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Phoenix Solar Thermal signs framework agreement with Absolicon to set up Production line in Canada

2021-11-09

Phoenix Solar Thermal Inc., a CEM Company, has signed a framework agreement with Absolicon for development of the solar thermal industry in North America and the installation of a production line for the T160 Solar collector in Canada. CEM and its affiliates (the “CEM Group”) is a family-owned thermal power project delivery group of companies that is focused on engineering consulting, project development, and construction of custom engineered energy systems throughout North America. The total sales value covered by the agreement is estimated at € 4-5 million plus a monthly license fee of approximately € 30/sold collector and sales of components. 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.

Market potential

Canada has many locations with high solar radiation. The potential market in Canada, for a production line producing Absolicon T160 Solar collector amounts to 10 million sqm, equivalent to 2 million solar collectors or 5 GWth, reducing CO2 emissions in the industrial sector in Canada when replacing the use of fossil fuel as energy source in the industry.

Over the last 20 years, the CEM Group has built a reputation for successful delivery of thermal power projects through excellence in project development, engineering, and construction. As a member of the CEM Group, Phoenix Solar Thermal will focus on the development, financing, engineering, and construction of solar thermal projects for industrial and institutional thermal energy users.

Absolicon and Phoenix Solar Thermal have signed a framework agreement for the establishment of a production line in Canada to provide the region with advanced solar collectors.

The collaboration is based on Phoenix Solar Thermal and the CEM Group’s qualified experience of thermal energy as leading developer and designer of custom engineered energy systems in the region.

The largest segments of Absolicon’s solar collector technology in the region are:

  • Pulp & paper
  • Food processing
  • Mining
  • Chemicals

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 (18 000 collectors) 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 € 30/sold collector applies to the sales value.

The production line in full production produces on a shift 50 MW solar collector (18 000 collectors) per year with sales value € 20-25 million which with approximately € 30 license fee / sold collector would mean about € 500 000 per year in license revenue. Absolicon’s estimate, however, is that it takes time for Phoenix Solar Thermal 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 Canada or locally at the installation site.

At full production, the production line needs to buy materials for € 10-15 million per year where 30% – 40% of purchases may go through Absolicon and 60% – 70% 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. Absolicon estimates today that the sales value of the agreement is at the lower end of the range of € 4-5 million. The framework agreement does not stipulate any binding minimum levels meaning that Phoenix Solar Thermal is obliged to order for a certain value. The estimated value of sales is subject to change as well as the definitive design of the production capacity of the production line.

If Phoenix Solar Thermal 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.

Next steps

The cooperation is still at an early stage proceeding with online training and business development strategy. Following this, a more detailed contract will be drawn up and future payment will be made step by step in the same way as in the previous sale of the production line to the province of Sichuan.

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