E-Heat Oy

The heat company acquires a boiler for the facility. When Findgrid sends a signal to close the system, the heat pump automatically reduces its power by half and starts using hot water from the boiler. The water in the boiler is sufficient for a 20-minute down time.

E-Heat participates in both yearly and hourly markets. The instruments are FCR-D and FFR. The mentioned 60,000 EUR/1MW/year is the net amount of compensation that remains after the reserve market pool operator deducts their fees.

Demand response compensation is paid to the owner of the electricity connection. E-Heat owns the electricity connection it uses. Some of the demand response compensation can be passed on to the data center customer in the spirit of transparent pricing.

E-Heat provides the basic load to the heat company which corresponds to the lowest usage during the summer, so the annual hours amount to 8,760 hours.

E-Heat's turnover includes the service fee for the data center, which must cover the power consumption of the machines:

System capacity: 2,000 kW
Heat sales: 2,000 kW x 0.015 cents/kWh x 8,760 hours = 262,800 euros
Demand response: 120,000 euros
Service fee: 2,000 kW x 0.065 cents/kWh x 8,760 hours = 1,138,800 euros
Total: 1,521,600 euros

On page 8 of the information memorandum, we have taken safety margins into account and made the assumption that demand response is split 50/50 with the data center customer. So, in that calculation, the figures are a bit more conservative.

Tuomas Anttonen has had a long career in venture capital. Most recently he was a partner at IPR.VC, a firm investing in US film productions. In previous venture capital roles, he has prepared investments in several energy projects, including a company operating biopower plants, CHP projects and a thermal power plant construction company. Tuomas' area of expertise is international trade taxation, in particular complex withholding tax and VAT issues. Tuomas ensures good corporate governance and proper organisation of the company's financial management.

Special note: Tuomas is a former footballer and he competes in sprinting in the M40 category.

Lauri Pispa is originally from the theatre industry and has directed several productions for the theatre. After that he worked as an entrepreneur for six years, studying blockchain technology until he sold his company. He then founded E-Heat Oy with Tuomas and Samuli (then Coinseeker Oy). Lauri specialises in sales and public relations and is the company's sales person. Negotiation and sales skills, as well as persistence, are basic requirements for international sales work. Lauri's knowledge of the energy market has grown as the project has progressed. He is well equipped to negotiate with heating companies and equipment suppliers and to implement projects in cooperation with an engineering company.

Special note: Lauri is the national team captain of the Magic the Gathering strategy card game and a Grand Prix winner.

Samuli Hirvonen is an IT specialist with 12 years of experience in designing and implementing customized software solutions. He has extensive knowledge of network technologies, software architecture and working with distributed systems. Samuli is responsible for the design of the network infrastructure for E-Heat's data centers and the implementation of system monitoring and automation.

Special note: Samuli is a long-time music enthusiast and plays bass in a Finnish punk rock band.

Lauri Pispa and Tuomas Anttonen are full-time employees. Samuli Hirvonen works part-time on an hourly basis.

Lauri has daily discussions with hosting customers, heating companies and partners. During the summer there were close to a hundred meetings with customers from all over the world. Together with Tuomas, he monitors the electricity market and is in close contact with the portfolio managers who carry out the purchase of electricity derivatives.

Lauri and Samuli make sure that everything works and maintenance runs smoothly in the operational data centers, which are running at 2 MW. These are just a few things, and on top of that there is of course a huge amount of other management and negotiation, tendering and discussions with engineers.

By deal flow we mean the sales pipeline for plant investments. For the past two years we have been negotiating with several different heating companies and other heat users to recover waste heat.

The outage will affect server room customers. Our customers' workloads are computationally intensive with no requirements for real-time. For example, rendering, AI training, blockchain security or data analysis. It is also possible that the customer is an entity whose servers cannot be shut down, in which case the data warehouse in question cannot be used in the reserve market. Solutions for such customer needs already exist, e.g. in the Amazon cloud, but at E-Heat we can offer a hosting service for customer-owned devices.

Some power plants have spare capacity at the connection and transformer. For example, we are currently negotiating with a large greenhouse, and they have space for a 2MW data room at the connection and transformer. It is worth noting that, in addition to cheaper heat and reduced emissions, the 1MW addition will reduce the greenhouse's transmission costs by around €30,000 per year.

