relationships and revenue sources. The business model provided below was selected following detailed analysis.
It
provides a quick snapshot of how Wind Tech will operate, generate revenue and deliver
value
to
shareholders
and
customers. The 9 elements considered include: 1. The Value Proposition – What are we offering to our customers? 2. Capabilities/Resources – What skills and capacity do we require to deliver on the value proposition? 3. Partnerships – Who do we need to work with to create value and access our revenue streams? 4. Activities – What will the business actually do? 5. Relationships – What organisations can influence our buyers purchase decision (excludes partners)? 6. Costs – What significant cost types are likely to be incurred as a developer company? 7. Channel to Market – Who will support us in our desire to connect wind blast turbine modules with wind farm developers and wind farm operators 8. Revenues – What will our customers pay for, how will we earn our revenue? 9. Customers – Who are our customers, purchasers and consumers?
July 2016
Confidential Business Plan
P a g e | 14
1. THE VALUE PROPOSITION
Our value proposition was developed from our customer’s perspective, to ensure that Wind Tech solves a key issue/opportunity for our customers.
“Offer the ability to operate wind farms in a much wider variety of wind velocity situations.”
This value proposition has been used to guide the development of the overall business model.
2. CAPABILITIES & RESOURCES Specific skills and organisational capabilities are required to effectively deliver on our value proposition. These capabilities will be the focus of future recruitment activities. We see our business critical capabilities as:
Technology development for high stress turbine applications
Software development to encode our technology in control routines
Semi-conductor chip development to encode the software directly on the chip
Intellectual property protection
Intellectual property licensing
We have worked hard to assemble as many as possible of these capabilities into the organisation to date and the focus of our development path will be to acquire outstanding resources to fill any capability gaps.
3. PARTNERSHIPS We understand that Wind Tech does not operate in isolation, we require active engagement with existing industry participants. Our selection of potential partners for the development of
July 2016
Confidential Business Plan
P a g e | 15
Wind Tech is critical to influence our customers to engage with our products and services. We have carefully selected partners that will reflect and support our market positioning. Our early partner development activities will be focused on Wihg Ho wafer fabrication plant (Korea).
These partner relationships will assist in building diverse revenue streams and
ensuring our products and services are supported in the market.
4. ACTIVITIES
Several primary activities will outline what the team at Wind Tech is actually focused on achieving. The Completion of testing associated with prototype 4 will be the primary activity undertaken.
Supporting activities include:
Development of design specifications for commercial version
Capital raising and grant applications
Chip design and management of fabrication
Engagement with the market to promote the technology at trade fairs
By executing effectively on these activities we can ensure effective progress towards commence commercial application of the technology in the Nevada desert over the coming 12 months.
5. RELATIONSHIPS There are a number of organisations that can influence our customer’s decision to purchase. We will develop relationships with the following organisations:
Walter and Sons Patent Attorney
The Wind Farm Operators Committee
The Cleantech Association of the United States
We believe that ongoing, sustainable relationships with these organisations can be developed over the next 12-18 months.
6. COSTS Ensuring that costs remain below operating revenue is a core priority. We understand our key cost centres and the interplay of these costs with revenue. Our major cost items include:
National Phase Patent Costs
Design of Commercial Prototype
Construction of commercial prototype
Business Development and international travel
Equipment leases
July 2016
Confidential Business Plan
P a g e | 16
Detailed costings for each of these items and the associated cash flow implications are provided in the financial forecasts. (See our cash flow statement in the financial section for details)
7. CHANNEL TO MARKET Reaching our customers is a key priority for Wind Tech. We understand the alternative market channels for Wind Turbine Electricity Generators products and services, and the margins associated with engaging these channels. We have elected to use the following channels to reach the wind farm developers and wind farm operators:
Direct Sales
Sales via distributors
Introductions via brokers
Introductions through universities
This multi-layered approach will ensure a diverse and secure income stream.
8. REVENUES To further leverage our market entry approach and strategy, we have identified several possible revenue streams.
This breadth of revenue has been designed to maximize our return on
marketing efforts to reach our customers. Expected revenue streams to be developed include:
Licensing of the technology
Sale of software to operation on laptops (remote control unit)
Sale of encoded chips for embedding into turbines
Services to assist with the implementation
Services to assist with turbine design and development
These revenue streams have been designed to maximize the “Lifetime Customer Value” of our target market to Wind Tech.
