ENERTIME 07/10/22
Price on 07/10/22 : _______ 1,65€ | ENERTIME |
Fair Value : _____________ 2,91€ | |
Cleantech | |
Market : _______________ Euronext Growth |
Share ticker: _____________ ALENE
FUTURE MID-SIZE ACTOR IN THE TRANSITION TO A CO2-FREE ENERGY INDUSTRY?
- Enertime is riding the wave of the energy efficiency market for industrialists that has been accelerated by high electricity prices, surging carbon credits, gas shortage and incentives in favor of decarbonization. The company aims to become the market leader in five years' time for waste heat recovery into electricity and in the less competitive 1 to 10 MWe ORC (Organic Rankine Cycle) systems market.
- Against this backdrop, following a period of stagnation (2021 and 2022e turnover remaining at < EUR2.5m, reflecting notably delayed order taking during the pandemic), revenues are set to rise with effect from next year, boosted by 3 ADEME projects totaling EUR 22m turnover awaiting signature. Annual average growth rates, modeled by us, of more than 60% over the next five years, are impressive. They are justified, nevertheless, by structural delays to the expansion of European electrical production capacity, in addition to mounting governmental incentives to industrial electricity savings, including in the US.
- A faster than expected penetration of the geothermal market, more competitive but accounting for the bulk of the worldwide ORC systems market, could even, on an optimistic basis, generate 50% of additional sales by 2027 relative to our base scenario.
- One of the drivers of future growth is based on a currently unique range of services offered in the waste heat recovery market by Energie Circulaire, its subsidiary. This offer has attracted subsidies totaling almost EUR 8m for the three projects already validated by ADEME. This «Energy Service Company» model could be duplicated not only in geothermal energy but also in expanding opportunities that should emerge in heat pumps and gas expansion turbines.
- Innovation represents another pillar of commercial dynamism. Enertime has won two European grant totaling EUR8.5m (payable over four years). These covered the DECAGONE (ORC system) and PUSH2HEAT (high-temperature Steam Generation Heat Pumps (SGHP)) projects. These subsidies were won, moreover, within the framework of a very competitive program, which could lead to significant commercial opportunities in Europe.
- Similarly, the company is set to generate its first revenues in the electricity storage market as from 2023, thanks to an innovative solution involving high-temperature air compression and expansion currently under development with STOLECT.
- Finally, the company should generate initial revenues on the hydrogen storage market from 2026 thanks to an innovative solution for very high pressure on hydrogen currently at the development and trial stage.
Our calculated fair value is an average between DCF (EUR2.70) and market comparisons with Enogia, Climeon and Ormat (EUR3.13). A more optimistic scenario integrating notably a significant advance into geothermal energy yields an indicative fair value of EUR3.43 via DCF.
Market Data | ||
Market Cap (EURm):..... | 14,0 | |
Enterprise Value(EURm): | 14,1 | |
Shares outstanding : ....... | 8 | 475 496 |
Free float : ....................... | 87,05% | |
Daily average volume..... | 52 269 | |
Ext 52 weeks : ................ | 1,55-2,95 € | |
Ext over 3 years : ........... | 0,67-4,77 € |
Ratios | 12-21 | 12-22e | 12-23f | 12-24f | 12-25f |
P/E | Ns | Ns | Ns | 18,1 | 8,3 |
EV/sales | 6,5 | 6,0 | 1,8 | 1,1 | 0,8 |
EV/EBIT | Ns | Ns | Ns | 17,4 | 8,8 |
Dividend yield | - | - | - | - | - |
Operating margin | Ns | Ns | Ns | 9,1% | 6,4% |
Net Margin | Ns | Ns | Ns | 6,7% | 10,5% |
Gearing | 101,4% | 5,6% | 17,7% | -15,0% | -33,2% |
Agenda | EUR m | 12-21 | 12-22e | 12-23f | 12-24f | 12-25f | |||||||||||
Turnover | 2,17 | 2,36 | 7,75 | 12,72 | 17,70 | ||||||||||||
Annuels results : April 2023 | |||||||||||||||||
Operating income | 1,05 | 1,19 | 2,82 | 4,09 | 4,60 | ||||||||||||
EBITDA | (2,65) | (2,40) | 0,04 | 1,91 | 2,71 | ||||||||||||
Shareholders | % cap | EBIT | (3,03) | (2,70) | (0,54) | 0,81 | 1,61 | ||||||||||
Gilles David | 4,83% | ||||||||||||||||
Net result | (2,93) | (2,81) | (0,50) | 0,85 | 1,85 | ||||||||||||
Siparex / Xange | 7,59% | EPS (€) | (0,35) | (0,34) | (0,06) | 0,10 | 0,22 | ||||||||||
Treasury stocks | 0,53% | Shareholder's Equity | 1,46 | 2,32 | 2,82 | 4,68 | 7,53 | ||||||||||
Free float | 87,05% | ||||||||||||||||
Net debt | 1,48 | 0,13 | 0,50 | (0,70) | (2,50) | ||||||||||||
Analyst : Jean Pierre Miguet | Page 1 sur 23 | 01Equity | |||||||||||||||
