Initial coverage report Hexicon: Great potential for offshore wind technology

Floating wind technology is gaining momentum
Offshore wind technology is expected to be one of the solutions for energy transition, both floating and the currently more conventional bottom-mounted wind power. The market for floating wind technology is predicted to double annually over the next 20 years. Examples of it now gaining momentum include large oil companies and other highly capitalized players are investing in Europe, Asia and USA. An auction pertaining to rights in Scotland recently raised SEK 5 billion for areas of water for floating wind power alone. In Sweden, the government has commissioned Svenska Kraftnät to enable connection to offshore wind power and wants to both expand possible areas and expedite permit processes.

Major projects and the TwinWind technology
Hexicon has a well-diversified portfolio of projects for floating wind technology in different phases and geographies. As the projects mature, its value increases. Hexicon drives value development in partnerships with major players, such as Shell and Copenhagen Infrastructure Partners, as well as local players. The Munmu Baram project in South Korea has advanced the most, and Hexicon's share is expected to be MSEK 500-750 in 2024.

The company's patented technology "TwinWind” is different from established solutions, which have one turbine. TwinWind consists of a platform with two turbines and rotates according to the wind direction. Hexicon's solution increases the energy capacity for a given body of water. At the same time, the number of platforms and amount of cabling is reduced, which reduces costs. The first full-scale demonstrator project is expected to be completed by the end of next year.

Hexicon's two strategic prongs reinforce each other commercially. The company becomes more relevant as a project partner thanks to the technical solution that is being developed. At the same time, the chance of succeeding in commercializing the technology increases when networks and access to projects are already in place. The early project revenues that can be expected in 2022-2024 reduce the need for external capital.

The project aspect alone vindicates the valuation
The weak price development has meant that the project aspect alone justifies the current market value, even with relatively prudent assumptions. Both potential and risk are high. As with most similar companies, a sustained upturn is based on the stock market climate becoming reasonably positive for this type of share. Price target: SEK 3.54.

Note: A Swedish version of this research report was published on March 22th 2022.