OVERVIEW

  • Samad Power Ltd, a privately owned, pre-revenue, engineering company, based in Milton Keynes (UK), is developing a range of innovative, new micro CHP (‘combined heat and power’) domestic gas boilers, which have the potential to replace the current generation of condensing boilers almost completely. Over the next 5-10 years, Samad management believes the ‘micro-CHP boiler’ could become the de facto industry standard across the UK and Europe .
  • Samad’s first product to market will be the Turbo Green Boiler ‘TGB’ – a wall-mounted 17 kW(th) / 2.9 kW(e) system, which is currently at TRL stage 8 and is designed for use in larger houses and other properties such as care homes and hotels. Commercial trials are due to start within the next few months with the first TGB sales expected before end 2019. The second product will be ‘TwinGen’ – a slightly smaller 10 kW(th) / 2 kW(e) wall hung unit, currently at TRL stage 5 with the first product sales expected before end December 2020.
  • The UK is the largest domestic boiler market in Europe, (and the third largest in the world, after China and South Korea) with 26 mn installations and approx. 1.7mn unit sales per year. EU boiler sales (incl. UK) total 8.1 million units per year.
  • Samad Power’s micro-CHP technology offers two clear and compelling advantages. For domestic consumers it means a dramatic reduction in overall utility bills – up to 30% without a ‘feed-in tariff’ or any other form of government subsidy. For the UK economy as a whole, it means more efficient utilisation of natural gas, the UK’s principal source of non-renewable energy – with the added bonus of reduced pressure on the electricity grid during periods of peak winter demand.
  • Current headcount comprises 18 staff members; 11 full time employees + 7 part-time contractors. Because it intends to follow an ‘Intel-inside’ licencing model, rather than manufacture its own boilers, management does not anticipate any significant increase in headcount. Total forecast headcount as of June 2024 is 46 full-time employees (FTEs).
  • Samad is currently looking to raise a total of £2.5 million new equity by May 2021. All new funds will be used to support the commercialisation of TGB and TwinGen. No further equity investment will be required after May 2021. The company is EIS eligible and has already issued compliance certificates to investors following confirmation of EIS eligibility by HMRC in May 2017.
  • The company is 63% (directly and indirectly) owned by its founder, Seyed Mohseni, who is a seasoned entrepreneur based in Milton Keynes. The rest of the shares are held by ‘angel’ investors. There are no institutional shareholders.
  • Samad Power is also investigating the possibility of adapting its micro-turbine technology for other applications, apart from domestic gas boilers.

MARKET OPPORTUNITY

In terms of domestic heating, the default solution in most European houses is a gas, or oil-fired boiler. Natural gas is relatively cheap across most of Europe and boiler technology has evolved to the point where modern condensing boilers are both efficient and relatively cheap to buy and install. The EU boiler market is currently the largest in the world with a total of 8.1 million units sold per year.  According to forecasters, annual sales, currently USD 9.0 Billion, could exceed USD 12 Billion* by 2024. So, there is a very large commercial opportunity for Samad – provided it can demonstrate that its new technology offers improved overall efficiency (versus condensing boilers) coupled with high reliability and a relatively short ‘pay-back’ period.

Samad Power management team believes that its new, micro-CHP boilers have the potential to displace the condensing boiler and become the new industry ‘standard’ product.

 [*source: Global Market Insights, Inc.]

ENVIRONMENTAL BENEFITS 

Samad Power’s micro-CHP technology offers considerable environmental benefits in terms of carbon saved. According to 2016 data from the British Property Federation, total CO2 emissions from the residential buildings sector amounted to 94 million tonnes – of which 28 million tonnes resulted from electricity generation by power stations.

 

UK property CO2 Emissions (2016)      
(CO2 mn tonnes) Direct emissions via power stations Total emissions Share of total
Public sector buildings 7 5 12 3%
Residential buildings 66 28 94 25%
Commercial buildings 19 13 32 9%
Factories & other uses 235 63%
Total emissions 92 46 373 100%
[source: British Property Federation “Property Data Report 2017” www.bpf.org.uk]

 

The company estimates that for every TGB or TwinGen boiler installed there should typically be a saving of 0.6 – 0.9 tonnes CO2 per house per year (see following table).

