Battery Metals

With lithium ion batteries as stationary energy storage for the power grid emerging rapidly as a growing market, manufacturers may be challenged with the prospects of redistributing capital from the potential of electric vehicle battery manufacturing to grid oriented energy solutions.

By Dave Brown —Exclusive to Lithium Investing News

With lithium ion batteries as stationary energy storage for the power grid emerging rapidly as a growing market, manufacturers may be challenged with the prospects of redistributing capital from the potential of electric vehicle battery manufacturing to grid oriented energy solutions. Automotive battery maker JohnsonControls (NYSE:JCI) has recently filed a petition in Delaware’s Chancery Court to dissolve a joint venture enterprise with Saft Groupe SA (EPA:SAFT) that was formed to manufacture lithium ion batteries for electric and hybrid vehicles.

President for Johnson Controls’ Power Solutions unit, Alex Molinaroli stated in the media release, “Johnson Controls and Saft have a fundamental disagreement about the future direction and appropriate scope of the joint venture. The industry is evolving rapidly and the investments needed to achieve market leadership require us to do more than the joint venture has done or can do.”

Unrealized potential

Last month Johnson was involved significantly with the 2011 Electric Drive Transportation Association (EDTA) Conference in Washington, DC, featuring workshops and breakout sessions with policymakers and their peers from the electric drive industry. A123Systems (NASDAQ:AONE) recently posted a $53.6 million loss for its first quarter 2011 financials, in part because it has not been profitable in its EV deals yet.  Ener1Inc. (NASDAQ:HEV) has reported a capital loss for its investment in Norwegian electric car maker Think, noting that: Think had halted its vehicle production in Finland for longer than anticipated, has been unable to raise the funds needed to continue production, and because the overall market for EVs has been moving slower than expected.

Existing stakes

A joint venture plant to produce lithium ion batteries had been built in Nersac, France, and opened in 2008. The venture is also building a battery plant in an existing Johnson Controls facility in Holland, Michigan. The company has assured stakeholders that the legal action would not affect “current contracts, production orders or program launches.” Current contracts for batteries include customers such as Mercedes-Benz S-Class hybrid, BMW’s 7-series ActiveHybrid and Azure Dynamic Inc.’s hybrid-electric system, and for a Ford Motor Co. (NYSE:F) plug-in hybrid.

Saft has indicated that it recorded a loss of $24 million in 2010 from its 49 percent stake in the venture and contested that it “sees no legitimate grounds” for the dissolution and it intends to oppose the petition.

Restrictive joint venture

According to analysts with Needham & Company, Johnson Controls is discontented because the Saft joint venture, which is five years old is limited to EV batteries and the partnership is holding it back from pursuing a broader focus on selling batteries for the power grid, a multi-billion dollar market that seems to be growing substantially recently.

Investors will note that in February, Saft announced that it secured a contract to supply renewable energy storage for 2500 R Street, California’s first micro-grid, distributed energy community housing project. The project will involve advanced homes employing the latest in smart grid, solar generation and energy storage to ensure each home generates as much clean energy as it uses, “thus maximizing homeowner utility bill savings.”

Opportunity knocks

In their report, Needham & Company espouse that Johnson Controls might pursue an expanded allegiance, or a new partnership with Hitachi (NYSE:HIT). Investors will note that Johnson Controls has already signed a memorandum of understanding with Hitachi regarding energy storage applications. Although the precise terms of the deal were not disclosed, areas of co-operation would cover sales, marketing and could include collaboration on energy storage technology.

The analysts from Needham & Company support the Johnson Controls action, as they say, “We believe the JV terms and conditions have minimized the company’s efforts to develop a stationary storage market strategy, while competitors have been able to make headway into this large multi-billion opportunity.” The report also favors a new strategic alliance with Hitachi, “The formation of a JV with Hitachi could enable Johnson to cover more bases in the evolving lithium ion landscape given Hitachi’s penetration into the heavy-duty market and focus on stationary applications.”

MARKETS

Markets
TSX19062.91+345.79
TSXV647.33+15.54
DOW31500.68+823.32
S&P 5003911.74+116.01
NASD11607.62+375.43
ASX6528.40+19.90

COMMODITIES

Commodities
Gold1838.64+7.63
Silver21.50+0.36
Copper3.78+0.03
Palladium1930.50+53.50
Platinum914.50+3.50
Oil107.21-0.41
Heating Oil4.18-0.06
Natural Gas6.10-0.12

DOWNLOAD FREE REPORTS

×