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Axion Power Concentrator 36: Beginning Dec. 21, 2011, Futurist's Article

Today we bring a terrific article written by Futurist. Please note that there are some font and margin issues that did not translate perfectly from Futurist's document file, probably due to some quirk in Seeking Alpha's software. This non-computer geek tried unsuccessfully to fix the minor problem.  


                               
                                Axion Power International

 

                         Production Capability Analysis

                                    December 21, 2012

                                          by Futurist

                                        an Axionista

 

The PbC battery. What is it?

Axion Power produces negative electrodes made from finely ground carbon material that are placed in an Absorbed Glass Matt battery (NYSE:AGM). Its a simple procedure. Instead of the normal lead-based negative electrode being placed in the battery, the manufactures put in the Axion carbon negative electrode. A very simple process. The resulting product is far from simple. An AGM battery turns into a asymmetrical battery capacitor.

What does that mean? Well, it means that the new carbon based lead acid battery (PbC) now lasts 5 to 10 times longer than other lead acid technology; it accepts a charge quicker, deploys it faster, and overall, it only costs twice as much. A perfect battery for heavy charging and discharging over a long life at a small cost.

This PbC battery is patent protected. Who wants it?

Norfolk Southern railroad wants it for use in and all electric rail yard slug. Instead of having a diesel engine slug idling 80% of the day and doing a few trips around the yard, they would rather see the little electric slug chug along when needed, and not spewing the venomous exhaust of a diesel engine in the air when it isn't working.

Norfolk Southern railway was so enamored by the PbC that they have engineered a hybrid locomotive long haul engine. This engine sits between a couple of diesel engines. When the train goes downhill the PbC batteries on the hybrid engine accept the regenerative braking of the train. The batteries then help power the train uphill, resulting in diesel engine fuel savings. The entire concept is explained in detail on the Norfolk Southern website in their report on the future of Norfolk Southern Railroad.

BMW wants it. The white paper study (found on Axion's website under INvestor Relations) is a scientific study showing how the PbC battery outperforms the ordinary AGM battery in a idle elimination stop/start environment. The differences are enormous. Instead of a battery starting to fail after a few months, as with an AGM battery, the PbC simply keeps working for 5 years or more.

Any company (plants, universities, military bases, data centers) with a large energy back-up system could use this product. Look at data centers for example. Their need for back-up storage is great. But what if the back-up storage device could put a little energy back into the grid when the grid needs it? Would that be cool? What if the grid would pay you to do that? Wouldn't that be neat? Of course. And that is what Axion, Viridity, and PJM have developed. A PowerCube of PbC batteries that make money for the owner while doing its boring storage job. Pretty neat stuff.

One Giant market for any energy storage device is the utility companies. This market is expected to be a 200 Billion dollar market in the next decade. If the ability of the PbC can match the needs of the utilities as far as performance and price, then Axion won't be a micro-cap any longer. However, the bulk of that market is destined for less expensive solutions. Different, cheaper kinds of battery solutions than the PbC. It is always nice to keep in mind however, that even a tiny bit of a 200 billion dollar market can be something valuable to a company like Axion.

 

So how many of these devices can Axion produce? Good question

As I understand it, the Axion negative electrode line can make about 300 battery units of negative electrodes--it takes about 30 electrodes for one PbC battery-- every day if they ran 3 shifts per day, right now. But right now they only have one modern carbon negative line. It is called the gen 2 line. There is the older Gen 1 line in existence but it doesn't produce many units per day. The next line will be labeled the Gen2a or the Gen3 line. We would expect some improvements in productivity or quality control over any new line. The new lines should be able to be ordered and installed in 4 months time. That is fast, but a slower time frame than what has been reported by the company. So far production equipment time lines have never exceeded estimates. No reason to not be conservative with these figures.

If the negative electrodes can be produced at 300 units per day that equals 75,000 PbCs per year.

The Axion battery plant currently can produce 250,000 AGM batteries (or PbCs) per year. They can also produce another 500,000 regular flooded batteries per year. This production schedule presumes three shifts but does not account for working weekends or holidays.

What then is in store for little Axion Power in 2012? A small micro cap business with a big product. Plenty.

A railroad yard slug engine takes about 1,000 PbCs to operate. A Long Haul railway engine takes about 1,600 PbCs to operate. A 1 MW PowerCube takes about 1,000 PbCs to operate. An automobile takes 1 PbC to operate a stop/start system.

