Blue Sphere Updates Shareholders on Company Progress

CHARLOTTE, N.C., May 26, 2016 /PRNewswire/ — Blue Sphere Corporation (the “Company”, “Blue Sphere”, “we”, “our” or “us”), an international Independent Power Producer (IPP) that is globally active in the clean energy production and waste to energy markets, released today a shareholder letter from the Company’s Chief Executive Officer, reviewing developments at the Company and outlining plans for its future.

Dear Fellow Shareholders,

I am pleased to update you on the ongoing progress at our Company.  Our industry is growing at an unprecedented pace, with environmental and regulatory concerns making Blue Sphere’s assets and experience more relevant than ever. We reside in a unique niche of the clean energy market by focusing on de-risked, cash flow-generating assets that provide attractive returns on investment.

U.S. Assets

In the United States, we are nearing completion of our North Carolina and Rhode Island biogas projects.  These two facilities will produce a combined 8.4 megawatts of power and have aggregate construction costs of nearly US$47 million.  The energy produced by these facilities will be purchased under long term power purchase agreements (PPAs) by our utility partners, Duke Energy (DUK) in North Carolina and National Grid (NGG) in Rhode Island, both giants in the industry.  We believe having PPAs in place allows the projects to have a “predictive” revenue source.

These projects are now over 90% complete, and we expect both facilities to come online this summer.  The facilities are estimated to produce combined annual revenue of approximately US$14.5 million and EBITDA of US$8 million.  Blue Sphere owns 25% of the 5.2 megawatt North Carolina project and 22.75% of the 3.2 megawatt Rhode Island project.  Once online and at full operating capacity, the Blue Sphere cash flow participation from these projects will take the form of equity dividends, since we are minority partners in the projects.

In addition to any cash flow participation from these U.S. facilities, we expect to receive the remainder of the one-time milestone payments under our development contract totaling nearly US$2.5 million once the U.S. facilities come online. To date, the Company has received US$4.5 million in milestone payments.  In addition, the projects in North Carolina and Rhode Island qualify for and have received incentive tax credits.  Blue Sphere and its financial partners will receive the benefits of these incentives by either taking credits against project earnings or potentially selling the benefit to another user at a discount.

Italian Assets

As we have previously disclosed, in Italy, Blue Sphere is the 100% owner of four biogas facilities that are already operational and collectively producing approximately 4 megawatts of power.  These assets also have long-term power purchase agreements (PPAs) with the state-owned electrical authority, Gestore del Servizi Energetici (GSE).   We receive monthly cash flow from these facilities.  These assets are expected to produce over US$9 million in sales and over US$4 million in EBITDA on an annual basis, which we will consolidate on our financial statements.  As the acquisition costs of these projects are retired, the long-term value of our predictive revenue model will become more apparent.

The EBITDA from the Italian plants is guaranteed by Austep, S.p.A., our operating partner. Blue Sphere expects to receive the annual guaranteed EBITDA, and Austep, S.p.A. will receive any revenues in excess of the guaranteed EBITDA.  Austep is a 20-year old engineering firm with deep experience in the alternative energy sector, having built over 350 such facilities.

Pipeline

Our success in developing two large-scale waste-to-energy plants in the United States as well as acquiring four biogas plants in Italy has opened the door to many opportunities.  The Blue Sphere management team is proceeding in a disciplined manner and insisting on IRR’s that are at least 15-25 percent or higher for development projects.

In Italy, we anticipate making acquisitions of additional operating facilities, each around 1 megawatt in size, under similar terms to the four we already own, including guaranteed EBITDA arrangements and outsourced plant management.  We have signed letters of intent or term sheets for three facilities and are currently evaluating over 40 other opportunities in Italy. Although we cannot make any guarantees, we hope to will close on multiple Italian facilities in the coming year or two.

