(Please note that this is not financial advice. It’s just my personal view on WePower)
The WePower ICO took place in early February. It was a very successful ICO, which quickly reached their $40 million hard cap. The WePower project sounded very promising to me; after all, it involved supporting renewable energy, which is just something pretty cool, right? So, my first reaction was to participate in the ICO, but then I decided to read the White Paper myself instead of just acting based on what I had heard from several Youtubers.
Below is a list of the main findings from my research, which led me not to invest in this ICO. Note that I’m not saying the project has no future; I just doubt that it will have the explosive growth that most Youtubers were expecting.
1. WPR tokens as a source of passive income?
One of the main features of the WPR tokens is that it enables token holders to collect 0.9% of the electricity that is expected to be generated by each producer that funds its project through the platform. WPR holders receive this energy in the form of energy tokens (different from the WPR tokens) which are issued by each producer at the time of funding. WPR token holders can do three things with this tokenised energy:
- Sell it in the WePower trading platform before it is produced.
- Sell it in the wholesale market when it is produced.
- Consume the energy when it is produced.
This tokenised energy can indeed be seen as passive income. The issue I see is that to sell the energy before it is produced, it will need a significant discount over the wholesale market price of energy. This is because you are getting energy that may be produced in the future. Remember that these are projects that currently do not exist. If everything goes smoothly, the projects will probably be generating electricity 12 to 15 months in the future. This is an optimistic scenario, though. New projects usually encounter unexpected problems (complying with national and local regulations, getting licenses, and most importantly being able to connect to the electricity transmission grid) that could easily and significantly delay their operations.
Another possibility is that funded projects end up not delivering energy at all. The future is uncertain and anything can happen. Just like we continuously see in ICOs (where many of them have collected funds but have failed to deliver), it is not unreasonable to expect some of these new funded energy projects to fail to deliver as well.
As a result, the income that you may get as a WPR holder could potentially be pretty low, or you may have to wait a long time until each project starts producing energy (if they start producing energy) to be able to sell it at wholesale market prices.
2. Overly optimistic projections in their White Paper
The White Paper shows the following table with projections for the first six years of the WePower’s Platform:
Based on these projections, some have argued that WPR tokens offer a very high passive income. This is based on the revenue of €0.0146 (US$0.017) per WPR token shown in line 8. The price per WPR token in the ICO was US$0.13, so the revenue on the table represents a generous 13% rate of return in one single year! Nonetheless, these revenues are inflated for the following reasons:
- First, the WPR supply (shown in line 6) is not 270 million tokens. According to Coinmarketcap.com, current circulating supply stands at 442 million, while total supply stands at 745 million. Objectively, this means that all the projections in the table will nearly lose two thirds of their value once all the tokens are in circulation.
- Second, the values in line 8, assume that the energy can be sold at wholesale market prices. However, as I argued in the previous point, energy will likely sell at a discount to account for the risk of these new funded projects failing to deliver.
- Third, the renewable generation capacity (shown in MW in line 1) seems overly optimistic for a six year period. Note that the total MW financed through the platform accumulates over time (for example, according to the table, in year two 5,000 MW of new capacity will be funded through the platform: 1,000 in year 1 and 4,000 in year 2). This means that in its first six years of operation, the platform will have funded a total of 245,000 MW of new renewable energy. This is a lot!!! To put things in perspective, in its latest projections, the European Commission expects new solar and wind capacity to grow by just 93,126 MW between 2020 and 2030 in all 28 EU Member States! (Source: EU Reference Scenario 2016: https://data.europa.eu/euodp/data/dataset/energy-modelling). That is over a 10-year period and over 28 countries. WePower’s projection imply that they will reach a significantly broader market than the whole EU in just six years.
3. So, so much advertising
Tweeter is my main source for getting to know about interesting ICOs. In the case of WePower, it wasn’t just because of tweets from I people I follow, but also because of the continuous paid-for ads that kept popping on Facebook, Twitter, Youtube, and Instagram. This was also followed by sponsored video reviews from several Youtubers. Seriously, this is the ICO I have seen most ads about. I understand that advertising is not a bad thing per se, however, in my opinion, if a project is indeed really good, it will sell by itself without having to spend so many resources on advertising it. To me, finding way too many paid-for ads about something is more of a red flag than a good thing as it means that the project is not good enough to be sold by itself.
4. Some minor things
According to the White Paper, WePower has already secured the funding of 1,000 MW of solar capacity in Spain from the company Conquista Solar. Currently Spain has 4,687 MW of photovoltaic capacity, so adding another 1,000 MW is something very significant. Therefore, you would expect to be able to see, at the very least, some details about the new projects that are behind those 1,000 MW (for example, their location, whether they have gotten local licenses, whether they have arranged with the transmission to operator to connect to the national grid, etc.). Unfortunately Conquista Solar’s website (http://www.conquista.solar/) has no specific information about these or any projects. The most information they show about their new projects is that “Conquista Solar counts with an extensive portfolio of PV projects in Spain…”.
Another minor thing is that WePower is not yet listed in the Spanish registry for independent energy suppliers (https://sede.cnmc.gob.es/listado/censo/2), which is something they will need to be able to operate in Spain. They could be listed under a name other than WePower, or they might still be in the process of getting listed. This is why I consider this a minor thing, for now.
5. More minor things
One of the first things anyone learns in the electricity sector is the difference between kW (which measures capacity) and kWh (which measures energy). It is common for outsiders to use them interchangeably or to write kW/h instead of kWh, however this is something unforgivable to anyone who claims to the in the industry, as kW/h has no meaning whatsoever. Yet, in one of the earlier versions of their White Paper we can see the following:
I know this is a minor typo, which got corrected in future versions of the white paper, however it is the thing that made me go in more detail through the White Paper. Another minor thing was the following claim in their White Paper:
You don’t need to be an energy expert to know that 1 TWh = 1,000,000 MWh, so both numbers above are exactly the same, implying that all 24,756 TWh of total global energy was produced from renewable sources, lol.
Anyway, I leave it there. As of the writing of this article, WPR is trading at $0.076, about 40% below the ICO price. Even at this lower price, I am not convinced to invest, as WePower has engaged in a second wave of massive advertising, which doesn’t match the first one just because several platforms –like Facebook- no longer allow this type advertising. As I mentioned before, too many ads, have the opposite effect on me. Does this happen to you too? Let me know if you agree with my analysis above. Thanks for your time!
Great analysis - I always feel that overly optimistic projections are a really bad sign. Often, they indicate a poor current situation that needs the overly optimistic scenario to occur for financial well-being.
Totally concur. Thank you very much!
interesting post. but perhaps the demand for renewable energy will grow substantially to subdue any concerns. And people want to invest in it.
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