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Tocardo International B.V.a Dutch private limited liability company
(besloten vennootschap met beperkte aansprakelijkheid)(the “Company”)
Issue of up to €5,000,000 7% Bonds with a maturity of five years (the “Bonds”)
T: +31(0)227 726200 E: [email protected] A: Sluiskolkkade 2, 1779 GP Den Oever (NL)
April 2017
INFORMATION MEMORANDUM – 25 April 2017
tocardo.com
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IMPORTANT INFORMATION
General
We are offering Bonds to investors in the Netherlands and we may offer Bonds to specifically targeted investors outside the Netherlands if this is permitted under local laws and regulations.
This information memorandum does not constitute or form part of an offer to sell or solicitation of an offer to sub-scribe for Bonds to any person in the United States of America or in any jurisdiction to whom or in which such offer or solicitation is unlawful. The Bonds have not been and will not be registered under the U.S. Securities Act of 1993, as amended (the “U.S. Securities Act”). The Bonds may not be offered, sold or delivered within the United States of America or to, or for the account or benefit of, U.S. Persons (as defined in Regulation S under the U.S Securities Act (Regulation S) except pursuant to an exemption from, or in a transaction not subject to, the registration require-ments of the U.S. Securities Act and applicable state securities laws.
The distribution of this information memorandum and the offer of Bonds in certain jurisdictions may be restricted by law. No action has been or will be taken by the Company to permit an offering of Bonds or to permit the posses-sion or distribution of this information memorandum in any jurisdiction where action for that purpose may be re-quired. Persons into whose possession this information memorandum comes should inform themselves about and observe any applicable restrictions. Any failure to comply with such restrictions may constitute a violation of the law.
Forward-looking statements
Certain statements in this information memorandum, such as statements that include the words or phrases “aims”, “would”, “could”, “is expected to”, “will continue”, “anticipates”, estimate”, “intend”, “plan”, “project”, “objective”, “goal”, “in-tention”, “forecast”, “strategy” or similar expressions, may constitute forward-looking statements. Other forward-look-ing statements can be identified by the context in which the statements are made. Forward-looking statements may appear in a number of places in this information memorandum. Although we believe that expectations reflected in forward-looking statements in this information memorandum are reasonable, such forward-looking statements are based on our current views and assumptions and involve known and unknown risks, uncertainties and other factors, many of which are outside our control and are difficult to predict, that may cause actual results or developments to differ materially from any future results or developments expressed or implied from the forward-looking statements.
Some of the factors that could cause actual results to differ materially from those contemplated by the for-ward-looking statements include, but are not limited to those discussed in chapter 9 (Risks) of this information memorandum. Should one or more of these risks or uncertainties materialize, or should any underlying assumptions prove to be incorrect, our actual financial condition, cash flows or results of operations could differ materially from what is described herein as anticipated, believed, estimated or expected.
Investors are urged to read this information memorandum thoroughly for a more complete discussion of the factors that could affect our future performance and the industry in which we operate.
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The forward-looking statements included in this information memorandum speak only at the date hereof and are expressly qualified in their entirety by the cautionary statements included in this information memorandum. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Investor suitability
The contents of this information memorandum should not be construed as legal, financial or tax advice. Each pro-spective investor should consult his or its own legal adviser, independent financial adviser or tax adviser for legal, financial or tax advice.
We do note that we are of the view that the Bonds are not suitable for investors that:
do not understand what we want to do with the proceeds of the issuance of Bonds; do not understand the Bonds; do not want to take the risk of losing money; need the money they may spend on Bonds within five years; need the interest on the Bonds in order to cover daily living costs; need to borrow money to invest in the Bonds.
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Table of contents
Chapter 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Chapter 2 The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Chapter 3 Our business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Chapter 4 The market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Chapter 5 Historical financial information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Chapter 6 Our future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Chapter 7 The offering and use of proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Chapter 8 The Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Chapter 9 Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Chapter 10 Tax aspects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Chapter 11 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Chapter 12 Subscription and allotment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Chapter 13 Parties involved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Annex I: Terms and conditions of the Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Annex II: Subscription form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
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Chapter 1 - Introduction
About us
Tocardo International B.V. (the “Company”, “Tocardo” or “we”) was established as an independent company in December 2008 and is active in the design and production of tidal energy turbines as well as in providing services to users of such turbines. We currently own ten grid connected operational turbines in various locations in The Netherlands and Scotland. The Company is located in Den Oever, The Netherlands.
We are also increasingly active in tidal energy project development through site selection, feasibility studies, front end engineering design, business case development and financial and project engineering. We are in the process of acquiring exclusive project development rights for tidal energy project sites in the UK, Canada and the Netherlands. These sites have a combined potential installed capacity of 75 megawatt (MW) and are expected to be installed over the next two to five years.
In our view the tidal energy market is on the brink of becoming a commercially viable alternative and addition to other renewable energy solutions. Major countries linked to the sea have programs to stimulate tidal energy research and development or have favourable energy feed-in tariffs for tidal energy projects. The International Re-newable Energy Agency (IRENA) has estimated that the technically harvestable tidal energy resource from those areas close to the coast, is estimated at 1 terawatt (1 million MW)1. Tidal and river energy can play an important role in the future energy mix, due to the high degree of predictability.We are driven to develop state-of-the-art solutions that maximize the potential of tidal energy production worldwide. We believe that this type of energy stands at the beginning of its development and its full potential, much like wind turbines some twenty years ago. And even more than other alternative sources of energy this ‘flow of energy’ delivers a solid, reliable volume of green energy.
Reason for the offering
For the year 2017 we have a total funding requirement of approximately €6.5 million as working capital, ongoing investments in research & development and project investments to reach financial close on the first commercial projects as is further described in Chapter 7 of this information memorandum.
We have recently obtained a €1.5 million bank loan. Consequently, our remaining funding requirement amounts to approximately €5.0 million. In light thereof we are now offering the Bonds and we are grateful for your interest in an investment in our Company.
1 IRENA Ocean Energy Technology Brief 3, June 2014 (www.irena.org)
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Overview of the Bonds
The key characteristics of the Bonds are as follows:
Issuer Tocardo International B.V.
Size of the issuance Up to €5,000,000, with a minimum of €2,500,000.
Interest 7% per year, paid annually.
Maturity Five years from issue date, which is expected to be on or about 30 June 2017.
Nominal value per Bond €10,000.
Transferability Via Van Lanschot’s trading platform.
Minimum investment Ten (10) Bonds.
Status Unsecured and unsubordinated. The Bonds will rank lower than current and future bank loans, currently amounting to €1.5 million.
Repayment At maturity or prior to maturity at the option of the issuer.
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Chapter 2 - The CompanyIn this chapter we describe the Company, its group and other stakeholders.
General information
Tocardo International B.V. is a private limited liability company (besloten vennootschap met beperkte aansprakelijk-heid) incorporated under Dutch law on 19 December 2008. Its offices are located at Sluiskolkkade 2, 1779 GP, Den Oever, the Netherlands. The Company is registered in the trade register of the Dutch Chamber of Commerce under number 37146891. Its telephone number is +31 (0) 22 642 3411. Its website is: www.tocardo.com.
Our history
The Company was founded in December 2008 as a spin-off from the engineering company Teamwork Technolo-gy B.V., which was founded by water technology experts with extensive background in shipping, innovation and engineering. One of the founders was our current CEO Hans van Breugel. Technology development started in co-operation with the Dutch Energy Research Centre (Energieonderzoek Centrum Nederland, ECN) and various Dutch engineering companies.
Research and testing
In the years 1999 to 2005 research and testing of various concepts for turbines took place. Horizontal axis turbines with a centre based generator proved most economical. We therefore decided to continue with the development and testing of such turbines towards a commercial series production.
First prototype and good performance results
From 2005 to 2008 we performed prototype testing of a full scale two-bladed turbine with a maximum power out-put of around 50 kilowatts (kW). Performance and environmental impact tests were performed at the Afsluitdijk tidal discharge sluice test location in the Netherlands. The turbine showed good performance results with the two-blad-ed rotor design and chosen power system. Fish monitoring surveys showed no negative impact on fish. Our require-ment was not to use gearboxes and traditional generators and therefor it was decided to develop a commercial demonstrator turbine with a permanent magnet direct drive generator. The direct drive generator made it a much better solution for offshore tidal turbine application for its straightforwardness and efficient technology.
Bi-blade design
From 2008 to 2012 we designed and tested a full scale technical demonstrator of our T1 turbine with a maximum power output of around 70kW. Since 2008 this demonstrator has been operational at the Afsluitdijk tidal discharge sluice test location. This turbine is grid connected. First a fixed pitch uni-directional blade rotor was tested and sec-ondly a patented bi-directional fixed pitch blade rotor. In 2012 open water tests were performed with the T1 demon-strator and the bi-blade design was improved. This demonstration turbine provided proof of product and formed the blueprint for the commercial production series design. Until today this system is still operational in Tocardo’s own research and development site in Den Oever.
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Commercialization
From 2012 to date we started the engineering and production of a commercial T2 turbine with a maximum power output of approximately 300kW. We entered into a strategic long-term partnership with Huisman Equipment, an international designer and manufacturer of construction equipment for the on- and offshore industry. We also realized major projects:
the installation of three linked turbines (T1) in the Afsluitdijk; the installation of one turbine on the Texel Foundation System (TFS) platform near Texel and later at the
European Marine Energy Centre (EMEC) test site in Orkney, Scotland (www.emec.org.uk), both offshore moored floating platforms locations for tidal turbines; and
the installation of five linked turbines (T2) on the Oosterscheldekering (Roompot 8).
Our group
Our current shareholders are Tribute Resources Inc., our management team and the founders of Tocardo: Hans van Breugel (Chief Executive Officer), Fred Gardner (founder of the technology), Pieter de Haas (Chief Technical Officer), Nico Lommers (Chief Production Officer) and Teamwork Technology B.V.
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Our management team
Our management team consists of the following persons.
Hans van Breugel, Chief Executive OfficerHans van Breugel (1957) is one of the founders of Tocardo. His background is in ocean going tugboats and heavy lift vessels where he sailed on as a first officer, after which he worked many years in the offshore oil and gas sector. To-gether with Fred Gardner he started Teamwork Technology in 1993. Following a spin-off from Teamwork Technology, Tocardo became an independent company in December 2008. Hans joined Tocardo for most of his time and within Tocardo he is responsible for daily management and strategy.
Pieter de Haas, Chief Technical Officer Pieter de Haas (1974) is a naval architect from a family of shipbuilders and shipping companies. From 1998 he was involved in the development of offshore heavy-lift vessels for the Chinese market. In the following years he started several initiatives in shipbuilding and renewable energy marketing in Europe, Africa and South America and helped converting Tocardo to a commercially driven company. He joined Tocardo in 2006 and is now responsible for tech-nology development.
Nico Lommers, Chief Production OfficerNico Lommers (1954) is an entrepreneur in the machining industry. He owned a large machining workshop in the Netherlands, delivering very large high-precision components for gas turbines of Siemens and other producers. He is responsible for building Tocardo turbines. Nico manages our production facilities and supply chain. He has been working with us since 2012.
Sjoerd Keijser, Commercial DirectorSjoerd Keijser (1978) is a commercial professional with an industrial design engineering background. He has experi-ence as an innovation consultant and program manager, helping start-ups to become commercial. He joined Tocar-do in 2015 and is responsible for the commercial roll-out of Tocardo’s projects around the globe.
Our Supervisory Board
Our Supervisory Board currently consists of one person.
Paul KruitPaul Kruit (1947) has been Chairman of the Supervisory Board since February 2013. He is a seasoned (renewable) ener-gy professional and advisor with previous management positions at various companies including Alstom Netherlands.
Our Advisory Board
Our Advisory Board comprises of various senior industry executives with an extensive professional network in the Netherlands and beyond. It advises the management team on corporate issues and strategy.
Piet KlaverPiet Klaver Piet Klaver (1945) is a well connected Dutch industry professional and seasoned board member with previous positions at SHV Holdings of which he was CEO from 1998-2006. He was a supervisory board member at various prominent Dutch companies such as Dura Vermeer and SHV Holdings till April 2017.
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Jan van der ZouwJan van der Zouw (1954) is a seasoned industry executive predominantly active in the mechanical engineering industry with previous (board) positions at Eriks (ultimately as CEO), Econosto and Transmark (CEO). Current and previous non-executive board positions include Eriks, Aalberst Industries, Van Wijnen Holding, HGG, Grontmij and Newdell Company.
René van der Borch tot Verwolde René van der Borch tot Verwolde (1952) is founder and Managing Director at Profin Sustainable Energy Solutions. He is a seasoned finance professional with extensive knowledge and experience in the insurance industry. Current and previous positions include positions at Eemstroom, Profin Financial and Econcern. René is also shareholder in Green Giraffe and Duurzaam Investeren, which are strategic partners of Tocardo.
Roman Thomassin Roman Thomassin (1961) is a senior industry executive with over 25 years of managerial experience including board level engagements. He has comprehensive knowledge of aerospace, automotive, renewable energy and B2C mar-kets. Previous roles were with Airbus, LM Wind Power, Elster, Hella and Telair. Roman is currently Global CEO Core Materials at 3A Composites.
Paul KruitSee above under “Our Supervisory Board”.
Tribute Resources is represented in the Advisory Board by:
Jane LowrieJane Lowrie has been president of our major shareholder Tribute Resources since 2003 and has been a director of Tribute Resources since its inception in 1997. Jane has been instrumental in building Tribute Resources’ asset base. Jane is a second generation oil and gas producer in Ontario, Canada, and has been involved in oil and gas explora-tion and production in Ontario for over 35 years, and renewable energy project development for over 10 years.
