Invinity Energy Systems (IES LN)#
Manufacturing and Royalty Agreement, Next Generation Product Tests and Strategic Funding Progress
Invinity Energy Systems (IES) , develops Vanadium Flow Batteries (VFBs) for utility scale grid storage. VFBs, alongside pumped hydro, are seen as an alternative to lithium-ion batteries, able to generate electricity for longer periods (4 hours+) without degradation; so called Long Duration Energy Storage (LDES). Markets are international and in December 2023, the Company stated that it was seeing multiple new opportunities in the 200 to 500 MWh size range. In December 2022, IES entered into a reseller agreement with Everdura Technology Company in Taiwan targeting 255MWh of product over 3 years. Everdura has also invested £2.5m in IES and placed orders for 14.4MWh of IES’ next generation Mistral batteries. IES has announced today that Everdura has agreed to undertake domestic manufacture of IES’ Mistral technology to serve Taiwan and other markets.
A Royalty Based Business Model: Driving Margins and Value from IP
Under the agreement announced today, Everdura will manufacture Mistral VFBs to fulfil orders it intends to secure under the terms of the existing reseller agreement targeting 255MWh. Everdura will purchase cell stacks directly from IES and it will pay IES a royalty fee based on a percentage of the sale price of any Mistral product sold by Everdura. To see IES win business on a royalty basis is, we believe, excellent news as this will reduce own working capital requirements, manufacture and supply risk, and open up market channels through bigger manufacturing and distribution partners. Ultimately, royalty-based businesses can command high margins and, therefore, a premium valuation for IES.
Successful Mistral Performance Testing
IES, through its Joint Development and Commercialisation Agreement with Gamesa Electric, is developing a next generation VFB named “Mistral” which is suitable for very large-scale wind, utility, and solar installations (+500MWh projects). IES reported today that its product development team has successfully undertaken initial performance testing of the first operating Mistral prototype and that testing has verified Mistral’s fundamental performance targets and operating parameters. This is seen as a key development milestone and enables the Company to conclude the development of production tooling, processes and procedures required for manufacturing and delivery of initial Mistral modules. Commercial launch of the Mistral is planned for later this year.
Strategic Funding Due Within 4 to 6 Weeks
The projects and opportunities that IES is seeing are getting larger as the electricity grid seeks to benefit from LDES and in December, the Company stated that it was seeing multiple new opportunities in the 200 to 500 MWh size range across Europe, North America, and Asia. To address the international opportunities seen and to significantly scale, the Company has previously outlined the need for strategic funding. IES stated today that it is, “very pleased with the level of interest shown in the Company by a number of potential strategic partners. Discussions with these parties are now at an advanced stage and continue to progress positively. On this basis, the Company estimates that it should be in a position to conclude an agreement with one or more of these partners within approximately four to six weeks“. IES is at an inflexion in growth with orders and revenues rising. Securing royalty based business, and strategic partnerships will expand margins and valuation.
Buy. Target price of 145p/sh.