 

 

Annual CO2 saving per installation    
Average house Large house Care home
  TwinGen TGB TGB x3
Average emissions (CCGT)* kgCO2eq/kWh 0.487 0.487 0.487
Electricity use per year kWh 2,608 4,017 72,800
CO2 emissions per year tonnes CO2eq 1.3 2.0 35.5
Saving on grid kWh 1,261 1,867 39,918
Carbon reduction tonnes CO2eq 0.6 0.9 19.4
[source: GridWatch.co.uk]

 

If Samad Power can achieve consumer support for the concept of domestic electricity generation, there is a clear potential to eliminate a significant part of that 28 million tonnes of CO2. According to current data from GridWatch.co.uk, gas-fired (i.e. ‘combined-cycle gas turbine’ – CCGT) power stations produce 0.487kg of CO2* equivalent (CO2e) per kWh of power generated. Gas represents the most important energy source as regards power generation. As of Q1 2018, gas accounted for 39.9% of total power generation for the UK national grid

 

Assuming that every TwinGen boiler will generate, on average, 1,261 kWh per year, means that each unit installation should typically save 0.6 tonnes CO2 per year. So, if Samad Power could achieve 10% UK market penetration – i.e. a total of 2.5mn TwinGen installations – it would mean a saving of approximately 1.5 million tonnes CO2 per year. [*source: GridWatch.co.uk]

Samad Power’s micro turbine technology offers the additional benefit of reducing demand on the UK electricity grid at peak periods.  Enabling domestic gas boilers to produce electricity means that demand on the grid in the winter months between approximately 4pm and 8pm will be reduced, because that peak electricity demand will coincide with the demand for central heating and hot water.

PROGRESS TO DATE 

  • TGB, which will be Samad Power’s first product to market, is currently undergoing CE certification and field trials. So far, the first batch of five TGB units have been assembled, two of which have been installed in workshop rigs for endurance testing. The second batch of TGBs, comprising a further five units will be assembled by end February 2019, and start field trials in April. This will be followed by a third batch of five units to be assembled and to start field trials by end June 2019.
  • Samad Power expects to have completed the initial field trials and to have achieved final CE product certification by end December 2019.
  • As the TGB field trials progress over H1 2019, management will be engaging with OEMs with the intention of signing its first manufacturing / distribution agreement in H2 2019. Management expects to have secured orders for a total of 500 TGB units before end 2019.
  • Concurrent with the TGB development programme, Samad is also working on ‘TwinGen’, which will be its second product to market. Broadly speaking, the TwinGen programme will run approximately 12 months behind the TGB programme. Management expects to have achieved certification and the first orders for TwinGen units before end December 2020. According to current forecasts, Samad expects to sell slightly more than 1,000 TwinGen units before the end of the June 2021 financial year.

ROUTES TO MARKET

Samad Power does not intend to start its own boiler manufacturing operation. Instead it will supply micro turbines and power electronics to the boiler Original Equipment Manufacturers (‘OEMs’) who will integrate the products into boiler designs that are currently produced.

Samad intends to sign licence distribution agreements with boiler manufacturers, whereby Samad will supply micro turbine sub-components, which the OEMs will incorporate into their own branded boilers and distribute via their existing sales channels.

Major players in the domestic UK boiler market include Baxi Heating (Warwick, UK), Vaillant Group (Remscheid, Germany), Ideal Stelrad (Hull, UK), Worcester Bosch (Worcester, UK), Viessmann (Telford, UK), Johnson & Starley (Northampton, UK) and Intergas (Kidderminster, UK). Samad Power has already held preliminary discussions with a number of EU based OEMs including Baxi, Riello, Viessmann, Sermeta (burner manufacturer) and Elco.

RISKS  

Risk 1: Technology 

There are still a number of technological challenges which Samad Power must overcome before its new products are ‘market-ready’. One of the key issues is matching the output specification of TGB and TwinGen to typical domestic use.

 

Risk 2: Consumer Acceptance

Even if Samad Power can successfully meet all the technological challenges, it is still possible that consumers prove slow to adopt the new generation of micro-CHP boilers, particularly if they are more expensive to buy and install than standard condensing boilers.

 

Risk 3: Government Regulation

The UK Energy Research Centre has prepared a 2050 Target for the UK, which aims at 80% carbon emission reduction by the end of 2050. While, UK Govt. policy should be broadly supportive of Samad Power’s new micro-turbine technology, there is a risk that future UK Govt policy might be implemented, which is deliberately designed to favour the introduction of other carbon-reducing technologies at the expense of micro-CHP.

 

Risk 4: Capital

Management anticipates that it will need to raise £3.0mn by May 2021. Samad Power Ltd. is a pre-revenue company and does not expect to start generating revenue from product sales until 2020. To date the bulk of its funding has come via a combination of new capital invested and grant funding from the UK Govt.

 

Risk 5: Failure to Secure an OEM Partner on Acceptable Terms

If Samad Power cannot reach a royalty / licence deal with one of the major OEMs, its route to market will be harder and probably take longer. The UK boiler market is dominated by 5-6 key OEMs, most of which are either direct or indirectly owned by larger European groups.