9. CUSTOMERS Combining market research with our understanding of the target market, we have identified several key customer groups. Reaching the following customers will be critical to the success of Wind Tech :
Wind Farm Developers
Wind Farm Operators
Turbine Manufacturers
July 2016
Confidential Business Plan
P a g e | 17

Turbine Designers

Blade fabricators
These customers have been selected to represent only those whose needs are most closely addressed by our products and services and can be reached effectively using the identified channels to market.
SUMMARY We believe that the unique design of this business model, demonstrated by our unique ability to combine and leverage each of these elements will ensure that Wind Tech is a success.
July 2016
Confidential Business Plan
P a g e | 18
OPERATIONS TEAM – EXECUTIVE CAPABILITY The team has many of the requisite skills to be the leading supplier of turbine technology to the world market. Any additional capabilities required will be acquired through contracting and recruitment of new team members. The team is led by Chuck Selda, president whose role it is to Guide the development of the business from inception. By providing strategic guidance, Chuck will ensure that the overall site development and market entry strategy will be realised. Simon Rafte’s role will be as the VP Technical Operations. His primary responsibility will be to Simon will ensure that the technology is integrated into simple and cost effective production techniques. James South will assume Intellectual Property Licensing responsibilities.
James will be
responsible for the ongoing development of our patent family and international registrations. He will commence our licensing program.
July 2016
Confidential Business Plan
P a g e | 19
BUSINESS DEVELOPMENT SCHEDULE In building a path forward for Wind Tech,
we
have
significant
identified
development
three
milestones.
We will monitor the achievement of both time and cost parameters in the achievement closely.
of
Any
these
investment
milestones into
the
business can be provided in tranches, pegged to these. A detailed project plan outlining how and who will be responsible for the delivery of these tasks is provided in Appendix A
MILESTONE 1: INITIAL D EVELOPMENT We believe this stage is critical in order to build the best possible business planning solution to enable novice users to build an investor grade business plan. Core tasks to be undertaken in this stage include: a) Finalise initial prototype drawings b) Commission development of Windbreaker Chip c) Work with chip developer to embed windbreaker technology d) Conduct initial testing of prototype chip e) Stress test chip under operational conditions
We have already commenced delivery of this stage of activity and believe that we are well placed to meet the timeframes outlined in the project plan, and the costs provided in the financial section.
MILESTONE 2: ROLL-O UT Our objective in the delivery of this stage is to to ensure the customer experience is smooth and all activity is strongly supported. Key actions to deliver this milestone will include: a) Identify core sales channels b) Engage potential distributors c) Finalise distributor agreements
July 2016
Confidential Business Plan
P a g e | 20
d) Conduct distributor training e) Manage distributor progress Successful delivery of this milestone will be judged by the efficiency of the Roll-Out of wind blast turbine modules.
