By Richard Gill, CFA

EQTEC (EQT), the waste gasification to energy technology provider, has added to its long list of development partners by signing a Collaboration Framework Agreement with CompactGTL, a small scale, modular, gas-to-liquids company specialising in the production and use of synthetic fuels from gases, including natural gas, synthesis gas and off-gases. Under the deal, which is for an initial two year period, the two parties will collaborate on the design, development, construction and operation of waste-to-fuel projects and other synthetic fuel and energy infrastructure projects, with an initial focus on small-scale, modular, waste-to-fuel plants.

One area that EQTEC has increasingly been focussing on in the past few months is the extension of its technology into new syngas applications such as waste-to-hydrogen, waste-to-SNG and waste-to-biofuels. CompactGTL then seems like an ideal partner as it is actively considering application of its capabilities to production of new fuels, and especially to conversion of synthesis gas into sustainable, drop-in, liquid fuels for industries that are more difficult to decarbonise, such as the aviation and heavy haulage industries.

EQTEC and CompactGTL are looking to integrate their respective technologies and know-how to pursue a growing number of opportunities for clean, sustainable liquid fuel production. EQTEC will provide project development, syngas technology solutions, engineering and technical design services, while CompactGTL will provide its gas-to-liquids technology solutions and access to development sites, funders, infrastructure investors and blue chip offtakers.

The deal will also see the two parties promote and introduce each other to commercial opportunities and to jointly develop projects. So far they have identified a potential pilot-demonstration project for which feasibility work will be commenced as soon as possible. This project will focus on designing and developing the first, small-scale, commercial plant utilising RDF (refuse derived fuel) as feedstock in the production of sustainable liquid fuels, applying both EQTEC and CompactGTL technologies. A location has been found for the project and there discussions going on with the site owner about acquiring development rights.

ASSESSMENT

Part of EQTEC’s growth strategy is to leverage its partner network to ultimately supply its technology to hundreds of plants around the world, so adding CompactGTL to the team further strengthens its position. With this latest deal EQTEC has advanced its move into potential new types of synthetic fuels, something that the company has been keen to highlight as an ongoing strategic focus. We note a recent report from Maximize Market Research which estimates the global synthetic fuel market will grow at a CAGR of 28.7% from 2021 to 2027, driven by the world’s increasing focus on reaching net zero carbon emissions by the middle of the century. This latest deal also continues to show that EQTEC is highly active in looking for new market opportunities and bodes well for a further strong flow of news in the coming months and years regarding development projects.

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.

While the shares have edged up to 0.725p on the announcement they are 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. With the shares remaining well below our EV/EBITDA multiple based target of 2.41p, we retain our stance of Conviction Buy.

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