Eguana Technologies Inc. (EGT.V) designs and manufactures s high performance residential and commercial energy storage systems. EGT.V has two decades of experience in grid edge power electronics for fuel cell, photovoltaic and battery applications, and delivers proven, durable, high quality solutions. With thousands of its proprietary energy storage inverters deployed in the European and North American markets, Eguana is one of the leading suppliers of power controls for solar self-consumption, grid services and demand charge applications at the grid edge.
“Significant growth is expected for the residential energy storage markets through 2021 and beyond, with a record order book and back log, higher margin products, as well as a diversified battery module supply chain, Eguana is poised to deliver its best results to date,” - EGT.V's CEO.
Feb. 9 - Announces Proposed Private Placement of Special Warrants: Intends to raise up to $15M (or up to $20M if the Agents’ Option (as defined below) is exercised in full) by way of a private placement on a “best efforts”, agency basis. Company will issue special warrants at $0.40 cents. The Offering is scheduled to close in February 2021.
In addition to strengthening its balance sheet, the Company plans to use net proceeds of the Offering to accelerate cost reduction activities, to further vertically integrate its supply chain through battery management and module development, to expand its development and lab testing capabilities, and to strategically position inventory for the transition from batch manufacturing to flow manufacturing, enabling consistent product availability.
As of close of markets February 18, 2021, the VWAP of the listed shares on the TSXV exceeded $0.30 for a period of 20 consecutive trading days. As a result of the Conversion, the estimated remaining total of approximately $1.943 million (face value) of Debentures outstanding will be converted into approximately 12,953,339 Common Shares, and accrued interest will be paid by the Company in cash or through the issuance of Common Shares to the applicable holders.
Holders of the Debentures can voluntarily convert in accordance with the terms of their Debenture Certificates prior to the Conversion Date. As of the date hereof, holders of $2.284 million worth of Debentures have voluntarily converted their Debentures into Common Shares, some of which have entered into debt settlement agreements with the Company pursuant to which the Company will settle $57,613 worth of Accrued Interest by issuing a total of 115,218 common shares in the capital of the Company to the Electing Holders at a deemed price of $0.50 per share.
Conversion of Class F Limited Partnership Units: Exercised its previously announced right to acquire all 1,150 Class F limited partnership units in EGT Markets Limited Partnership, a subsidiary of the Company, issued on November 2, 2020 in exchange for 7,665,900 common shares in the capital of Eguana.
Feb. 25 - Closes $20 Million Private Placement of Special Warrants: Company issued 50,000,000 Special Warrants at a price of $0.40 per Special Warrant. Each Special Warrant is exercisable into one common share in the capital of the Company without payment of any additional consideration upon certain conditions being met.
In addition to strengthening its balance sheet, the Company plans to use net proceeds of the Offering to accelerate cost reduction activities, to accelerate research and development of its battery technology, to expand its development and lab testing capabilities, and to strategically position inventory for the transition from batch manufacturing to flow manufacturing, enabling consistent product availability.
Certain directors and officers of the Company participated in the Offering. As a result, the foregoing constitutes a related-party transaction under Multilateral Instrument 61-101.
Mar. 16 - Debt Settlement Agreement With ITOCHU Corporation and Closing of Shares for Debt Transactions: Dated March 15, 2021, the Company and ITOCHU agreed to settle C$247,945.20 of debt (the “Debt”) through the issuance of 590,345 common shares in the capital of the Company (“Common Shares”) at a deemed price of C$0.42 per share.
Closing of Shares for Debt Transactions: The Company also announces that it has received the approval of the TSXV for its previously announced shares for debt transactions to settle an aggregate of $57,912.60 in indebtedness to certain creditors of the Company (the “Creditors”), through the issuance of 115,818 common shares in the capital of the Company (“Shares”) at a deemed price of $0.50 per Share (the “Debt Settlements”).
Mar. 18 - EnergySage and Eguana Team Up for Texas Homeowners with Residential Energy Storage Rebate Program: Announce a homeowner program to support families impacted by the recent storm driven power outages in the state of Texas. Eguana is offering Texans a $500 rebate to the first 1,000 homeowners who place an order for the Eguana Evolve energy storage solution by May 3, 2021, and has allocated product inventory to ensure timely installation.