Jack SchoemakersJack Schoenmakers (1957) was previously the Vice President of Corporate Development at our major shareholder Tribute Resources and has been a director of Tribute Resources since 2005. Jack is currently President of Schoevest Investment Inc. and Avenue Energy, both based in Canada.
Our employees
In 2016 the average number of fulltime-equivalents (“FTEs”) we employed was 22, comprising of a strong engineer-ing team, a commercial/project development team and a finance support team for financial reporting and complex subsidy compliance rules.
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Chapter 3 - Our businessOur mission
The Dutch have a strong relationship with water. The interaction between water and land has led to innovation as well as inspiration. On one hand we tend to defend ourselves against the water with dams and dikes and on the other hand we stretch ourselves with new solutions using the force of water. Water has become a key factor in our economy. The struggle and challenge with water is a key factor in our DNA. As a nation of entrepreneurs we look for new opportuni-ties and multi-use of our water-infrastructure. Therefore tidal energy fits us well. In combination with the need for sustainable energy and smart solutions this means to generate energy is an excellent opportunity for the Dutch.
Tocardo is driven to develop state-of-the-art business solutions that maximize the potential of the tidal energy production worldwide. We believe that this type of energy only stands at the beginning of its development, much like wind turbines some twenty years ago, with a lot of potential. . And even more than other alternative sources of energy this ‘flow of energy’ delivers a solid and reliable volume of green energy with the predictability of the tides.
Our ambition
In our view the tidal energy market is on the brink of becoming a commercially viable supplement to other renewa-ble energy solutions. Major countries linked to the sea have programs to stimulate tidal energy research and devel-opment or have favourable energy feed-in tariffs for tidal projects. According to Ocean Energy Systems (OES), the international technology collaboration initiative on ocean energy under the International Energy Agency, a world-wide potential of up to 337 gigawatt (GW) of wave and tidal energy capacity by 2050 is within reach.
The wind turbine industry has proven that strong growth over a relatively short period is possible. Well-known wind turbine manufacturers Vestas (Denmark), Enercon (Germany) and Gamesa (Spain) increased their turnover from less than €10 million to more than €4-10 billion from 1995 to date. We believe time has come for tidal energy to follow. Our technology covers both tidal and river markets. We have the ambition to be in the top 3 players of total tidal and river energy system suppliers. State-of-the-art technology, ongoing research and development and strong part-nerships are essential to achieve this goal.
We aim to keep our research and design centre and our production hub for Europe in the Netherlands. North- and South America will, in the future, be supplied through our Canadian branch. We expect that the Asian market will most likely be supplied by a licensing partner, either in Japan or Korea. Strategic parties from both countries have shown interest, as soon as energy feed-in tariffs become available locally.
Our strategy and core business
Our strategy is to build scalable and commercially viable technology and to stimulate a new market. At present we have installed a significant part of the world’s installed capacity. Currently our core business is the development, production and sale of tidal turbines. In addition we can generate revenues from services, such as feasibility stud-ies, installation, technical assistance and maintenance of turbines. We also have in place various projects, which are primarily important for further development of our products and services but which may also directly contribute to our revenues as third parties may have an interest in the projects or parts thereof. The various aspects of our busi-ness are described in more detail below.
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Our products
Our current tidal energy turbine product portfolio consists of the R(iver)1/T(idal)1 (100kW) and the T(idal)2 (300kW) series. The T2 turbines are fitted with patented bi-directional blades to harvest electricity from both ebb and flood flows. The next generation T3 series is currently being developed and is expected to be launched in 2019. It is expect-ed to have a capacity of approximately 2,000 kW or 2 MW.
Tidal energy turbines are in essence very similar to wind turbines except that they are operating below the water surface instead of above or on land. A tidal energy turbine converts the movement of water resulting from change in tide, the kinetic energy, into electricity. Water is 830 times denser than air and therefore tidal energy turbines can generate electricity with smaller diameter blades than wind turbines.
We are currently developing the Universal Foundation System (“UFS”) and we expect it to be engineered and built late 2017 for installation for the first time in 2018. The UFS is a fully integrated 1.5 MW tidal power solution with five T2 turbines on a semi-submersible U-shaped floating platform, which is moored to the seabed. This UFS is expected to be used in our projects in the next four to five years. Thereafter the UFS will be equipped with T3 turbines, scaling up the UFS to a 10 MW system to be used in future larger scale offshore tidal farms. The UFS has been severely test-ed at 1:18 scale in the Marin tank test facility in the Netherlands. It has passed all possible flow and wave conditions found throughout Tocardo’s project locations.
Product Certification and Technology Due Diligences.
Tocardo’s T2 turbine, has recently received a statement of feasibility by DNV-GL. This marks an important step towards a full type certification which is expected to be granted later this year. Tocardo would be the first technology develop-er within the tidal energy industry to hold this certificate.
Royal Haskoning performed a technology due diligence into the T2 turbine and UFS. Objective of this study is to provide insight to investors into (technical) risks associated with deployment of the UFS carrying five Tocardo T2 turbines - in the Minas Project site, Minas Basin (Canada) in relation to expected annual power yield, considering the various components. It is concluded that Tocardo generally covered the majority of risks associated with deploying turbines mounted on a floating foundation system in the Minas basin satisfactorily and has endeavoured its best to minimise technical risk at affordable cost seeking robust and practical solutions for risk mitigation, using best and relevant engineering practice.
Technology road map 2017-2022
Our technology road map outlines the required technological innovation to develop a turn-key tidal energy solution that generates a full commercial 15 to 20 year business case on current feed-in electricity tariffs.
We believe that our technology is now at approximately 80% in fulfilling that aim. A T2 turbine, the core of the product, is already operational at our Oosterschelde project with a 20 years production license. The next development challenges are completion of the total tidal energy product by addition of a robust foundation technology, improving the energy capture effectiveness and adding a full service concept to the business model. Our road map is based on 4 pillars.
Energy up: generating more energy with the existing T2 turbine. This essentially involves efficiency optimization and increasing blade area without adding costs. This can be done by smart control software optimization and using hydro-elastic (flexible) turbine blades to reduce its force spectrum.
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Cost down: reducing capital expenditure costs by: technically optimizing our products and services; faster and more efficient production of our products and provision of our services; and benefiting from a larger scale.
Risk down: reducing cost of capital by focus on reducing perceived risk and related financial return demands. Measures taken to reduce risks are certification of turbines and equipment, and building up reliability evidence in projects.
Future proof: Prepare for longer term developments such as the larger and more powerful T3 turbines and the UFS.
Our servicesWe offer the following services:
Tidal energy project development, including: site selection feasibility studies front end engineering and design (FEED) business case development financial and project engineering
Turbine supply and foundation design; Installation of turbines; Operation and maintenance of turbines; and Hybrid solutions for diesel replacement. In countries such as Indonesia and the Philippines nearly all
islands run on (expensive) diesel generators. Tidal energy in combination with solar, wind and storage can play a major role in making the islands more sustainable.
Discussions are ongoing with parties which can assist in (supporting) project finance. Atradius has a financial sup-port scheme in place for assisting export of the Tocardo products. It is an insurance instrument, which supports a bank loan to our clients and which is therefore important for de-risking projects. For finance matters we collaborate with renewable energy advisors Green Giraffe and crowdfunding platform Duurzaam Investeren.
Our solutions
The tidal energy market is developing quickly and the worldwide potential for this type of sustainable, reliable and predictable power is an interesting opportunity for the energy sector, project developers and investors. We believe that the market is ready for commercial roll-out and is therefore looking for proven solutions.
This ‘megawatt’ driven market has traditionally lead to mega solutions: large machines, heavy shipping equipment, complex maintenance and expensive foundations. This creates high costs for shipping, adjusting to site specifics and makes maintenance expensive. At Tocardo we see things differently. Instead of creating a mega solution we developed our technology from the T1 turbine to the more powerful T2 tur-bine. Based on the T2 turbine and long term experience in offshore, we have developed the Universal Foundation System (UFS) which combines five compact 300 kW machines together generating 1.5MW: one machine to fit many different sites. This standardization and site adaptability ensure that costs can be reduced and the UFS can be in-stalled worldwide. It can be manufactured at local shipyards, enabling a boost to local economies and employment. It also makes a more cost effective approach for shipping, mooring and maintenance possible.
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Certification will play a key role in building trust and confidence in the technology. Therefore, we have requested DNV-GL, an international certification body and classification society with expertise in technical assessment, advisory, and risk management, to issue a ‘Statement of Feasibility’ and a ‘Type Certificate’. The certification process is currently ongoing and the finalization of this process is expected in 2017. As a result, Tocardo will be in a position to sell turbines supported with an insurance package during the construction and operational phases.
As a Dutch company, tidal energy fits us well. We have vast experience in creating standard solutions based on a long history in offshore, engineering and renewable energy sectors. We develop leading tidal power solutions. Our philos-ophy is based on a strategy of developing standard products by continuously testing and improving solutions. There-fore, costs are relatively low and long term cost effective results are potentially high. In the developing market of tidal energy we can match each site specifics and scale up easily. With the new UFS solution we will be able to match the market demand for megawatt tidal power and roll out worldwide, delivering a commercial business case.
Inshore solutions
Bridges, dams and dikes make ideal locations for deployment of our turbines. Existing structures can be given added value by generating clean energy from the free flow of water. The Dutch are internationally renowned for their delta works and extensive knowledge regarding water, deltas and safety. Now we can also add sustainable energy from water to this list and export the technology to twenty identified delta’s in the world that resemble the Dutch Delta.
Offshore solutions
We can bring innovative Dutch water technology to the next level with our UFS. The UFS is a fully integrated 1,5 MW tidal power solution with five Tocardo T2 turbines on a semi-submersible U-shaped floating platform. The UFS is ide-al for the implementation of multi megawatt offshore tidal energy farms because of its proven turbine technology, easy installation, easy inspection and maintenance or the turbines and low service requirements.
Smart grid solutions
Smart grids are evolved grid systems that manage electricity supply and demand. Our turbines are a highly predict-able and reliable source of electricity production. Our turbine yields are well suited to be combined with electricity from wind turbines, solar panels, battery storage and aggregates to bring electrification to remote and off grid areas within microgrid deployments.
River solutions
We offer a total river power plant. Building on the proven T1 turbines, the R1 turbine with a unique floating platform makes renewable energy more accessible than ever before. This total solution makes it possible to deliver clean pre-dictable energy via microgrids on a scalable base to the location where it is needed. Each individual platform carries four R1 turbines, delivering a combined capacity of 400kW. All components can be transported by 20ft containers and assembled on site. The foundations are built with the local supply chain. We are working together with Allian-der’s subsidiary ZOWN on a smart grid solution for rural communities and islands.
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OUR PROJECTS
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Our projectsGeneral
Project Oosterschelde (Roompot 8), operational since 2015
In 2008 we started developing a project involving the installation of tidal turbines into a primary sea defense in the Netherlands: the Oosterschelde storm surge barrier. This is largest of the famous Delta Works, a series of dams and barriers, designed to protect the Netherlands from flooding. This project is a unique combination of water safety and renewable energy made possible by Dutch water technology specialists.
Initial permits and funding constraints caused a slow start to this ambitious project, but once in place progress was good and the project was completed successfully in 2015. Strict safety regulations, environmental conditions and very short window for installation made it a complex operation.
Huisman Equipment has built the support structure and supported the project financially, because they believe in the future of tidal energy and Dutch export opportunities. Strukton has been actively involved in the project planning and was responsible for project management during installation. Supply chain companies Hillebrand and Istimewa were important in order to realize the project.
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In September 2015 the complete structure (5 T2 turbines) was installed inside the barrier within just two hours’ time. This meant a big step forward for the Dutch water technology sector and the global tidal energy industry.The fifty meter long support structure, including turbines, was transported over water by heavy lift specialist Mam-moet. Using a special barge and Mammoet’s self-propelled modular transporter, the structure was put into place between two of the barriers pillars.
A Green Deal was made between the Province of Zeeland, the Dutch Government and Tocardo. In this Green Deal the agreement was made to install more tidal power plants in the Oosterschelde barrier. After a period of careful monitoring preparations will be made to expand tidal energy at this site.
Project Den Oever, operational since 2008
In 2008 we installed a T1 tidal turbine in our test site at the Afsluitdijk in the north of the Netherlands. The purpose of this turbine was to demonstrate the technology and its operational capabilities during a longer period. The turbine is suspended in the sluice using a simple T shaped frame and can be lifted out of the water for inspection and testing.
Various tests have been performed with this turbine, including open water tests for which the turbine was placed on a barge in open sea. The patented bi-blade system was also tested on this turbine.
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Afsluitdijk research tidal power plant, operational since 2015
In 2015 we installed three T1 turbines in the Afsluitdijk tidal barrage, a 32 km long primary sea defense. The turbine array is an extension of the Dutch Tidal Testing Centre (TTC) test facility and the first tidal turbine that has already been producing electricity for more than seven years. TTC is a long-standing partner of ours.The three turbines are the first to be installed closely together in an array. Tocardo manages the project as a research and development facility. All electricity produced is fed into the grid. The turbines give us vital data and experience in turbine arrays. The array has a capacity of more than 300kW, producing electricity for approximately one hundred local households. The turbines also produce vital data and experience in turbine arrays. We monitor the array in turbulent waters and see how the turbines interact. This information is necessary for up-scaling and the commercial roll-out of such tidal projects.
The initiative of Tocardo and TTC was officially opened on 20 February 2015 by the Province representatives Hans Konst (Deputy Province Friesland) and Jaap Bond (Deputy Province Noord-Holland). This tidal test pilot is part of the collaboration program ‘De Nieuwe Afsluitdijk’ (DNA). DNA is a collaboration of the provinces Noord Holland and
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Fryslân and the municipalities Hollands Kroon, Harlingen and Súdwest-Fryslân. The project is also supported by Energising Deltas, which is a collaboration to investigate successful integration of water management, water safety and renewable energy.
