Leclanché S.A. plans to create a separate holding company, the BOO HoldCo, where it shall retain a controlling majority stake.. To launch the highly profitable and selective Build-Own-Operate (BOO) business line, the company moved its St. Kitts project from a turnkey EPC contract to a BOO contract. While Leclanché will still build the project as an EPC contractor, International Financial Reporting Standards (IFRS) accounting rules prevent any revenue recognition as an EPC contractor under the BOO model. Financing for St, Kitts project was provisionally agreed in Q4 2019, but then Leclanché decided to switch to a BOO model where the accounting requirement will likely lead to a reduction of more than CHF40m revenue in the revenues for 2019.

The shift to the BOO model is expected to secure the long-term profitability for the Company. The shift of the revenue due to technical accounting rules mentioned above shall also push back positive EBITDA results to 2022.

Somik Das, Power Analyst at GlobalData, comments: “This shift from a traditional turnkey EPC contract model to the BOO model is expected to be a highly profitable pivot for Leclanche. However, in the first couple of years, the initial establishment phase of this new model will likely require access to large infrastructure capital. Being aware of this the company secured a construction loan of CHF46m for the St. Kitts project and is likely to start the construction of this project at the earliest, once the COVID-19 related travel restrictions are eased.

“With the incorporation of the BOO model the company is likely to add profitable growth for, as long as, 20 years. The model is expected to further strengthen the assets in the balance sheet and make the company less susceptible to annual fluctuations of project revenues.”