So there's a bit of chatter on Delorean and the bioenergy space in general. Special thanks to @Gprp for contributing on the technological analysis and some personal experiences with Yarra Valley Water, and @Halo99 for oversight of the company's model.

Delorean's lack of IP: Bear thesis?

Gprp notes that Delorean lacks a unique proposition in it's offering - I 100% agree, but also think this is less bearish than one might believe. A lot of new green tech is unproven and lacks scale. Delorean isn't trying to produce a new anaerobic digestion approach, rather it is trying to scale a technology that has been proven in other countries (e.g. UK and Germany are classic examples). There is huge potential for bioenergy using this approach, which is quite flexible. Arguably the TAM could be 5-6% of the energy market, though I would take out some of the larger scale municipal-to-waste projects that Delorean is not necessarily competing in.

Distributed Model: Bull thesis ?

I ascribe a bull thesis for Delorean based on it's distributed model. What I mean is that they are able to go to individual properties (e.g. a mill site, a fertilizer processing plant, a brick production plant, etc) which may be on/off grid. And they design, build and operate this facility on behalf of the owner. By being distributed they have lower competition as less folks are looking at this smaller scale approach - yet the TAM may actually be much bigger than the TAM for waste-to-energy. Secondly, because they are site-specific, they have a specific biomass / feedstock coming in to the system. The anaerobic digestion is then tailored for that feedstock, and the output (gas, heat, electricity) is also tailored to the needs of that site. So there's barriers to entry/exit once the capital is in place.

Long term returns: low or high?

The engineering, procurement and construction (EPC) contracts is what Delorean have been doing. And yeah, you bascically get a small margin on the build. If you do it on budget and on time, it;s OK; if you do it quicker even better; if you take too long or the costs blow out, you lose. Because of Covid delays and cost increases, they had two EPC contracts they are going to lose big on. Before that, they were very profitable with around 19.4% EBITDA margins. This higher margins to me shows that there is less competition in the smaller scale distributed segment of the market.

However, Delorean has moved on from that. They are now looking at a razor + blades model. Either they get paid to build the system and have some ongoing operation and maintenance type role to expand the returns; or they don't get paid initially and own the system going forward (along with all the profit from the energy sales, gate fees, and potential carbon credits ACCUs). This model has a higher return into the future, but requires capital outlays today which has been the problem.

To my mind, I don't think the bull vs bear thesis is so much on the technology side of things - it's more about their ability to operationalise the 'land and expand' model on a proven tech, and that means capital financing.