The Renewable Gas Company TSXV: XBC INVESTOR PRESENTATION June - - PowerPoint PPT Presentation

TSXV: XBC

June 2020

INVESTOR PRESENTATION

The Renewable Gas Company

TSXV: XBC

Certain statements in this presentation may constitute "forward-looking" statements within the meaning of applicable securities laws. This forward-looking information includes, but is not limited to, the expectations and/or claims of management of Xebec Adsorption Inc. (“Xebec”) with respect to information regarding the business, operations and financial condition of Xebec. Forward looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Xebec or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such statements use words like "anticipate", "believe", "plan", "estimate", "expect", "intend", "may", "will" and other similar terminology. This list is not exhaustive of the factors that may affect forward-looking information contained in this presentation. These statements reflect current expectations regarding future events and operating performance and speak

• nly as of the date of this presentation. Forward-looking statements involving significant risks and

uncertainties should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements.

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Forward Looking Statements

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• Xebec is accelerating the adoption of renewable gases (renewable natural gas and renewable

hydrogen) to reduce carbon emissions in the gas grid

• We design, engineer and manufacture equipment used in the production of renewable gases
• Xebec provides customers such as utilities, municipalities, waste management companies and

energy suppliers the ability to transition to a sustainable future

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Cleantech Systems

Equipment used in the generation

• f renewable gases

Industrial Service & Support

Services our cleantech systems and contains

• ur legacy equipment and parts business

Renewable Gas Infrastructure

Build, own, operate renewable gas infrastructure projects in Canada

What We Do

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• 1. Join the Transition from Fossil to Renewable Gases
• Inflection point in the growth of renewable gases as the world needs to decarbonize
• Xebec is the world’s only focused “Renewable Gas Company” with exposure to both renewable natural gas (RNG)

and renewable hydrogen (H2)

• 2. Rapidly growing, profitable cleantech play with proprietary technology
• Accelerating traction with $100M+ in order backlog that validates the technology
• Over $60M invested into proprietary technology in combination with industry leading know how
• More than 65 RNG and 200 hydrogen projects deployed worldwide
• 3. Accretive Acquisition Strategy that Creates Unique Competitive Advantage
• Ability to acquire profitable service companies at attractive valuations to expand geographical reach of our service

network for cleantech systems

• Grows our recurring revenue base by allowing us to capture revenue through parts, service and local support

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Investment Highlights

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• Xebec has demonstrated the ability to deliver a significant revenue growth profile, while improving profitability and

efficiency of the business

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2020 2019 2018 2017 2016 (CAD million) FY Guidance FY FY FY FY Revenue $80 - $90 49.3 20.2 14.7 9.6 Gross Margin $24 - $27 15.5 5.7 5.8 2.2 Gross Margin % ~30% 31% 28% 39% 23% Selling, General and Administrative Expenses $16 - $18 11.3 7.2 5.2 4.4 SG&A as % of Revenue < 20% 23% 36% 35% 46% Adjusted EBITDA 11 – 13%* 5.9

• 1.4

0.8

• 2.2

Net Income (Loss) from Continuing Operations 7 – 9%* 2.0

• 2.9

0.1

• 2.7

Earnings Per Share 0.05 – 0.08 0.03

• 0.07

0.00

• 0.07

* Shown as a percentage of total FY2020 revenue

Financial Highlights

TSXV: XBC

• Two categories of gases in a sustainable future, renewable gases (renewable natural gas and

renewable hydrogen) and low carbon gases

• Renewable gases are sourced from feedstocks that are forms of waste or excess capacity

(electricity), that otherwise would have little to no value

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Renewable Gas Renewable Natural Gas (RNG) Green Hydrogen (RH2) Low Carbon Gas Blue Hydrogen

Feedstock: Organic waste (food, manure, agriculture, industry, waste water) Feedstock: Surplus renewable electricity (solar, wind, hydro) Feedstock: Fossil Natural Gas with Carbon Capture, Utilization and Storage (CCUS)

What Are Renewable Gases?

