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Https://soundcloud.com/user-596578261/vsa-capital-technology-transitional-energy-120924?si=58f0ea8758ce458a8640e4cd873fd823&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing

I take your point and would be delighted if it is true but they said this,

"Activities at the Clink #1 well will pause for a period of circa one month whilst mobilising a rig to set intermediate casing over the Mowry shale at ~2,100 feet."

Will pause not were paused. My take is that they spent the time between 23rd Aug and 3rd Sept de-rigging the previous rig, setting up for wirelines/commencing and then assessing the issue with the Mowry shale when it became apparent. So I take 1 month to be from 3rd Sept.

But in all honesty, I don't care so long as a rig has been selected (big de-risker) and the process to re-enter Clink #1 is being worked towards. A few days here or there isn't key. I was merely pointing out that it could well be sooner than we all think.

The 3rd Sept RNS which communicated it.

The message is that all efforts are being made to beat this.

I would suggest this is the calm before the storm. The fact that a ring has been identified early means it should be purely about gathering the necessary equipment together. A few rough days in the markets and a smidgeon of silence and people get nervous but that should all change when the next update comes.

HEX is now 9 days into an indicated c. month-long period to re-enter Clink #1. However, the message from Bo that they could be drilling in 2-4 weeks indicates that they are very busy and keen to get the new rig mobilised. If communicated to the market it could be soon. All depends on how much equipment needs to be gathered. But one way or another this is definitely the calm before the storm.

@valuation-it-is I believe it is important to understand that Mistral is expected to launch at similar margins to the VS3 model but that does not mean it will come at the same cost. It was communicated to me that amongst other things Mistral strips out the repeat materials because the footprint is much smaller and the number of stacks per container much higher than the VS3. Add to this far fewer tanks, pumps and battery controllers.

I was also told that up until now deals with suppliers were about single module supply. These now need to be turned into bulk deals for multiple take offs. Why it hasn't been done already is anyone's guess but that is what I was told. That work has begun and they have up to c. 4 months to make progress prior to launch of Mistral.

But the key takeaway here is that Mistral is expected to launch at around breakeven/small positive margin but inevitably will cost much less than the VS3 at launch. hence the interest. The task at hand is to create the margin which I talked about i my earlier posts.

Hope that helps.

https://invinity.com/wp-content/uploads/2024/05/IES_Investor_Presentation_0424_WEB.pdf

Also, the following section is my thoughts on the cap and floor mechanism decision. Some cutting and pasting has moved it lower down than it should be. Worth copying and pasting these notes for those who wish to keep them and understand the flow properly.

"My note - Plus, long-duration storage requires technology outside of lithium which requires this support and said support isn't one way as higher electricity prices mean invinity projects would pay back into the system. This is purely about a floor to ensure FID can be reached on these projects."

Apologies under item 4 it should read

carry the business through until net cash generation in 2026 and not 'new' as written.

3/3

So right now it looks like Invinity has a great product in the making that will sell but they need to get to work on pulling down its cost and delivering positive gross margin per battery to eat into their admin costs. That work has already begun and the first results or plans associated with this will be communicated in the interim update in late Sept.

I trust that helps those who perhaps haven't been able to speak with the company themselves.

2/3

5. From a performance point of view Mistral has hit or bettered what has been asked of it at the product prototype stage. This is not about performance issues but improving the cost to produce it.

My note - Plus, long-duration storage requires technology outside of lithium which requires this support and said support isn't one way as higher electricity prices mean invinity projects would pay back into the system. This is purely about a floor to ensure FID can be reached on these projects.

6. US DOE projects and elections.

There is a risk associated with US projects if Trump wins re-election and re-writes the rule book on renewables support. The US DOE projects are unlikely to make headway until after the election because those in charge of releasing them are signalling we are too close to the election now for it to make sense.

My view - For me, these projects Invinity had in the pipeline made up the front-end sales pipeline planned for H1 2025 and are the reason why sales in 2025 will now be much lower. These projects offered grant-based support which allowed Invinity to sell Mistral at a higher price and still bank positive cash flows. They haven't gone away but nor are they as guaranteed as they were 6 months ago.

