EuroSite Power Raises $7.25 Million to Fund Expected Growth

EuroSite Power (EUSP – $0.62), which sells the energy produced from onsite energy systems as an alternative to the outright sale of energy equipment, has raised $7.25 million in a private placement at $0.575 per share.

Several members of the Company’s senior management and its board of directors participated in the offering. It’s always encouraging to see management members participate in a private placement. There’s no better way of showing confidence in the future.

Although this financing causes dilution to existing shareholders, the cash inflow is very welcome for a number of reasons. First, late last year EuroSite had less than $600,000 in cash on its balance sheet. Now, four and a half months later, that number has undoubtedly declined further as the Company isn’t cash flow positive yet.

Second, $2 million of the raised funds will be used to fully pay back a loan to Mr. John Hatsopoulos, the Chairman of the board of directors of the Company.

A third, and very important reason, is that EuroSite needs sufficient funds – roughly between US$200,000 and US$300,000 – to purchase and install CHP units at customer facilities. Although the Company will entirely be refunded by either Macquarie or Societe Generale as soon as the cogeneration unit is up and running, it first needs to advance all costs.

And lastly, the funds will be used to speed up the roll out of the Company’s On-Site Utility solutions throughout the UK and Europe. The above mentioned project financing arrangements, the gas supply agreement with Corona Energy, and the new distribution collaboration with the Czech CHP manufacturer TEDOM, have significantly expanded EuroSite market and potential. So although it wasn’t specifically mentioned in the release, it’s safe to assume that a strategy is in place to make best use of the funds raised.

Conclusion

Taking the repayment of the $2 million loan into account, about $5 million will be added to EuroSite’s balance sheet. We’re curious to find out how these funds will be used. Undoubtedly we’ll find out more next week, when the Company’s first quarter results are announced.

EuroSite Power now has sufficient funds to fulfill upcoming orders from various customers. In fact, as the Company is getting closer to becoming cash flow positive, this could have been the last private placement in its history. Buy recommendation.

Smallcaps.us Advice: Buy	Price Target: $2.75	Latest Company Report (pdf)
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