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• Carbon neutral form of natural gas that is created from

decomposing organic matter

• Bacteria decompose organic matter to create a raw biogas
• Raw gas goes through a process of purification called

“biogas upgrading” to create RNG

• As a result, methane from landfills, wastewater treatment

plants, farms and industries can be captured, refined and converted into renewable energy

• Xebec specializes in the separation of molecules using the

“upgrading” process to create RNG

1 https://www.socalgas.com/1443741887279/SoCalGas_Renewable_Gas_Final-Report.pdf 2 https://www.snam.it/export/sites/snam-rp/repository/file/investor_relations/presentazioni/2019/Snam_role_of_gas.pdf

Carbon neutral or negative

(depending on the source)

Less costly than electrification

(2-3x savings1)

Interchangeable with fossil gas

(same composition)

Chemical Composition

CH4

Xebec Technologies

Biogas Upgrading

Renewable Natural Gas 101

Waste management tool

(completes circular economy)

Seasonal energy storage

(orders of magnitude more capacity than batteries2)

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• Hydrogen is the universe’s most abundant chemical

substance

• Today, majority (95%) of hydrogen is produced through a

process called steam methane reforming (SMR)

• Blue hydrogen is becoming relevant and seeing growth

from opportunities in mobility and industry, SMR process with carbon capture and storage (CCUS)

• Future opportunity with electrolysis using low costs or excess

renewable energy producing Green hydrogen for energy storage applications and/or industry

1 https://www.snam.it/export/sites/snam-rp/repository/file/investor_relations/presentazioni/2019/Snam_role_of_gas.pdf

Carbon neutral

(applicable to Blue or Green hydrogen)

Versatile energy carrier

(created from wind, solar, hydro)

Zero tailpipe emissions

(from FCEV, improves air quality)

Existing industry applications

(food, glass, chemical, steel, power generation)

Chemical Composition

H2

Xebec Technologies

Steam Methane Reforming with CCUS

Economic energy storage

(storing energy with hydrogen is 1/3 the cost of lithium ion batteries)

Renewable Hydrogen 101

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• Shift away from fossil gases and continues to gain momentum
• Energy providers need renewable gases to reduce their emissions, create

compatibility with gas infrastructure and economic viability

• We’ve seen “greening” of the electric grid, but not of the gas grid
• Canada’s natural gas grid contains 0.1% renewable content while the

electric grid is 66% renewable1,2

• Gas utilities are threatened by electrification of their customer base
• Renewable gases offer a solution for utilities to safeguard their business

and this has created a massive market opportunity worldwide

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1 https://www.cer-rec.gc.ca/nrg/sttstc/lctrct/rprt/2017cndrnwblpwr/cndnvrvw-eng.html 2 https://www.cga.ca/wp-content/uploads/2016/05/RNG-publication-FINAL-April-2016-EN.pdf

A Paradigm Shift In Energy

Outlook for biogas and biomethane (RNG), International Energy Agency (2020)

Actual Production vs. Actual Potential Worldwide 2018

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Target or Mandate Geography Leader(s) 20% Renewable Gas by 2030 California, U.S.A SoCalGas 20% RNG by 2030 Vermont, U.S.A Vermont Gas 15% RNG by 2030, 30% by 2050 Oregon, U.S.A NW Natural 15% Renewable Gas by 2030 British Columbia, Canada FortisBC 5% RNG by 2025 Québec, Canada Énergir €4.8B Support Scheme for RNG Italy Snam 10% Renewable Gas by 2030, €800 million Investment France Engie 10 billion cubic meters of RNG by 2025 China 10 State Owned Enterprises

• Utilities are the driving force behind renewable gas adoption and have worked with regulators and governments to

enact targets and support schemes

• Suppliers of RNG can receive up to $105 USD / MMBtu1 of RNG, ~50x the price of fossil natural gas
• Based on targets we estimate the market exceeds $10.9B for our cleantech equipment based on estimated 2,300

project requirement in Xebec’s core target geographies (U.S, Canada, Italy, France, China)

1 https://www.epa.gov/sites/production/files/2018-11/documents/7._deanna_haines-508.pdf

Global Market Opportunity

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Cleantech Systems Industrial Service & Support Renewable Gas Infrastructure

• Biogas Upgrading
• Biogas Upgrading Plants
• Small-Scale Containerized

Biogas Upgrading Systems

• Steam Methane Reforming
• Small-Scale Containerized

Hydrogen Generators

• O&M Service Contracts for

Cleantech Installations

• Compressed Air Service Contracts
• Compressed Air Dryers
• Medical Air Systems
• Natural Gas Dryers
• Oxygen and Nitrogen Generators
• Industrial Air & Gas Purification

