DERBY, UK, March 30, 2022 -- 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, continued its trend of improving financial performance after reporting $20,031 positive EBIT for the year ending December 31, 2022, an increase of 113.9% when compared to the EBIT loss of $(143,744) reported for the prior year. This is the first time the Company has reported a positive EBIT for a full 12-month period and follows improved performance by the UK operating company that saw its net profit for financial year 2022 rise by 45.2% to £192,797 ($233,245), as compared to the £132,789 ($179,688) reported for financial year 2021.

Full year 2022 revenues increased 28.9% to $5,724,637, up from $4,441,965 in 2021, helped primarily by rising utility tariffs.  Gross profit also increased to $1,639,151 (2021: $1,323,726), although the lower 23.8% increase as compared to the growth in revenue reflects the narrowing spark-spread that resulted from natural gas prices increasing slightly more than the cost of electricity throughout the year. In turn this pushed gross margin down by 1.2 percentage points to 28.6% when compared to last year’s 29.8%. Non-GAAP EBITDA for the year ending December 31, 2022 increased to $746,881, up 12.0% when compared to the $667,013 reported for the prior year. Overall the Company reported a net loss for 2022 of $(102,661), an improvement of 25.6% when compared to the $(137,987) loss reported for the prior financial year.  

Commenting on the Company’s full year results Dr Elias Samaras, Chief Executive Officer said “The UK operation has now delivered profitability for two years, profitability that is now helping to deliver improved results when consolidated. Having achieved a consolidated positive EBIT for the year we must now strive to turn this into a net profit. At the same time, we must also continue to focus on growing our new renewables division.”

“The last year has provided all sort of challenges for EuroSite Power, but to have ended the year with the UK operation delivering greater profits alongside a positive consolidated EBIT gives me confidence for the year to come” said Paul Hamblyn, Chief Operating Officer and Managing Director of the UK operating company.

KEY TAKEAWAYS

Income from operations

• The operating loss for the fourth quarter 2022 was $(41,507) compared to a loss from operations of $(127,585) in the same quarter of 2021.
• For the year ending December 31, 2022 the operating loss was $(102,661) compared to a loss from operation in 2021 of $(137,987), an improvement of 25.6%.
• The UK operating company delivered a net profit from its operations for the fourth quarter of £47,959 ($58,010) compared to a loss from operations of £2,978 ($4,228) in the same quarter last year.
• For the year ending December 31, 2022 the UK operating company delivered an operational net profit of £192,797 ($233,425) compared to a profit from operations in 2021 of £132,789 ($179,688), an improvement of 45.2%.
• Net loss per share, basic and diluted, was $(0.001) per share for FY 2022 and $(0.0005) per share for Q4 2022 compared to a loss of $(0.002) and $(0.0016) per share for the same periods in 2021.

EBIT and EBITDA

• Fourth quarter 2022 EBIT was recorded as a loss of $(21,827) compared to loss of $(98,174) in the same quarter of last year.
• Non-GAAP EBITDA for the quarter (defined as net income or loss attributable to the Company, adjusted for interest, income taxes, depreciation and amortization, stock-based compensation expense and impairment charges) was $175,314 as compared to $94,386 for the same quarter in 2021, an increase of 85.7%.
• EBIT for financial year 2022 was $20,031 as compared to a negative EBIT of $(143,744) for the prior year, an increase of 113.9%. This is the first time the Company has reported a positive EBIT for a full year.
• Non-GAAP EBITDA for the year ending December 31, 2022 was $746,881 as compared to $667,013 for the same period last year, an improvement of 12.0%.

Revenues

• Total revenues for the quarter ending December 31, 2022 were $1,585,514, an increase of 11.1% as compared to the $1,426,644 reported for the same quarter last year.
• For the year ending December 31, 2022 total revenue increased 28.9% to $5,724,637 as compared to the $4,441,965 reported for financial year 2021. This was primarily the result of increased customer utility tariffs.

Gross Profit

• Gross profit for the fourth quarter of 2022 reduced 4.7% to $403,469 compared to a profit of $423,536 in the same quarter of 2021. This decrease in gross profit was the result of an impairment charge taken against an underperforming site.
• Gross margin for fourth quarter also reduced to 25.4% as compared to the 29.7% posted in the same quarter last year. Gross margin excluding depreciation and impairment for the quarter was also down at 37.8% as compared to 43.2% in the fourth quarter of 2021, the result of rising gas prices narrowing the spark-spread. 
• Gross profit for the financial year of 2022 was $1,639,151 compared to profit of $1,323,726 during 2021, an increase of 23.8%.
• Gross margin for the year ending December 31, 2022 dropped 1.2 percentage points to 28.6% as compared to the 29.8% posted for financial year 2021. Gross margin excluding depreciation and impairment for 2022 was also down at 41.4% as compared to the 47.7% reported in 2021.

Operating Expenses

• Fourth quarter operating expenses reduced 18.5% to $425,296 as compared to the $521,710 posted in the same period last year.
• For the year ending December 31,2022 the Company’s operating expenses were $1,619,121, as compared to $ 1,467,470, an increase of 10.3%. This was primarily the result of an increased headcount.    

