Altech Batteries [ASX: ATC]
Materials
CERENERGY® Battery DFS reveals robust results
Altech Batteries Ltd (ASX: ATC) completed a Definitive Feasibility Study (DFS) for the CERENERGY® Batteries Project in March 2024 to construct an initial 120MWh CERENERGY® Grid Packs production line in the state of Saxony, Germany. The DFS demonstrates robust project economics, with a pre-tax Net Present Value (NPV9) of €169m and an estimated Capex of €156m. Following an estimated 3-year ramping-up period, the plant is designed to produce 120 of Altech’s 1MWh Grid Packs, specifically designed to address the burgeoning grid storage market. Altech has finalised the plant’s process design and has engaged Specialised German companies to carry out each step of the CERENERGY® Grid Packs production process.
CERENERGY® battery plant’s funding and permitting processes started
Given the attractive opportunity in the rapidly growing grid storage market and the significant benefits of CERENERGY® batteries over other battery technologies for grid storage applications, Altech’s management has decided to proceed with the funding process of the CERENERGY® Battery project. Considering the CERENERGY® battery project's alignment with Europe's commitment to renewable energy transition, the funding prospects for the project appear favourable. This encompasses a range of opportunities at the European, German federal, and Saxony state levels. Altech is proactively engaged with numerous potential financiers to secure funding for constructing the CERENERGY® Battery plant in Germany.
Positive offtake discussions with potential customers are ongoing
Altech has signed NDAs with major utility conglomerates in Germany, signalling a strong interest in supplying CERENERGY® 1 MWh GridPack batteries. Currently engaged in advanced discussions, Altech aims to secure pre-sales agreements for the entire initial production line over a five-year period with two prominent utility companies. According to Altech, the company’s primary focus in the upcoming period is to solidify these promising partnerships. Securing offtake agreements with major clients will validate the quality and usability of CERENERGY® Grid Packs and facilitate possible project financing from these strategic customers, in our view.
Valuation range of A$0.16-$0.22 per share
In our initiation report from 15 February 2024, we outlined a valuation of A$0.15 per share base case and A$0.21 bull case solely based on our DCF valuation of Altech’s Silumina AnodesTM Project. We have updated our DCF valuation by adding the valuation of the CERENERGY® Batteries Project to our model. Our updated model values Altech at A$0.16 per share in a base-case scenario and A$0.22 per share in a bull-case scenario. The observed marginal impact on our per-share target valuation range stems largely from Altech's ownership stake in the CERENERGY® project being less than 60% and the fact that Fraunhofer's 25% stake in the project is free-carried, thus not contributing to project development costs. Our DCF model is broadly based on the assumptions of Silumina AnodesTM DFS and CERENERGY® Battery DFS results and net of minority interests in both projects. The key risks to our investment thesis include uptake, competition, exchange rate, and funding risks.