Cleantech Industry Nervously Awaits A123 Systems' IPO

A123 Systems (AONE), a Massachusetts-based provider of rechargeable lithium-ion batteries and battery systems, is set to price its IPO this week. The planned offering has both the alt-energy and finance worlds abuzz. Portfolio.com dramatically notes that "the hopes and aspirations of an entire industry are riding on the back of A123 Systems, Inc. as it takes its first step into the public markets this week."

Business Overview (from prospectus)

We design, develop, manufacture and sell advanced, rechargeable lithium-ion batteries and battery systems. Our batteries and battery systems provide a combination of power, safety and life that we believe no other commercially available battery provides. We believe that lithium-ion batteries will play an increasingly important role in facilitating a shift toward cleaner forms of energy. Using our innovative approach to materials science and battery engineering and our systems integration and manufacturing capabilities, we have developed a broad family of high-power lithium-ion batteries and battery systems. This family of products, combined with our strategic partner relationships in the transportation, electric grid services and consumer markets, positions us well to address these markets for next-generation energy storage solutions.

Offering: 25.7 mm at $8 - $10 per share. Net proceeds of approximately $201.8 million will be used for capital expenditures, including capital expenditures related to the expansion of the company's manufacturing capacity in Michigan, working capital and other general corporate purposes. A portion of the proceeds may also be used for as yet unspecified business acquisitions.

Lead Underwriters: Morgan Stanley (MS), Goldman Sachs (GS), BofA Merrill Lynch (BAC)

Financial Highlights:

The increase in product revenue [from $21,934,000 to $42,922,000 during the six months ended June 30, 2008 and 2009] was primarily due to an increase in sales to customers in the transportation industry of $25.1 million... The increase in cost of product revenue [from $26,675,000 to $43,691,000 for the same period] was primarily due to the increase in product revenue... We experienced a product gross loss [of 55.9%] during the six months ended June 30, 2009, primarily due to low factory utilization.

Competitors:

We have recently begun facing competition from joint venture companies in our industry. For example, in 2008, Bosch and Samsung formed LiMotive to focus on the development, production and marketing of lithium-ion battery systems for use in HEVs and other electric vehicles. Dow Chemical has recently announced the establishment of a joint venture with Kokam America and others, pending receipt of government incentive funding, to build a facility in Michigan for the manufacture of lithium polymer batteries for use in HEVs and other electric vehicles.

In the rechargeable battery market, the principal competitive technologies currently marketed are lead-acid, nickel-cadmium, nickel metal hydride and lithium-ion batteries. Our primary competitors who have announced the availability of either lithium-ion or other competing rechargeable battery products include Panasonic (PC), BYD (BYDDY.PK), LG (LGERF.PK), Lithium Energy Japan (Mitsubishi-GS Yuasa), Blue Energy Company (Honda-GS Yuasa), and LiMotive and Samsung, among others.

Additional Resources:

• Company website.
• Online roadshow
• Greentech Media: 'A123's IPO Could Open the Floodgates for Greentech Sector'
• Greentech Media: 'SoCal Edison Wants A123 to Build Biggest Grid Battery Ever'
• Portfolio.com: 'Hopes Ride on IPO'

Comments

[sliman:]

Anybody out there trying to get a piece of this IPO?

Sep 22 09:26 AM

[Douglas Kor...:]

You'll notice that according to this article, the cost of manufacture alone is higher than the revenue stream coming in...meaning that they are losing about $1 for each $1 in sales, if SG&A is in proportion.

This is not sustainable; but it's in accordance with other Lithium battery companies, which (so far) have not made much money on their product. So it's all smoke and mirrors, so far; the only proven technology for all-electric EVs is Nickel Metal Hydride, not Lithium; and lead-acid also works, but is higher in cost. The highest cost of all is Lithium, that's why the Tesla costs so much.

There are about 100 converted Plug-i-Prii using A123 batteries, it seems; but none has more than a few months of operation. The big problem with Li is lifespan; Li is yet to be proven. We hope it works, and will last 100K or 200K, like NiMH; but so far, no reason to move to Lithium from NiMH, which makes it mystifying why car companies refuse to use NiMH for upcoming proposed EVs. Perhaps, they really don't want them to succeed.

So far, experience shows that NiMH costs about a third of Lithium, and lasts 4 times as long.

Sep 22 10:09 AM

[Fred W:]

Don't chase this one.

Sep 22 11:02 AM

[Avooch:]

stay far away -

It is a general rule: Insiders sell equity when they think their company has limited prospects and raise debt when insiders think their company has a big future.

Who would be dim enough to buy stock from an insider ?

Much better to wait a few months and see what happens.

-------------

Don't Get Massacred !

