Another Major Contract Win for EuroSite Power

EuroSite Power Inc. (EUSP – $0.71) has signed an On-Site Utility agreement with the prestigious Celtic Manor Resort, in Newport, UK. The contract is worth approximately US$5.32 (£4.11) million over a 15-year long period.

The 400 KW system is estimated to produce up to 2,174,960 kW of electricity and 2,579,990 kW of heat per year, while saving up to 751 tonnes of carbon dioxide (CO2) – equivalent to taking 159 cars off the road. The CHP system at Celtic Manor will be EuroSite Power’s largest in its history. The Company aims to have the CHP system up and running in the fourth quarter of 2016.

The Company has opted to install two 200 kW TEDOM CHP units, instead of just one 400 kW machine. Two separate units not only fit better in the resort’s machine room, there is also a very good economical reason; Celtic Manor requires much less thermal load during the Summer. So by installing two machines, there is greater flexibility to match demand while also providing redundancy in the event of maintenance or other service issues.

The Celtic Manor Resort consists of three hotels – a 334-room luxury Resort Hotel, a historic 19th century Manor House with 67 rooms, and a 148-bedroom hotel – two exceptional spas, two state-of-the-art health clubs, a shooting school, tennis courts, fishing, adventure golf facilities, etc. It has no less than seven restaurants and was voted the UK’s best hotel for four years running.

EuroSite Power will retain ownership of the equipment installed and cover all maintenance costs. Avoiding any capital outlay, Celtic Manor will simply buy the energy produced by the system from EuroSite Power at a rate guaranteed to be lower than if it were to source the same energy directly from the grid.

Also in this case, the project will be funded by Societe Generale Equipment Finance following The Dome project, which was announced a couple of months ago.

Almost Debt Free

EuroSite Power eliminated most of its outstanding convertible debt this week via a conversion to common shares of the Company.

In total, 3,909,260 EuroSite Power common shares were issued at $0.54 per share in exchange for $2,100,000 in 4% Senior Convertible Debt principal as well as certain accrued and unpaid interest of which $1,800,000 was due in June 2017 and the remaining $300,000 due in June 2018. Following the completion of this conversion, just $300,000 in 4% Senior Convertible Debt, due June 14, 2017, remains outstanding.

Knowing that a $2,000,000 promissory note was also paid back in May 2016, following the $7.250,000 private placement, EuroSite Power is now almost debt-free.

New Chairman of the Board

In other news, EuroSite’s Board of Directors elected Mr. Jacques de Saussure to become the new Chairman of the Company. He is a member of the board of the Swiss Bankers Association, and has also served as vice chairman of the Swiss Stock Exchange.

As an expert in asset management and wealth management, Mr. de Saussure joined Pictet Group in 1980 and was elected partner in 1987. He served as Senior Managing Partner of the Pictet Group from 2010 until June 2016. Founded in Geneva in 1805, Pictet is today one of Europe’s leading independent wealth and asset managers, with EUR 437 billion of assets under management and custody as of year-end 2015.

Very interesting to note is that Mr. de Saussure participated for $2.5 million in the Company’s recent private placement. Also, this investment was alongside ones from both Dr. Elias Samaras, EuroSite Power’s CEO and Mr. John Hatsopoulos, the former Chairman of the Company.

We always consider management investing directly in their company a very strong demonstration of an insiders’ confidence into the Company’s future and potential. After all, no one knows a company better than its insiders and so, when they want to put their money on the line, why wouldn’t other investors?

Conclusion

The contract with Celtic Manor was won through a competitive process, indicating that EuroSite Power offered a better and more cost effective solution than its competitors. Also noteworthy is that EuroSite Power for the first time used a term sheet with a potential customer in its sales process. Designed to get an early commitment and allow negotiation to take place in a period of exclusivity it proved very useful as it kept the project moving forward towards the signing of the final agreement.

The agreement with Celtic Manor brings the number of systems under contract to 38. The total lifetime contract value to the Company of all 38 systems combined is US$91.2 (£70.33) million totaling 4,498 kW electrical capacity.

With a growing number of CHP systems in operation, EuroSite Power gets ever closer to becoming cash flow positive. According to our information, the Company only needs around an additional 800 kW of installed power to reach that feat. It’s just a matter of time before the Company achieves that magic number of operational installations, making it an ideal time for investors to get on board.

EuroSite Power is clearly ready to become a big winner for its shareholders. Buy recommendation.

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