In an effort to provide Axion Power International (AXPW.ob) investors some diversion from the tedium of waiting for financing news, I've built a spreadsheet with my attempt at an algorithm for estimating the cost of PbC batteries. I won't be able to do that with precision, but hopefully it'll be a useful tool that you can edit to arrive at your own estimates. Generally speaking, I think these numbers are conservative. I fully expect that the real total cost number for a 30HT-sized PbC is less than my $269 estimate.

John Petersen is kindly hosting the spreadsheet, which you can download at:

https://dl.dropboxusercontent.com/u/26257506/4.30.13%20PbC%20Cost%20Estimate.xlsx

The spreadsheet has a lot of explanatory info in it, including John's comments in yellow and references to discussions in past Axion concentrators.

The spreadsheet begins with my estimate of the economics of an AGM battery. I started with my assumptions for the selling price, gross margin, and weight/cost of lead to solve for all other costs referred to as "non-lead costs".

In addition to providing a basis for comparison, I carry the non-lead cost down into the PbC section to provide a baseline PbC cost.

I add to that baseline the cost of the lead in the PbC. Note, I'm assuming the lead content of a PbC is 70% of that of an AGM not our "traditional" 60% number. John Petersen recommended this change. Additionally, drawing from numbers mentioned in various concentrators, I put together fixed cost allocations for the carbon sheeting and electrode lines using a five year assumption and an annual production volume of 50,000 units.

The 50k unit volume is much less than our current estimate (90k) of Axion's PbC production capacity. I did this to be conservative because the smaller the production volume number, the higher the per-unit cost allocation and of course the higher the total cost and, presumably, sale price numbers must be. As you can see, this analysis represents an exercise in forward pricing and this number is the key lever for that analysis.

In addition to the fixed cost allocation for the two lines, I also came up with operating cost assumptions of $150k and $600k for the Carbon Sheeting and Electrode lines respectively. The former is for a single shift while the latter assumes two shifts. I also made the latter much larger because in addition to being more expensive, it also seems to be much more complicated. Still, I acknowledge that there is a lot of WAG there.

Side note: If you don't want to use forward pricing then use 2,000 units as the production volume assumption and cut the electrode operating cost number to reflect a single shift.

At the bottom of the spreadsheet I arrive at a total PbC cost and provide a place for the user to enter a price point. The spreadsheet then calculates the gross margin as well as the gross profit assuming 50k units and the current state $8m annual burn rate.

A $360 price point gets you to the 25% margin that we think is the norm for AGM in the industry today. Axion would still be losing money ($3.4m net loss) if it sold 50k units at that price.

Eventually, if not sooner, Axion may have higher margins due to its unique and patented technology. For example, if Axion continues at the Norfolk Southern price of $463 then it would have a 42% margin and $1.7m net income on 50,000 units.

**Disclosure: **I am long AXPW.

**Additional disclosure:** I have a long position in Axion stock but consider it an extremely risky investment not suitable for most people.