You're listening to A Climate Change. This is Matt Matern, your host. I've got Kevin Chin, CEO of VivoPower on the program. Vivo is a leader in electric conversions for off road and on road fleets helping industry meet their net zero targets was Kevin how he helps his customers achieve “net zero.” Vivo is a certified B Corp. It's also listed listed on NASDAQ.

So, you know, it's kind of an interesting pairing. I don't think I've seen a B Corp listed on NASDAQ. But you know, I'm not the expert in it. So we're going to ask Kevin about that, and lots of other questions about the work that he's doing to help his customers achieve “net zero.” Kevin, welcome to the program.

Thanks very much, Matt, and appreciate the invites and great to be on the show. Thanks, again.

Well, tell us a little bit about your your background and how you came to kind of the environmental movement. I saw in your bio, you had a bit of a corporate background and in business and accounting, what what led you to the environmental space?

Yeah, so I guess, in terms of outside of business life, even from an early age, I was one that spent a lot of time in the outdoors, and particularly underwater, and enjoyed diving, enjoyed snorkeling. And, you know, very passionate about marine life. And over the years, I think from around 2008-2009 started to, you know, see firsthand some of the degradation and the ecosystems around around the world that you know, that I'd go and spend time in. And that also then sort of led to around that same time, understanding more about what was happening with the environment.

I think everyone's seen the Al Gore documentaries. And so that was really the genesis of going down the rabbit warren, so to speak, in this space. And so since 2013-14, 10 years ago, I've been looking for a way to get into the sector, in terms of energy and renewables with a view to making a small contribution to, to addressing climate change.

And fast forward to today, we've, we've now got a business that spans a few different areas, including the conversion of utility vehicles, which is one of the largest segments of the transportation sector globally.

So what what brought you to doing electric conversions? I haven't seen companies doing that. Exactly. You know, we all know of Tesla and, and their success. So what, what made you go in this direction? And describe for the audience, kind of like what an electric conversion is to?

Yeah, for sure, for sure. So what we do, and this is with Tembo, which is our electric conversion brands that sits under VivaPower, what we do is we we take both new as well as secondhand utility vehicles, aka pickup trucks. And we take out the ice infrastructure, so whether it's diesel or petrol inside and replace it with an EV powertrain.

And the reason we, I mean, kinda stumbled into this area is that through another business of ours, we had a range of mining sector clients that started to reach out and inquire about whether we were able to do you know, conversions of the utility vehicle fleets, and that that was around 2017-2018. And so that was the start of the journey that led us to this segment of the markets, which spans off road as well as on road vehicles.

And the reason we do this is that if you think about utility vehicles, or pickup trucks, they're inherently built to last, you know, they're very durable. You know, models such as the Toyota Landcruiser, there's a famous saying that “a Land Cruiser never dies.”

And indeed, if you look at most utility vehicles that are used by fleet owners around the world, they tend to have a second life, in some cases, a third life where they'll start off, say, in Western Europe, and then they'll end up in Central Europe, and then they'll end up in Africa.

And so they'll last for, you know, 12 to 15 years on average. And if you replace the ISE architecture with an EV powertrain kidt, as a fleet owner, you can extend the useful life of that of that utility vehicle, which is, you know, which is attractive, not just from a environmental perspective, but also from from an economic perspective as well.

So how is it? How does it pencil out that it's, it actually is more efficient or profitable to swap out a, an internal combustion engine for for an electric powertrain? How does that pencil out? How much does it cost? I guess is the first thing to do a conversion.

Yeah, good question. So it ranges from, depending on the use case, anywhere from $50,000 US, to, in some cases $150,000. So for example, if it's going into an underground mine, where it needs to be reinforced ruggedized and customized to a whole nother level, you know, in order to be able to operate effectively and safely underground, that that can be, you know, significantly more expensive, wherever, whereas if it's being used for sort of construction site, then then it's a lot a lot cheaper.

The elephant in the room question that we get asked a lot is that, well, why wouldn't people just buy a new vehicle, a new electric utility vehicle instead? There are basically three reasons. So number one is that at present, you know, there's anywhere from a two to three year waiting list to get your hands on, not just electric vehicles, but some of the more popular utility vehicles, including, you know, some of the models I mentioned, such as the length.

Reason number two is, you know, from a fleet owners perspective, and especially if the company that they represent has built in an internal carbon price for emissions, the total cost of ownership makes sense to convert a vehicle, especially if it's been fully depreciated, to electric rather than just simply by buying a new one.