The turbine array is the latest for us in the area, in addition to our existing tidal turbine that has already been pro-ducing electricity for more than eight years. The project partners plan to implement additional tidal installations with a capacity of up to 2 MW in the Afsluitdijk.
The installation of the three-turbine array is part of a recent agreement to cooperate for three-to-five years to ex-pand the tidal test facility in the Afsluitdijk, where outflow of fresh water into the Wadden Sea creates powerful tidal flows. The array’s installation is supported by the ‘Waddenfonds’, a not-for profit organization promoting sustainable development in the Dutch Wadden Sea region. The project is also backed by the national and local Dutch govern-ments, which are focused on strengthening the country’s sea defense. The functionality of the Afsluitdijk will also be improved by implementing and combining ecology, tourism, mobility and renewable energy as a showcase of the Dutch water technology expertise.
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Project Texel
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Project Texel, operational 2015-2016
Offshore operator Bluewater as project leader has partnered with a group of leading companies such as Damen, Vrijhof, TKF and Van Oord to realize a floating tidal energy platform. The platform was installed and commissioned in the summer of 2015 with our T1 turbine. In early 2016, the platform was commissioned with a larger T2 tur-bine. The platform generates clean electricity from the tides in the Wadden Sea in the north of the Netherlands. It has an innovative modular design and is very suitable for small island grids in central Asian countries such as Indonesia and the Philippines.
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Texel has the ambition to become completely sustainable by 2020 and is well underway to realize this. Various pro-jects have been started from saving energy, waste management to generating electricity. Being an island, generat-ing electricity from water is an obvious choice. In 2015 a prototype construction of the modular BlueTEC platform was installed near Texel with a Tocardo T2 turbine as a first phase of a total 5 MW system to be installed in 2020.
The project is a unique collaboration of Dutch companies in various fields of expertise. The modular principle of the system means it can be transported, assembled and installed anywhere around the world and especially to remote locations.
The modular BlueTEC platform is based on Damen’s Modular Barge System which is deployed worldwide and used for floating jetties, multi-cat ships and ferries. The platform is anchored to the seafloor using Vrijhof’s Stevpris an-chors. The grid connection and power cable was provided by TKF, a Dutch cable manufacturer.
The modular BlueTEC platform is developed for cost effective installation, operation and maintenance of tidal tur-bines. This floating platform accommodates all vulnerable electronic equipment inside the unit, where it is dry and protected, yet allowing for easy access for inspection, maintenance and repair. The platform can be disconnected from the moored location and taken to a local port for heavy repair if that would be needed. The Texel platform started operations with a single tidal turbine that can produce up to 100kW. Since early 2016, the platform has been upgraded and fitted with a T2 turbine. At the end of 2016 the BlueTEC system was demobilized as Tocardo used the T2 turbine for a back to back testing at the Catapult test centre in the UK. In March 2017, the system has been in-stalled at the Tocardo location at EMEC.
Project EMEC, operational since early 2017
The European Marine Energy Centre (EMEC) is the world’s leading tidal and wave energy test location, based in Orkney – Scotland. In March 2017 the BlueTEC platform with the Tocardo turbine, now named TFS (Texel Floating System), has been installed at the Fall of Warness, the tidal testing location of EMEC. The TFS deployment is part of the 20 year program of Tocardo at this location, where the TFS will later on be replaced by one UFS with five T2 tur-bines. EMEC is ideal to test the UFS and its turbines in a fully exposed offshore high water flow environment, with the presences of leading supply chain companies in the marine energy sector.
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Subsidized research and development projects
Our total portfolio of subsidized research and development projects is close to €10 million with approximately 50% subsidy. It is an important contribution to our ongoing research and develop-ment activities for the coming four years. The main subsidy programs are:
OP-Zuid 2
OP Zuid 2 is the follow-on program of Project Oosterschelde . The aim of the project is technical optimization of the Oosterschelde lay-out, environmental monitoring and testing interest of supplying the energy to the local com-munities around the Oosterschelde. This project will contribute to the further roll-out of the Oosterschelde project, starting with the permitted second sluice gate.
In To Tidal
In To Tidal is an EU program to develop a smart installation methodology of the Tocardo founda-tion system UFS and the development of an underwater drilling tool to improve anchor installation. It is a two year program with partners from the UK and France.
2SEAS (Met Certified)
MET Certified is an EU program for certification of tidal turbines and their foundations. Certifying institutions such as DNV/GL and Lloyds are partners. Under the program we are able to build one full scale UFS foundation system with five T2 turbines. This platform will be used for standardization of the certification. MET Certified has partners from the UK, France, Belgium and the Netherlands and is running over a three year period.
DMEC
DMEC is the abbreviation of Dutch Marine Energy Centre. The DMEC program is of interest to us due to the work on smart blade design, certification, testing facilities, lobby and building the industry.
* With “Tocardo scope”, the gross expenditure on the project for Tocardo is meant, before deduction of subsidies. The above subsidy programs are included in the business plan. The subsidies are 100 % granted.
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Our commercial pipeline
Our commercial pipeline consists of projects in various stages of development from awaiting permits and feed-in tariff up to nearly financial close. The following overview illustrates potential future projects for which exclusive negations are currently taking place. At this stage no assurance can be given that the projects will be granted.
The following overview illustrates potential future projects for which exclusive negations are currentlytaking place. At this stage no assurance can be given that any of the projects will be granted to us.
Tocardo is in ongoing contact with project developers in Indonesia, Pakistan and UK. The nature of those leads are lessor concrete and in early stage, but realistic due to energy shortages or active developers.
Project Location Project value Tocardo turnover # UFSs / # Turbines Total capacity Status
Minas Passage Nova Scotia, Canada €30 million €24 million 3 UFS, 15 T2 turbines 4.5MW Working towards financial close (expected Q4, 2017)
EMEC Fall of Warness, Scotland €7.8 million €5 million 1 UFS, 5 T2 turbines 1.4 - 2.0MW Securing *) feed-in tariff (expected Q2, 2017)
Kornwerderzand Afsluitdijk, Netherlands €8.5 million €5 million 18 T1 (retrofit) turbines 1.8MW Awaiting final permit and feed-in tariff
Oosterschelde Roompot 10 Oosterscheldekering, Netherlands €10.5 million €2.7 million 5 T2 (retrofit) turbines 1.5MW Awaiting **) feed-in tariff &
subsidy
PTEC Isle of Wight, England €96.8 million €40 million 16 UFS, 80 T2 turbines 20MW Awaiting feed-in tariff
Morlais Energy Westanglesay, Wales €84.4 million €34.9 million 13 UFS, 65 T2 turbines 15MW Project development
Isle of Man Isle of Man, England €145 million €60 million 24 UFS, 120 T2 turbines 30MW Project development
*) Securing feed-in tariff means that the feed-in tariff is in place, but final approval has not yet been given.**) Awaiting feed-in tariff means that the Government support policy is under development and not secured yet.
Project Location Project value Tocardo turnover # UFSs / # Turbines Total capacity Status
Petit Passage Nova Scotia, Canada €11.5 million €7 million 1 UFS, 5 T2 turbines 1.5MW Contract negotiations
Third party project Nova Scotia, Canada €28.6 million €24 million 3 UFS, 15 T2 turbines 4.5MW Contract negotiations
Digby Gut Nova Scotia, Canada €15.7 million €6.4 million 2 UFS, 10 T2 turbines 2MW Contract negotiations
Nepal demo Kurkhut river, Nepal €60 million €32.6 million 150 T1 (floating and retrofit) turbines
15MW Letter of Intent
Morlais Energy upscaling West Anglesay, Wales €84.4 million €34.9 million 3 UFS, 15 T2 turbines 15MW Project development
Oosterschelde roll-out Oosterschelde, Netherlands
€55.8 million €22.5 million 90 T2 (retrofit) turbines 36MW Project development
Ramsey Sound Wales €8 million €5 million 1 UFS, 5 T2 turbines 1.5MW Due Dilligence to buy project
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Minas Passage The Bay of Fundy in Nova Scotia – Canada is known for its enormous tidal range. The high water flows in combina-tion with low wave regime makes it one of the best tidal energy locations in the world. The Nova Scotia Government initiated the Fundy Ocean Research Centre for Energy (FORCE), assigned the Minas Passage as a tidal testing location and provides tidal energy de-velopers a relatively high feed-in tariff (FIT). Tocardo’s shareholder Tribute Resources has obtained the development rights for a berth at Minas Passage and has selected Tocardo as technology supplier. Project development is far advanced and foreseen to reach financial close in the fourth quarter of 2017. Technical due diligence has been finalized, contracting is in final phases.
EMEC projectThe European Marine Energy Centre (EMEC) is situated in Orkney, Scotland and offers tidal testing locations to developers. In February 2016, Tocardo signed a 20 year berth lease agreement with EMEC for deployment of a 1.4 – 2MW commercial demonstration project with the UFS at the Fall of Warness tidal testing location. The site is grid connected up to the subsea cable at the project location and fully consented. Since EMEC has a long and world leading history in the sector of tidal testing centra, they established an excellent supply chain of industry, marine con-tractors and knowledge providers to be locally available in Orkney. In the first months of 2017, Tocardo installed the TFS platform with a single T2 turbine to start cooperating with the local supply chain, getting to know the project location and delivering the first power to the grid. The latter being necessary to obtain the Renewable Obligation Certificate (ROCs). Tocardo is anticipating on being accredited for ROCs in Q2 2017 for a five turbine 1.4MW project, sufficient for deploying one UFS.
Kornwerderzand (started in 2015)The Dutch are famous for building sea defenses. With large parts of the country lying below sea level we have to protect ourselves against the sea. In the twentieth century many structures have been built, amongst which the Zuiderzee works and the Delta Works. The new generation of water technology experts and civil engineers realize that there is a great opportunity to use the water to our advantage instead of only fighting against it. The project at Kornwerderzand is an example. We are preparing a tidal power plant in the Afsluitdijk. The 32 kilometer dam was built in the 1930’s to protect the country from flooding. It cuts off the former Zuiderzee, a big estuary which is now a fresh water lake called the IJsselmeer. At the sluices in Kornwerderzand the excess water is being discharged in the Wadden Sea, creating a strong water flow. This flow will be used to generate clean electricity by our technology.
The project is part of the overhaul of the Afsluitdijk starting in 2018. The overhaul is necessary to protect the land against the rising sea level. Another important aspect of the overhaul is to improve the functionality of the dam with uses like renewable energy, tourism and ecology. The overhaul is one of the biggest civil projects in the Netherlands and is led by the Dutch state, provinces and municipalities. Knowledge institutes and private companies are closely involved. Tocardo is developing this project with Antea Group, a civil engineering consultancy firm. We are awaiting the final consent for the project and have been granted two subsidies for building the project.
Oosterschelde, Roompot 10After the successful installation and operation of the tidal power plant in Roompot 8, Tocardo obtained consent for developing a second project in the neighboring sluice gate. Presently, two subsidies are applied for and the SDE feed-in will be applied for in October 2017. The main aim of this second retro-fitted turbine array will be to bring down the cost of the foundation system while improving the turbines yield.
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PTECThe Perpetuus Tidal Energy Centre (PTEC) is located south of the Isle of Wight in England. PTEC offers a consented 30MW project location, divided over three discrete berths. The project infrastructure is placed in an SPV as well as the three projects. Tocardo has been selected by PTEC as partner for two berths, so for 20MW, and is also partner in the grid infrastructure SPV. PTEC and technology providers Tocardo and Schottel Hydro are negotiating industrial support with the UK Government to support the business case and when successful, PTEC will start building the onshore grid infrastructure, as soon the UK Government has announced appropriate support schemes. The present support scheme isn’t sufficient to make the project viable.
Morlais Energy The Morlais Energy project is located west of Anglesey in Wales. Wales offers decent resource for tidal energy and the Welsh Government is keen to getting the tidal energy industry off the ground. Morlais has been appointed by the Welsh Government for developing a tidal energy pro-ject over eight discrete berths. Tocardo have been award-ed the high flow berth to share with Schottel Hydro, so 15MW. Morlais Energy are in the process of obtaining ERF funding through the Welsh European Funding Office (WEFO) for financing resource assessments and obtaining grid infrastructure.
Isle of ManTocardo obtained the project development rights of 30MW. Before starting further development work, Tocardo is awaiting final legislation and feed-in tariff policy at the Isle of Man.
Petit PassageThe Petit Passage is a small but very interesting project in Nova Scotia, Canada. The project has a strong commercial business case and is intended to be integrated in a hybride energy system. Tribute Resources is finalizing agree-ments with the owner of the site and. The challenging part of the location are the time tables to reach commercial operations, due to permit constrains and finalization of the agreements. The project is a so-called “community based” project with a high and attractive feed-in tariff. The local community should benefit from the project and has to invest in the equity of the project.
Third party projectTocardo is investigating the joint development, or complete take-over, of another berth at the FORCE (Nova Scotia, Canada) with a third party project developer. This berth has similar project properties as the Minas Passage project and would be a valuable extension to Tocardo’s Minas Passage project.
Digby GutDigby Gut is in the same area as the Petit Passage location, but the business case is less interesting and requires additional funds. The other conditions are similar compared to the Petit Passage project, like community based, high feed-in tariff, final negotiations and permitting.
Project Nepal (started in 2015)With the first batch of R1 turbines sold in 2015 we set foot in the Nepalese river energy market. A demonstration project is being developed with our Nepalese partner Glowtech Solutions, near Khurkot, central Nepal. The project will provide much needed electricity to local villages, to power schools and homes and to stimulate the develop-
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ment of the region. Project implementation in Nepal is ongoing, but has unfortunately been delayed because of the devastating earthquakes. While we take responsibility for project and technology development, project partner ZOWN is developing the required microgrid infrastructure. Early 2017 the project was restarted with a new partner in Nepal and discussions with the Nepal electricity company, FMO and the Dutch Enter-prise Agency of the Dutch Government to install 20 MW river turbines in the coming 2-3 years. This program could be further rolled out up to 100 MW until 2021.
