DERBY, UK, November 11, 2021 -- EuroSite Power Inc. (OTCPK: EUSP, the "Company") an On-Site Utility solutions provider, offering clean electricity, heat, hot water and cooling solutions to healthcare, hospitality, housing and leisure centers in the United Kingdom (UK) and Europe, reported its highest third quarter revenues at $1,058,798, an increase of 57% on the $674,470 reported for the three months ending September 30, 2020 and 19% higher than for the same period in 2019. Gross profit also grew in the third quarter with $350,832 being delivered at a gross margin of 33%. This compares to the $108,575 and 16% reported for the same quarter of 2020. Together this delivered third quarter adjusted non-GAAP EBITDA of $191,246 as compared to an adjusted non-GAAP EBITDA loss of $1,967 for the third quarter 2020. Overall, the Company reports an adjusted non-GAAP EBITDA of $572,627 for the nine months ending September 30, 2021, and a net loss of $10,402. This represents more than a 700% increase in adjusted non-GAAP EBITDA and almost a 100% improvement in the net loss position, the result of strong operational performance at the Company’s UK operational subsidiary that reported a net profit for the third quarter 2021 of £10,146 ($13,678) and a net profit for the first 9 months of the year totalling £135,767 ($183,024).

The growth in revenue follows the trend first reported in quarter two and results from lockdown measures in the UK ending such that all customer sites in the sports, leisure and hospitality sectors were able to fully reopen from the beginning of the third quarter. In addition, the Company’s larger fleet of generation assets delivered increased output compared to prior years while operating expenses remain lower as compared to pre-COVID levels.

Commenting on the Company’s performance Dr Elias Samaras, Chief Executive Officer said “Although we reported a small net loss for the quarter the UK operation actually continued to be profitable, and we feel confident that this will continue as the winter months arrive and fleet output increases”. He added “Growth is now our focus and so we have started to rebuild our UK business development team and will be further enhancing our offer in response to rising energy prices and the need for net zero solutions”.

“Despite the difficulties of a second COVID lockdown the UK operation has now been profitable in nine of the last twelve months” said Paul Hamblyn, Chief Operating Officer and Managing Director of the UK operating company. “The summer has always been difficult for a business that relies on selling heat, so it has been great to see our energy revenues bounce back to levels exceeding pre-COVID levels and even better to see margins continue to grow”. In response to a question about rising gas prices Mr Hamblyn commented “we expect recent wholesale gas price rises to start impacting the business in the fourth quarter but while these could place a pressure on our margin the way we charge for heat means we can help mitigate the risk this poses by charging more for our heat. Also, gas prices won’t change in isolation. Already we have seen electricity tariffs starting to increase and as our tariffs are directly linked to the underlying cost of electricity, any price changes we do see will be quickly passed through to our customers. This will boost our revenue, both from electricity and heat”.    

HEADLINES
Significantly reduced losses, continued profitability at a UK level and strong positive EBITDA position

• Third quarter 2021 net losses totalled $41,034 compared to a net loss of $179,252 in the same period of 2020. This represents an improvement of 77%
• Net losses for the nine months to September 30, 2021 totalled $10,402 compared to a net loss of $391,231 for the first nine months of 2020, an improvement of 97.3%
• Within the UK operating company, the third quarter of this year delivered a net profit of £10,146 ($13,678) as compared to a net loss of £87,114 ($117,435) in 2020, an improvement of 111.6%
• The UK operating company reported a £135,767 ($183,221) net profit for the nine months ending September 30, 2021, as compared to a net loss of £115,111 (£155,345) in 2020, representing a swing of 218%
• Third quarter EBITDA increased to a positive $191,246 in 2021 compared to a negative $1,967 in the third quarter 2020, an increase of 9823%
• EBITDA for the first nine months of 2021 increased to a positive $560,627 compared to a positive $52,795 for the same period in 2020, an increase of 961%. Adjusted non-GAAP EBITDA also increased to a positive $572,627 for the nine months of 2021 as compared to a positive $71,387 in 2020
• Revenue increased 57% to $1,058,798 for the third quarter of 2021 compared to $674,470 for 2020, the result of COVID restrictions ending and increased fleet capacity
• Overall gross profit including depreciation for the third quarter increased to $350,832 compared to $108,575 in 2020, an increase of 223%
• Overall gross margin including depreciation was 33%, an improvement over the 16% posted for the third quarter 2020
• Overall gross margin excluding depreciation and impairment improved to 52% for Q3 2021 compared to 39% for Q3 2020
• GAAP diluted loss per share (EPS) was $0.0005, an improvement over the $0.002 loss per share reported in 2020
• Liquidity and cash position on September 30, 2021 remained strong at $2,053,879 and an improvement over the $1,111,077 position reported at September 30, 2020

