Hydrodec targets USA

Recycled transformer oil pioneer Hydrodec plans a £15 million push into the USA, after winning approvals and orders in Australia.

Mark McNamara, chief executive officer of AIM-quoted Hydrodec, described approvals won from the State of Victoria’s two largest electricity distributors for the company’s “Superfine” transformer oil – made from “degraded” waste oil – as a ‘watershed’. A large South Australian utility has also approved Superfine, which recently won a 22p-a-litre federal subsidy under the Australian Oil Product Stewardship programme.

Chaired by long-term backer John Gunn, the former City tycoon who now supports early-stage and often green-tinged ventures, Hydrodec is in line for ‘three big contracts’ that will take half the capacity of its one operating plant in Young, New South Wales, according to McNamara.

He claimed the company should now be able to grab 30 per cent of Australia’s transformer oil market, where transformer maker Schneider Electric has already agreed to use Superfine.

McNamara said all this could take Hydrodec into profitability in the second half of this year, after cutting its losses in 2006 from nearly £6 million to £2.8 million. But the big prize is the US market, where Hydrodec can present Superfine as green – in that it uses up waste oil – as well as being cheap and reducing American dependence on imported oil.

The company has received planning permission for a plant in Ohio and plans a second facility in Mississippi. McNamara said Ohio should start producing in late 2008, with Mississippi on stream early the following year.

The cost would be around £15 million and McNamara suggested there is an offer of a debt and convertible finance package on the table from a major US corporation. A third facility on the West coast of the USA might be considered later on.

‘Hydrodec will grow tenfold in 24 months,’ boasted McNamara. The company, which eschews joint ventures in a bid to guard its patented intellectual property, reckons it has many other uses besides transformer oil.

Floated at 5p in 2004, Hydrodec shares reached 37.5p in March last year, but now trade at 26p, down 0.5p this morning and valuing the company at £48 million. If the orders do come and the financing offers come through, they could find new favour.