Renewable energy
developer Eco Wave Power
Ltd. is reportedly planning a public offering of its
common stock in Sweden. From its base in
Israel, the company has developed proprietary technology to capture the energy
in ocean waves and turn it into electricity.
Eco Wave has systems in place in Gibralar and the Jaffa Port of its home country. Its pipeline of proposed projects
encircles the globe through the United Kingdom, Scotland, Mexico and China
among other countries.
With a building
list of potential customers, Eco Wave needs capital. Management has disclosed
that the 100 kilowatt wave energy installation in Gibraltar required $450,000
to build. However, most of its projects will be considerably larger. Eco Wave has agreed to build a 5 megawatt
plant also in Gibraltar, which is expected to have significantly higher price
tag. A plumper purse would provide
working capital for construction and potentially allow Eco Wave to take equity
positions in it is projects. Even
without that equity investment, a stronger balance sheet could help in
discussions for project financing from banks.
According to the
financial information portal Crunchbase, Eco Wave Power has raised a total of
$5 million in two separate rounds. The
company’s most recent financing was a Series B round in 2017, which valued Eco
Wave Power at $40 million. The valuation appears in line with an estimate $3.6
million in annual revenue with about 150 employees. That implies $24,000 in revenue per employee
and suggests the company is not yet profitable.
Reportedly the
company is seeking $13 million to $18 million in new capital through the sale
of common stock. The offering circular is still under review by
Sweden’s
Financial Supervisory Authority.
Sweden has
become increasingly popular with European companies seek access to public
capital markets. Relatively low interest
rates and moderate volatility have helped make the country attractive. Historically, oil companies have figured
prominently in Scandinavian markets.
However, there is increasing diversity that includes technology
innovators such as software, biotechnology and engineering firms. Sweden has four stock exchanges, including
the Nasdaq’s
First North Sweden where Eco Wave Power is reportedly
planning to list its securities.
Nasdaq’s First North exchange has recently ranked just behind the London
Stock Exchange for number of transactions per year.
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| Eco Wave Power Flotation Device |
When the
offering prospectus is completed, investors will have a rare chance to read
details about the technology and business of wave power generation. The Eco Wave system relies on a flotation
device that rises and falls with the ocean waves. The flotation devices are attached by an arm
or piston to stationery structures such as a pier or jetty. For example, the system in the Jaffa Port in
Israel is attached to a sea wall. The
floater’s motion builds fluid pressure in a land-based generator that spins to
create electricity.
Eco Wave Power
has a deep patent portfolio to protect its innovations. The protections cover not only the system
design, but extend to the various mechanisms and structures. The company has also sought protection for
wave farm architecture that should help protect the company’s ability to
capture the value in electricity generation.
Wave power
development has been frustrated by the sometimes hostile environment of the
ocean. Storms are sudden and
violent. Seawater is highly saline and
corrosive. The unique structure of the
Eco Wave Power system means that only the flotation device and piston are
located in sea water and all the other devices are located safely on land. The flotation device and piston can also be
pulled up out of the water when storms are expected or operators need access
system features. This helps reduce risk
of damage and facilitates maintenance.
Capitalizing on existing land structures also helps to keep capital costs
low.
The market
opportunity for Eco Wave Power is impressive.
The World Energy Council estimates that in ocean bodies there is energy
of as much as 32 petawatts per hour per year.
High capital costs and the frustrating operating environment have been
too intimidating for most to pursue the chance.
Of the few companies with wave power technologies, all have struck out
for the open ocean. Eco Wave Power, with
its floater system that hugs the shore line, may ultimately prove to have
greater profit potential. Those who
participate in the initial public offering will have an ocean front view on the
industry.
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.
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