Minesto publishes Year-End Report 2023

Financial Reports

26 februari 2024

CEO Dr Martin Edlund: ”Historic milestone reached – Dragon 12 energy production to the grid paves the way for buildout of commercial arrays”.

Significant events October-December 2023

In November, the onshore testing of the Dragon 12 kite is completed. The system is being shipped for installation and commissioning in the Faroe Islands.

In December, Minesto successfully completes the installation of a drilled and grouted seabed anchor solution for the Dragon 12,at the company’s production site offshore in Vestmannasund, Faroe Islands. The offshore infrastructure is completed and the production site for Dragon 12 is ready for power production.

In December, Minesto takes for the second time part in the Swedish official business delegation to United Nations’ global climate change conference, COP28, this time held in Dubai.

After the end of the period:

The Swedish Energy Agency awards Minesto a 2.8 MSEK grant to support development and testing of next generation mooring system. The grant co-funds a project through which Minesto will advance performance of the unique tether system that moors the powerplant to the seabed.

Minesto uses the existing Launch & Recovery method (LARS) for the first megawatt tidal kite Dragon 12 (1.2 MW, 25 tons). The operations developed for the Dragon 4 (100kW, 2.5 tons) were proven equally effective with the large-scale kites utilizing the same small work vessel.

In the early morning of February 9, Minesto reaches a key milestone: the tidal powerplant Dragon 12 – rated at 1.2 MW – is commissioned and generates its first electricity to the national grid in the Faroe Islands.

After the first two weeks of testing, the Dragon 12 functionality is verified and power production performance is satisfactory and as predicted. All core operating functions have been successfully verified in its first phase of operation. Given the stable system behaviour, Minesto concludes the technology risks of scale-up have been significantly reduced.

The Group in summary 1 January-31 December 2023

Total operating income amounted to SEK 45,590 thousand (45,749 thousand) and mainly included capitalised development work.

Operating loss was SEK –28,680 thousand (–23,745 thousand). The negative result is largely attributable to business development and administration related to technology development and includes costs such as personnel and consultants. Of the personnel costs, SEK 41 393 thousand (42 818 thousand) has been capitalised as development work.

At the end of the year, the capitalised development costs amounted to SEK 476,608 thousand (377,172 thousand), in addition to capitalised patent expenses of SEK 16,320 thousand (15,285 thousand) within the intangible assets of SEK 492,928 thousand (392,457 thousand).

Grants of SEK 23,189 thousand (71,794 thousand) were accrued during financial year, of which SEK 20,006 thousand (69,152 thousand) reduced the acquisition value of the capitalised development costs. During the year, payments of SEK 43,675 thou­sand (54,638 thousand) were received from public funding schemes, of which SEK 42,408 thousand (54,638 thousand) relates to approved claims and the remainder relates to advances.

Cash flow amounted to SEK -20,015 thousand (–116,766 thousand).

At the end of the reporting period, equity amounted to SEK 522,746 thousand (453,343 thousand).

CEO comment:

Historic milestone reached – Dragon 12 energy production to the grid paves the way for buildout of commercial arrays

The megawatt-scale Dragon 12 powerplant now producing electricity to the Faroese grid, shows the way for the global exploitation of tidal and ocean currents as a renewable natural resource, in many parts of the world. For Minesto, the Dragon 12 is highly valuable to showcase electricity production from a full-scale powerplant, in attracting both private and public financing of the first larger customer projects – arrays of underwater kites.

The site in the Faroe Islands – a strategic asset

Testing and electricity production of the Dragon 12 continues with a high priority. We’re learning through our experience the knowledge and capabilities required to deliver a first series of megawatt systems for energy-producing arrays in the Faroes, and other entry markets. The Dragon Class powerplants have delivered all functionality and at satisfactory performance and so form a basis for buildout in commercial sites. We now have a full-scale production site in operation, which demonstrates our unique technology to utility customers and site investors. This is a great asset in the business creation process.

Sales and financing of production sites

Large energy projects have long sales cycles, especially so for first large-scale tidal arrays. Therefore, the sales process work is running in parallel towards closing deals. Minesto is currently engaged in several in-depth dialogues with potential customers to achieve this. We are working systematically with our partners to develop buildout plans based on the available natural resource, similar to the 200MW plan in the Faroe Islands. The smaller entry-level projects are perfect starting points for large-scale buildout, potentially generating good profitability and enhanced value-creation to the total energy mix. It should be noted that these “smaller” entry-level projects are assessed to be worth 50-200MSEK to Minesto.

The cost and risk profile for the first sites often makes it desirable to offer private investors complementary public financing. Therefore, Minesto is working actively to tie public financing to the first production sites. The successful commissioning of Dragon 12 has provided a good foundation for competing for public financing, both in and outside of the EU. The size of public funding available illustrates that the political will is more explicit and powerful than ever before to reshape the energy system. This in turn increases the level of engagement of the private energy corporations’ wishing to lead and drive the energy transition globally. The potential funding for Minesto’s technology the coming years is around 90-120M EUR.

A complementary entry-level business opportunity is based on smaller reference installations. These installations aim to create local market acceptance and will support environmental permitting of future larger site projects. In our key markets, we are offering to collaboration partners an upgraded version of the Dragon 4, into microgrid projects. This offering can be a step towards large-scale buildout. It also paves the way for a substantial market for small-scale installations for niche applications and smaller islands.

A growing interest for ocean energy in general and for Minesto in particular

It is very positive to see the growing understanding and increasing support for innovative energy technology. Ocean energy is now depicted in growth forecasts connected to the global energy transition outlined in IRENA and IEA reports. It is most welcome and important to see focus on innovation as a necessity to transform the global energy system. Another observation is that Minesto, to an increasing extent, is invited to high-level forums within the global energy sector. At one of these recent occasions, the IEA’s (International Energy Agency) Innovation Forum, in Paris, it was stated that innovation is needed as soon as possible, but also good to see that the world is now acting powerfully to drive the transition.

A well-defined market potential and a sharpened investment case

Minesto’s global long-term market for larger sites adds up to a 650 GW in powerplant sales with associated aftermarket. For every planned and ordered megawatt, Minesto generates sales of about 1 M EUR, constituting about 50% of the production site investment. The aftermarket is considerable and is estimated to generate, during the project life span (20 years), more than twice as much sales as the initial investment. Applying the same logic to the proposed buildout of 200 MW in the Faroe Islands, Minesto would generate product sales of about 200 M EUR.

In March 2024, Minesto plans to carry out a Rights Issue to continue the commercial development. The rights issue is secured as planned by approximately 83% subscription- and guarantee commitments. The rights issue will provide the company with a solid financial base for the ongoing commercial roll-out.

More than ever, we look forward to pushing the commercial development further, to build a new industry within ocean energy and create industrial value for our owners and collaboration partners.

/Martin Edlund, CEO of Minesto

The Year-End Report is available to download at Minesto’s website: