Europlasma bridges delays with costly equity
Europlasma bridges delays with costly equityFINANCING ISSUE
Clients/funding delays lead management to activate expensive equity/convertible funding.
FACT
Europlasma launches a €8m capital raising by a way of a convertible issue to bridge delays in its ongoing projects.
ANALYSIS
Europlasma is experiencing delays to the funding of its Tiper power generation plant and to a technology JV with ArcelorMittal. This is presumably forcing the group to go for another tranche of expensive financing in lieu of a traditional rights issue.
Indeed, convertibles issued in up to four tranches of €2m each over the next four months are immediately converted into equity and subsequently sold by the buyer (European High Growth Opportunities Fund). The mechanism at work means that Europlasma gets the necessary funds at the market expense. On a fully-diluted basis, the cost to existing shareholders is a c. 17% dilution.
The delays in completing the funding of Tiper, Europlasma’s second clean power generation unit, are disappointing as Europlasma had secured the backing of the European Investment Bank for €30m in debt financing as well as €12m from Ademe (a French state agency) and €2m from the region where Tiper sits. The delays in the technology JV with ArcelorMittal probably reflect the importance of the breakthrough in terms of process efficiency, somewhat implied in the lack of a public calendar anyway on this sensitive subject.
IMPACT
We had assumed a €10m equity raising over 2018 after allowing for a first €8m draw on the resources provided by European High Growth Opportunities which took place over H1. The second possible €8m round could potentially bring the effective total to €16m and presumably at a lower per share valuation. We will thus increase the number of shares by year-end by about 60 million as a first guess. This amounts to a c. 25% mechanical dilution.
Europlasma SA. Europlasma SA is a France-based company that offers a range of solutions for hazardous waste treatment. The Company's technology allows converting toxic waste into reusable materials. The Company is composed of four entities, such as Europlasma Torch & Process, which provides engineering consulting for hazardous waste treatment, and sells and licenses its plasma torches and technology; Inertam SAS, which specializes in destruction and valorization of asbestos waste and operates ash melting units; CHO Power SAS, which supplies technological solutions for the efficient transformation of biomass and waste into electric energy and Europe Environnement, which offers ventilation and air cleaning systems for industrial applications.
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