7. Everdura

The Everdura deal is based on Invinity supplying their IP to projects won by Everdura at near to cost value and then receiving a royalty on any sales Everdura makes. Everdura production on all other elements is fully independent of Invinity and so not affected by current Invinity build cost improvement works. So they are free to sell the product to as many customers as they wish once launch is completed. The previously announced 14.4MWh project with Everdua will form part of the pilot projects that are closed when Mistral launches later this year.

Conclusions (My thoughts only)

Delays to projects associated with regulatory approvals look to be the biggest influence here. Both cap and floor and the US DOE projects carry political risks. Be it the UK issue is believed to be coming to an end shortly. It landing changes the landscape significantly here.

In the US a Harris win delivers the same effect.

The pipeline remains very strong compared to what Invinity needs to breakeven (previously thought to be c. 300MWh) but the messaging around cost savings on Mistral at launch vs the reality was wrong.

There are several markets outside of the UK and US which lower the risk on H2 2025 and beyond volumes being achieved (note 1x 100MWh/200MWh projects changes Invinity's outlook completely) but the deals still have to be closed out as they would with any business of this type. Invinity sounded confident they would be because the performance of the battery so far has been at or above specifications. Meaning that its market disruptive advantages remain in place so interest in the battery is strong and will continue to grow post-commercial launch.

1/3

Morning all,

I spoke with Invinity yesterday and as promised I will publish some notes here on what I found out.

Where my opinion is included I will clearly state this otherwise I am quoting (not in the exact words because taking word-for-word notes was difficult) what I was told.

1. When Mistral is launched later this year it is expected to have a similar starting cost to the VS3 model which is currently being sold at breakeven/small positive margins. The intention then is to improve this margin as they move through 2025 with improvements expected in H1 2025 before H2 2025 where industry-standard margins are expected to be reached even before the savings that would come from larger volume throughput.

2. The June project pipeline remains intact but decisions on projects in the UK and the US have been slowed due to the reasons given in the trading update (Cap and floor and US elections). However, the strength of the pipeline overall is giving the team the confidence that they can increase volumes from H2 2025.

Also, the £18m of infrastructure bank finance is available for UK projects in general and not just cap and floor. Industrial projects sit outside the cap and floor mechanism scope and so can closed without its conclusion. However, Invinity would prefer to employ the cash for cap and floor projects but they do have optionality there.

Furthermore, Invinity is focusing on other key markets which do not have the same regulatory hold-ups. Australia is one big one with very large projects there to be won and I was told this is a core market alongside the UK and the US. The EU was also mentioned with a particular interest in Eastern Europe where Invinity has already done some smaller scale business and is now looking to scale this up.

Up until now, I had taken it that Invinity had two core markets but it was made clear there are 3. In terms of Asia Everdura will be focusing on Taiwan and surrounding countries in their region. They do not have exclusivity. So projects in other Asian nations and Australia are very much there for Invinity to secure.

3. IES believe the decision on Cap and Floor is imminent which has the ability to open up a considerable amount of work for the company. The exact details of what will be included won't be known until it is published but lithium is still expected to be excluded. The view is this is a civil service and so rules led decision as opposed to political. It was also stressed to me that the Labour Scottish cabinet Secretary visited Invinity in Scotland recently. GB Energy will be based there and there is a desire in the new government to drive homegrown green transition businesses and avoid the use of Chinese imports.

4. The cash on hand is still expected to carry the business through until new cash generation in 2026 so long as the plan around volume uplift in H2 2025 + cost reductions on production comes through. The same message was communicated in May's fundraise.

Worth noting that said $50/MWh is not the level required to make a profit on their batteries but the ultimate goal for Invinity Mistral batteries to replace gas-fired plants.

The fact he is still talking up the very bets position says to me that achieving gross profit margins on Mistral isn't as big a task as some would want us to believe.

I have a call with Invinity today and will report back on what I learn.

Thank you for sharing. Worth noting that article is from 10th Sept so very recent indeed.

"that means you have to have a battery that can absorb that energy and then dispatch it back to the grid at $50 a megawatt hour or less. That’s the number that we are absolutely focused on. And we think we can get there.”

This ties in with the messaging I have been hearing from the company. That Mistral is a process that has only just reached pilot stage and so time is needed to get the costs to where they know they can be. If they achieve it they will have the best battery on the market bar none and the IP valuation of that will be very large indeed and that is what I am staying invested for.

Listening to that interview (thank you for sharing by the way) one realises just how undervalued this business is.

