RED.L Regulatory News (RED)

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redT energy plc

("redT" or the "Company")

Operational Update

redT energy plc (AIM:RED), the energy storage technology company, is pleased to provide an update on the Company's operations in the first half of FY17.

Market Update

Customer interest in storage continues to grow across grid connected markets. In particular, the UK energy storage market has reached an economic tipping point earlier than originally expected. UK energy storage applications are now achieving attractive project investment IRRs with payback periods below 10 years, which is a strong proposition for energy infrastructure projects. Furthermore, we see increasingly significant interest for energy storage in Australia, based on highly attractive investment returns. This has resulted in the recent announcement of a number of large, grid connected energy storage projects. In addition to the above, the sub-Saharan African diesel coupled with storage market continues to achieve highly attractive payback periods as a result of the focus on reducing diesel consumption.

Penetration of the UK market has been limited until now to small scale domestic energy storage, short term (circa 30min discharge) large scale lithium projects and a number of large pumped hydro projects. Take up of new technologies outside of these narrow applications has initially been more cautious than expected due to customers not understanding the difference between "Power" and "Energy". redT has focused heavily on re-education of the market during 2017, and has successfully communicated the functional and long term benefits of energy storage over short-term power-focused battery storage to more experienced participants. This has been well received, as key market participants are now experiencing the limitations of short term battery storage, such as the inability to utilise it for multiple services and the need to manage its usage and other elements, such as temperature, very carefully. Energy storage machines address these issues and, as a result, the Company's customer pipeline has increased as the market actively considers energy over power storage solutions.

Commercial Update and Outlook

Commercial highlights include:

· Shipping our first large size 15kW-75KWh unit to the Thaba Eco Lodge site, which is currently in transit to South Africa - a key project which will demonstrate the value of the systems in off-grid & microgrid applications

· Successful commissioning of the 5kW-20kWh machine situated at the University of Strathclyde in the UK

· Deployment and commissioning process continues on schedule for;

o The Olde House project, in partnership with Centrica and the largest energy storage to be installed in Cornwall to date. This project will act as a flagship demonstration site for redT's UK customers.

o The RNLI project, a key installation working alongside one of the UK's best known charities

· Production in line with customer schedule of 10kW-75kWh and 5kW-30kWh machines

· Production of a 60kW-300kWh commercial unit for a key UK agricultural application which will demonstrate commercial revenue generation from providing UK grid services

The market for durable, long-duration energy storage is developing stronger than expected, as focus shifts towards energy-centric technologies such as flow machines. Most notably, the UK market, considered one of the most challenging for storage, has reached an economic tipping point earlier than originally anticipated. Alongside this, the Australian market has also observed a rapid expansion in interest as the requirement for storage increases in response to the recent boom in renewable generation. redT is looking to capitalise on these positive developments by focussing on volume sales within the UK and an entry into the Australian market later this year.

Mid-term, the wider market is looking stronger than expected for redT, which is reflected in the Company's growing final stage of customer selection and pipeline numbers. In the short-term, conversion of redT sales to orders has been slower than expectated due to the market's lack of differentiation between energy versus power solutions, delays in recruitment and manufacturing as explained below. However, the Company is focused on developing its order book for 2018 and its Generation 3 product. Group EBITDA for 2017 remains in line with expectations, with lower redT sales balanced by the continuing strong performance of the legacy Camco business.

redT continues to see customer interest grow in its second generation product and is excited to shortly showcase its flagship 1MWh Cornwall project to interested customers and investors. This project, conducted in partnership with Centrica, will be critical in demonstrating the clear benefit of energy storage to generate UK grid services revenue and utilisation of renewable generation for customers.

redT currently has 2.25 MWh of machines either deployed in the field, in transit to customer sites, or currently in production. redT's commercial pipeline by this stage of development is; Production and Deployment - 15 x tank unit modules*, 2017 Orders - 6 x tank unit modules*, Final stage of customer selection - €15.9m (265 x tank unit modules*) and active customer pipeline - €314m.

Since the fundraise at the end of 2016, the Company has grown substantially by investing in its operations and is now positioned as the front runner within the flow machine market as a result. Overall, redT remains focussed on delivering its business plan and providing long term value to its shareholders.

*redT tank unit module = the size of redT's liquid energy storage machines differ from large 20ft containers to small 6ft containers. In order to provide relative comparability across redT's product range, a uniform tank unit module metric is used. For example; a 20ft, 300 kWh system contains four 75kWh tank modules whereas a small 20kWh unit contains just one tank module.

