electro power systems (aka engie eps): clean tech market leader with 3x potential upside over the next 24 months - energy storage solutions

Statement: This report is the work of the investment consultant to which the author belongs.
The report is the result of the consultant's implementation of his investment strategy.
Consultants hold positions in the security sector, but there is no guarantee that the consultant will continue to act as an investment or make additional investments, and no information will be updated to reflect future changes in the consultant's investment assessment.
Eps fp: In connection with the big trends in the energy industry, there is an opportunity to acquire leading cleaning technology companies, rockstar leadership and world-
Industrial partners.
There is three times the potential to return in the next two years. ENGIE EPS (OTCPK:ENGIY)(
Formerly known as EPS and power system)
Is a hybrid energy storage and Micro
Solution provider for grid systems.
The company was an early entrant to the industry with cutting-edge technology products.
Engie eps is at the crossroads of many of today's energy trends: increased use of energy storage, increased penetration of renewable energy, smarter power grids, distributed energy generation, emphasizing infrastructure resilience.
According to industry experts from Bloomberg NEF, the installation base of Enji EPS's energy storage terminal market has increased by 63 times in the past eight years, and it is expected to increase by 10 times by 2025.
In March 2018, ENGIE, one of the world's largest energy companies and the world's largest independent power producer, gained control of EPS.
ENGIE later offered an EPS of 100% for the bid on June 2018.
Only a small number of shareholders bid, after the tender offer, ENGIE owns about 60% of the equity of EPS.
This relationship is transformative for EPS.
Together with many of the industry people we have spoken to, it is expected that Auggie EPS will leverage its relationship with Auggie to drive potentially explosive growth in the coming years.
The most obvious signal of this shift is the recent 50-
The 60 m euro project to build the world's largest micro-grid is becoming increasingly apparent.
The company is led by former venture capital operating partner and successive entrepreneur Carl Alberto gugliminotti;
At the age of 35, Carlalberto has successfully withdrawn twice for tens of millions of euros, and in the past three years, engie eps's market value has increased by about three times. 5 years.
Although engie eps has not been screened as "value stocks" based on historical gains, we believe that there is now a chance to buy leaders to double the income of clean technology assets every year ~ Monthly X 2020 EBITDA is a bargain. We expect the 3x return to be discussed in more detail over the next two years.
Before discussing the rules of the game that we believe that the ownership of ENGIE may change the earnings per share of ENGIE, it is most important to discuss what engie eps does and the technology behind it.
Enji EPS is a hybrid energy storage and Micro
Solution provider for grid systems.
To put it simply, the company uses proprietary technology and proprietary technology to design and install 1)
Independent renewable energy generation coupled with storage systems (micro-grids)and 2)
Energy storage system supporting power grid stability and optimizing power production-
Connected power plant.
The micro-grid of engie eps is an independent renewable energy generation system that provides a stable energy supply of 24/7.
The microgrid includes power generation and storage systems, as well as engie eps proprietary power conversion and control systems that can effectively regulate the functions of the microgrid.
The company knows nothing about various types of battery and renewable energy production technologies from third parties.
Source: Auggie EPS-
2018 Clean Technology Forum as the main terminal market for Enji EPS micro-grid
Power Grid "regions and enterprises, both regions and enterprises today are driven by diesel.
The micro-grid of Enji EPS provides regional or enterprise power generation at a cheaper price (
Sometimes 60% ~)
Higher reliability and elasticity than diesel power generation.
According to our telephone with industry experts and engie eps customers, we believe that due to the company's leading edge in industry and proprietary technology, engie eps is usually the only credible bidder in the micro-grid bidding.
The company has more than 150 academic publications, 130 patents and applications, more than 500 registered trade secrets in 48 countries, and about 30% employees with the same degree as a doctor or MBA, it has benefited from 15 years of research and development.
Historically, 25% of the company's revenue has been invested in R & D.
Comments from ENGIE, an expert in the energy sector, confirm the technical advantages of EPS.
According to a number of ENGIE executives, "the value of EPS lies in its technology," and "We acquired the company with its technology," We did not build it internally, because the acquisition of EPS gave us a 2-
Have technical advantages over competitors.
"In comparing EPS's microgrid with Tesla's microgrid, further evidence of the company's technical advantages is obvious (TSLA).
EPS offers similar performance to Tesla, but requires 25 to 30% MWh battery power, so the same solution is provided at a lower cost.
We have conducted extensive independent consultation with engie eps's customers and industry experts, which also supports our view of the company's technical advantages.
While competition in this industry may intensify in the future, we believe that attractive economic cases should support the long term for the microgrid and the US dollar TAM
Long-term profit growth in the industry.