Gudovac1941

Sep 22 12:54 PM

[User 484348:]

A direct competitor is Altair Nanotechnologies (ALTI).
www.altairnano.com Check out web site and do your DD.
Involved with AES, Military, Mass Transit, Navy, Wind and Solar.
Good Energy play.

TL

Sep 22 04:34 PM

[Road Runner:]

Douglas, you need to differentiate, just like most people, the difference between A123's Li-ion battery and all the other Li-ion batteries. A123 is Lithium Iron Phosphate (LiFePO4) which is far superior to all the other Li-ion batteries when it comes to vehicles. These batteries are extremely safe, have long life, can be charged very quickly, etc.

Also, vehicles need Li-ion batteries. I just test drove a 2010 Toyota Camry hybrid. It had the third generation Synergy drive, like the Prius, that uses the Nickel Metal Hydride battery. The car was great. It drove just like a standard Camry – very well. There was only one problem with the car that would prevent me from buying it or a similar Lexus model - the battery took up too much trunk space. I never want to apologize for driving mid-sized sedans instead of SUVs. I never want to turn down picking up friends or family at the airport because I don’t have enough trunk space in my car.

Li-ion, notably LiFePO4 li-ion, batteries are essential for the future of hybrids. Just give it time and volume to improve their characteristics and lower their costs.


On Sep 22 10:09 AM Douglas Korthof wrote:

> You'll notice that according to this article, the cost of manufacture
> alone is higher than the revenue stream coming in...meaning that
> they are losing about $1 for each $1 in sales, if SG&A is in
> proportion.
>
> This is not sustainable; but it's in accordance with other Lithium
> battery companies, which (so far) have not made much money on their
> product. So it's all smoke and mirrors, so far; the only proven technology
> for all-electric EVs is Nickel Metal Hydride, not Lithium; and lead-acid
> also works, but is higher in cost. The highest cost of all is Lithium,
> that's why the Tesla costs so much.
>
> There are about 100 converted Plug-i-Prii using A123 batteries, it
> seems; but none has more than a few months of operation. The big
> problem with Li is lifespan; Li is yet to be proven. We hope it works,
> and will last 100K or 200K, like NiMH; but so far, no reason to move
> to Lithium from NiMH, which makes it mystifying why car companies
> refuse to use NiMH for upcoming proposed EVs. Perhaps, they really
> don't want them to succeed.
>
> So far, experience shows that NiMH costs about a third of Lithium,
> and lasts 4 times as long.

Sep 22 04:53 PM

[Steven Vincent:]

At GreenTechnologyBull.com we think that the green tech sector will be the next big bull market akin to the IT and Internet boom of the 90's. Join us to keep up with developments in this sector. There will be a weekly podcast featuring interviews with companies like this one. www.greentechnologybul...

Sep 22 05:52 PM

[User 490260:]

You state that the lithium is the biggest expense. I thought it was the Cobalt and that one of the advantages of A123 batteries is that they are Lithium Iron- Phosphate - no Cobalt- and therefore eventually much cheaper than Li Cobalt batteries


On Sep 22 10:09 AM Douglas Korthof wrote:

> You'll notice that according to this article, the cost of manufacture
> alone is higher than the revenue stream coming in...meaning that
> they are losing about $1 for each $1 in sales, if SG&A is in
> proportion.
>
> This is not sustainable; but it's in accordance with other Lithium
> battery companies, which (so far) have not made much money on their
> product. So it's all smoke and mirrors, so far; the only proven technology
> for all-electric EVs is Nickel Metal Hydride, not Lithium; and lead-acid
> also works, but is higher in cost. The highest cost of all is Lithium,
> that's why the Tesla costs so much.
>
> There are about 100 converted Plug-i-Prii using A123 batteries, it
> seems; but none has more than a few months of operation. The big
> problem with Li is lifespan; Li is yet to be proven. We hope it works,
> and will last 100K or 200K, like NiMH; but so far, no reason to move
> to Lithium from NiMH, which makes it mystifying why car companies
> refuse to use NiMH for upcoming proposed EVs. Perhaps, they really
> don't want them to succeed.
>
> So far, experience shows that NiMH costs about a third of Lithium,
> and lasts 4 times as long.

Sep 23 09:24 AM

[Co Batteries:]

Funny this blog went silent. The IPO happen last week and the stock went above $20 day one. As with a lot of mfg goods, the cost of epuipment is big for Li-ion batteries - >$100M per line....and that is once you have your powder developed. A123, Altair Nano, Valence, BYD and others have invested a lot of money in that part of the process. It will be interesting to see A123 move into full scale production. Costs of goods will come into line and profits will follow.

Sep 27 11:25 PM