MILESTONE 3: MATURITY This final stage has been designed to drive ownership of core keywords. To achieve this objective, we will action the following: a) Move into international markets b) Build international distribution capability c) Optimise service function d) Grow market share without discounting e) Establish position as preferred brand in the market
July 2016
Confidential Business Plan
P a g e | 21
WindTurbine Technology Inc. Business Plan 20 16 Task Id 1
Stage 1 - Initial Development Finalise initial prototype drawings Commission development of Windbreaker Chip Work with chip developer to embed windbreaker Conduct initial testing of prototype chip Stress test chip under operational conditions
a b c d e
2
Stage 2 - Roll-Out Identify core sales channels Engage potential distributors Finalise distributor agreements Conduct distributor training Manage distributor progress
a b c d e
3 a b c d e
Task Title/Description
Stage 3 - Maturity Move into international markets Build international distribution capability Optimise service function Grow market share with out discounting Establish position as preferred brand in the market
Responsible Resource(s) Chuck Selda Simon Rafte James South Simon Rafte James South Simon Rafte Chuck Selda Simon Rafte Simon Rafte Simon Rafte Simon Rafte James South Chuck Selda Simon Rafte James South Simon Rafte James South Simon Rafte
Start Date
End Date
Status
01-Sep 01-Sep 01-Sep 01-Oct 01-Oct 01-Oct 02-Oct 02-Oct 02-Oct 02-Oct 01-Nov 01-Dec 03-Jan 03-Jan 03-Jan 04-Mar 23-May 07-Aug
01-Oct 16-Sep 16-Sep 16-Oct 16-Oct 16-Oct 02-Nov 12-Oct 12-Oct 12-Oct 11-Nov 11-Dec 03-Dec 06-Feb 04-Mar 23-May 07-Aug 10-Oct
In Progress In Progress In Progress Select Select Select Select Select Select Select Select Select Select Select Select Select Select Select
0 20 1 0 7 0 0 0 0 0 0 0 0 0 0 20 18
PoweredBy
Company Development Roadmap
Sep Oct Nov Dec Ja n Feb Ma r Apr Ma y Jun Jul Aug Sep Oct Nov Dec Ja n
2 2 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
2 0 0 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0
0 0 0 0 0 0 1 0 0 0 1 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 1 0 1 1 0 0
0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 1 0 0
0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 1 1 0
0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 1 0
0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 1 0
0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 1 1
0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 1
0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 1
0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
SWOTM ANALYSIS Our
SWOTM
(Strength,
Weaknesses,
Opportunities Threats and Mitigation Strategies) analysis has been informed
Strengths
by our knowledge of competitors and
SWOTM
the marketplace in which we operate. Following
extensive
facilitated
discussions, the following strengths, weaknesses
and
been developed.
Weaknesses
opportunities
have
Threats & Mitigation
Opportunties
Where possible any
weaknesses have been identified as opportunities for further focus during the development of the business.
STRENGTHS
Currently regarded as the world leader in high velocity turbine technology
The granted patent position ensures we have a monopoly position for the next 18 years
Our licensing manager has been responsible for some of the largest transactions in the Cleantech Sector
Technology utilised in the manufacturing process ensuring that a quality product is produced for less
The operating range of our product is far superior to any competitive technology
The trademark WindBlast has established credibility and significant market recall
These strengths have been consolidated to achieve our core objective “be the leading supplier of turbine technology to the world market”.
WEAKNESSES
We are a new entrant to the marketplace
Our technology is yet to be proven in commercial scale operations
We currently lack the capital to achieve commercialisation
No established relationships with key potential customers
OPPORTUNITIES
We do not have the historical issues of under performing on promised capacity enhancement that our competitors do. This should assist our ability to drive growth
To demonstrate commercial viability within the next 6 months
Raise
sufficient
capital,
combined
with
federal
grant
funding
to
achieve
commercialisation
The ability to offer a fresh approach to a long term issue for the Wind Farm Operators
July 2016
Confidential Business Plan
P a g e | 23
THREATS AND MITIGATION The key potential threats have been identified, and mitigation strategies developed to minimise their impact on the business. Threats
Mitigation Strategies
Federal government support for Wind
Farm construction is depleted
By
increasing
the
technology
operating range, we will make Wind Farm sites that were previously not commercially
viable,
a
investment proposition.
strong
IN addition
we will focus on global markets including Spain and Portugal
The chip based implementation of
Our selection of chip manufacturer
our technology does not deliver the
will be guided by those that have
expected operating range
chips operating in very high stress environments.
We
will
request
evidence of operating life prior to signing the supply agreement
An alternative approach to creating a
We
have
high operating range with superior
ongoing
dynamics is developed
technology.
budgeted
to
maintain
development
of
the
It is anticipated that
further developments will add to our existing patent family
Existing agreements between Wind
We
have
allowed
a
6
month
Farm operators and turbine
contingency in our capital raising
manufacturers slow our market entry
requirements
July 2016
Confidential Business Plan
P a g e | 24
GOVERNANCE AND OWNERSHIP OWNERS The current ownership structure of Wind Turbine Technology Ltd. is as follows: Chuck Selda, President owns 70% of the business. Chuck was responsible for the development of the WindDrive technology. His contribution to intellectual property development has been crucial to the business Simon Rafte, Turbine Technologist, owns 10% of the business.