Additional financial headlines

• Liquidity and cash position at December 31, 2022 remained strong at $1,836,435.  Although down by 9.9% on the position at the year-end of 2021, this was solely the result of the late collection of account receivables due to a one-off operational reason.
• In October 2022 the UK operating company opted to repay its outstanding CBILS loan (Coronavirus Business Interruption Loan Scheme). The amount repaid was £81,666.      
• In the second quarter of 2022 the Company signed a master receivables agreement with Attika Holdings Limited, a subsidiary of Aquilla Energy Efficiency Trust to provide funding for future On Site Utility projects.  To facilitate this the Company formed a new Special Purpose Vehicle (SPV) company called EuroSite Power Projects Limited. This company is a 100% owned subsidiary of the Uk operating company, EuroSite Power Limited.

Operational performance

• Total energy production decreased by 11.7% to 42,596,258 kWh for the year ending December 31, 2022 as compared to 48,221,416 kWh for the same period in 2021. This was attributable to an insolvency event causing a large 355kW cogeneration system to be shut down from October 2022 onwards, and supply chain problems causing prolonged periods of downtime for certain assets throughout the year.   
• Operational fleet capacity at year-end 2022 was 46 systems at 44 sites totalling 5,810kW, the same as at the end of the prior year. Of these 44 systems totalling 5,194kWe are under contract as On-Site Utility Solutions with the remaining 2 systems owned by customers but maintained by the Company.
• One system, a 355kW unit installed at the Coventry Building Society Arena (formally known as the Ricoh Arena) remained switched off at year-end following the insolvency of the customer, Wasps Holdings Limited. Since March 2023 the unit has been able to be restart after a temporary agreement was reached with the site’s new owners, Frasers Group.  
• Two other systems were offline for much of 2022 as a result of planned refurbishment works being undertaken by customers at each host site. In each case the underlying On Site Utility contracts were extended to cover any furloughed period of operation.
• The service team supporting and maintaining the fleet of operational assets was expanded during 2022 to include a Service Manager and four Service Technicians.   
• At December 31, 2022 the company had one project in backlog. This project is the installation of a 100kW combined heat and power solution for the Mercure St Helens Hotel. Following delays in obtaining planning consent this project is now expected to be operational by the end of end of Q2 2023.

Business development

• During 2022 the Company signed a new Shared Risk On-Site Utility agreement with St Helens Hotel Limited.   The new agreement, which is expected to generate revenues of approximately £1.37 ($1.54) million over its 15-year term is the first of its type secured by the Company.
• The Company continued to promote its hydrogen ready, Green CHP solution first launched in July 2021.
• The Company completed development of its new fully-funded On Site Utility Solution that provides solar PV to both commercial and public sector organisations across the UK. This was successfully launched early in January 2023.
• To further support diversification, and as announced in February 2023 today the Company formed of a new division to develop both grid scale and on site, renewable energy generation solutions. This new division will initially operate alongside the current cogeneration business.  
• During 2022 the Company and its fellow shareholders in FCN Energy Logistics reached agreement with Molgas Energy Holdings, owned by French private equity firm InfraVia Capital Partners to provide significant additional investment into FCN Energy Logistics and ultimately to its Greek subsidiary Blue Grid Gas & Power. As a result of this investment the Company’s holding was diluted to 11.42%. Following Molgas’ investment, Blue Grid is now focusing on accelerating growth in LNG and bioLNG supply in the broader region of SE Europe and the Eastern Mediterranean.

Outlook and risks

• The Company reports that the outlook for its financial performance in 2023 appears to be good with both increased revenue and gross profits expected to continue off the back of sustained high energy prices and reducing government energy price support. Management expects UK profitability to continue but investment in renewables, including hiring new staff to better exploit these opportunities could delay profitability at the consolidated level.
• Risk remains in the volatility of wholesale energy markets and, in particular the ongoing ability for the war in Ukraine to increase gas and electricity prices. As the Company’s revenue and gross margin is linked to underlying energy prices Management will continue to monitor these markets closely. In addition, with UK government support for business energy prices being scaled back with effect from April 2023 Management considers that the risk of customer failure will increase.  
• Some operational challenges remain. For example, supply chain problems, particularly relating to the timely availability of certain spare parts has and could continue to cause extended downtime of units that develop a fault and require repair. While Management has sought to increase the inventory of parts it holds locally, the nature of the CHP equipment in uses means that it is not always possible to hold stock in reserve.
• New business development activity, particularly for cogeneration systems remains difficult in the UK as natural gas-fuelled CHP remains disadvantaged compared to the electrification of heat using heat pumps or heightened demand for solar and other renewable solutions. In response Management in the UK is investing in marketing and sales activity to support a diversification towards solar and other technologies. In addition, the Company has also created a new division to focused on grid-scale renewables, although this remains at an early stage of development.  
• Other risks remain in the form of the availability of project credit, a possible shift in UK government energy policy in response to the Ukrainian crisis and/or unexpected equipment failures.

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, 2022. 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.