From the CEO

Those who know me privately know that I am a big fan of ice hockey, and particularly of Västra Frölunda. If I have a chance to see my Indians play, I’ll take it. In attempting to sum up financial year of 2019 for the company in this CEO’s statement, I cannot help but borrow an expression from the world of hockey. From my perspective, 2019 was the year when Swedish Stirling definitely “came off the side boards and joined the fray”. During the year we delivered and commissioned our first PWR BLOK unit. We signed our first contracts with both of the two largest ferrochrome producers in South Africa. We introduced ourselves seriously to institutional investors – both in Sweden and abroad. We laid the groundwork for a future financing/leasing solution for the PWR BLOK. Finally, we formally wound up the solar projects that the company was founded around. The game is now about the PWR BLOK 400-F – and things are looking very bright now after the end of the year.

Initial delivery and protracted negotiations

At the start of the 2019 financial year, we shipped our first PWR BLOK unit to Afarak Mogale in South Africa. This is obviously a milestone in the company’s history, but it is also a major engineering achievement. Delivering a completely new technology from concept to finished commercial product in just under a year and a half is pretty much a unique achievement, something that in itself offers clear proof that we have succeeded in attracting the very best engineers and technicians.

We also continued our negotiations with Glencore regarding a major installation at Lydenburg, based on the letter of intent signed with them in October 2018. On the strength of the huge level of interest we saw from Glencore, I was quite convinced that the agreement would come about fairly quickly. As it turned out, things ended up taking longer than I expected.

In May 2019, we commissioned our first PWR BLOK unit at Afarak Mogale. This gave us both a live reference facility in South Africa that let us show various stakeholders how the PWR BLOK actually works and performs, and the operational data necessary to further develop the product. The results we got were usually fully in line with expectations, in some cases better, and in some cases required action on our part. Based on this, we initiated an extensive program to further develop the PWR BLOK. Increased robustness and lower manufacturing costs are the chief goals.

The agreement with Glencore was finally in place in early July. An exclusive agreement to finalise a full-scale installation with up to 25 PWR BLOK units at the company’s Lydenburg facility. In practice, the agreement meant that we had landed the deal, but it also ended up taking significantly longer to get the final energy conversion agreement into place than I had thought. In fact, the entire autumn went by and it was not until February 2020 that the agreement was finally signed. This taught us that the South African ferrochrome industry is a bit more conservative than it lets on at meetings, and that negotiations with companies of this size easily turn into lengthy, drawn-out processes. Yet there has never been any doubt as to Glencore’s intention – they want the PWR BLOK.

Two types of financing

Another area that has characterised much of the work done at Swedish Stirling during the year is financing. Both PWR BLOK sales and the running of the company require capital. Our long-term ambition and strategy is to sell the PWR BLOK to customers. But we have been clear about the fact that initially, in order to enter the market and to prove that the product is commercially viable, we will need to offer the first customers an energy conversion service. Under this arrangement we are responsible for the financing and operation of the PWR BLOK, while customers pay for the delivered electricity

I have always been convinced that the PWR BLOK would become ”bankable” after a few months of live operation, and that a financing solution would quickly be in place as a result. In retrospect, it would seem that I was probably a bit overoptimistic. The process took longer than estimated, but in November we signed a letter of intent with the South African development bank IDC to form a jointly-owned financing/leasing company – Southern Shield. Earlier in the year – in August – we had also launched a ”green loan” which provides interest and removes large volumes of carbon dioxide emissions permanently. The founders of Oriflame – the af Jochnick family – became the first lender and financier of Swedish Stirling’s first two PWR BLOK units.

In order to finance company operations, we carried out two issues during the year. A preferential rights issue at the beginning of the year and a targeted issue during the autumn. We also launched major efforts to present the company to somewhat larger investors, not least Swedish and international institutional investors. We also reached an agreement with Longspur Research and ABG Sundal Collier regarding the regular publication of analyses of the company. The work done during the year was both extensive and time-consuming, but the results have surpassed our expectations.

Strong finish

The agreement with Glencore also sent a clear signal to the metallurgical sector globally that the PWR BLOK is the solution for recovering the energy in residual gases. The result was a spike in interest during the autumn, with plenty of inquiries from various players around the world. At the end of last year, this prompted us to decide to recruit a head of marketing and sales in 2020, and to start exploring which markets to prioritise after South Africa.

In December, we also landed an agreement with South Africa’s other major ferrochrome producer – Samancor – regarding a facility plant at their TC Smelter. It will be commissioned as early as Q2 2020. The value of this three-year agreement is nothing huge per se (SEK 6 million), but it opens up the possibility of reaching an agreement regarding a full-scale facility for Samancor in 2020. It also means that today, two and a half years after the launch of the PWR BLOK, we have signed agreements for both pilot and full-scale facilities with three customers who together account for just over 95 percent of South African ferrochrome production.

I had originally intended this summary to be concluded using metaphors from the world of ice hockey. 2019 would be described as the first period and the start of 2020 as a strong opening of our second period, with the Glencore agreement in February and the targeted issues of SEK 147 million landed with major investors in March. However, against the backdrop of the coronavirus outbreak, tanking financial markets and a major societal crisis, it feels significantly more important to inform everyone with an interest in the company – employees, shareholder, suppliers, partners and others – that Swedish Stirling stands firm and acts with determination. Our liquidity, as a result of our issues in March, is excellent. Furthermore, several internal measures were quickly put into place to limit the short-term effects of outbreak. Both the management team and the Board of Directors are closely monitoring the situation and are well prepared to act if the crisis stretches out. Most importantly, we are doing whatever we can to reduce the spread of the virus. All of us have people close to us for whom the virus could have a devastating impact and limiting the risk of the virus spreading further is naturally the most important task at hand. It is my sincere wish that we soon will be able to put this crisis behind us and once again direct all our attention and energy towards making Swedish industrial history


Gunnar Larsson

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