VSA Morning Transitional Energy Comment, 14/12/20
Invinity Energy Systems (LON:IES)
Invinity Energy Systems plc (LON:IES), a manufacturer of Vanadium Flow Batteries (VFB’s) for the large-scale energy storage requirements of businesses, industry and electricity networks, has today announced the sale of a 0.8 MWh VFB’s to Absolute Solar and Wind Limited for use in a solar plus storage project at a waste-water treatment plant (WWTP). The plant is owned by Scottish Water, a utility that serves around 2.7 million households and business premises. Scottish Water has committed to net zero emissions by 2040, five years ahead of the Government’s target schedule.
The IES system, comprising four VFBs, is to be installed alongside 1 MWp of solar PV generation at the site located in Perthshire, Scotland. The VFB’s will be used to move excess solar generation from day to evening in the summer months and to perform grid arbitrage activity during winter, reducing energy costs for the site and maximising its use of low-carbon solar power. The IES battery system will also be used to provide ancillary services to the UK grid including frequency response.
The principal contractor for the project is Absolute Solar and Wind Limited, a leading Scottish renewable energy solutions specialist. The Perthshire site, according to IES, is the first of a number of similar solar-plus-battery projects currently under development by Scottish Water Horizons.
The sale announced today, state IES, has an anticipated revenue contribution of approximately £0.7m to the Group, relating to the IES battery system itself, ancillary components and associated services. The project is expected to go live in 2021.
To date, approximately 10 MWh of IES VFB’s have been installed at more than 40 sites, in 15 different countries, on five continents, with a further 17.8 MWh (prior to today’s announcement) under contract for delivery in 2021. The Company’s pipeline (on November 24th, 2020) sees an overall opportunity of 121.4 MWh. The order backlog, including the project announced today, is for 25.1 MWh of VFB’s. The backlog, at this stage, given accelerating commercial interest, supports our forecast for 2021 of £21.2m (from 43.4MWh of VFB’s) and an EBITDA loss of £7.2m and for 2022 revenue of £52.2m (from 112MWh of VFB’s) and an EBITDA loss of £0.9m.
To support the high growth of the business, the Company, on December 3rd 2020, announced that it has raised a total of £22.5m. £20.5m (before expenses) through the placing of 11,714,286 new ordinary shares (Placing shares), at a share price of 175p, to Institutional Investors. In addition, the Company announced that it planned to raise approximately £2.0m (before expenses) by way of a conditional Open Offer.
Pursuant to the Open Offer, Qualifying Shareholders will be given the opportunity to subscribe for up to 1,141,325 Open Offer Shares at the Issue Price, on the basis of 1 Open Offer Share for every 64 Ordinary shares held on 1 December 2020 (the “Record Date”). Any Open Offer Shares not subscribed for by Qualifying Shareholders will be available to Qualifying Shareholders under the Excess Application Facility.
The market is significant, Bloomberg New Energy Finance predict the sector will receive approximately US$620 billion in new investment by 2040 with the market projected to grow at nearly 900% between 2017 and 2022. Against this background, according today’s announcement, VFBs are expected to capture around 18% of a total addressable stationary energy storage market by 2027. This is a major market opportunity for IES.
IES is already seeing broad interest in a breadth of applications from utilities through to commercial and government.
We reiterate our Buy recommendation and target price of 269p/sh.
#Indicates VSA house stock.
All disclosures and supporting charts can be found in the PDF version.
Phil Smith, Equity Analyst, Transitional Energy | T: +44 (0)20 3617 5187 | E: [email protected]
VSA Capital Research | T: +44 (0)20 3005 5000 | E: [email protected]
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