CEO’s statement

I would like to start by expressing my concern over Russia’s invasion of Ukraine. It’s shocking and completely incomprehensible how a country in modern-day Europe can attack a neighbour and subject its population to the terror that the Russian government are presently guilty of inflicting. Our thoughts go out to all of the people affected, and I encourage all of you who possibly can to support and help Ukraine and its citizens.

The war affects all of us of course in different ways, including Swedish Stirling. Global insecurity in general, higher raw material prices, higher energy costs, inflation and economic stagnation have started to take their toll. Swedish Stirling currently has no operations in those countries that are directly impacted by the war. At present, some of our subcontractors have announced minor delivery delays of materials but we haven’t needed to significantly change or revise our plans. However, we’re following events closely, and I’ll revisit this point if the situation changes further.

Reduced financing costs
For Swedish Stirling, the 2022 financial year has started positively. The single largest and most important event in the quarter was that we secured loan financing in South Africa, when the South African bank, The Industrial Development Corporation of Africa (IDC), granted project financing of the PWR BLOK in South Africa. This is a very significant milestone in the company’s history, and of greater importance than many people perhaps realise. The fact that the PWR BLOK is now considered bankable, i.e. loan-worthy for commercial banks, means that, from now on, we can reduce our cost of capital to finance the technology. This also means continued competitive electricity costs for the customer in the long term, and that we can finance larger energy conversion projects and customer assignments from now on. This is a real plus in our ongoing negotiations.

Green preference shares
During the quarter, we also had confirmation that the reduction of approximately 80,000 tonnes of CO2 that the fully-developed Lion Smelter facility in South Africa is going to achieve each year entitles Swedish Stirling to an equivalent amount of emission allowances in South Africa. Furthermore, it seems that these emission allowances can be registered with the UN’s FCCC agency (Framework Convention on Climate Change). In that case, we can resell the allowances, which in itself should add additional value to our PWR BLOK technology. We have however opted to examine a more eco-friendly way of using these emission allowances, which in addition will further reduce our financing costs.

We’re introducing a new type of security; a unique green preference share, which in addition to an attractive direct return, also makes it possible for investors to carbon offset themselves by investing in energy conversion projects utilising the PWR BLOK in South Africa and Europe in the future.

With this in mind, we held an Extraordinary General Assembly in March, which authorised the board of directors to go ahead with a possible new share issue of up to 1,100,000 preferential shares. The capital raised from these preferential shares is intended to contribute to the financing of the energy conversion project. At the time of writing, and with the help of ABG Sundal Collier as financial advisor, we’re currently exploring the possibilities and drawing up an offer.

Serial production in Sibbhult
During the quarter, we completed the new production line in Sibbhult. We’ve also recruited more personnel, placed necessary orders for material, and are now starting serial production. We tend to be wary of making forecasts, but I want to inform you nevertheless that we aim to deliver at least 6 PWR BLOK units to Lion Smelter before the end of the year. The units will be installed and put into operation as they arrive in South Africa. The plan is then to gradually increase the production rate. The increase will be achieved in a sustainable manner, and at a rate that does not incur unnecessary costs for us. I can already inform those shareholders who are interested that we’re going to host an open day in Sibbhult after the summer, where we will show off our activities and new production line. More information on this to follow.

We remain committed to our primary areas of focus, which are to deliver contracted projects, and to transform our declarations of intent into actual contracts. But our product development division has also, in the course of the period, started work on further development of the PWR BLOK. Our main objective is to reduce product and production costs, but we’re also now looking at future new applications and areas of use in which Stirling engine technology can produce climate-friendly electricity.

Dennis Andersson
Swedish Stirling AB (publ)