jp.miguet@01equity.com | Warnings in back page to be read attentively before study of this publication | 25 rue de Ponthieu | 75008 Paris | |||||||||||||||
ENERTIME briefly…
Business… | Current topics… | ||
• | Design and manufacture of medium and high power (> 1 | • | High electricity prices and the necessity of natural gas savings |
MW) ORC (Organic Rankine Cycles), and gas expansion | are boosting project launches by industrial companies | ||
turbines (derivative of ORC solutions). | seeking improvements in their energy efficiency. | ||
• | These technologies are dedicated to energy recovery to | • | |
produce electricity self-consumed by the industry. | This trend is reinforced by structural measures introduced by | ||
• | Design of high-power (> 2 MWth) and high temperature | the authorities, notably within the framework of Plan France | |
(above 95°C) heat pumps, a segment focusing on industry | 2030. | ||
and without established competitors | |||
• | This technology aims at replacing natural gas in the | ||
industrial heat production process. |
Sales Breakdown (2021) | Geographical breakdown of sales (2021) | ||||
• | ORC module sales and other materials: 72.4% | • | France ......................................................... 91,0% | ||
• Others European countries .................... 1,3% | |||||
• | Services and engineering: 27.6% | ||||
• | Asia .............................................................. 7,7% | ||||
Forces | Weaknesses | ||||||||||||||
• One of the global leaders in value added solutions for waste heat | • ORC system activity is exposed to relatively high WCR due to | ||||||||||||||
generally long decision processes. | |||||||||||||||
recovery into electricity | (sector | leaders being focused | on | ||||||||||||
• | Actor lacking the critical mass to compete with rivals such as | ||||||||||||||
geothermal energy). | |||||||||||||||
Turboden, Ormat or Exergy on major tenders, notably in the | |||||||||||||||
• | Strategically | positioned | with | its | heat pump | technology | to | ||||||||
most important segments, geothermal energy and recovery of | |||||||||||||||
accompany | the acceleration | of | the transition | by European | |||||||||||
waste heat into electricity in energy intensive industrial sites. | |||||||||||||||
industry away from natural gas. | |||||||||||||||
• Delays of payment, occasionally unilaterally extended by certain | |||||||||||||||
• Quality of management, of R&D and developments, validated, | |||||||||||||||
clients. | |||||||||||||||
for example, by the sale to China of a 1MW turbine license (the | |||||||||||||||
country having no domestic manufacturer mastering this | |||||||||||||||
technology integrated into waste heat recovery modules). | |||||||||||||||
Innovations acknowledged at the European level with the award | |||||||||||||||
of a major European grant for DECAGONE innovation project | |||||||||||||||
• Only ORC | system manufacturer to sell the entire system | ||||||||||||||
including heat recovery. | |||||||||||||||
• | capture. | ||||||||||||||
Opportunities | Threats / risks | ||||||||||||||
• | On a five-year term, become | the world leader in ORC | • The Ukrainian crisis has amplified the | inflationary trend in | |||||||||||
applications for industrial energy efficiency. | commodity prices and impacted the high-temperature heat pump | ||||||||||||||
• Gain a leadership position in the high-temperature heat pump | market. | ||||||||||||||
market. | • Industrial risk attached to the Energy Services Company business | ||||||||||||||
• Move towards the economic model of a services supplier via the | resulting from closure and /or production reduction at the plant | ||||||||||||||
Energy Services Company model. | in which Energie Circulaire will install the Enertime systems. | ||||||||||||||
• Benefit from its turbomachine competency to offer electricity | Redeployment of these systems to another site would be | ||||||||||||||
storage solutions via heat storage. | complicated by the large size of these waste heat recovery systems. | ||||||||||||||
• | Inertia in large contract signings and cancellation risk / | ||||||||||||||
• | Associate its know-how in Supercritical CO2 Rankine Cycles | ||||||||||||||
with | modular nuclear reactors within the framework of | the | postponement of projects for which | subsidies have been | |||||||||||
obtained. | |||||||||||||||
EUR1bn released by the government to boost the French offer | |||||||||||||||
• | Emerging recruitment difficulties. | ||||||||||||||
of small nuclear reactors. | |||||||||||||||
• Deep geothermal energy approached in two years, hydrogen | |||||||||||||||
