Announcement PDF Australia’s future in bioenergy and renewables Annual Report 2023 Delorean Corporation Limited ACN 638 111 127 Our Annual Report This annual report provides a summary of our activities and performance for the financial year ended 30 June 2023. Delorean Corporation We are a leading bioenergy company in Australia, committed to sustainability and innovation. Our solutions are paving the way towards a greener future, reducing environmental burdens and powering a cleaner, more sustainable Australia. Our Vision To be recognised as Australia and New Zealand’s leading emerging renewable energy generator and retailer, led by its fast-growing bioenergy infrastructure footprint. Our Mission To build, own and operate the largest portfolio of commercially successful renewable energy infrastructure in Australia and New Zealand, measured by value of developed assets and quantity of renewable electricity, heat and renewable gas produced. DELOREAN CORPORATION LIMITED | ANNUAL REPORT 2023 2 Table Of Contents Corporate Directory ......................................................................................................................................... 4 FY2023 at a Glance ...........................................................................................................................................7 Chairman’s Address ......................................................................................................................................... 8 Directors’ Report ............................................................................................................................................ 10 Auditor’s Independence Declaration ..............................................................................................................41 Consolidated Statement of Profit or Loss and Other Comprehensive Income ...............................................42 Consolidated Statement of Financial Position ................................................................................................43 Consolidated Statement of Changes in Equity................................................................................................44 Consolidated Statement of Cash Flows ..........................................................................................................46 Notes to the Consolidated Financial Statements............................................................................................47 Directors’ Declaration .....................................................................................................................................94 Independent Auditor’s Report ........................................................................................................................95 ASX Additional Information ............................................................................................................................99 DELOREAN CORPORATION LIMITED | ANNUAL REPORT 2023 3 Corporate Directory Directors Mr Hamish Jolly Mr Joseph Oliver Mr David McArthur Mr Steve Gostlow ASX Code Shares: DEL Company Secretary Mr David McArthur Country of Incorporation and Domicile Australia Legal Form of Entity Public Company Contact Details deloreancorporation.com.au info@deloreancorporation.com.au +61 8 6147 7575 Registered and Principal Office Ground Floor 1205 Hay Street WEST PERTH WA 6005 Corporate Governance Statement https://www.deloreancorporation.com.au/ corporate-governance/ Postal Address Ground Floor 1205 Hay Street WEST PERTH WA 6005 Auditors RSM Australia Partners Level 32, Exchange Tower 2 The Esplanade PERTH WA 6000 Bank Commonwealth Bank of Australia Level 14B, 300 Murray Street Perth WA 6000 Share Registry Automic Group Level 2, 267 St Georges Terrace PERTH WA 6000 Telephone: 1300 288 664 DELOREAN CORPORATION LIMITED | ANNUAL REPORT 2023 4 Delorean Corporation Building Tomorrow’s Legacy 3 Award winning bioenergy projects completed: · · · Jandakot Bioenergy Plant Blue Lake Milling Bioenergy Plant Ecogas Bioenergy Plant Received a commendation award in the South Australian Premier's Awards: Energy and Mining (Environment) Category for the Blue Lake Milling bioenergy project. Delorean Corporation is proud to pioneer the development of the bioenergy industry in Australia. Delorean Corporation is the only ASX-listed company leading with bioenergy and commercial production of renewable gas in the form of biomethane. We are a vertically integrated business operating in two of Australia’s highest growth industries – renewable energy and waste management. In Q1 FY23 Delorean was named as a Top 5 Leader in the Australian Financial Review’s inaugural Sustainability Awards 2022 DELOREAN CORPORATION LIMITED | ANNUAL REPORT 2023 5 Nurturing Sustainable Growth Investment Highlights ✓ ✓ ✓ ✓ ✓ DELOREAN CORPORATION LIMITED | ANNUAL REPORT 2023 6 FY2023 at a Glance In FY2023, Delorean Corporation made notable