A new connection and main transformer station will be built at the data center under construction in Satakunta. The costs will be shared with the heating company. E-Heat will contribute to the costs of the connection, and we will purchase our own transformer (included in the investment budget of the investment memorandum).

The efficiency of our liquid cooling is 95-98%, so we capture virtually all the heat generated by the servers, which is why we don't need a massive plant. In comparison, the Yandex data center in Mäntsälä is air-cooled, with an efficiency of 30-40%. We can use 20- or 40-foot containers depending on the heat demand. The modular solution, on the other hand, is customised to suit each site, implemented by a Finnish operator specialising in heat centers.

In many of the projects in the pipeline, the district heating company has a ready-made space for the E-Heat system. In Satakunta, for example, we do not use a container/module solution because we can use a building on their property.

District heating accounts for 44% of all heating in Finland, so practically every municipality has a heating plant. Most of them are small, so our solution is perfect fit for them. They save on production costs, emissions are reduced and electricity transmission costs are decreased.

If a large heating plant has a maximum capacity of 50 MW, only about 10 MW of this is used in summer, so E-Heat can supply this base load with non-combustion heat. We are also able to do larger solutions, the largest project we are currently negotiating on is 20MW.

The emission-free, low-cost heat from waste heat has been used for a long time and its usefulness has not been criticised as such. The city of Hamina uses district heating with maybe 2.5MW of power during the summer, so building a heat pipe is not economically viable. For heating companies, the fact that we can bring a heat source to their doorstep will turn their investment calculations profitable.

We always start with heat first, because the contract negotiations with the heating companies are more detailed and the delivery time for a heat pump is currently 6-8 months. There are plenty of data center customers and demand for the hosting service due to emission-free and reasonably priced electricity and a safe environment in Finland.

Our customers are currently from Finland, Switzerland and France. We provide a complete infrastructure for the customer's equipment. By selling heat, we are able to offer a very competitive service fee to our data center customers, while maintaining a good margin on our own sales. We do not offer servers, but focus purely on infrastructure, heat sales and the reserve market.

The immersion technology has been piloted at our partner's facility in Eastern Finland and it works well. The plant under construction in Satakunta will be ready for test operation in Q1/2024 and heat production will start in Q2/2024. The electrical and air conditioning work is already underway as planned by A-Engineering. The heat production contract has been signed with the heating company for a period of 10 years, after which the contract will be extended for an indefinite period.

E-Heat has an immersion fluid developed by a chemist for the company, which is optimised for the temperature program of the heat pump. This proprietary technology cannot be patented, but it gives the company a competitive advantage. E-Heat Oy is not an R&D company, but we will use the funding to build a first production plant from solutions that are already on the market and proven to work. We aim to capture the market with a solution that is as easily replicable as possible. The potential is thousands of megawatts and our team is strongly focused on sales. There are identifiable exit routes for E-Heat and we have discussed with two larger companies of the possibility of selling the company, even in a short timeframe. We believe that the value of E-Heat is determined by valuation multiples such as P/S and P/E.

The efficiency of the E-Heat system is quoted as 95-98%, whether immersion or hydro cooling. This has been confirmed by A-Engineers, who are responsible for coordinating the whole system. The surface between the district heating company and E-Heat is the heat exchanger, where of course there is a heat loss of a few degrees, but the heat loss does not mean a loss of efficiency. According to the calculations of A-Engineers, the efficiency loss due to the pipes is 1-3%, and there is no other loss. In addition, the COP value of the heat pump is close to four according to the heat pump manufacturer’s calculations, which is excellent.

E-Heat has two options. We can use the Foreman application, which has a shutdown time of around 4 seconds. The machines go into idle mode, from where we can get to full power very quickly.

The other option is to use a transformer shutdown. The transformer containers used by E-Heat have a shutdown capability with a response time of 0.2 seconds. The shutdown is fully automated and the command comes from Fingrid. In this option, the machines start up as soon as power is restored to the transformer. According to Fingrid, the duration of the shutdowns is between 1 and 10 seconds. When the power comes back on, the servers will start after a delay of a few seconds.

The consumer price of heat has averaged between 5 and 7 cents/kWh VAT 0% (i.e. 50-70 €/MWh) and E-Heat receives 1.5 cents/kWh for the heat it produces, or 3 cents/kWh with a heat pump investment. The contract is therefore very profitable for the district heating companies. In addition, their emissions will fall by 1 500 tonnes per megawatt per year. For some companies, this is more important than the low price of heat purchased from E-Heat.

