From the CEO

Back at the end of last year, I said that our ambition for 2019 was to prove the PWR BLOK 400-F both commercially and technically, and that the year could be a smashing success for Swedish Stirling. During the second quarter, much has happened at the company to confirm this, and I particularly want to emphasise three important events.

To begin with, during the quarter we commissioned our first commercial PWR BLOK 400-F at Afarak Mogale in South Africa, and are now producing climate-smart electricity from industrial waste gas. We anticipate that the PWR BLOK will be considered to have been commercially proven by a number of banks in the second half of the year. This allows customers who purchase our product, or who invest in projects where it is used to gain access to debt financing and thus a lower cost of capital. This is a very important factor when it comes to generating a kWh at a low price.

The second major event during the period was that Lloyd’s Register – one of the world’s largest independent certification companies – verified in its audit of our technology what we have been saying for a long time; that the PWR BLOK is the cheapest way to generate electricity in existence today, and that the technology yields greater CO2 savings per krona invested than any other type of energy. This is a huge success for Swedish clean tech, and of course for me personally as well. When I founded Swedish Stirling just over 10 years ago, the dream was that the Stirling engine would be able to generate cheap, climate-smart electricity and make a contribution to minimising global warming. The Lloyd’s certification confirms this, and the solution is competitive without any government support or subsidies.

The third major event actually occurred two days after the close of the half year. On July 2, Swedish Stirling and Glencore SA signed an exclusivity agreement to finalise an installation of, initially, up to 25 PWR BLOK 400-F units for a 9.9 MW power generation facility at Glencore’s smelter in Lydenburg, South Africa. For the time being, we have reached an agreement with Glencore not to communicate the details of the deal, but it gives Swedish Stirling the exclusive right to all residual gas from Lydenburg and contains agreements regarding prices, delivery criteria, emission allowances and contract length. The deal first needs to be financed, after which, final agreements need to be signed. I rate the possibilities of this coming to pass as being good, as the offer is attractive to all parties and the collaboration is working very well. When the first stage has been fully developed, the facility is expected to generate annual revenues of SEK 40 million, but we assess that it will be possible to further expand the facility over time. I can also confirm that the agreement received a great deal of coverage in the South African mass media. This was the headline that ran on the South African news website BusinessLIVE: “Glencore finds cleaner, cheaper alternative to Eskom”*. This creates good conditions for continued marketing efforts in South Africa.

The negotiations with Glencore took a little longer than we initially thought. It was not because there was any doubt on their part about our offer. Quite the opposite. In the negotiations we have made a lot more progress in matters of detail than we had imagined in this first stage. The only challenge that we deem stands in the way of a final agreement is financing, and there we have several working promising avenues, as green loans and bank financing.

Peering into the future a little, I can confirm that we have an intense and exciting half year ahead of us. We continue to work on reducing the production cost per PWR BLOK unit, and I can state even now that we have good prospects of hitting our target costs. We will also examine the conditions for strengthening the balance sheet. Both through the mandate for targeted issues issued at the Annual General Meeting last spring and by offering green loans. As communicated in May, we plan to apply for listing on the Nasdaq Stockholm Main Market during the first half of 2020. Internal work to prepare the company ahead of this process commenced last winter and will continue into the coming fall and winter as well. A part of this effort is also the recruitment of a new CFO, which is now ongoing.

In conclusion, I can state that given the agreement with Glencore, our short-term focus on South Africa and ferroalloys is entirely appropriate. We understand the customer’s needs and have no competition, and will therefore continue working to penetrate the market over the next few years, as at least 95 per cent of its potential remains. We have undertaken commitments to finance the first two deals that we are entering into ourselves. Our long-term ambition, however, is to sell the technology and a share of the maintenance and spare parts contracts. We believe that there are good opportunities for future business where the customer or a third party handles the financing and operational components as the technology becomes established. We also believe that there is room for future price increases, as a repayment period of just over three years is quite low for equipment that will last for at least 25 years.


Gunnar Larsson

(*) ESKOM is the state-owned electricity company in South Africa.