Final leg of development phase
Quadrise (L:QFI) is the supplier of MSAR, a technically proven alternative to heavy fuel oil (HFO) for marine, power generation and industrial applications. Since our last outlook note, it has executed contracts governing production of MSAR for extended LONO sea trials, preparing the way for commercial adoption from calendar H117 onwards. Our indicative value is £431m (53.2p/share) at current levels of perceived risk.
Commercial-scale production expected FY17
The next 18 months will be an exciting time for Quadrise. Management expects extended LONO sea trials lasting nine to 11 months to commence in calendar H116, once sufficient MSAR is available for fueling. These trials are the final precursor to commercial roll-out across the Maersk fleet and beyond. Preparations are underway for a semi-commercial scale ‘production-to-combustion’ demonstration in Saudi during CY16 and a refinery refuelling project, also during CY16. Activities in Latin America have been temporarily shelved because low crude oil prices have restricted funding available for development projects. The programme with a global oil major is ongoing. The economic attractiveness of MSAR is linked to the spread between diesel and heavy fuel oil residues, which is fairly stable, rather than to absolute crude oil prices.
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