Technology Upgrades at Tecogen Lead to Significant New Sales Contract

In recent years a growing awareness of environmental issues has encouraged people to reconsider their energy use and explore products that provide cleaner options for their needs. For Tecogen (NASDAQ: TGEN – $3.69 & Fra: 2T1 – €3.08), as a technology company providing efficient on-site power, heating and cooling products, this trend is good for business.

As the Company has been active in this sector for more than three decades, well before the environment became a mainstream issue, Tecogen has established itself as a leader in improved efficiency and cleaner energy technologies that are in high demand today.

The product line originally developed and installed by Tecogen was designed to provide the benefit of many years of reliable operations. Meanwhile, through a series of technology improvements along the way thereafter, Tecogen has developed more powerful and efficient systems that are even more attractive for its customer base today.

It comes as no surprise then that Tecogen is now generating repeat business from long term clients that are ready to upgrade to new equipment as their original systems approach the end of the scheduled service life. Back in June, the Company reported a significant sale to a long term client that had purchased a newer system.

This week the Company reported a similar new contract with another existing long term client. The University of Connecticut has purchased four of the larger 400-ton TECOCHILL chiller units for installation into the main campus facility located in Storrs, CT. This purchase agreement is designed to replace a Tecogen chiller system that has been in operation at the campus for 20 years. A clear validation of the product line.

The University of Connecticut has purchased four of the larger 400-ton TECOCHILL chiller units for installation into the main campus facility located in Storrs, CT.

The large size of the facility is one of the contributing factors that led to the choice to select Tecogen for this important equipment contract. The TECOCHILL product line is the only natural gas powered system available on the market that can deliver air conditioning for a facility of this scale. This emphasizes the advantage Tecogen has achieved in this market segment with its diversified product line.

Upgraded Technology Advantage Delivers Environmental Benefits

The University of Connecticut has already secured long term cost savings and reliable operations from its relationship with Tecogen and therefore the choice to upgrade to an even more efficient TECOCHILL system was easy to make. The improvements in technology for these units will also ensure greater environmental benefits from the Ultera emissions controls system that is now incorporated in the TECOCHILL product line. Another plus, the refrigerant used in TECOCHILL units is ozone-friendly.

One other benefit comes from the tax incentives that are now available from the State of Connecticut to encourage more system installs like the TECOCHILL units, as they are powered by natural gas and therefore contribute to lower electrical energy consumption.

The contract announced this week is important because of the high value of the sale, but also because it highlights the air conditioning component of the full product line offered by the Company. As part of its growth strategy, Tecogen has been focused on increasing sales of its TECOCHILL line.

The new system is expected to be installed and operating before the summer air conditioning season begins in 2019. A long term service contract is also part of this agreement, managed through Tecogen’s Connecticut Service Center. With a large base of existing units operating in the region, this service facility is well positioned to meet the needs of clients to keep the equipment operating at peak performance.

Conclusion

With the improvements and upgrade features that are built in to every TECOCHILL system, these units have set the standard for efficient, natural gas powered air conditioning. Tecogen expects the sales of these chillers will comprise a larger share of its order book going forward as more customers appreciate the economic advantages offered by these advanced systems.

Sales growth is achieved as new clients are attracted to the savings derived from lower operating costs, environmentally-friendly performance features, and access to financial incentive programs that are becoming more common. In addition, long term customers that are happy with the performance and reliability of the products have come back to purchase upgraded replacement models.

Tecogen is well positioned to continue increasing revenues and net income based on this strategy. The combination of a diversified product line in a growing sector, plus the prospect of recurring sales and long term service contracts, has established the Company as one of the market leaders with a strong balance sheet and a high growth profile. This trend provides the backdrop to support a rising share price. Recommendation: BUY.

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