Time for AMTE Power to power on?
“…Cruising at around 300p last summer, the company’s stock has subsided to around 80p at the time of writing. The company has to demonstrate it can turn its prototypes into profit, but all the elements seem to be in place: a set of cutting edge battery cells on the cusp of certification, a roadmap to large scale production, relationships with a host of prospective customers, UK government support, and strong tailwinds generated by the global imperative to move to cleaner energy production…”
Soaring oil and gas prices have been headline news for some months now, their surge sparked by the post-pandemic supply squeeze and, now, by the shocking return of war to Europe. But clean energy stocks have been flying too, as the world scrambles to wean itself off cheap Russian fossil fuels and doubles down on investment in green power. Security considerations, as well as climate concerns, are now driving the energy transition.
AMTE Power (AIM:AMTE), a developer and manufacturer of next generation lithium-ion and sodium-ion battery cells, is seeking to position itself to make a significant contribution. AMTE focuses on the requirements of specialist customers ‘whose power, performance and endurance needs are outside the scope of the mainstream international battery manufacturers’, particularly in the electric vehicle and energy storage sectors.
Founded in 2013, the company joined AIM a year ago, raising £12.9m to allow it to bring its suite of cells to market through the development of commercial relationships and partnerships, and a move to mass production. AMTE has a product development team based in Oxford, and a purpose-built cell manufacturing facility at Thurso, in the north of Scotland. The facility has one of the most extensive cell manufacturing capacities in the UK, but the company has advanced plans to scale up to a ‘gigafactory’. The company is led by CEO and founding director Kevin Brundish, a director of two other companies in the energy storage sector and a member of the industry group advising the government on energy storage.
Surfing the battery metals wave
AMTE is seeking to surf the battery metals mega trend as the world rushes to decarbonise ahead of the 2050 Paris Agreement, an urgency supercharged by the effective removal of Russia from world markets, at least so long as the Putin regime holds power. AMTE’s most recent half year report offers a blizzard of statistics indicating the scope of the transition. Demand for energy storage systems is expected to grow by 21pc a year this decade, from 23 GWh (gigawatt hours) in 2020 to 155 GWh in 2030, requiring global investment of some $262bn. The global automotive battery market is forecast to grow at a CAGR of 6.57pc from $44bn in 2021 to $103bn by 2030. Demand for lithium-ion batteries is estimated to grow at a ten-year CAGR of 25pc. Here in the UK the government has announced ambitious plans for a ‘green industrial revolution’ aiming to generate all of our electricity from clean energy by 2035. With some 60pc of UK power still dependent on hydrocarbons, that means huge investment in battery innovation and production, and a rapid transition to electric vehicles.
AMTE is currently developing several battery cell types it expects to rollout over the next three years as it proves their capacity to meet customer specifications and for mass manufacture. Ultra Energy is designed for the storage energy market, and Ultra High Power, a ‘rechargeable pouch format battery cell’ with acceleration enhancement capabilities, for high performance electric vehicles and the aerospace sector. Ultra Prime is a robust ‘single use cylindrical battery cell’ with a long standby life, making it suitable for challenging environments within the oil and gas and defence sectors. AMTE already has an agreement to supply up to a million Ultra Prime cells to an oil and gas equipment manufacturer. The third product, the company’s Ultra Safe sodium-cell battery, is at an earlier stage of development than the others, but has the potential to be the company’s most transformative product, offering a battery solution based on an element much more readily available than lithium, and at a significantly lower price.
AMTE is aligned with the growing range of government initiatives to support the development of battery cells. It is one of the first companies to have taken advantage of the UK Battery Industrialisation Centre (UKBIC), a cell manufacture facility designed to support manufacturers as they scale up production. AMTE will use the Centre to demonstrate that its cells can be produced at commercial rates before building its own UK manufacturing facility, a gigafactory capable of producing at an initial rate of 2 GWh per annum, and subsequently at up to 10 GWh and beyond. With government support, AMTE expects the new site to be up and running within the next three years.
