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Two cutting-edge energy efficiency companies team up to capture growing market
Commodity Online | March 14 2018
UPDATED 14:38:33 IST

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Companies and residences are always looking for ways to cut energy costs and Smartcool Systems Inc. (SSC:TSX.V, SSCFF:OTC.MKTS, R3W:FSE) has been on the cutting edge of developing energy efficiency software that reduces the energy consumption of air conditioning, refrigeration and heat pump systems.

Total Energy Concepts Inc. (TEC), a Minnesota-based firm in business since 2003, also provides energy efficiency solutions, and offers a holistic approach to energy cost reduction, and is a distributor of Smartcool products.

The two companies have agreed to join forces with the recent announcement that Smartcool will acquire TEC; the synergistic move is expected to help propel the combined company to capture a greater share of the rapidly growing energy efficiency market.

According to the March 13 news release, TEC "will merge into a wholly owned Nevada subsidiary of Smartcool to create a new TEC division of the Smartcool group of companies." Damian Smith, CEO of TEC, will stay on as CEO of the division.

Under the terms of the agreement, Smartcool will acquire 100% of TEC in return for "US$150,000 in cash payable over 12 months from the closing date, US$850,000 payable in Smartcool common shares priced at the closing market price on the date before the transaction closes (the "Closing Price"), and 5,000,000 non-transferable share purchase warrants." For each warrant, Smith is entitled to purchase one share of Smartcool at the Closing Price for a period of five years.

The CEOs of the two companies believe that "the synergies from a strategic merger of these two companies present a very attractive growth opportunity."

Smartcool's CEO Ted Konyi stated, "I first met Damian 3 years ago and was immediately impressed with the way he combined his engineering background with sound sales strategies, a rare combination. . .I am very excited for this merger to occur and I am eagerly anticipating significant benefits for all parties."

Damian Smith said, "The combination of our two company's sales and distributor networks, as well as the complementary products that we can offer as a comprehensive solution are key to growth in new sales opportunities, both domestically as well as internationally."

Both companies are among the vanguard for the development of energy efficiency products. Sonia Aggarwal, vice president of Energy Innovation and director of America's Power Plan wrote recently in Forbes that "global cooling is on the brink of a huge economic boom." She notes that urbanization and rising incomes in tropical climates have led researchers to predict that the energy needs for cooling could increase tenfold by 2050.

"Simply improving the efficiency of room air conditioners 30% by 2030 could reduce peak electricity demand by the same amount of electricity produced by more than 1,500 power plants, saving consumers hundreds of billions of dollars and improving public health by reducing pollution," Aggarwal notes.

The International Energy Agency (IEA) noted that global investment in energy efficiency grew 9% in 2016 to $231 billion.

Smartcool's products allow air conditioners, refrigeration equipment and heat pumps to function more efficiently by reducing the energy consumption of their compressors by as much as 40%. Return on investment can be as little as 12 months.

Smartcool's clients include a major Premier League football stadium as well as a golf club in the UK, McDonald's branches in Riyadh, and SSE's Data Centre in the UK. A long list of users including Burger King, Dell Computers, Tesco, General Electric, Hilton, Radisson, Mercedes Benz, Jaguar Motorcars, United Utilities, Telefonica and Emcor have benefitted from its technology.

Late last year, Smartcool announced the formation of a division to market its ECOhomeproduct and is initially targeting residential air conditioning systems in the Phoenix, Arizona, area.

TEC brings to the table multiple conservation measures. CEO Damian Smith told Streetwise Reports that the company's "systematic approach addresses all aspects of electrical and HVAC energy optimization for a facility that make sense, offering a cumulative effect for energy savings that will all add up to a total savings."

TEC's Voltage Conditioning Units "make the energy distribution smooth, needing less energy to get power to the equipment in a facility," explained Smith. "Our Power Factor Correction products optimize the usage of energy throughout the facility, requiring less energy from the utility company. We have Intelligent Motor Controllers that optimize the energy a motor uses, resulting in energy savings of up to 40%. Our LED Lighting program can give up to an 80% savings."

TEC also partners with schools and government agencies to reduce the energy footprint of their buildings. Offering energy project financing, public entities are able to reduce energy costs without capital expenditures.

Companies solely focused on energy efficiency have been able to take a piece of the energy efficiency market. For instance, Legend Power Systems Inc. (LPS:TSX.V) has a CA$80 million market cap.

Smartcool has around 200 million shares outstanding, of which nearly 50% are closely held. Its market cap is around CA$10 million.

Source: Streetwise Reports

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