For personal use only. RedFlow Limited. Investor Presentation. 23 May 2014

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1 RedFlow Limited Investor Presentation 23 May 2014

2 Disclaimer Disclaimer This is a document which has been prepared by RedFlow Limited (Company) to provide the recipient (Recipient) with information and a general understanding of the Company and its business. This document is provided to the Recipient on the conditions set out below. This document is not a recommendation, offer or invitation This document is not a recommendation, offer or invitation by any person or to any person to sell or apply for securities in the Company. This document is not a prospectus This document is not a prospectus under Australian law or under any other law. It is for information purposes only. Accordingly, this document neither purports to be exhaustive nor contain all of the information which a prospective investor or the Recipient may require to make an investment decision and it does not contain all of the information which would otherwise be required by Australian law or any other law to be disclosed in a prospectus. Events after date of this document The Company and its officers have no responsibility or obligation to inform Recipients of any matter arising or coming to their notice, after the date of this document, which may affect any matter referred to in this document. No reliance The document is provided to the Recipient on the basis that the Recipient must rely on their own inquiries and seek appropriate professional advice in relation to the information and statements in relation to the proposed prospects, business and operations of the Company. Distribution The distribution of this document in jurisdictions outside Australia may be restricted by law. Any Recipient who receives this document outside Australia must seek advice on and observe any such restrictions. Exclusion of representations or warranties The only representations or warranties in relation to the preparation of this document and the information in it (such as its accuracy, reliability, completeness or reasonableness of any assumptions) are those which are implied by law and which cannot be excluded by law. Otherwise, all such representations or warranties are excluded and the Recipient releases the Company, its advisers and the officers of each of the aforementioned persons from any liability or responsibility for this document. 2

3 Company Overview ASX code RFX Share price $0.13 Shares on issue 192,757,366 Options 4,410,000 Market capitalisation Cash position $25 million $5m (post placement pre rights issue) RedFlow (RFX) is an energy storage company listed on the Australian Securities Exchange (ASX). The company produces a unique zinc bromide flow battery that has the potential to enable cost effective, safe energy utilisation and storage. Sustainable cost base operating overheads currently at $500,000 per month. Large orders not expected to require significant working capital. Chairman Managing Director Non Exec. Director Non Exec. Director Chief Engineer Chief Technology Officer Business Development Manager Howard Stack Stuart Smith Bruce Brown Richard Aird Dr Alex Winter Dr Mike Giulianini Bruce Ebzery 3

4 Investment Highlights 4 Product ready for commercialisation Large Market Opportunity Partnering business model with key stakeholders engaged Active business plan through to commercial operations Well funded Over 600 batteries have been manufactured including 60 in a residential trial for 2 years Technology readiness level (TRL) such that product ready for commercial manufacture Significant design improvement in the last 18 months have improved reliability and battery performance Feedback from key trial customers and research partners to drive future improvements The energy storage market is rapidly evolving and Lux Research has estimated that of a potential $114 billion energy storage market by 2017, zinc bromide flow batteries will have a 19% market share equating to a USD$21 billion market opportunity. Telecommunications infrastructure, renewables integration, rural and remote power, residential, DC only microgrids and transmission and distribution investment deferral are all potential market applications. Existing customers have prototypes deployed in some of these markets. Follow on trials after initial success in progress. Partnering strategy in place with large multinational companies with scale, expertise and established channels to market. This includes Emerson, Raytheon and SMS Global Technologies. Engaged in early stage discussions with other integrators. Manufacturing partner with Flextronics, a large global manufacturer with a specialised energy focus. Manufacturing in process of being transitioned to Flextronics North America. Ongoing development collaboration includes Albemarle, ICL, Sandia, CSIRO and the Universities of Sydney and Queensland amongst others. Complete implementation of outsourced manufacture with Flextronics in progress. Non binding indicative orders to be converted into firm sales as manufacturing capability increases. Continue to collaborate with partners and leverage off their specialised expertise to further improve performance and extend the life of the product. Completion of the higher voltage Cleantech program will provide expanded market opportunities including off grid and micro grid applications. Strong cash position of approximately $5m (Post Placement but pre Rights Issue) Operating overheads reduced to $500K per month No large working capital requirement expected as orders grow