Oosterschelde roll-outThe Eastern Scheldt storm surge barrier has 62 sluice door openings across the three barrier segments. Presently, one of these openings is used for the Oosterschelde project, while Tocardo has consent for a second opening and is working towards a financial close for that project. The potential for rolling out with additional tidal turbine arrays across the Eastern Scheldt storm surge barrier is up to about 30 of the 62 sluice door openings: so one opening with turbines, the next without, the next with, etc. Tocardo is discussing this rollout opportunity with various organiza-tions, a.o the Ministry of Infrastructure, ‘Rijkswaterstaat’ and the Ministry of Economic Affairs.
Ramsey SoundRamsey Sound is the project location in Wales that was owned by the Welsh company Tidal Energy Limited (TEL). TEL has gone into administration last year. Tocardo is conducting a due diligence to buy the TEL assets that include the project location. Ramsey Sound is presently the only consented tidal energy site in Wales, has a 400kW Renew-able Obligation Certificate (ROCs) accreditation, onshore power equipment and subsea cable. The aim is to decom-mission the TEL tidal turbine from the seabed and commission a UFS to the subsea cable and grid infra-structure in place, while benefitting from the ROCs. Also a WEFO subsidy application has been submitted recently. The Welsh Government is very supportive, as Tocardo are the only developers that could take up this site and they would like to see the tidal activities remaining within Wales.
Our patentsWe have successfully applied for patents for our turbine and blade technology in key geographic areas. Our key patent relates to the bi-blade design of our turbines. Also, we have applied for an interesting patent regarding our UFS technology.
Important arrangementIn July 2016 Huisman Equipment has sold its majority stake in the Company. At the same time Huisman Equipment and Tocardo entered into a royalty arrangement under which Huisman Equipment will receive future royalty payments up to a maximum of €12 million based on turbine sales. In exchange, Huisman Equipment gave up existing loans to Tocardo and its subsidiary Oosterschelde Tidal Power 2 B.V. to an amount of €12 million. Therefore, an equity increase of €12 million was accounted for, as the royalty agreement is regarded as a contingent liability. The arrangement ends July 2026, or be-fore when a total balance of €12 million royalty payments is reached. The transaction was consistent with Huisman Equip-ment’s strategy to divest activities in non-core businesses. The transaction allowed Huisman to focus on their core offshore activities and markets.
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Chapter 4 - The marketIntroduction
Tidal energy generation is a relatively new and untapped source of renewable energy with very significant potential. The currents in water, created by the tides, moves tidal turbines which can be considered as under water wind turbines. The turbines transform rotation to electricity. Major advantages of tidal energy are (i) a low impact on the environment, (ii) low visual impacts as the turbines used are covered under water, (iii) the enormous potential energy capacity, and (iv) energy generation predictability. In “Developing the potential of Ocean Energy” (October 2015) the European Com-mittee of the Regions stated the following in relation to the long term potential of what they refer to as ocean energy:
Creation of 500,000 jobs in the EU; 10% - 15% of the EU energy need (approximately 115 million households); A yearly deduction of more than 130 million tons of CO2.
The further development of renewable energy technology and production has increasingly become a global priority driven by, inter alia, the global increase in energy consumption, environmental constraints, depletion of fossil fuel reserves and the risks associated with nuclear power production. The climate conference COP21 led to ambitious CO2 reduction targets: reduction by 40-70% of greenhouse gas emissions by 2050.
Electrical energy from wind, sun and biomass have already benefited from the increase in investments in the sector. Tidal energy is widely regarded as the next generation source of renewable energy with a low environmental impact and inexhaustible resources. The technology is nearly at commercial stage. Tidal energy is ideal for transfer of knowl-edge and skills from the offshore and marine industries, and therefore an appealing alternative business activity for companies in the offshore oil and gas sectors.
The global tidal energy market is an attractive and sizeable market. According to Ocean Energy Systems (OES) a worldwide potential of up to 337GW of wave and tidal energy capacity by 2050 is within reach. The predictability of tidal energy makes it a very welcomed addition in the renewable energy mix. The industry is more developed in countries such as the UK and Ireland, Canada and the Netherlands where developers benefit from good resources, infrastructure and/or supportive governments (e.g. favourable feed-in-tariffs and availability of funding). Future markets include France, South Korea, Japan, Nepal, Singapore, Indonesia, the Philippines and Chile.
Competitive landscape
There are a number of companies active in the design and development of tidal energy turbines of which the lead-ing players include Andritz Hydro Hammerfest, Open Hydro, Atlantis, Sabella, Schottel Hydro, ScotRenewables and Nova Innovation.
Commercial readiness and technology differ per company. However, the majority of larger players focus on larger scale bottom mounted (attached to the sea bottom) turbines whilst we have taken a step-by-step approach and currently focus on smaller turbines mounted on (floating) platforms. We believe that the advantage of a floating solution is that the current on the water surface is significantly higher than on the sea bottom, thus enabling the possibility to generate more energy. In addition, we believe that both installation and maintenance is easier and less costly for floating solutions.
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A number of players such as Atlantis are also active in the development of tidal farms (also taking equity stakes) thereby generating a market for their own turbines. Most turbine manufacturers also offer operation, maintenance and engineering services.
In general, there are two main installation approaches for offshore tidal turbine deployment: standing on the sea-bed and hanging from floating platforms. We believe that working with floating systems offers a far better business case than seabed-mounted devices. This is because of lower deployment risk (easier accessible), lower CAPEX due to lower weight and lower installation and service costs due to smaller vessels. The floating systems are regarded as “second generation tidal technology”: ScotRenewables, Schottel Hydro and Tocardo.
We believe that we have a strategic advantage over our competitors because of our proven turbine technology with nine turbines operational and grid connected and because we are the first in the sector with full type certification by DNV-GL.
Comparison with the wind turbine market
We believe that tidal energy technology is in a phase similar to the wind energy technology in the mid-1990s, just before the wind energy industry started to grow rapidly. Subsequently various wind turbine manufacturers such as Enercon and Gamesa have evolved into industry leaders / multinational companies and have demonstrated revenue growth rates of € 10 million to € 2 billion revenues in approximately ten years. Only very recently, large 300MW+ off-shore wind farms have been tendered to deliver energy for approximately €0.08/kWh (all-in), proving this industry has become mature and close to grid parity with fossil fuel generated energy.
We foresee a similar pattern for the tidal energy players, where the technology is proven and reaching the offshore wind benchmark in 4 to 6 years. Original equipment manufacturers such as Siemens, GE and Alstom are likely to (re-)enter the tidal energy industry and compete for the leading technology players leading to attractive valuations.
Levelized cost of electricity
The levelized cost of electricity (LCoE) is a measure of a power source which attempts to compare different methods of electricity generation on a consistent basis. It is an economic assessment of the average total cost to build and operate a power-generating asset over its lifetime divided by the total energy output of the asset over that lifetime. The LCoE can also be regarded as the minimum cost at which electricity must be sold in order to break-even over the lifetime of the project.
Figure: Components of LCoE of wave and tidal energy devices (source: SI OCEAN Strategic Technology Agenda
AEP: (Lifetime) Annual Energy Production CAPEX: Capital Expenditure (investment costs) OPEX: (Lifetime) Operational Expenditures
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LCoE for tidal technology is still relatively high compared to alternatives. The industry’s mission is to reduce risk through further technological development resulting in lower costs and higher energy output (“energy-up, cost down, risk down”) and subsequently improving project returns.
Tidal energy is now in relatively early stages of the industry’s learning curve, comparable to 1995-2000 in the wind energy industry: further investments in the technology are expected to lower LCoE. The learning curve consists of energy-up (smart blades and control strategy) and cost-down (mass-production and optimized turbine design). The LCoE is expected to be comparable with offshore wind LCoE by 2021.
Figure: LCoE Predicitons for 10MW arrays, after 10MW has already been installed (Source: SI Ocean Cost of Energy Report, 2013).
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Chapter 5 - Historical financial informationIntroduction
In this chapter we provide key historical financial information for the previous four financial years, including a brief discussion thereof. The 2016 financial information is preliminary at the date of this information memorandum.The data stated are derived from the full consolidated financial statements, which will be provided at the request of interested investors.
The annual (consolidated) accounts of Tocardo have been audited for the past 4 years (up to and including 2015). However, no formal Auditor’s Reports have been issued, due to the audits being performed for consolidation purposes on a higher (Huisman) level. Therefore, we state the historical financial information as being unaudited. Under Dutch Law, Tocardo is recognized as a small company and therefore has no obligation to have its annual accounts audited.
Historical financial information
Consolidated profit and loss 2013-2016
Profit & Loss 2013 2014 2015 2016€k actual actual actual prelim.
Receipt from Sales 245 0 0 63Subsidies 0 19 282 45Net turnover 245 19 282 108Cost of Sales (203) 0 (2.816) 1.084Gross margin 42 19 (2.534) 1.192Changes in work in progress 0 677 (1.045) (12)Gross operating result 42 696 (3.579) 1.180Staff costs (879) (1.095) (1.251) (1.300)Marketing & Sales (84) (50) (83) (231)Housing costs (48) (49) (64) (113)General & Administrative (417) (395) (721) (572)Reported EBITDA (1.386) (893) (5.698) (1.036)Depreciation (23) (33) (39) (41)Amortisation (124) (143) (324) (342)Reported EBIT (1.533) (1.069) (6.061) (1.419)Financial income/(expenses) (45) (40) (298) (165)Profit before tax (1.578) (1.109) (6.359) (1.584)Income taxes 180 235 1.427 (672)
Income from associates 0 0 0 (3.112)Net result (1.398) (874) (4.932) (5.368)
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To date the Company has been largely dependent on government grants, shareholders and related parties to fund its operations. Wages and salaries increased along with the increase in fulltime-equivalents (“FTEs”). The average number of staff employed in 2016 was 22 FTE (2015: 20 FTE).
General & Administrative include amongst others costs for legal and subsidy advisory services. Depreciation and amortization predominantly consist of amortization of capitalized research and development costs and goodwill.
Financial expenses increased as a result of increased funding by Huisman Equipment, a former shareholder of the Company. The debts bore interest at a rate of 4.5%. In 2016 these debts were replaced by a royalty arrangement based on future sales of turbines. This royalty arrangement is recognized as a contingent liability.
As a result of the restructuring of loans by Huisman Equipment, a loss from associates relating to Oosterschelde Tid-al Power 2 B.V. of €3.1 million had to be accounted for in 2016. This amount was a non-cash loss.
Resulting from the negative income (loss) before tax and the possibility to compensate those losses with fiscal prof-its in the 9 following years, a tax gain has been brought to the profit and loss account and recorded as a deferred tax asset on the balance sheet.
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Consolidated balance sheet 2013-2016
Intangible assets in 2016 include capitalized research and development costs (€4.3 million) and goodwill (€0.2 million).
Tangible fixed assets predominantly consist of the five turbines, including mounting system deployed in the Ooster-schelde (part of Oosterschelde Tidal Power 2 B.V. balance sheet), the turbine deployed near Texel (currently at EMEC) and the three turbines and mounting system deployed at the Afsluitdijk (part of the Company’s balance sheet).
Financial fixed assets in 2016 comprise of deferred tax assets. At 31 December 2016, the Company had deferred tax assets of €1.4 million, based on carry-forward tax losses of approximately €9.5 million (up to fiscal year 2016).
Movements in 2015 of other short-term receivables include increases in subsidies receivable (€2.1 million) and VAT receivable (€0.5 million), both related to the Oosterschelde project. On the opposite, trade payables showed a significant increase by the end of 2015 due to invoicing related to the Oosterschelde project.
Over the years 2013-2016 the Company has been funded through (long-term) debt issued by participants and shareholders as well as equity.
In July 2016, former shareholder Huisman Equipment and Tocardo entered into a royalty arrangement under which Huisman Equipment will receive future royalty payments up to a maximum of €12 million based on turbine sales. In exchange, Huisman Equipment gave up existing loans to Tocardo and its subsidiary Oosterschelde Tidal Power 2 B.V. to an amount of €12 mil-lion. Therefore, an equity increase of €12 million was accounted for. The royalty agreement is recognized as a contingent liability. The arrangement ends July 2026, or before when a total balance of €12 million royalty payments is reached.
Balance Sheet 2013 2014 2015 2016€k actual actual actual prelim.
Intangible fixed assets 2.240 3.255 3.411 4.482Tangible fixed assets 132 986 2.470 2.090Financial fixed assets 351 701 2.113 1.419
Total fixed assets 2.723 4.943 7.994 7.991Raw materials and consumables 10 8 23 0Work in progress 284 263 86 497Trade receivables 17 43 40 21Other short-term receivables 263 539 2.870 481Prepayments received on orders (300) (300) (399) (399)Trade payables (197) (163) (5.184) (616)Other payables (444) (343) (408) (391)
Net working capital (367) 47 (2.972) (407)
CAPITAL EMPLOYED 2.356 4.990 5.022 7.584
Group equity 2.717 1.843 (3.089) 6.655Short-term debt 11 116 359 37Long-term debt 339 2.962 8.755 850Cash and cash equivalents (797) (133) (1.191) (133)
Net debt (447) 2.945 7.923 754Provisions 86 201 187 175
CAPITAL INVESTED 2.356 4.990 5.022 7.584
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Consolidated cash flow statement 2013-2016
Changes in working capital in 2015 and 2016 are largely a result of the Oosterschelde project. In 2016 an adjustment was made to the investment done in this project, resulting in a negative investment in tangible fixed assets.