3.5 years line life with the indication that they can double it through the current drilling programme + satellite add ons.

That alone is enough to re-rate this stock but then we have Douta which is turning into a massive project that currently carries limited value but that THX says can be built without further dilution.

More detail on what I talked about earlier today with extracts from IES information as supportive information.

I have started adding a few more shares at 11p because I think this is a big misread compounded by fear and a very poor market liquidity wise.

https://x.com/BigBiteNow/status/1833456509016998018

The company had no product that was profitable in May when they raised £57m at 23p a share and told the market they wouldn't be net cash generation for another 2 years.

However, they told the market that they would reach that point based on £50m of strategic and subscription funding.

So when they raised £57m what they did was create nearly 6 months of slack at today's cash burn which is why they still have near as damn it the full £50m at 30th June.

But now suddenly cash burn matters and the stock isn't worth half its raise price? Are you sure about that?

I have had initial interactions with Invinity's in-house investor relations and the messaging there is that this is about allowing time to complete supply chain development and product processes to complete and it is about H1 2025 only.

I am sure I am not the only one who has been talking to them because I was told they have been very busy. I think once this reality starts to spread then a +50% discount to an oversubscribed fundraise that was completed just 3 months ago will be seen for what it is.

Are you sure you are on the right side of this bet?

Interesting to see in the VSA note today that they expect Invinity YE 25 cash to still be at around £26m. This is based on average revenues for FY24 of just £24.5m but £7.5m of this is expected to be a pure grant funding cash injection from LODES. They have the ear of the management team having arranged the May funding. So it is interesting that they have applied this spilt on LODES and their overall numbers are worth noting.

They also state that "IES reported June 30th end cash of £49.0m which remains sufficient to support production ramp up and a move to profit in FY 2026."

Additionally, " It could also win new orders ahead for shipment in FY 2025" which was a point I have made that got lost in all the noise.

Lastly,

"Whilst the trading update was disappointing, we believe the fall was an over reaction and highlight that IES is a technology company with IP and strategic partnerships in a structural growth market. All of these positive factors are now not reflected in the valuation."

Https://x.com/MetalsCapital/status/1833045172923289753

Ties in with,

"Stuart is well connected with the relevant service and equipment providers that we will be working with to develop, and vendor finance, our staged approach to the Project, with a view to getting it self-funding as quickly as possible."

I will be clear here. Investors have every right to sell if they feel the risk here is too high and I certainly wouldn't encourage new buyers who would be well within their right to (at the very least) wait for the interim update. I just don't like people praying on the more vulnerable investors and am happy to debate that here for the foreseeable if it helps.

There is a good chance they announce some positive news around cost improvements in the interim because the new CEO will want to demonstrate he is turning things around. They may also announce LODES which should guarantee up to £22m in contracts at what should be positive gross margins because it is supportive grant finance.

"Invinity's commercial team is focused on concluding the LODES project and is in advanced tripartite discussions with a major international renewable energy project developer and the Department for Energy Security and Net Zero ("DESNZ") to finalise that project's structure and conclude contracts."

Lastly,

"By maintaining strict capital discipline and a focus on targeted sales in 2025 as referenced above, the Company believes it will enter 2026 in a position to deliver Mistral at industry standard margins and an ever-growing production rate, together sufficient to achieve EBITDA breakeven and set the Company on a sustainable future."

My reading of that is that they are aiming to make existing funds last them until EBITDA breakeven but we will learn more in a couple of weeks.

Mistral product development is not about hope but a manufacturing process and at the pilot stage they have noted elements that need improving on the cost side of things. But they have a product other wise it would not be launching commercially by the end of the year along with pilot projects. That is a fact.

We have had no information as to how far away they are on costs so speculating that their equipment is too expensive to make at this stage is just scaremongering or at best a lack of understanding of the business.

What we do know is that they feel it will take around 9 months to correct because that is when they intend upping production which they wouldn't do without better costings. One other important consideration here is that battery contracts have to be signed well in advance of production so they will have to be more cautious than perhaps the timelines for cost reductions need. Meaning there is chance that they may hit their target sooner.

We will find out more at the end of this month. In the meantime, you can if you wish continue with your efforts to separate investors from their holdings so you can make a few pence. But I can certainly see through your inflammatory nonsense.