And the third reason is increasingly, there is an understanding amongst fleet owners that with electric vehicles, there's significantly less repairs and maintenance required.

So if you take a, you know, a great chassis, in the form of a pickup truck that's inherently durable, and replace it with an EV powertrain, you're going to be able to significantly reduce your repairs and maintenance bill going forward. And you don't necessarily need to wait for the newest EV pickup truck, which you know, will cost a premium to get in especially in this in this environment.

I guess another reason that you kind of may not have hit on, was that a lot of companies have goals and commitments to go net zero, and I assume this is a positive, you know, net positive to them in terms of reaching that goal. Correct?

Very much. So, very much. So, you know, and you know, net zero targets amongst corporates, you know, span from 2030 to 2050. Most sort of triangular triangulate around the 2040 to 2050 zone. I would say though, that whilst net zero targets and wanting to, you know, help contribute to reducing carbon emissions, is a very significant and very powerful driver.

When it comes to the crunch, most corporates, you know, have a fiduciary duty to sort of maximize profits and reduce costs. So in order to convert them to be a customer, we often find that we've got to be able to demonstrate both “green” from an environmental perspective, but also “green” from a dollars perspective as far as savings are concerned.

Well, it's great that you can do both, because obviously, if you can show them that it is economically viable and as a good business decision, then it's a win win scenario. And hopefully, we can have more of those win win scenarios set up for businesses to do the right thing, and also to be profitable, or even more profitable, as a result of making the right decision.

Exactly.

So kudos to you and your company for setting up that so that companies can do both. We're gonna take a break right now. And we'll be back in just a minute to talk to Kevin Chen, CEO of VivoPower, about the many things that his company is doing to help his customers achieve net zero and do it in a profitable way. We'll be right back.

You're listening to A Climate Change. This is Matt Matern. I've got Kevin Chin, CEO of VivoPower on the program. And Kevin was telling us a little bit about the work that he does with electric conversions of off road and on road fleet vehicles.

You also Kevin had some things listed on the company website that you work on solar systems, battery technology, micro grids. Tell us a little bit about those areas that the company is working on.

Sure, Matt. So we've obviously spoken a bit about Tembo, which is the electric conversion company. So we do provide all these ancillary solutions that complement what we do on the EV conversion front. And so from the perspective of a large fleet owner, the decision to convert that fleet to electric is not simply one that can be made without considering, for example, their power infrastructure on site. And this is what we do, by critical power segments.

And to re-architect if you will, the power infrastructure to includes, for example, a microgrids, a renewable power component, whether that's solar and/or wind or some other power source. In addition to that, we offer training solutions, because driving an electric vehicle, especially off road is a very different experience.

There's a lot more torque with electric vehicles. So from a safety perspective, but it's very important that the workforce is properly trained in that regard. And we you know, we offer these solutions as part of a holistic package, which we call the VivoPower sustainable energy solution.

So, in terms of what percentage of the revenue is coming from the Tembo or part of the company, the electric conversions, and how much of the revenue stream is coming from other pieces of the company?

So as a percentage of total revenues, you know, Tembo is relatively small at the moment - under two and a half percent. That being said, though, Tembo has orders and commitments from corporates around the world, that total in excess of 13,000 conversion kits. That's that's an estimated value in excess of a billion dollars. So that will become the major revenue contributor to the company over the next five years.

So 13,000 conversion kits is, is totaling approximately a billion dollars in revenue?

Just over a billion dollars in revenue, correct. Over the next five years.

Okay, well, that will be substantial growth in revenue for the company, I guess.

Yes, and that the challenge is ensuring we're able to deliver sustainably.

So in terms of, are you producing the batteries in house? Are you buying the batteries for the electric conversions and the electric motors, from third party vendors and assembling them? Or how does Tembo make this happen?

We do source our batteries from third party partners and suppliers as well as other components. And we assemble them and integrate them. What is, I guess, IP and trade secrets for us are some of the hardware elements that we have created internally to effectively integrate, you know, various elements. And there's also software that we've built that's proprietary to us as well.

Okay. Tell us a little bit about VivoPower being a B Corp, a, what is a B Corp? And why did you decide to go that route?

Yeah, good question. So a B Corp is, is an entitry that. And they're governed by a body called B Lab, which is a nonprofit. And the biggest differentiator of a B Corp is an attestation that's codified in the memorandum and articles or constitution of the company, to not just deliver for the benefit of shareholders, but deliver and operate for the benefit of all stakeholders. And the B Corp mantra is the triple bottom line, which is people, planet, and profit.