Capital expenditure consist of investments in tangible fixed assets (i.e. machinery and equipment as well as capital-ized own company production) and intangible fixed assets (research and development, goodwill and concessions and licenses).
The Company has not paid cash taxes over the previous years and has considerable carry-forward tax losses of ap-proximately €9.5 million (up to fiscal year 2016).
The Company’s operations and capital expenditures have been funded by the shareholders through the issuance of equity in 2013 (€3.3 million) and 2016 (€12 million as a result of the conversion of Huisman loans into a royalty arrangement).
Cash Flow Statement 2013 2014 2015 2016€k actual actual actual prelim.
Reported EBITDA (1.386) (893) (5.698) (1.036)Change in net working capital (114) (414) 3.019 (2.565)Investments in intangible fixed assets (399) (1.158) (479) (1.413)Investments in tangible fixed assets (120) (887) (1.523) 339Operational cash flow (2.019) (3.352) (4.681) (4.675)Income taxes (P&L) 180 235 1.427 (672)Chage in financial fixed assets (158) (350) (1.412) 694Change in provisions (6) 115 (14) (12)Free cash flow (2.003) (3.352) (4.680) (4.665)Financial income/(expenses) (45) (40) (298) (165)Free cash flow after interest (2.048) (3.392) (4.978) (4.830)Change in debt (405) 2.728 6.036 (8.227)Change in equity 3.250 0 0 12.000Change in cash 797 (664) 1.058 (1.058)
Cash @ beginning of the year 0 797 133 1.191Change in cash 797 (664) 1.058 (1.058)Cash @ end of the year 797 133 1.191 133
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Chapter 6 - Our futureThis chapter describes our business plan and relating potential future financial data. The information included in this Chapter is based on our best knowledge. It has not been and will not be audited and no assurance report has been of will be issued by external financial advisors.
Business targets 2017-2019Our ambition is to close several contracts in the 2017-2019 period, which should result in a positive operational cash flow from 2018 and onwards. More specifically we aim for contracts relating to 1 project in the UK, 1-3 projects in Canada and 1-2 projects in the Netherlands. Other projects as described in Chapter 3, “Our commercial pipeline”, are foreseen to be closed in 2020 or later.
Business planOur business plan was last updated in March 2017. Detailed assumptions have been used for the period until 2019. The forecasts thereafter are based on more high-level assumptions. The figures for 2017 are based on a latest esti-mate (LE) compiled of actual figures up to February and forecasts for the remaining months of 2017.
The business plan foresees ongoing research and development activities to drive down LCoE. We expect a growth in expenditures mainly caused by the growth in the number of employees needed to give substance to the develop-ment activities. The extra engineering required relates to the ongoing design of the UFS, flex-blade technology and T3 turbine.
Subsidies will cover an important part of our research and development costs. Besides the general assigned subsi-dies such as WBSO1 (Wet Bevordering Speur- en Ontwikkelingswerk) which reduces the cost of personnel, a number of project based subsidy schemes are in place or to be expected. We will continuously work on attracting relevant subsidies from local, provincial, national and EU sources to co-finance research and development and implementa-tion of our tech-nology. An overview of subsidies is included in the following chart:
* With “Tocardo scope”, the gross expenditure on the project for Tocardo is meant, before deduction of subsidies.
The above subsidy programs are included in the business plan. The subsidies are 100 % granted.
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Business plan: gross margin on turbines and systems sales
Relevant assumptions and explanations are as follows:
1) T1/R1 floating river turbines and systems: 2019: 18 T1 turbines in Kornwerderzand, the Netherlands, 8 R1 turbines in Koshi River (Nepal)
and 20 R1 turbines under the earthquake restructuring program (Nepal); 2020: 16 R1 turbines in Koshi River (Nepal), 20 R1 turbines in Nepal (rebuild) and 64 R1 turbines
(retrofit) in Pakistan; >2020: 16 R1 turbines in Koshi River (Nepal), 120 R1 turbines Nepal (rebuild).
2) T2 products and systems: 2018: 5 T2 turbines on one floating systems (UFS) in Bay of Fundy - Minas (Canada); 2019: 10 T2 turbines on two floating UFSs in Digby (Canada), 5 T2 turbines on one floating UFS in Petit
Passage (Canada), 10 T2 turbines on two floating UFSs in Bay of Fundy - Minas (Canada), 5 T2 on one float-ing UFS at third party project (Canada), 5 T2 on one floating UFS at EMEC (Scotland, UK), 5 T2 turbines in the Oosterschelde and one single turbine in Japan;
2020: 10 T2 on two floating UFSs at third party project (Canada), 20 T2 on four floating UFSs in the Isle of Wight (UK), 15 T2 turbines on three floating UFSs in the Isle of Man (UK), 5 T2 turbines on one floating UFS in South-Korea, 20 T2 turbines retrofit in the Oosterschelde (NL) and 16 T2 turbines retrofit in Larantuka (Indonesia);
>2020: 40 T2 turbines on floating UFSs in the Isle of Wight (UK), 15 T2 turbines on floating UFSs in the Isle of Man (UK), 30 T2 turbines on floating UFSs at Anglesey Skerries (UK), 30 T2 turbines on floating UFSs at Morlais (UK), 5 T2 turbines on floating UFSs in South Korea, 50 T2 turbines retrofit in the Oosterschelde (NL) and 16 T2 turbines retrofit in Larantuka (Indonesia)
Gross margin 2017 2018 2019 2020 2021 2022€m LE plan plan plan plan plan
T1/R1 turbines 0,0 0,0 10,9 24,0 17,9 14,1T1/R1 systems 0,0 0,0 3,9 7,9 4,8 3,8T2 turbines 0,0 8,7 17,3 47,3 55,6 46,8T2 systems 0,0 12,7 21,8 70,0 83,0 59,0T3 turbines 0,0 0,0 0,0 0,0 7,5 45,0T3 systems 0,0 0,0 0,0 0,0 6,0 36,0FEED studies 0,7 0,4 0,0 0,0 0,0 0,0Services 0,0 0,0 0,0 0,0 0,0 0,0
Receipt from Sales 0,7 21,8 53,9 149,1 174,7 204,6% growth - 147% 177% 17% 17%
T1/R1 turbines 0,0 0,0 (8,2) (18,0) (13,4) (10,6)T1/R1 systems 0,0 0,0 (3,7) (7,5) (4,5) (3,6)T2 turbines 0,0 (6,5) (12,9) (35,5) (41,7) (35,1)T2 systems 0,0 (10,2) (21,0) (66,5) (78,9) (56,1)T3 turbines 0,0 0,0 0,0 0,0 (5,6) (33,8)T3 systems 0,0 0,0 0,0 0,0 (5,7) (34,2)Services 0,0 0,0 0,0 0,0 0,0 0,0Royalty fees 0,0 (0,6) (1,7) (3,7) (3,7) (2,3)
Cost of Goods Sold 0,0 (17,3) (47,5) (131,1) (153,4) (175,5)as a % of Net turnover - 79% 88% 88% 88% 86%
GROSS MARGIN 0,7 4,5 6,4 18,0 21,2 29,1
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3) T3 products and systems:
No sales of T3 turbines are expected in the 2017 - 2019 period as the technology is still being developed. From 2021 approximately 35 T3 turbines on seven floating UFS systems are expected to be sold for installation in 2020 and 2021.
4) FEED Studies and Services:Income from FEED (Front End Engineering and Development) studies has only been projected for 2018 (Minas project). Conservatively, no income from services has been projected yet, although this may become a significant income source in the near future as the installed base grows.
5) Cost of Goods Sold:Our business plan assumes a 25% gross margin, excluding royalty arrangement, on turbines throughout the entire fore-cast period. Foundations (or “systems”) are assumed to yield a 5% gross margin throughout the entire forecast period.
We are focussing on turbine sales and it may be decided on a case by case basis that the foundations (UFS or system) are directly ordered via project Special Purpose Vehicles (SPVs) and manufactured by third parties locally. That may affect total turnover, but will not affect the gross margin as in those cases a license fee will be charged to the SPV.
Business plan: operational costs
The assumptions relating to operational costs are based on budget figures and expected FTE development. Staff, Marketing & Sales and General & Administrative costs are assumed to increase in line with sales growth in 2020 and subsequent years. Other relevant assumptions and explanations are as follows:
1) Oosterschelde Receipts:These amounts represent income from the sale of electricity generated by the grid connected turbines in the Oosterschelde to Dutch utility company Delta.
2) Oosterschelde O&M:These amounts represent costs related to operations and maintenance of the Oosterschelde installation as well as insurance and legal costs.
3) Staff:Staff costs are based on approximately 25 FTEs in 2016 (30 employees) and includes approximately 15% social secu-rity contributions and travel expenses. The total amount is netted with €190,000 WBSO subsidy in 2016. The amount
Operating costs 2017 2018 2019 2020 2021 2022€m LE plan plan plan plan plan
Oosterschelde Receipts 0,0 0,1 0,1 0,1 0,1 0,1Oosterschelde O&M (0,1) (0,1) (0,1) (0,1) (0,1) (0,1)Staff costs (1,2) (1,6) (2,2) (2,6) (3,0) (3,5)Marketing & Sales (0,2) (0,3) (0,3) (0,2) (0,2) (0,3)Housing costs (0,1) (0,1) (0,1) (0,1) (0,2) (0,2)General & Administrative (0,6) (0,6) (0,6) (0,6) (0,7) (0,9)
OPERATING COSTS (2,2) (2,6) (3,2) (3,5) (4,1) (4,8)
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of FTEs increases with 5 in 2017 (project manager, sales employee, construction engineer and 2 production employees). Approximately 33% of the staff costs are capitalized annually for 2017 and 2018 and 20% afterwards. The figures shown in the table above are after deduction of these capitalized amounts.
4) Marketing & Sales:Marketing & Sales costs predominantly consist of i) travel expenses related to sales, ii) marketing and PR costs, and iii) costs related to the continuation of patents.
5) Housing costs:The Company currently rents an office in Den Oever and a production facility in Wieringerwerf, both in the Netherlands. Housing costs include rent, energy costs and other housing costs.
6) General & Administrative:Within General & Administrative the principal costs are related to insurance, accountancy, advisory services and legal advice.
Business plan: research and development costs
Research and development costs represent third party costs and relate to external costs and exclude capitalized employee costs for hours spent by own engineers. These costs are capitalized (intangible fixed assets) and amor-tized in a straight line over a twenty year period.
The technology roadmap includes details for these costs for the period until 2018. For the period thereafter we as-sumed total research and development costs (excluding labour) to amount to approximately 2% of sales per annumRelevant assumptions and explanations are as follows:
1) Turbine development:These expenses include costs for external engineering companies, upscaling and improvements, costs for testing facilities and production of prototypes.
2) System development:External engineering costs for the development of a floating tidal power plant solution with T2 turbines, cost for scaled testing and full scale field testing of the first version of this solution, external engineering for further improvement and up-scaling towards a floating power plant solution with T3 turbines.
3) Project support:Expenses required for certification of turbines and floating foundations, expenses for specialized companies that support the development of operations and maintenance of monitoring systems, offshore maintenance methods for both turbines and foundations and expenses for development of special maintenance tools.
R&D costs (excl labour) 2017 2018 2019 2020 2021 2022€m plan plan plan plan plan 0
Turbine development (1,0) (0,1) (1,5) (1,7) (1,0) (1,2)System development (0,6) (0,6) 0,0 0,0 0,0 0,0Project support (0,3) (0,0) 0,0 0,0 0,0 0,0
R&D EXPENSES (1,9) (0,7) (1,5) (1,7) (1,0) (1,2)
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Business plan: receipt from subsidies
Our business plan includes in total €5.1 million of (anticipated) subsidies over the 2017-2019 period. This number excludes the WBSO subsidies (netted off staff costs). The subsidies are either netted with capitalized research and development, work in progress, or used to make ex-ternal projects commercially viable. We have over 20 years’ experience on subsidy management.
Business plan: profit and loss statement
The profit and loss statement illustrates that the business plan assumes that the Company will be profitable as of 2018.
Relevant assumptions and explanations are as follows:
Although we are focussing on turbine sales, it may be decided on a case by case basis that the foundations (UFSs or systems) are directly ordered via project Special Purpose Vehicles (SPVs).
Income from FEED studies (2017: € 0.7 million forecasted) and other services are conservatively not taken into account for the year 2018 and following.
Increase in total operating costs in 2017 are predominantly driven by increase in staff costs (5 new FTEs assumed in 2017).
Approximately 33% of staff costs 2017-2018 (20% thereafter) will be capitalized as research and develop-ment on an annual basis. The staff costs shown are the net amounts after capitalisation and after deduction of WBSO subsidy.
