Bushveld Minerals (LON:BMN), the AIM quoted, integrated primary vanadium producer, with ownership of high-grade vanadium assets in South Africa, has communicated and outline in greater detail its previously announced strategy for partnering with, and investing in, vanadium redox flow battery (VRFB) companies. Implementation of the strategy is led by Bushveld Energy, Bushveld’s 84% owned subsidiary, focused on three business lines covering vanadium electrolyte, VRFB manufacturing and VRFB deployment.
Highlights
· Bushveld announces its intention to establish a VRFB Investment Platform (“VIP”) to lead investments in VRFBs, original equipment manufacturers (“OEMs”) with attractive upside potential. The VIP is one of multiple avenues of partnering with OEMs.
· The Company and its initial investment will play a catalyst role and mobilise additional capital from third party funders to establish an investment capital pool to support VRFB OEM growth.
· These partnerships support Bushveld Energy’s business model, that includes electrolyte, VRFB manufacturing and deployments.
· Today, separately, Bushveld announced an investment into the proposed merger of redT Energy and Avalon Battery, in line with this strategy.
· Bushveld Energy is now in an even stronger position to capitalise on the VRFB market dynamics given its knowledge of the vanadium market, first-hand battery expertise and strong relationships across the industry.
Strategic rationale
Bushveld Minerals believes that VRFBs, with their long lifespan, intrinsic safety and scalability, among other benefits, are well placed to capture a significant share of the long duration stationary energy storage market.
Bushveld Energy was established with the objective to drive adoption of VRFBs in the energy storage market to:
· Create significant upside for vanadium demand;
· Provide a natural hedge to vanadium price volatility; and
· Deliver an additional compelling commercial opportunity for the Group and its shareholders.
Combining these benefits with low cost upstream vanadium assets, uniquely positions Bushveld to create additional value through vertical integration.
Clear strategy to partner with VRFB companies
VRFB OEMs are the critical drivers for the success of the VRFB technology and vanadium demand in energy storage. A key activity for Bushveld Energy is developing partnerships with VRFB OEMs that can take the form of multiple structures, including:
· Establishment of a new VRFB Investment Platform (“VIP”) to make strategic investments directly into VRFB OEMs that offer strong growth upside and provide potential off take for Bushveld’s vanadium products. The VIP will leverage Bushveld Energy’s expertise in the energy storage market, its capacity to ramp up vanadium supply and its capital investment to attract additional external funding into the VRFB OEMs and the industry. Bushveld’s role would be that of a significant minority investor, with strategic involvement such as vanadium sourcing, while keeping the day-to-day operations in the hands the management team. The Company intends to leverage its initial capital commitments by mobilising additional third party capital to create sufficient capacity to play a meaningful role in scaling up VRFBs manufacturing capacity.
· Supply contracts for vanadium material, vanadium electrolyte and vanadium electrolyte rental. Bushveld has already been supplying sample materials to multiple OEMs;
· Joint development of region or project specific business models for vanadium electrolyte rental. Bushveld enabled the successful deployment of a vanadium electrolyte product in industrial-scale batteries developed and sold by Avalon Battery.
· Joint development of large potential customers or projects well-suited for VRFBs. This includes the work showcasing the technology at the Eskom Research & Testing facility in South Africa.
By partnering with different VRFB companies, Bushveld can diversify its vanadium customer base and support various technologies, maximising its exposure to VRFB upside potential. In the medium term, the increased diversification of vanadium demand from the energy sector may also lead to an overall decrease in vanadium’s price volatility. Additional details of the VIP will be provided in due course.
Favourable market dynamics
Medium- and long-term trends continue to reinforce the strong potential of the stationary energy storage market, especially VRFBs. Energy storage is needed to stabilise and make variable generation from solar and wind dispatchable, therefore a key element in the shift towards increased renewable energy sources. These trends are reinforced by the following trends:
· The stationary energy storage market is forecast by Navigant Research to grow at a rate of 58% p.a., exceeding 100GWh and US$50 billion annually by 2027. Technology companies with direct IP will capture a large portion of the value created within the energy storage sector;
· 90% of the market will be dominated by long duration use cases, including transmission and distribution asset optimization and peak load support, requiring four or more hours of storage;
· VRFBs are competitive for long duration applications, with Navigant forecasting flow batteries to capture 18% share of the total stationary energy storage market by 2027;
· Recent investments into stationary storage technologies, including SoftBank’s investment in a mechanical storage technology company, and NEC’s joint development agreement with a liquid metal battery technology company, demonstrate the market need and investment appetite for long duration stationary storage technologies that do not use lithium-ion formulations;
· In the long term, the recent DNV-GL Energy Transition Outlook 2019: Power Supply and Use noted that by 2050 installed energy storage capacity will approach 30 terawatt hours. In comparison, that amount is six times what will be deployed through pumped hydro and more than twice the energy storage capacity provided to the power system by electric vehicles.
Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented:
“The energy storage market presents a sizeable commercial opportunity, potentially exceeding $660 billion by 2040 according to Bloomberg, and significantly greater than the value of the vanadium supply opportunity on its own. The VRFB Investment Platform is an exciting new opportunity to directly access the massive upside in energy storage and support select OEMs. In addition, pursuing a wide array of partnerships with VRFB OEMs that cover supply, deployment and investment gives Bushveld many more options to unlock value through its integrated strategy. Bushveld Energy will continue to pursue value accretive relationships with VRFB companies along these three avenues, reinforcing our leading position as a growing, low-cost, vertically integrated vanadium company.”
