You certainly ask a lot of questions Doug, and make an equal number of statements. How about helping me a bit and keeping the questions short so I'm not stuck at the computer all night trying to answer everything at once. I like to be responsive..... so please a little help here.
We have won contracts that are World Bank, Asian Development Bank and even OECF (Japan) financed. I understand from our agent in Indonesia that we won an OECF contract against stiff Japanese competition as the customer insisted on Unitec.
Like any other commercial contract, the WB, ADB and other IFIs (International Financial Institutions) have set contract qualification requirements. We have been successful in targeting and winning these projects. Currently there is an estimated $4Billion+ in SCADA contracts that we are tracking that will come to tender over the next few years. In the last 6 weeks we have received over $360M in RFQs, primarily from Asia, Latin America and the Middle East. Most of them we will not qualify for by ourselves, so we are looking at some partnering. A large majority of these have a short closing date, and I will pass on them and focus on some of the smaller ones, $10M and under.
Most of these contracts are bid in US funds however, some may have local currency restrictions. We are careful in these cases, or in one case where foreign exchange restrictions hurt the customer, we were able to provide significant foreign funding to their benefit.
I would rather not discuss our margins in a public forum like this, but if you would like call me or better still, drop by, I will show you our bidding model. I have created a bidding model that lets us modify the numbers, scheduling etc to work different margins and scenarios. It works pretty good. On a contract we won in Brazil, a two envelop bidding system was used. Envelope 1 was the technical proposal, envelope 2 was the price. Only the top 3 technical proposals would be considered. Our technical evaluation scored 7.6. The next was 6.7. I understand that the second bidders price would have needed to be 40% lower than ours to beat us. Our bid was $US1,000 lower than theirs on a US$600K project. So it works well, our margins were good, but not too high. I believe in good value for our product, but am building long term relations with our customers.
Export Development Corporation (EDC)has been a big supporter of Unitec. Except, last month I got a call from the group we were dealing with (they looked after emerging companies) where I was told he couldn't deal with us anymore! Unitec was no longer consider an emerging company by them and we were booted upstairs to another division. He added that they had greater approval levels, so I shouldn't be disappointed. Yes, EDC has been supurb. They have supported us with L/Cs, performance guarantees, medium term financing for our customers, bid bonding and of course export credit insurance.
Business Development Corp.( BDC) is a different animal. Last year they offerred us $400K term financing which I built our business plan on. When it came time to draw down on their offer they reneged, or more correctly deferred indefinitely. This caught me short and was the reason that we were not able to bring many of the orders in hand on line in the last two quarters. I have no good words to say about BDC. That is the difference between those two corporations.
EDC financing arangements are confidential.
Most of our projects require posting of bid and performance bonds. Typical, they are 5% bid, 50% payment and 50% performance bonds. The bid bond is applied to the performance bond if we win, and returned if we don't.
Domestically we have to put up cash as we do not have a sufficient track record to interest a Surety Company, or bid with a general contractor who provides the entire bond. Internationally, EDC or CCC (Canadian Commercial Corporation -also a Federal Agency) assists us with the bonding, although our bank is getting braver and has provided us with interim L/C support.
We take great care to maintain our technical leadership and competitiveness. Watch our webpage over the next several months for new announcements.
At this juncture we are doing a small brokered financing which will handle our needs for the moment. If we are successful in winning some of the very large projects, we will need more financing. I have deferred any significant financing until our stock price gets up to a more equitable level for the present shareholders. I am working with some major national and multinational firms to partner in the bids. We can bring the contracts and winning technology, they can bring the money and large scale construction and project management.
I'm not interested in spinning off our technology for royalties. I have had two such offers in as many months. I am trying to build a company that will some day be the global leader in the SCADA market. Spinning off our technical achievements for royalties would not build the company. Many of our technical advancements are made because we have that hands on relationship with the customer and his field equipment. We would lose that and our creative edge if we grandfathered that to someone else.
DB and Ford bought into Ballard because it made sense to their business. They would have nothing in common with Unitec, except to be a customer. I can think of companies that would be a better fit, but we don't need that kind of investment. We are not a capital equipment intensive industry.
We do have a good network of agents and representative. They are our eyes and ears. Our selection process is refined and works. Through them. I have been introduced to some of the highest levels of industry and Government. The best way for those agents to participate in the growth of Unitec is to give them good product, fair prices and solid support. Help them help us win the business. We have been excellent on the first two, but weak on the latter due to the tremendous influx of business. We are correcting that now with our added staff.
I do not try to sell or stock to our customers. That is a sure way to distract our agents and destroy a business relationship if the stock fails to perform to their expectation. Nevertheless, many of our customers have purchased Unitec stock. Like anyone else, should they inquire, I tell them that if they are going to invest consider it a speculative LONG TERM HOLD.
Doug, I'm focusing on building the business. If I can get the sales up, earnings will follow. If the sales and earnings are satisfactory, the flippers won't matter. I would rather focus my energies where they are productive. I thought I saw some down ticking of the stock last summer and under advice from counsel I advised the VSE. They said they would investigate. I sent a copy of my letter to the VSE to several parties who I thought might have been responsible for it. It stopped. I haven't received a report from the VSE, but they said they would advise if they found anything. I am watching for that sort of thing, and won't mess around.
Doug, I appreciate your continued interest and enthusiasm, but I would be grateful if you would keep the questions short.
Best regards,
John |