storage/distribution in four years (innovative technology | |||||||||||||||
involving high-pressure hydrogen compressor). | |||||||||||||||
Analyst : Jean Pierre Miguet | Page 2 sur 23 | ||||||||||||||
jp.miguet@01equity.com | Warnings in back page to be read attentively before study of this publication | ||||||||||||||
A buoyant energy efficiency market for Enertime's innovative solutions
record electricity and « pollution rights » price rise, plus a gas shortage represent strong drivers for the sector
The efficient energy market is underpinned by high electricity prices and by structural measures introduced by governmental authorities like in France with the "Plan de Relance Verte" and France 2030. At the beginning of the year the French government announced the mobilization of EUR 5.6bn to back the decarbonization of industry, notably in favor of low emission CO2 heat and electricity production aimed at fossil fuel combustion substitution. A policy structurally favoring the demand for Enertime designed solutions. Not only do ORC systems allow for low-carbon electricity production but also high-temperature and high-power heat pumps.
The CO2 price/ton (« polluting rights ») that was reached on the European market, marked a record historic high in early February 2022, approaching EUR100/ton. It has since held at a high level at around EUR80/ton. Factors behind this rise appear durable: European market reform announced on the 14th of July (more ambitious climate objectives with a faster lowering of the ceiling for available CO2 emission rights); surging natural gas prices obliging electricity producers to revert to coal. While this alternative is cheaper it is more polluting, prompting more carbon credit purchases to offset these additional CO2 emissions. This trend is set to become more marked with the arrival of cold weather.
The surging price of carbon on the European market impacts directly the market price of electricity: the European spot price is now higher than EUR450/MWh, having been driven up by a factor of 15 year-on-year. This price has a direct bearing on European forward electricity purchase contracts. Structural delays built up over the last fifteen years in new basic electrical production capacity could aggravate the risk of electricity shortage as sector demand (electrification of industrial processes, mobility) increases.
Current (ie, Ukraine) and potential geopolitical tensions, or new difficulties encountered in the nuclear sector, inflation on new capacity cost, frequent unavailability, profitability of certain renewable energies eroded by those of intermittent renewables tend, moreover, to amplify this trend.
2021 carbon credit price on the European market
Analyst : Jean Pierre Miguet | Page 3 sur 23 |
jp.miguet@01equity.com | Warnings in back page to be read attentively before study of this publication |
Enertime's ORC systems and turbines contribute to the security of the industry's energy supply for 10 to 15 years.
The surging of European energy costs opens the door to strong demand for Enertime's ORC, heat pump and gas pressure reduction solutions. Installation by industrialists of these systems will enable massive electricity consumption reductions. Investment in energy efficiency in Northern Europe is 50% cheaper than building new capacity in nuclear and solar and is still lower than wind power. Thanks partly to compensation from White Certificates (CEE), it becomes profitable three times faster (on an average of 5 years versus 15 to 30 years for new capacity in the three aforementioned energies).
Enertime intends to take advantage of the France 2030 investment plan and of the industry's decarbonization objectives to accelerate the marketing of its heat pump range as a first step, followed by hydrogen and electricity storage within four years.
This decarbonization, through the development of new electricity production capacities that it will generate should boost ORC sales in parallel. Enertime targets especially the global glass, steel and cement industries. Industrialists are looking for protection from electricity shortages during accelerated electrification of their industrial processes (ie, replacement of blast furnaces with DRI or electric or arc furnaces, such as the project at Arcelor Dunkirk).
Successful diversification into heat pumps
Enertime launched a heat pump offering a few years ago as part of its strategy of diversification outside of ORC systems. This succeeded notably in the winning of a large contract for a 3.7 MW (EUR2m) pilot installation at Veolia for Le Mans Metropole, urban heating being seen as a long-term growth vehicle.
