Merus Power: Loan agreement supports visibility for growth financing

Translation: Original published in Finnish on 11/19/2025 at 7:55 am EET.

The announced 5 MEUR loan agreement provides the company with significantly more liquidity to finance the working capital required for electricity storage-driven growth in the coming years. We estimate that the company is currently on the verge of a profitability turnaround, which would allow growth to be increasingly financed by internal cash flow in the future. The loan agreement has a moderately increasing effect on financing costs in the short term, but we do not see a need for significant forecast changes at this point.

5 MEUR loan from NEFCO

Merus Power announced on Tuesday that it has agreed on a 5 MEUR loan with the Nordic environmental financing company NEFCO. The loan supports Merus Power's business growth and internationalization opportunities at a time when the company has not yet managed to clearly raise its overall profitability to a positive level and is thus forced to finance growth with external financing options. The company carried out a directed share issue of 2 MEUR in the summer, which we estimate has supported the realization of the now announced financing arrangement. We understand that there are no special additional conditions for obtaining the loan that the company would not already meet.

The financing covers a five-year period and, according to our estimate, will be drawn down during 2025-26. The loan is partly guaranteed by the European Investment Fund, which lowers the cost of financing compared to purely market-based financing. The interest rate of the loan was not disclosed in the release, but we estimate it to be around 4-6% p.a. The loan may partly be used to pay off the company's existing loans, but we estimate that it will increase the company's absolute net financing costs at least in the short term as the amount of gross debt increases. We will review financing costs in connection with the next analysis update, but we do not expect the changes to be significant for the equity story.

The loan provides liquidity to support growth

At the end of June 2025, Merus Power had 4 MEUR in interest-bearing debt and 4.6 MEUR in cash, meaning the company was net debt-free. The equity ratio was 35%, just meeting the company's target level. The balance sheet is not actually indebted, but the company's growth, especially in energy storage, ties up funds in the form of working capital, which affects financing needs. The announced loan provides the company with additional liquidity and reduces its dependence on customer prepayments, which expands growth opportunities.

Aim to improve profitability and self-financing capability

Merus Power has grown strongly in recent years, supported by its energy storage business, with average revenue growth in the post-listing years 2022-25e estimated at 33% per year. However, the company's profitability has not developed as expected. EBIT is estimated to turn moderately positive this year (2025e EBIT: 0.3 MEUR), but the cumulative EBIT for 2022-25 is estimated to be -2.1 MEUR. The forecast EBITDA margin for 2025-26 is 4.3-6.2%, which we estimate to be clearly below the target for the strategy period ending in 2026 (over 15%). The rapid scaling of the business has weighed on profitability in the recent past, but EBITDA is clearly improving in our forecasts as the scale and routine of the energy storage business improve. We believe that improving profitability is strategically important for the company, as demonstrating the business's earning potential would support the availability of additional growth financing, and growth could also be financed by internal cash flow. We still consider it unlikely that the company would achieve the high 15% EBITDA target even within a 3-4 year timeframe, as margins in the energy storage sector are relatively low due to the large proportion of batteries in project deliveries.

The scale of deliveries can grow even from the current level

The company's energy storage business revenue mainly consists of fairly large delivery entities valued at 10-20 MEUR. We estimate that the company's delivery capability is scalable and that in the future it could deliver even larger electricity storage systems, although this would require a sufficient financial position to manage working capital. Thus, the now announced loan agreement plays a key role in continuing growth. In addition to the Finnish electricity storage market, the company is increasingly looking to other parts of Europe to expand its revenue base. The company announced two separate electricity storage deliveries to Poland during Q3, which are its first international electricity storage deliveries. In power quality solutions, the company has had extensive international distribution for some time, but market growth in this segment is closer to a mature level.