CHARLOTTE, N.C., May 26, 2016 /PRNewswire/ -- Blue Sphere
Corporation (the "Company", "Blue Sphere", "we", "our" or "us"), an international Independent Power Producer (IPP) that is
globally active in the clean energy production and waste to energy markets, released today a shareholder letter from the
Company's Chief Executive Officer, reviewing developments at the Company and outlining plans for its future.
Dear Fellow Shareholders,
I am pleased to update you on the ongoing progress at our Company. Our industry is growing at an unprecedented pace,
with environmental and regulatory concerns making Blue Sphere's assets and experience more relevant than ever. We reside in a
unique niche of the clean energy market by focusing on de-risked, cash flow-generating assets that provide attractive returns on
investment.
U.S. Assets
In the United States, we are nearing completion of our North
Carolina and Rhode Island biogas projects. These two facilities will produce a
combined 8.4 megawatts of power and have aggregate construction costs of nearly US$47
million. The energy produced by these facilities will be purchased under long term power purchase agreements (PPAs)
by our utility partners, Duke Energy (NYSE: DUK) in North Carolina and National Grid (NYSE: NGG)
in Rhode Island, both giants in the industry. We believe having PPAs in place allows the
projects to have a "predictive" revenue source.
These projects are now over 90% complete, and we expect both facilities to come online this summer. The facilities are
estimated to produce combined annual revenue of approximately US$14.5 million and EBITDA of
US$8 million. Blue Sphere owns 25% of the 5.2 megawatt North
Carolina project and 22.75% of the 3.2 megawatt Rhode Island project. Once online
and at full operating capacity, the Blue Sphere cash flow participation from these projects will take the form of equity
dividends, since we are minority partners in the projects.
In addition to any cash flow participation from these U.S. facilities, we expect to receive the remainder of the one-time
milestone payments under our development contract totaling nearly US$2.5 million once the U.S.
facilities come online. To date, the Company has received US$4.5 million in milestone
payments. In addition, the projects in North Carolina and Rhode
Island qualify for and have received incentive tax credits. Blue Sphere and its financial partners will receive the
benefits of these incentives by either taking credits against project earnings or potentially selling the benefit to another user
at a discount.
Italian Assets
As we have previously disclosed, in Italy, Blue Sphere is the 100% owner of four biogas
facilities that are already operational and collectively producing approximately 4 megawatts of power. These assets also
have long-term power purchase agreements (PPAs) with the state-owned electrical authority, Gestore del Servizi Energetici
(GSE). We receive monthly cash flow from these facilities. These assets are expected to produce over
US$9 million in sales and over US$4 million in EBITDA on an annual
basis, which we will consolidate on our financial statements. As the acquisition costs of these projects are retired, the
long-term value of our predictive revenue model will become more apparent.
The EBITDA from the Italian plants is guaranteed by Austep, S.p.A., our operating partner. Blue Sphere expects to receive the
annual guaranteed EBITDA, and Austep, S.p.A. will receive any revenues in excess of the guaranteed EBITDA. Austep is a
20-year old engineering firm with deep experience in the alternative energy sector, having built over 350 such
facilities.
Pipeline
Our success in developing two large-scale waste-to-energy plants in the United States as well
as acquiring four biogas plants in Italy has opened the door to many opportunities. The
Blue Sphere management team is proceeding in a disciplined manner and insisting on IRR's that are at least 15-25 percent or
higher for development projects.
In Italy, we anticipate making acquisitions of additional operating facilities, each around 1
megawatt in size, under similar terms to the four we already own, including guaranteed EBITDA arrangements and outsourced plant
management. We have signed letters of intent or term sheets for three facilities and are currently evaluating over 40 other
opportunities in Italy. Although we cannot make any guarantees, we hope to will close on
multiple Italian facilities in the coming year or two.
In the United States, we have a robust pipeline of over 10 megawatts emphasizing greenfield
development. These developments are similar to our Rhode Island and North Carolina projects. We expect to have announcements regarding these developments in 2016.