Systems

• Filters, Elements, Accessories
• Equity Investments in Renewable

Natural Gas Facilities in Canada

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Business Segments

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• Driver of our recent growth with $50 to $55M in revenue guided for FY2020
• Includes systems for upgrading biogas to renewable natural gas, hydrogen purification and

steam methane reforming natural gas to hydrogen

Steam methane reforming installation in South Korea producing 500KG / day of hydrogen for buses Renewable Natural Gas plant in Italy Renewable Natural Gas plant in France with a large scale project developer

Cleantech Systems

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• Services our cleantech systems and

contains our legacy equipment (air dryers, gas purification) and parts (filters, elements, etc.) business

• Repeat business through service

contracts and replacement parts, 65 - 70% recurring revenue

• Creates competitive advantage by

leveraging tuck-in acquisitions for cleantech service centers

• $30 - $35M revenue guided for

FY2020, includes acquisition growth

Acquisition Target Profile

• $5 - 8 million CAD Revenue
• 10% EBITDA Margin
• ~12 employees

2 Acquisitions Completed, 4 Targeted in 2020

Industrial Service & Support

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• Initiative to invest in Build, Own, Operate renewable gas assets in Canada, first project to be commissioned in Q1 2021
• Canada has a unique dynamic where utilities (FortisBC and Énergir) will sign 20-year RNG purchase agreements

(GPA) at up to $30 CAD / GJ, thus creating significant recurring revenue

• Canada to introduce Clean Fuel Standard (CFS) mid-2020, requiring a 10% GHG reduction in carbon intensity of gas

grid which will have to be fulfilled by renewable gases (RNG and RH2)

• Estimate 600 to 800 projects will need to be built, only 11 currently operating in Canada

Renewable Gas Infrastructure

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GNR Québec Capital L.P. Overview

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• Capital development fund managing Quebecer’s savings
• $16.7 billion net assets under management as of November 31st, 2019

$20 million

initial equity investment

$100 million

anticipated total equity investment

$400 million+

worth of project financing

• On June 1st, 2020, announced a new investment fund to increase RNG production in Québec
• Equity investment split amongst partners, potential for several partners in total
• Xebec is the general partner, sole responsibility for managing the partnership
• Projects will drive Xebec Cleantech Systems sales and recurring O&M contracts

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• Two technology platforms that Xebec is deploying for renewable gases: pressure swing adsorption (PSA) and

steam methane reforming (SMR)

• Focus of R&D is to pursue innovation that can further drive down renewable gas production costs
• Our technology helps customers achieve the lowest project lifecycle costs through reduced electricity

consumption and higher reliability

Pressure Swing Adsorption (PSA)

East-cycle, rotary valve technology was created by Xebec to upgrade biogas or purify other gases efficiently

Industrial Service & Support

Licensed from JNK Heaters to produce Green or Blue Hydrogen from (renewable) natural gas

Future Technology

Continually exploring opportunities to expand our technology portfolio (electro-chemical applications)

Proprietary Technology

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ü Acquired 2nd Service & Support Company in North California ü Completed Two Successful Bought Deal Offerings of $11.6M and $23M ü Entered California Dairy RNG Market with LOI from Maas Energy Works ü Commissioned First Italian Renewable Natural Gas Project

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2019

ü Welcomed Brian Levitt and Peter Bowie as Advisor to Board of Directors ü Announced $27 Million in U.S Dairy Projects Orders ü Started Development on First Renewable Gas Infrastructure Project (BOO) ü Launch of Renewable Natural Gas investment fund in Québec with Fonds de solidarité FTQ ü Received LOI for first Renewable Natural Gas project in Alberta, Canada

• More Traction with Cleantech Orders, Hydrogen M&A Activity, Additional Renewable Gas Projects

2020

Recent Milestones and Upcoming Catalysts

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Municipalities Farmers EPC Waste Management Gas Utilities

• Diverse set of customers between different industries and geographies
• 260+ installations across the world with customers located in U.S.A, Canada, Italy, France,

