DERBY, UK, November 14, 2024 -- 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 third quarter revenues of $1,454,715, a fall of 6.5% compared to the $1,556,585 revenue reported for the same quarter last year. Gross profit for the quarter reduced 18.7% to $422,014 from $519,330 in the third quarter of 2023 which, alongside a 37.3% increase in operating expenses resulted in a Net Loss of $39,622 for the quarter as compared to the Net Profit of $169,332 delivered last year.  Importantly, at a UK operating level, the Company maintained a profitable position with Net Profits for the third quarter reported at £22,186 and for the nine months ending 30 September 2024 at £304,551.

The pressure reported on revenue and profitability is the result of softening retail electricity and gas prices in the UK market combined with a narrowing ‘spark- spread’ or difference in price between electricity and gas plus inflationary pressure on operational expenses. However, as the Company also reported a 6.0% increase in energy generation from its fleet of CHP systems in the first 9-months of the year, this additional energy generation helped mitigate some of the impact of these underlying changes.   

Overall, the Company reports that revenues for the first nine months of 2024 were down 4.0% at $5,169,568, as compared to the $5,387,715 reported in the same period last year and gross profits reduced 10.5% to $1,537,549. Profitability has however, been maintained with Net Profit for the first nine months ending at $89,871.

Commenting on the quarter’s results, Paul Hamblyn, Chief Operating Officer and Managing Director of the UK operating company said “The third quarter is always a more difficult period for the Company as the summer weather typically reduces energy demand, however, the Operations Teams did a great job increasing generation this year which proved very helpful as lower energy prices and rising costs began to increase pressure on both revenue and margin. Although we expect these pressures to continue through the fourth quarter, we remain hopeful that we will end the year strongly.”

“Despite a more challenging market this year our underlying operation continues to deliver positive cash flow and profitability” said Dr Elias Samaras, Chief Executive Officer “Elsewhere we are making good progress developing our renewables offer with multiple projects moving forward and funders keen to provide facilities to fund development of these projects.” he added.  

HEADLINES

Lower energy prices apply pressure, but positive cash flow and profitability continue

• Total revenue decreased 6.5% from $1,556,585 in the third quarter of 2023 to $1,454,715 in the same period this year, while total revenues for the first nine months of 2024 decreased 4.0% to $5,169,568 as compared to $5,387,715 in 2023, the result of lower retail electricity and gas prices in the UK market.
• Overall gross margin including depreciation in the third quarter decreased from 33.4% in 2023 to 29.0% this year, while gross margin excluding depreciation and impairment decreased from 45.3% to 42.8%, both the result of the difference between electricity and gas prices narrowing.
• Third quarter net losses were $39,622 this year as compared to a net profit of $169,332 in the third quarter of 2023, a reduction of 123.4%.
• Net profit for the first nine months of 2024 reduced 76.9% to $89,871 as compared to a net profit of $388,620 in the same period last year.
• Third quarter Non-GAAP adjusted EBITDA decreased to $ $159,989 compared to $366,475 in the third quarter of 2023.
• Non-GAAP adjusted EBITDA for the nine months to September 30, 2024 was $672,771, a reduction of 30.6% as compared to the $970,059 reported for the same period last year.
• Liquidity and cash position at September 30, 2024 improved to $3,849,458, up 33.5% on the cash held at September 30, 2023.
• Q3 2024 GAAP diluted net loss per share (EPS) was $0.0005, although the GAAP diluted net gain per share (EPS) for the 9-months ending September 30, 2024 was $0.001.

Operational performance

• Total energy production increased by 6.0% to 10,022,677 kWh for the quarter ending September 30, 2024 as compared to 9,454,644 kWh for the same period in 2023. Overall, energy production is up 6.0% in 2024 compared to 2023, the result of an enhanced operational strategy.

• Operational fleet capacity at September 30, 2024 was 47 systems at 45 sites totalling 5,851kW, a slight change in the 46 systems at 43 sites totalling 5,810kWe in operation at the end of the same quarter of 2023.