Investment in Operations

The Company is pleased to report that it has filled almost all key roles set out in its business plan. redT's overall headcount is up by 70% with the expansion taking place across the key commercial, engineering, implementation and customer service teams. The investment in a highly skilled team is critical to the delivery of redT's business plan. Some functions were recruited in a timely manner in accordance with the plan, whilst other functions such as software and application engineering have taken longer than expected. The industry is facing a shortage of software engineers and programmers who have the requisite knowledge and experience to work with unique energy storage technology such as redT's. This is an industry wide, rather than redT specific, challenge, with redT having now secured key staff within these functions. In parallel to core team roles, the Company is in the final stages of recruiting a Technology Director to lead the engineering function. This appointment will serve as a catalyst for the delivery of the Company's intensive engineering and software development plan over the next 2 to 5 years.

Of particular note during the period was the hiring of David Stewart as Commercial Director. David joined redT from Jabil Circuit Inc. and, given his deep and highly relevant commercial and engineering experience, is already playing a key role in the strategic growth of the business. David has also been a strong addition to the executive leadership team, alongside Scott Laird (Finance Director), with both joining the Board in April 2017.

Further, redT is pleased to announce it has commenced development of its third generation stack and electrolyte, which are key to achieving increased product performance and price targets for its third generation product to be launched in 2018.

Manufacturing and Engineering update

During the year, the Company has successfully diversified its production facilities, reducing manufacturing process risk and creating flexibility within redT's supply chain. New product and low volume manufacturing has been moved to Heights (UK) Limited in Yorkshire under a new manufacturing contract, increasing the Company's responsiveness to rapid product development and customer order flow. Alongside this, redT's relationship with its key partner, Jabil Circuit Inc., has been restructured to the overall benefit of redT to provide more flexibility whilst retaining key strategic benefits of low cost volume manufacturing and global manufacturing capacity for large orders.

The closure of Jabil's Livingston plant has moved redT stack manufacturing to Jabil's Marcianise facility in Southern Italy. This move has benefited the Company commercially through a reduction in production costs at the new site. The expedited nature of the Jabil Livingston plant closure has had a short term impact on timelines and resourcing, however, the move will benefit redT in the medium to longer term.

In line with its growth strategy, redT is expanding its primary operational & engineering base at its own Livingston facility. In addition, the Research and Development facility at Wokingham, is also being expanded to create additional space for validation, R&D and materials testing. The Wokingham site will also house a dedicated customer demonstration and training area.

Scott McGregor, CEO, commented:

"redT, through its determined and patient approach to developing its business, now finds itself positioned at the forefront of the flow energy storage machine sector. Experienced customers now understand the benefits of energy technologies such as redT's flow machine over short-lived power-focussed batteries. As a Company, we are well placed to capitalise as the rest of the market begins to fully understand how to utilise energy storage.

The Company is focusing on delivering its key projects this year which include installation of the largest energy storage project in Cornwall, pursuing short term orders and building its orderbook for 2018.

Finally, I would like to personally thank our staff for their extraordinary efforts and focused work so far this year, growing the company at such a rapid pace, and our shareholders who continue to support and work with us to deliver this important technology to such an exciting market."

Enquiries:

Notes to Editors

About redT energy

redT energy develops and supplies durable and robust energy storage machines based on proprietary vanadium redox flow technology for on and off-grid applications. The liquid storage medium affords an exceptionally long life of up to 25,000 full charge/discharge cycles and a 100 per cent usable depth of discharge. Combined with low maintenance requirements, this delivers industry leading lowest levelised cost of storage (LCOS) and total cost of ownership (TCO) results. The modular approach allows the power and energy components of systems to be independently sized to meet customer requirements.

Until now it has not been possible to directly compare variable renewable energy generation sources with diesel or fossil fuel generation. PV + Storage is now reaching 'grid parity' in many countries, a paradigm shift in energy production, which will ultimately enable a distributed energy network optimising conventional and renewable generation. The redT energy storage machine has applications in remote power, smart grids, power quality, and all aspects of renewable energy management.

To find out more about redT products or to register your interest in purchasing an energy storage machine please go to the below web address:

http://www.redtenergy.com/register-interest

For sales enquiries, please email enquiries@redtenergy.com or call +44 (0) 207 061 6233