Ten-year commercial agreement with Spirax-Sarco Limited

RNS Number : 6241I
Corac Group Plc
27 March 2015

("Corac" or the "Group")

Ten-year commercial agreement with Spirax-Sarco Limited 

Corac, the specialist engineering group focused on the aerospace & defence and energy & process industry sectors, today announces it has signed a ten-year, exclusive, global licensing and manufacturing agreement with Spirax-Sarco Limited ("Spirax"), for packaged steam products containing Corac micro-turbines and compressors. Spirax-Sarco Limited is a subsidiary of Spirax-Sarco Engineering plc, a world leader in both steam system management and peristaltic pumping. 

Under the terms of the agreement, which supersedes the joint development and licensing agreement announced on 15 November 2012, Corac will license its patented micro-turbines and compressors to Spirax for integration into a number of their packaged steam products for sale across their global customer base.

Corac's micro-turbines generate usable power from steam that is already used as a heat source in diverse industries such as food & drink, paper & packaging, pharmaceuticals & chemicals and as the primary heating in large buildings such as office blocks, hospitals, hotels and universities. The result is low carbon energy that is more efficient to produce than through conventional steam turbine systems, and can either be used locally or sold back to the grid. 

Initial income will be generated through consultancy services to establish a manufacturing supply chain and support Spirax's global roll out and through the technology transfer process. In addition, there is an option for Spirax to commission Corac to manufacture and assemble initial units to support launch during supply chain development. Long term income will be derived from Technical support to Spirax engineering teams for ongoing service management.

Once production is established, Corac will receive royalty income for its equipment sold in packaged steam products. This is anticipated to be in excess of £0.5m per annum, and having a direct impact on operating profit. Royalty income is expected to rise from this level as the technology/products are adopted, and sales grow as they are introduced across Spirax's international customer base. 

Corac will continue its commercial collaboration with Spirax to explore opportunities to design additional products in the range, delivering greater returns to end users.

Phil Cartmell, Chief Executive Officer of Corac, commented:

"We are pleased to have evolved our working relationship with Spirax that will take our turbo machines into the next stage of their commercial use.  Today's announcement is culmination of a two-year development programme, which began with our design team exploring adjacent possibilities for Corac's gas compression technologies beyond their original gas production applications.

"The innovative approach and dedication from both Corac and Spirax has enabled the team to deliver a highly attractive commercial opportunity that delivers tangible efficiency and cost benefits for the end customer.  We look forward to working alongside Spirax as they seek to deploy these products across their customer base."