The first commercial order includes one TES.POD® for delivery to the Dubai Solar complex named after the vice president Mohammed Bin Rashid Al Maktoum. The complex is one of the largest in the world and set to reach 5000MW of capacity by 2030 by mainly PV (and some CSP). The solar plant is a part of Dubai&#8217;s extensive plans within its Clean Energy Strategy, targeting a 7% clean energy output for 2020, which is set to expand into 25% in 2030, followed by 75% until 2050.
&nbsp;
The installation will be placed at the visitor center by ALEC Energy as EPC. ALEC has an already existing MoU-pipeline of 49MW together with Azelio until 2025. This first deal shows good faith in the potential of converting the rest of the pipeline into actual deals. Even if the order is as small as one unit, it has importance for the commercial process in terms of both establishing the first installation to get commercial running data but also in terms of marketing value.
&nbsp;
It&#8217;s good to have the first deal in place as we consider delays to be the largest risk at this point. It&#8217;s not either the deal we expected but is sound in relation. Anyhow, based on the current MoU-pipeline for 2021 in terms of potential deal value and the likelihood of reaching a deal in each project, we now consider our current sales estimate of SEK ~250m to be rather optimistic. As the current MoU-pipeline for 2021 currently amounts to around SEK 212m. Taking a more cautious stance, we reduce our sales estimate to SEK 84m (-67%) while leaving 2022 unchanged for now. Below follow our current projections.
&nbsp;
<img class="alignnone wp-image-801318" src="https://res.cloudinary.com/redeye/w_700,h_532,c_fill,dpr_2.0/cms/app/uploads/2020/12/2020-12-09-first-commercial-order-table.png" alt="Base case scenario - Estimates" width="700" height="532" />
&nbsp;
As the near-term sales are small compared to the potential sales in just the next few years, the estimate changes have no major effect on our current valuation range. We reiterate our positive stance while the share is trading almost at our bull case of SEK 45 per share. There is, however, further upside potential if the company&#8217;s high set production targets are met, despite the latest months price surge of almost 80%.
&nbsp;
In relation to our base case projections, Azelio trades at around 5x EBITDA for 2023E, where a more reasonable multiple would be at least 10x if the company progresses nicely with a substantial scale-up without any delays to its production or pipeline conversion. To exemplify such a revision, we believe a commercial validation will result in a reduced risk premium (WACC) from today&#8217;s around 15% down to around 10-11%, justifying revisions of our base case up to around SEK 60 per share. Further sparring our positive view is the potential ESG-investments from larger institutions, which to date only owns a minor piece of Azelio. 2021 will be a very exciting year, as Azelio approaches an inflection point, with volume production and hopefully several commercial deals.