By Richard Gill, CFA

The strong flow of news coming from EQTEC (EQT), the waste gasification to energy technology provider, has continued, with four announcements in the past seven days.

Deeside

Firstly, and as expected, last Monday saw the announcement that Black & Veatch, the global engineering, procurement, consulting and construction company specialising in sustainable infrastructure development, has been appointed to undertake the powertrain front-end engineering design (FEED) for Phase 2 of the company’s project at Deeside, Flintshire. In October, EQTEC announced that planning consent had been granted for a proposed 9.9MWe plant at Deeside to enable a complete and local waste-to energy solution that would combine a 182,000-tonne waste reception plant with 2MW anaerobic digestion facility and EQTEC Advanced Gasification Technology. There are also ongoing discussions with development and infrastructure investors, as well as owner-operators, for a minimum £15 million sale of the project SPV, with a number of parties engaged at due diligence stage.

Fundraise

Secondly, last week EQTEC raised £3.75 million before expenses by issuing 750 million new shares at 0.5p each, with certain directors subscribing for 37 million shares (£185,000 worth). The funds have been earmarked for three main strategic reasons: to maintain momentum with existing projects critical for demonstrating the company’s capabilities and raising awareness of them; to accelerate growth by pursuing second and/or third projects in existing markets; and to build for scale by extending the company’s capability and capacity to support the pipeline and take on an increasing number of projects.

Billingham, UK

This week brought further news on a FEED contractor, this time at the flagship multi-technology, waste-to-energy project at Billingham, Teesside. EQTEC has signed a Letter of Intent with international energy services firm Petrofac to formalise their joint commitment to collaborate on the FEED and as potential EPC partner for development and delivery of the Billingham project. The two parties have worked together since 2021 when they collaborated on pre-FEED work, including a thorough review by Petrofac of EQTEC’s technology. Petrofac then made a formal proposal for provision of the FEED. Along with the firm’s experience as both an Engineering Services provider and EPC contractor, EQTEC selected Petrofac to be the nominated FEED contractor. Selection of the EPC partner would require approval of the SPVs’ owners at the time of appointment but EQTEC believes Petrofac will be the leading candidate.

A formal start date for the FEED has not been set so that prospective investors may be included in consideration of the various site designs. Petrofac has agreed to support EQTEC’s efforts with engagement of funding candidates, in the interest of sharing its views on the delivery strategy, including procurement and integration risks and how it would mitigate them.  

At Billingham, EQTEC has secured all relevant permits and permissions to build a refuse-derived fuel (RDF)-to-combined heat and power (CHP) facility that would transform 200,000 tonnes per year of RDF into up to 25MW of electricity for export to the national grid, with the potential for creating up to 34MW of thermal energy. The company has also secured the contract for a grid connection and is pursuing discussions with neighbouring companies about provision of private wire offtake.

Southport

Finally, EQTEC has secured a resolution from Sefton Council’s Planning Committee to grant revised planning consent for a Phase 1 waste recycling and anaerobic digestion facility at its Southport Hybrid Energy Park project with partner Rotunda Group. The Phase 1 plan includes a waste processing facility, an anaerobic digestion facility, CHP engines and a 2MW battery storage facility. The Phase 1 Plant will convert 80,000 tonnes of waste per year for six million cubic metres of biomethane to be injected into the national gas transmission system, also pulling gas from the grid to generate 9MWe for export to the national electricity transmission system. EQTEC has also been working on a Phase 2 plan which could add EQTEC synthesis gas technology to convert 25,000 tonnes of RDF per year, supplied by the plant’s waste processing facility, into an estimated 2.5 – 3.0MWe of clean electricity.

As we recently commented on, EQTEC and partner Wood Group have agreed to co-develop a RDF-to-clean hydrogen solution that would replace or augment the Phase 2 RDF-to-electricity solution. The RDF-to-hydrogen solution would combine EQTEC syngas technology with Wood’s VESTA syngas-to-hydrogen technology. Implementation of the solution is subject to further planning permission. With both Phase 1 and Phase 2 solutions in place, the full plant facilities are expected to export to the grid the equivalent of 20% or more of Southport’s energy requirement.

ASSESSMENT

The updates from EQTEC on operational progress at various projects are very welcome and continue to show that the company is putting in place all the pieces to finalise the financial packages required to get them into operation. This appointments of Black & Veatch and now Petrofac reflect the company’s attitude to working together with Tier 1 global partners in order to advance its large project pipeline. Along with Wood Group, these are all global, multi-billion dollar revenue businesses which should continue to open up new opportunities throughout the world. 

Meanwhile, the fundraising, which we note was ahead of the initial £3 million minimum, comes at a welcome time when EQTEC has five plants under construction, around 20 other projects under development and a pipeline of over 200 potential projects across the world. The funds will go to accelerating the commercialisation of these projects as well as advancing the deployment of new technology solutions for hydrogen, SNG and complex feedstocks, one of the company’s key strategic goals at present. In terms of financing, we also note that EQTEC retains access to the £5 million balance of the unsecured £10 million loan facility announced with Riverfort Global Opportunities in March this year.

We last updated coverage on EQTEC in April, noting that the company has set itself up nicely for strong growth over the coming years. All this comes under the backdrop of a global effort to reduce waste, increase the use of alternative sources of energy and achieve net zero carbon emission targets – three things which the company’s market leading Advanced Gasification Technology has been designed for.

EQTEC shares have come down to 0.46p on the back of the discounted placing, well off highs of around 2.75p seen at the start of 2021. That seems odd to us given that over that time EQTEQ has made significant commercial progress and grew revenues by 410% in the 2021 financial year. Our last valuation of the company derived an EV/EBITDA multiple based target price of 2.41p. However, given the dilution from the new shares in issue we revise this to 2.21p. Nevertheless, with this remaining well above the current price we retain our stance of Conviction Buy.

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