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Eguana Technologies (EGT.V)

Remember when Elon Music made the following announcement?

 

 

In case you don't want to watch this 22 minute video, this is Elon Musk announcing the Tesla Powerwall. The premise is; the world can get off coal and nuclear power by switching over to clean energy, using solar plus energy storage. We just need a solution: enter the Tesla Powerwall.

The idea was simple, have a giant home battery and use your excess solar power from the daytime for the nighttime. Or even better, have power controls that can shoot excess energy into the grid when demand exceeds supply (referred to as load balancing). 

The odd thing about this presentation was that Elon (in classic Elon form) was pretending this was his original invention, he even made light of how ridiculous current batteries look. In reality, the concept of the home battery was well established in Germany. 

 

Picture from Tesla Powerwall

After the Fukishma nuclear disaster, Germany determined that nuclear power was unsafe. They elected to shut down all nuclear programs, which created a giant rush to find new green energy solutions. A small startup company called Sonnenbatterie decided that using home batteries with solar energy would be an excellent solution for Germany and their new initiative. But in order to do so, they needed to find a company that could help them convert power from DC to AC and vice versa (refereed to as a bi-directional inverter) and a company that could provide a solution that would be considered grid friendly (approved by utility companies for grid hookup).

This is where our little buddy Eguana Technologies entered the picture. They were started by a Queen’s engineering graduate named Brent Harris who spent a great deal of time in Northern Alberta and chose to study microgrids (mini power grids for remote areas) and power solutions for remote areas. In 1999 he opened Sustainable Technologies with the two the Carten brothers, their focus was providing power control solutions for all types of energy storage. They went on to spend their first 15 years as a company creating great intellectual property, while tripping over their own feet producing power controls for the military and fuel cell applications.

In 2014, Sonnenbatterie was looking for someone to design the inverters and power controls for their home battery. Somehow this small little startup managed to sign an exclusive contract with Eguana.  This contract led to Eguana designing and integrating the technology that created the world’s first major home battery company (Sonnen installed over 5000 batteries with Eguana’s technology).

The first Sonnenbatterie

 

After two years of struggling with terrible margins and the exclusivity of the contract, Eguana and Sonnen parted ways. By this time, shareholders were frustrated. This frustration included one significant shareholder, a venture capital firm named Daughtery Hanson (owning over 25%). They chose to fire Michael Carten as CEO and elected to replace him with a supply chain specialist (recent hire presumably being groomed for the role), Justin Holland. The new direction for Eguana was simple: to become a major player in home energy storage as both a brand and a supplier. 

Imagine a 15 year old startup going from annual revenues of 6M (finally getting traction) down to nothing. You can imagine the impact this had on the stock price.

For the last two years, shareholders have patiently waited and supported Eguana’s revision. They would do three things:

1. Have their own home battery. This started out with an industrial unit in Hawaii which began installs in calendar Q4 (EGT Q1) of 2017.  Eguana was the first company to receive permission in the state to allow home owners to connect a PV system with energy storage to the grid. They are now connected with a top solar installer in a state where 1 in 9 homes have solar panels.

Eguana Hawaii Battery

And in January of 2018, they released a suspicious website displaying the new all-in-one unit that would be released in Germany. This is the first self branded Eguana battery. But more importantly it has features that sets it apart (remote diagnostics, pre-charge, etc) and allows it to be installed in under 2 hours; in a place where there are over 1M homes with PV systems.

Eguana All-in-One

2. Offer sub-assembly units. Similar to what they did before with Sonnenbatterie, except they are no longer exclusive to anyone. The big partner is presumably Dailmer, and a good guess is that they will be working on the vehicle-to-grid units:

MBE Vehicle to Grid

Eventually they could also be a part of Mercedes Benz all-in-one, currently offered as just a battery (find your own inverter), but one can assume that all-in-ones are an inevitable progression.

Also they have done some work for a startup with big aspirations out of Europe called Ampere Energy (started by the founders of UKs largest solar installer). They make home batteries that can go in your living room called "The Sphere":

Ampere Energy Sphere

3. Work with partners on commercial projects. Announced partners include Greenlots, Passons, and Bosch. Here is twitter confirmation they are helping EV charging station companies (presumably Greenlots):

Tweet

The key idea was: why have one customer when you can have many? They would attempt to latch onto every company they could and grow with them; reducing customer concentration and having more lottery tickets in a mega growth industry.  Home energy storage is just getting started and projects to be mega-growth moving forward:

growth

After 2 years of constant dilutions, a pretty big announcement came for those loyal shareholders. Eguana announced a multi-year contract with an unnamed German automanufactuer to provide power controls; increasing revenues 1700%. This contract is expected to generate 13M in its first year alone.  

Now combine that with the first mover advantage they have in Hawaii with e-gear solutions, and we can conservatively expect 2018CY revenues north of 20M.  This is where things get exciting, because the real prize is Germany; where home energy storage is expected to be a $1B industry by 2021. Eguana has a contract with the highly reputable Technologietransfer & Marketing GmbH ("Tt&M"). If EGT can grab 10% of this market place by 2021, that could generate $100M of annual revenues (at 5x sales that would get EGT a share price of approximately $2 on the Germany all-in-one alone).

Here is a quick summary of what I like about this company.

  1. They have years of research and leading technology in an industry that is more than likely to have extreme growth over the next decade.
  2. They have created the best/easiest solution for houses with PV systems (solar panels) to add an ESS.
  3. They have partnered with world class companies that normally wouldn't partner with a tiny microcap.
  4. The story is totally under the radar. One of the few YouTube videos where Brent Harris (founder/CTO) talks at length about EGT’s opportunity in Hawaii has 815 views (posted in 2016). This is one of the only videos where the company is mentioned on all of YouTube.
  5. Every raise gets oversubscribed. The last raise had a 70% employee participation.
  6. They are trying to grow with various partners in various verticals, thus eliminating concentration risk.
  7. The applications can extend well beyond Lithium Ion Batteries and Residential. They have partners in fuel cell, flow batteries, and even a company working with Salt Water Batteries.
  8. It appears they are supplying power controls for one of the world's most distinguished brands (Dailmer/Mercedes Benz).
  9. There are enough insiders w/DH to prevent a cheap takeover. I suspect Sonnenbatterie tried and they wouldn’t pull the trigger for anything south of an earth shattering price; which Sonnenbatterie didn’t have the funds for.
  10. We are at the front of the revenue ramp looking up. Expect over 1M sales in Q1/2018 and upwards from there.
  11. They don’t have an IR company, and they don’t promote the story. Insiders believe in this thing and are looking to get paid off the equity, not salary. The two top guys make 150k each, yet continue to buy at each raise. Justin owns over 3M shares w/ over 1M options.


I see many upcoming catalysts for Eguana technologies. Starting with last week, when they announced their deal with Dailmer (“German Auto Manufacturer”). Auto companies are terrified about the impact electric vehicles will have on the grid and will need companies with power control solutions to help work with utility companies to solve this. Secondly, I see the all-in-one roll out in Germany as just a start. Other countries will follow suit and we could see Eguana being a 10% player what will eventually be an industry exceeding over $20B a year globally.  I will conservatively estimate a target price of $3 by Dec 31, 2020.

Comments   

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