Friday, July 31, 2015

EnerDel: an Obvious Bedfellow

In April 2015, General Electric (GE:  NYSE) won a contract to supply Con Edison Development with an 8-megawatt-hour battery storage system at a solar project in California.  The system will incorporate GE’s Mark IVe control system and Brilliance MW inverters.  However, instead of GE’s Durathon sodium-ion batteries, GE will be outsourcing or acquiring lithium-ion batteries for the project.

Where will GE source the lithium-ion batteries for the Con Edison Development project?  So far, spokespersons have been non-committal on the name.  GE has had a number of bedfellows in the energy industry over the years  -  some strange and some obvious.  For lithium-ion batteries the obvious partner would be privately-held EnerDel, Inc.

EnerDel is supplying lithium-ion batteries technology for an energy storage facility under joint development in Portland, Oregon for electric utility Portland General Electric.  The rated power of the facility is 5 megawatts and the storage resource is 1.25 megawatt-hours.  GE has partnered with Eaton Corporation to develop the project and we expect this project has given GE good exposure to EnerDel’s capabilities.

EnerDel owns a portfolio of lithium-ion battery technologies used in a mix of cells, modules and packs.  The technology originally came from Delphi, which had a stake in EnerDel until it was sold in 2008 to EnerDel’s current parent Ener1.  The company can also configured these components into systems for distributed energy solutions for remote and utility-scale situations. 
As a private company, EnerDel is silent on detailed financial performance.  However, in late 2014 the company’s senior officer ws quoted as saying the company may deliver $45 million and $55 million in sales in 2015 and 2016, respectively.  Profitability is not expected until 2017.

Recent press releases provide some insight into top-line momentum and at least partially back up management’s projections.  In April 2015, the company announced a contact it characterized as it’s largest to date.    EnerDel will supply its Vigor+ battery packs to Washington Metro Area Transit Authority for help running the WMATA’s diesel-hybrid bus fleet.  The order follows an agreement forged with Allison Transmission (ALSN:  NSYE) to allow EnerDel to market the Vigor+ pack as approved replacement batteries for vehicles outfitted with Allison transmissions.  WMATA’s fleet of hybrid buses is reliant on Allison units that originally came equipped with Panasonic batteries.
The order from WMATA is not the first transit systems business for EnerDel.  In 2014, the company won new business from King County Metro in Seattle and the County of Honolulu.  Both orders were for the Vigor+ lithium-ion battery packs to serve as replacement batteries in Allison units.

EnerDel also has a portable power solution that it markets to the military.  It can also be used for back-up power at healthcare facilities or as a main power source at remote or temporary locations.
Do not expect much more than a purchase order from GE for EnerDel battery technology.  On the surface it does not have the profile of an acquisition target.  EnerDel is a subsidiary of Ener1, a privately-held company that emerged from bankruptcy in 2012 after a failed attempt at developing the ‘Think’ electric vehicle.  The white knight in the bankruptcy was a Russian industrialist who, along with other equity investors, recapitalized EnerDel with $86 million in new funding.

EnerDel’s storied past is not the only obstacle.  The company’s current focus on selling replacement batteries is not likely to impress GE, where senior executives think of markets and sales in terms of billions.  The portable energy storage market may have some appeal, but even that does appear to be a priority for GE.

EnerDel is not GE’s sole partner in the energy storage arena and certainly not the only source for lithium-ion battery technology.  Next week we look at two more storage battery sources.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

 

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