As a secondary market, engie eps also uses its HyESS technology to serve utilities.
Extend the storage system.
In recent years, the penetration rate of renewable energy in the power grid has increased significantly, and the penetration rate in the future should continue to increase.
The intermittent nature of renewable energy generation poses some challenges to the grid.
Engie eps's grid support solutions leverage battery and hydrogen storage to smooth energy demand and production and allow renewable and traditional power plants to operate more efficiently.
Source: Auggie EPS-
2018 Asia Clean Technology Forum is an ideal partner for EPS as 1)
The business of EPS is the intersection of the strategic focus of Enji, 2)
ENGIE will be the source of EPS future revenue
Joining ENGIE group eased the historical pain points of eps business, 4)
ENGIE provides an additional competitive advantage of EPS in the micro-grid field. ENGIE’s long-
The strategic focus of the energy market is called "3d": de-carbonizing, de-centralization and digitalization.
EPS products are located at three intersections.
The solution for EPS is achieved by increasing the penetration rate of renewable energy, the microgrid is an example of decentralized power generation, and the entire solution for EPS is digitally controlled.
EPS is ENGIE's only substantial product in the fixed storage and micro-grid market. Source: ENGIE -
2017 investor workshop we believe ENGIE will be the source of future earnings for EPS.
ENGIE has 110 gigawatts of power generation worldwide and is the world's largest power generation footprint.
In terms of the environment, the storage capacity of 1 MW is approximately equivalent to the sales of 500 euros for EPS and 1 GW is approximately equivalent to sales of 500 euros.
While grid support is more competitive than the micro-grid, ENGIE executives tell us that EPS is definitely the preferred provider for ENGIE grid support needs.
As clear evidence that the ENGIE relationship has generated new business for EPS, about 95 m eur for 53% of the EPS 180 M pipeline or projects under development is related to ENGIE's power generation assets.
We believe that in the project, for these ~ Conversion rate of 95 M, it is safe to assume very high.
Source: ENGIE Eps-Q3 2018 investor CallENGIE should also help EPS find new businesses outside the ENGIE footprint through the benefits and active cooperation of ENGIE global network.
As the world's largest power generation company, Enji has close relations with regions around the world.
ENGIE is on their shortlist when developers or territories are looking for energy solutions.
For example, developers running the Palau micro-grid competition process contacted ENGIE and asked them to participate in the bidding.
ENGIE forwarded the proposal to EPS, which was awarded to the project by the Republic of Palau shortly thereafter.
EPS does not rely solely on coincidence or ENGIE's reputation to create new businesses.
Following the conclusion of the ENGIE transaction, the CEO of EPS met with the head of the business unit of the ENGIE global organization, explained EPS's products to them, and initiated a collaboration to find the business for EPS.
One of the most notable collaborations is with ENGIE Solar.
Enji Solar, which is the main solar power generation business unit in Enji, has installed about two thousand MW of solar energy worldwide.
According to EPS and ENGIE executives, EPS will be the preferred supplier for ENGIE Solar's future storage projects, and ENGIE Solar will be actively looking for projects for engie eps.
In addition to helping EPS bring new business, ENGIE should also mitigate the historical pain points of EPS winning new contracts.
Historically, some of the more troublesome disadvantages of EPS include: lack of brand and customer credibility, lack of balance sheets to guarantee projects, and limited financial resources, limited ability to negotiate with suppliers on pricing and working capital.
The relationship with ENGIE can eliminate all these problems.
ENGIE is the industry's leading brand with an investment-grade credit rating and a 50 B euro balance sheet.
ENGIE's purchasing department has provided savings to EPS and helped the company get 90 to 150 days of improvements in working capital for key projects such as batteries.
The last advantage to note is that ENGIE is the world's leading independent power producer (IPP).
In the micro-grid sector, most of EPS's competitors are IPPs, engineering companies, or component manufacturers.
Historically, engie eps was able to provide engineering and high-performance components, but not project financing.
Considering the relationship with ENGIE, EPS is now able to provide a full range of solutions.
According to the consultant in charge of Palau's competitive process, EPS won the deal, in part because it was the only bidder capable of providing an end-to-end turnkey solution.
Through extensive telephone conversations with industry experts and former ENGIE and EPS employees, our above observations and conclusions are confirmed.
A former ENGIE executive said, "ENGIE investment is obviously a game --
According to another "EPS will win every fixed storage tender that ENGIE is after", I can easily see the chance that EPS will win 1 billion euros.
A former head of business development at EPS told us that he thought "ENGIE relieved all the historical pain of ep --
Points . . . . . . As a partner, I can easily see a short-term income of 100 and a medium-term income of 1B.
