Tecogen Again Secures Large Contract in New York City and Strengthens Balance Sheet
Two weeks ago, we wrote about Tecogen Inc (US: TGEN – $3.96 & GER: 2T1 – €3.38) after it procured the largest single contract in its history with an $8.4 million deal for Turnkey Engineering, Procurement, and Construction Services to install a one MW trigeneration plant at a data center in New York City.
The Company has quickly followed up that deal with the announcement of multiple turnkey contracts with a luxury apartment building owner in New York. Tecogen will install, commission and provide complete maintenance services for seven InVerde CHP systems to be installed in three of the owner’s properties. The systems will also provide backup power to the complex in the event of a grid outage. While no revenue numbers were disclosed, it’s important to note that the contract includes five years of maintenance on the seven CHP units.
Tecogen operates three service centers in proximity to NYC. This ensures availability of technicians to maintain and service equipment, plus rapid access to parts. The service support on hand for this large urban center is a contributing factor to the large client base in the area.
Building owners and developers are continuing to invest heavily in improvements to their buildings. Tecogen’s CHP systems reduce operating expenses, improve resiliency and increase the value of these properties.
Tecogen’s Flexible and Reliable Systems Save New York Property Owners on Energy Costs
Dense, space-limited urban areas like New York have high demand for clean and reliable power, especially as energy costs are on the rise. The flexibility of Tecogen’s modular approach to its CHP solutions was imperative when procuring this new contract and will continue to be for any future business in the city.
While Tecogen units can only be sold to buildings that can handle the vast amount of energy produced, the most important aspect of Tecogen’s sales pitch to landlords is the significant energy cost savings that can be generated, with a secondary benefit of being able to provide reliable power through outages, which improves service to the tenants.
The seven units are projected to exceed $500,000 in annual savings with a 5-6-year payback for the property owner, based on the analysis of an independent engineering company. These savings, along with State incentive programs that rebate a portion of the CHP project cost, continue to be the driving forces behind Tecogen’s success in New York City.
Tecogen Strengthens Balance Sheet
In other news this week, Tecogen announced that it strengthened its balance sheet with approximately $7 million thanks to the sale of eight projects that it obtained when it acquired American DG Energy Inc (ADGE) in May 2017.
The assets were sold to a company managed by the New York office of Sustainable Development Capital, an investment firm with a proven track record of investment in energy efficiency and decentralized generation projects.
American DG Energy distributed, owned and operated natural gas powered cogeneration systems that produced electricity, hot water, heat and cooling. ADGE’s business model was to own the equipment that it installed at customers’ facilities and to sell the energy produced by these systems to the customer under long-term contracts at prices guaranteed to the customer to be below conventional utility rates.
At the time when ADGE was acquired, it had 92 installed energy systems, including various models of Tecogen cogeneration units, Tecochill water chillers, and conventional air-conditioning systems. The acquisition was a stock-for-stock transaction, which valued American DG Energy at approximately $18.8 million.
Tecogen will continue to maintain the equipment and perform invoicing for the energy supplied by the equipment for the duration of the power purchase agreements. These agreements include performance incentives split evenly by both parties for energy savings collections exceeding the minimum collection guarantees in the agreements.
Tecogen will use the cash generated by the sale to eliminate debt, support growth in strategic product areas, and strengthen the balance sheet.
All is all, this is an excellent deal for Tecogen, as its service revenues are still in place and the Company still owns 84 former ADGE units which it can monetize at a later date. In addition, the Company added $7 million to the balance sheet without having to issue one share.
Conclusion: Technical and Fundamental Indicators Help Drive Tecogen’s Stock Upwards
TGEN is a stock that is very under the radar. As the stock price remains steady at just under its 52-week high, the business prospects keep getting better, adding more value for shareholders and prospective shareholders looking to buy in.
Because the stock is not heavily traded, a breakout to new highs could occur fairly easy, something that would be a very positive technical indicator. Investors who follow technical analysis patterns, could that way be introduced to Tecogen and be exposed to the Company’s recent positive developments for the first time. The combination of positive technical and fundamental indicators would indeed be very enticing for these kinds of investors.
Every news release builds more buying pressure and puts the Company on stronger operational footing. Eventually Tecogen will release news that causes the stock to spike; whether that is a new large contract, or revenue growth and profits that are indicative of the Company’s recent agreements in an upcoming quarterly report.
Tecogen is due to release its 2018 annual report late this month, which will provide shareholders with pertinent information related to operating performance and its balance sheet. We are particularly looking forward to the most recent backlog figure, which may be at a new high for the Company given the recent contracts that have been announced. Smallcaps Recommendation: BUY.
| Smallcaps.us Advice: Buy | Price Target: $9.41 | Latest Company Report (pdf) |
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