News Column

Important Asset Build-Out Should Elevate Undervalued Blue Sphere Significantly

Aug 13 2013 12:00AM

Marketwire

LogoTracker

LOS ANGELES, CA -- (Marketwired) -- 08/13/13 -- Blue Sphere Corp. (OTCQB: BLSP) is on the cusp of breaking ground on two significant electrical production plants in the United States, using Anaerobic Digestion technology. Blue Sphere's plants located in Charlotte, North Carolina and Johnston, Rhode Island are expected to produce 5.2 MW and 3.2 MW of electricity daily. Blue Sphere's management believes they are at the forefront of a technological shift that will change how the United States will process waste and produce a substantial amount of its energy. There are many practical and regulatory factors that point to success for Blue Sphere's initiatives.

The CEO of Blue Sphere, Shlomi Palas, had a good explanation of Blue Sphere's business plan in a recently published interview. "Blue Sphere develops, builds and operates facilities which use organic waste to produce clean energy. Blue Sphere is positioned in a multibillion dollar arena which is currently serviced by very few and small-scale competitors. The endless supply of waste, which we call "the new oil fields", the new strict Federal and State legislation to divert organic waste from landfills, the already-in-force legislation to substitute fossil energy with renewable energy, the Federal and State incentives for the activities above, all these tectonic movements are the power behind Blue Sphere's raison d'être. Blue sphere has an objective of building a portfolio of 60 MW high yield assets with an IRR greater than 15% with-in the next 5 years."

Anaerobic Digestion technology has been used for years in Europe to convert organic and food waste into electricity. There are approximately 8,000 anaerobic digestion plants functioning in Europe, but only a handful in the U.S. Most of the U.S. based plants are small and use manure waste on or near animal farming sites. The technology utilizes the waste product to extract methane gas and the methane is in turn injected into generators to produce electricity. The electricity is sold into the local grids and the remains of the waste are sold as a supplement to fertilizer. In the end, the waste is turned into usable and saleable products, thus there is nothing left after the process. Blue Sphere has partnered with one of the leading designers and manufactures of anaerobic digestion facilities out of Germany, Biogas Nord, to co-develop and build these facilities in the U.S. Biogas Nord has built approximately 400 anaerobic digestion facilities in Europe and worldwide, and had over $100 million in revenues in 2012.

Blue Sphere has other major partners on these projects as well. They have brought in a hedge fund that specializes in Cleantech investing as an equity partner. This equity partner has committed to up to $7.5 million for the Charlotte project and $5 million for the smaller Johnson plant. Caterpillar Financial Services, a division of Caterpillar Inc. is providing almost $18 million in debt for the construction of the Charlotte project. Both groups are expected to fund upon their respective commitments to the Charlotte project by the end of August, which will allow Blue Sphere and Biogas Nord to begin construction of the facility in September of this year. Blue Sphere's management has stated that they expect the Charlotte project to be complete and producing within 12 months of the beginning of construction.

With the beginning of construction expected in the next 6 weeks, investors should be looking at what Blue Sphere will be worth when their two projects are completed at the end of 2014. Management stated in their investor presentation, located on the company's website, that they expect the net present value of the Charlotte project to be $40 million upon completion. The Johnston project is about 60% smaller, thus it can be inferred that the Johnston plan will have a net present value of about $24 million. Blue Sphere will own 37.5% of each project, making its ownership positions worth $15 million for Charlotte, $9 million for Johnston and $24 million combined. Blue Sphere has about 910 million shares outstanding, making the value of the projects, on a per share basis, worth $0.026/share (2.6 cents per share) upon completion. If investors add in the value of future projects that management has alluded to, the total value at the end of 2014 could be worth over $0.03/share (3 cents per share). Blue Sphere's stock price closed at $0.0036/share (.36 cents per share) on Friday, August 9th, which means that Blue Sphere's stock could appreciate over 700 to 800% by the completion of the construction of both facilities at the end of 2014.

The aforementioned valuation facts suggest Blue Sphere is undervalued today. Once the financings close on the equity and debt for the Charlotte project at the end of this month, Blue Sphere will be paid back their expenses for planning the Charlotte project. Blue Sphere will be reimbursed over $500,000 and management will look to finalize the financing on the Johnston project. With asset value literally building and significant cash being added to Blue Sphere, it could be surmised that Blue Sphere should be trading about $0.01/share (1 cent per share) by early September to reflect the growing value of the company.

Blue Sphere is a small company working to become a leader in the clean energy production area. They have a business plan that fits the changing regulatory standards for waste and energy, and have two facilities about to begin construction. Blue Sphere's management believes they will have several more facilities in various stages of construction and planning by 2015. The above quote from the CEO states they want to have a portfolio of facilities producing 60 Megawatts of electricity in 5 years. That equates to 11 facilities the size of the Charlotte project. If Blue Sphere manages to fulfill this goal while maintaining their 37.5% ownership position, they will have created $165 million of net present value for the company, if Blue Sphere can increase their ownership to the stated desired levels of over 50%, they will exceed $200 million in value. These valuations are several years off, but investors looking for a Cleantech investment that has longevity and tremendous upside potential owe it to themselves to research and consider and investment in Blue Sphere.



Add to Digg Bookmark with del.icio.us Add to Newsvine



Media Contact:
Email Contact
Equity Brief Magazine
14 South Moulton Street
3rd Floor
London W1K 5QP
United Kingdom





Source: Marketwire