Welcome to Sponge Shares
Research Area – AMTE Power Research Note
AMTE Power (LSE:AMTE)
UK based lithium-ion battery developer with five cells under development including three highly differentiated battery products targeting automotive, aerospace, energy storage and specialist end markets with at least one product launch planned a year over the next three years.
11 November 2021
Market Cap: £55M / 165p
Current Share Price
- Leading UK battery specialist investment opportunity
- One of only five UK battery cell manufacturers
- Purpose built cell manufacturing facility in Scotland (2nd Largest in UK)
- Exciting cell development programme derived from secured IP
- Cell product applications across EV’s, Oil and Gas, Aerospace and Energy Storage
- One planned comercial product roll out per year 2022-2025
- Revenue generating with potentially huge upside growth potential
- Government and industry funding support with grants awarded
- Planned UK Gigafactory
The world goes electric!
As I put pen to paper or should I say ‘fingers to keys’, the UK plays host to COP 26. The event brings countries together with the aim of addressing climate change. With many countries signing up to make commitments to lower their carbon footprints, an emergence of green-energy companies take centre stage.
The world is on a charge to look at alternative lower carbon energy solutions and associated infrastructure/applications.
Global electrification is in the spotlight and so is how it’s sourced, delivered and applied to every day applications from cars planes trains and automobiles to powering homes, offices, industry and literally anything else we rely on for power.
One such company that I have recently invested in is AMTE Power
So lets talk about AMTE then…
AMTE Power listed on the UK stock market in March 2021. The company is developing and commercialising a set of highly differentiated lithium-ion and derivative-of battery cells that will target more specialist applications across the Automotive, Oil and Gas and Energy Storage sectors.
We’ll talk about these exciting products a bit later but for now the key take away is that AMTE are positiinoing themselves as a more specialist producer of battery cells, aiming not to compete with mainstream producers but rather target more niche applications such as high burst energy automotive cells that could be used in high performance cars or motor sport as one example.
The company already have a purpose built battery cell manufacturing facility in Thurso, Scotland which in fact is the second largest manufacturing facility in the UK today.
In addition, the company has accessed and licensed the relevant IP that will enable the final cell designs that in conjunction with its customers will leverage early investment by those companies.
The company are also revenue generating with a substantial team in place c.60 employees. One would argue the existing business, facilities and IP (estimated £35m Thurso replacement cost) more than cover the Market Cap with little or no enterprise value factored in which in a heavily ESG focused landscape provides opportunity.
The company has its fingers in a few pies with various alliances and partnerships already in place. There is a lot going on and the following gives a flavour of what else the company are doing alongside their existing battery cell development and commercialisation pipeline which of course is the primary focus.
Ultra-fast charging (CELERITAS)
AMTE have partnered with no less than BMW and BP along with Sprint Power in a Government backed project to develop ultra-fast charging systems for EV’s. Targeting BMW’s future battery specifications and requirements, the battery platform will bring together innovations from each partner, including rapid charging cell technology being developed by AMTE Power. You can come back and read more on this later here
High Power, High Energy Li-ion Battery Cell R&D Project (ULTRA)
AMTE have been selected as ‘lead-supplier’ in this project which is focused on bringing AMTE’s own Ultra Energy and Ultra High Power automotive cells into mass volume production. The project is a collaboration with some of the leading Global automotive manufacturers and other industry participants such as Magtec who design electric drive systems and Petalite who develop fast charging systems.
As part of the project AMTE notably receive £2.3m from the UK’s APC (Advanced Propulsion Centre) a Government funded body. A little clue here to how instrumental AMTE could be as a leading UK volume battery cell manufacturer – ‘The APC selects companies that they believe will be key players in the UK’s electric vehicle supply chain‘.
