Invinity Energy Systems Looks Poised For Aggressive Growth In 2023

Invinity Energy Systems [AQSE:IES] [LON:IES] is a leading global manufacturer of utility-grade vanadium flow batteries. These are considered to be a viable alternative to lithium-ion technology. Invinity was created via a 2020 merger of two leading flow battery providers, namely redT energy and Avon Battery.

Why vanadium flow batteries?

Vanadium flow batteries represent a fast-developing section of the new energy economy. They provide storage of electricity on a much larger scale than, for example, lithium-ion batteries. They can be used by larger consumers of power who want to store energy produced by solar farms, for example, for periods when the sun does not shine.

Typical users of these batteries include hospitals, schools, data centres and factories. As more of these facilities develop clean energy generation technology, they will want to conserve that power in on-site batteries that can still deliver power off-grid.

Substantial increase in revenues

In 1H 2022 Invinity’s revenues increased substantially to £1.4m – that’s up from a mere £0.015m in 1H 2021. This was driven by the delivery of 7.6 MWh of VS3 batteries to Energy Superhub Oxford, Scottish Water, and the European Marine Energy Centre.

Invinity reported a healthy cash position for 1H 2022, ending the period with cash and cash equivalents of £16.1m, again up substantially on its 1H 2021 cash position.

Share price action has been interesting: despite the improving financial position the shares are down at around 37p at time of writing, off from a 52 week high of just under a pound on the UK market.

Investors may want to see the company move into a position of profitability before piling in, but right now they look cheap to us. The company is operating in what we consider a fast-expanding and strategically important sector. Stock performance before 2020 has to be ignored, but we can envisage this returning to the 100p level with relative rapidity.

On 13 October 2022 the company received California Energy Commission funding for its largest project to date for the Viejas Band of the Kumeyaay Native American tribe. This project is a 10 MWh vanadium flow battery which will be delivered to the site in southern California.

Other recent news has included the sale of a 1.3 MWh flow battery system to Kinetic Solutions. It will be used as a microgrid providing 24/7 power to a datacentre in Arizona.

Invinity has also recently confirmed that its new Vancouver factory has shipped the first 23 VS3s destined for Elemental Energy’s project at Chappice Lake, Alberta. This facility represents a significant expansion to its previous manufacturing capabilities, and at its full complement of staff and equipment is expected to be capable of delivering over 200 MWh of VFBs per year.

Further, Invinity has successfully completed the previously announced transition to new manufacturing partner Baojia, who are currently delivering components to Invinity’s factories in North America and the United Kingdom and completed VS3 products to customers across the Asia-Pacific region.

Possibilities from US Inflation Reduction Act

Finally, Invinity has said it is closely watching developments in the US regarding domestic content requirements that could benefit Invinity’s customers through the Investment Tax Credit introduced under the US Inflation Reduction Act. Invinity is developing plans for domestic production with an expanding network of partners, including localised VS3 production.

US investors will be interested to know that Invinity Energy Systems has just secured DTC Eligibility that will allow for real-time clearing and settlement of its OTCQX ordinary shares [IESVF ticker].

The company agreed terms on a convertible loan facility for up to USD 10m with Riverfort Global Opportunities and YA II PN in December, of which it drew down USD 2.5m almost immediately. This will provide additional support for Invinity’s short-term working capital requirements.

It should be noted that Invinity closed several high profile contracts in Q4 2022, with orders for over 30 MWh of batteries received over that period. It is still not operationally profitable, although we can see it working itself towards that position in the near future.

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