In the Netherlands, our third focus market, we previously announced that we entered into a
letter of intent to develop a US$24 million waste-to-energy facility in the Brabant province.
Assuming we close the financing for this project, the development has an estimated construction time of 12 months and forecasted
annual EBITDA of US$4 million once operational. We have been active in the Netherlands for two years and have several other project developments that we are advancing.
In addition to the above listed developments, our pipeline includes projects at earlier stages. Blue Sphere has two
development projects in Israel and greenfield projects in the UK, collectively representing over
US$400 million in potential development. We have no certainty that any of these projects will
come to fruition and delays in our industry are all too common, but we are pleased with the opportunities before us and
optimistic that we will have additional progress to share in the months ahead.
Balance Sheet
As the Company prepares for an up-listing to a primary stock exchange such as the NYSE MKT or NASDAQ, you can expect to see
Blue Sphere improve on our internal controls and the timeliness and quality of our filings. In the interim, I thought it would be
helpful to clarify certain items on our balance sheet as of March 31, 2016, the most recently
reported and not yet reviewed.
Because we focus on acquiring and developing cash flow generating assets with long term PPAs (and EBITDA guarantees in the
case of our Italian assets), we think it is appropriate to finance a portion of our assets with debt. Nearly all the debt on our
balance sheet is project-level debt associated with specific assets. The only corporate level debt we have consists of
approximately US$3.0 million in debentures, which mature in November
2017, and approximately US$500,000 in long-term notes due to managers.
Additionally, I want to point out that the current liability on our balance sheet of approximately US$9.3 million in deferred revenues from joint ventures will be eliminated when our Rhode Island and North Carolina projects reach development completion.
Concluding Thoughts
I am very proud of Blue Sphere's current portfolio of assets. With our market cap at its current level, and EBITDA and
other income from our current assets expected to soon equal a US$6 million annualized run rate, we
believe that the Company's common stock is deeply undervalued. We are proactively meeting with investors and presenting at
investor conferences to help introduce the Company's success and potential to a wider audience.
As the CEO of the Company, I believe that Blue Sphere is much more than an undervalued portfolio of cash flow-generating
assets. Our pipeline, experience, relationships and execution show that we are a strong growth company with a proven
ability to expand our portfolio and create attractive investments with long-term return potential. I am extremely excited about
the opportunities in front of us and feel that, with some successes already behind us, we are in the best position we have ever
been to execute on our pipeline of opportunities.
I thank you for being part of this journey.
Sincerely,
Shlomi Palas, CEO
About Blue Sphere Corporation
Blue Sphere Corporation is a diversified independent power producer that develops, owns, and operates clean-tech,
waste-to-energy facilities in the United States and abroad. The company primarily converts
organic waste into electricity, but also has the ability to generate heat, natural gas and organic byproducts through various
technologies.
Blue Sphere facilities eliminate waste that would normally be disposed in landfills, reduce greenhouse gas emissions and
protect water quality, helping to solve important global environmental issues. Blue Sphere is headquartered in Charlotte, North Carolina and has operations in the United States and
Europe. For further information about Blue Sphere, please visit the Company's website: www.bluespherecorporate.com.
Forward-Looking Statements
This press release contains certain forward-looking statements (within the meaning of Section 27A of the Securities Act of
1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform
Act of 1995), which are subject to risks and uncertainties and may change at any time. Because such statements include risks and
uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. These
statements are only predictions and involve known and unknown risks, uncertainties and other factors including, without
limitation, (i) uncertainties regarding general economic and market conditions, (ii) uncertainties regarding changes in the clean
tech sector, (iii) uncertainties regarding implementation of the Company's business strategy, and (iv) other risk factors as
outlined in the Company's periodic reports, as filed with the U.S. Securities and Exchange Commission. As such, there is no
assurance that the initiatives described in this press release will be successfully implemented or meet expectations.
Forward-looking statements in this document speak only as of the date on which such statements were made, and we undertake no
obligation to update any such statements that may become untrue because of subsequent events.
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SOURCE Blue Sphere Corporation