So it goes beyond, I guess, shareholder primacy, and embraces stakeholders beyond shareholders. And, you know, the thinking is that in doing so, actually it creates better value for shareholders in the long term.

How so?

Yes, let me give you an example, which we talk about internally a lot at the company, which is, you know, the Boeing 737 Max, which I think everyone knows that the story there now. Where, in essence, what happened was, I guess, a rush by Boeing to produce a model and get it into operations and sell it globally, to compete with Airbus.

And because of that, focus on short term profits and what shareholders you know, in the short term wanted, decisions were made that compromise safety. And ended up costing, costing the company, you know, billions. And there's still remnants of that in terms of reputational damage and brand damage. And we do see this a lot as well. And actually the EV space where companies rush out too quickly. And feel pressured by a short term shareholder objectives and make decisions which are not optimal.

Well, that's a that's a fascinating conversation. We're going to pick it up in just one minute. And we're going to talk to Kevin Chin as the CEO of VivoPower about the corporations and if that might be the wave of the future. We'll be back in just one minute.

You're listening to A Climate Change. This is Matt Matern. And I've got Kevin Chin, CEO of VivoPower. Kevin, we're just talking about B Corporations and how they are to be for the benefit of all stakeholders, people planet and profit. It kind of flies in the face of traditional corporate behavior.

Milton Friedman was a proponent of that the shareholders are really the only people that a corporation should be concerned of. And I think that that emphasis over the last 50 plus years has, has hurt the planet in so many ways.

Because as you said, many corporations are focused too much on the short term profit and not the long term costs of, you know, the externalities of hurting the planet, because pollution wasn't priced into that model.

Basically, a lot of companies felt and acted as if the repercussions related to the polluting of the planet were essentially free. And they didn't care to reduce their pollution, because that would cost money and reduce their profits.

So do you see other a lot of other companies going in that direction? Or are you kind of out there on your own?

You're exactly right, Matt, you know, Friedman was the was the inflection point about 50 years ago, that's, you know, driven this shareholder primacy focus, if you will, and I guess coupled with a structural decline in interest rates over the last 30 years, and you know, mass financialization of assets. We've seen this, you know, increasing myopia, you know, when it comes to corporate behavior, and shareholder behavior, everyone wants everything now.

With respect to B Corp itself, knowing that we're not alone, which is, which is great. I first learned about B Corp in 2016. And back then it was growing. Now, there are over 6,000 companies that are B Corps, and some very large ones, have have embraced B Corp. And I do know for a fact that, you know, B Lab is struggling with the weights of how many companies want to become B Corps. And the accreditation processes is very tough. I say it's, it's like ISO 9001 on steroids.

And so the good news is that, you know, more and more companies, large ones included, are embracing this, this movement. And I think, you know, a catalyst for that was Larry Fink's famous letter to shareholders and the world at large in 2019, calling for a more sustainable approach to how companies operate.

Well, it's about time. Hopefully, it's not too late for us. So tell us some of the things that you think will be the catalyst for hitting the net zero goal by 2050? Do you see us being able to hit that goal, and how do you think it's going to be achieved?

I think it's going to be a challenge, you know, from where we sit today. That's, that's my personal opinion. But it's not not unachievable. There's a lot more action that's that's required. When you ask about catalysts, I think one that's not often talked about is, the increase, you know, and it's quite exponential, in climate litigation that's happening, and being directed at large corporates.

Especially in some of the extraction industries that we, you know, we try to help and work with. So, that I think will be increasingly powerful as a catalyst to large corporates. You know, embracing and being serious about hitting net zero targets.

So I think it's going to be a challenge. It's not an unachievable, but a lot more needs to happen from you know, many corporates around the world, but you know, the good news is we definitely do see that it's not simply lip service anymore. And of the companies we work with a very very serious about hitting the net zero targets.

Well, I also note that you've got a US subsidiary called Caret Digital which engages in “Power-to-X” strategy. Can you explain Power-to-X and what Caret Digital does.

Yes, yes. So, Caret Digital owns solar farms, basically solar development sites, and we pivoted strategy to Power-to-X two years ago. So Power-to-X, is, in essence, vertical integration of renewable power by industries that are heavy power users. And that can be anything from ammonia production to hydrogen to, you know, more recently Bitcoin mining.

And the, the reason why we pivoted strategy with respect to our solar portfolio in the US was when we started to get approached by Bitcoin miners are seeking to either acquire US sites and or to partner with us, to build renewable powered data centers, to mine Bitcoin.