strides in various projects, demonstrating its commitment to sustainable solutions and solidifying its position as a frontrunner in the Australian bioenergy industry. • • • • • • Company has now successfully completed three major bioenergy infrastructure projects, with the Blue Lake Milling project (SA) and Ecogas (NZ) projects both reaching practical completion during the year. Now in build for $53m Yarra Valley Water (YVW) bioenergy project in Lilydale, Victoria being YVW’s second bioenergy facility. Brickworks/NSW1 project progressed from feasibility to development stage with lodgement of planning application and Environmental Impact Assessment in advanced stages. Orderly divestment and wind down of Energy Retail operations completed, de-risking exposure to wholesale energy market – with retail licenses retained to support DEL’s own bioenergy infrastructure development and operations. New feasibility activities have commenced on a grain-waste feedstock project with a major Australian grain operator. Cash balance of $1.0m as at 30 June 2023 DELOREAN CORPORATION LIMITED | ANNUAL REPORT 2023 7 Chairman’s Address Delorean Corporation (Delorean) consolidated its position this year as Australia’s bioenergy leader with the successful delivery now of three major bioenergy projects, despite a very difficult year for the entire Australian construction industry in terms of FY22/23 ‘black swan event’ cost escalations, supply chain disruptions and delays in project startup. The Company has emerged stronger and leaner now with the $53m Yarra Valley Water project, our biggest project to date, fully under way in the post-COVID era with inflationary protections in place and a great partnership with Victoria’s third biggest water utility to build YVW’s second bioenergy facility. We have refined, focused and de-risked the business with the strategic orderly divestment and wind down of Delorean’s Energy Retail operations to eliminate cost-side exposure to escalating wholesale energy prices while the Company’s Infrastructure Division instead benefits from upward pressure on energy prices to underpin revenues and infrastructure project viability and future returns. The Energy Retail revenues are replaced by Engineering division construction contracts as that business continues to scale up. In a second key partnership, Delorean is well advanced in the collaborative development of the NSW1 project with Brickworks Building Products. This is the first project in a multi-project Master Services Agreement, that is set to deliver 190,000 GJ per annum of renewable gas directly into Brickworks operations at Horsley Park in Sydney. With completion of the feasibility stage, the Company is well advanced in preparing submissions for planning and environmental approvals on this project, in readiness for FID and construction to start in 2024. Between the fully-funded Yarra Valley Water and Brickworks projects (both of which are structurally cashflow positive), the Company currently has adequate working capital, resources and cashflow to support its normal operations without the foreseeable need for further capital injection. With a 5-year track record of profitability prior to listing in 2022, the Company expects to return to profitability in FY2024. Delorean’s stated Vision to be recognised as Australia and New Zealand’s leading emerging renewable energy generator and retailer, led by its fast-growing bioenergy infrastructure footprint. The Company remains active in developing and arranging finance for its own pipeline of bioenergy projects. Beyond the NSW1 project with Brickworks, Delorean met all Agreed Due Diligence requirements relating to the SA1 project and VIC1 project under the proposed funding partnership with Palisade Impact. In August 2023, the parties agreed not to extend the exclusivity period to enable Delorean to secure an alternative funding partner to take the projects forward. Palisade Impact has confirmed it will assist Delorean to secure such alternative funding partner and Delorean is again active in securing investment in these two cornerstone projects. Development of Delorean’s QLD 1 project will also be more actively progressed into FY2024 with the Company awaiting the outcome of an application for a $5m Queensland Government grant relating to this project. DELOREAN CORPORATION LIMITED | ANNUAL REPORT 2023 8 More widely, following on from the successful completion of the Blue Lake Milling bioenergy project in South Australia this financial year, Delorean has entered into a new agreement with a major Australian grain business to commence studies underpinning the potential development of a bioenergy facility powered by grain-based feedstocks. We look forward to a strong year in FY2024 and return to the growth and profitability that typified our business prior to listing. Delorean Corporation Ltd is well positioned for this. We now have three major projects under our belt and a track record for