Positive Fundamentals Support Continued Sales Growth for Tecogen

The purchase of cogeneration units developed by Tecogen Inc (NASDAQ: TGEN – $3.15 & Fra: 2T1 – €2.57) becomes ever more appealing to a larger market of end users. This trend has been supported by the creation of several government sponsored incentives and cash rebate programs that effectively reduce the upfront capital costs to bring the systems online, and lower the associated operating costs.

Meanwhile the frequency of high profile storms and weather-related service interruptions to the electrical grid, often affecting entire regions and millions of customers, has encouraged a growing number of clients to invest in distributed power options to maintain control of their energy supply during grid-down events.

These factors are leading to greater sales growth of the most efficient cogeneration systems in the Tecogen line, which are equipped with technology to ensure access to heating, cooling and electrical generation during grid power interruptions.

Significant New Sales Agreement Reported

This week, Tecogen has reported details on the sale of three InVerde e+ units, as part of a Microgrid system for an entire school serving a town in Massachusetts near the Atlantic coast. The comprehensive energy solution will deliver heating, cooling, and electrical service for this large public facility.

Key factors driving the Tecogen sale involved the ability of this system to provide continuous power in the event of a grid-down event, along with providing standby power that can be rapidly brought online if needed during normal operating conditions. In effect, the Tecogen CHP units serve double-duty, and therefore eliminate the need (and additional costs) to have a separate back up generating system for the facility. The capacity of the Tecogen system to provide cooling also reduced the overall costs by eliminating the need for purchasing a separate air conditioning unit for the facility. In addition, the system as designed was available within a competitive price range.

As part of the agreement, Tecogen is providing the entire integrated trigeneration system package including the InVerde e+ units, engineering modules, absorption chillers and cooling towers, to be installed by the contractor involved with the construction of the new school. Tecogen will also manage the ongoing service commitment for the long term operations of the system as part of the contract.

This purchase agreement is noteworthy because it represents a high profile installation based on the capacity of these units to provide efficient operations and deliver emergency service during potential times of crisis. In a part of the state where electricity interruptions due to weather emergencies are common, schools are often established as areas of refuge. To be selected as the reliable energy source for this essential role is a validation of the distributed energy systems developed by Tecogen.

Certified Acceptance Within Government Financial Incentive Programs

Another factor that contributed to the choice for the Tecogen system is the compatibility within Massachusetts’ incentive programs for alternative energy options. The InVerde e+ units are among the most efficient cogeneration systems available, qualifying for Alternative Energy Credits (AEC) established by the Massachusetts Department of Energy Resources. The AEC program enables certified users to receive quarterly financial credits for the operation of qualified equipment, which effectively lowers the overall operating costs for these systems, making them more affordable to end users.

Another incentive is provided through the Mass Saves rebate program that is available to corporate clients in Massachusetts opting for more energy efficient systems installation. The choice to purchase the Tecogen system qualifies the school to receive the rebate, which effectively lowers the upfront capital cost for install of heating and cooling equipment.

New Tecogen Sales and Service Facility Established in Florida

The Company also announced that it has opened a new regional facility serving the Southwest United States, located in Tampa, Florida. This was in response to the growing customer base in the region, as more end users are motivated to invest in distributed power due to frequent weather-related interruptions affecting the electrical grid. The recent impact of Hurricane Florence across much of the Southwest is a demonstration of this threat.

The presence of this dedicated service center, with technical staff and a full inventory of parts and tools, will also contribute to faster and more complete service capacity for customers. This added reliability to keep the operating units online in turn will optimize the economics for Tecogen customers, and further encourage new sales in the region. As the 10th full service facility established by Tecogen, it underscores the commitment to reliability and sales growth for the Company and the focus on expanding its operations in yet another important domestic market for its systems.

Conclusion

The headline sale of a comprehensive trigeneration system again demonstrates the advanced technology now available through the InVerde line to deliver full spectrum capabilities for heating, cooling and electrical generation at a competitive price.

Tecogen systems are gaining greater recognition for the specific capability to provide reliable back up power during large-scale power disruptions that have been widely publicized in recent years. This was also one of the factors that led to the sale agreement for the new school in Massachusetts.

Another important customer demand is that online units continue efficiently operating to ensure the optimum financial performance for the investment. The commitment to provide rapid service and improved reliability for each installed unit has led to the establishment of large regional sales and service centers for strategic markets, like the one announced this month in Florida.

The increased sales and ongoing revenue from the service of a larger number of units in the field are powering the growth of the Company and improving the bottom line for shareholders. Recommendation: BUY.

Smallcaps.us Advice: Buy	Price Target: $9.41	Latest Company Report (pdf)
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