In the United States, we have a robust pipeline of over 10 megawatts emphasizing greenfield development. These developments are similar to our Rhode Island and North Carolina projects.  We expect to have announcements regarding these developments in 2016.

In the Netherlands, our third focus market, we previously announced that we entered into a letter of intent to develop a US$24 million waste-to-energy facility in the Brabant province.  Assuming we close the financing for this project, the development has an estimated construction time of 12 months and forecasted annual EBITDA of US$4 million once operational.  We have been active in the Netherlands for two years and have several other project developments that we are advancing.

In addition to the above listed developments, our pipeline includes projects at earlier stages.  Blue Sphere has two development projects in Israel and greenfield projects in the UK, collectively representing over US$400 million in potential development.  We have no certainty that any of these projects will come to fruition and delays in our industry are all too common, but we are pleased with the opportunities before us and optimistic that we will have additional progress to share in the months ahead.

Balance Sheet

As the Company prepares for an up-listing to a primary stock exchange such as the NYSE MKT or NASDAQ, you can expect to see Blue Sphere improve on our internal controls and the timeliness and quality of our filings. In the interim, I thought it would be helpful to clarify certain items on our balance sheet as of March 31, 2016, the most recently reported and not yet reviewed.

Because we focus on acquiring and developing cash flow generating assets with long term PPAs (and EBITDA guarantees in the case of our Italian assets), we think it is appropriate to finance a portion of our assets with debt. Nearly all the debt on our balance sheet is project-level debt associated with specific assets.  The only corporate level debt we have consists of approximately US$3.0 million in debentures, which mature in November 2017, and approximately US$500,000 in long-term notes due to managers.

Additionally, I want to point out that the current liability on our balance sheet of approximately US$9.3 million in deferred revenues from joint ventures will be eliminated when our Rhode Island and North Carolina projects reach development completion.

Concluding Thoughts

I am very proud of Blue Sphere’s current portfolio of assets.  With our market cap at its current level, and EBITDA and other income from our current assets expected to soon equal a US$6 million annualized run rate, we believe that the Company’s common stock is deeply undervalued.  We are proactively meeting with investors and presenting at investor conferences to help introduce the Company’s success and potential to a wider audience.

As the CEO of the Company, I believe that Blue Sphere is much more than an undervalued portfolio of cash flow-generating assets.  Our pipeline, experience, relationships and execution show that we are a strong growth company with a proven ability to expand our portfolio and create attractive investments with long-term return potential. I am extremely excited about the opportunities in front of us and feel that, with some successes already behind us, we are in the best position we have ever been to execute on our pipeline of opportunities.

I thank you for being part of this journey.

Sincerely,

Shlomi Palas, CEO

About Blue Sphere Corporation

Blue Sphere Corporation is a diversified independent power producer that develops, owns, and operates clean-tech, waste-to-energy facilities in the United States and abroad. The company primarily converts organic waste into electricity, but also has the ability to generate heat, natural gas and organic byproducts through various technologies.

Blue Sphere facilities eliminate waste that would normally be disposed in landfills, reduce greenhouse gas emissions and protect water quality, helping to solve important global environmental issues. Blue Sphere is headquartered in Charlotte, North Carolina and has operations in the United States and Europe.  For further information about Blue Sphere, please visit the Company’s website: www.bluespherecorporate.com.

Forward-Looking Statements

This press release contains certain forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995), which are subject to risks and uncertainties and may change at any time. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors including, without limitation, (i) uncertainties regarding general economic and market conditions, (ii) uncertainties regarding changes in the clean tech sector, (iii) uncertainties regarding implementation of the Company’s business strategy, and (iv) other risk factors as outlined in the Company’s periodic reports, as filed with the U.S. Securities and Exchange Commission. As such, there is no assurance that the initiatives described in this press release will be successfully implemented or meet expectations. Forward-looking statements in this document speak only as of the date on which such statements were made, and we undertake no obligation to update any such statements that may become untrue because of subsequent events.

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