Electro Power Systems (DJSTOXX:EPS PA)a complete range of integrated solutions and tailor these to...

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Controlling the market Electro Power Systems offers power storage and microgrid solutions to the fast growing off-grid and grid support markets. With a market led approach and hybrid solutions focused on control and stabilization rather than any single technology, the company is beginning to gain traction. We initiate with a BUY recommendation and a target price of €10.50.

Commercially driven and nimble Electro Power Systems stands out among storage providers in our view as being market led rather than technology led. It has a proprietary hydrogen storage system, but it is the ability to combine this with other storage technologies together with spinning reserve control into a hybrid storage system that is a key differentiator, in our view. Customer needs are complex and highly varied and the ability to offer bespoke solutions provides a perfect fit with the needs of this rapidly evolving market.

Differentiation through a system approach We see storage control technology as emerging as a key differentiator in the power storage market. In this regard we see last year’s acquisition of Elvi Energy as transformational. Electro Power Systems now has a full suite of modular energy management systems, power conversion systems, firmware and software to vertically integrate power generation and storage technologies into sophisticated grid and microgrid systems. We believe that very few competitors have truly comprehensive offerings in this area and that this is in itself a key driver of success with clients.

Playing to its strengths Battery and hydrogen storage already competes with diesel in situations where diesel logistics costs are high. As a result, Electro Power Systems is concentrating on off-grid solutions and grid support applications where it has a competitive advantage. Both these markets are experiencing growing demand. The underlying sales trend is up and we expect a strong year in FY 2016 with sales at €6m. The company has a good track record with 22.1MW of projects, with 13.5MW installed and 8.6MW under commissioning, and a pipeline worth €86m of which 35MW is in pre-execution.

Foundations for growth We have valued the company using a DCF model with a cost of equity of 14% to get a target price of €10.50. The key risks to our valuation are failure to gain traction in target markets and competitor response. Electro Power Systems is at an early stage but we think that with key building blocks in place these risks are reduced.

10 November 2016 | Initiation Note | Alternative Energy & Resource Efficiency Equity Research | UK

Electro Power Systems ( DJSTOXX : EPS PA )

BUY Share price (as at close: 07/11/2016) €5.80 Target price €10.50 Upside to TP 80% Market cap (€m) 45.7 Net cash (€m) 8.6 Enterprise value (€m) 37.1 Shares in issue (m) 7.9 Free float (%) 91.9 Average daily vol ('000, -3m) 4 Dividend yield (%) 0.0 PER at Target price (Y1) (17.9) Sector PER 21.7 Price/book 3.7 12 month high/low (€) 7.60/3.65 (%) 1m 3m 12m Absolute +0.2 +26.6 -23.3 FTA relative +3.2 +25.3 -27.1 Price & price relative (-2years)

Source: Datastream

Next news Q3 Interims – 15 November 2016 Business Power storage and microgrid solutions to off-grid and grid support markets. www.electropowersystems.com

Adam Forsyth Research Analyst +44 (0) 20 7894 7214 [email protected]

Year end December

Revenue (€m)

EBIT* (€m)

PBT* (€m)

Tax (%)

Adj. EPS* (c)

PER (x)

EV/EBITDA* (x)

Div yield (%)

2014A 0.8 (1.5) (1.5) (40.5) (136.7) (4.2) (25.3) 0.0 2015A 1.2* (7.9) (7.9) 0.6 (142.7) (4.1) (4.8) 0.0 2016E 6.0 (4.8) (4.6) 0.0 (58.3) (9.9) (8.6) 0.0 2017E 15.0 (2.3) (2.8) 0.0 (35.2) (16.5) (21.2) 0.0 2018E 42.2 7.7 7.2 25.0 68.4 8.5 4.4 0.0

* excludes exceptional items and amortisation of acquired intangibles. 2015 revenue is shown to local GAAP

Source: CFE Research estimates

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Apr May Jun Jul Jul Sep Sep Oct Nov Dec Dec Jan Feb Mar Apr MayMay Jun Jul Aug Sep Sep Oct

Price Relative

2 Cantor Fitzgerald Europe Research

Electro Power Systems | 10 November 2016 Investment Summary

Table of Contents

Investment Summary 3

History 5

What Electro Power Systems does 8

ElectroSelf 9

Hybrid and microgrids 10

Control is key 12

Target Markets 16 Main Market Opportunities 19

Where EPS fits competitively 22

Financials 25

Valuation 27

Risks 28

Management 29

Financial model 31

Cantor Fitzgerald Europe Research 3

Investment Summary Electro Power Systems | 10 November 2016

Investment Summary

Overview Electro Power Systems designs, manufactures and installs power storage systems and microgrids using a combination of proprietary technology together with renewable and storage technologies. It has acquired the capability to offer fully integrated control solutions and is targeting key markets that offer strong growth potential. Bespoke solution Electro Power Systems is one of the very few power storage companies that can offer a complete range of integrated solutions and tailor these to the needs of their clients. The resulting hybrid power storage systems are therefore optimised for the clients’ needs. In a market where each installation is different this gives Electro Power Systems a significant competitive advantage, in our view. Control and conversion offering Electro Power offers a fully modular and integrated power conversion and control solution that can manage the range of storage configurations across the wide range of customer requirements. Effective control and management of microgrid spinning reserve and islanded operations is increasingly emerging as a critical component in making storage work effectively and efficiently. Offering a full range of solutions again gives Electro Power Systems a strong competitive advantage, in our view. Hydrogen storage coming of age One optional component of the Electro Power offering is a hydrogen storage module based on a fuel cell and an electrolyser. This acts as a closed-loop system allowing pure hydrogen and oxygen to be used, avoiding many of the issues of fuel contamination that has affected similar systems. This is one of the few technologies that can cope with the large energy storage requirements of longer term power storage needs. Recent history shows traction While the IFRS accounting treatment of the full year results to December 2015 hid the underlying top line progress, the H1 2016 numbers show revenue back on track with strong growth and sales being made in both of the company’s key market segments. The H1 results also demonstrate a healthy gross margin of 41.7% that points to good profitability once the company achieves sufficient scale. Strong pipeline At the half year, Electro Power Systems has installed or is commissioning over 22.1MW of storage systems with an aggregate output of 46.3MWh. The company is currently working to convert a pipeline of 35MW of storage projects and microgrids. There is a firm pipeline of business worth €86m, 10% of which has been converted into firm orders, the bulk of which will fall in FY 2016 underpinning revenues of over €6m. We expect further pipeline growth and continued order conversion to drive sales of €15m in FY 2017 with strong growth to continue beyond.


