Wavepiston

Cleantech is a ‘hot’ sector. Unsurprisingly, the company has secured €9.6 million of funding since 2019. Its latest funding round is going to be circa €2 million including a €670k debt facility. Clearly, the company is pre-revenue and the earliest first commercial installation will only be possible by 2027. That means execution and the current demonstration phase is not without risk. However, the company has not committed all its trial work to one project. Wavepiston is also conducting a demonstration in the Carribean island of Martinique on a hybrid electricity/desalination project.

The key commercial delivery metric, apart from the hardware surviving the mechanical challenges of huge ocean forces, will be the effective unit cost of delivering one MW hour of electricity and/or one cubic metre of clean desalinated water. So, there is a combined mechanical and commercial challenge for Wavepiston’s technology. So far, the prototype results at 1:2 scale in the North Sea, the 7 month trial in the calmer seas of Nissum Bredning and the lab results at the University of Aalborg have been encouraging. The founder team have committed more than 8 years to the development of Wavepiston’s solution so that should be also considered a signal of confidence in commercial success.

The one liner …….

• Wavepiston’s technology can harness wave energy and turn it into clean electricity and water with a potential customer base prepared to spend €20 billion per annum for a cleaner non-diesel alternative.

Stats for your besties…..

• $275 trillion – yep, that’s what McKinsey reckon will be spent on physical assets over the next 30 years to hit Net Zero decarbonisation targets for 2050. On an annual basis, that’s $9 trillion per annum – or the combined GDPs of Japan and Germany – spent each year to wean the planet off fossil fuels.
• $100 billion – a recent Bloomberg article highlighted the fact that in the subarctic region of Sweden alone a whopping $100 billion has been committed to a variety of cleantech projects from textile recycling to  battery gigafactories to hydrogen-fueled steel manufacture.

The Problem

Wave energy is very real and very powerful. To date, too powerful. The engineering challenge to develop mechanical units durable enough to survive the violence of ocean storms must be weighed up against the cost efficiency of deploying heavyweight steel structures. Existing wave power structures and wind turbines weigh between 400 and 900 tonnes. The challenge is to deliver a durable relatively light-weight solution which works with the forces of the sea, not against them.

The Solution

Wavepiston’s solution weighs just 190 tonnes and is installed easily in standard modular form. Critically, the patented energy collector units are a series of plates(with adjustable surface areas) on a durable chain/string which, when they oscillate with the motion of the sea, pumps sea water in a pressurised state into a pipe. This pressurised water is then piped to a standard turbine or desalination plant on dry land. Using Wavepiston’s patented “force cancellation” principle the system is able to reduce the amount of forces on the mooring and structure to 1:10, requiring a simpler structure and therefore reducing capital costs.

Additional attractions of this technology are the modular design and light flexible structure which remains fully submerged, non-polluting and non-intrusive. This is an attractive alternative to diesel generators but also does not spoil the aesthetics of resorts, islands and communities who wish to preserve the natural beauty of a coastline.  The Wavepiston system is initially expected to deliver electricity at a cost of € 0.13-0.2/kWh and desalinated water at a price of € 0.7-1/m3. Prices are expected to drop to one-third as the technology matures and scales up.

How will Wavepiston make money?

Wavepiston will deliver turn-key systems for producing wave-to-energy, wave-to-desalinated water or combined. Revenue will be based on the installed capacity as well as operations and maintenance during the system’s lifetime. Sounds good? Yep, but to be honest, it needs to read better. On two fronts: i) there are very few financial details in the Wavepiston investment documents and ii) the designated CFO in the management team does not even list Wavepiston as a current role in his LinkedIn bio! Given the significant amounts of money raised and spent to date, plus the flagged €30-40 million of future investment required, investors should receive greater reassurance that good financial controls and disciplines are already in place.

The Opportunity

• The total addressable market (TAM) for Wavepiston is valued at €300 billion per annum
• The serviceable addressable market(SAM) is worth €20 billion
• The realistic obtainable market (SOM) for Wavepiston is probably worth €4 billion per annum.
• Exits and funding round/valuation uplifts, even pre-commercial system deployment, can range from €40 million to €200 million compared to current pre-money valuation of €13.9 million. 

Financials

The company is in pre-revenue phase. The investor slide deck does not contain any detailed breakdown of annual financial projections but is forecasting revenues of more than €50 million in its first year of commercial deployment(2027/28).

To date, investment has been a mix of equity and grant funding totalling €9.6 million. The current round of funding (€1.4m equity, €600k debt) will bring total investment to almost €12 million ahead of potential full scale installation works. The balance sheet is not burdened with any significant debt which will be helpful when more significant funding rounds are negotiated.

The Team

The founder and management team is a mix of engineering and business skill sets. Many have been with Wavepiston since the beginning. However, the team does lack any real track record of previous successful builds/exits albeit the Board has reasonable levels of banking and institutional investment experience. As mentioned previously, the nature of this capital intensive business cries out for a significant focus on the Finance function. Additional comfort and commitment to financial controls would be helpful for the overall investment proposition.

The USP?

The combination of robust light weight technology with low cost and submerged positioning  is the triple- win for Wavepiston’s solution.

Valuation:

Given the pre-revenue positioning of this opportunity and the lack of financials (or commercial contracts) this investment must be considered an “option”. The size of the opportunity in the cleantech sector is enormous with €300 billion of annual spend and the potential value ‘crystallisation’ in Q2 2023 of a successful demonstration in Gran Canaria possibly allows for a double-digit million euro valuation but perhaps the more persuasive valuation pillar is the amount of funds invested. On that basis of invested capital(EV/IC), a valuation of almost €14 million against invested capital of €12 million can reasonably underpin the current offer of equity. This mitigates the significant margin for error inherent in a capital intensive ‘option’ play.

*Please note Wavepiston is not eligible for EIS tax rebates for investors.

Other Considerations:

Campaign Content: Deck materials, explanatory videos, expert and partner papers/statements all provide a ‘slick’ narrative for the opportunity. A stronger roadmap on financials/milestones and capex deployment would have given more substantive comfort to this reader.

Social/Financial Media: Relatively low profile in a noisy space. The Wavepiston Twitter handle has just the 123 followers but its LinkedIn account has a healthier 3,000 followers.