A123 Looks To Add More Production Capacity

August 11, 2010

A123 Systems disappointed Wall Street with weak second-quarter results on Tuesday, but said it remains confident a huge market for its batteries is just around the corner.

The lithium-ion battery maker said that once again it is considering expanding production capacity. And it calculated its market opportunity from current customers at $1.5 billion by 2013 – a huge target.

The lithium-ion battery market holds great promise. With electric cars and trucks starting to go on sale in significant numbers this year and next, there is great potential for growth. Late last year, Pike Research said lithium-ion battery sales to the transportation market could reach $8 billion by 2015.

But the expense of building factories is high, and concerns have begun to emerge about industry-wide over capacity.

A123 doesn’t seem alarmed. The company said on a conference call that projected demand from its current customers could present it with a $1.5 billion opportunity by 2013.

To prepare, CEO David Vieau said the company is considering expanding production capacity another 30 percent by the end of 2011. The company also announced capacity expansions when it released first- and fourth-quarter results.

The present plan is to reach 760 megawatts of production capacity by the end of 2011. A123 is now considering raising the target to 1,000 megawatts. Vieau told analyst he would take three to four months to make a decision.

He also announced a deal with AES Energy Storage to deploy 44 megawatts of lithium-ion battery storage on the electric grid. By mid 2011, as much as 70 megawatts could be deployed worldwide by the AES, making it the largest lithium-ion battery storage deployment, he said.

A123 said second-quarter revenue came to $22.6 million and its loss widened to 33 cents a share. Wall Street analysts had been looking for sales of $25.5 million and a loss of 27 cents a share.

A123 stock fell to $9.95 in after-market trading. The shares are down about 26 percent from their IPO price last September.

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Posted by Mark Boslet

Lithium Battery Over Capacity Debate Rages

July 27, 2010

Lithium Energy Japan, a Mitsubishi joint venture, decided in April to build a new lithium-ion battery factory in Japan. The plant is to supply 50,000 cars.

Several months earlier, A123 Systems said it would use a $249 million government grant to expand its manufacturing capacity. The company calculated its total could supply 320,000 hybrid cars. Then in May, it decided to add another 200 megawatt hours of production, bringing its total to 760 megawatt hours – a 350 percent increase since the end of 2009.

Early this year, EnerDel of Indianapolis unveiled its own plan to more than double U.S. production. The cost: $237 million.

Makers of lithium ion batteries are rapidly expanding their factories in anticipation of a ballooning market for electric cars. The trouble is none of them can be sure what the demand will be.

Carmakers have big plans for electrics. But it could take years for the industry to reach the production levels battery makers appear to be preparing to supply. General Motors, for instance, will make 20,000 Chevrolet Volts in 2011 and increase the production run to 30,000 in 2012.

Nissan has 17,000 pre-orders for its electric Leaf in the United States, suggesting that production is already sold out for the year. The company will accelerate this modest start with ambitious plans for 500,000 cars worldwide starting in 2013.

For many battery makers, the consequence of long-term oversupply could be catastrophic. A flooded market will push down prices and send profits tumbling. Start-ups with innovative technology could find it hard to survive.

With electric cars starting to reach consumers later this year, the supply-demand debate was a key focus of the first day of the Plug-In 2010 conference in San Jose. The conference brought together some of the leaders of the business: A123, LG Chem’s Compact Power, Electrovaya, Applied Materials and the Johnson Controls-Saft joint venture – and there was little agreement.

At this point, demand is not clear, says Roger Lin, director of product marketing at A123. The adoption of electric cars may be faster than the pessimists believe.

At A123, the company’s capacity is sold out through 2013 and 2014, Lin said.

(EDITOR’S NOTE: The following statement is from Andy Chu, vice president of marketing and communications at A123: “Any statement that A123’s battery production capacity is sold out through 2013 and 2014 is inaccurate. We are sold out through this year and into early 2011.”)

On the other hand, some projections suggest worldwide lithium-ion battery supply could be three times greater than demand. “The upsurge in domestic manufacturing has been a surprise for us,” says Kevin Chen, director of business development at manufacturing-equipment supplier Applied Materials.

Recovery Act funds have played a big role in the build out. One company to benefit is Johnson Controls-Saft. Without stimulus funds, the company would have built a factory in Asia, says John Schaaf Jr., vice president of market development at Johnson Controls.