Electro Power Systems | 10 November 2016 Investment Summary

Valuation We have valued Electro Power Systems using a DCF methodology with a WACC of 14% based on a cost of equity of 14% and no historic debt. We have explicitly forecast over the next five years followed by a five year fade period and then used a Gordon’s Growth model to calculate a terminal value based on a negative growth in real terms to reflect maturity and eventual price erosion. This puts the terminal EV/EBITDA at 5.8x which we do not see as onerous. Discounting back gives us a valuation of €10.50. This puts the company on a 2018 EV/EBITDA of 8.8x and a PE of 15.4x, neither of which we see as demanding given the potential for growth from this company. Risks The main risk in our view is failure to gain traction in line with our forecasts. Despite a short commercial history, recent traction and a strong pipeline give us comfort. Project delays could impact our numbers but these are relatively straightforward projects to implement. Competition is still evolving but could pose risks and there is some technology risk although the company is well diversified in this regard. This also reduces policy related risks. Finance, especially the working capital needs of a growing company, creates some risk but the company has been successful in securing €9m debt finance from Unicredit and Intesa Sanpaolo.


History Electro Power Systems | 10 November 2016

History

Electro Power Systems started as a technology incubator, developing a hydrogen power supply system that was to become the ElectroSelf system in 2007 following initial development at the Politecnico di Torino and a spin out in 2005. A focus on energy markets launched in 2014, followed by a fund raising in 2015 and the acquisition of Elvi Energy at the end of 2015. This allowed the company to transform itself from a producer of storage products into a vertically integrated hybrid energy storage provider. This has allowed the company to offer customers a fully bespoke service, something we think is key to meeting the widely varying requirements of the power storage market. Historically, up to the end of 2013, the company was a technology incubator, operating with limited commercial drive and focused on validating the technology with back-up systems to users such as telecoms and defence operators. Since the appointment of Carlalberto Guglielminotti as CEO in October 2013 the company has moved its focus to concentrate on network storage and off-grid applications. The company has now installed and has under commissioning 21.1MW in 21 countries providing 44.3MWh of storage annually, with more than 35 microgrids powering more than 100,000 people, mainly in Africa and South-East Asia. ElectroSelf System & Hybrid Backup Solutions installed base and pipeline

Source: Electro Power Systems

The company has historically been active in several key markets, grid support, off-grid mobility and telecoms. As it moves forward the priorities are off-grid and grid support with distributed smart storage under observation


Electro Power Systems | 10 November 2016 History

Historic Electro Power Systems’ resource allocation (%) H116 revenues and current backlog (%)

Source: Electro Power Systems Source: Electro Power Systems

A framework cooperation agreement with Enel has added to the opportunity set for the company which now includes as its customers and partners Enel, Toshiba, Terna and GE. Electro Power Systems is a truly vertically integrated player. ABB, Siemens and Bosch claim to have a vertically integrated approach but none of these cover the full supply chain to the extent of Electro Power Systems.

Market Environment and Competitors

Source: GTM Research, Electro Power Systems

Moving away from research to a truly commercial offering Electro Power Systems is no longer a grant funded technology business in our view but a commercial market led company with a solid pipeline of opportunities. We expect that the revenue mix will move from 23% grant funding to 100% fully commercial in the current year. A key role in Europe’s largest storage project Electro Power Systems is a key player in Europe’s largest storage project, Terna’s multi technology project to increase the security of the electrical systems in Italy’s major islands by installing 40 MW of energy storage. The first 16MW phase of this project, called “Storage Lab”, is currently under development and it will consist of installing two multi-technology plants (using various storage technologies and eight different commercial products), divided between Sicily and Sardinia. Electro Power Systems has played an important role in the project, acting as a systems provider for GE, which successfully completed the commissioning and testing phases in March 2016, and for Toshiba.

Off-grid power generation

Grid support

Distributed smart storage

Off grid

On grid

Mobility

Telecoms


History Electro Power Systems | 10 November 2016

Installed Base Project List

CUSTOMER COUNTRY APPLICATION COMMISSIONING DATE*

STATUS POWER OUTPUT (kW)**

STORAGE (kWh)

Global Utility USA Grid Support 2017 Commissioning under planning

4,000 1,000

Local Utility Bosnia Off-grid HyESS/Hybrid Power Plant

2016 Commissioning planned 125 100

University (Cagliari) Italy Grid Support 2016 Commissioning planned 70 94 Local Community Tasmania

(Australia) Off-grid HyESS/Hybrid

Power Plant 2016 Under manufacturing 500 266

Local Community Australia Grid Support 2016 Commissioning planned 1000 492 National Utility Somalia Off-grid HyESS/Hybrid

Power Plant 2017 Under manufacturing 450 313

Global Utility Cile Off-grid HyESS/Hybrid Power Plant

2017 Under manufacturing 125 1018

University (Milano) Italy Grid Support 2016 Commissioning planned 20 24 Luxury Resort Maldive Off-grid HyESS/Hybrid

Power Plant 2016 Commissioning planned 1200 282

Research Center Italy Grid Support 2016 Commissioning planned 125 300 Grid Operator - Codrongianos

Italy Grid Support 2016 Under commissioning 1000 2000

National Utility Somalia Off-grid HyESS/Hybrid Power Plant

2016 Commissioned 3,500 1,440

Local Utility Italy Grid Support 2015 Commissioned 125 300 Engineering Company Italy Grid Support 2015 Commissioned 35 24 Global Utility Italy Grid Support 2015 Commissioned 35 24 Retail Store Chain Italy Off-grid HyESS/Hybrid

Power Plant 2015 Commissioned 125 188

University (Brescia) Italy Grid Support 2015 Commissioned 20 24 National Utility Spain Grid Support 2015 Commissioned 500 760 Luxury Resort Maldive Off-grid HyESS/Hybrid


University Italy Grid Support 2015 Commissioned 70 141 National Utility Somalia Off-grid HyESS/Hybrid


Grid Operator - Codrongianos

Italy Grid Support 2015 Commissioned 1,000 1,000

Grid Operator - Ciminna

Italy Grid Support 2015 Commissioned 1000 1000

School Tanzania Off-grid HyESS/Hybrid Power Plant

2015 Commissioned 5 20

Local Utility China Grid Support 2014 Commissioned 500 1000 University (Milano) Italy Grid Support 2014 Commissioned 35 24 Local Utility Madagascar Off-grid HyESS/Hybrid


Local Utility China Grid Support 2013 Commissioned 250 500 Local Utility Italy Grid Support 2013 Commissioned 125 24 European Utility Italy Grid Support 2012 Commissioned 30 24 Telecom Operators Asia Pacific Hybrid Backup solutions

(H2) 2012-2015 Commissioned 527 7,500

Telecom Operators NAFTA Hybrid Backup solutions (H2)

2013-2015 Commissioned 88 900

Research Center Italy Off-grid HyESS/Hybrid Power Plant


Research Center Switzerland Off-grid HyESS/Hybrid Power Plant


Global Utility Italy Grid Support 2012 Commissioned 20 10 Global Utility Italy Grid Support 2012 Commissioned 30 24 Research Center Italy Off-grid HyESS/Hybrid


