Minesto / product is a "dragon" that carries a turbine and generator and "flies" in a water

Pareto Securities comments on Minesto: The company's basic product is a "dragon" that carries a turbine and generator and "flies" in a water flow to generate green electricity. The benefits of marine currents versus wind are many: marine currents are more predictable, more energy-dense (more mass moving), and use minimal land. Minesto's technology adds to this by having a compact design that sweeps over a large area. This makes Minesto's system more efficient than competing stationary systems for marine energy, which means that water flows of less than 2.5 m / s become a financially reasonable resource to extract. In this way, Minesto expands the available resource in marine energy in a significant way. Minesto can thus offer renewable base power for coastal areas in much of the world - and thus a suitable complement to land-based (and intermittent) solar and wind power. The great potential of Minesto's technology has made the company successful in attracting public grants for its development and project activities over the years from various EU bodies, the UK and Sweden. The technology is proven on a quarter scale, and well protected by patents that were first developed when the concept was born within the framework of SAAB's R&D operations 2006-2007. Minesto started its first commercial scale project outside Wales in 2018 and since then a number of additional projects have started. In the Faroe Islands, installations will begin within the next few months to contribute to the islands' goal of reaching 100% renewable energy mix. In Florida and Taiwan, Minesto also has advanced plans to install power plants powered by ocean currents (such as the Gulf Stream), which naturally have great market potential. Minesto guides to reach an installed base of up to 10MW 2022 based on existing projects, with a strong rate of increase thereafter. The company further indicates a long-term potential for the project area in Wales of 80MW and for the project in the Faroe Islands of 70MW. We assume that Minesto can reach installed capacity of 10MW 2022e and 200MW 2025e, and as a result we expect Minesto to report positive cash flow 2022e and profit at EBIT level 2023e. Our DCF model indicates that the company value of SEK 2.9 billion (SEK 22 / share after dilution) and discounted multiples indicate a range of SEK 1.7-3.2 billion. Minesto's current market cap is around SEK 1.7 billion and the share stands at SEK 15. In summary, we see Minesto as a company with good potential to become an established supplier of equipment for producing renewable electricity, a large part of which will constitute renewable base power, which is highly sought after to increase the share of renewable electricity further in many electricity grids.