Ricknplano

Energy Storage: Chrysler - A123 Alliance Likely to Spark Interest in Sector

Juan,

I follow John's articles and I get the impression that John is critical of the cost of lithium, not the technology, and is skeptical of projected cost reductions and market penetrations. Lithium is without a doubt the best technology where size and weight are critical and cost is secondary, like watch batteries or laptop computer batteries. For applications like cars, buses, trains, or electrical grid backup, wind power smoothing and backup, etc., where cost is critical and size/weight are secondary I sense that John favors existing low cost battery and flywheel technologies and emerging new lead acid technologies like those from Axion, CSIRO and Firefly. His is an informed approach and his arguments make sense. I am sure he can defend himself quite adequately, but as a reader I take issue with your comment which seems to question the integrity of his arguments. Of course he would like the market to prove him correct and make his stocks go up, but then don't we all.

Why Pure Play Energy Storage Companies Could Double for Investors

John,

I enjoy starting my Monday with a good read courtesy of your active mind and busy fingers. Upcoming earnings conference calls will allow opportunity to ask questions of company officials. Hoepfully we will learn more about specific company plans regarding the stimulus grants.

How to Determine Value of Alternative Energy Stocks

Hi John,

As I read your article I felt I was reading a well reasoned interesting article with caveats about investors using the information only to assist, not to determine, investment selection. I have enjoyed and learned from your articles and I understand your bias towards Axion which is not without merit.

Long ago I wrote a little saying, With people infinite patience is next to infinite wisdom. If it helps, keep that in mind when your get inflammatory criticism. I appreciate your thoughts as do most readers. Please keep it up.

Alternative Energy Storage Needs to Take Baby Steps Before It Can Run

John,

Happy holidays and best wishes to you for the new year. Another excellent article. Thank you.

Alternative Energy Storage: Cheap Will Beat Cool

John,

Nice article as usual. Your last article was the best I have seen you write and I appreciate the global overview it gave. You might mention in this and subsequent articles that the storage competitors are not all public companies.

I listened to John Granville on the recent conference call, as I am sure you did as well, and I was pleased to hear how up beat he sounded. I think things are happening nicely there. However, I believe it is still too soon to invest due to the large number of shares outstanding and the need to get a huge buildup in sales before the share value goes up appreciably.

Thanks again for your efforts and your articles.

Rising Tides in Alternative Energy Storage

John,

Do the folks at AXPW consider the new UltraBattery from Csiro in Australia to infringe upon their patents? It seems to be a similar concept with similar cost/benefit and uses but I do not know enough about the design to know if it infringes on the patents.

Alternative Energy Storage and Blood in the Streets

Paul,

Many thanks for the link and for your excellent insight. My fundamental analysis suggested a tough time getting enough income to justify a stock price much above the present level. The large block sales and sudden withdrawal of insider buying, together with the fundamentals, confirm that concern. And now the plan to increase shares. I will keep a link to Axion but will look elsewhere for investments for the next year or two and then revisit the stock. Best wishes to you in this market.

Alternative Energy Storage and Blood in the Streets

John,

I see that Axion has a proposal to increase the authorized shares from 50MM to 100MM at the upcoming annual meeting. Fully diluted the outstanding shares are currently at almost the full 50MM authorized.
This can only mean the company is either actively planning to issue more shares or at least have that option available should cash needs require it.

If another 50MM shares are issued, at whatever price, then the existing holders are diluted. The question is always whether the cash raised is enough to offset that dilution. Looking past that I am trying to see what that means to an investment in Axion stock.

If I wanted to buy Axion today at $1.50 and hopefully roughly triple my investment, a reasonable expectation for a speculative investment, then I would be hoping for earnings sufficient to, at some point in the future, support a $5 stock after the company starts really producing product and revenues. Assuming a conservative market price of about 10 times earnings then we need net earnings of about $0.50 per share to support a $5 stock. If there are potentially 100MM shares outstanding then we will need net earnings of about $50MM. To get $50MM net earnings with a 10% net margin on sales we need sales of $500MM. If our wholesale per unit price is $250 per battery then we need to sell 2M batteries per year or about 8,000 batteries per day. First, is there sufficient market to expect that many sales? But if so, can Axion build that many batteries or even that many PbC electrodes.

If I understand correctly the capacity limit of the current manufacturing facility is 3,000 per day. I suppose earnings can come from licensing agreements but my understanding of the companies objective is to make the PbC electrodes at their facility and ship them to others. Unless additional factories can be bought or built I do not see where there is enough physical capacity to get the sales to make the stock significantly higher than the current price. Where do you see the additional revenues developing? I am open to your explanation, just curious and cautious. I want to understand where the revenues will come from and how we get from here to there.

Thanks.

Alternative Energy Tax Credits for the Storage Sector

John,

Thank you for the additional info on Axion. I noticed at the Merriman Investors Conference they were using a significantly lower cost per KWH for PbC than on their website. That makes their technology seem much more competitive than the data on the website and helps me understand your optimism. I am also glad to learn their cash will carry them through mid-year. Thanks again for your insight. And though I am not expecting the new tax credits to have any measureable impact on overall demand, it helps a little and good news is hard to find in the stock market at the moment.

Energy Storage Opportunities vs. Irrational Expectations

John, I agree completely about the demand curve for lithium trending towards smaller vehicles, tools and devices where the the size and weight versus cost equation is different than that in cars, trucks, trains or non-motive applications where the size and weight are less critical and the cost for lithium becomes excessive versus acceptable alternatives. Also as demand grows for lithium end product so will demand rise for lithium raw materials which will add to cost and slow the cost reduction curve that is expected from new production and technology. Net net is that it may be a while before mass produced all electric cars are competitive with ICE.

On the other hand hybrid cars, trucks and trains are price competitive now and will continue to grow in use as is pointed out in comments above. A good lead acid alternative to lithium is attractive for these uses since the wieght difference may only be 50 or 60 pounds in a car while the price difference should (barring huge technological changes) be well worth the weight penalty. Apparently Axion and Firefly both think they have such lead acid alternatives coming soon.

But comparing only lithium and LAB ignores the other technologies out there including NiMH and others. Efforts are ongoing to reduce the cost and increase the performance of these technologies as well, of course, and the ultimate winners are not clear. What is typically true, as John points out here and in other posts, is that the winner is not always the best technology. First a rising tide lifts all boats and the near term increasing demand may make lots of winners in this field who do not necessarily have the "best" technology. Secondly a technology is one part of a big puzzle. Management is crucial, financing, good sales force, manufacturing capacity, etc. So the long-term winners will likely be more contingent upon the synergy and competence of the entire company rather than the specific technology. Short-term winners, most of the companies in the field. Long-term winners, well financed companies with good management and good production / sales teams. Warren Buffet likes to say he buys managment teams, not companies. For the long-term that is usually the way to go.

Opportunities in Energy Storage Stocks

Thank you for another excellent article. As relates to Axion, you mention a marketing focus on industrial replacement batteries. I would also expect a market niche particularly appropriate for a battery with long cycle life and fast recharge ability would be garbage and delivery trucks with regenerative breaking. These vehicles do not have weight or size critical requirements (removing two of the primary lithium advantages) and the cost advantage versus lithium lies with PbC. Traditional lead acid batteries do not have enough energy density or power and do not recharge fast enough and have shorter lives in this kind of harsh use environment. Even Firefly carbon foam does not have near the cycle life and do not re-charge nearly as easily as PbC.

Besides the industrial replacement market, where do you see the best opportunities for the PbC technology?