China, Brazil, South Korea, Austria, Taiwan

Customer Segments

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19 Company Operating Margin (TTM) Revenue Growth (TTM) EV / Revenue (TTM) EV / Revenue (2020) EV / EBITDA (TTM) EV / EBITDA (2020)

Questor Technology Inc. (QST.V) 38% 21% 4.4x 3.5x 9.7x 7.2x Bloom Energy Corporation (BE)

• 26%

35% 1.9x 1.7x

• 20.4x

Westport Fuel Systems Inc. (WPRT)

• 4%

9% 1.3x 1.1x

• 9.1x

Clean Energy Fuels Corp. (CLNE)

• 8%
• 6%

1.6x 1.5x 15.2x 8.3x Greenlane Renewables Inc. (GRN.V)

• 47%
• 1.6x
• EnviTec Biogas AG (ETG.DE)

6%

• 3%

1.2x

• 9.4x
• Ballard Power Systems Inc. (BLDP)
• 28%
• 14%

22.9x 16.2x

• FuelCell Energy, Inc. (FCEL)
• 77%
• 32%

9.1x 9.8x

• Nel ASA (NEL.OL)
• 51%

0% 24.8x 15.1x

• ITM Power Plc (ITM.L)
• 201%

36% 109.3x 86.5x

• Hydrogenics (HYGS)*
• 46%

37% 7.3x

• Plug Power Inc. (PLUG)
• 29%

32% 8.5x 5.6x

• 128.1x

Xebec Adsorption Inc. (XBC.V) 3% 118% 5.6x 2.5x 110.1x 17.7x

Source: Bloomberg as of January 23rd, 2020, 2020 numbers based off analyst estimates | * Numbers at time of acquisition by Cummins Inc.

NATURAL GAS CLEANTECH HYDROGEN

Industry Comparables

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As of June 1st, 2020 Securities (#) Common Shares Issued & Outstanding 88,715,784 Employee Options 4,081,860 Warrants – July 2019 ($1.85), Expire July 4th, 2020 6,963,277 Compensation Shares & Warrants 1,022,918 Fully Diluted 103,783,839 Insider & Institutional Ownership % Total Shares Held Insiders 11.4% Institutional 25.8% As of June 3rd, 2020 Securities (#) Last Price $3.99 1 Year Performance +143.3% 30-day Average Volume 431,164 shares

Capital Structure

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Kurt Sorschak

Chairman, President & CEO

Co-founder of Xebec, developed it from a local compressed air and gas dryer manufacturer into the international cleantech company it is today

• Dr. Prabhu Rao

Board Director, COO

Former CEO of McPhy Energy North America, former CCO of Nuvera Fuel Cells who was acquired by Hyster-Yale (NYSE:HY)

Louis Dufour

CFO

20+ years of corporate finance and

• perational experience, most recently as

Partner of CFO Optimum

• Dr. Amir Ghasdi

Director of Business Development

10+ years in process engineering, Xebec veteran with almost a decade at the company leading research and now business development

• Dr. Francesco Massari

General Manager, Xebec Europe

Former CTO at McPhy Energy S.A. (French Hydrogen Alkaline electrolyzer company)

• Dr. Peter Cheng

General Manager, Xebec China

Former executive with ABB, Ontario Power Generation, Hong Kong and China Gas Investment Limited, and A.T. Kearney

Management Team

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Bill Beckett

Lead Board Director

Former President and CEO of Dart Aerospace (acquired by Greenbriar Equity Group and First Aviation Services)

Joseph Petrowski

Board Director

Former CEO of Cumberland Farms Gulf Oil Group (65th largest private company), founder of Mercantor Partners

Guy Saint-Jacques

Board Director

Former Canadian ambassador to China, part of Department of External Affairs since 1977, served as Deputy Director of the Energy and Environment division

Brian Levitt

Board Advisor

Current chairman of The Toronto-Dominion Bank, former President and CEO of Imasco Limited, current board member of Domtar Corporation and TD Ameritrade Holding Corporation

Board of Directors & Advisors

Peter Bowie

Board Advisor

Current board member of Magna International, former CEO of Deloitte China, former Chairman of Deloitte Canada

TSXV: XBC

Kurt Sorschak

President & CEO 450-979-8701 ksorschak@xebecinc.com

Brandon Chow

Investor Relations Manager 450-979-8700 Ext. 5762 bchow@xebecinc.com

TSXV: XBC