IR

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As we approach the end of the Covid-19 lockdowns in China, we look back at all the unprecedented challenges brought about by the Covid-19 pandemic. The lockdowns in major cities in China resulted in the Group deferring the execution of its projects, and the global escalations in raw material prices as exacerbated by major supply chain bottlenecks have impacted the financial performance of the Group in 2022. Notwithstanding the economic uncertainties, the Chinese government has shown that it remains committed to support and grow its economy. The easing of the COVID-19 restrictions, and the PRC government’s increased stimulus measures as an added impetus to boost its economy, give rise to optimism that the Chinese economy could be on the mend, albeit slowly. Against the above backdrop, the re-opening in China provides the opportunity for the Group to work actively on its already secured projects, and also on securing new artificial intelligence water (“AIWater”) management and sludge treatment projects.

With the team’s efforts, the Group has added another operation and maintenance contract to treat up to 90,000 tons/year of sludge for the city of Suining, Sichuan Province, China in December 2022 to its projects pipeline, with the services to be rendered in 2023. Management is quietly confident that with the re-opening in China, this will be the start of many more contracts to be secured by the Group in 2023.

TRANSFORMATION AND FUTURE BUSINESS GROWTH

In our transformation journey to a technology-driven company, a key development for the Group was the application of the AIWater management system to tap on the great potential for process optimisation of water treatment. This optimisation process translates into cost savings for the customers in terms of energy consumptions and chemical usage, and thereby reducing carbon emissions. The Group has successfully implemented AIWater management projects in Tianjin and Fujian province, China, and hopes that these successes will help to accelerate the Group’s growth in this segment of the business.

Besides AIWater management, the Company is also actively marketing and deploying its Continuous Thermal Hydrolysis (“CTH”) and pyrolysis sludge treatment solutions in China. In the urban centres, there is an urgent need to better manage sludge disposal and reduce carbon footprints as the conventional method of landfill disposal – with its pollution concerns, space constraints and community resistance – is becoming an increasingly untenable solution. The Group is in the midst of constructing a sludge treatment facility in Hebei province, China. This large-scale project will become an important milestone and benchmark for the Group to build and grow its income in the sludge treatment segment.

The Group is committed to create and provide sustainable solution and growth driven mainly by technology, and it will spare no efforts in its research and development activities to develop, improve or enhance its technical competencies. As of the end of 2022, the Group has received approvals for 15 invention patents and 19 utility patents, a strong testament to the Group’s investment and commitment in research and development works.

KEY MILESTONES

While 2022 had turned out to be a relatively quiet year for the Group, it had accomplished several key milestones which could play a pivotal role in its pursuit of a sustainable long-term growth for its businesses in the near future.

In January 2022, the Group secured a Public-Private- Partnership project with a total amount of RMB114.75 million in Bazhou city, Hebei province, China. The project involves the design, construction and operation of a 120 tons/day sludge treatment plant and the recycling of the treated sludge into bricks for a concession period of 30 years. This project will be implemented using the Company’s proprietary technologies with innovative sludge pre-treatment and efficient energy recovery system, to achieve the objectives of zero-waste discharge and resource recovery.

In September 2022, the Group’s wholly owned subsidiary, United Greentech Investment (Guangzhou) Co., Ltd, acquired 70% shareholding in the capital of Zhejiang Bofeng Environmental Technology Co., Ltd, incorporated in Ningbo, Zhejiang province, China, which focuses on providing oil sludge treatment solutions. With the acquisition of Bofeng and its technology, the Group will be able to embark on the oil sludge treatment business tapping on the Group’s existing networks.

In October 2022, the Company attracted strong interest from an institutional investor which culminated into a definitive agreement entered into with InnoVision Pomelo LP, a special purpose vehicle established and managed by China InnoVision Capital GP Limited as general partner, for a US$15 million convertible bonds investment. The net proceeds raised will enable the Group to build sizeable sludge treatment and AIWater management projects. This partnership will create synergy and enable the Group to tap on the investor’s expertise and networks to grow its environment related businesses in China.

In the last two weeks of FY2022, the Group welcomed news of its membrane manufacturing facility becoming operational, and ready to accept orders from customers. It is currently in the midst of negotiating and finalizing a contract to supply its membranes to a potential customer. Once confirmed, this will contribute to the Group’s revenue in the new financial year.

Last but not least, the Group has built up good working relationships with the PRC banks, and they are supportive of the Group’s environmental businesses. Consequently, the Group has successfully secured new banking facilities with these banks. In addition to the RMB2.8 m short term loans that were granted earlier in 4Q2022, another RMB5.0 m will be disbursed to the Group as working capital loan for FY2023. These funding are a welcome boost and will provide us with the additional resources to grow our businesses.

MAKING STRIDES FORWARD

Moving into 2023, we look to fast track collaborations with technological partners by offering our AI Water management and sludge treatment solutions to the market swiftly as restrictions are relaxed and business travel resumes in China. The Group will continue to stay focused, invest in technology and its people, and further its research and development activities so as to stay relevant and competitive in an everchanging business environment.

The wastewater treated in China is approximately 220 million tons/day of municipal wastewater and 60 million tons/day of industrial wastewater. Total sludge produced by the 220 million ton/day of municipal wastewater treatment plants is estimated to be 60 million ton/year. Management believes that market potential for AIWater management and sludge treatment business is huge, and the Group has a competitive advantage with its pioneering AIWater management and sludge treatment technologies. With such enormous market potential which the Group could tap on coupled with its proven patented technologies in AIWater and sludge treatment, Management believes that the Group has the capabilities and resilience to turn around its performance.

The greater emphasis placed on sustainability globally bodes well for the Group. Management views this as a business opportunity as this is closely related to our environmental businesses, and has set targets to grow its sustainabilitylinked businesses in FY2023 and beyond. At the same time, we are also playing our part as a responsible corporate citizen to help reduce carbon emissions in business activities. In advancing our sustainability and growth agendas, the Group constantly reviews and evaluates its processes and solutions, and explore ways to offer more efficient and effective solutions to our customers, and further reduce emissions.

APPRECIATION

In conclusion, and on behalf of the Board of Directors, I would like to take this opportunity to express my gratitude for the continued support and trust from our shareholders, customers, management team and employees amidst a challenging business landscape in FY2022. As we look forward to a better year in 2023, we will strive to work harder to create long-term value for our stakeholders, and execute our ESG-related strategies so as to make the world a better place to live in.

Dr Lin Yucheng

Executive Chairman