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How many clients do you need to reach break-even?
One, a typical wind farm implies 50 jackets which is a TC project of € 250M in revenues, a gross margin of € 170M and an EBITDA of appr. € 150M.
What is your margin?
Our margin is 60-70% - an important factor here is the production rates we need to obtain with the industrialised production method.
Verdieping:
We can make those margins based on the pricing exercise we did together with our partners and clients. With these margins we provide our client with a cost benefit.
We expect our clients to push back on our margins, but we deliver a unique product. Our margins are comfortable and leave room to manoeuvre if necessary.
How did you calculate your penetration rates?
The market data were supplied through WindEurope data analysts. Our SAM is the European Jacket Market 2030 and 1 GW = 12.5% of this market.
Where is the EC grant going to be spent on?
To enter the market with our first signed contract. To get there, the money will be spent on the final barriers and thus reach the two goals mentioned in the presentation: 1) obtaining an A-level certification for our joint and 2) an industrialised production process to manufacture them because that is a crucial step.
Verdieping:
Why? Read our LOIs with partners in the value chain; this is what they are waiting for.
What are the investment needs after your project?
The investment need after the project is approximately € 30 million, mainly to scale up the team and production capacity i.e. capex for machinery to build production lines large enough to supply the joints for a single wind farm of 50 jackets -> 2,000 joints in a short time period of 9 months.
Why is the EC grant critical for your company?
We need a first signed contract to successfully build our business. To get there we need to take two capital intensive steps: 1) certification of our technology and 2) scale up our manufacturing process. These steps are hard to finance in this stage with equity; we need patient capital.
Verdieping:
The EU grant is critical for us for several reasons as mentioned in the presentation: 1) the TC joint is a disruptive technology for a conservative market; 2) the time to an exit is relatively long for investors with a limited investment horizon; 3) our solution requires significant investments in Capex (hardware).
What is your turn over?
In 2024, our turnover was € 1.9 million, consisting of € 1.4 million in subsidies and € 0.5 million in other income (partner contributions and projects).
What is the growth opportunity for the company?
The growth opportunity for the company is offshore wind for the energy transition. This is a € 2 billion market in 2030 for us. The global market will have more than quadrupled in 2050. Apart from that there is a huge potential to diversify to other industries; effectively the TC joint can be applied in any construction.
What is your current burn rate?
Our current burn rate for Q1 2025 is an estimated € 130k per month and will climb to over € 300k in the last quarter. This mainly relates to personnel costs and materials used.
How much working capital do you need next three years?
We do not intend to use part of our funding for working capital purposes. We intend to use project financing in customer contracts (i.e. a payment schedule) to shorten our cash conversion cycle. If this fails, based on our current financial model, we will need € 3-5 million in 2027 to cover this.
Note:
Financial model: € 8 million of total € 30 million funding is issued in 2027; remaining € 22 million in 2028. Cash position end of 2027 is € 4 million. That means € 3.5 million excess cash. Thus 3-5 million would suffice to fund the business in terms of working capital in 2027.
How do you plan to scale up financially?
We will scale up in basically two phases. In phase 1 we will focus on self-manufacturing, thus creating a track record. This implies both an increase in Opex (personnel) and Capex (machinery). In phase 2: we will build production capacity, innovating and licensing existing technology. The funding for our scale up to produce jacket joints for one windfarm in 2030 amounts to € 30 million.
After that, we expect our margins to be sufficient to increase production capacity. To grow even faster we can also lease equipment and licence out our technology.
Are the projections ambitious?
Yes, we are both ambitious and realistic. A single wind farm implies revenues of € 250 million and an EBITDA of € 150 million. Achieving that first contract is only the first step of our future success.
Is your proposed growth realistic? Based on what?
Yes, our current financial model is aimed at delivering one full scale project in 2030. From 2030 to 2050 we intend to be delivering on a much larger scale in combination with licensing out our technology across the world.
Why are you only part time active?
I am active on a part time basis because every SME company needs on demand financial expertise. However, CFO at TC is not yet a full time function. My expertise is needed at certain moments in time, but not on a daily basis. After the EIC project I will help TC find the safe pair of hands they need as head of Finance.
What is your projected breakeven point?
That is in 2030, when we reach revenues that significantly exceed expenses.
What is the financial risk in scaling the production?
Underestimating the financing needs for scaling. We have mitigated this risk through early conversations with industry partners about pricing and financing options.
Is the money you’re getting within the EIC enough?
Yes, to meet our project outcomes and reach our first client contract. With the EIC grant we can accelerate the growth of Tree Composites and realise our ambitions to disrupt the offshore wind market.
