BREAKING NEWS – 08.07.2024

In the press release dated July 1st, 2024, ESPE SpA – a Company operating on a continuous basis and structured in the renewable energy sector as an EPC (Engineering, Procurement and Construction) contractor specialised in the supply of photovoltaic systems and owner of the “ESPE”-branded technology for the construction of small wind turbines and biomass cogenerators, announced that it has completed the notary deed for the transfer of the branch relating to the Operation & Maintenance (“O&M”) activity to Reflow Srl (“Reflow”), company active in the wind farm sector based in Carmignano di Brenta (PD), Italy. Consequently, ESPE assumes legal control of Reflow, with a 67.0% stake.  The transaction, consistently with what was stated during the IPO, aims to optimise the O&M services offered to ESPE customers, increasing quality levels and maximising the efficiency of the organisational structure. The integration with a team of professionals, with whom ESPE has already collaborated well in the past, will enable a more efficient management and an increase in plant performance. The branch transferred concerns service activities, including preventive and routine maintenance of photovoltaic systems, instrumental checks of electrical equipment, cleaning of panels and inverters, analysis of the status of photovoltaic panels and structures, as well as maintenance of air conditioning units. In addition, it includes washing of photovoltaic modules with a reverse osmosis system and vegetation management, such as mowing grass and watering plants. Finally, daily monitoring services of the performance of photovoltaic systems are provided. The transferred business line includes equipment and motor vehicles, finance leases, software licenses used for the business, eight employees and trade receivables as at April 30th, 2024 for a value of approximately € 14,000.00. The transaction took place in continuity of book values and the transfer was made for an amount of € 50,000.00 of which € 20,304.00 as capital and € 29,696.00 as a premium. The expert attributed a value of € 199,797.00 to the branch Following the transaction, Reflow’s share capital amounts to € 30,304.00, of which ESPE holds 67.0%. The remaining part of the share capital is held by the founding partners of Reflow, Pietro Fabris (8.0%) and HPRO Srl (25.0%), company held by Enrico Savegnago (50.0%) and Ivan Fabris (50.0%). During today’s shareholders’ meeting, Enrico Meneghetti was appointed Chairman of Reflow, while Dr. Ivan Fabris assumed the role of Chief Executive Officer. The subscription of the capital increase and the transfer of the branch will take effect from the date of completion of the registration with the Commercial Register. However, to simplify the management and accounting relationships, the Company’s transfer and takeover took place with effect from July 1st, 2024. It should be noted that Reflow holds a 40.0% stake in Brain Room Srl, company specialised in video surveillance for photovoltaic systems through an advanced artificial intelligence system developed internally. The remaining part of Brain Room Srl is held by Giuseppe Mongillo (20.0%), Alessandro Signorelli (10.0%) and Secur Impianti Srl (30.0%), company 51.0% controlled by Luciano Signorelli and 49.0% by Elisa Signorelli. In compliance with what we anticipated during the IPO, ESPE SpA continues moving forward brilliantly with the implementation of its development, integration and business rationalisation plan. The news of the transfer comes after the announcement, by means of the press release dated June 28th, 2024, concerning the signing of the binding letter of intent (LoI) for the acquisition of the entire share capital of PERMATECH Srl, a company specialised in obtaining preparatory authorisations for the construction of large photovoltaic plants.  The proposed transaction, which is expected to be completed by October 31st, 2024, upon successful completion of the specific commercial, legal, financial, tax and accounting Due Diligence on the target, aims to allow ESPE to continue to develop its expertise, for the upstream integration of the complete bureaucratic and authorisation process necessary for the construction and deployment of large photovoltaic plants. The eventual integration will optimise project development timeframes and improve operational efficiency, offering more complete and competitive solutions on the market. Thanks to this approach, ESPE will be able to respond more effectively to customer needs, consolidating its position and achieving higher margins thanks to the internalisation of a high value-added activity such as authorisation development. PERMATECH, established in 2008 and based in Resana (TV), is a leader in the field of photovoltaic, agrivoltaic and BESS (Battery Energy Storage System) project development. The company stands out for the offer of energy design, consultancy and diagnosis services for the industrial, commercial and civil sectors. The share capital of PERMATECH, equal to € 0.01 million, is currently held by the historical partners Matteo Vecchiato (for a stake of 80.0%) and Giuseppe Vecchiato (for the remaining 20.0% stake). PERMATECH’s customers include EPCs, energy producers and national and international industrial customers. Moreover, in June 2024 the Company boasts a pipeline of photovoltaic projects to be authorised on the national Italian territory of over 600 MW. As at 31 December 2023, the Company achieved a turnover of approximately € 2.30 million and an EBITDA of approximately € 0.60 million, with an EBITDA Margin of 27.0% and a positive cash NFP of € 0.30 million. The organisational structure, composed of highly specialised resources, had an average staff of 13 people in 2023. The acquisition of PERMATECH will allow ESPE to expand its business, offering a complete service ranging from the authorisation of a project, to the turnkey installation of a photovoltaic system, in addition to the O&M activity, thanks to the acquisition of Reflow.  The acquisition will enable ESPE to benefit from greater strength and structure in the area of obtaining permits for renewable energy plants, consolidating a long-term competitive advantage through a more integrated service. A price of € 1.50 million has been agreed on, to be paid in several instalments, of which € 0.10 million as a possible conditional portion to the occurrence of certain future events. Specifically:  the price to be paid entirely in cash through own resources amounts to € 0.60 million, of which € 0.13 million as an advance payment (€ 0.09 million already paid) to be attributed to the payment of the price in case of completion of the Proposed Transaction or to be returned in case of negative outcome of the Due Diligence activity; the remaining component of the price, equal to approximately € 0.90 million, will be paid upon completion of the Proposed Transaction through the exercise of the proxy granted by the extraordinary meeting of ESPE shareholders to the Board of Directors on January 26th, 2024 through a capital increase reserved for the selling shareholders, the methods and timing of which will be defined later.  The Proposed Transaction is conditioned upon the occurrence of certain circumstances including: the successful outcome of the Due Diligence;  reaching an agreement on the content of the SPA (Sale and Purchase Agreement) and the related representations and warranties in line with market practice;  reaching an agreement with Matteo Vecchiato for his appointment as sole director of PERMATECH; reaching a non-compete agreement with a duration of at least three years with the sellers.  The transfer of the Operation & Maintenance branch and the signing of the binding Letter of Intent for the acquisition of PERMATECH are major milestones in ESPE’s growth and strategic development path. These events not only enhance our Company’s operational and competitive capabilities in the renewable energy sector, improving both revenues and margins, but also contribute to consolidating the Company’s experience in the O&M sector and facilitating its expansion into the large photovoltaic system segment. This positive evolution of the business, in line with expectations of growth and added value for investors, further reinforces our positive view on the stock. Pending further news on the evolution of operations and evaluation of the half-year results, we confirm our estimates: target price of € 4.15, BUY rating and Medium risk.

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