So, that was happening, you know, up till the “crypto winter,” which, which obviously came into play about a year ago now. But more recently, what what we've seen happen is we're getting approached by datacenter developers, you know, seeking to build out high performance data centers for AI computing.

And there's obviously been an explosion of interest in AI, post chat GPT launching, and given the S curve of GPT 4.0, as well. And what's perhaps not really well understood at the moment is that AI computing is significantly more power intensive than then even Bitcoin mining. So we see these assets that we have as very strategic. And, you know, we want to be partnering with the right people in terms of creating value and executing on that power tech strategy.

I guess I'm fully behind the creating renewable power that helps, you know, create green hydrogen, I'm less enthused about Bitcoin mining. But, you know, as I don't see that as being such a societal good, but I guess I realize there are a lot of people out there that are that are doing Bitcoin mining. It just, to me doesn't seem like the greatest use of our power to to mine for coin. So what's your thinking on that one?

Yeah, it's a very, very controversial and very robust area for dinner discussions and debates. So it's a great, great question, Matt. My view is I'm agnostic with respect to of crypto mining, I think one of the benefits that perhaps is, again, not talked about as much as that renewable power spills.

So in particular solar, because, you know, and what's happening in countries where there's been a large solar build out in Australia included is that solar farms obviously generate a lot of power during the day and less so, you know, and not at nights.

And so, it creates significant intermittent power dynamics, which, which affects the grid. So, you know, Bitcoin is a way to, you know, absorb that excess power and turn it into basically a financial battery, if you will, which which can be monetized.

And then, you know, if the proceeds of that are used in the right way for the benefit of society, then that's great. If it's not used in the right way, then you're absolutely right. It's, you know, it's not it's not a value creating process.

And certainly, you know, compared with, you know, green hydrogen, ostensibly, it's a less noble use case, if you will. Having said that, though, there's a lot of, and this is a whole topic for another conversation. There's a lot of conjecture of green hydrogen and you know, the amount of capital expenditure that needs to be invested to enable green hydrogen to be produced.

And where the, you know, the carbon footprint of of that CapEx, you know, far outweighs the carbon savings from green hydrogen is still a live debate at present.

Certainly fascinating questions. We'll be right back in just one minute, talking to Kevin Chin, who is the CEO of VivoPower, we'll be right back and talk to Kevin about green hydrogen and crypto.

You’re listened to A Climate Change, I've got Kevin Chin of VivoPower here. We were just talking, Kevin, about the weighing the pros and cons of Bitcoin versus producing green hydrogen with the solar power that is in excess of what is used by the grid. And I guess I'd kind of be pushing more for green hydrogen and pushing it in that direction.

You did mention a question as to how much capital expenditure we need to go to a green hydrogen economy, I kind of see that green hydrogen is the cleanest way to go in the future. And that, that we should be building out that infrastructure, yes, it will have a cost to it.

But in the long term, if we can create enough green hydrogen, that is, to me, the gold standard for powering our economy going forward, because it has virtually no pollution in the creation of the energy that we need to run the economy.

It's a view shared by many governments, Matt, and you know, another reason for it is energy independence as well. You know, basically, anywhere that has access to a body of water and sufficient landmass, you know, can can be a site for, you know, for producing green hydrogen. As we speak, today, the economics of green hydrogen do not stack up without government subsidies.

So there does need to be significant investment, significant subsidiaries provided by governments, you know, in order to motivate and mobilize the build out of green hydrogen plants. That said, though, you know, these these subsidies are coming, you would know that the situation in the US very well. You know, especially with the inflation reduction acts, but also other countries like the UK, and also, for that matter, Australia, pushing hard with respect to green hydrogen.

Interestingly enough, you know, we have a number of very seasoned EV experts that are ex-Tesla, ex-Rivian, within our team, and they tend to be more skeptical about green hydrogen, particularly in relation to it being a source of fuel for for the transport sector.

And I think that's really driven by by this equation of you know, is the CapEx that's required, actually more carbon intensive than the cumulative savings and carbon you would get from green hydrogen. That equation obviously can change, you know, over time as CapEx costs decline.

Well, that's a, there's a, you know, there's a goal that the US government has to bring the cost of hydrogen down to $1 per kilogram. And some, you know, processes are getting closer to that goal. I don't know if you're aware of what, you know, the price of green hydrogen would be in Australia at this point in time.

