Invinity Energy Systems: VSA Capital
New Order Placed in California
Invinity Energy Systems (IES LN) develops Vanadium Flow Batteries (VFBs) for utility-scale grid storage. The Group’s next-generation Mistral VFB technology, jointly developed with Gamesa Electric, launches in H2 2024 to provide grid-scale longer-duration energy storage (LDES) as renewable generation increases globally. To capture this opportunity, in May 2024, the Group raised £57.4m through a share placing which included £25.0m of UK Infrastructure Bank funding for projects. The Group announced yesterday a 4 MWh VFB sale to PowerFlex, part of EDF Renewables North America on behalf of a California Energy Commission-funded solar microgrid project being undertaken by the Rincon Band of Luiseño Indians. This win, in the high growth U.S. grid storage markets, underpins our FY 2024 forecast for revenue growth of 72% to £37.3m from sales of 57MWh of VFB systems and services. With its strong commercial pipeline, we see this as an early new order unlocked by the Group’s strengthened balance sheet that provides a new source of potential share price catalysts.
California is One of the Fastest Growing Energy Storage Markets
California is one of the world's fastest growing battery markets and by April 2024 had installed capacity of 10GW. The California Energy Commission is also one of the leading funders of non-lithium-ion long duration energy storage (LDES). It provided US$140m to various projects in the state throughout 2022-23 and has US$190m of funding planned for the 2023-24 State Budget. The project announced today will see 18 Invinity VS3 vanadium flow batteries, with a combined capacity of 4 MWh, installed by PowerFlex alongside a new 1 MWp expansion to an existing PV solar array as part of a large-scale solar microgrid project. IES' batteries will be used to store excess solar generation which can be discharged on-demand to provide economic, low-carbon power to the site at any time of the day or night.
Global Market Opportunity
IES is focused on the UK, U.S. and Asia markets. UK energy storage data insights platform, Modo Energy, estimated 1.5GW of new battery capacity was added in 2023 and total generating capability reached 4.6GWh. The U.S. is the second-largest energy storage market in the world, behind China and commissioned an estimated 7.5GW of battery storage capacity in 2023. In Asia, IES highlights a 2.4GWh market from a strategic desire to reduce reliance on Chinese products in many countries in the region.
Recommendation and Target Price
IES is on a high growth trajectory supported by rising order and underpinned by the new funding in May 2024. The licencing and royalty model and UK investment projects are not explicitly modelled and provide upside potential.
Our DCF valuation of £486m sets our 12-month target price of 110p/sh. Buy
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