Apr.19 - Announces Conversion of Remaining $5 Million Convertible Debenture: Effective as of April 14, 2021, Itochu Corporation has elected to exercise its right under the convertible debenture certificate, which governs the Company’s 10.0% unsecured convertible debentures issued to Itochu on March 13, 2020 in connection with its strategic investment into the Company, to convert the principal amount outstanding under the Debenture Certificate, being $5 million, into 33,333,333 units (the “Units”) of the Company (the “Conversion”) at a price of $0.15 per Unit.Each Unit shall be comprised of one common share in the capital of Eguana and one-half of one common share purchase warrant. Each Warrant will entitle the holder thereof to acquire an additional Common Share at a price of $0.20 per share until March 13, 2023. In the event the Warrants are exercised, Itochu will hold a 15.2% equity interest in the Company on a partially diluted basis.
Apr. 27 - Filing of Preliminary Short Form Prospectus: Further to its press release dated February 25, 2021, EGT.V has filed a preliminary short form prospectus with the securities commissions in the Provinces of Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia and Ontario, in connection with its previously announced private placement of 50,000,000 special warrants of the Company.
May 5 - Expands Operational Capacity in Southern California: Begun assembling product in Carson, California for the US market. Through an expanded partnership with its key supplier Noratel, the Company has established packaging, logistics, and customer service capabilities in market and will commission assembly capabilities during the quarter.
The Noratel team has been trained by Eguana personnel and first shipments have been completed from the Carson facility. In addition to the operational expansion with Noratel, the Company has secured off-site storage capacity in the Carson area to manage its raw material overflow as part of its inventory positioning plan
May 12 - 10kW Evolve Final Certification Scheduled, Eguana Prepares for First Production: 10kW Evolve product has completed construction review and is proceeding to final system certification ahead of schedule. This milestone allows to begin procuring materials for first production units planned in July and customer shipments.
The 10kw Evolve has an integrated, heavy-duty, home battery, with twice the power and storage capacity of leading competitors, giving homeowners longer duration back up power modes. In addition, it will perform an important role in virtual power plant (“VPP”) infrastructure builds given its increased power and expandable storage capacity.
May 14 - Announces Change of Auditor to KPMG LLP.
May 27 - Sign MoU with FREYR for Joint Development of Battery Modules and supply of Battery Cells: Under the MoU FREYR intends to engage Eguana in designing and producing cost-optimized, standardized battery modules utilizing FREYR’s clean, low cost battery cells based on 24M’s innovative cell design and production process.
FREYR will also hold licensing rights to produce the Eguana developed modules for other customers. The new modules will be designed for easy integration into existing and new energy storage systems developed by third-party integrators, developers or power utilities. Eguana intends to integrate modules from FREYR into its range of ESS products.
July 6 - Receives 3.6M First Order for Hawaii Virtual Power Plant Program: Evolve system will be immediately deployed under the recently announced Emergency Demand Response Program (EDRP) by the Hawaii PUC (Public Utility Commission), kick starting advanced Virtual Power Plant activities on Oahu.
Due to the pending retirement of the AES coal generating station in September 2022, and delays in renewable/storage projects previously planned to replace its capacity, the PUC has ordered the procurement of 50MW of scheduled dispatch services, or approximately 10,000 5kW residential energy storage systems, from distributed energy storage resources to be installed alongside rooftop solar.
July 28 - Appointment of New Board Members: Karen Hayward, a Canadian national, is an author, international speaker and a Managing Partner and CMO with Chief Outsiders. Graeme Stening, a British national, is Managing Partner of DH Private Equity Partners which owns the Company’s largest shareholder, DHCT II Luxembourg Sarl (“DHCT”).
February 2021, a private placement of special warrant for 15M to 20M at $0.40 cents along with the conversion of $2.5M debentures ($0.15 cents) and 1,150 Class F units to common shares ($0.50 cents) were announced.
"Eliminating over 9 million of debt will put the Company in a much stronger financial position going forward as we continue to execute our business plan." - EGT.V's CEO.
Within the month, the $20M private placement of special warrant closed at $0.40 cents (through the issuance of 50M shares) with insider participation. March 2021, the debt settlement agreement with Itochu ($0.24M): 0.59M shares at $0.42 cents was completed, as well as, the conversion of debenture and debt settlement agreement.
“One of our core objectives this fiscal was to strengthen our balance sheet and working capital position, Eliminating the
remaining $1.9 million of debt associated with our 2019 debentures has put the Company in a stronger financial position,
with the expectation of converting all remaining debentures in April, as we work toward a debt free balance sheet.”
- Eguana CFO.
April 2021, as telegraphed the conversion of the outstanding $5M convertible debentures from Itochu was completed (33.3M shares were issued at $0.15 cents, including 16.5M warrant at $0.20 cents expiring March 13 2023).
