The latest Investing Matters Podcast episode with London Stock Exchange Group's Chris Mayo has just been released. Listen here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
(1 of 2)
Good morning all,
Well where do we begin?
With the potential purchase of Cellcube, I just wonder if Bushveld Energy and their partners, have just found the product and company that will form the basis for their South African based VRFB assembly and production.
Up until yesterday i was fairly convinced that it was merely a matter of time until UET sign up to a partnership of this sort, but the fact that we are talking a buyout of Cellcube's Enerox GmbH, has certainly stopped me in my tracks.
Enclosed below is a copy of Cellcube's March 2019 presentation. It is well worth a thorough review but I am particularly fond of slide 17, where the LCOE for the Cellcube FB250 series (one of those 4th Generation units I talked about yesterday), is offered up against the likes of Tesla, Lgchem, and most importantly, BYD.
It is BYD whose lithium-ion battery is currently installed at Eskom Rosherville. The LCOE calculation is always more complicated that it appears, but according to that slide, under the right circumstances, the FB series can be upto 40% cheaper than that of BYD.
That is before we start talking about vanadium rental, or indeed localised supply of beneficiated vanadium.
So in theory (and we do have a lot of wriggle room, particularly when I think that BYD are not S.A. based), a Cellcube offering for the Eskom BESS Project, should wipe the floor with BYD, and BYD are the only potential tenderer, who has a credible battery installed at Eskom.
There is of course the question of the UET battery at Eskom, but as Vsun have begun to demonstrate, a confidence can be built up in a VRFB supplier, even when they decide to employ an alternative battery supplier. This is particularly true when one considers that it is Enerox GmbH that has the 140 installations and 12 year track record. It is they that own the Generation 4 series, which is plugged as being "the most advanced (“VRFB”) on the market today as stated by independent industry experts."
I do not easily discard the merits or potential of a UET tie up but with their strong connections to Rongke Power and Balong New Materials (all effectively owned by Dalian Bolong Holding Group), they are potentially a more tricky partner with which to strike a favourable deal.
With the buyout of Enerox, if nothing else, BMN and potentially their partners, have another option. Opening a S.A. based subsidiary of Enerox, when you already control the company, is a lot easier to plan towards.
https://static1.squarespace.com/static/5b1198ada2772c6585959926/t/5c9cd83ff9619a021c2de4c4/1553782876741/CellCube+Investor+Presentation+-+2019+March+26+%281%29.pdf
(2 of 2)
That doesn't automatically place the IDC of S.A. as a partner in this buyout. Whilst they have some foreign investment interest, it tends to in neighbouring African countries. However, a subsidiary of Enerox could very easily set itself up as a partnership with the IDC. That would then satisfy all current communicated plans, and deliver BMN and their shareholders an local, active VRFB assembler and later manufacturer, that is automatically part owned (significant minority interest), that automatically takes its vanadium from BMN (1).
(1) Fm in the RNS says that "Bushveld will have the right to match commercial terms for the provision of vanadium products."
If Enerox is building VRFBs in S.A, then I cannot see how BMN could not match any one else's commercial terms, particularly if those batteries are destined for Eskom.
I am not writing off UET and I am absolutely sure that UET, still needs BMN more than BMN needs it. If that weren't the case then we would be seeing a far more active project pipeline from them. If that were so, then where is their rental product? Where are the projects?
For all their perceived Chinese backed might, they do not appear to be succeeding, and now 3 of their competitors just signed up with the largest high grade vanadium resource company in the world, owner of 2 of the world's primary processors, owner of an active vanadium rental contract, and the driver of lower cost VRFB inputs.
So if nothing else, UET Technologies just had a good number of their bargaining chips (if they truly had any in the first place), removed from the table, such that once again, if a deal is still to be done in S.A. then the power at the table, is BMN.
The Enerox transaction may complete post the Eskom BESS Project going to tender, but for me the message is clear ;
"An initial sale and purchase agreement (the "Initial SPA"), to be signed as soon as reasonably practicable after the signing of the term sheet, whereby the Bushveld Consortium would for a sum of €1.65 million (including the €300,000 referred to above) purchase 24.90 per cent of the share capital of Enerox (the "Initial Shares"), including shareholder capital contributions of €1.2 million for working capital purposes over the course of the coming four months."
This initial investment will be before the "technical, legal and financial due diligence" required for the actual sales and purchase agreement, which is a tad risky but it provides the necessary support for Enerox and their active contracts, for the 4 months leading up to the full buyout.
So if Enerox want to tender for the Eskom BESS Project, they can. If they want to employ the BMN rental product, they likely can, be it that the "as soon as reasonably practicable" could do with getting a bit of a move on.
All of that said, the Eskom project is just one project, it is not binary. It is merely a very nice to have, which I am sure BMN are all over. The question is are Enerox now too.
BBN - interestingly slide 11 of that presentation also shows a pipeline of more than 6 GWh storage - that's around 30,000 tonnes worth in VRFBs
BBN 'the right to match commercial terms' is almost reverse psychology in my opinion.
Bushveld may be able to supply vanadium products at x price given its involvement at all levels, but a different supplier may have to charge x+y where y is additional costs whether it be processing, procurement etc.
Bushveld match this x+y cost, so never undersell themselves and are seen as being competitive and fair.
Masterstroke
@Alfacomp Yes I did see that and it is most impressive, given that BMN support (rental contract, guaranteed prices etc) can certainly improve their conversion rates on that work. However, right now, just like with Redt, its a pipeline list, which needs more development.