Progress since IPO
Since IPO the company has moved toward commercialisation on multiple fronts. Last October it announced a joint venture agreement with infrastructure advice and financial services firm InfraNomics Technologies to build a micro production line in Australia’s Lithium Valley capable of producing 200,000 energy storage cells. AMTE will contribute technology and manufacturing expertise to the line, envisaged as a forerunner to a gigafactory capable of producing lithium battery cells for the Australian energy storage markets, at a capacity of 1 to 2 GWh per year.
In December the company said it had been confirmed as a partner in the new UK government funded project CELERITAS focused on the development of ultra-fast charging systems for electric vehicles. Best-in-class charging systems currently take approximately 22 minutes to reach an 80pc charge for a 280-mile range: the project, supported by the Advanced Propulsion Centre, aims to reduce that to around 12 minutes, thereby further encouraging consumer adoption of electric vehicles. AMTE will recast its rapid charge pouch cells into a cylindrical format tailored to sit at the heart of the system.
Another update late last year reported progress towards UN38.3 certification of its Ultra Higher Power line – the current United Nations standard that lithium batteries must meet to satisfy regulators they are suitable for safe transport. Production of the cells is being stepped up at UKBIC to demonstrate their suitability for mass manufacture. Target customers ‘include BMW, Arrival, a number of other leading brands in performance and commercial vehicles, energy storage operators and the UK’s largest integrator of electric power trains’. Commercial offtake agreements will be negotiated throughout 2022 with prospective clients that have acquired cells for testing or made one-off orders. The announcement also said that planning for the UK gigafactory was ‘progressing well’, with a location due to be selected this year from three candidate sites. Progress was also being made towards the selection of a site for the Australian joint venture, with construction expected to begin by September.
Earlier this month AMTE reported that an initial order for its Ultra Safe sodium-ion cell technology has been placed by Midlands-based renewable energy and battery specialist AceOn. The cells will power a portable energy storage power unit, the AceOnPES, that will help bring clean, affordable and sustainable power to some of the world’s poorest and most remote regions. The unit will be used for primary or back up power generation in countries with under-developed electricity infrastructures, including Africa, India and Australia.
AMTE’s half year update, also published this month, said that the company was engaged with ‘local authorities, designers and investment banks’ with a view to making a final decision on the location of its mass manufacture factory this year. The Ultra Energy cell is now the subject of 94 automotive opportunities, 43 of them averaging a million cells per annum, equating to roughly 2,000 electric vehicles per opportunity and a potential capacity of 6 GWh. The company’s Ultra High Power pouch cell has 26 commercial opportunities, each with an average of 270,000 cells per annum, with a potential capacity of 0.28 GWh.
From prototypes to profits
AMTE continues to build out its team and invest in infrastructure in anticipation of commercial production. In the year from 30 June 2020 it increased its headcount from 55 to 68, taking on new electrochemists and engineers, and strengthening its legal counsel, supply chain, marketing and finance teams. The company therefore expects ‘reduced revenue and a moderate impact on loss before tax over the next two years’. AMTE’s half year update reported a loss before tax of £2.65m, up from £1.46m for H1 2021. Its turnover, however, was up to £0.81m from £0.62m, £0.65m secured through grant income. Commercial income, which fell from £0.31m from £0.17m as the company focused on battery development, is expected to accelerate as contracts are secured.
AMTE has work to do to convince a sceptical market that it can turn its impressive technical credentials into a sustained commercial venture. Its share price has been caught up in the market’s turn away from clean tech stocks over the past year. Cruising at around 300p last summer, the company’s stock has subsided to around 80p at the time of writing. But Russia’s war has refocused the market’s mind on the strategic importance of clean energy: green power stocks are surging again. AMTE seems set for a re-rating, its price rising by 10p over the past week. The company has to demonstrate it can turn its prototypes into profit, but all the elements seem to be in place: a set of cutting edge battery cells on the cusp of certification, a roadmap to large scale production, relationships with a host of prospective customers, UK government support, and strong tailwinds generated by the global imperative to move to cleaner energy production. If it can continue to make solid progress on its path to commercialisation, AMTE Power’s stock may be set to rise for years to come.