Sam will be responsible for
management of production volumes and ensuring wastage is monitored and managed effectively. James South currently holds 20% of the equity. James has been responsible for some of the largest licensing agreements signed in the Cleantech industry.
His relationships with key
manufacturers will ensure commercial success The owners are driving the plan commence commercial application of the technology in the Nevada desert in the short term, and in the longer term, entrench the WindBlast technology in new wind farm applications, positioning the business for an IPO (Initial Public Offering)
BOARD OF DIRECTORS Chuck Selda Chuck will be responsible for ensuring that the technology that is implemented is a true reflection of his vision. Simon Rafte Simon is a PHD in turbine technology and will use specific knowledge developed during his PHD to control peak load issues James South James will be responsible for commercial development of the business, and overseeing Business Development teams
July 2016
Confidential Business Plan
P a g e | 25
ASSETS The following is a catalogue of the 4 key business assets that will be used to deliver on our strategic objectives. Asset
Ownership Structure
Why
it
is
critical
to
WindTurbine Technology Inc. US Patent No 12432 2321
Select
This patent secures the core technology and will provide the basis of our licensing platform
US Patent No 2321 54331
Select
This
patent
builds
underlying specified 2321
on
the
technology in
by
patent
12432
protecting
the
approach to implementing the underlying technology The trademark, WindBlast
Select
WindBlast market
now
recall
circles.
As
has
some
in
technical
the
business
develops this trademark will offer additional protection to our patents Prototype version 4
Select
Prototype version 4 is the largest operating turbine in the world. This prototype will act as a sales tool, enabling potential
customers to see
and touch the technology
July 2016
Confidential Business Plan
P a g e | 26
FINANCIALS INVESTMENT The business is seeking an initial investment of USD $700,000 in order to meet planned milestones over the next 12 months. Failure to receive the funds will result in a delayed launch schedule.
Beyond the initial tranche, we will require an additional USD $20 million to fully
realize our plans. The investments have been assumed in our cash flow model. This model demonstrates the level of free cash flow expected generated, and produces NPV (Net Present Value) and times earnings (cash) valuations.
July 2016
Confidential Business Plan
P a g e | 27
CASH FLOW PROJECTIONS Our revenue projections outline the financial implications of our business model and strategy outlined in this document. Three alternative scenarios are presented. 1. The base case scenario represents what we believe to be the most likely scenario. 2. The best case scenario represents above expected results (the variables determining this result are outlined in the Cashflow model assumption table below). 3. The worst case scenario has been developed to “Stress Test� the business and determine the financial impact of a less than favorable operating environment. Model assumptions, analysis and graphical dashboards are provided for each scenario below.
Cash Flow Model Assumptions Forecasting period to begin on 01/09/2012 Unit of Currency AUD Discount rate for Net Present Value Calculation 30% Best Case Scenario Operating Income is higher than expected by: Operating Costs are higher than expected by:
50% 30%
Worst Case Scenario Sales are lower than expected by: Costs are lower than expected by:
30% 10%
Valuation Multiplier (X Net Operating Cash Flows)
July 2016
Confidential Business Plan
3
P a g e | 28
ANALYSIS OF THE BASE CASE SCENARIO The base case scenario represents most closely the expected financial implications of executing on this business plan. A lack of effective cash flow management can cause significant issues in ensuring stability. We have endeavored to cover all foreseeable costs and revenue, taking into account credit terms where applicable. The most accurate form of financial forecasting is to use both market (Top Down) and Capability to deliver (Bottom Up) assumptions in preparing the forecasts.
NET CASH BALANCE
Net Cash Balance 60,000,000
Cash Value
50,000,000 40,000,000
30,000,000 20,000,000 10,000,000
0 Year 1
Year 2
Year 3
Year 4
Year 5
Our base case forecast, representing a minimum annual cash balance of $1,857,660 in Year 1 ensures that all foreseeable variables are taken into account. Costs associated with executing our development plan have been accounted for in these figures. After the end of 5 years we will have $48,757,556 in funds available. This balance is added to the valuation multiple to determine the business value at the end of 5 years (See Valuation of Base Case Scenario)
July 2016
Confidential Business Plan
P a g e | 29
CASH RECEIPTS FROM S ALES
Cash Receipts from Sales 60,000,000 50,000,000
Cash Value
40,000,000 30,000,000 20,000,000 10,000,000 0
Year 1
Year 2
Year 3
Year 4
Year 5
The cash receipts from sales represent the cash we have received from customers for operating activity (Cash Revenue). We expect our Cash receipts from sales to grow from an average per month figure of $356,405 in year 1 to $4,055,670 per month by Year 5. Given the market size, our entry niche and our business strategy, we believe that this is both possible and achievable.