Telecom Operators EMEA Hybrid Backup solutions (H2)

2009-2016 Commissioned 2,352 23,700

TOTAL 22,085 46,220



Electro Power Systems | 10 November 2016 What Electro Power Systems does

What Electro Power Systems does

Electro Power Systems designs, produces and installs hybrid energy storage systems and hybrid power plants for microgrids and stationary applications. It is able to offer its customers both capacity and flexibility by putting together bespoke solutions using a combination of technologies and control systems. It is fully vertically integrated, offering a complete solution to customers from storage technology through to control systems. Electro Power Systems owns the intellectual property to a Universal Conversion and Control System for Distributed Generation, but also to a hybrid system composed by battery technologies and a combined fuel cell and electrolyser that can act as a combined power storage system branded ElectroSelf. It can then add additional storage technologies to tune the system to exactly match the use case or cases required within a hybrid energy storage system “HyESS”. Key to this is a full suite of control solutions that are the key to meeting the complex demand required from both grid and off grid demand. Additionally the HyESS can be combined with a variety of generation technologies to create a hybrid power plant (“HPP”) or microgrid. The current product range includes solutions designed and realised with a modular approach like a “modular system”, scalable from 20kW to 200MW:

• Hybrid Power Plants (HPP) and Microgrids, operating in grid-connected, off-grid and islanded mode.

• Energy Storage Systems (ESS) for grid-support applications in developed economies and power-quality applications in emerging countries.

• Photovoltaic Systems stabilized that transform intermittent renewables in a stable power source, e.g. “fixed capacity”.

• Master Controllers for ESS. • MicroGrid Controllers. • Energy Management Systems (EMS) for ESS, HPP and microgrids. • HMI and Supervision Systems for microgrids and Hybrid Power Plants. • Power Conversion Systems including bi-directional inverters for hybrid power

plants, battery energy storage systems and solar photovoltaic integration. Power range: 20, 35, 70, 125, 250, 900 kVA.

Electro Power Systems acts as system provider, technology provider, and where requested EPC contractor, providing turn-key solutions. This is a fully vertically integrated offering across the storage supply chain. Fully vertically integrated supply chain



ElectroSelf Electro Power Systems | 10 November 2016

ElectroSelf

The original capacity solution, the ElectroSelf hydrogen storage system uses a combination of electrolysis and fuel cell technology to provide an efficient power storage solution with longer discharge characteristics. The fuel cell is a PEM cell using a Nafion membrane and fuelled by hydrogen. The hydrogen is created by an electrolyser and stored in cylinders until required. The fuel cell is the gas to power (“G2P”) unit and the electrolyser is the power to gas (“P2G”) unit.

Electro Power Systems Hydrogen Storage Solution


Because this is a closed system it can use pure oxygen and hydrogen, reducing degradation of the fuel cell. Additionally the fuel cell and the electrolyser do not have to match in size but can be scaled to the requirements of the use case. For example in a grid support application there may be a long charging period but a rapid discharge requirement. Here the electrolyser could be of a much smaller capacity than the fuel cell. Alternatively in a renewable support role the electrolyser could be larger than the fuel cell to capture energy over a shorter period for slower release later on.

The overall round trip efficiency of the combined system is between 38% and 41% at the DC bus. While this is higher than diesel generators to which such technology is effectively comparable in microgrid environments, the design also means that the cost of additional energy is less than some other storage designs so that for long duration storage this is can be a very effective solution.


Electro Power Systems | 10 November 2016 Hybrid and microgrids

Hybrid and microgrids

While we think the ElectroSelf product is a viable offering in the market in key use cases, the ability to combine this or to use the same technology with other storage solutions to provide a solution that covers a range of needs creates a very competitive offering in our view.

How a hybrid plant or microgrid can solve many needs There are many differing needs for power storage and several solutions. Crucially smoothing out power supply and demand is something that needs to be done over different time frames. Different storage solutions are better for different discharge times and also have differing abilities to charge and discharge. By combining different technologies in a single solution, EPS can optimise performance to make full use of the technologies on offer.

By way of example consider a need to convert a typical grid daily power supply profile to a baseload demand need. The profile supplied varies across the day with small variations from second to second and larger variations across the day.

Typical daily electricity demand profile during a 24 hour period

Source: CFE Research

A single storage solution with enough capacity to cover this need in full would be charging and discharging almost continuously in order to meet the short term fluctuations in demand. The most efficient solutions that would cover the full peak to trough required would probably be a flow battery or Electro Power’s ElectroSelf solution. But continuous charging and discharging would limit the life of the cells involved. A lithium ion battery solution might prove more useful but would only really be efficient for a lower level of storage. It would also have its life limited by constant charging and discharging. The best solution for the short term needs would be the inertia within the storage system’s control units. A hybrid solution would overcome these problems.


Hybrid and microgrids Electro Power Systems | 10 November 2016

How different types of storage smooth power demand over a 24 hour period


Actual scenarios have both varying supply and demand creating more complexity to the balancing requirement. Electro Power Systems technology can embed a wide range of storage technologies and has experience in coupling its systems with all the main battery chemistries into battery energy storage systems: lead acid, lithium ion, sodium nickel chloride, lithuim iron, and sodium nickel. These vary according to the total amount of discharge time (broadly split between short term flexibility offerings and longer term capacity offerings) and also according to total power output.

A complete offering


Short term storage

Medium term storage

Longer term storage


Electro Power Systems | 10 November 2016 Control is key

Control is key

Matching storage technologies to demand in the ways described above physically requires complex controls systems. Integrating hybrid storage and power increases this complexity dramatically. This is a less commoditised part of the market than the provision of physical storage equipment alone and is seeing growing demand. Electro Power Systems is at the forefront of this market. Most storage systems will be connected to a grid via power electronics components. Normally an inverter modulates the waveforms of current and voltage to match with the grid. The inverter itself is managed by a controller that defines the set points of the storage system, normally in terms of the magnitude of active and reactive power. Control of the battery or other storage devices is undertaken by a Battery Management System (“BMS”) which monitors and controls the charge and discharge process. This maximises the lifetime of the cells and ensures safe operation. For a complex system a master control module will co-ordinate charging and discharging of slave control modules. For a hybrid power plant, control becomes even more complex. Between different power or storage sources a further convertor known as a boost convertor or chopper boost is required to levelise voltages. More than one of these may be required in a full hybrid system. Complexity can increase as more assets are added. Finally a SCADA (supervisory control and data acquisition) system interfaces with the end users including the local grid if appropriate. This may include interface protection for the grid. A straightforward battery based system would look like the diagram below. Energy Storage System Control Schematic


Electro Power Systems can go far beyond this basic offering and provide the control systems and balance of plant to create a full hybrid power plant with a variety of storage, traditional generation and renewable generation sources and the ability to serve off-grid, grid connected and distributed demand.


