SHARC International Systems Inc (CSE: SHRC, OTCQV: INTWF, Forum) is not your typical green energy company. SHARC’s “market” is not your typical market.
When most people think of a “green energy company”, they envision an energy producer, utilizing an environmentally-friendly form of power generation. SHARC is even greener than that. SHARC International has developed patented technology that can (potentially) become the world’s #1 form of energy conservation.
Does that sound like too grandiose a claim for a junior company with (as of this writing) a market cap of only $12.5 million? Read on.
SHARC’s mission is to save, recycle, and reuse the energy we waste every time we turn on a hot-water tap. Think about it.
Every morning when we turn on the shower, we use many gallons of hot water that we have paid to heat, with that heating requiring energy (typically) produced from some form of conventional power generation. As that hot water runs down our drains, all the energy used to heat this water is being wasted.
(See how SHARC™ works in this brief clip)
How much energy? The numbers are literally mind-boggling.
In just one year, the average person produces a ½ tonne per year carbon footprint from just the energy needed for their hot water. Put in different terms, the new “Wall Centre Project” is a 1,000-unit housing development with a SHARC™ system installed. This is the single-largest installation to date. Just this one SHARC™ system will reduce annual carbon emissions by 700 – 1,000 tonnes.
When we frame this equation in aggregate terms, the numbers are even more staggering. Each day, around the world, we produce roughly 100 billion gallons of sewage flow, with much of this wastewater being heated.
For each degree of heat extracted from this wastewater by SHARC’s patented heat-exchange technology, this saves $500 million – per degree, per day. If installed globally, this could translate into 14 million tonnes of additional carbon emissions reductions per degree.
When we take a shower, we typically use water 20 to 30 degrees (Celsius) warmer than what comes into the building. That wastewater contains significant amounts of recoverable energy. In a conference call with Stockhouse Editorial, CEO Mueller framed this wastewater in different terms.
The world is currently throwing away 1/3 of the energy used in buildings through the heated wastewater that runs down our drains. This is a huge economic opportunity. For SHARC, this heated wastewater is an inexhaustible resource that we can harvest.
The potential for enormous energy conservation exists, with an “inexhaustible resource” for the Company’s operations. SHARC’s heat-exchange energy conservation technology can dramatically reduce energy requirements – at the individual residence level, for multi-unit residential or commercial buildings, and even at a district or city-wide scale.
(click to enlarge)
The question in the minds of investors: is this extremely innovative technology economical? Yes.
For SHARC’s clients, a full SHARC™ system can save on total energy usage by as much as 80%. Payback on the initial investment comes in four years (or less). However, investors want to make money.
The SHARC™ system also generates strong returns for the Company. Revenues come in two forms: the initial cap-ex for the system plus installation. Then there are the recurring revenues from “heat purchasing agreements” (monetizing the energy extracted from wastewater).
SHARC negotiates a 20-year “heat-purchase agreement” at the time of sale/installation. The systems themselves have a projected 30 – 40 year lifespan. That means (at least) 20 years of recurring revenues with each new system installed.
Margins on the sale and installation of SHARC™ systems are robust. The heat purchasing agreements are the icing on the cake. The Company is projecting achieving cash-flow positive operations this quarter. But this success hasn’t come overnight.
(click to enlarge)
SHARC International is the brainchild of co-founders Lynn Mueller and Daryle Anderson, created in 2010. Anderson continues to support operations as a Director. CEO and Chairman Mueller has a track record of corporate success.
Before SHARC, Lynn Mueller was President of Water Furnace Canada and Water Furnace International during the 1990’s. WFI moved from $0.30 per share up to $30.60, at the time of its $378 million takeover. Given the size of this market and the opportunities for energy conservation, the potential of SHARC International is significantly greater.
As previously noted, SHARC’s operations are not comprised of only a single technology platform. After pioneering the original SHARC™ system, the Company experienced a common issue with respect to the adoption of revolutionary technology: sticker shock.
A SHARC™ system can typically be installed at a cost of approximately $1 million, generating a 400 – 600% return in cost savings versus the initial investment. This is generally double the savings/return that can be generated from any competing technology.
The full SHARC™ system does more than merely recycle energy from heated wastewater. It also optimizes energy usage for a building’s heating and air-conditioning systems – a complete “HVAC” solution. However, for city-planners and large project-developers, squeezing an additional $1 million out of an operating budget isn’t always easy, even for a smart-building innovation that more than pays for itself.
The next step in SHARC’s evolution was to devise a system designed for a single multi-unit residential or commercial building: PIRANHA™. PIRANHA™ was first rolled out in 2016.
