Annual report 2018
Azelio offers a system of thermal energy storage and Stirling engine-based electricity production 24 hours a day, or during peak demand. Azelio carries out the final assembly of the Stirling engine in factories and owns all of the unique product design for the system, while subcontractors produce components and subsystems such as heliostats. Research & development and sales & marketing are managed internally and in cooperation with strategic partners.
Azelio can use two distinct business models, depending on the commercial conditions and requirements specific to each individual project. Initially Azelio may run jointly owned projects in cooperation with third parties to establish the technology in the market. Over time, once Azelio’s systems and technology are established and tested, the Company will act as a technology provider, sell the technology and provide training in building a successful and commercially viable project. Azelio’s system is offered to customers in the global energy market who build projects around the sun belt with installations of between 500 kW and 20 MW for electricity production during the day, combined with storage capacity for the electricity produced at nominal effect for 13 hours. In the longer term Azelio intends to develop its offering and offer systems for projects up to 100 MW. Azelio will sell the system to EPC providers (project development companies) who are then responsible for installation. Initially, however, Azelio will participate in the start-up phase for new installations to train EPC providers for successful system installation and maintenance.
Azelio may work with project development companies who are responsible for project development but supported by Azelio. Joint discussions are taking place with potential project stakeholders such as financial institutions and local authorities. This approach will help Azelio to generate income both as a project owner and technology provider, but will also generate aftermarket income through system monitoring, maintenance and service. Aftermarket processes will be particularly important for Azelio in the initial projects. By having full control, Azelio can obtain data from the systems in operation to ensure a faster transition to a business model as a technology provider.
Once the system is established in the market Azelio will use an income model based on system sales. In the aftermarket phase an income model in the form of a service fee will be used, with recurring income being received for system monitoring, service and maintenance.
Discussions are under way with various actors who can fund projects by providing loans, such as the Swedish Export Credit Agency (EKN) and the Swedish Export Credit Corporation (SEK). Under an agreement with financial backers, they would provide a loan to Azelio where the manufacturing risk and risk of loss on claims is covered by a guarantee. This provides a lower interest expense for Azelio compared with normal loan financing. There is also the possibility of obtaining equity, loans or contributions from organisations, authorities and international development banks such as the World Bank and the European Bank for Reconstruction and Development to finance projects.
Azelio’s goal is to provide renewable electricity at a low cost through energy storage and distribution on demand. The Company intends to offer the most cost-effective alternative for controllable and distributed electricity production, and to contribute to progress towards renewable energy making up a majority of the future global energy mix. To achieve the above goal, the Company has established the following targets for each year from 2019 to 2021:
Azelio has the following targets for annual production of Stirling engines:
The Company has a long-term target of achieving an EBIT margin of at least 15%.
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