We believe that Carle Alberto gugliminotti, CEO of Auggie Epps, is a "rock star" CEO and a visionary entrepreneur.
Carl Alberto's resume, his success in EPS so far, our observations over the past year, comments from independent references have given us confidence, he will take advantage of the big market opportunities of Enji EPS and the strategic partnership with Enji to bring considerable value to shareholders.
Although Carlalberto is only 35 years old, he already has the qualifications, experience and success of a senior executive.
Carl Alberto is highly recognized in the academic field: 2012 MBA of boconey, 2005 Doctor of Law of the University of Paris, and 2006 Master of Law of the University of Turin;
Gain additional experience in law, economics and philosophy at the European School of Economics and the University of Haifa.
He is proficient in Italian, English and French.
Between degrees, Carl Alberto worked at Linklaters, London's top law firm, for four years.
During his formal education and as a legal assistant, Calle Alberto co-
Two successful technology start-ups have been set up. First, he co-
Blackform aircraft was founded in 2009.
The company was acquired by an investment group focusing on Aerospace and Electronic Products, developing and selling the highest products
Execution Super
Light aircraft made entirely of carbon fiber in the world. In 2011 he co-
Founded Restopolis, now known as the TripAdvisor company and the leading online restaurant TheFork
European booking platform with nearly 14 million monthly visits.
During his tenure on the board of directors of Restopolis, Carlalberto became the operating partner of 360 Capital Partners, one Europe-
Manage 400 of the focused venture capital companies.
Since then, Carle Bento has joined EPS, a portfolio company of 360 Capital Partners.
According to bonsto Boni, founder and general partner of 360 Capital: since EPS's initial public offering in early 2015, Carlalberto's market value has almost doubled.
Now, the company has to complete 2018 months-
19 M of revenue and almost cash flow disruption-even.
It has a signature ~ 80 m project backlog, we expect to deliver at least ~ 50-
Income in 2019 was 60 million.
In our reference call to Carlalberto, former colleagues have been scoring him nine out of ten in terms of ability.
The people who know him best emphasize his extraordinary wisdom, vision, motivation for success, and professional ethics.
These observations are consistent with our experience of interacting with Calle Alberto over the past year.
The company's fast-growing open TAM is evidenced by historical industry growth, growth forecasts from leading industry experts, and the growth of EPS's competitors in fixed storage space.
According to data from Bloomberg New Energy Finance, a leading industry consultant, Enji EPS's energy storage terminal market installation base has grown 63 times in the past eight years and is expected to increase 10 times by 2025. Although Bloomberg News will not be able to accurately predict economic growth until 2025, the rapid growth of the storage terminal market is obvious.
Bloomberg NEF has been revising its storage market growth prospects: engie eps is targeting a massive TAM, and the company's 2020 plan includes moderate penetration assumptions.
Source: engie eps-investor performance of comparable companies in July 2018
Evidence of rapid growth of EPS. Alfen (
Open trade in the Netherlands)
Its energy storage sector grew from zero in 2016 to eight euros in 2017.
Seller analysts expect the department to achieve 20-
In 2018 it was 25 million, with an annual income of 60 million in the medium term.
Winch Energy, a private fixed storage provider
Revenue in 2016, however, is expected to reach 30 euros in 2018 and 100 euros in 2020.
Fluence Energy is another competitor of Siemens in fixed storage (OTCPK:SIEGY)and AES (NYSE:AES)
Revenue of 100 euros is expected in the next five years.
Besides encouraging high
In terms of industry prospects, the company has a compelling opportunity in the short term to replace diesel power generation for island countries. ENGIE EPS’s 50-
Palau's 60 m euro project is far from one-
Because the decline in solar panels and lithium-ion prices has made island Microgrids increasingly economically attractive, many island countries are highly committed to turning diesel into renewable energy, these countries are actively exploring micro-grid solutions.
Engie eps can provide power purchase agreement within 10 to 20 cents per kilowatt-hour range.
Some island countries can pay up to 30 or 40 cents per kilowatt.
Diesel is generating electricity for one hour today.
Now, engie eps's micro-grid economy is more compelling than ever in history.
The two trends that drive and will continue to drive the competitive power of the micro-grid are 1)
Battery Price down 2)
The price of solar panels fell.
Source: many island countries are highly committed to converting diesel into renewable energy, according to the PVinsights poll data provided by bloomberg.
Source: Greenwerk analysis based on INDCs, IRENA (2017), UN Data (2017)
We spoke with the energy minister and NGO leaders in the randomly sampled island countries (
Vanuatu (Fiji)
Countries are actively considering the development of new micro-grids.
