During the past 45 days, Tecogen Inc. (NASDAQ: TGEN – $2.45 & Fra: 2T1 – €1.83) sold no less than $4.1 million worth of InVerde e+ cogeneration units. The CHPs, with a total capacity of 800 kW, will be installed the coming months in six different apartment buildings in Manhattan, NY. Moreover, each deal comes with a long-term service contract, which will generate additional revenue for the Company in years to come.
Also good to know is that several of the orders were won through third parties, such as engineering companies, building management companies, and energy efficiency consultants. This is important as those parties often advise building owners and managers on their construction or renovation plans. Being top of mind when it comes to a building’s energy solutions is crucial.
Tecogen’s Co-CEO Benjamin Locke was quoted saying, “As our robust flow of contract wins suggest, we are a dominant player in New York City’s multi-unit residential cogeneration market. In fact, we believe that we are the leader in our segment of the market nationwide. As interest in cogeneration among owners and residents of multi-unit housing gains traction, we are at the top of the list of preferred vendors.”
The New York Cogen Market
New York City has experienced severe weather events in the past few years, such as Superstorm Sandy and Hurricane Irene. Such disasters, often causing electric outages lasting for days or weeks, have urged national and local officials to review ways to improve energy reliability and resiliency. After all, backup generators only have fuel supplies for a few days at most, and refueling them is often impossible as roads are flooded or blocked.
However, because some CHP systems operate independently of the grid, they do keep the lights on at apartment buildings, hospitals, nursing homes, and college campuses in case of an emergency.
Consequently, many state agencies and local utilities offer grants or other incentives for the installation of CHP equipment. For example, grants from the New York State Energy Research and Development Authority, known as NYSERDA, typically cover about 40 percent of the total cost to buy and install a CHP unit. The grants are worth $1,800 per kilowatt in New York City and $1,500 per kilowatt in other parts of New York State, up to a maximum grant of $2.5 million.
Next to grid independence, New York also recognizes CHP as a key element in achieving its environmental goals. In order for New York State to reach its ambitious clean energy targets of 50 percent renewable energy by 2030 and an 80 percent reduction in greenhouse gas emissions by 2050, it is counting on CHP technology, amongst others.
Tecogen’s Ultera low-emissions technology ensures simple, cost-effective and robust solutions for meeting even the most stringent emissions standards. The patented system lowers NOx and CO to near-zero levels without the need for complex additional controls or frequent maintenance.
Nationwide Factory Service
A final item that mustn’t be overlooked is getting the units up and running and maintaining them properly. This is a key aspect of the entire package. It is critical to do it right. Only an impeccable installation ensures the buyer of maximum energy and cost savings.
As for the installation of a CHP, Tecogen relies on experienced electrical and mechanical contractors. They are familiar with local codes and standards, have broad expertise on gas and electrical interconnections, and a building’s heating/cooling integration. Each CHP installation is unique; having an engineering team that can work with customers to solve their specific challenges is a differentiator.
But offering outstanding service extends beyond installation. Since many CHP systems are in place for 20 years or more, Tecogen also offers second to none service support. The Company does that through a nationwide network of nine field service centers in California, the Midwest, and the Northeast. These centers are staffed by full-time Tecogen technicians and have been an essential part of Tecogen’s growth and success through the years.
Service contracts are a reliable and growing part of the Company’s total sales. In fact, more than half of Tecogen’s installed units nowadays have a service contract.
Cogeneration is clearly changing how buildings generate power, while they help New York City alleviate a huge problem in getting power to buildings.
Of course, the opportunity for CHP extends far beyond the five boroughs of New York City. North America’s power industry is undergoing a wave of coal and nuclear plant retirements, and CHP will play an important role contributing to the power needs in an efficient manner. Available natural gas, combined with high electric rates and a climate conducive to both heating in the winter and cooling in the summer, is an accelerator for the CHP industry.
Take advantage of Tecogen’s extremely low stock price. We wouldn’t be at all surprised if the stock rebounds to the $3 level, up about 30%, in the next few months. Recommendation BUY.
|Smallcaps.us Advice: Buy||Price Target: $8.41||Latest Company Report (pdf)|
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