John Gartner, a senior analyst at Pike Research, says oversupply is possible. He projects that by 2015 the installed price of battery systems (including thermal management gear and other finishing equipment) will be cut in half.

There is the chance for at least a temporary glut, he says. “I think there is a potential for that.”

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Posted by Mark Boslet

Boston-Power Raises $60 Million, Seeks Stimulus Money In China

June 24, 2010

Boston-Power said Friday it raised another $60 million in venture funding as it closes in on stimulus money from China and its first Chinese factory.

The new capital brings financing for the lithium-ion battery maker to $185 million, making it one of the most richly financed start-ups in the industry. The high cost of battery factories makes large bank accounts a necessity.

The Westborough, MA, company said the money should help it win stimulus funding from the Chinese government. CEO Christina Lampe-Onnerud declined to predict how much or provide details on the negotiations. But she said talks with several authorities in the country are continuing and an arrangement is expected in three to four months.

Boston-Power says it expects to announce new electric vehicle deals this year. The company is already working to develop an EV patterned after the Saab 9-3.

A deal will require Boston-Power to build a factory in China, which reportedly will be near Shanghai. Such a deal would represent a major step for a company that was turned down for $100 million in federal stimulus money last August in a bid  to build a U.S. factory.

Separately on Friday, Boston-Power said it is close to announcing deals with additional vehicle manufacturers and utility customers. The announcements are expected later this year.

The company’s first contract, a deal with Saab, was unveiled in December. Lampe-Onnerud said in an interview that the development of an electric car patterned after the Saab 9-3 is on track. The first prototype is to be on the road this summer at Saab’s Trollhattan headquarters in Sweden. More will follow in 2011. The program has production models scheduled for release but has not disclosed the date, she said.

Despite the progress, Boston-Power has no shortage of well-funded competitors. Battery maker A123, which went public in a $378 million IPO in September, raised $266 million prior to the offering and added another $249 million last year with an Energy Department grant.

EnerDel received $118.5 million of government funds, and Warren Buffett put $230 million of his money in Chinese battery maker BYD.

Boston-Power said it would use its new money to expand manufacturing in Taiwan. The company’s plant, owned by GP Batteries, needs scale to supply laptop batteries to Hewlett-Packard and Asus, which Boston-Power added as a customer earlier this month.

The company also will add engineers and sales staff at its Westborough, MA, headquarters and elsewhere.

The five-year-old start-up differentiates itself from rivals by making a lithium-cobalt battery with the same chemistry commonly used in notebooks and by the Tesla Roadster. The technology is modular, meaning that numerous small cells are packed into a single casing, as with laptops. The Saab prototype now under development will have 2,000 small cells clustered together from Boston-Power’s new Swing battery line.

The advantage with lithium cobalt is power and long life – perhaps 1,000 charge cycles compared with 300 or so with more conventional lithium-ion technologies. The downside is the greater chance of a meltdown and short circuit. Alternative chemistries – lithium manganese and lithium phosphates – don’t catch fire, but also don’t have as much power.

Boston-Power says that despite the competition, revenue growth is “very fast.” It declines to offer figures, but says it employs 110 people in Massachusetts, 50 in China and 350 in Taiwan.

“I believe we have the chance to be one of the significant players” in the industry, says Lampe-Onerud. “I think (the funding) will be a very serious signal for big time growth.”

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Posted by Mark Boslet

Clean Tech IPOs Have Much To Prove, Says Top VC

April 26, 2010

Clean-tech IPOs have yet to prove themselves.

Sure, investor excitement is on the rise with Tesla Motors, Solyndra, Amyris and Ameresco preparing to sell shares to the public. Another potential blockbuster, Silver Spring Networks, is said to have chosen its investment bankers.

It appears the market for clean-tech IPOs is thawing, says Erik Straser, a venture capitalist at Mohr Davidow Ventures

But the track record of recent green IPOs is anything but encouraging. Lithium battery maker A123 Systems went public in September and its shares trade below their introductory price.

Sensata Technologies Holding, a sensor maker from the Netherlands, is hanging onto a gain over its initial price in March, but only a modest one. Biofuel maker Codexis, which debuted its shares last week, is suffering the same fate. And the fortunes of Jinko Solar Holding of China are worse. It canceled its coming out altogether.

“The clean-tech IPOs at this stage are still proving themselves,” says Erik Straser, a partner at the venture firm Mohr Davidow Ventures and leader of its cleantech investment team. Nevertheless, “it appears the markets today are thawing.”