• With an average remaining contract length of 8.5 years some of the existing fleet of TEDOM units has been approaching milestone maintenance work such as engine overhauls or generator replacements. Despite the Company seeking to minimise disruption by scheduling these works for the summer quarter, some units had to be done sooner after condition-based monitoring highlighted a potential risk of failure. This affected generation and increased costs in the quarter.
• The Operations Team underwent personnel changes during the third quarter with the Plant Maintenance Technician’s contract being terminated and a new Service Engineer being hired, starting at the beginning of September. With increasing inflationary pressure on operating expenses and recent employment tax changes in the UK, Management have opted to postpone replacement of the Plant Maintenance Technician until early 2025.

Business and strategic development

• The term sheet signed with Celtic Manor Resort to provide a 1.5MW solar PV microgrid solution supported by a 500kW battery energy storage system has been extended while various consents are sought from both the local district network operator and local authority. Management expects to close this contract before year-end and the proposed system remains on course to be operational by the third quarter of 2025.
• An On-Site Utility form of contract has been agreed with a new funding partner for solar PV projects and final negotiations are currently underway to secure a master receivables funding agreement with this partner. Management expects this to be finalised during the fourth quarter and will make a separate announcement once it is in place. It is expected that this partner will provide funding for the Celtic Manor Resort project.
• Two further solar PV projects are in final negotiation with customers and contracts. These total 1,710kW and will also be funded by the new funding partner.  
• The first graduate Business Development Associate started with the Company in September and a second is currently being recruited. This second role is expected to be in post by the end of the year.
• The qualified pipeline of solar PV projects consists of 32 sites totalling more than 21.2MW of installed capacity. In addition, a qualified pipeline of CHP projects totalling 7 sites and 1.15MW of installed capacity has also been established.
• To minimise costs, the Directors of the UK operating company have opted to dissolve its two subsidiary companies and repay the loan outstanding to Attika Holdings Limited associated with the International Convention Centre Wales project. As a result, EuroSite Power Projects Limited, the UK entity has been placed into a Members Voluntary Liquidation and EuroSite Power Holdings Limited, the Cypriot entity is undergoing a formal Strike-off process with the Cypriot authorities.

Outlook and risks

• Management reports that the outlook for its financial performance in 2024 remains positive although the volatility of retail energy prices mean that both revenue and gross profits will continue to be subject to market forces that are beyond the Management’s control, particularly as many customers have opted for variable price contracts rather than the fixed price contracts that were previously the norm. This has led to greater month-to-month price volatility. Management will continue to focus on increasing generation from the existing fleet to help offset some of this variability.
• The difference between electricity and gas prices has narrowed in recent months leading to pressure on gross margin and reduced profitability. This narrowing is expected to persist, at least for the remainder of this year and into the first quarter of 2025. 
• Recent fiscal measures taken by the new UK government will result in increased costs, particularly related to employment taxes in the UK and these, together with other inflationary pressures may result in continued pressure on operating expenses both in the short and medium term. This could impact the Company’s ability to maintain profitability, but this is expected to ease as new solar PV projects become operational.
• Management expects profitability to continue, particularly at the UK level but investment in renewables, including hiring new staff to better exploit these opportunities could result in higher overheads and pressure on profitability.
• Risk remains in the volatility of wholesale energy markets and, in particular the ongoing ability for conflict in both Ukraine and the Middle East 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.
• Some operational challenges remain, particularly in the form of supply chain problems and availability of staff when recruiting for new roles. Both could cause extended downtime of units that develop a fault and require repair and expansion of our sales effort may also be restricted. Management will continue to do its best to counteract these problems.
• 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. Sales effort continues to be focused on renewables although the Company continues to offer CHP solutions.
• Management continues to keep a close eye on customer business performance and have identified a risk to some customers or specific sites, principally due to long-term debt needing to be restructured. This increases the risk of business failure in some customers or individual site closures that could in turn result in either novation or the termination of some existing contracts.

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, 2023. 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.

Investor Contact:
Dr. Elias Samaras                                                                                          
EuroSite Power Inc.                                                                                   
+44 800 028 8001                                                                                   
elias.samaras@eurositepower.co.uk