I try to periodically take the pulse of what’s going on with the latest ICOs, and every so often something jumps out of my browser and forces me to take a deeper look. This time, it was WPP Energy. This is another example of a company (I use that term loosely when referring to ICOs) that makes outlandish claims that can be debunked with about 20 minutes of Googling. Given that their ICO claims to have raised $248 million as of the beginning of 2019, and the fact that they likely purchased their favorable ICO ratings, they deserve deeper investigation.
In looking at the WPP Energy platform, I can say with confidence that the founders are either totally incompetent or they are running a scam. Here's a big red flag: "The combination of the Global Green Energy Platform and the use of WPP TOKEN as the payment method will accomplish at least a 50% reduction in energy prices." There is no way they can reliably claim this, this is the type of extravagant claim you see from a company that is either a scam or is delusional. They claim the token is used to facilitate "the worldwide electronic trading of energy supply at wholesale prices from Green Energy Suppliers to buyers around the world." Let’s look into this claim a bit deeper.
First, a utility that buys energy buys it locally, partially due to transmission costs, partially due to price predictability. Second, there is no point for a utility in, say, South America to buy energy from a supplier in Asia. Even if someone was buying the rights to energy supply in one country, they can still only sell it to another utility in the same region. If you wanted to use the tokens as a bridge currency, then both the generator and the utility would need to be on board and would need to exchange tokens. But when the two parties need to convert back to fiat (and they inevitably will), they have exposed themselves to exchange rate risk. There is no reason to use a token as a bridge currency for this transaction because the generator and the utility can just trade the energy in their local currency. Both companies would inevitably have to convert back to fiat to pay expenses. At minimum, they would have to pay out salaries to employees because people need to pay their rent and buy groceries. No landlord is going to accept WPP tokens as rental payment; the infrastructure required for this transaction to be quick and risk-free does not exist because major financial institutions are still not involved in the crypto markets as market makers. While tokenizing energy is an interesting idea, the model and use case for this token does not make any sense.
Utility companies have been negotiating energy contracts with each other for decades without problems. This token is essentially a solution that is looking for a problem. In short, there is no way that tokenizing energy markets can reduce prices paid by energy consumers. They claim their solutions will reduce costs by 65%. The only cost that tokenization reduces is auditing costs. However, auditing costs don’t account for 65% of the costs paid by energy consumers. The only way costs can be reduced by 65% is with more efficient generation technology or cheaper energy sources (or both).
In looking at their HHO energy solutions part of the whitepaper, they make more outrageous claims. They don't even quote the correct units for power output, something that is so basic a high school science student could tell you the correct unit. Municipal scale hydrogen fired power plants are still in the research stage. There was a paper published in December 2017 that illustrated the feasibility of a 100 MW hydrogen plant at an ASME conference.
The whitepaper claims that their energy solution will be "capable of operating a 500 MW/h or 1000 MW/h power plant" (notice the incorrect power generation units!). They also claim that their solution is turnkey, even though the world's most prestigious engineering society is still only talking about feasibility, and at 10% to 20% of the generation capacity claimed in the WPP whitepaper.
I looked into one of the municipal projects they listed in the whitepaper, specifically the California MSW project listed on the website and their whitepaper. If the California municipal project were a real project, it would be registered in the California State Contracts Register. This project does not exist in the California State Contracts Register. Also, one would expect that a company that claims to have $60 billion in government contracts would be working with the world's largest purchaser of private services on contract: the United States federal government. I am currently registered as a US government contractor, so I know the eligibility requirements. The company has not listed DUNS or CAGE numbers anywhere on the website or in the whitepaper, they do not exist in the D&B system, and they do not exist in the SAM system. According to the state of California and the US federal government, WPP energy does not exist.
If the MSW project were really awarded to the company, then they would have no problem listing the contract vehicle on their website, which is what every single US and state government contractor does in order to prove past performance. This is, after all, the only way you go about winning $60 billion in government contracts. The question no one seems to be asking is this: why would a company with $60 billion in government contracts need to do an ICO to raise funds? If the company were really receiving 1.5% of the US federal spending budget, then they wouldn’t need to do an ICO. The answer to this question is that they have not received a single contract. They aren’t even registered!
I strongly caution against investing in this type of platform. I would expect that energy markets will be properly tokenized in the future, simply because it facilitates audits. But the amount of speculative language used by this company is a major red flag, and the fact that they do not list their contract vehicles shows that they are either distorting their involvement in government contracting or they are making blatantly false statements.
The sad part of this is that your typical uninformed crypto investor will buy into this and will purchase the tokens, despite the fact that they are extremely unlikely to ever see any practical value from them (that is, after all, the whole point of a utility token!). I predict a classic pump-and-dump will occur. So if you are interested in making money from a pump-and-dump scheme, then this token is for you.