Operational performance

• Third quarter energy production increased by 35.9% to 11,535,288 kWh as compared 8,491,029 kWh for the same period in 2020.
• During the quarter two energy systems were decommissioned. The first, a 101kWe solution installed as part of an On-Site Utility Solution at the Brentwood Centre resulted from the customer becoming insolvent. The second, another 101kWe solution but owned by the customer was removed from site as part of a decarbonisation plan implemented by Lancaster City Council that is now under Green Party control. In both cases the Company was able to purchase the CHP units as distressed assets ready for redeployment elsewhere and the Company suffered no losses as a result    
• As a result of these changes the Company’s installed energy fleet capacity on September 30, 2021 totalled 46 systems at 43 sites totalling 5,810kWe compared to 45 systems at 43 sites totalling 5,696kWe at the end of September 2020. Of these, 44 systems totalling 5,194kWe are now under contract as On-Site Utility Solutions with the balance owned by customers but maintained by the Company under long-term maintenance contracts
• By the end of the third quarter all except two systems were back in operation following site closures due to COVID restrictions. Both systems are expected to be brought back into operation during the fourth quarter    
• The Company brought no new systems into operation during the quarter as its current backlog remains at zero

New business and strategic development

• The Company signed no contracts during the third quarter but has signed a term sheet with an existing customer to replace all four of its existing CHP systems with new, higher specifications units alongside EV charging systems for each site. Once installed these new systems will operate under the terms of new 15-year On-Site Utility agreements that will deliver both enhanced revenue and gross margin. Once finalised these new OSU agreements are also expected to include solar PV solutions for each site that will generate additional revenue over a 20-year period
• The Company has submitted a tender to provide a 750kW CHP solution to an NHS Trust in the North of England. This bid, for a turnkey solution together with a long-term maintenance agreement was submitted under the terms of Crown Commercial Services’ Heat Networks and Electricity Generation Assets (HELGA) dynamic purchasing system
• The Company was appointed as a Trader within the UK’s Green Gas Certification Scheme. As Trader the Company can now directly provide Renewable Gas Guarantees of Origin (RGGOs) as part of its Green CHP offer so avoid reliance on third parties or the customer’s gas supplier
• Interest in the Company’s new Green CHP has led to a number of sales opportunities being developed in the industrial and commercial sectors with specific inquiries received from a major brewer, other food product manufacturers, a metal products manufacture plus a number of other manufacturing businesses
• Paul Hamblyn, the Company’s Chief Operating Officer and Managing Director of the UK operating company was interviewed about the Company’s new Green CHP offer as part of the Manufacturing Management’s regular “Ask the Expert” feature. The interview can be seen at https://lnkd.in/easFF8Kb
• The Company has hired a new Business Development Manager to start mid-November. This role has been created to spearhead growth of the Company’s existing OSU offer, using the full range of energy savings technologies in our portfolio into both the industrial and broader commercial sectors