Another point to note here is that this project does not affect existing commercialisation plans for these battery cells but rather focuses on future high volume mass production. You can read more here
Sodium-ion Battery Collaboration with Faradion
The collaboration with Faradion, the world leader in sodium-ion battery technology brings that technology together with AMTE’s design and manufacturing capabilities. This is a particularity exciting sector which covers energy storage such as storage of energy generated by renewable sources such as tidal, wind turbines and solar.
AMTE belive that combining their expertise with Faradion and the advent of increasing future use of sodium-ion replacing lithium-ion long-term the UK will become a leader in next generation battery technologies. I’m sure this will have been discussed in detail at COP 26!. Again you can read more here
Bardan Cells Energy Storage partnership with Infranomics, Australia
If the last three projects I’ve mentioned haven’t wet your appetite yet then how about this partnership with Infranomics in Australia ?
AMTE and Infranomics have signed heads of agreement to create Bardan Cells which will operate from Western Australias ‘lithium-valley’. The company will be jointly owned and focused on developing the manufacturing, sales and distribution of power storage systems.
The joint company will focus on setting up an initial manufacturing facility scaling to Gigafactory which will produce niche safe power storage solutions which will be at the heart of global energy transformation. This is very exciting! You can read more here
Framework Agreement with UK BIC (Battery Industrialisation Centre)
AMTE are one of the first commercial battery developers to have an agreement with the UK BIC. The agreement enables AMTE to prove and refine large-scale volume and manufacture initially of its Ultra High Power Cell and prove its commercial viability.
Current cell manufacturing capability is at AMTE’s own Thurso facility but use of the BIC will allow AMTE to transition to large scale, reliable manufacturing and ultimately build their planned UK Gigafactory, plans for which they expect to announce in 2022. You can read more here
In the previous section you get a flavour for just how busy AMTE have been. So how do their product offerings tie back to these very exciting projects ?
The Info-graphic below highlights the products in development and their target markets.
Ultra High Power
This one of AMTE’s most advanced products designed primarily for the automotive industry and targeted towards high performance hybrids/ev’s and even motorsport applications. It’s key selling point is its ability to deliver power at a very high rate consistently and without fault.
This battery cell is already progressing through the BIC (I mentioned earlier) and is already demonstrating Gigafactory production speeds. I suspect this will be the first of AMTE’s products to market following final testing at BIC when we could hear of the first supply deal with a leading automative brand or two! I believe commercial launch could be announced any time from now onwards.
Similar to Ultra High Power this battery cell is targeted initially towards the automotive sector and is designed to deliver market beating energy density and range.
Like Ultra High Power, this cell is also being progressed through the BIC and demonstrating Gigafactory production speeds. This product should also be close to commercial roll-out and again we may see a supply deal/s soon.
Ultra Safe is based on Sodium-ion battery chemistry which can deliver high performance that is inherently safe. Again the battery can be used in the automotive/aerospace sector but is very suited to energy storage and back-up power applications due to increased safety.
This battery will tie in nicely with the partnership with Infranomics to deliver power and energy storage solutions in Australia and ultimately anywhere else with release I believe targeted in 2023 via Bardan Cells. I think this battery if commercialised successfuly could have the potential to catapult AMTE into a big global name notwithstanding their other advanced cell developments.
Pretty much what it says on the tin! A battery cell for energy storage. It’s recently appeared on the company presentation as an additional product so I assume its a lithium-ion based energy storage battery. Similar to Ultra Safe in its application where renewables can store energy.
I see Ultra Storage as perhaps the pre-cursor to Ultra Safe but not necessarily superseded by it. I assume like Ultra Safe this cell will follow on after the company have commercialised their Ultra Power and High Energy cells.
Finally we have Ultra Prime – a battery cell targeted at more specialised markets. This could be Oil & Gas or other Industry where power may be needed in extreme/remote operating environments – say high temperature conditions.
The cell is non rechargeable and is designed to offer very high energy density and high temperature operating environments with a low self discharge rate.
The company state the planned release for this cell will be late 2023 with production equipment already being commissioned at Thurso.
