Saietta Group PLC (AIM:SED) has agreed new contracts to replace a joint commercialisation and development agreement with auto component giant Consolidated Metco (ConMet).
The e-drive system developer had a year ago formed the original agreement to bring an in-wheel generator (IWG) and an in-wheel motor (IWM) to commercial production, with development costs and potential profits to be split 50:50.
Tweaking the agreement to fit Saietta’s new cost-reduction strategy announced in March, ConMet will now pay a front-loaded €3.3mln for assignment of jointly developed intellectual property, machinery and equipment, with a licence agreement on top.
Saietta will no longer bear any costs from development and production of the IWG and IWM, with ConMet now receiving 100% of resulting revenue and profit.
Under the new licence agreement, the AIM-listed company has granted exclusive and non-exclusive licences over its existing IP in consideration for the payment of 2.5% of an agreed uplift to the product cost of future IWG and IWM sales incorporating Saietta's licensed IP, capped at €20mln.
The UK company said it will also save around €2mln in annual costs as all employees at its Netherlands office will transfer to ConMet, which will also rent the motor development and testing facilities.
Saietta said it will use the €3.3mln on its light-duty eDrive operations, with its heavy-duty eDrive function moving from the Netherlands to its Silverstone base in the UK.
Executive chairman Tony Gott said the changes are a “pragmatic solution” that will enable the company to “benefit from an immediate cash payment and accelerate its activities in the LEV sector where there is greater near-term revenue potential”.
"To fully exploit the significant and immediate revenue opportunities from selling Saietta's electric drive technology to manufacturers of lightweight electric vehicles globally, it is vital that we focus our time and resources in that area.
"This development is fully aligned with our stated strategy of driving Saietta into positive EBITDA as soon as possible, with a target of early 2024."
Saietta said it remains free to develop any eDrive products for trucks and buses apart from IWG and IWM for truck hubs.
Half of the cash inflow represents non-capitalised project costs, so constitutes revenue for 2022/23 and so the company's guidance for the year remains unchanged.