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Blue Sphere: Grid Connection Dates Set for Biogas Power Plants
The Blue Sphere (BLSP:OTC/QB) stock price has weakened in recent months
as investors registered their apparent frustration with fundamental developments.Proposed acquisitions of operating biogas
power plants in Italy have taken much longer than expected and majority
interest in planned biogas plants in the U.S. were sold into joint venture
arrangements rather than held as 100% equity positions.Despite these developments, Blue Sphere
management has doggedly moved forward on all fronts and there has been
measurable progress toward first revenue.
North Caroline Biogas Power Plant - Construction Site
Commercial operation dates have been set for Blue
Sphere’s first two biogas development projects in the U.S.Construction progress is on-schedule for a
5.2 megawatt biogas power plant near Charlotte, North Carolina.The facility is scheduled to be connected to
the local electrical grid on October 27, 2015.Likewise construction is on-schedule for a 3.2 megawatt biogas power
plant in Johnston, Rhode Island.The
Johnston plant is on the calendar for connection to the local power grid the
third week in December 2015.Both plants
deploy anaerobic digestion equipment to convert food waste to energy to heat
steam-powered turbines and electrical generators.
Blue Sphere lined up Austep, S.A. of Italy to supply the
digestion and generation equipment for both the North Carolina and Rhode Island
plants.Austep has also agreed to
operate both plants once construction is completed and has provided performance
guarantees to the Blue Sphere and its joint venture partner in the two plants,
York Capital.Food waste supply
agreements for both plants have been secured and tipping fees to the joint
venture have been finalized.A 15-year
power purchase agreement with Duke Energy (DUK:NYSE) is in place for the North Carolina
electricity output and a similar agreement has been secured for the Rhode
Island plant.Additionally, McGill
Environmental has signed a 10-year off-take pact for
compost by-product of the anaerobic digestion process.
Once operational, Blue Sphere will claim 25% and 22.2%
of the profits from the North Carolina and Rhode Island joint ventures,
respectively.Since construction of both
plants is near completion, and connection to the electrical grid and power
purchase agreements are in place, we expect both plants to begin contributing
to financial results in fiscal year 2016.
Progress has also been made in Blue Sphere’s bid to acquire fully operational biogas powered
plants in Italy’s famed Lombardy agricultural region.The final due diligence and legal
arrangements have been completed, clearing the way for Blue Sphere to close its
pending purchase agreements to acquire the four plants.All four plants will be 100% owned by Blue
Sphere and are expected to contribute revenue beginning in fiscal year
2016.Each plant is separately operated,
producing 999 kilowatts that is being transmitted to the contracted power
del Servizi Energetici, S.p.a., through Italy’s regional
power grid.Biogas equipment supplier
and operator, Austep, has been signed to operate each plant.Pending completion of legal and financing
arrangements, Austep is monitoring operations at each of the four plants.
Our most recent research report on BLSP still cites shallow
trading volume as a potential securities risk for investors in the stock.However, the report also notes that average
daily trading volume has increased to 1.2 million shares per day over the last
six months compared to about 800,000 in the previous six months.This is an encouraging development that
signals rising investor interest and more efficient valuation of the
stock.The report also noted that
management has made progress in reducing debt, albeit at the expense of
shareholders through the dilutive impact of debt converted to common stock.Thus the stock at its current depressed price
remains an interesting option on management’s execution success.
Neither the author of the Small Cap Strategist web
log, Crystal Equity Research nor its affiliates have a beneficial interest in
the companies mentioned herein.Crystal
Equity Research publishes research on BLSP through its Focus Report Series. Please review important disclosures at the end of every report.