delivery that has been earned by tenacity and commitment but has come at some cost. We are through the significant turbulence of 2022/23 in the construction sector and embarking on our biggest construction project yet with margin protections in place. We have shed our downside exposure to the upward trending energy prices and our business is focused on developing and building bioenergy assets that harness this upward trend and the tailwinds associated with both organics and waste management sector and renewable energy. Against this backdrop, there has never been more urgency or demand for renewable gas for which, in the current absence of a viable, cost-competitive hydrogen solution, there are only two main sources – landfill gas which is being actively curtailed by legislation diverting organics from landfill, and bioenergy in a form that Delorean is pioneering in the Australian market. We are confident that Delorean will be a significant player in meeting this demand, to the benefit of our shareholders and the progressive decarbonisation of Australian industry. I genuinely thank our dedicated team at Delorean and our shareholders for their support and patience through FY2023. We are excited at the opportunities afforded to the Company in FY2024 and we are committed to returning Delorean to profitability and growth. Yours sincerely, Hamish Jolly Executive Chair DELOREAN CORPORATION LIMITED | ANNUAL REPORT 2023 9 Directors’ Report The Directors’ present their report together with the financial statements of Delorean Corporation Limited (“Delorean” or “the Company” or “DEL”) and its subsidiaries (“the Consolidated Entity”) for the financial year ended 30 June 2023 and the auditor’s report thereon. Our Board Delorean’s Board comprises a balance of strong and committed executive leadership through its co-founders, Executive Chair Hamish Jolly and Managing Director Joe Oliver, matched with Steve Gostlow’s deep experience and company growth track record in the Australian waste sector with Tox Free Solutions Ltd, and David McArthur’s decades of experience in the complexities of ASX-listed businesses. The Board functions well with the Non-Executive Directors providing guidance on finance, performance management and M&A strategy. Together, the Directors hold 42.19% of DEL’s issued capital and are motivated to guide the Company to meet its growth and profitability targets and realise the Company’s vision. Strong Leadership Hamish Jolly Executive Chair & Co-Founder Hamish is a seasoned executive and holds a Bachelor of Business (Business Law and Accounting) and is a Member of the Institute of Chartered Accountants in Australia and New Zealand. He is a former Director of Strategy and Ventures at Bankwest, and former CEO of Greening Australia, one of Australia’s largest environmental NGO’s. Joe Oliver Managing Director & Co-Founder Joe has 15 years’ experience in engineering, power generation and renewable energy across both Australasia and Europe. Prior to Delorean, Joe worked for Edina Ltd, specialising in power generation. Joe has been involved in developing the UK Anaerobic Digestion sector delivering over 10 facilities nationwide through both Farmgen Ltd and Monsal Ltd. Steve Gostlow Non-Executive Director Steve has over 20 years’ experience in the waste management industry. He was Managing Director of Tox Free Solutions Ltd (Toxfree) for 16 years where he developed Toxfree into one of Australia’s largest waste management companies. Steve has formal governance qualifications as a Graduate of the Australian Institute of Company Directors. David McArthur Non-Executive Director & Company Secretary David is a Chartered Accountant, with over 30 years’ experience. David has sat on the board and been company secretary for a number of listed companies including Lodestar Minerals Ltd (ASX: LSR), Xstate Resources Ltd (ASX:XST) as well as Harvest Technology Ltd (ASX:HTC). Additionally, he was also chair of Audit and Risk Management Committee for all three. DELOREAN CORPORATION LIMITED | ANNUAL REPORT 2023 10 Directors’ Report (continued) Operating and Financial Review Principal Activities Delorean is a leading builder and developer of bioenergy infrastructure and a retailer of electricity throughout Australia. The principal activities of the Consolidated Entity during the financial year were: • • • • • Renewable energy asset investment Development Construction Tank and infrastructure fabrication Energy retail, focused on renewable energy Overview Delorean Corporation was established in 2013 as a pioneering bioenergy EPC provider in Australia and New Zealand. Delorean has successfully delivered 3 award-winning bioenergy projects (Jandakot WA, Blue Lake Milling SA, Ecogas NZ). As we continue to expand our impact in the renewable energy sector, we are now actively engaged in the construction of our fourth and most ambitious project to date, valued at approximately $53m, for Yarra Valley Water. The advancement