Control is key Electro Power Systems | 10 November 2016

Hybrid Power Plant Control Schematic


The number of suppliers capable of offering such systems is limited. This gives Electro Power Systems a strong competitive advantage in our view.

Intellectual property in detail

This competitive advantage is strengthened by Electro Power’s patents and know-how with the latter including some really powerful assets in our view. The intellectual property coverage is summarised in the diagram below.

Intellectual Property Coverage


One of the most important patents is for the Universal Power Conversion Systems (“PCS”) and Controller capable of managing multiple renewable sources, energy storage and loads, both on-grid and off-grid. Specifically:

• the power converters are able to operate an automatic and instant transition from operating modes to follow the renewable sources

• the power converters and the controllers are capable of managing multiple configurations including one or more renewable sources, some or no energy storage and a single load or a full grid connection

• the system is able to switch rapidly (< 20 ms) from on-grid to off-grid and islanded operation


Electro Power Systems | 10 November 2016 Control is key

Know-how also key The patents are augmented by with two main trade secrets: the DROOP Virtual Inertia at the inverter level and the POOL Algorithms at the Energy Management System level. These technologies provide what is known as inertia and allows Electro Power Systems to deliver spinning reserve just like a larger rotating power system such as a large coal fired plant.

These technologies allow Electro Power Systems to react in less than 125us, and stabilize a drop in frequency in less than 20ms. This reaction speed is provided at the inverter level, and outlines the importance of the integration between the inverter and controller technology. While the Master Controller or Energy Management System can react on average between 200 and 400ms, a frequency drop causing a microgrid outage can occur in less than 40ms. While the controller cannot react quickly enough, the inverter can react in less in 125us and stabilize the microgrid. In this case the controller can act to set the split of the spinning reserve required by the grid between the generators and the energy storage system.

These innovations enable a microgrid powered by the Hybrid Power Plant to act exactly like a national grid, securing stabilization of renewable intermittency and microgrid stability, together with spinning reserve and full virtual inertia.

In the diagram below an existing off grid demand source is served by two diesel generators. These provide spinning reserve to the system. If 3MW of solar is added then the requirement for spinning reserve rises to 3MW. This puts strain on the diesel units reducing the low cost and environmental benefits of solar. Adding storage with “following” inverters helps but only a little. Using a “forming” inverter allows spinning reserve but these cannot be used with diesel and also mean that storage capacity has to be oversized increasing costs. Electro Power’s solution allows spinning reserve to be shared between a diesel generator and storage, allowing the diesel unit to run flat out at maximum efficiency, minimising both costs and emissions.

Spinning reserve as the game changer of storage economics


These advantages of the DROOP Virtual Inertia at the inverter level and the POOL Algorithms at the Energy Management System level have been proven through the commissioning and testing of a Terna 1MW/1MWh Energy Storage System comprising Toshiba batteries and Power Conversion System, controllers, transformer, and SCADA manufactured, containerised and commissioned by Electro Power Systems. The system was located in a 300MW substation, both in grid-connected and islanded operation. Test results show that round trip efficiency and power accuracy target values are met and that the BESS can effectively be used for black-starting a grid. The target performance values were met or exceeded.


Control is key Electro Power Systems | 10 November 2016

The advantages of the Electro Power solution are expected to contribute to a dramatic reduction in diesel fuel consumption at a number of microgrid installations and projects under commissioning by Electro Power Systems including:

• Garowe (Horn of Africa): 3MW microgrid, with 1,7MWh of storage, 1MWp solar plant and 450kW windmills;

• Coober Pedy (Australia), 1MW HyESS connected to a 3.3MW microgrid, with 500kWh storage, 3MWp solar plant and 2MW windmills;

• Tilos (Greece), 1MW HyESS connected in a microgrid Plant with 2MWh storage; • Maldives: microgrid of 1,2MW, with 700kWp solar plant and 282kWh storage; • Las Anod (Somaliland), microgrid of 1,3MW, with 500kW solar plant and 1,3MWh

storage; • Flinders Island (Tasmania), 500kVA HyESS connected in a microgrid with 300kWh

storage; • Cerro Pabellon (Cile), microgrid of 125kW with 1,1MWh storage and hydrogen

module integrated; and • Maldives: microgrid of 1,8MW with 282kWh storage.


Electro Power Systems | 10 November 2016 Target Markets

Target Markets

Stationary power storage applications are varied and include the fast growing areas of grid support and renewables support. Both are driven by the growth in renewable energy and distributed generation. The cost of these renewable technologies has fallen significantly so that the point at which they compete without a subsidy has been reached in many parts of the world. As a result we see further strong deployment of renewable generation. As it is by nature intermittent, varying with wind or sunlight, it puts pressure on grids, increasing demand for grid storage solutions.

The Rocky Mountain Institute has identified thirteen use cases for power storage.

Power Storage Use Cases

Source: The Rocky Mountain Institute

These are described in further detail below.

Mainly grid uses

Energy Arbitrage This is the purchase of wholesale electricity when it is cheap (such as at night) and sale of electricity back to the wholesale market when it is expensive (such as during the day).

Frequency Regulation Frequency regulation is the immediate and automatic response of power to a change in system frequency, either from a system or from elements of the system.

Spin/Non-Spin Reserves Spinning reserve is the generation capacity that is online and able to serve load immediately in response to an unexpected event, such as an unplanned generation outage. Non-spinning reserve is generation capacity that can respond to contingency events within a short period, typically less than ten minutes.

Voltage Support Voltage regulation ensures reliable and continuous electricity flow across the power grid. Voltage on the transmission and distribution system must be maintained within an acceptable range to ensure that both real and reactive power production are matched with demand.

Black Start Electricity is required to start a power station. In the event of a grid outage (power cut), black start generation assets are needed to restore operation to larger power stations and bring the grid back online.

ISO / RTO SERVICES UTILITY SERVICES CUSTOMER SERVICESEnergy Arbitrage Resource Adequacy Increased Renewables

Self-Consumption

Frequency Regulation Distribution Deferral Time-of-Use Bill Management

Spin/Non-Spin Reserves Transmission Congestion Relief

Demand Charge Reduction

Voltage Support Transmission Deferral Backup Power

Black Start


Target Markets Electro Power Systems | 10 November 2016

Mainly utility uses

Resource Adequacy Instead of investing in generation to meet demand at peak times, grid operators and utilities use storage, to incrementally defer or reduce the need for new capacity.

Transmission/Distribution Deferral Delaying, reducing the size of, or entirely avoiding utility investments in transmission or distribution system upgrades necessary to meet projected load growth on specific regions of the grid.

Transmission Congestion Relief Grids charge utilities to use congested transmission corridors during certain times of the day. Storage can be deployed downstream of congested transmission corridors to discharge during congested periods and minimize congestion in the transmission system.

Mainly customer uses

Time-of-UseBill Management The consumer equivalent of energy arbitrage where time of use rates are available.