July 2016
Confidential Business Plan
P a g e | 30
NET CASH FLOWS FROM OPERATIONS
Net Cash Flows from Operations 30,000,000 25,000,000 20,000,000 Cash Value
15,000,000 10,000,000 5,000,000 0 -5,000,000
Year 1
Year 2
Year 3
Year 4
Year 5
-10,000,000
The net cash flow from operations figure excludes all financing costs, capital raised and drawings.
The operational cash flow of the business turns positive during Year 1, delivering
an operating annual surplus of $1,137,660 in that year. The minimum net annual cash flow from operations is experienced in the first year and is an average of $94,805 per month. An improved net cash flow position is experienced in year 5, increasing to an average of $2,082,900 per month.
July 2016
Confidential Business Plan
P a g e | 31
BUSINESS VALUATION
Times Earnings Based Valuation 140,000,000
Cash Value
120,000,000 100,000,000
80,000,000 60,000,000 40,000,000 20,000,000
0 Year 1
Year 2
Year 3
Year 4
Year 5
The valuation represented by the above graph is determined by using a times earnings multiplier. Based on valuations of other companies in the Wind Turbine Electricity Generators market, we believe that an earnings multiplier of 3 is reasonable. To determine the year 5 value of Wind Tech, we multiplied year 5 net operating cash flow ( $24,994,802 ) X 3 (the earnings multiplier) = 74,984,407 To this we added the cash at bank ($48,757,556 ) to this calculation. The result is a valuation at end of year 5 of $123,741,963. As an alternative valuation approach we have also run a Net Present Value (NPV) calculation on our 5 year net operating cash flow. After reviewing reasonable discount factors used for other pre-seed venture investments, we settled on a “Discount Factor� of 30%. Using this approach the Net Present Value of the business under the base case scenario is
$9,373,838
as at
September 2012.
Hence, given the assumptions used in the cash flow model, and the discount rate used, the current value of the business is $9,373,838 and is expected to increase to $123,741,963 over the next 5 years, resulting in a ROI (Return on Investment) of 1320% and an average annual return of 264%.
July 2016
Confidential Business Plan
P a g e | 32
Wind Turbine Technology Ltd. Cash Flow Forecast Pre-Start Holdings Cash on Hand (beginning of period)
Sep-12
50,000
20,000
Oct-12 157,120
Nov-12 233,770
Dec-12 389,391
Jan-13 522,787
Feb-13 691,823
Mar-13 863,012
Apr-13
May-13
Jun-13
Jul-13
Aug-13
1,730,928
1,887,372
2,020,216
1,911,762
1,936,455
Year 1 1,936,455
Year 2
471,590 518,748 570,623
4,276,857
1,857,660
Year 3
Year 4
Year 5
10,810,020
12,890,641
23,762,754
CASH RECEIPTS
200,000 220,000 242,000 266,200 292,820 322,102 354,312 389,743 428,718
w ind blast turbine modules Cash Sales Collections from Credit accounts TOTAL CASH RECEIVED FOR OPERATIONS
0
200,000
220,000
242,000
266,200
292,820
322,102
Total Cash Available (before cash out)
354,312
389,743
428,718
471,590
518,748
570,623
700,000
Proceeds from Loan/ or Capital Raised TOTAL CASH RECEIPTS
8,345,000 15,021,000 27,037,800 48,668,040
0 4,276,857
8,345,000
700,000
14,000,000
15,021,000
27,037,800
48,668,040
0
200,000
220,000
242,000
266,200
292,820
322,102
1,054,312
389,743
428,718
471,590
518,748
570,623
4,976,857
22,345,000
15,021,000
27,037,800
48,668,040
50,000
220,000
377,120
475,770
655,591
815,607
1,013,925
1,917,325
2,120,671
2,316,090
2,491,805
2,430,511
2,507,078
6,913,312
24,202,660
25,831,020
39,928,441
72,430,794
20,000
22,000 70,000
24,200
26,620 30,000
29,282
32,210
35,431
38,974
42,872
47,159 200,000
51,875
57,062
427,686
200,000 3,737,600
0
200,000 200,000 200,000 7,300,000 5,840,000 4,672,000 2,300,000
33,600
37,632
42,148
47,206
723,994
1,235,460 1,606,098 2,087,927
2,714,306
CASH PAID OUT Purchases (National Phase Patent Costs) Purchases (Design of Commercial Prototype)
300,000
Purchases (Construction of commercial prototype) Purchases (Business Development and international travel)
30,000
52,870
59,215
66,320
74,279
83,192
93,175 104,356
Purchases (equipment leases)
0
Gross w ages (exact w ithdraw al)
0
Payroll expenses (taxes, etc.)