of Delorean’s development pipeline of infrastructure projects has led to Delorean transitioning into a ‘develop, own and operate’ business model, enabling us to take a more active role in our project’s life cycles: • Infrastructure (core): rollout of Delorean owned bioenergy projects through partnerships. • Engineering: refocused to primarily support EPC and O&M of Delorean’s own projects whilst selectively taking on third party work • Energy Retail (now materially inactive – pending future ramp up in support of DEL’s infrastructure projects): refocused as retailer of energy (electricity and gas) generated only from Delorean projects. With a firm foothold in the renewable energy landscape and a strong dedication to driving positive change in the energy industry, Delorean Corporation is incredibly well placed to capitalise on the major and long-term structural change in gas demand. Our steadfast commitment to advancing sustainable solutions and expanding our portfolio exemplifies our purpose of shaping a cleaner future for Australia and New Zealand. DELOREAN CORPORATION LIMITED | ANNUAL REPORT 2023 11 Directors’ Report (continued) Operating and Financial Review (continued) Bioenergy Plant Revenue Model Bioenergy plants benefit from multiple revenue streams, deriving income from various sources such as waste acceptance and processing, as well as sale of renewable electricity, heat and gas. Furthermore, there are prospects for additional revenue streams in the future, including the sale of biofertiliser, CO2, and hydrogen. These opportunities contribute to the overall financial viability and sustainability of bioenergy operations. Organics Market Across Australia Australia’s waste policy places a strong emphasis on the recycling of organic waste. According to the National Waste Report 2022, approximately 48 million tonnes of organic waste is generated annually in Australia, which can be utilised for bioenergy. As part of the National Waste Policy Action Plan 2019, Australia aims to halve the amount of organic waste to landfill disposal by 2030 (Target 6 under the plan). This target is expected to heighten the urgency for local government authorities to divert organic waste to bioenergy. Waste levies are a key driver underpinning each state government’s waste and circular economy policy. The escalating landfill levies across the country are encouraging waste generators and feedstock suppliers to seek alternative waste disposal options. This significant trend is projected to further enhance Delorean’s revenue from gate fees. DELOREAN CORPORATION LIMITED | ANNUAL REPORT 2023 12 Directors’ Report (continued) Operating and Financial Review (continued) Vertically Integrated Renewable Energy Business Delorean is a vertically integrated business operating in the organic waste management sector and the renewable energy sector (particularly renewable gas). Both sectors have strong macro drivers for growth and are rapidly developing. Within this structure, Delorean has the inhouse capability to deliver bioenergy projects across the full lifecycle, from project conception to commissioning and operation; processing organic waste and generating and monetising renewable electricity, heat and gas. [ Currently inactive ] EPC Projects progressing with DEL-owned Project Development and Build Pipeline DELOREAN CORPORATION LIMITED | ANNUAL REPORT 2023 13 Directors’ Report (continued) Operating and Financial Review (continued) Delorean Engineering Division Revenue Underlying EBITDA** • • FY23 1HY23 FY22 Change* $ $ $ % 2,719,992 86,809 3,563,459 (2,225,770) -12% 3,138,787 (2,946,509) 32% Incurred a net loss on Ecogas (NZ) and Blue Lake Milling (SA) projects from impacts of COVID, global materials and shipping cost uplift and access to site. Contracted for construction of Yarra Valley Water, $53m value. Contract executed with key commercial terms to manage future escalations. Initial phase works completed profitably. *%Change in FY22 and FY23 ** Refer to page 26 for definition of Underlying EBITDA Yarra Valley Water, VIC Bioenergy Plant Project Background Location: Lilydale, Victoria - $53M + $6.5M contract value Delorean Corporation’s Engineering Division was awarded the contract for the design, construction, operation, and maintenance of Yarra Valley Water’s second food waste to energy plant at Lilydale, Victoria. This new facility will be one of the largest food waste to energy facilities of its kind in Victoria. The total design and construction contract sum is $53M. Additionally, the contract includes a two-year agreement for operations and maintenance (and an option for digestate management) by Delorean with a value of $6.5M. Project Update Delorean Corporation’s Engineering Division was awarded Notice to Proceed under its existing contract with Yarra Valley Water. Long lead item orders are being placed and site commencement is expected in late CY2023, subject to final regulatory and planning approval. Image 