Straser says it is likely there will be more clean-tech IPO filings this year and even a period when less mature companies will go public. That’s because the criteria for what a company needs to interest investors is unsettled.

Several years ago, a high-tech company might need $100 million in annual revenue and profits to attract investors. Clean-tech companies appear to have more latitude. Revenue can be in the neighborhood of $50 million, Straser said in an interview, and business models vary.

Some companies have high production costs and are working them down. Others have businesses that are more future than present. Silicon Valley electric car manufacturer Tesla is an example.

The company sells its Roadster sports car today, but IPO investors will bet on the success of the less expensive Model S sedan, he says. What the Roadster did is show there is a high-end market for high-end electric cars, says Straser, who has invested in green-tech firms such as ZeaChem, Nanosolar and OPX Biotechnologies.

Still, it is hard to predict how clean-tech IPOs will do this year. What is clear is that at some point, investors will become more discriminating and look for more mature companies rather than trendy ones, says Straser. When will this occur? No one knows.

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Posted by Mark Boslet

A123 Betting Bigger Than Expected On Electric Cars

March 9, 2010

A123 Systems can hardly be called the “Netscape” of the lithium ion battery market.

The company’s stock launched last September with an impressive 50 percent first day gain. It has since retreated to $16.75, a more modest 24 percent above its offering price of $13.50.

The company plans to expand its lithium ion battery factories another 54 percent.

This swoon isn’t due to a lack of ambition. In fact, A123 is betting bigger than most analysts know on the battery market, which it expects will benefit from a flood of affordable electric cars in the next two years here and in China.

The company gave the clearest indication of its intent on Tuesday when it unveiled aggressive plans to expand its factories another 54 percent. Just two months ago, the manufacturer said it would more than double the size of the plants by the second half of 2010.

“Our customers are demanding it,” says CEO David Vieau. “As we see the forecasts (from customers)…we’re going to put the capacity in place.”

The 560 MW hours of capacity the company will have at the end of the project will be capable of making batteries for almost 500,000 hybrid electric cars or 37,000 plug-in electrics. Some of this capacity will be devoted to making storage batteries for wind and solar power plants, so not that many cars need to sell.

But it nevertheless is an ambitious approach to an automobile market just now getting underway.

A123, which received a $249 million grant from the Department of Energy to help fund the growth, says its goal is to become a billion dollar company. (Revenue was $91 million in 2009.)

Key to this achievement will be strong car sales, which Vieau says appears to be so solid he is rushing to bring all the new capacity online by the end of the year or early next year. “We feel very comfortable with it.”

Perhaps he has a point. On Tuesday Nissan seemed to confirm the enthusiasm, saying it had 56,000 advanced orders for its electric Leaf. Perhaps the ramp of electric cars might not be so slow.

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Posted by Mark Boslet

Behind The Scenes At A123, Fisker Is A Drop In The Bucket

January 14, 2010

A123 Systems made hay Thursday morning by announcing a intimate pact with one of the nation’s most promising new age car maker, Fisker. But the move is only one tiny step in the electric battery maker’s grand ambitions.

An A123 lithium ion cell for plug in hybrids and electric vehicles

The Wall Street darling said it would supply lithium ion batteries for Fisker’s nameplate Karma plug in hybrid, expected late this year.

Karma is expected to have a 50-mile range with its battery and a 300-mile range when using its gasoline powered generator. It also is designed to go from 0 to 60 in 6 seconds, rivaling the performance of the all-electric Tesla Roadster, which already has 1,000 models on the road.

The complicated agreement also has A123 and Fisker working together to develop a battery for Fisker’s second model, the lower priced Nina, slated for 2012.

At the same time, A123 will invest $23 million in the car company, $13 million in cash and $10 in stock. Both companies are among the phalanx of anointed new generation transportation companies receiving grants and loan guarantees from the Department of Energy’s program to promote green technologies.

But behind the scenes, the Fisker deal is but a drop in the ambitious battery maker’s bucket. The company, which launched a well-received IPO last year, announced on Thursday a major expansion of its manufacturing capacity, fueled by its $249 million DOE grant.

The expansion will more than double its Michigan manufacturing capacity by the end of 2010 and give it the ability to produce batteries for more than 320,000 hybrid vehicles or 24,000 plug-in hybrids. – far more than Fisker could hope to produce in several years.

So watch for more deal like the one A123 unveiled today. The company will need the business to fill its newly enlarged plant.

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Posted by Mark Boslet

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