Profit & Loss 2017 2018 2019 2020 2021 2022€m LE plan plan plan plan plan
Receipt from Sales 0,0 8,3 67,3 149,1 174,7 204,6Income from FEED studies 0,0 0,7 0,0 0,0 0,0 0,0Net turnover 0,0 9,0 67,3 149,1 174,7 204,6Cost of Sales 0,0 (4,5) (58,7) (131,1) (153,4) (175,5)Gross margin 0,0 4,5 8,6 18,0 21,2 29,1Changes in work in progress 0,0 0,0 0,0 0,0 0,0 0,0Gross operating result 0,0 4,5 8,6 18,0 21,2 29,1
Oosterschelde Receipts 0,0 0,1 0,1 0,1 0,1 0,1Oosterschelde O&M (0,1) (0,1) (0,1) (0,1) (0,1) (0,1)Staff costs (1,2) (1,6) (2,2) (2,6) (3,0) (3,5)Marketing & Sales (0,2) (0,3) (0,3) (0,2) (0,2) (0,3)Housing costs (0,1) (0,1) (0,1) (0,1) (0,2) (0,2)General & Administrative (0,6) (0,6) (0,6) (0,6) (0,7) (0,9)
Total operating costs (2,2) (2,6) (3,2) (3,5) (4,1) (4,8)Reported EBITDA (2,2) 1,9 5,4 14,5 17,2 24,3Depreciation (0,1) (0,1) (0,1) (0,1) (0,1) (0,1)Amortisation (0,4) (0,5) (0,5) (0,5) (0,7) (0,7)Reported EBIT (2,7) 1,3 4,8 13,9 16,4 23,4Financial income/(expenses) (0,4) (0,5) (0,5) (0,4) (0,3) (0,2)Profit before tax (3,0) 0,9 4,3 13,5 16,1 23,2Income from associates 0,0 0,0 0,0 0,0 0,0 0,0Income taxes 0,4 (0,1) (0,6) (2,8) (4,0) (5,8)Net result (2,6) 0,7 3,7 10,8 12,1 17,4
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Depreciation is assumed to be constant in the 2017-2022 forecast period. Capitalized research and development costs are assumed to be amortised in twenty years resulting in an increase in amortisation of intangible fixed assets over the projection time.
The financial expenses include interest expenses on the €1.5 million bank loan, as well as on the €5 million Bonds.
Income taxes are based on the assumption of an effective tax rate of 25%. As a result of the tax loss carry forward of approximately €9.5 million (including tax loss 2016), the Company will not pay (cash-out) in-come taxes till 2020.
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Business plan: balance sheet
The balance sheet includes both the €1.5 million bank loan and the €5 million Bonds that fulfil the Company’s funding needs.
Relevant assumptions and explanations are as follows:
Intangible fixed assets are assumed to increase based on the capitalisation of the research and develop-ment expenditure and subsequent amortisation over a twenty year period.
Tangible fixed assets to reduce along with depreciation in 2017 - 2019 remain constant as a result of annual capital expenditure of approximately €0.1 million.
Financial fixed assets include deferred tax assets that are to reduce once we are profitable and tax losses are utilised. Besides, the financial fixed assets include equity investments in projects for an amount of €2.5m as of 2017 and onwards.
Working capital remains fairly constant during the forecast period.
Provisions to remain constant throughout the entire forecast period.
Balance Sheet 2017 2018 2019 2020 2021 2022€m LE plan plan plan plan plan
Intangible fixed assets 6,3 6,4 8,0 9,8 10,9 12,2Tangible fixed assets 2,0 1,8 1,7 1,6 1,6 1,6Financial fixed assets 4,3 4,2 3,5 2,6 2,6 2,6
Total fixed assets 12,6 12,4 13,2 14,0 15,1 16,5Raw materials and consumables 0,0 0,0 0,0 0,0 0,0 0,0Work in progress (0,9) (1,7) 0,5 0,5 0,5 0,5Trade receivables 0,0 0,0 0,0 0,0 0,0 0,0Other short-term receivables 0,4 0,4 0,4 0,4 0,4 0,4Prepayments received on orders (0,4) (0,4) (0,4) (0,4) (0,4) (0,4)Trade payables (0,3) (0,1) (0,1) (0,1) (0,1) (0,1)Other payables (0,5) (0,4) (0,4) (0,4) (0,4) (0,3)
Net working capital (1,6) (2,2) (0,0) (0,0) (0,0) 0,1
CAPITAL EMPLOYED 11,0 10,2 13,2 14,0 15,1 16,6
Group equity 4,0 4,7 8,4 19,2 31,3 48,7Short-term debt 0,0 0,0 0,0 0,0 0,0 0,0Long-term debt 7,4 6,9 6,4 5,9 5,0 0,0Funding requirement 0,0 0,0 0,0 0,0 0,0 0,0Cash and cash equivalents (0,5) (1,5) (1,7) (11,1) (21,3) (32,2)
Net debt 6,9 5,4 4,6 (5,3) (16,3) (32,2)Provisions 0,2 0,1 0,1 0,1 0,1 0,1
CAPITAL INVESTED 11,0 10,2 13,2 14,0 15,1 16,6
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Business plan: cash flow statement
As a result of the total funding to be acquired in 2017, the amount of debt will increase with €6.5 million.
Relevant assumptions and explanations are as follows:
Change in net working capital mostly relates to building the first 3 systems in 2017-2019
Investments in intangible fixed assets represent the research and development costs which are capitalised.
Cash taxes payable as from 2020 onward as the tax loss carry forward has been fully utilised by then.
Cash Flow Statement 2017 2018 2019 2020 2021 2022€m LE plan plan plan plan plan
Reported EBITDA (2,2) 1,9 5,4 14,5 17,2 24,3Change in net working capital 1,2 0,6 (2,2) 0,0 0,0 (0,1)Investments in intangible fixed assets (2,2) (0,6) (2,1) (2,3) (1,7) (2,1)Investments in tangible fixed assets (0,0) 0,0 0,0 0,0 (0,1) (0,1)Operational cash flow (3,2) 2,0 1,2 12,2 15,3 22,0Income taxes (P&L) 0,4 (0,1) (0,6) (2,8) (4,0) (5,8)Change in financial fixed assets (2,9) 0,2 0,7 0,9 0,0 0,0Change in provisions (0,0) (0,0) (0,0) (0,0) (0,0) (0,0)Free cash flow (5,7) 2,0 1,2 10,3 11,3 16,1Financial income/(expenses) (0,4) (0,5) (0,5) (0,4) (0,3) (0,2)Free cash flow after interest (6,1) 1,5 0,7 9,9 11,0 15,9Change in debt 6,5 (0,5) (0,5) (0,5) (0,9) (5,0)Increase in equity 0,0 0,0 0,0 0,0 0,0 0,0Change in cash 0,4 1,0 0,2 9,4 10,1 10,9
Cash @ beginning of the year 0,1 0,5 1,5 1,7 11,1 21,3Change in cash 0,4 1,0 0,2 9,4 10,1 10,9Cash @ end of the year 0,5 1,5 1,7 11,1 21,3 32,2
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Chapter 7 - The offering and use of proceedsTocardo identified a working capital requirement of € 3.0M at the beginning of 2017, taking into account intra-year (working capital) swings as subsidies are paid after realization and have to be pre-financed.
Furthermore, we believe that an additional €2.5 million of flexibility is required for potential early-phase investments in tidal farms. By doing so, we believe to enlarge the feasibility of realising projects and therefore increasing and derisk-ing our commercial pipeline.
Finally, an additional headroom of €1.0 million on top of the minimum year-end cash balance and intra-year (working capital) swings ensures that we can continue to operate in the event that turbine deliveries in 2017-2019 will be delayed with approximately 6 months, which we consider to be a negative scenario.
Consequently, the total funding need amounts to approximately €6.5 million for 2017, as shown in the following table:
Recently, we have obtained a €1.5 million bank loan. Consequently, our remaining funding requirement amounts to approximately €5.0 million.
In light of the above we are now offering the Bonds. We aim to issue Bonds with a maximum total value of €5 mil-lion. The issue will not take place in case of subscriptions below €2.5 million. The issue date of the Bonds is expected to be on or about 30 June 2017, subject to an earlier or a later date to be chosen at our discretion. The final date will be announced to subscribers in due course.
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Chapter 8 - The BondsIn this chapter we summarize the terms and conditions of the Bonds. The complete terms and conditions are included in annex I to this information memorandum.
Nominal value and costs
The nominal value per Bond is € 10,000. Each Bond will be issued at nominal value. The Company will repay the nominal value at the latest at the final maturity of the Bonds.
Subscribers to Bonds will be required to pay issuance costs as follows:
Subscriptions up to and including 15 May 2017: 0% of the nominal value. Subscriptions from 16 May 2017 up to and including 15 June 2017: 0.5% of the nominal value. Subscriptions as from 16 June 2017: 1.0% of the nominal value.
Interest
A fixed yearly interest of 7% will be paid on the Bonds. The interest is due as from the issue date. The first payment will be one year after the issue date of the Bonds. Subsequent payments will be on or about the same date in following years. The interest on a Bond will be credited to the most recent buyer of the Bond.
Example: On 25 August in a certain year you sell a Bond to Mr “Y’ in an open period. This means that when the first following interest is paid, the interest accrued over the period since the last day of the previous interest period (previous 30 June ) up to the last day of the yearly interest period (next 30 June) will be paid to the new holder of the Bond (Mr “Y”). Unless Mr “Y” has sold his Bond in a open period of the market before June 30th next year. In that case the interest will be paid to the person who bought the Bond from Mr “Y”.
Maturity and redemption
The final maturity of the Bonds is five years from the issue date. The Company may decide to partially or fully redeem the Bonds prior to their final maturity. In case of early redemption the interest accumulated and not yet paid at such time will also be paid.
Status
The Bonds constitute direct, unsecured and unsubordinated obligations of the Company ranking at least pari passu with any other unsecured and unsubordinated indebtedness of the Company (save for those preferred by mandatory and/or overriding provisions of law), and without any preference among themselves. The Bonds will rank lower than current and future bank loans, currently amounting to € 1.5 million, which will have the benefit of security rights.
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Involvement of Van Lanschot
We have appointed F. Van Lanschot Bankiers N.V. (“Van Lanschot”) to provide us the following services:
managing the bondholders’ register containing the details of the bondholders, the number of Bonds and the history of the purchase and sale transactions;
making available its online trading platform where the Bonds can be traded; processing the incoming payments, interest payments and Bond repayments; providing relevant information to bondholders; acting as point of contact for technical support to the bondholders with regard to the trading platform and for questions
about the information memorandum, whereby no opinion or advice on the Bonds is given under any circumstances.
Van Lanschot is a specialized and independent investment manager, which focuses on the preservation and accumulation of capital for its clients. Van Lanschot has existed since 1737 and is the oldest independent bank in the Netherlands. Van Lanschot is a private bank for individual customers, entrepreneurs and family businesses.
With its Equity Management Services (EMS) department, Van Lanschot focuses on large companies – both listed and unlisted – with an employee participation plan, and on companies and funds that require liquidity in their securities, but which are not listed on a stock exchange.
The services that Van Lanschot provides, taking on and passing on orders at the initiative of actual or potential bond-holders and executing these on its trading platform, qualify as providing an ‘execution-only’ investment service with-in the meaning of the Dutch Financial Supervision Act (Wet op het financieel toezicht, “Wft”). Van Lanschot does not inquire about the knowledge and experience, risk appetite or financial situation of actual or potential bondholders.
Van Lanschot falls under the Dutch Money Laundering and Terrorist Financing (Prevention) Act (Wet ter voorkoming van witwassen en financieren van terrorisme). In that context, Van Lanschot can inquire about, among other things, the origin of the capital of subscribers to Bonds. In addition, Van Lanschot can ask for written evidence to substanti-ate the origin of funds.
Van Lanschot is registered as bank in the Wft register and is under the supervision of De Nederlandsche Bank NV (P.O. Box 98, 1000 AB Amsterdam) and the Netherlands Authority for the Financial Markets (P.O. Box 11723, 1001 GS Amsterdam).
Trading
The Bonds can be only be traded via the multilateral trading facility (MTF or ‘multilaterale handelsfaciliteit’ as de-fined in the Wet op het financieel toezicht) operated by Van Lanschot. Listing the Bonds on the trading platform is aimed at improving the liquidity of the Bonds.
Orders on the platform will be handled in order of receipt and processed during the trading hours and days of Euronext in the open periods. Tocardo and Van Lanschot are entitled to reject the purchase or sale of Bonds by actual or potential bondholders without stating any reasons.
Twice a year, there is a trading period of 10 working days. The market is closed outside this period. On overview of open periods will be provided to investors. Trading takes place on the basis of supply and demand.
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Bondholders must agree to the Van Lanschot trade agreement applicable to the transactions on the trading plat-form.Trading Bonds is subject to transaction costs. These costs amount to 0.45% of the transaction value for both the buyer and the seller. Tocardo will not bear these transaction costs.
Form
The Bonds are in registered form. No certificates will be issued.
Register
At our request Van Lanschot will maintain a register containing the personal data of bondholders, the number of Bonds and the transaction history. The relevant buyer and seller of bonds will receive a transaction confirmation of each purchase or sale transaction.
Meetings of holders of Bonds
Meetings of bondholders may be convened at the initiative of the Company or bondholders holding not less than 25% in a nominal amount of the Bonds for the time being remaining outstanding. Each Bond gives right to one vote in a meeting. Decisions can be taken by more than 50% of the votes cast.
Governing law
The Bonds are governed by Netherlands law.
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Chapter 9 - RisksInvesting in the Bonds may result in financial benefits. However, investors must realise that investing in the Bonds also leads to certain risks. In the worst case, the entire amount invested might be lost. In this chapter we describe certain risk factors that may affect the Company’s ability to fulfil its obligations under the Bonds. Additional risks may exist or may arise in the future.
Risks relating to the Company
Insolvency
In the event of insolvency of the Company certain creditors, including banks which have provided loans and the fiscal authorities, will have priority position compared to the holders of Bonds. This means that an insolvency of the Company is very likely to result in the holders of Bonds losing their entire investment.
Uncertainty regarding projects
In our view our commercial pipeline is interesting. Although we believe that at least several of the projects described under “Commercial pipeline” on page 24 will indeed be granted to us, at this stage no assurance can be given that this will be the case. Our business and financial position heavily depend on projects which will be granted to us. If less or, in the worst case, no projects will be granted to us, the potential future financial information included in Chapter 6 (Our future) would prove to be too optimistic and our business and financial position will turn out sig-nificantly more negative than reflected in the potential future financial information. Strategic risks
We expect to derive most of our revenues from the sale of a relatively small range of products and services, of which certain are still in a development stage (T3 turbine). Future sales are difficult to predict and may not meet our expec-tations. Underperformance due to our inability to develop and sell sufficient products will have an adverse effect on our business and financial position.
