Biofrigas is one of Sweden's few listed companies dealing with biofuels - which are used by transport companies both at sea and on the road, as well as in industry. Biofrigas has developed a plant ‘Cryo Sep’ that converts biogas into liquid form. In today's interview, Jonas Stålhandske will tell us more about why the range increases by several times with liquid biofuel compared to gas, as well as tell us about where Biofrigas is right now and what is on the horizon!
Refresh our readers' memories! What is Biofrigas doing?
Jonas Stålhandske (CEO) Biofrigas: Biofrigas makes container-based plants that convert biogas, from gas to liquid. This allows biogas producers to start selling a liquid, circularly produced fuel, for example to heavy transport, shipping or industry.
The advantage of having it as a liquid is that it is more compact than gas and thus you get more energy into the tank of a vehicle and can then drive much further on the roads. In 2020, the proportion of liquefied gas was a few percent of all biogas fuel refuelled in Sweden, in the first half of this year the corresponding proportion is about 30%. We see that more and more haulage companies and bus operators are now switching to liquid fuels as the range is much better, about 3-4 times!
Shipping and industry also see great benefits as they can replace the fossil liquid natural gas with a circular biogas instead. This will have a strong positive impact on their climate footprint.
So basically you collect cow waste and ferment it in a tank? And then transfer the contents to CryoSep?
Jonas Stålhandske (CEO) Biofrigas: That's right, you collect cow waste and other manure (or our source-sorted food waste, or production residues from the food industry) in a tank (digester). This produces a gas called biogas, which contains about 60% methane and 40% carbon dioxide. This gas can be fed into our plant and the methane comes out in one pipe and the carbon dioxide in another. That's clever.
Does Biofrigas have more products than CryoSep P?
Jonas Stålhandske (CEO) Biofrigas: CryoSep P is suitable for larger plants such as many municipal biogas plants for food waste or medium-sized professional operators.
In addition to CryoSep P, we also have our original product, CryoSep. It is suitable for smaller facilities such as individual farms or smaller municipal wastewater treatment plants.
Both products have in common that they feed a gas that is a mixture of different amounts of methane and carbon dioxide. Our plants separate the two gases into two different pure products that are more commercially interesting than the gas that is a mixture. The methane can be sold as a fuel or input to the chemical industry and the carbon dioxide can be used, for example, to fill fire extinguishers and other applications.
In your Q2 report, we could read that revenues amounted to SEK 3.0 million. Is this Biofrigas' first ever revenue?
Jonas Stålhandske (CEO) Biofrigas: At least during my time in the company. The SEK 3 million relates to the plant that we are now finalising for installation at our first customer, and as we accumulate costs for that plant, we are now recording the advance we received earlier as revenue. This is an important milestone for us, of course.
You have now presented two LOIs totalling SEK 26 million, from Norway and Finland respectively, with the possibility of an extension with the Finnish player of a further SEK 41 million. Tell us more about these orders, and what are the conditions for these to become concrete orders?
Jonas Stålhandske (CEO) Biofrigas: The two letters of intent are a clear intention from our customers to invest in Biofrigas plants once they have gone through their processes related to financing and authorisation.
Right now, they are in the process of applying for government funding for their project and the processes look a little different in different countries, but there are national drivers for increased production of circular fuels and politicians want to support this type of project.
To receive this type of support, you need an investment with a very high climate benefit, and producing liquefied biogas for the transport sector is one such case. The climate benefit in relation to the size of the investment is very good. In parallel with the financing process, the customer can also start preparing to obtain the necessary permits.
If it is a new operator, this may take a little longer, while for a business that already produces biogas it is easier.
In both cases the customer has an existing plant, the one in Norway is on a farm and the one in Finland is a private biogas producer. The plant in Finland is a few times larger than the Norwegian one and therefore there is also an exciting opportunity in Finland to add more plants as they continue to convert their production.
It is worth saying about letters of intent that not all types of actors can write them. In the municipal world, for example, there is an evaluation, then a public tender, and whoever wins the tender gets the contract.
How big is your outstanding offer stock right now?
Jonas Stålhandske (CEO) Biofrigas: At the end of May it was more than 150 MSEK and when we presented the Q2 report it had increased significantly.
We do not see a decline in interest in our products, but quite the opposite!
We continue to offer but do not communicate more details about the size of the stock now. We started communicating the size of the offer stock to show the market that there is a concrete interest in our products, but in the future we want to be able to communicate more about letters of intent and contracts.
How many of these offers are assessed/guessed to possibly become concrete orders?
Jonas Stålhandske (CEO) Biofrigas: Those who ask for quotations are seriously interested and we make every effort to respond to these requests in the best possible way.
We are getting good feedback and feel that we have good products that are well suited to the task.
It is still too early for us to be able to draw conclusions about how many people go into business. However, I think we are competing well with others in the market.
Trading in your TO2 warrants is in full swing! Soon it will be time to subscribe (buy) these options. What are the dates and conditions?
Jonas Stålhandske (CEO) Biofrigas: If you own a TO2, you have the right to subscribe for a share in Biofrigas during the period 1-15 October, some banks and managers may have a last day for exercise that falls before 15 October and it is best to check what applies to your own part. The subscription price has been set at SEK 0.42 per share, which corresponds to 70% of the volume-weighted average price of the Biofrigas share during the period 12-26 September. So in practice, one can say a 30% discount on the average price.
Right now you can buy and sell TO2 on Spotlight Stock Market and the last day for trading in them is 11 October.
It is worth adding that the warrants of series TO2 that are not exercised by 15 October 2024, or sold by 11 October 2024, will expire without value.
In the future, we will repeat these conditions through separate press releases and all information will of course be available on the website.
How many shares are there in Biofrigas right now, and how many will there be if all TO2 are subscribed?
Jonas Stålhandske (CEO) Biofrigas: There are now 37,670,918 shares in Biofrigas and there are 28,766,982 TO2, which means that at full subscription there will be 66,437,900 shares.
What will you use the money for?
Jonas Stålhandske (CEO) Biofrigas: We want to continue to develop the company during the transition to commercialisation we are in and will therefore use the majority for sales and marketing. Over time, as we grow, we also want to strengthen our resources in research & development as well as in purchasing, production, logistics and support.
We expect a lot to happen in the company in the coming years.
Do you have any financial targets?
Jonas Stålhandske (CEO) Biofrigas: No, our main goals right now are to successfully install our first commercial plant and to continue our commercial transition with the intention of signing further letters of intent and contracts.
Give three reasons why you should invest in Biofrigas!
Jonas Stålhandske (CEO) Biofrigas: We are a company with a relatively small cost base and we sell plants at relatively high values, which means that we can reach interesting turnover and profit levels fairly soon as sales increase.
The market for liquefied biogas is growing rapidly and now accounts for a significant proportion of all biogas fuel used.
We expect this share to continue to increase, which will create business opportunities for customers who want to take advantage of this and protect their existing investments by adding liquefaction. A steadily growing market reduces the commercial risk of investing.
There is a favourable investment climate in the market at the moment, with government investment and production subsidies allocated to favour green investments, this lowers the bar for investment decisions and we see these subsidies continuing to exist in the long term. This will drive business and the financial risk is reduced.
Dagens Börs thanks Jonas Stålhandske for a very interesting interview and we wish him and Biofrigas all the best for the future!