2,000,000 4,600,000 10,580,000
0
12,000
Outside services
16,800
23,520
32,928
46,099
64,539
90,354 126,496 177,095
247,933 347,106 485,948
1,670,817
SEO (Search Engine Optimisation
0
SEM (Search Engine Marketing)
0
Offline Marketing
0
Car, delivery & travel
2,339,144 3,274,802 4,584,723
6,418,612
0
880
Accounting & legal
950
1,026
1,109
1,197
1,293
1,396
1,508
1,629
1,759
1,900
2,052
16,700
Rent
0
Telephone
0
Utilities
0
Insurance
0
Taxes (real estate, etc.)
0
Interest
0
Other expenses (specify)
0
Miscellaneous
18,036
19,479
21,037
22,720
0
TOTAL CASH PAID FOR OPERATIONS
0
62,880
143,350
86,378
132,804
123,784
150,912
186,397
233,299
295,874
580,043
494,056
649,418
3,139,197
13,392,640
12,940,379
16,165,687
23,673,238
NET CASH FLOWS FROM OPERATIONS
0
137,120
76,650
155,622
133,396
169,036
171,190
167,915
156,444
132,844
-108,453
24,693
-78,795
1,137,660
-5,047,640
2,080,621
10,872,113
24,994,802
Loan principal payment
0
Capital purchase (specify) Other startup costs
0
30,000
30,000
Reserve and/or Escrow
0
Ow ners' Withdraw al
0
TOTAL CASH PAID OUT
30,000
62,880
143,350
86,378
132,804
123,784
150,912
186,397
233,299
295,874
580,043
494,056
649,418
3,169,197
13,392,640
12,940,379
16,165,687
23,673,238
Cash Position (end of perioed)
20,000
157,120
233,770
389,391
522,787
691,823
863,012
1,730,928
1,887,372
2,020,216
1,911,762
1,936,455
1,857,660
1,857,660
10,810,020
12,890,641
23,762,754
48,757,556
ANALYSIS OF THE BEST CASE SCENARIO The best case scenario represents an optimistic outlook. The graphs and figures presented below assume a 50% % increase in sales over the base case scenario and a corresponding increase in costs by 30%. All other variables used are held constant with those reflected in the base case scenario.
Under the best case scenario,
Net Cash Balance
the cash balance ends Year 1 at 3,114,329 which is higher than
90,000,000
the
80,000,000
case
scenario
by
1,256,669. By year 5 the cash
70,000,000
balance
60,000,000
Cash Value
base
would
substantially
50,000,000
to
increase 79,698,562,
54,703,760 more than under
40,000,000
the base case scenario.
30,000,000 20,000,000 10,000,000 Year 1
Year 2
Year 3
Year 4
Year 5
Cash Receipts from Sales
Receipts
from
sales
have
increased directly in-line with our assumption of 50%.
Cash Value
80,000,000
70,000,000
This drives sales growth from
60,000,000
$534,607 per Month in year 1
50,000,000
to $6,083,505 in year 5.
40,000,000
30,000,000 20,000,000 10,000,000 Year 1
Jul-19
Year 2
Year 3
Year 4
Year 5
Confidential Business Plan
P a g e | 34
Our
Net Cash Flows from Operations
50,000,000
cash
flow
position
improves markedly over the base case scenario, as the gap between cash expenses and cash receipts from sales widens.
