Hydrodec Group plans to exit Australia, birthplace of the technology that it uses to rerefine used electrical transformer fluids.
In its semi-annual earnings report last month, the company said it will sell its plant in Wagga, New South Wales or relocate it to another facility in the United States.
The decision to exit Australia arose from a group-wide business review, Hydrodec said. Last months earnings report stated that the plant was to be treated as discontinued business because it is considered non-core, given the sub-scale market there and the groups focus on the U.S. market.
The plant - in Wagga, 285 miles south of Sydney - has capacity to rerefine approximately 20,000 liters per day of used transformer oils. It uses technology developed by the government-funded Australian scientific research body, CSIRO, in conjunction with the electricity network authority, Transgrid. The process was registered under the name Hydrodec. Hydrodec Group was subsequently formed and listed in 2004 on the London Stock Exchange to raise funds and commercialize the technology worldwide. Transformers are used for switching electrical supply from low to high voltage for transmission over long distances and back to low voltage nearer to end users. Transformer oil insulates and cools transformers.
Hydrodecs original plant was situated in Young, Australia, and moved 80 miles to Bomen, Wagga, in 2015, under an arrangement with Southern Oil to operate the transformer rerefinery on a toll basis. The plant is located on land owned by Southern Oil. Hydrodec said at that time that the move was designed to cut overhead costs. That toll contract has not expired, according to information gathered by Lube Report.
The fact that the plant was relocated once, suggests it can be relocated again, but the equipment is more than a decade old, and sale of the facility seems to be the preferred option.
The sale process we are in is commercial in confidence, and so Im unable to offer comment at present, Will Hand, a spokesman for Hydrodec, said in an interview.
Hydrodecs report for the six months ended June 30 said the Australian operations will be discontinued because a review of the business highlighted the poor return on investment of remaining, compared with using funds to grow its U.S. business.
The board decided that with the capacity of one train in Australia, as opposed to six in Canton, Ohio; the impact of the business on management bandwidth; the nature of the small, fragmented domestic market; and the feedstock challenges experienced in recent years, shareholder equity was better invested behind U.S. growth plans, Hydrodec Executive Chairman and Interim CEO Lord Moynihan stated in the half-year report. As a result we have initiated a formal process to sell our business in Australia to a vertically integrated participant in the market whilst simultaneously commissioning a business case to consider the relocation of the plant to the U.S.
The company said in its half-year report that the groups property, plant and equipment in Australia were valued at U.S. $4.8 million.
The half-year results show revenue from Australia was U.S. $1.03 million, while expenses amounted to $2.14 million, for an operating loss of $1.1 million.
Hydrodec opened its other transformer oil rerefinery in Canton, Ohio, in 2008.