By Richard Gill, CFA

EQTEC (EQT), the waste gasification to energy technology provider, has completed the acquisition of a 1.2 MWe waste-to-energy gasification plant in Beliše, Croatia. The deal has been done through Synergy Projects, a joint venture between EQTEC and its Croatian project development partner Sense ESCO.

Originally commissioned in 2016, the plant was built around EQTEC’s proprietary and patented Advanced Gasification Technology. The intention is to recommission and repower the plant to convert forestry wood waste from local farms and forests into green electricity and heat for use in the local community. Once operational, it is expected that EQTEC will become the plant’s O&M contractor and that it will become the second of the company’s planned Market Development Centres – a showcase for the company’s technology in a fully operational, commercial setting. 

In terms of key events before the plant is up and running, once the joint-venture partners have agreed the optimal financing structure further announcements will be made and local EPC contractors vetted and chosen. Active discussions with investors are currently underway, with the plan being for financial close in the coming months. The JV acquisition was funded by EQTEC via a €550,000 loan and a €1,650,000 10-year loan provided by a third party.  Both are intended to be converted into privately placed bonds to meet local corporate requirements. EQTEC currently owns 100% of the joint-venture, with 20% to be transferred to Sense ESCO after completion and an additional 20% subject to performance milestones.

On the operational side, in the second half of 2021 a grid connection application will be made, with the plant expected to be updated, recommissioned and repowered for operations towards the end of 2022. Annually, the expectation is for the production of c.1.2 MW green electricity from c.8,000 tonnes per year of locally-sourced wood chips and forestry waste biomass from regional forests.

EQTEC estimates that the plant will generate an unlevered IRR of 12% and annual EBITDA in excess of €850,000. Alongside this, the contract value of EQTEC’s technology sales for the plant is expected to be €1,700,000 in technology and engineering upgrades, with additional fees from acting as O&M contractor after commissioning. 

ASSESSMENT

As expected, this deal further advances EQTEC’s strategy to recommission old plants that are built around its technology. The re-entry into Croatia is the latest of several such planned EU based “waste-to-value” facilities, with the company also targeting a 1.2 MWe plant in Karlovac, in central Croatia. The deal also adds to the recent financial close of the Italia MDC project, the first of EQTEC’s Market Development Centres, due to be fully recommissioned and operational by Q2 next year.

Following the company’s recent £16 million fundraise we revised our expectations for the 2021 to 2023 financial years and used these as a basis for providing a valuation. In 2023, as more projects are progressed and the substantial non-contracted pipeline is translated into commercial success, we are looking for revenues to more than double to €149.3 million and EBITDA to grow by 142% to €36.6 million. Using our updated 2023 forecasts, and on an EV/EBITDA multiple basis discounted back to end 2021, we have a target price of 3.47p per share. With EQTEC shares currently sitting at 1.4p we retain our stance of Conviction Buy.

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• EQTEC