8-K: Tecogen Enters Sales and Marketing Agreement with Vertiv for Data Center Cooling

Tecogen Inc. has partnered with Vertiv Corporation to market and sell Tecogen DTx Chillers for data center cooling applications, effective March 1, 2025.

Summary

• Tecogen Inc. has entered into a Sales and Marketing Agreement with Vertiv Corporation, effective March 1, 2025, for a term of two years.
• The agreement focuses on the sales and marketing of Tecogen DTx Chillers for data center cooling applications.
• Vertiv will establish a marketing budget and use commercially reasonable efforts to sell Tecogen Chillers, aiming to meet a Sales and Marketing Threshold outlined in Schedule A.
• Vertiv gains exclusive rights to market Tecogen Chillers for data centers outside the US and non-exclusive rights within the US, with the potential to gain exclusive US rights upon achieving agreed sales levels.
• Tecogen will provide Vertiv with reasonable volume discounts and technical support, while Vertiv will assist Tecogen in securing favorable terms for engineering components and supplies.
• The agreement also sets the stage for negotiating a definitive supply agreement between the two companies, which, if not reached, allows either party to terminate the Sales and Marketing Agreement.

Sentiment

Score: 7

Explanation: The agreement is a positive step for Tecogen, providing access to a larger market and potential revenue growth. However, the lack of guaranteed sales and the need for a further supply agreement introduce some uncertainty.

Positives

• Tecogen gains a significant partner in Vertiv, a subsidiary of Vertiv Holdings Co. (NYSE: VRT), to expand its reach in the data center cooling market.
• The agreement provides Tecogen with access to Vertiv's marketing resources and sales network.
• Vertiv's assistance in securing favorable terms for components could reduce Tecogen's manufacturing costs.
• The potential for exclusive US marketing rights based on sales performance incentivizes Vertiv to actively promote Tecogen Chillers.
• The agreement includes provisions for technical support and training from Tecogen to Vertiv, ensuring proper product implementation and customer satisfaction.

Negatives

• The agreement is subject to termination if a definitive supply agreement is not reached.
• Vertiv has no minimum purchase requirement, which could impact Tecogen's revenue projections.
• Pricing and payment terms for purchases of Products by Vertiv will be agreed on a case by case basis pending the execution of a definitive Supply Agreement.

Risks

• Failure to reach a definitive supply agreement could terminate the partnership.
• Vertiv's inability to meet the Sales and Marketing Threshold could limit Tecogen's market penetration.
• The agreement's success depends on the effective collaboration and good faith efforts of both parties.
• Changes in the data center cooling market or competitive landscape could impact the demand for Tecogen Chillers.

Future Outlook

The agreement anticipates the negotiation and execution of a definitive supply agreement, which will further solidify the partnership between Tecogen and Vertiv. The success of this collaboration hinges on both parties' ability to cooperate and achieve the Sales and Marketing Threshold.

Management Comments

• The Parties acknowledge and agree that cooperation in good faith between the Parties is integral to ensure the success of this collaborative effort.

Industry Context

This agreement reflects the growing demand for efficient cooling solutions in data centers, driven by increasing computing power and energy consumption. Tecogen's chiller technology, combined with Vertiv's market presence, positions both companies to capitalize on this trend.

Comparison to Industry Standards

• Vertiv is a major player in the data center infrastructure market, competing with companies like Schneider Electric, Eaton, and ABB.
• Tecogen's chiller technology competes with other cooling solutions such as traditional air conditioning systems and liquid cooling technologies.
• The success of this partnership will depend on the competitiveness of Tecogen's chillers in terms of efficiency, cost, and reliability compared to alternative solutions.

Stakeholder Impact

• Shareholders: Potential for increased revenue and profitability for Tecogen.
• Employees: Opportunity for growth and development within Tecogen.
• Customers: Access to innovative and efficient cooling solutions for data centers.
• Suppliers: Potential for increased demand for components and supplies used in Tecogen Chillers.

Next Steps

• Negotiation and execution of a definitive supply agreement between Tecogen and Vertiv.
• Vertiv establishing a marketing budget and initiating sales and marketing activities for Tecogen Chillers.
• Tecogen providing technical support and training to Vertiv.
• Vertiv assisting Tecogen in securing favorable terms for engineering components and supplies.

Key Dates