Competition
Several companies are active in the tidal turbine industry. Our competitiveness depends upon our ability to develop high quality products that are competitively priced and introduced on a timely basis. If our competitors turn out to be more successful in the development and sale of their products, this might be detrimental to us as our sales may be negatively impacted by the success of our competitors. Also, generation of tidal energy is currently more expen-sive than generation of solar energy and wind energy. Although we believe that in the future tidal energy prices will be at the same level as solar energy and wind energy, the current difference is a disadvantage for us and may have a materially adverse effect to our business and financial position.
Young industry
The tidal turbine industry is a relatively young industry. It is uncertain how the industry will further develop. For example, the total demand for tidal turbines in the future is very difficult to predict. In an industry downturn, our
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ability to be profitable will depend substantially on whether we are able to manage our costs. If sales levels do not develop as expected as a result of an industry downturn and we are unable to adjust our costs over the same period, our net income may not meet our expectations, or we may even suffer losses.
Commercial and technical changes might be required if the market develops in another way than expected by us. For example, there might be changes in customers’ expectations, industry standards and technology. Our products could become obsolete sooner than anticipated because of a faster than anticipated change in one or more of the technologies related to our products or in market demand for products based on a particular technology.
Investments in research and development
Our success in developing our product range and in enhancing our existing products depends on a variety of factors, including the successful management of our research and development programs and timely completion of product development and design relative to competitors. If we do not develop and introduce new and enhanced products at competitive prices and on a timely basis, our potential customers may decide not to purchase our products or use our services, which would have a material adverse effect on our business, financial condition and results of operations.
In addition, we are investing considerable financial and other resources to develop and expand our product range, that our customers may not ultimately adopt. If our customers do not adopt these new technologies, products or product enhancements that we develop due to a preference for more established or alternative new technologies and products or for other reasons, we would not recoup any return on our investments in these technologies or products, which could have a materially adverse effect on our business, financial condition and results of operations.
Funding and liquidity risk
We may not be able to adequately fund our business or continuously have sufficient liquidity available. A lack of financial resources may be very detrimental to us as such resources are key to making our business successful. Claims Claims might be brought against us by parties, including but not limited to competitors and customers. Defending ourselves against claims may be costly and the outcome of legal proceedings might have a negative effect on our business and financial position.
Key persons Our business and future success significantly depend upon our employees, including highly qualified professionals, as well as our ability to attract and retain employees. Competition for such personnel may be intense, and we may not be able to continue to attract and retain such personnel, which could adversely affect our business, financial condition and results of operations.
In addition, the complexity of our products results in a relatively long learning curve for new and existing employees potentially leading incurring significant additional costs or missing opportunities, which could adversely affect our business, financial condition and results of operations.
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Intellectual property rights We rely on intellectual property rights such as patents to protect our proprietary technology. However, we face the risk that such measures could prove to be inadequate because:
intellectual property laws may not sufficiently support our proprietary rights or may change in the future in a manner adverse to us;
patent rights may not be granted or construed as we expect; patents will expire which may result in key technology becoming widely available which may hurt our
competitive position; the steps we take to prevent misappropriation or infringement of our proprietary rights may not be successful; and third parties may be able to develop or obtain patents for similar competing technology.
In addition, litigation may be necessary to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Any such litigation may result in substantial costs and, if decided unfavora-bly to us, could have a material adverse effect on our business, financial condition and results of operations.
International operations
Part of our sales may occur to customers outside Europe. There are a number of risks inherent in doing business in some of those regions, including the following:
potentially adverse tax consequences; unfavorable political or economic environments; unexpected legal or regulatory changes; and an inability to effectively protect intellectual property.
If we are unable to manage successfully the risks inherent in our international activities, our business, financial condition and results of operations could be materially and adversely affected.
Support scheme no longer available
Atradius has a financial support scheme in place for assisting export of the Tocardo products. It is an insurance in-strument, which supports a bank loan to our clients and which is therefore important for de-risking the early stage risk of the projects. If Atradius would no longer be willing to offer the scheme and we are unable to find replace-ment, this may have a detrimental effect on our business and financial positions. Currency risk
Currency risk arises from the change in price of one currency in relation to another. We have business operations abroad and are therefore exposed to currency risk that may create unpredictable profits and losses. Forward-looking statements
Although we believe that our financial expectations reflected in forward-looking statements in this information memorandum are reasonable, such forward-looking statements are based on our current views and assumptions
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and involve known and unknown risks, uncertainties and other factors, many of which are outside our control and are difficult to predict, that may cause actual results or developments to differ materially from any future results or developments expressed or implied from the forward-looking statements. The forward-looking statements are based on our best knowledge. They have not been and will not be audited and no assurance report has been of will be issued by external financial advisors.
Rules and regulations
Laws and regulations which apply to us and holders of Bonds may change and there may also be court decisions which are unfavourable to us and holders of Bonds. Non-exhaustive topics which may be relevant are renewable energy, financial supervision and tax.
Changes in Governments may adversely affect us, for example a significant change in vision on and supporting of renewable energy projects and technology developments.
Lower than anticipated subsidies
Our total portfolio of subsidized research and development projects is close to €10 million with approximately 50% subsidy. It is an important contribution to our ongoing research and development activities for the coming four years. Decreasing subsidies may have a material adverse impact on our business and financial position.
Risks relating to the Bonds
Limited liquidity of the Bonds
Transactions are possible only through the trading platform of Van Lanschot. Even though the Bonds can be traded through the trading platform, you should take into account that the actual trading of Bonds may be difficult or im-possible. This could be, for example, because there is little or no interest from potential buyers. We are not required to redeem the Bonds prior to final maturity, nor are we required to repurchase any Bonds. You should therefore consider the possibility that you might have to hold onto your Bonds for a longer period than anticipated or desired. The possibly limited marketability of the Bonds can also have a negative effect on the value thereof.
Early redemption
We may at any time redeem the Bonds prior to their final maturity. As from the moment of partial or full early re-demption holders of Bonds will no longer benefit from the right to receive the same amount of interest payments or to receive interest payments at all, respectively.
Changes to the Bonds
Decisions by the meeting of holders of Bonds, including decisions to change the terms and conditions of the Bonds, can be taken by more than 50% of the votes cast. Consequently, one or more investors holding a majority of the Bonds will be able to take decisions which may not be preferred by or in the interest of other holders of Bonds.
Ranking
The Bonds have a lower rank than the €1.5 million bank loan which the Company recently acquired. Consequently, in the event that the Company has insufficient funds to pay interest and/or repay the principal the amount on the Bonds, the bank will be repaid before the holders of Bonds.
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Chapter 10 - Tax aspectsInvesting in the Bonds may have tax consequences
Investing in the Bonds may have tax consequences for you. In this chapter you will be informed about the conse-quences in general. Perhaps, those consequences are not applicable for you, due to specific circumstances. The consequences described here are only applicable for Dutch (resident) tax payers. You are solely responsible for un-derstanding the tax consequences of investing in the Bonds. We strongly advise you to consult your own tax advisor.
The information given in this chapter gives a general description of the situation at the date of this this information memorandum and is based on the tax rules and laws published court verdict per the date of this this information memorandum. Figures, percentages and amounts noted in this chapter are for the fiscal year 2017, as known per the date of this this information memorandum. Due to changes in tax rules and laws, the information given in this chapter might be outdat-ed at the moment of reading.
It can be that tax consequences change. In specific cases this can be applied retrospectively, meaning that chances can affect the past. We cannot be held responsible for either of those chances.
The Bonds will be sold to both private persons and corporations. For private persons and corpo-rations other tax regimes are applicable. In the following paragraphs the tax consequences for both private persons as well as corpo-rations will be described.
Tax consequences for private persons
If you are a private person with taxable income, you have to pay income tax. The amount of tax levied, will depend on the type of income and the total amount of income per type. The Dutch income tax is divided into three catego-ries or so called ‘boxes’.
1. In box 1 income from (former) employment, business, professional activities and home ownership is taxed. 2. In box 2 income from substantial shareholding is taxed3. In box 3 income from savings and investments is taxed.
Whether the income from investing in the Bonds is taxed in box 1 or box 3 depends on your personal situation.
If you invest in the Bonds from a source or activity of which the income is taxed in box 1, income from the bonds will also be taxed in box 1. That income can be the interest received on the bonds and/or the gain or loss on sale of the bonds. A loss from the bonds can be compensated with other income in box 1.
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The combined income in box 1 is taxed progressively as shown in the following table:
Box 1: income vs tax rates * Till AOW age From AOW age
Income € 0 - € 19,982 36.55% 18.65%
Income € 19,983 - € 33,791 40.80% 22.90%
Income € 33.792 - € 67.072 40.80% 40.80%
Income above € 67.072 52.00% 52.00%
* All amounts and percentages mentioned in the table above apply to 2017. The AOW age in 2017 is 65 years and 9 months.
In box 3, taxes are levied on assets minus liabilities. Net capital (the value of the assets minus any liability) is deter-mined once a year, on January 1. Only capital available for savings and investment is taken into account. Conse-quently, the owner-occupied dwelling as well as the endowment insurance linked to it and capital invested in some-one’s own company or in a substantial interest are not taxed in box 3. The tax law assumes that a fictitious return is received on the net capital, see table below. The computed taxable return is taxed in box 3 at 30%. A general tax-free capital threshold of € 25,000 (€ 50,000 for couples or fiscal partners) applies for 2017.
Table: computing taxable return on net capital (er person)
Box 3: taxable net capital vs return
Return percentage 1.63%
Return percentage 5,5%
Cumulated return
Taxable net capital € 0 - € 75,000
67% 33% 2.9071%
Taxable net capital € 75,001 - € 975,000
21% 79% 4.345%
Taxable net capital over € 975,000
0% 100% 5.5%
In the case that the holder of Bonds deceases or the Bonds are donated to others, taxes may be levied depending on specific circumstances. Please consult your tax advisor for those tax implications.
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Tax consequences for corporations
If you are a corporation, you have to pay Corporation Tax on your income. In general, a Besloten Vennootschap (Lim-ited Liability Company) or ‘Naamloze Vennootschap’ (Public Limited Company) is taxable under the Corporation Tax Law. Stichtingen (Foundations) are only taxable under the Corporation Tax Law when they exploit a business.
The Corporation Tax is 20% on the profit made up till € 200,000. Over the profit above € 200,000 25% corporate tax is levied. Both income from the bonds, as well as capital gains or losses are part of the taxable income.
Withholding tax
No withholding tax applies in the Netherlands to interest paid on Bonds. Therefore, we do not withhold any tax on the interest to be received by you.
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Chapter 11 - InformationWe will inform holders of Bonds of matters relevant to them as follows.
Annual accounts
Once a year the Company’s annual accounts will be sent to holders of Bonds who have provided an e-mail address.
Newsletter
Twice a year a newsletter describing the key developments of the Company and the Bonds will be send to holders of Bonds who have provided an e-mail address.
Ad hoc
In case of events which are material for holders of Bonds we will send an e-mail holders of Bonds who have provided an e-mail as soon as possible after the events.
Trading platform
All relevant information will also be made available on a section of Van Lanschot’s trading platform accessible to holders of Bonds whom Van Lanschot provides with login codes. Bondholders who have not submitted their e-mail address cannot benefit from this feature.
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Chapter 12 - Subscription and allotmentSubscription
We have requested Van Lanschot to facilitate the subscription to Bonds on our behalf.
Natural persons can subscribe to the Bonds with a minimum investment of € 100,000 (excluding issuance costs) by online subscription at www.onderhandsemarkt.nl/tocardo and attach the document below in digital format:
A copy of a valid proof of identity bearing an original signature.
Legal entities can subscribe to the Bonds by online subscription at www.onderhandsemarkt.nl/tocardo and attach the following documents:
A copy of a valid proof of identity bearing an original signature of the authorized signatory;
The company’s current articles of association;
An extract from the commercial register of the Chamber of Commerce not older than 3 months. If there are mul-tiple account holders and/or authorized signatories, the aforementioned documents, if applicable, of all account holders and/or authorized signatories must be sent.
As an alternative to online subscription natural persons can subscribe to the Bonds (with a minimum investment of € 100,000, excluding issuance costs) by sending the documents below:
A completely filled out and signed subscription form (as included in annex II and available via Van Lanschot (www.onderhandsemarkt.nl/tocardo);
A copy of a valid proof of identity bearing an original signature.
As an alternative to online subscription legal entities can subscribe to the Bonds by sending the following documents below:
A completely filled out and signed subscription form (as included in annex II and available via Van Lanschot (www.onderhandsemarkt.nl/tocardo);
A copy of a valid proof of identity bearing an original signature of the authorized signatory;
The company’s current articles of association;
An extract from the commercial register of the Chamber of Commerce not older than 3 months. If there are multiple account holders and/or authorized signatories, the aforementioned documents, if applicable, of all account holders and/or authorized signatories must be sent.
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There are two possible ways of sending the documents:
1. Delivery by post to:
F. van Lanschot Bankiers N.V. Equity management Services P.O. Box 1021 5200 HC ‘s-Hertogenbosch
2. E-mailing scans of the documents to: [email protected].
Multiple subscriptions are allowed and subscription is not limited to a maximum. By sending the subscription form, the subscriber accepts the irrevocable obligation to pay the amounts for the Bonds to be purchased.
Information on the subscription period and any further particulars, such as an extension or premature closing of the subscription, can be found on the respective websites of Tocardo (www.Tocardo.com) and Van Lanschot (www.onderhandsemarkt.nl/tocardo).
The subscription form will be marked with the date of receipt upon receipt thereof, after which the procedure will be as described below.