1: Yarra Valley Water bioenergy plant render DELOREAN CORPORATION LIMITED | ANNUAL REPORT 2023 14 Directors’ Report (continued) Operating and Financial Review (continued) Delorean Engineering Division (continued) Ecogas, NZ Bioenergy Plant Project Background Location: Reparoa, New Zealand - $10.1M contract value Delorean Corporation’s Engineering Division was contracted for the design, turnkey build and commissioning of this bioenergy project in Reparoa, New Zealand. The completed project is taking food organics from Auckland City Council collections, with the energy produced supplying a major greenhouse operation. This bioenergy facility is New Zealand’s first commercial scale anaerobic digestion plant. Project Update The bioenergy facility for Ecogas / Pioneer achieved Practical Completion in Q4 FY2023, with the plant successfully generating biogas. The project is operated by the client and is successfully producing green electricity and biofertiliser. Image 2: Ecogas bioenergy facility DELOREAN CORPORATION LIMITED | ANNUAL REPORT 2023 15 Directors’ Report (continued) Operating and Financial Review (continued) Delorean Engineering Division (continued) Blue Lake Milling, SA Bioenergy Plant Project Background Location: Bordertown, South Australia - $7.8M contract value Delorean Corporation’s Engineering Division was contracted for the design, turnkey EPC and commissioning of this world-first grain milling operation bioenergy plant. The plant supplies renewable electricity, heat and biofertiliser from ground out milled feed. Project Update The AD facility for Blue Lake Milling achieved practical completion on 29 September 2022, and is powering Blue Lake Milling’s site, with surplus electricity exported to the grid. The project is operated by the client and continues to produce green electricity and biofertiliser. Delorean received a joint commendation award (with Blue Lake Milling) in the South Australian Premier's Awards: Energy and Mining (Environment) Category for the Blue Lake Milling bioenergy project. Image 3: Blue Lake Milling bioenergy facility DELOREAN CORPORATION LIMITED | ANNUAL REPORT 2023 16 Directors’ Report (continued) Operating and Financial Review (continued) Delorean Infrastructure Division Revenue Underlying EBITDA** • • • FY23 1HY23 FY22 Change* $ $ $ % 385,588 (104,371) 161,344 92 365,022 205,687 6% -151% Invested in project pipeline progressing SA1, VIC1 and QLD1 and other projects across Australia Invested in the project delivery and operations team across engineering, infrastructure and corporate Infrastructure projects on foot to align to institutional investors key objectives to subsequently meet FID requirements for direct investment *%Change in FY22 and FY23 ** Refer to page 26 for definition of Underlying EBITDA Project Finance From October 2022, Delorean and Palisade Impact were actively focused on completing the workstreams necessary for Palisade Impact’s due diligence on the SA1 and VIC1 projects under a structured plan and process. During this time, Delorean was subject to certain exclusivity and conduct of business restrictions which were due to lift on 17 August 2023. The parties have agreed not to extend the exclusivity period to enable Delorean to secure an alternative funding partner to take the projects forward. Palisade Impact has confirmed it will assist Delorean to secure such alternative funding partner. The due diligence process with Palisade Impact enabled meaningful progression and proving up of the commercial proposition of both SA1 and VIC1 to ready each project. Delorean intends to actively connect with a shortlist of potential investors with whom the Company was unable to engage during Palisade Impact’s exclusivity period, with the objective of securing an alternative investment partner for the SA1 and VIC 1 projects. VIC1 Stanhope Bioenergy Plant Project Background Location: Stanhope, Victoria In stage one, this facility will process 54,000TPA of organic waste. It will generate 15,400 MWh per annum of green electricity and contribute to emissions reduction of 69,400tCO2e/annum. This is equivalent to powering 3,850 homes with green energy every year. Project Update During FY2023, Delorean’s Infrastructure Division has been actively advancing the project. The VIC1 project has successfully obtained all the necessary approvals. The Powercor electricity grid technical report has been completed, and higher volumes of feedstock have been identified, surpassing the planned capacity of the facility. Initial construction works have commenced. The project is currently shovel ready for full construction pending project finance. DELOREAN CORPORATION LIMITED | ANNUAL REPORT 2023 17 Directors’ Report (continued) Operating and Financial Review (continued) Delorean Infrastructure Division (continued) SA1 Salisbury Bioenergy Plant Project Background Location: Salisbury, South Australia This project will be one of Australia’s first to create green gas