Altech Batteries: Dual-Pronged Approach to Capturing the Booming Battery Market

• Altech Batteries is developing two main projects: the Silumina Anodes project for EV batteries and the CERENERGY® sodium-chloride solid-state battery project for grid energy storage.
• The CERENERGY® project has completed its bankable feasibility study, showing promising economics with €48 million annual free cash flow and €169 million NPV at 10% discount rate.
• Altech is in discussions with German utility providers for sales contracts and has appointed KPMG to manage financing, exploring green bonds and government grants.
• The Silumina Anodes project involves coating silicon with high-purity aluminum to enhance battery capacity, with a pilot plant being commissioned to produce samples for potential customers.
• Altech is currently raising up to AUD 8.5 million through an entitlement offer, partially underwritten by a board member, to fund prototypes and pilot plant commissioning.

In an era marked by the urgent need for sustainable energy solutions, battery technology stands at the forefront of innovation. As the world transitions away from fossil fuels towards renewable energy sources, the demand for efficient, reliable, and environmentally friendly energy storage solutions has never been greater. This shift presents a compelling opportunity for investors to participate in the growth of companies developing cutting-edge battery technologies. One such company making significant strides in this field is Altech Batteries Limited (ASX: ATC).

The push for electrification in transportation and the integration of intermittent renewable energy sources into power grids have created an unprecedented demand for advanced battery solutions. This demand spans from high-capacity, long-life batteries for electric vehicles (EVs) to large-scale energy storage systems for grid stabilization.

Altech Batteries: A Dual-Pronged Approach

Altech Batteries has positioned itself uniquely in this landscape by pursuing two distinct yet complementary projects: the Silumina Anodes project for EV batteries and the CERENERGY® sodium-chloride solid-state battery project for grid energy storage. This dual focus allows the company to address critical needs in both the automotive and utility sectors, potentially capturing significant market share in these rapidly growing industries.

Interview with Chief Financial Officer, Martin Stein

The CERENERGY® Project: Revolutionizing Grid Energy Storage

Altech's CERENERGY® project represents a significant leap forward in grid energy storage technology. This sodium-chloride solid-state battery system offers several advantages over traditional lithium-ion batteries, particularly in terms of sustainability and long-term performance.

Key Features of CERENERGY®:

• Uses common table salt (sodium chloride) as a key component
• Fully recyclable
• Longer lifespan compared to lithium-ion batteries
• Capable of multiple daily charge-discharge cycles without degradation
• Lower maintenance requirements

Martin Stein, Chief Financial Officer of Altech Batteries, highlights the economic viability of the CERENERGY® project:

"We have a free cash flow of 48 million EUR per annum and we have 135 million EUR of Revenue per annum and a net present value at 10% of 169 million EUR. So economically there's enough there to push forward with the project."

These figures, derived from the recently completed bankable feasibility study, present a compelling case for the project's potential profitability.

Market Positioning & Strategy

Altech is strategically targeting German utility providers transitioning from fossil fuels to renewable energy sources. As these providers increase their solar and wind power generation, the need for reliable energy storage to stabilize the grid becomes paramount. Altech's CERENERGY® batteries are positioned as a solution to this challenge, offering a green alternative to traditional energy storage methods.

Financing & Development

To bring the CERENERGY® project to fruition, Altech has adopted a multi-faceted approach:

• Appointment of KPMG: One of the "Big Four" global finance and accounting firms has been tasked with managing the financing for the plant.
• Exploration of Green Bonds: Given the project's environmentally friendly nature, Altech is looking into the European green bond market for funding.
• Government Support: The company is pursuing German and European government grants and subsidies to assist in plant construction.
• Strategic Partnerships: Altech is open to partnering with utility providers, potentially using their renewable energy in exchange for battery supply contracts.

The Silumina Anodes Project: Enhancing EV Battery Performance

While the CERENERGY® project targets grid storage, Altech's Silumina Anodes project aims to revolutionize EV battery technology. This innovative approach involves coating silicon with high-purity aluminum to create a more efficient anode material for lithium-ion batteries.

Key Advantages:

• 30% increase in battery capacity compared to graphite-only anodes
• Addresses the swelling and cracking issues typically associated with silicon anodes
• Potential to significantly extend EV range and performance

Current Status & Next Steps

Altech has constructed a pilot plant in Germany capable of producing 120 kg per day of the Silumina Anodes material. The company is in the process of commissioning this plant, with the goal of producing commercial samples for potential customers.

Martin Stein explains the strategic importance of this step:

"When it's fully commissioned and operational, we'll have the commercial samples to a whole range of prospective customers that we've already signed up under non-disclosure agreements. These potential customers are some of the world's biggest name EV companies and vehicle companies and batteries material supply chain companies."

This approach of engaging with major industry players early in the development process could potentially lead to significant commercial opportunities for Altech.

Market Potential & Industry Interest

The EV market's rapid growth and the constant push for better battery performance create a substantial opportunity for Altech's Silumina Anodes technology. Major automakers, including Tesla, have publicly expressed interest in silicon-based anode materials, indicating a receptive market for Altech's innovation.

Altech is currently raising up to AUD$8.5 million through an entitlement offer to fund the development of both projects. Notably, AUD$5 million of this raise is underwritten by a board member, demonstrating internal confidence in the company's prospects.