Conservatively, Norfolk Southern will retrofit 10 engines in 2012. I pick this number because there are thousands of rail yard slugs and thousands of over the road locomotives. Making ten test engines is a small number. The need to test in different climates in different rail yards or over different terrain will cause the number to be more than one. Assuming 100s of engines are overhauled each year, I would expect ten to be a minimum conversion number. I won't be surprised to see a larger number since both locomotives should have a quick payback and return to the railway company. As an added benefit the carbon footprint of the railroad goes down with each engine ordered.

Conservatively, 10 PowerCubes will be purchased and installed for testing and real time use.

There are thousands of data centers in this country that operate huge power backup systems. Most are lead acid. Many are now using AGMs. These batteries must be replaced every few years. This is an avoidable expense with the PbC.

A PbC will last 4-5 times longer and only cost twice as much as an AGM. Plus the PbC will payback the owner for the power the system gives back to the grid when the grid calls for it. To suggest that only ten 1MW systems or twenty 500KWh systems will be sold this year is quite conservative.

If 1/5th of all lead systems have to replace their batteries this year anyway, then finding ten buyers out of thousands availiable should pose little problems. Especially when PJM, and its offshoot Viridity Energy, are able to steer their clients base to Axion's new marketing arm, Rosewater Energy. A pretty simple process.

It is hard to believe that only OEM testing (as opposed to actual product sales) will continue in 2012 for automotive, but lets say that is so. At least 5,000 PbCs will need to be purchased for just that testing market. Reports so far have BMW, GM, and "multiple OEMs testing the PbC." Ford worked with BMW on the European stop/start testing protocol. Speculation is that this relationship has Ford testing the PbC as well as BMW. This speculation has never been confirmed.

The GM program is for a mild hybrid application. A very significant market, if the PbC works in that application. It takes a lot more PbCs in a mild hybrid application than a single battery for start/start applications. Suggesting that selling 5,000 PbC batteries this year for fleet testing by the OEMs, is not overly ambitious.

Therefore, I anticipate 25,000 PbCs to be manufactured and delivered in 2012. At $250 apiece that would mean a gross revenue from PbC alone of $6,250,000. A three fold increase with no large volume order in place.

A large volume order can come at any time by any of the three companies mentioned above.

 

Can any other field use the PbC?

Other uses for the PbC come up all the time. It is a good device for storing the electricity generated from wind or solar. It can absorb these charges, kick them out to the grid or other places, and then accept more charges time after time. For a price only twice that of an AGM battery, a company can get a product that lasts 5 times longer. It would seem that many companies in the renewable energy field might be testing or ordering the PbCs in the very near future.

Another Axion partner is Envision Solar who is testing using the PbC as a solar powered car charging unit. Although a niche market, who knows where the relationship will lead.

Oil well rigs use smog creating diesel generators for power. For three years Axion has been talking about this niche industry using the PbC. Rosewater Energy has gone so far as to partner with an Arab company for marketing this product to the Arab oil producers in that area.

Axion can fill those orders

Even with the projections made above Axion can produce an additional 50,000 PbCs in the existing plant without spending one dime in additional plant capacity. That would be an additional $12,500,000 in gross revenue.

I realize that Axion is stating that it will soon need a cash infusion by March 2012. This is very true. Axion would need an order for the PbC battery that would equal at least 40,000 PbCs per quarter to be truly profitable. One can see how this market, and much more is obtainable. But it isn't obtainable now without a significant PowerCube order (100-200 PowerCubes), 100 railroad engines, or a 100,000 unit OEM automotive order. But Axion does not need to raise any additional funds for plant expansion unless it has a very large order it cannot fulfill. And that would be a very large order. Axion could add 9 more Gen 3 lines to its present facility within a 4 month time frame (albeit at a cost of 20 Million or so). That would bring production capability for the negative electrodes somewhere in the 750,000 battery unit per year area or more.

The revamping of the current flooded lead acid battery lines into AGM lines will allow Axion to make about 750,000 PbCs per year, in house. Those kind of numbers will not be happening in 2012 . But with another year of testing in new fields and if the current testing proves the value of the product, then large numbers can be projected for 2013.

Overall my projections are rosy but, I hope, not so unrealistic as to be disingenuous. The point of this article is to prove that production capacity far outweighs demand at Axion today. Capital expenditures should be low for awhile. If the Board of directors does authorize a major expenditure in capital spending you should see that as a reason to buy Axion Stock. Because the need for more negative electrode production is only due to a large order coming in. And that my friends is an opening of the floodgates for Axion. A step into the big time arena and a chance to be a truly disruptive technology in the 21st century.


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On behalf of the Axion Concentrator, I greatly appreciate the time and energy Futurist put into this wonderful article.