Outlook and risks

• The UK operating company has now delivered a net profit for 9 out of the last 12 months, ending September 30, 2021. Management is now optimistic of financial year 2021 being profitable at a UK level.
• Wholesale gas and electricity prices have risen sharply in recent months although much of this change is yet to show itself in the retail prices paid by customers due to many clients being within long-term fixed price contracts. Management does expect price rises for some customers during the fourth quarter 2021 and second quarter of 2022. In addition, as several retail energy suppliers have ceased trading some customers are being forced to recontract for energy but at higher rates. All these changes represent a risk to the business however, the nature of the Company’s contracts helps to mitigate these risks. Investors should note that as underlying retail energy tariffs increase so too do the energy tariffs charged by the Company. In addition, any rise in the cost of gas is at least partially offset by increases to the cost of the heat energy generated by the Company. Management’s current view is that gross margins will come under pressure if gas prices rise faster than the cost of electricity but that this such changes are likely to be offset by increased revenues delivering higher gross profit, all be it a lesser margin    
• Inflationary pressures continue with both labour and material costs rising across the supply chain. The Company also reports supply delays for some components, particularly those sourced from the US. Competition for staff has also increased and management believe that pay rises may be necessary in order to retain key personnel
• Access to debt funding for projects has tightened over the last quarter with some funders withdrawing for the low carbon asset finance market. Management continues to pursue new opportunities for project funding
• The underlying demand for low carbon on-site energy generation remains strong in the UK with many companies and organisations continuing to respond to the UK government’s policy to achieve net carbon zero by 2050. Further policy announcements were also made in the lead up the UN Climate Change Conference of the Parties (COP26), including a new Heat and Building Strategy setting out key policies for the decarbonisation of heat. While management believes this presents an opportunity it also contains risks, particularly for natural gas-fuelled CHP but the Company’s recent launch of its Green CHP offer is designed to mitigate these risks. Management will continue to actively engage in the development of alternate technical and commercial solutions designed to exploit the opportunities offered by newly announced policies 

Future News Releases

News provided all financial results and news are only published on the Company’s website (http://investors.eurositepower.co.uk/news-releases). 

Anyone wishing to receive notice of a news release should subscribe to the email alerts service provided within the Company’s investors pages (http://investors.eurositepower.co.uk/email-alerts).

Alternative Reporting Standard

The Company now files its financial statements under the Alternative Reporting Standard (ARS). Financial reports, which are prepared in accordance with US GAAP, are generally provided within 45 days of period end (90 days for fiscal year end results) and are reported to maintain at least the OTC Pink Limited Information tier.

Following corporate reorganisation and de-registration of the Company’s common stock, with effect from January 1, 2017 foreign exchange gains/losses are reported in the cumulative translation adjustment (CTA) account on the Company’s balance sheet. 

Fiscal year-end financial reports for the operating company, EuroSite Power Limited are audited by a PCAOB registered firm and the Company provides current information for the purposes of SEC Rules 144(c)(2) and 10b-5 using the OTC Disclosure & News Service. Financial statements for EuroSite Power Limited are prepared in accordance with UK GAAP, and consequently differences in accounting treatment and presentation may arise.

On-Site Utility

EuroSite Power sells the energy produced from an onsite energy system to an individual property as an alternative to the outright sale of energy equipment. On-Site Utility solution customers only pay for the energy produced by the system and receive a guaranteed discount rate on the price of the energy. All system capital, installation, operating expenses and support are paid by EuroSite Power.

About EuroSite Power

The Company provides institutional, commercial and small industrial facilities with clean, reliable power, cooling, heat and hot water at lower costs than charged by conventional energy suppliers – without any capital or start-up costs to the energy user. More information can be found at www.eurositepower.co.uk.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 that involve a number of risks and uncertainties. Important factors could cause actual results to differ materially from those indicated by such forward-looking statements, as disclosed on the Company’s website and in financial statements held by OTC markets for the fiscal year ended December 31, 2020. This press release does not constitute an offer to buy or sell securities by the Company, its subsidiaries or any associated party and is meant purely for informational purposes. The statements in this press release are made as of the date of this press release, even if subsequently made available by the Company on its website or otherwise. The Company does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

For further information please contact: Elias Samaras - Chief Executive Officer +44 800 028 8001 elias.samaras@eurositepower.co.uk