40,000,000
Cash Value
net
30,000,000
This leaves us with a substantially
20,000,000
better operating position at the
10,000,000
end
of
year
5
of
$3,518,904 per month in net
Year 1
-10,000,000
250,000,000
Year 2
Year 3
Year 4
Year 5
operating
cashflow,
a
59%
improvement on the base case.
The optimistic scenario produces a
Times Earnings Based Valuation
times
earnings
valuation
of
$206,379,115 at year 5. If it were possible
to
execute
on
this
scenario we would be able to
200,000,000
create an additional $82,637,152
Cash Value
150,000,000
in year 5 value. Using the NPV approach to value
100,000,000
the future 5 years cash flow, this
50,000,000
produces a current valuation of $19,713,832.
Year 1
Year 2
Year 3
Year 4
Year 5
Successful
delivery
on
the
optimistic scenario will produce a total
return
of
1047%,
or
an
average annual return of 209%. These
percentage
calculated
as
valuation,
and
figures
return hence
on
are initial
may
be
higher or lower than under the base case scenario.
Jul-19
Confidential Business Plan
P a g e | 35
ANALYSIS OF THE WORST CASE SCENARIO The worst case scenario represents a pessimistic outlook.
It is designed to represent an
unlikely scenario that represents the worst financial outcome anticipated.
The graphs and
figures presented below assume a 30% decrease in sales over the base case scenario and a corresponding decrease in costs by 10%. All other variables used are held constant with those reflected in the base case scenario.
Under
Net Cash Balance
worst
case
scenario, the cash balance ends Year 1 at $948,523
30,000,000
Cash Value
this
which is lower than the base
25,000,000
case scenario by $909,137.
20,000,000
By year 5 the cash balance
15,000,000
to
10,000,000
24,013,495 less than that
would decrease substantially $
24,744,061,
represented
5,000,000
by
the
base
case scenario.
Year 1
Year 2
Year 3
Year 4
Year 5
Receipts
Cash Receipts from Sales
sales
directly
have in-line
with our assumption of a 30% reduction in sales.
40,000,000
Cash Value
from
decreased
35,000,000
This
30,000,000
from $249,483 per Month in
25,000,000
year 1 to$2,838,969 in year
20,000,000
5.
limits
sales
growth
15,000,000
10,000,000 5,000,000 -
Year 1
Jul-19
Year 2
Year 3
Year 4
Year 5
Confidential Business Plan
P a g e | 36
Our net cash flow position
Net Cash Flows from Operations 15,000,000
significantly
when compared to the base case scenario.
10,000,000
This
leaves
us
with
a
substantially lower operating
5,000,000
Cash Value
deteriorates
position at the end of year 5 of $1,063,476 per month in
Year 1
Year 2
Year 3
Year 4
Year 5
-5,000,000
net operating cashflow, a 51% lower figure than the base case.
-10,000,000
This
Times Earnings Based Valuation
Cash Value
70,000,000
pessimistic
scenario
produces a times earnings valuation of $63,029,203 at year
5.
This
figure
60,000,000
represents a reduction in
50,000,000
overall
business
value
$60,712,760 in year 5 when
40,000,000
compared to the base case
30,000,000
scenario.
20,000,000 10,000,000 Year 1
Jul-19
of
Year 2
Year 3
Year 4
Year 5
Confidential Business Plan
P a g e | 37
SUMMARY The financial analysis provided demonstrates that the successful execution of our strategy will deliver above average financial returns. Furthermore, given unfavorable circumstances, Wind Tech still manages to deliver a minimum net cash flow in year 5 of $12,761,714. We would expect our valuation at the end of year 5 to be between $63,029,203 and $206,379,115. Given the business model and strategy outlined throughout this document, we would expect the most likely valuation to be $123,741,963
Name:
Chuck Selda
Company:
Wind Turbine Technology Ltd.
Phone:
02 9004 54654
Email:
c.selda@windtech.com.au
Mail:
24 West St, Sydney, NSW
Jul-19
Confidential Business Plan
P a g e | 38