PESI update from Aaron Warwick
Below are some notes on my call with PESI 0.00%↑ this morning.
Most importantly, please note that information I posted regarding the 2.2M gallons mentioned in Group 1 of the document released earlier this week was incorrect. That waste will NOT generate near the revenue I expected based on my misunderstanding. HOWEVER, as you will see below, there is likely yet more to come for PESI and the waste mentioned in this week's document is still HIGHLY material for PESI. I just want to get that out of the way at the top! I also want to note that all of this stuff is highly complex and difficult to understand, but I have a much better grasp on it after this call. Now, on to the update.
This week's "Final WIR" relates to the DFLAW facility (i.e. vitrification plant) ONLY. Although the document mentions "grouting," it is only because PESI treats this effluent waste from the DFLAW facility similarly to the way it treats TBI--meaning that certain types of the effluent waste will be grouted, just as the TBI waste is also grouted.
It is expected that the DOE will soon release a second "Final WIR" related to TBI. As noted previously, TBI is a supplement/complement to the DFLAW facility. Consequently, the DOE is dealing with them in a complementary way.
In general, PESI still feels confident about TBI as a complement to DFLAW and believes they will benefit from that. But again, this is totally separate from this week's "Final WIR."
As for this week's Final WIR, I think it is fair to say the company is beyond ecstatic about how that document turned out and how much they believe it will benefit PESI over the next decade or more. While we do not yet know the likely revenue potential from this contract, we will probably hear more about it on the Q4 conference call (likely mid-March based on past precedent).
We will likely never see any sort of fanfare or press release from the DOE when this work with PESI begins. The reason is that PESI has a Master Services Agreement under which this falls. That said, I am confident PESI will do everything it can to convey this information to Mr. Market in proper time.
As for the revenue being recognized, note that we are one year away from that, with the DFLAW facility on track to start up in December 2023. The facility will produce this effluent waste which will then be sent to PESI for treatment.
OK, now for my own notes/commentary. Important to note these are my opinions/thoughts and NOT representative of the company in any way, shape, or form.
My impression is that the amount of waste PESI will be treating based on this Final WIR is *significantly* and materially more than PESI originally expected.
The fact that PESI was mentioned specifically and exclusively in this Final WIR is of great significance. The issue with DFLAW and effluent waste is this: will that waste be treated on-site or will it be treated commercially? The DOE roadmap *could* have said: we will treat the effluent waste commercially/off-site. However, the document did not say that: it said, essentially, "PESI will treat this waste."
Related, the DOE in that document has delayed by ten years the consideration of even treating this effluent waste on-site. In essence, PESI has at least a 10-year window of continuous streams of this waste headed its way. And again, the *amount* of this seems to have exceeded PESI's original estimates.
Although the revenue amount is less than I originally estimated based on what I was told by sources that have been highly reliable in the past, we should keep in mind that this seems to far exceed PESI's expectation for this type of work (i.e. effluent waste). Moreover, we should expect another document in the future related to TBI. And, of course, the "free option call" of the ITDC, which is still expected to be awarded in Q1.
Please feel free to ask questions in the comments section of this post on the Breakout Investor platform. Happy to answer anything I can. I believe I have a much clearer picture of this all now after today's call.