The cost of biomass for heating companies is around €25/MWh (most of the country's district heating is produced in biofuel plants). The price of biomass has been on the rise since Russia started the war. On top of that there are other production costs, i.e. labour and CapEx. When the first plant is in operation, we will certainly gain more negotiating power in the direction of district heating companies and an even better price for heat.

We started in September 2021, focusing on cryptocurrency mining. From the very beginning, we knew we wanted to make use of the waste heat generated by the machines. We made our first contacts with local heating companies in November 2021 and based on the feedback we received, we started planning the heat recovery solution. In early 2022, a heating company in Pirkanmaa hired an employee and an engineering office to manage the project with us. At the same time, we contacted other potential heating customers and started to grow our sales pipeline. We found out that district heating companies, greenhouses, industrial buildings and other operators that need heat are very interested in using waste heat, but the biggest problem was the location and size of the data centers. All potential customers were interested in the same things: cheaper heat that is completely emission-free and cheaper electricity transmission due to the increase in capacity.

As the discussions continued, it became very clear that there was a market demand for an operator that could install its data center at the heating company's own plant, so the company decided to focus entirely on waste heat recovery and changed its name to E-Heat Oy. A by-product is participation in the reserve market, which is carried out for us by domestic operators.

We realised from investor feedback that scaling the business with our own server equipment was too capital intensive. E-Heat should therefore use the funding it receives only to build data centers, as these investments (a) have a short payback period, (b) generate fixed revenues and (c) can be scaled up more quickly.

District heating companies prefer long contracts because their investment payback periods are between 3 and 5 years. For example, the contract period for our first project is 10 years.

The main reason for pivoting was the capital intensity of the original strategy, and the instructions for the change came from the direction of the investors.

The economic life of the module is at least 30 years. The modules are made of steel and are used in cases where the container solution does not fit on the site provided by the heating company, for example because of its shape. It is also possible to use two floors in the module.

The modules are manufactured in Finland. Heating companies use the same modules in their operations. For example, pumping stations are built inside the modules and designed to fit into small plots.

If we only raise the minimum amount, we will skip the air-cooled site expansion and proceed with the heat recovery investments in a cheaper order: 1) 2MW Satakunta district heating, 2) 1MW Satakunta greenhouse, 3) 1MW Satakunta greenhouse, 4) 2MW South Ostrobothnia district heating. In this scenario, the turnover in 2024 would be around €2.5M depending on the start-up schedule of the first plant, with a positive profit around €300,000. Please note that the projections are based on contract billing and the profit side has the potential to surprise positively if electricity futures prices remain low. We are discussing with the bank to finance the big growth, and a loan is possible once the first plant is up and running.

Achieving the minimum target in the financing round will not significantly affect the MW volumes for the next few years, as we will then build sites that do not require a heat pump. The cost of a heat pump is around €600,000 per 2MW.

The plan for 2025 is to build the first large 10MW heat recovery unit and start the construction of the 10MW expansion part that will be completed the following year. So it is the start of strong growth and the scaling of the model on a large scale. As a rule of thumb, a 2MW plant with a heat pump costs 1MEUR so the above 10MW+10MW investments will total around 10 million EUR. During 2025, in addition to the capital investment, the company will also have to actively promote the acquisition to a suitable buyer.

No fluorinated compounds are present in the liquid. It is not a volatile substance and therefore does not cause global warming. Compared to Shell's product for example; their fluid is API III and the one used by E-Heat is API IV. So, the fluid is completely synthetic and biodegradable. The low viscosity PAO compounds break down quickly and are not toxic to mammals or marine life.

Using a proprietary tank and fluid improves liquid flow in the tank and reduces compatibility issues with the heat pump because they are both fine-tuned to the heat pump's requirements. The challenge with finished commercial products is the non-optimised viscosity of the liquid, and the liquid is also not biodegradable. Once production has started, the oil is subject to continuous quality monitoring and formulation (i.e. changing the amount of additives in the liquid) if necessary.

E-Heat's data center is located on the heating company's fenced lot. The plot is guarded and the thermal cameras provide a direct alarm to the security company, whose guards are quickly there when the alarm comes. E-Heat has business interruption insurance and customers insure their own equipment.

E-Heat's hosting service is implemented using the BYOD model (bring your own device). E-Heat takes care of electricity and networks and each customer has their own private network.