I am just as happy to recognise actual contract wins and what they do for the relationship moving forward. In June 2019 Cellcube (Enerox) issued the following contract win ;
https://www.cellcubeenergystorage.com/cube-press-release-6132019
Its a confirmed $6m contract with Immersa, for delivery over the coming 24 months, so its very much alive.
The update came with the following rather interesting quote fromthe CEO & Director of Immersa Ltd. Robert Miles ;
“the combination of a best-in-class performance product at predictable price and delivery terms is key for our finance partners and customers. This allows Immersa not only to offer services at an attractive price but to deliver on multiple projects at the same time. The goal for many of our clients is to replace conventional generation and cover grid shortfalls with green energy thereby reducing CO2 emissions significantly and as soon as possible.”
This is pre-BMN input, pre a potential vanadium rental agreement or indeed guaranteed supply at guaranteed prices. So just imagine what that sort of security can add to the arsenal of a Enerox sales team, that is already able to secure a $6m contract without it.
Incidentally, and as an example, a circa 20% return on that project would deliver the BMN consortium around 10% of its total investment back, on just one project.
What I really like about this deal, is not just the energy storage ownership but the access these purchases give BMN/BE to the customers and contacts, that these companies have built up. Leads that were perhaps previously borderline, in terms of what Enerox, Redt, Avalon, could offer, given a little time, and it will take time, can be transformed by an injection of BMN willing, which will create a WIN/WIN scenario, across the board.
BMN talk about supporting the fledgling VRFB industry, but in one fell swoop, BMN just signed up 3 of the world's leading VRFB companies, to their vanadium, and their vanadium only, if it so suits.
So yes they are supporting that industry, but in reality, they are looking to dominate it.
What that means for the Bushveld vanadium resources, is simply unimaginable at this juncture.
BBN.. I think the up front money for Enerox is to support BMN own installation and possibly allow them to get other orders on their books out through the door... Goodwill to existing customer base.
Re Eskom there is potentially room for more than one battery supplier. UET for grid and Enerox for PV or visa versa. The key being tailor made installations.
I agree Enerox is probably best candidate for assembly and/or manufacturing in Africa. We have been told such an operation would be oned by the manufacturer... Ha ha what they didn't tell us was that we would be an owner.
I also think the Enerox/PV installation will be promoted to other mining/producers in SA...I suspect this was the 'our competitors' reference. Miners not V producers.
Well well, posted a couple weeks ago about Enerox subsidiary for sale and would BMN be interested in buying. They certainly are!!
I think it's almost a given (assuming deal all goes through) that a facility for Enerox will be established in SA, ultimately assembly and manufacturing. I had this in mind, but now knowing that Bushveld consortium will own it...its a no brainer. This will become BE flagship VRFB in SA imo. The cost savings benefits to BMN/BE and subsequent drivers for Sales across the free trading countries of Africa will be incredibly compelling. There will be no cost competion for VRFB there for them. Simply brilliant strategy yet again. Cornering a significant chunk of the market. The BE juggernaut is rolling now and it wont be long before its unstoppable.
@Bella6532 I would think the upfront money is to support the business full stop and ensure that all project pipelines are maintained, such that the company the least possible disruption during the transfer of ownership.
What that should do is allow the Enerox employees the confidence to continue with their business, as usual.
I think the key point about the Eskom BESS project, is that given it is a battery project, there will be several VRFB companies vying for its work. With deals now struck with 3 leading VRFB companies, BMN are positioned to play a part at a number of different levels. Not my words, Mikhail Nikomarov's words from the Energy Storage 101 webinar.
Now we can see where they are heading, we know what that many different levels means. It could be that Avalon, Redt, and Enerox all tender. If they win, then BMN can if it wants to, supply the vanadium into that contract.
The beauty is that now those 3 companies are in BMN's court, they have a renewed sense of purpose to tender for S.A. based projects, because that is where the vanadium is potentially at its most cost effective, be it that the electroyte plant is not yet built.
So if nothing else, that should force them to the tendering table. Any other VRFB company out there, has got to beat all 3 of those companies on price, local content, etc, to win those contracts. A tough task even in a low vanadium price environment, which is not a given when the batteries actually get built and deployed. However, for at least one of those 3 companies, it likely will be, in some shape of form.
Lets nor forget, that the battery tender is due any time soon, but the actual vanadium won't be needed until later next year, at best. At that point BMN will be a shareholder or part owner of those companies, so the deal can be done on the vanadium, if it gets that S.A. based project over the line, and Eskom in the bag.
That all said, the Eskom project is for me a must have for BE as a developer. Therefore, the deal perhaps will be done on the batteries themselves, as you say, and so could be across several manufacturers. That in itself could land all 3 manufacturers a lot of work, and also help deliver phase 1 faster for Eskom, given their tight deadlines.
What is clear from all of these thoughts is that the possibilities are numerous, and that one way or another, a BMN involved BESS tender, will highly likely, one way or another, be the best VRFB option on the table, such that it may well be about their option vs Lithium only.
I'll take that as a 1 on 1 contest, no problem at all.
PS Well done to you for pinning down that Cellcube move. I assure you my viewpoint was not plagiarized.
BBN... Again many thanks for your extremely detailed and most valuable input...it's simply about the exchanging of good info, research and thoughts on here which hopefully helps us all get a better insight and understanding of what the future may hold and how that might impact on our investments. Teamwork...