“Eguana has the outstanding energy storage system available in North America, Europe, and Australia, and we are proud to be investing by converting our debenture and working together to target the rapidly growing energy storage market in United States and Australia especially. Since Itochu has experience to deploy accumulated 43,000 units of residential energy storage in Japan as of today, we would like to contribute to Eguana by 1) provide a competitive and stable supply of Lithium Ion Battery source 2) developing the next generation energy storage with AI function in growing renewable energy markets. 3)Bring Eguana’s business opportunity through Itochu’s global network.”
-Itochu’s General Manager, Sustainable Energy Business Department.
Year to Date (YTD) revenues for FY 2021 are significantly lower than FY 2020. Moreover, net loss are also higher.
Much of the decline revenue is attributed by the relatively poor revenue performance in Q2 and Q3 2021.
“Planned supply chain investments and inventory positioning started to have an impact during the back half of the quarter. More than two-thirds of the quarter revenue was recognized in June. Moreover, the Company has continued to grow this monthly run rate into fiscal Q4 with consistent production output,” - Eguana CEO.
However, Eguana ended Q3 2021 with a cash balance of $7.70M.
May 2021, Eguana reported the initiation of assembly in Carson, California with key supplier and partner Noratel for the US market. EGT.V also disclosed that it had secured off-site storage capacity in the Carson Area.
May 2021, 10kW Evolve Final Certification was scheduled along with preparation for first production of units (July).
May 2021, an MoU with FREYR for joint development of battery modules and supply of battery cell was announced. Under the terms of the agreement, Eguana is to design and produce standard battery modules using FREYR battery cells. FREYR will also have licensed right to produce Eguana developed modules.
July 2021, a $3.6M order (first) for Hawaii Virtual Power Plant Program was reported.
"E-Gear and Eguana have developed the fully integrated E-Gear Evolve over many years with virtual power plants in mind. Hawaiian Electric, the major utility in the state, has directly tested the Evolve system in the lab, as well as the field, with multiple use cases over the past 6 years and it is ready for all phases of this program."
- Eguana Founder and Executive Vice President
Karen Hayward (Chief Outsiders) and Graeme Stening (DH Private Equity Partners; DHCT) to the board of directors. The addition of Mr. Stening is certainly meaningful at this juncture of Eguana's history.
At the beginning of the fiscal year, Eguana's main objective was to clean up the balance sheet and reduce its debt.
Q3 2021 MD&A
As at June 30, 2021 the Company had net assets of $5,533,339, which increased from net liabilities of $17,456,834 at September 30, 2020. This can be primarily be attributed to the private placement in February 2021 and the total conversion of convertible debenture debt into common shares.
Based on what has been reported, Eguana has achieved this objective. However, part of the debt conversion involves issuing shares (including warrants) which may weight on valuation in future depending on earning performance.
Nonetheless, EGT.V has used the proceeds from its financing to significantly increase its inventory position.
This is certainly positive as supply chain challenges continue to put pressure on its ability to generate revenues.
Q3 2021 MD&A
In March, following the Company’s $20M private placement, management began to strategically position certain raw materials and components to reduce mid to long term impacts to product availability customer shipments. While supply chain balancing continues, key components and sub assembly positions were stabilized in late May, with 68% of all third quarter product revenue delivered in the final three weeks of the quarter.
In March, Stifel-GMP initiated coverage with a price target 0f $0.85 cents based on revenues of $33M which was then reduced to $28M in May. It is unlikely that it will achieve this; only $4M in revenues were generated for FY 2021 YTD.
As such, potential catalyst going forward are communications of 1) Sequential quarterly revenue increase in Q4 2021 (unauditioned). 2)* Confirmation of white label partnership (Evolve & Evolve 10kW Max) with a tier one multinational. 3)* Positive response to RFP with a leading US solar installation company. 4)* Increase Enduro delivery in Europe. and 5)* VPP orders in Australia and successful completion of field trials (Itochu's Moixa based Evolve) with Sunnova.
*See MD&A for details.
In terms of valuation, FY 2021 continues to be a breakout year relative to FY 2020. Despite lower revenue YTD 2021, the market seems to value Eguana financial position and "believe" that its on the cusp of scaling its operation and revenue.
However, valuation is trending down of late and approaching S2 levels ($0.262 cents). Hence, supply chain and manufacturing challenges aside, its likely that it will continually be affected in the event that Eguana is unable to generate meaningful revenue growth and execute on the catalysts it set forth.
DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The content of rally is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions - rally cannot take responsibility for your investment decisions.