Allocation of Funds:

• Development of two 60 kilowatt-hour CERENERGY® battery prototypes
• Commissioning of the Silumina Anodes pilot plant

This funding round is crucial for advancing both projects to their next critical phases, particularly in producing samples for customer testing and validation.

Comparative Advantage & Market Positioning

CERENERGY® vs. Lithium-ion Batteries

While lithium-ion batteries currently dominate the grid storage market, Altech's CERENERGY® technology offers several potential advantages:

• Levelized Cost of Storage: When factoring in longevity, charge-discharge cycles, and maintenance, CERENERGY batteries may prove more economical over their lifetime.
• Environmental Considerations: The use of sodium chloride instead of rare earth metals positions CERENERGY as a more sustainable option.
• Performance in Grid Applications: The ability to handle multiple daily charge-discharge cycles without degradation is particularly suited to grid stabilization needs.

Silumina Anodes in the EV Battery Market

The EV battery market is highly competitive, with numerous companies vying to improve energy density and performance. Altech's Silumina Anodes technology, if successfully commercialized, could offer a significant performance boost without requiring a complete overhaul of existing lithium-ion battery manufacturing processes.

Challenges & Risks

While Altech's projects show promise, investors should be aware of the challenges and risks involved:

• Technological Validation: Both projects still require extensive testing and validation, particularly by potential customers.
• Market Adoption: The battery industry is notoriously conservative, and new technologies often face long adoption cycles.
• Competition: Both the grid storage and EV battery markets are highly competitive, with well-funded incumbents and other innovative startups.
• Financing: The capital-intensive nature of battery technology development and manufacturing presents ongoing funding challenges.
• Regulatory Environment: Changes in environmental regulations or energy policies could impact the attractiveness of Altech's technologies.

Future Outlook & Potential

Despite these challenges, Altech's dual-project approach positions the company to potentially capitalize on two of the most significant trends in energy technology: grid-scale storage for renewable energy integration and high-performance batteries for EVs.

The successful commercialization of either project could lead to significant revenue streams and position Altech as a key player in the global transition to sustainable energy systems. The company's engagement with major industry players and its focus on addressing critical pain points in both grid storage and EV applications suggest a well-considered strategy aligned with market needs.

The Investment Thesis for Altech Batteries

• Dual-project strategy addresses critical needs in both grid storage and EV markets
• CERENERGY® project offers a potentially more sustainable and economical alternative to lithium-ion batteries for grid storage
• Silumina Anodes technology could significantly enhance EV battery performance, a key focus for automakers
• Early engagement with major industry players through NDAs suggests strong market interest
• Positive economics from the CERENERGY® bankable feasibility study indicate potential for strong returns
• Green technology focus aligns with global sustainability trends and potential access to green financing
• Management team demonstrates confidence through board member underwriting of current capital raise
• Successful commercialization of either project could lead to significant market share in rapidly growing sectors

Key Takeaways

Altech Batteries presents a unique investment opportunity in the rapidly growing battery technology sector. With its dual focus on grid energy storage and EV battery enhancement, the company is well-positioned to capitalize on the global shift towards sustainable energy systems. The CERENERGY® project's promising economics and the potential performance improvements offered by the Silumina Anodes technology make Altech a company worth watching for investors interested in the energy transition.

However, investors should be mindful of the challenges inherent in bringing new battery technologies to market, including the need for extensive validation, potential competition, and ongoing financing requirements. The success of Altech will largely depend on its ability to move from promising technology to commercial adoption in two highly competitive markets.

As the world continues to grapple with the challenges of climate change and the need for efficient energy storage solutions, companies like Altech that are pushing the boundaries of battery technology may play a crucial role in shaping our energy future. For investors willing to navigate the risks associated with emerging technologies, Altech represents an opportunity to participate in potentially transformative developments in the battery sector.

Macro Thematic Analysis

The global push for sustainable energy solutions has created a macro thematic centered around advanced battery technologies. This trend is driven by two primary factors: the rapid growth of renewable energy sources and the accelerating transition to electric vehicles.

Renewable energy integration presents a significant challenge for power grids due to the intermittent nature of solar and wind power. This has created an urgent need for large-scale, efficient energy storage solutions. Grid-scale batteries, like Altech's CERENERGY® project, are positioned to play a crucial role in stabilizing grids and enabling higher penetration of renewable energy sources.

Simultaneously, the automotive industry is undergoing a seismic shift towards electrification. Major automakers are investing billions in EV development, with battery performance being a critical factor in consumer adoption. Technologies that can increase energy density, extend range, and improve charging speeds – such as Altech's Silumina Anodes project – are in high demand.

These trends are further supported by increasingly stringent environmental regulations and government incentives promoting clean energy and transportation. The European Union's Green Deal, China's push for EV adoption, and the United States' recent climate-focused legislation all contribute to a favorable macro environment for battery technology innovation.

Martin Stein's quote encapsulates the opportunity:

"The industry talks about what's called the levelized cost of storage and the levelized cost of storage takes into consideration many many different aspects of the battery including the life of the battery including how many times it can be charged and discharged per day."

This highlights the complex considerations in battery technology development and the potential for innovative solutions to capture significant market share.

As the world transitions away from fossil fuels, companies that can deliver improved battery technologies stand to benefit from massive market opportunities in both stationary storage and electric mobility sectors. This macro thematic presents a compelling case for investment in battery technology innovators like Altech Batteries.