Demand Charge Reduction Where utilities employ demand charge rate structures, the most economic use of energy storage for customers is often to reduce monthly maximum demand.

Renewable Energy Support Maximising the use of electricity generated by intermittent renewable generation, especially where export payments are unfavourable.

Backup Power In the event of grid failure, energy storage paired with a local generator can provide backup power at multiple scales, ranging from second-to-second power quality maintenance for industrial operations to daily backup for residential customers.



Market requirements

These various market segments have differing needs in terms of power demanded, duration and responsiveness. Looking at the first two criteria a map of requirements can be drawn up.

Storage Application Map

Source: CFE Research based on State Utility Forecasting Group and RedT

These stationary markets are served by a number of technologies at varying costs and stages of technological development. Increasingly lithium ion is seen as a cost effective solution particularly for smaller scale deployments.

Electricity Storage Technologies

Source: The Rocky Mountain Institute

1 GW

100 MW

10 MW

1 MW

100 kW

10 kW

1 kW

Seconds Minutes 1-2 hours 3-12 hours Day Month

Frequency RegulationVoltage Support

Spin/Non-Spin Reserves

Resource AdequacyTransmission Congestion

Relief/Deferral

Energy Arbitrage

Black Start

Renewables Self-Consumption

Time-of-Use Bill Management

Demand Charge Reduction

Backup Power

Mechanical Thermal Chemical Electro-chemical Electrical

Pumped storage Thermo-chemical Hydrogen storage Lithium-ion battery Super capacitors

CAES Sensible thermal SNG Lead acid battery

LAES Latent thermal NaS battery

Flywheels Redox flow battery



Storage Technology Map

Source: CFE Research based on State Utility Forecasting Group and RedT

Main Market Opportunities

Electro Power Systems is targeting three main market opportunities.

Grid support This covers most of the use cases for grid and many of the utility use cases listed above. As a result hybrid solutions are very valuable. There are a significant number of use cases where storage is the perfect solution to support TSO’s in balancing major and minor power grids. Most of the competition for these is from single technology solutions and from vendors without control solutions. Electro Power Systems’ integrated and hybrid approach provides TSO’s with bespoke solutions that can exactly fit their needs.

Global storage installed capacity


Off grid power generation Off-grid combines most of the use cases seen on grid solutions but at a smaller scale and with a requirement to cover all the use cases effectively. Again the EPS hybrid solution works well here to provide users with a full solution tailored to their particular needs. The normal competition is diesel fired generation. Diesel costs can vary significantly from location to location and can be well above the US based benchmark cost often used to compare diesel against storage options. The table overleaf shows average prices where diesel is easily available with the US price highlighted.

1 GW

100 MW

Lithium-ionPumped stora

10 MW

Lead-acid1 MW

100 kW

10 kWFlow battery

1 kW

FlywheelsSeconds Minutes 1-2 hours 3-12 hours Day Month

1.9 2.94.6

6.79.6

14.4

20

27.5

35.4

45.1

0

5

10

15

20

25

30

35

40

45

50

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

GW



However, where the location is remote, diesel can be a multiple of these prices making it a very expensive option.

Diesel costs by region (US$/l)


0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8

VenezuelaEgypt*

EcuadorBahrain

QatarOman

NigeriaSudan

Puerto RicoMozambique

El Salvador*USA*

Indonesia*EthiopiaMoldova*

Colombia*Fiji*

CambodiaNepal*

GuyanaBenin

Canada*Uzbekistan

Mexico*India*

Aruba*Singapore*

ArmeniaAngola

Tanzania*New Zealand*

SyriaBr. Virgin Isl.

St. Vincent and the GrenadinesNiger

Saint LuciaJapan*

Ivory Coast*Guinea

SenegalLuxembourg*

Lithuania*Cayman Isl.*

South Korea*Bulgaria*BurundiAustria*

Slovakia*Liechtenstein

Germany*Greece*Cyprus*

Mayotte*Serbia*

Ireland*Switzerland*

Israel*MonacoNorway

US$/l



Forecast off-grid storage installed capacity


Distributed smart storage Electro Power Systems has made some sales into this area but it is not seen as a priority for the time being. The market is highly fragmented and routes to market are different from those in grid support and off-grid markets. In many cases this is closer to consumer goods marketing, making it a difficult route for Electro Power Systems. It is more suited to single storage applications such as lithium ion battery units.

0

20

40

60

80

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120

2015 2016 2017 2018 2019 2020

mill

ion

hous

ehol

dsAfrica Pico-PV cash sale Asia Pico-PV cash sale Africa >10W cash sale

Asia >10W cash sale Pay-as-you-go


Electro Power Systems | 10 November 2016 Where EPS fits competitively

Where EPS fits competitively

Cost analysis For a microgrid or hybrid power plant, EPS estimates that a cost of generation of €190/MWh can be achieved, especially in power quality applications, with target of €150/MWh for fixed capacity depending on availabilty and load profile. This is well below the €220-500/MWh typical of diesel gensets which are the major competition in island and off-grid applications. Low balance of plant costs Balance of plant cost stack


Overall Electro Power expects that its HyESS can deliver a cost of storage of below €300/kWh and a cost of energy in a hybrid microgrid of between €190/MWh and €300/MWh. Compared with the Levelised Cost of Storage (“LcoS”) figures published annually by Lazard (Lazard’s Levelized Cost of Storage Analysis – Version 1.0, Lazards November 2015) this looks competitive. Levelised Cost of Storage by technology type

Source: Lazards

0

100

200

300

400

500

600

700

800

2015 2016e 2017e 2018e EPS 2016

BoS

Cos

t in

US$

/kW

Hardware Soft costs EPC Island microgrid function

192

290

461

347

188

396

230

248

419

321

365

221

276

211

288

516

400

426

285

192

892

1429

739

274

1079

376

927

1247

658

948

347

989

275

923

1692

789

1129

426

0 200 400 600 800 1000 1200 1400 1600 1800

Transmission system

Compressed Air

Flow Battery

Lead-Acid

Lithium Ion

Pumped Hydro

Sodium

Zinc

Peaker Replacement

Flow Battery

Lead-Acid

Lithium Ion

Sodium

Zinc

Frequency Regulation

Flywheel

Lithium Ion

Distribution Services

Flow Battery

Lead-Acid

Lithium Ion

Sodium

Zinc


Where EPS fits competitively Electro Power Systems | 10 November 2016

These costs are based on typical applications with differing storage discharge times. We think it is instructive to look at how costs vary with storage lengths. This builds up cost curves for the key storage technologies. We have calculated the levelised cost of storage for different technologies assuming a renewable (i.e. zero marginal cost) source of charging. This is done for different discharge times.