All the energy leaders we spoke to were impressed by ENGIE ep's Palau project and interested in considering similar solutions.
In such a positive industry context, engie eps is able to achieve stable revenue, a backlog of signatures, and a pipeline growth of trading prospects.
Please note the recent acceleration since the company started working with ENGIE.
Source: EPS Financial Disclosure Company EPS currently disclosed a backlog of contracts of about 80 m euros.
Taking all of the above into account, we believe that the company is fully capable of achieving the 2020 revenue target of 100 euros.
EPS has created a mixed gross profit margin of about 40% in its grid support and micro-grid business lines.
We believe that the gross profit margin of the micro-grid business is actually close to 50%, and the grid support profit margin is about 20%.
The company's goal is to mix 70/30 between the micro-grid and the grid support system, which will lead to the same 40% Hybrid gross profit margin in the future.
We note that, like Palau, the biggest opportunity engie eps sees is in the micro-grid space with higher margins.
Assuming the company maintains its mixed gross profit margin of 40% and its fixed cost (
Personnel and other operating expenses)
Growing at a healthy 12% rate, the 2020 target for the 30% EBITDA profit margin should be followed mathematically.
This profit target is consistent with what we have heard from other companies in the industry.
Alfen's goal is to get a gross margin of 30% in their grid support system business.
Winch, which focuses on the micro-grid, expects EBITDA's profit to drop 35% to 30 euros in 2018.
While engie eps does not have explicit direct comps or historical multiple data, we believe that the data available supports either 15x ltm ebitda multiples or 4.
5x EV/sales multiple.
The closest private peers of Engi EPS, Green Smith and younikos, were sold in 2017 at multiples of 5 to 6 times revenue.
ENGIE agreed to buy 100% EPS at the beginning of 2018 at a business value of 100 euros.
At that time, this represented 10 times the LTM revenue multiple and 5 times the backlog signed by the company.
MSCI clean technology index (GECT Index)
It includes companies with similar terminal market exposure to engie eps, with an average of 2018 ~ 16x EV/ltm ebitda multiple transactions.
Median valuation multiples of companies with comparable growth with engie eps (
+ LTM increased by 50%, + CAGR is expected to increase by 50%)
It is 20x EV/ltm ebitda.
By applying 15x EV/ltm ebitda multiples and implied 4.
5x EV/LTM revenue is a multiple of our target 2020 financial sector with revenue of EUR 100 and EBITDA of EUR 30 and we reached the price of EUR 36/share at the end of 2020.
This price provides about three times the increase from the current price or the annual share capital IRR of 65%.
We believe it's nine.
Bid offer from mid-50 euro/share
2018 shall be the lower limit for the medium-term valuation.
Although EPS has been launched before winning the Palau contract to change the rules of the game, this minimum price is only about 25% lower than EPS's current market price.
While we strongly believe in EPS investment cases, it is important to highlight some key risks.
We believe that some of the main risks of investing in EPS are: Early corporate risk, execution risk, and key personnel risk.
Although EPS is certainly not a "start --
As an early company, Up is at risk for business.
We confirm by customer phone that there is no execution problem in the history of the company, however, the increase in revenue from 10 euros to 100 euros will involve a larger execution scale than in the past.
We believe that Carl Alberto is committed to EPS, he has invested a lot of personal net assets in the business, and he is strongly motivated to reach the 2020 plan.
However, if Carl Alberto leaves EPS, we believe it will be a big loss for the company.
Engie eps told us that they plan to significantly increase investor relations in 2019.
In 2018, with the development of the business, the management of EPS was very distracted (
Sell to Enji, integrate with Enji, Enji bid offer, offer rights, win Palau deal).
Our understanding is investor relations.
Including roadshows for new regions and investor types, attending meetings, bringing new seller analysts
Priority will be given and increased in 2019.
Another catalyst to bring the value to fruition is the additional tender for ENGIE.
ENGIE bids for 100% of the shares in June 20, but takes less than 10% of the tradable shares.
Some industry experts believe that ENGIE plans to eventually acquire the entire EPS because it is strategically important for a wider group.
If ENGIE is trying to acquire the remaining minority shareholders, we think they have to pay a considerable premium for the current transaction.
Finally, we think that despite the ~ of ENGIE EPS ~ The backlog of 80 m euros has been signed and promised, but many investors will not underwrite these figures until they are seen in the financial results.
We believe that doubling the income of only CY 2019 and doubling the income of CY 2020 are enough to stimulate stocks.
Disclosure: I am/We are long EPS FP.
This article was written by myself and expressed my views.
I was not compensated.
I have no business relationship with any stock company mentioned in this article.