Energy storage firm Red T says its proposed merger with California-based Avalon Battery Corp will create the world’s largest flow storage company.
The two firms, which specialise in vanadium redox flow storage, have signed a non-binding MoU, with any deal subject to shareholder approval.
If approved, the merger would take place as a reverse takeover under AIM rules, with a share for share acquisition of Avalon with Red T shares valued at 1.65p per share, valuing Avalon at $37.5m (£30m).
The plan is to raise £24m in new funds via a placing as part of the merger and RedT said it and Avalon “have received substantial preliminary support for the Fundraising from a strong new strategic investor that intends to make a cornerstone investment in the merged business,” as well as institutional investors.
Avalon has manufacturing in China and a deal would give the enlarged company a more global footprint, spanning the US, Asia, Australasia and Europe.
Deals and timing
RedT announced a strategic review and fundraise in March to ensure sufficient working capital. Since then the company has announced an agreement with Statkraft to deploy and fund solar PV and energy storage units at industrial and commercial sites.
CEO Scott McGregor said funded deals under the Statkraft agreement “take time to get across the line” in terms of legal and contractual arrangements, but that the companies are “very happy with progress” to date.
“It is a very good product for customers,” delivering the bulk of their power requirements while “cutting their costs 20 per cent, and they don’t even have to pay anything [under the funded model],” said McGregor. “We are looking to roll out that model in Australia as well.”
Should the Avalon merger go ahead, McGregor suggested the enlarged company will be able to grow more quickly and deliver product pipelines.
“[Via the merger] we are building by far the largest flow machine company in the world with a serious amount of funding behind it,” said McGregor.
“We know the market is there, we have proven the applications, but we need to put serious capital behind it and take the opportunity now. Growing slowly as individual companies is more difficult.”
Until any deal is agreed, both companies will operate independently and work on their current project pipelines, said McGregor.
As well as a 50MW hybrid lithium-flow project in Oxford (going “full steam ahead”, according to McGregor), RedT struck a deal for its first Gen 3 machines with Anglian Water last year. The water company still does not have the units, but McGregor said that Anglian is working to ready its site, and that the units have been “humming along” in Scotland.
“The delay relates to their site, not our system,” he said.
Meanwhile, McGregor claimed a major project in Germany, while delayed due to “policy changes”, remains in play.
“The underlying projects are good, it’s just a matter of timing,” he said.
Meanwhile, the company, alongside aggregator Open Energi, has just secured pre-qualification status from National Grid to provide Dynamic Firm Frequency Response (dFFR) services – the first time a flow battery has pre-qualified.
That means it can bid the 300kWh unit, located on an industrial site in Dorset alongside 250kW solar array, into the frequency response tenders run by the Electricity System Operator in the hope of securing additional contracted revenues.