PIRANHA™ is a scaled-down technology platform, focusing exclusively on the heat-exchange (and energy conservation) from hot water usage alone. However, a PIRANHA™ system comes with a sticker price of only about $50,000, a much smaller financial bite. And the return on investment for end-users is still comparable.
(click to enlarge)
Even more recent is the Company’s latest innovation: “MAKO”. MAKO™ systems are designed for single-family residences. This smaller hot-water energy conservation system is a further scaled-down version of this technology – and with an installation cost of only a few thousand dollars.
With a world-wide opportunity, SHARC’s operations are global. To date, the Company has introduced SHARC™ systems into Canada, the U.S., the UK, and Australia. In 2014, SHARC Energy Systems was created as a wholly-owned subsidiary for its UK/EU operations.
The current showcase for SHARC’s operations is its joint venture with Scottish Water, the publicly-owned national water utility of Scotland. This long-term project has been a game-changer for the Company, with the first installations occurring in 2015.
SHARC is already targeting more than CAD$20 million in new system installations, excluding all of the recurring revenues. Scottish Water was so enthusiastic about the partnership with SHARC™ that it obtained a CAD$10.29 million grant from Scotland’s government to facilitate funding. The Company’s technology has already earned a “Best Innovation Award” in Scotland.
The latest initiative in this project was just announced on May 8, 2018. A leather manufacturer in the Dalmornock district of Glasgow has signed a deal to purchase energy produced from the SHARC™ system operated by Scottish Water. This is the first customer to enter into one of these “district heating” contracts with SHARC’s UK subsidiary.
This joint venture in Scotland is still in its infancy. Through an agreement with Scottish Water Horizons, SHARC has access to Scotland’s entire sewer system. This enables the Company to introduce additional SHARC systems throughout that nation.
(click to enlarge)
While Scotland represents SHARC’s greatest commercial success to this point, the opportunities for market penetration in the United States are potentially much more lucrative. Specifically, California is the Company’s current target.
SHARC’s focus on California is due to more than the State’s well-earned reputation for embracing “green” technology. California provides an ideal market for the Company’s MAKO™ platform. Not only are MAKO™ systems smaller, designed for single-family residences. They also incorporate an additional component: solar panels.
Through the green energy produced from these solar cells along with the energy savings from heat-exchange with heated wastewater, these “MAKO” homes approach energy self-sufficiency. As with SHARC™ and PIRANHA™, this is also technology that pays for itself. Homeowners have the opportunity to save money and save the planet.
CEO Mueller firmly believes that the strong economic incentives to adopt SHARC’s technology will be sufficient to drive sales, revenues, and profits. While moving to cash-flow positive operations is the near-term objective (expected imminently), the Company’s medium-term goal is to generate $200 million in new revenues over the next three years.
For those California residents who aren’t motivated to add a MAKO™ installation for cost savings or altruistic reasons alone, California’s government is about to give these homeowners a strong push. A New York Times article on May 9, 2018 spells this out.
California Is Set to Require Solar Power for New Homes
The California Energy Commission is expected to approve changes to the building code on Wednesday to require solar panels on all new homes, putting the state even farther in the forefront in the use of solar power.
The mandate, to take effect in 2020, is expected to add $8,000 to $12,000 to the cost of a house — no small sum in a state where housing affordability is already a major issue.
Homeowners (and construction companies) must incorporate solar panels into all new homes. With a MAKO™ system satisfying this requirement plus generating additional cost savings through its heat-exchange technology, SHARC’s solution will be financially attractive to homeowners and construction companies alike.
(click to enlarge)
Then there is the Holy Grail of energy-conservation markets: China. China’s government has made one of the planet’s strongest commitments to energy efficiency – especially in the energy efficiency of buildings. With its first China licensing agreement already in place, SHARC is already busy here.
From district-wide systems to single-family solutions, SHARC’s technology is flexible enough to provide several cost-effective sub-sectors in which to operate. CEO Mueller reinforced that the principal driver of demand for this technology is the robust economics for SHARC’s three installation options.
This technology provides cost optimization for any heating, airconditioning or hot-water load. But SHARC doesn’t have to rely upon government legislation to mandate the adoption of this technology. SHARC stands on its own in economic terms, while it also offers one of the greatest opportunities in the world to reduce carbon emissions.
For its customers, SHARC provides huge savings on energy costs. For the Company and its shareholders, the economics of this technology can generate robust profits. For the planet, SHARC offers one of the most cost-effective options to generate dramatic reductions in CO2 emissions. Win/win/win.
Appendix: SHARC case studies
Leisure CentreStudent Accommodation Block
(Nottingham, UK)
www.sharcenergy.com
FULL DISCLOSURE: SHARC International Systems Inc. is a paid client of Stockhouse Publishing.