to mains utilising organic waste. In Stage 1 it will process 70,000TPA of organic waste, generating 200 TJs of biomethane per annum. This will contribute to 92,200 tonnes/annum emissions reduction, the equivalent of powering 5,120 homes with green energy per year. Project Update Delorean’s Infrastructure Division has achieved significant milestones. The Project has successfully obtained all the necessary approvals, ensuring a smooth path for its development. The SAPN electricity grid technical report has been completed, and higher volumes of feedstock have been identified, surpassing the planned capacity of the facility. The project is currently shovel ready for full construction pending project finance. Image 4: SA1 Salisbury Bioenergy Plant Render DELOREAN CORPORATION LIMITED | ANNUAL REPORT 2023 18 Directors’ Report (continued) Operating and Financial Review (continued) Delorean Infrastructure Division (continued) Brickworks Project Background Brickworks Building Products (ASX: BKW) and Delorean have signed a landmark collaboration agreement to build and operate bioenergy facilities that will be co-located at Brickworks’ brick manufacturing sites. The completed facilities will convert organic waste to green gas and electricity for use in Brickworks’ operations. The collaboration has commenced with Brickworks’ NSW brick manufacturing sites, and if successful there is the potential for the model to be rolled out on a national basis. Project Update In Q4 FY2023, Brickworks Building Products and Delorean continued to progress the Development Stage of the NSW1 project under a Master Services Agreement (MSA). Following approval to progress to submission of planning and development approvals, the Company has been active in preparing documentation for full planning/development approval. Progress on the development application activities has been in line with expectations and the development work remains materially on track. Image 5: NSW1 Bioenergy Plant Render DELOREAN CORPORATION LIMITED | ANNUAL REPORT 2022 19 Directors’ Report (continued) Operating and Financial Review (continued) QLD1 Bioenergy Plant Project Background At full capacity, this site will process approximately 130,000TPA of organic waste with the primary energy output being either biomethane or green electricity. The facility is likely to be developed with a staged approach, with Stage 1 seeing 70,000 tonnes per annum of waste accepted. This is equivalent to powering 9,000 homes with green energy every year (based on full capacity). Project Update The Company is currently preparing to progress the project from feasibility stage to development approval. The project is expected to be FID-ready early in CY2024. DEL is awaiting the outcome of a $5m grant application from the Queensland Government to support the construction of this project. Energy Retail FY 2023 Report • FY23 $ 1HY23 $ FY22 Change* % Revenue 15,730,421 35,398,813 -56% Underlying EBITDA** 383,876 15,398,683 (213,648) 1,222,692 -69% Returned a profit from operations retailing energy and managing forward contracts for LGC’s *%Change in FY22 and FY23 ** Refer to page 26 for definition of Underlying EBITDA Overview In October 2022, after a review of its activities, Delorean elected to confine its energy retail operations to the monetisation of energy exclusively from its own bioenergy projects (either constructed for third parties or owned by Delorean), as those projects continue to come online. During 2H FY2023, consistent with strategy, Delorean divested its last two remaining electricity retail customers, pending a scale up of its retail operations as Delorean’s Infrastructure assets come onstream. The Energy Retail division also successfully resolved a residual payment due to the Clean Energy Regulator relating to its legacy business from 2022. DELOREAN CORPORATION LIMITED | ANNUAL REPORT 2023 20 Directors’ Report (continued) Directors’ Report (continued) Operating and Financial Review (continued) Operating and Financial Review (continued) ESG Strategy From its early beginnings, Delorean Corporation was founded on key Environment, Social and Governance (ESG) principles. Pioneering Australia’s diversion of organics from landfill and delivering renewable gas, electricity and heat means that Delorean directly delivers on climate action and the clean energy transition. Delorean’s business is, at its core, truly green. In Q1 FY2023, Delorean published its Environment, Social and Governance framework, its inaugural ESG Report 2022 and signed up to the UN Global Compact (UNGC). The inaugural ESG report articulates Delorean’s impact framework and prioritises Delorean’s sustainability goals and focus areas. It articulates how Delorean proposes to achieve its ESG aspirations and how the Company plans to measure progress. The report also includes formal alignment to the Task Force on Climate Related Financial Disclosures (TCFD) and our first Communication on Progress report