Industrial entities are showing interest today in heat pump installations that have an impact on their decarbonization. Rising demand reflecting the interruption of the Russian gas supply is expected.
Enertime is positioned on the less competitive high-power (> 2 MWth) and high temperature (above 95°C) systems. Focus is essentially on domestic industry.
The Strategy for this approach lies in avoiding projects where the Company is non- exclusive, to protect margins against the risks taken by its innovation contribution (rewarded with a EUR1.1m European subsidy for the PUSH2HEAT project).
In the longer term, the creation of a model that can be duplicated, permitting economies of scale backed by the Energie Circulaire services model.
Energie Circulaire: a disruptive offer in the industrial energy efficiency | |
sector holding the key to very strong growth expected from 2023 | |
A unique ESCO model build around ORC technology | |
In 2020 Enertime created its own dedicated ESCO (Energy Service Company) | |
subsidiary; Energie Circulaire, to take advantage of currently limited, even non- | |
existent, competition in the energy services company sector in an industry with high | |
technological content | |
This offer is currently unique in the energy services company market. It allows | |
industrial entities to benefit from a turn-key solution: installation of the energy | |
Analyst : Jean Pierre Miguet | Page 4 sur 23 |
jp.miguet@01equity.com | Warnings in back page to be read attentively before study of this publication |
efficiency solution (heat capture and ORC) without holding it as an asset, financed via the industrial entity's purchase of reduced-price electricity, thus linked to achieved energy savings and White Certificates (CEE for Energy Economy Certificates) obtained on their behalf, supported by maintenance provided by the original manufacturer.
In this development plan the long-term objective is three waste heat recovery installations per year.
This integrated offer proposed by Energie Circulaire has the advantage of being carried through Enertime's range of solutions: an offer covering heat pumps, and gas pressure reduction turbines should soon be introduced under the same principle. This offer could be expanded next into geothermal energy.
Operation of this model of contract or Corporate PPA for Corporate Power Purchase Agreement covering electricity sales to industrial companies works as follows:
Energie Circulaire, (non-consolidated,93%-owned by Enertime, the balance by Ferest Energie), arranges the financing mainly with infrastructure funds via a dedicated project company or Special Purpose Vehicle. Energie Circulaire then purchases the ORC system from Enertime and installs it. It then resells the electricity generated to the industrial client at a price of around 20% to 25% cheaper than the network electricity price, with the help of CEE participation into the financing.
Enertime would, moreover, be able to benefit from an "avalanche" effect on its waste heat recovery systems in a situation where Energie Circulaire may obtain a contract for a multi-site industrial entity. A successful first installation could then be extended commercially with the same client.
It should be noted that the announcement of an ADEME financing (Verallia, Recytech, FerroGlobe projects for the moment) does not imply an automatic commercial contractual engagement. Energie Circulaire is obliged firstly to conclude an agreement with the industrial client. At the same time, Energie Circulaire must arrange the necessary project finance with either, third-party investors (typically infrastructure funds) or, leasing contracts to finance the smaller operations.
Over a 10 to 15-year operational period, a hypothetical closure or production reduction of an industrial client's plant would raise the risk of re-employment on another site, even more complicated if the Project is of a large size.
At Enertime's level, the five-year objective is that nine out of ten waste heat capture projects will be financed by Energie Circulaire.
Hydrogen storage, an innovative growth relay on a five-year horizon
Since hydrogen storage calls upon compression and thermodynamic technologies, storage and distribution for industry and mobility have been earmarked as a medium- term growth relay. They are integrated into the French government's EUR2.3bn mobilization plan in support of the hydrogen and renewable energy sector.
Enertime has an innovative solution for very high-pressure hydrogen compression under phase I development (HYRECO project) targeting the energy storage and mobility market. Currently at the « proof of concept » stage the objective is to design the compressor and validate its functioning and performance on a test bench.
The project will then be followed by a second stage for implementation and validation of an industrial pilot integrated into a hydrogen distribution station.
Against this backdrop, initial financing from the Ile-de-France region and BPI France has been received as part of the Innov'Up program. The objective is to complete an industrial pilot from 2023, and 2026 as a horizon for commercialization.
Analyst : Jean Pierre Miguet | Page 5 sur 23 |
jp.miguet@01equity.com | Warnings in back page to be read attentively before study of this publication |
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Enertime SA published this content on 23 November 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 November 2022 08:54:01 UTC.