Levelised Cost of Storage According to Discharge Time


It can be seen that there is an efficient frontier with battery technologies at the short end and hydrogen or flow batteries at the longer end. Because EPS can offer hybrid solutions comprising a range of technologies, it can effectively offer solutions on the efficiency frontier making it competitive against individual technologies in all use cases. In respect of the hydrogen storage modeul offered under the ElectroSelf solution, while fuel cell based solutions have been seen as expensive when used in straightforward power generation roles, the ElectroSelf solution and more specifically the HyESS approach allows an optimal and cost efficient solution. As the energy storage medium for the ElectroSelf offering is hydrogen, as much or as little can be stored subject to any site constraints. The marginal cost of additional storage is minimal. This is a direct contrast to most battery technologies where additional energy storage must come with additional power capacity, increasing the cost. As a result in terms of cost per MWh, ElectroSelf can be highly efficient when used in a high energy application. EPS estimates that the cost of stored energy in its ElectroSelf system is between €200/kWh and €500/kWh. However by increasing the storage capacity, this may be reduced to €100/kWh for high energy applications. This advantage is further increased by the ability to scale the fuel cell and electrolyser differently according to the charging and discharging requirements of the application.

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1,000

1,200

0.0003 0.003 0.03 0.3 1 3 6 12 24 48

US$

/MW

h

Pumped storage Flywheels Hydrogen storage Lithium-ion battery Lead acid battery Flow battery OCGT Diesel


Electro Power Systems | 10 November 2016 Where EPS fits competitively

Competitive position

Competitive Rivalry We see a lot of players in the overall storage market but very few can offer a full service solution and the market is still evolving. We see this as keeping competitive rivalry muted and we do not see this as a significant competitive threat at this stage. Indeed, we think the current environment can allow smaller, more innovative players like Electro Power Systems to effectively target the biggest opportunities ahead of larger participants and the battery majors. Threat of Entrants While there are likely to be new players emerging, there are significant technology barriers to entry and the early entrants are in a position to build track record ahead of subsequent entrants. Threat of substitutes There is a clear risk that one of the many storage technologies currently under development or newly emerging technologies becomes dominant and bypasses Electro Power. However, the company’s approach to hybridisation means that it is free to adopt these as they are developed and integrated these into its own offering. Buyers Power Buyers range from big utilities which have a lot of power to island communities with only medium power. Suppliers Power There are few critical parts with most of the Electro Self product assembled from off-the-shelf components. The catalyst in the electrolyser and the membrane in the fuel cell could give the suppliers of these some power but there is scope to substitute here. Five Factor Analysis

Area Rating Comment Competitive rivalry Medium Early stage market with signs of co-operation Threat of entrants Low Significant technological barriers to new entrants Threat of substitutes High A large number of competing solutions Buyers' power Medium A mix of big utilities and smaller players Suppliers' power Low Few critical parts Overall Good Good margins should be sustainable for some time

Source: CFE Research after Michael Porter


Financials Electro Power Systems | 10 November 2016

Financials

Earnings history FY 2015 saw underlying sales of €1.2m, up 34.9%. However, because the company was still establishing its manufacturing facility in Turin, sales to two customers, MGH Systems Ltd and Advance Designs SpA, were entirely outsourced and these sales were replaced in the reported accounts by the gross margin contribution. This reduced revenue by €814k and operating profit also suffered from the outsourcing. However, the underlying trend in sales is upwards, which we view as important given the stage of the company’s development. A return to strong growth has been evidenced by the H1 2016 results which showed sales at €2.6m. Much of the income in FY 2014 and FY 2015 was grant income, with €786k in FY 2014 and €267k in FY 2015. Electro Power Systems is moving rapidly away from grant support towards true commercial income. This is shown in the H1 results where revenue was entirely commercial income.

Earnings outlook Order book and pipeline Electro Power Systems is guiding to revenues of €6.1m to €6.7m in FY 2016. It achieved €2.6m in H1 2016 and has an order backlog of €6.0m as of 20 September. Out of this, €3.5m to €4.1m of orders are expected to deliver revenues in H2 2016 with the remaining orders expected to deliver in FY 2017, where to date €8.6m of a pipeline of €80m to €90m has been converted into orders. FY 2016 Revenue Guidance

Source: CFE Research estimates, Electro Power Systems

For 2017 the order conversion rate is so far running at 10% and the quarterly growth in the pipeline during 2016 has averaged 25% to date. If we assume that these conversion and growth rates are continued then we would expect orders of c.€25m in 2017. Assuming that 58% are converted into sales in line with FY 2016 this would imply sales of €15m in FY2017.

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7

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9

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FY 2014Revenues

FY 2015Revenues

H1 2016Revenues

20.09.2016Order Backlog

FY 2015ExpectedRevenues

2016 Pipelinealready

converted intoorders

EUR

,m


Electro Power Systems | 10 November 2016 Financials

Pipeline and Order Conversion


FY 2017 Orders and Revenue Estimate (€,000)

Implied pipeline Pipeline growth Conversion rate Orders Revenue conversion Revenue 2016 Q1 55 2% 1.1 Q2 70 27% 5% 3.5 Today 86 23% 10% 8.6 Q4e 106 23% 10% 10.6 58% 6.1 2017 Q1e 130 25% Q2e 162 25% Q3e 203 25% Q4e 254 25% 10% 25.4 58% 14.6


For 2018 and beyond we have used a Bass diffusion model to predict market growth to 2020 and assumed that Electro Power can grow to take a market share of 2.5% by the end of the period. This takes sales up to €92m in 2020. In this exercise we have based the total cumulative market size on the long term power storage forecast by Bloomberg New Energy Finance of US$250bn. Electro Power Systems is targeting a gross margin of 40% which appears broadly achievable. For FY 2015 the gross margin was 43.8% despite the outsourcing of key business at a lower gross margin. Despite this the company remained in loss as business is still insufficient to cover operating costs. We expect these to fall in FY 2016 as the cost of stock options and warrants drop out, but staff costs will rise as the company gears up for higher levels of activity. With top line growth and reducing operating costs we expect the loss per share to fall dramatically in FY 2016 and subsequent years and for the company to reach break-even by 2019. Cash flow should show a similar picture. Financing The company had net cash of €2.9m at June 2016 down from €8.6m at December, but in order to fund the working capital increase generated by orders received, Electro Power Systems secured €9m debt financing, of which €5.5m is medium-long term, with Intesa Sanpaolo and Unicredit. We have also assumed that the company can create some working capital efficiency in terms of stock turnover as it grows with this falling from 120 days to 90 days by FY 2018.

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Valuation Electro Power Systems | 10 November 2016

Valuation

Given the high growth we expect and the move into profitability, we think a DCF is the most appropriate valuation technique. We have used a cost of equity of 14% and with no historic debt this gives a total WACC of 14%. We forecast explicit cash flows out to 2020 to capture the full impact of the growth of the storage market and then a five year maturity phase. We then calculate a terminal value based on cash flows declining at 1% in real terms which implies some assumed margin erosion as the market matures. This puts the terminal EV/EBITDA ratio at 5.8x which we do not see as onerous. Discounting back gives us a valuation of €10.50.