Subscription takes place in chronological order of the dates of receipt of the subscription forms. In the event of oversubscription, the subscribers concerned will be informed thereof. Any monies already paid will be repaid to the account from which the amount was paid as soon as possible. Both Van Lanschot and Tocardo are entitled to reject or reduce subscriptions without stating reasons.
Allotment
Allotment of the Bonds takes place in chronological order of the dates of receipt of the subscription forms. Van Lan-schot will send a letter of allotment to subscribers whose subscription was successful, confirming the allotment of the number of Bonds. The letter of allotment will be accompanied by a request to the subscriber to pay the monies for the Bonds to be purchased and the emission costs into the bank account with IBAN number NL31 FVLB 0226 696 413 and BIC: FVLBNL22 in the name of F. van Lanschot Bankiers in the matter of Tocardo International B.V., stating the number of Bonds allotted and the name of the subscriber. The monies must be received on the abovementioned bank account by no later than on the issue date. Subscribers who successfully subscribed will receive a notification of participation within 5 working days after receipt of the monies.
Van Lanschot will send all Bond holders a user name and a password by two separate e-mails once the Bonds have been allotted.
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The Company
Tocardo International B.V.Sluiskolkkade 21779 GP, Den Oeverthe NetherlandsTel. +31 (0) 22 642 3411
Chapter 13 - Parties involved
Administration and trading of Bonds
F. Van Lanschot Bankiers N.V.Hooge Steenweg 29 5211 JN ’s-HertogenboschAntwoordnummer 2895200 VB ’s-Hertogenboschthe NetherlandsTel. +31 (0) 800 1737
Legal advisor
Prospectus & Law B.V.Leidsekade 983531 HC UtrechtThe NetherlandsTel: +31 (0) 6 432 567 47
Tax and financial advisor
PricewaterhouseCoopers Advisory N.V.Thomas R. Malthusstraat 51066 JR Amsterdam
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International B.V. (the “Company”).
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions
In these Terms and Conditions, unless a contrary intention appears or the context otherwise requires:
“Bonds” means the bonds, issued at a nominal value of € 10,000.- each, by the Company on the Issue Date in accordance with these terms and conditions.
“Bondholders” means the persons from time to time entered into the Register as holders of the Bonds.
“Business Day” means any day other than a Saturday, Sunday or a day on which banking institutions in the Netherlands are authorized or required by law, executive order or governmental decree to be closed.
“Company” means Tocardo International B.V., a public limited liability company (besloten vernnootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands.
“Event of Default” has the meaning ascribed to such term in Clause 8.
“Issue Date” means date of issuance of the Bonds which is expected to be on or about 30 June 2017, sub-ject to an earlier or a later date to be chosen at the discretion of the Company. The final date will be announced to subscribers in due course. “Insolvency Event” means the bankruptcy, suspension of payments, winding-up, dissolution, or any analogous proceedings of the Company. “Interest Rate” means a fixed interest rate of 7 % per annum. “Maturity Date” means five years after the Issue Date. “Register” means the register kept or procured to be kept by F. Van Lanschot Bankiers N.V. in respect of the Bonds.
1.2 Construction
(i) any references to a document or agreement are references to that document or agreement as amended, supplemented, novated and / or restated from time to time, except if indicated otherwise;
(ii) Clause and schedule headings are for reference purposes only; and
(iii) Words denoting the singular include the plural and vice versa, and words denoting either gender include the other.
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2. FORM, DENOMINATION, ISSUE PRICE
The Bonds are issued in registered form. No certificates will be issued. The Bonds shall be registered into the Register, which shall inter alia indicate: (i) the name and address of each Bondholder; (ii) the number of Bonds held by each Bondholder; (iii) the date upon which the name of a Bondholder is entered into the Register and (iv) the details of the bank account of each Bondholder.
The nominal value per Bond is € 10,000. Each Bond will be issued at the nominal value. Subscribers to Bonds will be required to pay issuance costs as follows:
Subscriptions up to and including 15 May 2017: 0% of the nominal value. Subscriptions from 16 May 2017 up to and including 15 June 2017: 0.5% of the nominal value. Subscriptions as from 16 June 2017: 1.0% of the nominal value.
3. STATUS
The Bonds constitute direct, unsecured and unsubordinated obligations of the Company ranking at least pari passu with any other unsecured and unsubordinated indebtedness of the Company (save for those preferred by mandatory and/or overriding provisions of law), and without any preference among themselves. The Bonds will rank lower than current and future bank loans currently amounting to € 1.5 million, which have the benefit of security rights.
4. INTEREST
4.1 The Bonds shall accrue interest in favor of the Bondholders.
4.2 The annual Interest Rate is a fixed interest rate of 7% of the outstanding nominal value per annum paid annually, within 3 Business Days from the end of the periods described in article 4.3.
4.3 The first interest period shall start as from the Issue Date and shall end one year thereafter. Each subsequent interest period shall start as from the date on which interest was paid until one year from that date. The last interest period shall end at the latest the Maturity Date.
5. REDEMPTION
5.1 Redemption at maturity
On the Maturity Date, all outstanding Bonds shall be redeemed and the Company will be required to repay all outstanding amounts due under the Bonds (whether in principal or interests).
5.2 Mandatory redemption
If an Event of Default occurs the Company shall at the request of a Bondholder repay outstanding amounts due under the Bonds (whether in principal or interests).
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5.3 Early redemption at the option of the Company
The Company may, without premium or penalty, redeem at any time in whole or in part the outstanding Bonds subject to a twenty (20) Business Days prior written notice to the Bondholders of its intention to re-deem the Bonds. The Company will repay all outstanding amounts due under the redeemed Bonds (whether in principal or interests).
5.4 No early Redemption at the option of the Bondholders
The Bondholders may not request the redemption of their Bonds prior to the Maturity Date.
6. PAYMENTS
6.1 Payments of amounts due under the Bonds (whether in principal or interest) have to be made to the Bond-holders to such bank accounts shown in the Register subject in all cases to any applicable fiscal or other laws and regulations in the jurisdictions of the Company and in any other applicable jurisdictions.
6.2 All payments due to be made by the Company under the Bonds shall be made without any deduction or withholding (whether in respect of set-off, counterclaim, duties, taxes, charges or otherwise howsoever) ex-cept if any such deduction or withholding is required by law.
6.3 If the due date for payments under the Bonds is not a Business Day, a Bondholder shall not be entitled to receive a payment of the amount due until the next following Business Day and shall not be entitled to any further interest or other payment in respect of any such delay.
7. TRANSFERABILITY
The Bonds can be only be traded via the multilateral trading facility (MTF) operated by F. Van Lanschot Bankiers N.V. as described on page 45 of the information memorandum dated 25 april 2017.
8. EVENTS OF DEFAULT
An Event of Default shall occur in the following circumstances:
(i) Any failure by the Company to pay the Bondholders any amount in principal or interests which is not cured within 90 (ninety) Business Days from such failure;
(ii) The Company is subject to an Insolvency Event.
9. NOTICES
All notices, communications and convocations to the Bondholders shall be deemed to have been duly given if posted by registered letters to such Bondholders at their respective addresses as shown on the Register.
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10. MEETING OF THE HOLDERS OF BONDS AND MODIFICATION OF THE BONDS
10.1 Meetings of bondholders may be convened at the initiative of the Company or Bondholders holding not less than 25% of the nominal amount of the Bonds for the time being remaining outstanding. A request for con-vocation of a meeting must include the relevant matters.
10.2 Meetings will be convened by the Company by means of a notice to Bondholders, which will be sent at least 7 days prior to the meeting.
10.3 The Company will appoint a chairman.
10.4 Each Bond gives right to one vote in a meeting.
10.5 Decisions can be taken by more than 50% of the votes cast, unless an exceptional majority is required as described in the following paragraph.
10.6 An exceptional majority is considered to be 2/3 of the votes cast during a meeting at which at least 2/3 of all votes is represented. An exceptional majority is required in case of: (i) a decrease of the interest payable on the Bonds; (ii) an extension of the maturity of the Bonds; (iii) a change to the dates of which interest is due;
(iv) a change to the Bonds which is detrimental to holders of Bonds.
10.7 If less than 2/3 of all votes is represented in a meeting in which an exceptional majority is required, a sec-ond meeting will be convoked. At such meeting a 2/3 majority of votes cast will still be required in order to take a decision with an exceptional majority. However, no quorum is required.
10.8 The following decisions can only be taken with the explicit consent of the Company:
(i) a change to the dates of which interest is due; (ii) a change to the Bonds which leads to higher costs for the Company or which may in the opinion of
the Company any other way be detrimental to the Company.
10.9 The Company may modify the terms and conditions of the Bonds without consent of the Bondholders if:
(i) the modification is not materially prejudicial to the interests of the Bondholders; or
(ii) the modification of the Bonds which is of a formal, minor or technical nature or is made to correct a manifest error or to comply with mandatory provisions of the law.
11. LAW AND JURISDICTION
The Bonds are governed by and shall be construed in accordance with Netherlands law.
Any dispute arising out of or in connection with the Bonds and these Terms and Conditions, including a dispute regarding their existence, validity, interpretation, performance or termination, shall be subject to the exclusive jurisdiction of the courts of the Netherlands.
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SUBSCRIPTION FORMTocardo International B.V. 7% bonds due 2022 with a nominal value of €10,000 each (Bonds) (minimum purchase of 10 Bonds).
Annex II: Subscription form
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SUBSCRIPTION FORM FOR TOCARDO INTERNATIONAL B.V. BONDS
Register as a natural person / director(s) legal entityMandatory: include a copy of a valid proof of identification (passport or ID) natural person/director(s).
If applicable when registering as a legal entity:
Last name: ❑ male ❑ female Initials:
Address: Postal code:
Place of residence : Telephone number:
Date of birth: Email address:
Citizen Service Number (BSN): IBAN*:
Signature: ____________________________
* We will administer this account number as your fixed contra account.
Name of legal entity:
Listed in the Trade Register of the Chamber of Commerce under number:
If the owners of the Financial Instruments are natural persons who jointly hold these rights (for example a partnership or general partnership), all holders of the Financial Instruments must be listed on this
form. In case of a legal person, the director(s) with sole/independent authority must be listed on the form. A copy of a valid proof of identification must be included for all natural persons listed above.
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Owner/director 1: Owner/director 2:
Name: ❑ male ❑ female Name: ❑ male ❑ female
Initial(s): Initial(s):
Citizen Service Number (BSN): Citizen Service Number (BSN):
UBO*: ❑ yes ❑ no UBO*: ❑ yes ❑ no
Date of birth: Date of birth:
Signature: Signature:
Owner/director 3: Owner/director 4:
Name: ❑ male ❑ female Name: ❑ male ❑ female
Initial(s): Initial(s):
Citizen Service Number (BSN):
Citizen Service Number (BSN):
UBO*: ❑ yes ❑ no UBO*: ❑ yes ❑ no
Date of birth: Date of birth:
Signature: Signature:
* You are an Ultimate Beneficiary Owner (UBO) if you hold 25% or more of the capital of the legal entity, you can exercise 25% or more of the voting rights in a general meeting, you are the beneficiary of at
least 25% or more of the assets of the legal entity. Not applicable for a natural person.
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By submitting the subscription form, you declare:
a.
that you subscribe to ______ Tocardo International B.V. Bonds, under the obligation to pay up in full €10,000 per Bond, (minimum subscription of 10 Bonds),
to be increased with any issuance costs, i.e.
to the total amount of € ___________________
The minimum subscription, the direct minimum first payment and the minimum portfolio size is €100,000, excluding issuing costs.
Please transfer the subscription amount to bank account number NL31FVLB0226696413 (BIC: FVLBNL22) in the name of F. van Lanschot Bankiers concerning Tocardo International B.V. Bonds, stating the number of bonds and the name of the subscriber.
b.that you grant permission for the use of your personal data and for the provision to and use of your personal data by F. van Lanschot Bankiers N.V. in the context of this subscription.
c.that you are not a U.S. person. You are a U.S. person if you: have a U.S. Passport, reside in the United States, or are liable to pay tax in the United States. The same applies for all other legal representatives of a legal entity.
d. (if applicable) that you have truthfully filled out the UBO qualification.
e.that you have read and understand Tocardo International B.V.’s information memorandum relating to the Bonds and that you are aware of your rights, obligations and risks as a subscriber.
Origin of your assetsUnder Article 3 of the Money Laundering and Terrorist Financing (Prevention) Act, Van Lanschot is obliged to investigate the origin of your assets. In this context, we ask you to answer the following questions:
1. What do you do for a living?
2. What is the origin of the assets that you contribute to the trading platform? (for example profits from business activities, savings, inheritance, etc.**)
** Your data will be used for the purposes of Van Lanschot’s assessment and acceptance policy.
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Conclusion and signingThank you for filling out the form!We would like to receive the following documents together with the signed subscription form:
❑ A copy of a valid proof of identification (passport or ID) of the natural person and, if applicable, the directors/owners and/or UBO of the legal entity.
❑ If applicable (legal entity): recent extract(s) from the Chamber of Commerce (not older than 3 months). In context of the Customer Due Diligence, Van Lanschot must identify the structure of the entity.
To identify you, Van Lanschot Bankiers uses secondary identification (afgeleide identificatie).
❑ We verify your identity by payment of your investment amount from the IBAN bank account number and name you listed above. If you subscribe as a legal identity, you must provide the bank account number and the name of the bank account of the legal entity and use it as your contra account.
We would like to receive a fully completed and signed subscription form including appendices by email (scan) at the following email address: [email protected] or by post at our address:
F. van Lanschot Bankiers N.V. Equity Management Services PO box 1021 5200 HC ‘s-Hertogenbosch
Please do not hesitate to contact us if you have any questions and/or comments regarding the completion of this form. You can contact us by telephone at +31 (20) 570 5091.
