EQTEC provides engineering and design services and sells its EQTEC Gasifier Technology (EGT) to waste-to-energy operators and enterprise partners. The company works together with multiple parties involved in W2E projects including the developers, waste owners, building contractors and funders with a view to ultimately providing its gasification technology, associated engineering & design services and O&M services.
Unlike many operators in the gasification market, EQTEC has already proven the economic viability of its technology and seen many years of it operating in a commercial environment. Flagship project the Movialsa plant in Spain has seen over 90,000 hours of commercial operations since 2011.
EQTEC currently has a large pipeline of projects across the UK, Europe and US, with total capex values ranging from €10 million to €100 million. An operations update in April confirmed that the company has recently seen a “significant increase” in the level of international interest in EGT. This follows the signing of an equipment purchase contract with US power company Phoenix Energy, the first such contract signed under EQTEC’s Growth Optimisation Plan.
EQTEC has two debt facilities in place. A Combined Secured Loan Facility with Altair Group has recently been increased by £0.879 million to £3.5 million. Additionally, the company has a $10 million secured facility with Cuart Investments Fund. These provide substantial financial resources to use on executing pipeline opportunities and for working capital.
EQTEC’s technology and services lie in a sweet spot, providing a solution to dealing with problems associated with two of the world’s most pressing issues - rising levels of waste (and how to manage it) and growing demand for energy. Research Nester forecasts that the global waste-to-energy will grow at a CAGR of 5.7% to 2024 to reach a value of $42.52 billion.
Based on our forecasts and using a peer derived EV/EBITDA multiple we set an end 2020 target price for the shares of 2.293p. With this implying 171% upside, we initiate coverage of EQTEC with a stance of Conviction Buy.