Discounted Cash Flow Valuation

2016e 2017e 2018e 2019e 2020e 2021e 2022e 2023e 2024e 2025e Operating cash inflow -6,812 -3,597 2,317 10,719 19,390 26,056 26,707 27,374 28,057 28,75 Cash from associates 0 0 0 0 0 0 0 0 0 0 Tax paid 0 0 -1,796 -3,609 -6,367 -6,385 -6,625 -6,871 -7,125 -7,386 Interest tax shield 0 0 0 0 0 0 0 0 0 0 Capex & investments -4,435 -370 -380 -389 -399 -409 -419 -430 -440 -451 Free cashflow -11,246 -3,968 141 6,721 12,624 19,263 19,663 20,073 20,492 20,920 Terminal growth 1.5% Terminal valuation 170,418 Terminal EV/EBITDA 5.8 Implied enterprise value 73,917 Implied market cap. 82,491 Implied share price 10.5



Electro Power Systems | 10 November 2016 Risks

Risks

The main risk in our view is failure to gain traction in line with our forecasts. The company is so far showing that it can convert orders into sales but it is early days. We think that as the company demonstrates success here this risk will reduce. There is some related risk in project implementation delays but we generally see storage projects as relatively straightforward to commission and would not expect delays to be material. Competition is a risk. At this stage the market is still evolving. We have addressed competition more fully elsewhere in this note but we see Electro Power Systems as well placed. The company will need working capital to grow. While some projects such as the Somali project will pay up front, as more sales come from major utilities, payment terms may widen. The company has been able to attract efficient debt capital and we think can meet the working capital needs of our growth forecasts. Additionally we expect working capital efficiencies to be developed as the company increases scale. There is some technology risk although Electro Power Systems is essentially technology agnostic and will put together systems using the best technology available. Policy can be a risk for individual projects and we see regulators around the world as being often behind developments. For example, grid support storage can face grid charges for both storing power and then discharging it back. That said, Electro Power Systems is a global business and is highly diversified away from any single source of policy risk.


Management Electro Power Systems | 10 November 2016

Management

EPS has an experienced and well balanced board in our view with five non-executives to two executives.

Non-executive directors Chairman Massimo Prelz Oltramonti Career began with Boston Consulting Group in Paris, followed by corporate development at Olivetti both in the US and Europe and then Managing Director of their financial information services division (Radiocor). Returned to venture capital in London with Alta Berkley Associates and then private equity investment initially with Advent International and with GMT Communication Partners thereafter. Has been Chairman of the Board of Jazztel Plc, Vice-Chairman of Primacom AG and member of the board of a number of listed companies including ESAT Telecom, SBS SA, Edap-Technomed SA, Esaote SpA, Cityfibre Holding Plc. He is also chairman of the investment committee of DN Capital, a VC fund.

Deputy Chairman Emanuela Banfi

After spending 4 years as an Associate in the Corporate Finance Department at Arthur Andersen, she spent 2 years as an Investment Manager at Fidia SpA, a private equity management company owned by Mediobanca. From 2000 to 2005, she was Executive Director at Lehman Brothers, London, UK, in the Equity Capital Markets and Debt Capital Markets. During 2006 to 2013, she was Managing Director responsible for numerous financial portfolios at Societe Generale in Milan. In 2014 she joined Phinance Partners, and now serves as Managing Director of Natixis.

Non-executive Davide Peiretti

Joined KPMG as a consultant following graduation. During his nearly 7 years there. He joined the Prima Industrie Group in 2008 and currently serves as the CFO and VP of the Prima Electro Division.

Non-executive Sonia Levy-Odier

General Secretary at Euro Forma Dis since 2013 a leading French open distance learning company, and Board Member at Job & Co, a company dedicated to HR Solutions. Previously she has been Partner of Cimarosa Communications, a private equity fund specialized in media and IT in Europe, Board member and Shareholder of Media Publications, Partner and co-founder of Aster & Associés, Secretary-general at Capital Media, Associate at Archimedia.

http://electropowersystems.com/staff-member/massimo-prelz-oltramonti/

http://electropowersystems.com/staff-member/emanuela-banfi/

http://electropowersystems.com/staff-member/davide-peiretti/

http://electropowersystems.com/staff-member/sonia-levy-odier/


Electro Power Systems | 10 November 2016 Management

Non-executive Cesare Maifredi

He joined 360 Capital Partners, a pan-European venture capital fund in 2010 as investment manager, general partner in 2012. Currently holds board positions in 8 companies operating in the digital, energy and medical devices sectors. Prior to joining 360 Capital Partners he was Senior Engagement Manager at McKinsey & Company in Houston. Before that he was a Project Manager at A2A SpA, a leading Italian multi-utility.

Executive directors

CEO Carlalberto Guglielminotti

Carlalberto has more than ten years’ experience in high-technology, energy and digital sectors. He was Operating Partner and Chairman of 360 Capital Partners, one of the largest venture capital investment fund in Europe with €300mio under management, specialising in investment and technologies selection, and management of the companies in the fund’s portfolio. He co-founded Blackshape Aircraft and Restopolis (now, TheFork, Trip Advisor), and has been a board member of various companies, notably Eataly.net and Musement.com, focusing on commercial and strategic development. Prior to this, he spent more than four years as associate at Linklaters in London and Milan specializing in structured finance.

Director Global Energy Strategy Giuseppe Artizzu

Giuseppe joined EPS in late 2014. Prior to joining Cautha, a Milan-based project development and advisory company active in the renewable energy space, Giuseppe spent ten years with Lehman Brothers as an energy specialist responsible for the utilities sector in southern Europe and coordinated the bank’s corporate finance activities in the European renewable energy field. He is a visiting professor at Politecnico di Milano, and a member of the board of the Ridef Master Course in renewable energy and energy efficiency.

Shareholders

Institutional shareholders

Source: Factset (as at 04/11/16)