So as you can see the company have a number of cells in development with the likes of Ultra Power and Ultra High Energy going through their final stages of mass production testing that will then I believe be the trigger point for AMTE to secure investment to expand their Thurso manufacturing facility and build a planned 2Gw Gigafactory.
Their commercialisation plans for each of their cells is independent of the related projects I mentioned earlier however you can see interesting cross over. They’ve also sensibly staggered the stage of each cell development so they have bandwidth to bring the products to market.
An Eye on Risk
As with any investment we need to be aware of the risks particularly with micro cap companies. Risks to be aware of are as follows:
Failure to Commercialise
Despite a number of the battery cells being in late stage development and mass production testing there is no guarantee that the products will be commercially viable however reading between the lines and following company updates this looks promising.
The fact the UK Advanced Propulsion Centre have awarded a £2.3m grant to AMTE further mitigates the risk. The first commercial launch and corresponding supply agreements would be a major re-rating point for the company and of appeal to investors.
The company will clearly need on-going funding until first sizeable revenue generation which of course is normal but a consideration. That said the company have been qualifying for multiple grants to date and have additional applications pending with the Automotive Transformation Fund (ATF) – I suspect COP 26 fall-out will provide further impetus here too.
With regard to the planned Gigafactory, the company will be looking to secure debt financing.
IP & Competition
Lastly we need to consider the retention of relevant IP and the effect of competition. There are other UK companies in the space however as previously stated the relationships already struck with Government bodies bode well for AMTE’s fortunes.
If you are a relative newbie too investing come back here after you have read the note and read my blog on Managing Risk and Exposure
So before I highlight all the fluffy bits and why those invested could be sitting on significant returns we need to be aware that investing in micro cap companies in general carries high risk so don’t be throwing the kitchen sink in, manage your risk !
Now back to AMTE…
I have to say I am hugely excited about this investment and it’s probably one of the largest I’ve made to date.
The company are sitting at the forefront of the UK’s green energy agenda as evidenced by their attendance at COP 26 where there was senior level Government and Industry engagement (read more here)
The company is well established with five cells under development and targeting at least three highly differentiated cells for commercial release over the next three years with two in final large volume scale manufacturing testing. Off the back of this the first commercial product roll-out and supply agreement/s could be announced any day.
The company have this year increased product supply client engagements i.e. potential off-takers from under 10 to over 50 showing huge interest in the companies cell offerings which when manufacturing ramp up occurs could convert into multiple supply agreements.
Aside of the core commercialisation pipeline the company are engaged in a number of initiatives as I outlined earlier any of which could translate into significant revenue opportunities whether that be direct or via royalties/licensing.
In addition the company via its Australian subsidiary Bardan aim to bring its Australian production facility on-line in early 2023 an additional revenue stream.
The company IPO’d in March 2021 at 175p and following an initial uplift in share price (touching 320p) has since fallen back to below original IPO price. This is quite remarkable and wholly unjustified in my opinion when you consider the space AMTE are in however company PR has been quite frankly awful to date however I believe this is going to change.
For example Pensana another green energy company looking to build a UK Rare Earth processing facility has recently traded in excess of £350M Market Cap – to a certain extent that’s apples and oranges but the point is both companies could be at the heart of the UK’s green-energy transition and the growth opportunities could be huge. Pensana have also sold their story to the market!
So at £58m Market Cap (with assets and IP that arguably more than cover this), and a product pipeline that should see one or two cells reach commercialisation shortly, securing of associated supply agreements with further cells in development, the company gearing up for future mass production via a 2-10GW Gigafactory planned and other green-energy initiatives/partnerships I see little or no enterprise value priced in and for that reason think the stock should be on the cusp of a re-rate and a healthy one at that!
You can follow me on twitter https://twitter.com/TheMoneySponge
Research materials prepared based upon my own analysis and research. Accuracy cannot be guaranteed and research notes should not be taken as investment advice. Please always do your own research.
1,618 total views, 1 views today