Green hydrogen in Australia is prohibitively expensive at the moment in Australia. So depending on you know, where you are, in Australia, it's it's anywhere from $3 to $4 a kilo. So, you know, a lot more needs to happen with respect to cost sort of electrolyzers. But you know, I would, I would bet that that cost curve, you know, will come down.

So this is, I think this is a very much economic inflection point game, where at some point it does inflect. And it does, you know, become economic. But in order to get there, it needs to get to that critical mass and it needs that government impetus from a subsidies perspective to, as mentioned, you know, motivate and mobilize that that CapEx spend.

Now, critical power service business in Australia, what does that do? And how does it help with regard to the overall mission of VivoPower?

Yeah, so that business traditionally, and still does provide, in essence, backup power, for our data centers, for mines ,for agriculture, farms, and the likes, and Australia's got a very large landmass. And these type of critical power requirements are pronounced. That businesses pivoting more and more towards providing clean backup power.

And so increasingly, we're seeing our customers there want green energy, as opposed to, you know, diesel based generators, which are the traditional form of backup generation. So the growth from that business we see as being able to be one of the leaders and the pioneers in providing renewable base backup, power, battery, storage costs are still a little bit too high for mass adoption, but within the next two to three years, we expect that to change.

And in addition to that, what that business has started doing as well as how helped to build out charging infrastructure, not just for public utility, but also for fleet owners that may have depots, and specific sites where they house the electric fleets. So, again, that's that's a form of critical power. That's, that's essential, and in the new grid, architectural and new energy architecture going forward.

So where is the VivoPower going in the next few years? You're an investor and CEO of this company, and how do you see the trajectory headed? Where's it headed next?

It's certainly been a nonlinear journey, Matt, to be candid. It’s, you know, as with smaller, earliest stage companies, there's a lot of volatility to navigate. That said, you know, I honestly haven't had as much fun, and I'm really sort of fueled by the mission, if you will, on this. And, you know, to build something that's endearing, that's sustainable for the long term and, you know, helps to make make a small dent in the climate change issue we have globally.

So we've got a lot of growth, particularly through our EV business, Tembo. And then by virtue of that, we see that very much as the, the Trojan horse, which will activate all the other elements of the VivaPower business, you know, Critical Power, Power-to-X. And we very much as a team want to build this out to be a great, impactful and sustainable global company.

So how many employees does Vivo currently have?

We have around 160 globally at the moment.

Okay, and what's your, you know, what's your projection as far as where it will be? Maybe in a year or two years, five years?

So in terms of a five year goals, you know, looking at this from a people-profit-planet lens in terms of jobs created, we expect to be north of 1,000 roles in 1,000 people in five years time. In terms of revenues and profits, you know, based on what we have today, we expect to be north of a billion dollars, revenue-wise, north of $100 million in terms of pre-tax profits.

And then from a planet perspective, as far as contributing to reducing carbon emissions, you know, each vehicle that we convert saves around 50 metric tons of CO2 emissions. So if we get up to 100,000 vehicles converted in five years time, then that translates into about 5 million metric tons of CO2, that we've helped to take out of the world.

Well, that's a great goal. And we certainly wish you well, and, and getting to that goal and exceeding it. And, you know, having a great business that benefits the environment, as well as benefits the shareholders as well, because I think that's probably the way we have to, to design our world going forward - is to have both something that is profitable, as well as something that benefits the environment - so that it is truly sustainable.

Because if we have only things that benefit the environment, but they cost so much that they drive us into bankruptcy, that is not sustainable, and in the practical way of the world.

So thanks, Kevin Chin, CEO of VivoPower, for being on the program. Everybody, as listeners, check out VivoPower’s website to see the exciting work they're doing.

Any final comments for us, Kevin?

Yeah, thanks. Thanks so much, Matt, again, for inviting me onto the show. And it's been a pleasure talking to you and some some great topics there. Just perhaps as a final note, it's not mutually exclusive to be able to deliver on, you know, shareholder value and profits, as well as to be able to contribute to reduction in carbon emissions and create sustainable jobs.

And I think there's, there's many examples of that amongst some of our larger B Corp peers. And, you know, we have to emulate some of those that that have become, you know, huge corporations that do do good with with their business practices.

I certainly hope the same for you everybody. Follow us on your social media channels like Instagram, Facebook, Twitter. Go to our website: aclimatechange.com. Leave us comments and feedback questions. Tell us any topics, guests, or questions you'd like to ask our guests and leave comments on our climate change website.

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Tune in next week, and check out our website: aclimatechange.com. Look forward to having you listening next week. This is Matt Matern. Good bye for now.