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0

Symphonia Sgr Spa

Astor Investment Advisors Sim Spa

Other Institutions

Woodpecker Capital Sa

Decalia Asset Management Sa

Zenit Sgr Spa

Kairos Partners Sgr Spa

Norges Bank Investment Management

Ersel Asset Management Sgr Spa

http://electropowersystems.com/staff-member/cesare-maifredi/

http://electropowersystems.com/staff-member/carlalberto-guglielminotti/

http://electropowersystems.com/staff-member/giuseppe-artizzu/


Financial model Electro Power Systems | 10 November 2016

Financial model

Profit and Loss Account

(€,000) 2014A 2015A 2016E 2017E 2018E Turnover Goods 486 5 5,652 14,643 41,830 Services 275 351 359 368 378 Other 0 0 0 0 0 Total 762 355 6,011 15,011 42,207 Operating Profit Goods 107 -104 2,261 5,857 16,732 Services 275 351 359 368 378 Grants and other income 807 266 0 0 0 Total Operating Profit -1,522 -7,884 -4,768 -2,302 7,745 P&L Account 2014A 2015A 2016E 2017E 2018E Turnover 762 355 6,011 15,011 42,207 EBITDA -1,467 -7,798 -4,321 -1,749 8,406 Depreciation -54 -86 -448 -553 -661 Operating Profit -1,522 -7,884 -4,768 -2,302 7,745 Investment Income 0 0 0 0 0 Net Interest -9 -8 171 -472 -561 Pre Tax Profit (Adjusted) -1,531 -7,892 -4,597 -2,774 7,184 Goodwill amortisation 0 0 0 0 0 Exceptional Items 1,322 -2,770 0 0 0 Pre Tax Profit (IFRS) -209 -10,662 -4,597 -2,774 7,184 Tax -85 65 0 0 -1,796 Post tax exceptionals 0 0 0 0 0 Minorities etc 0 0 0 0 0 Net Profit -294 -10,598 -4,597 -2,774 5,388 Dividend 0 0 0 0 0 Retained -294 -10,598 -4,597 -2,774 5,388 EPS (p) (Adjusted) -136.66 -142.65 -58.32 -35.20 68.36 EPS (p) (IFRS) -24.87 -193.13 -58.32 -35.20 68.36 FCFPS (p) -217.03 -196.22 -142.69 -50.34 1.80 Dividend (p) 0.00 0.00 0.00 0.00 0.00



Electro Power Systems | 10 November 2016 Financial model

Balance Sheet

(€,000) 2014A 2015A 2016E 2017E 2018E Fixed Asset Cost 514 1,213 1,574 1,944 2,324 Fixed Asset Depreciation -438 -465 -912 -1,466 -2,127 Net Fixed Assets 76 748 662 479 197 Goodwill 0 0 0 0 0 Other Intangibles 145 820 4,894 4,894 4,894 Investments 0 0 0 0 0 Stock 700 939 1,976 3,701 10,407 Trade Debtors 536 1,152 1,482 3,085 6,938 Other Debtors 1,275 3,668 3,668 3,668 3,668 Trade Creditors -1,179 -2,112 -988 -2,468 -6,938 Other Creditors <1yr -1,427 -1,026 -1,026 -1,026 -1,026 Creditors >1yr -293 -336 -336 -336 -336 Provisions 0 0 0 0 0 Pension 0 0 0 0 0 Capital Employed -166 3,854 10,332 11,997 17,804 Cash etc 668 8,574 7,899 3,459 2,190 Borrowing <1yr 0 0 500 500 500 Borrowing >1yr 0 0 8,500 8,500 7,650 Net Borrowing -668 -8,574 1,101 5,541 5,960 Share Capital 1,004 1,576 1,623 1,623 1,623 Share Premium 696 18,083 19,436 19,436 19,436 Retained Earnings -1,015 -11,627 -16,224 -18,998 -13,610 Other -184 4,395 4,395 4,395 4,395 Minority Interest 0 0 0 0 0 Capital Employed -166 3,854 10,332 11,997 17,804 Net Assets 502 12,427 9,230 6,456 11,844 Total Equity 502 12,427 9,230 6,456 11,844


Cash Flow

(€,000) 2014A 2015A 2016E 2017E 2018E Operating Profit -1,522 -7,884 -4,768 -2,302 7,745 Depreciation 54 86 448 553 661 Provisions 0 0 0 0 0 Other -36 1,592 0 0 0 Working Capital -955 -3,192 -2,491 -1,848 -6,089 Operating Cash Flow -2,459 -9,398 -6,812 -3,597 2,317 Tax Paid -85 65 0 0 -1,796 Capex (less disposals) -10 -726 -361 -370 -380 Investments -13 -707 -4,073 0 0 Net Interest -9 -8 171 -472 -561 Net Dividends 0 0 0 0 0 Residual Cash Flow -2,575 -10,775 -11,075 -4,440 -419 Equity Issued 3,167 17,922 1,400 0 0 Change in Net Borrowing -668 -7,906 9,675 4,440 419 Adjustments 0 759 0 0 0 Total Financing 2,500 10,775 11,075 4,440 419


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CFE Research Team

Name Phone E-Mail Adam Forsyth | Alternative Energy & Resource Efficiency +44 (0) 207 894 7214 [email protected] Ian Osburn | Building Materials & Property +44 (0) 207 894 7291 [email protected] Freddie George | Consumer – General Retail +44 (0) 207 894 7565 [email protected] Keith Baird | Financials +44 (0) 207 894 8070 [email protected] William Game | General Industrials +44 (0) 207 894 8357 [email protected] Richard Hickinbotham (Head of Research) | General Industrials +44 (0) 207 894 7866 [email protected] Stephen Anstee | Generalist – Smaller Companies +44 (0) 207 894 8298 [email protected] Kevin Lapwood | Generalist – Smaller Companies +44 (0) 207 894 7560 [email protected] Ian Poulter | Generalist – Smaller Companies +44 (0) 207 894 8298 [email protected] Paul Taylor | Healthcare +44 (0) 207 786 3718 [email protected] Brian White | Healthcare +44 (0) 207 786 3724 [email protected] Monica Tepes | Investment Companies +44 (0) 207 894 8590 [email protected] Asa Bridle | Metals & Mining +44 (0) 207 894 7536 [email protected] Sam Wahab | Oil & Gas +44 (0) 207 894 7539 [email protected] Kevin Ashton | Technology +44 (0) 207 894 7851 [email protected] Robin Byde | Transport +44 (0) 207 894 7859 [email protected] Jenny Phillips | Research Production +44 (0) 207 894 7568 [email protected] Debbie Santell | Research Production +44 (0) 207 894 8334 [email protected]

CFE Research Sales Team

Name Phone E-Mail David Banks +44 (0) 207 894 7632 [email protected] Jonnie Cox +44 (0) 207 894 8517 [email protected] Andrew Keith +44 (0) 207 786 3733 [email protected] Alex Pollen +44 (0) 207 894 7670 [email protected] Caspar Shand Kydd +44 (0) 207 894 7140 [email protected] Keith Dowsing +44 (0) 207 894 7908 [email protected] Richard Sloss +44 (0) 207 786 3734 [email protected] Mark Westcott +44 (0) 207 894 8525 [email protected]

Global Equity Research locations

Cantor Fitzgerald & Co Cantor Fitzgerald Canada Corporation Cantor Fitzgerald (HK) Capital Markets Ltd

499 Park Ave 181 University Avenue 6707-6712, The Center

NY 10022 Suite 1500 99 Queens Road Central

New York, USA Toronto, ON M5H 3M7, Canada Central Hong Kong, SAR China

(212) 938-5000 (416) 350-3671 (852) 3477 7899

http://www.cantor.com/legal/marresearch

http://www.cantor.com/legal/marinvestmentrecommendation

mailto:[email protected]

mailto:[email protected]

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