Content of the framework agreement
The framework agreement describes the separate agreements to be drawn up in the process. Absolicon’s proceeds from the sale can be grouped into three groups: acquisition of the line, license revenue and revenue from material sales.
1. Sale of the production line
The production line is of the same model as Absolicon has in Sweden and which the company has already delivered to Sichuan Province. The line with two six-axis robots has the capacity to produce 50 MW solar collectors (100,000 m2) per year. Together with the hardware, Absolicon provides consulting support for marketing and technical support, development and technical training.
The total value of hardware and activities covered by the agreement is estimated at € 4-5 million.
2. License to manufacture T160
For the right to manufacture T160 under Absolicon’s intellectual property protection, take part in future product development and use Absolicon’s trademark, a monthly license fee of approximately 4% applies to the sales value.
The production line in full production produces on a shift 50 MW solar collector (100 000 m2) per year with sales value € 20-25 million which with 4% license fee would mean about € 800 000 per year in license revenue. Absolicon’s estimate, however, is that it takes time for Enercity to develop the solar thermal market for industries in the region so that these volumes can be achieved.
3. Material supply
Through the agreement, Absolicon ensures access to patented components and high-quality inputs partly manufactured in Ecuador or locally at the installation site.
At full production, the production line needs to buy materials for € 10-15 million per year where 20% – 30% of purchases may go through Absolicon and 70% -80% from local subcontractors. The outcome for Absolicon depends to some extent on the result of Absolicon’s ongoing material investment.
The framework agreement sets out overarching principles
The framework agreement prescribes the general principles for the separate agreements to be drawn up, and the steps to be taken before a binding agreement for the acquisition of the production line can be signed. The estimated value of sales is subject to change as well as the definitive design of the production capacity of the production line. Absolicon estimates today that the sales value of the agreement is at the lower end of the range of € 4-5 million.
If Enercity fails to meet its commitments at every stage, they lose the right to complete the acquisition and then have the opportunity to recover part of the purchase price, but never for Absolicon’s incurred costs.
Market potential
Ecuador is located at the equatorial zone and the Andes mountain chain, in the western part of South America and has many locations with high solar radiation. The potential market in Ecuador, for a production line producing Absolicon T160 Solar collector amounts to 19 million sqm, equivalent to 4 million solar collectors or 9 GWth, avoiding almost 80% of the CO2 emissions of the industrial sector in Ecuador when replacing the use of oil products as energy source in the industry.
Enercity is a leading company in Ecuador specializing in efficient energy use and renewable energy sources.
Absolicon and Enercity have signed a framework agreement for the acquisition of a production line for establishment in Ecuador to provide the region with advanced solar collectors.
The cooperation is based on Enercity’s established contacts in Ecuador and neighboring countries as well as their long commercial experience in the market as one of the largest solar product importers in the region.
The largest segments of Absolicon’s solar collector technology in the region are:
- Food and beverage industry
- Textile industry
- Chemical industry
Next steps
In this case, negotiations for the signing of the framework agreement have been fast and cooperation is still at an early stage. Discussions have just begun on the first pilot installations of the T160 in Ecuador. More detailed contract writing is now taking place. Payment is made step by step in the same way as in the previous sale of the production line to the province of Sichuan.