5 Core product the RedFlow ZBM Fully DC self managing battery with in built diagnostics and self protection capability Delivers 8kWh of energy with a continuous power rating of 3kW (peak of 5kW) High energy density at 33Wh/kg results in small footprint and light weight Efficient utilisation of capital with 100% depth of discharge, daily charging and discharging available Real 100% capacity available on a daily basis with no oversizing, requires less CAPEX Charge and discharge over several hours can be matched to application requirements volt range & 48 volts DC nominal matches standard electrical systems and as below 60V is within most safety limits Round trip efficiency approximately 75% 80% (DC DC) good business case Operates up to 50ºC no active cooling requirements or shelf life problems Calculated life of over 1,000+ full depth of discharge cycles (at rated energy) good business case current tests indicate further improvements which will reduce the cost per kwh New materials encouraging CSIRO, UOS and others next 12 months improvements pipeline significant Capital cost per kwh of US$875 and no scheduled battery maintenance until end of life (less than vanadium, comparable to similar lithium, more than advanced lead acid but usability of lead acid limited) Modular design allows for sizing that best suits an application and quicker more efficient ongoing product development than larger systems Scaleable for different applications with higher voltages and capacity now proven from Cleantech project Opportunity to improve performance and lower costs significant. Current improvements under test include new materials to extend overall life as well as improved methods of manufacture 5

6 Core product the RedFlow ZBM Key advantages Components Safety Lightweight and small footprint No exotic or heavy metal materials used and all easily sourced Primarily made of recyclable plastic take advantage of the plas cs industry manufacturing capability in future product development and cost reduction Safe, water based and recyclable electrolyte reduced fire risk Smart system with in built BMS to monitor performance and health remotely 600+ RedFlow ZBMs manufactured since 2009 The concentration of bromine salt in ZBMs in the discharged electrolyte state is very low, and only requires standard personal protective equipment (PPE). Bromine salts are stable and used as disinfectant in spas and it remains in solution (does not evaporate) HAZMAT 8 class of the zinc bromide electrolyte is in reference to the corrosive nature of the liquid being acidic (ph of between 1 4). Lead acid is of the same HAZMAT 8 class and lithium the HAZMAT 9 class The only potentially hazardous material in the ZBM is bromine in the electrolyte, which is usually held in a complexing agent as an oily liquid (not gas) when in the charged state. Bromine is commonly used as a fire retardant Over 9 years of research and over $38 million invested to date on research and development. 6

7 Technology Redflow has resolved and patented the mechanical and electrochemical issues. Non patented solutions have been retained as know how. TRL (technology readiness level) at a level where commercial manufacture and sales can commence. Pipeline of potential improvements significant. Over the past 18 months, Redflow focus has been on resolving outstanding issues a FMEA (failure mode and effect analysis) program was introduced ensuring all issues identified, prioritised and resolved. This saw over 54 issues methodically addressed. reducing the number of parts. making design, manufacturing and materials changes to extend the electrode life the number of calculated cycles is now well over 1,000 (approximately 3 years of 100% usage on a daily basis). development of a higher voltage solution funded by the Australian Government Cleantech grant. The decision to commence large scale manufacture was based on us achieving over 6MWh of energy throughput per battery (batteries still operating and at least 8MWh expected) demonstrating that the electrode longevity issue had been resolved and a calculated 1,000 cycles at 100% depth of discharge would be achieved. This equates to approximately 3 years of full daily charging and discharging and is expected to further improve with materials currently under test. Manufactured cost reduction will commence when manufacturing fully transferred to Flextronics and decreases expected to commence at beginning

8 Technology With design, manufacturing and materials changes, Redflow batteries have consistently increased the number of cycles achieved and total performance over the past 3 years at different states of charge. ACC1 : ACN7 : (in production) ACC8 : XXX : 2014 (currently in early stage laboratory testing) As some of these long term test batteries are still operating their expected lives have been calculated 1. 1 Calculated cycle life is necessarily calculated as with any significant design change, physical long term testing of the new/improved product begins again. Hence we calculate expected battery life by comparing laboratory test results and actual long term test data of previous versions to laboratory testing of the current version still continuing under test. There is a risk these correlations may not be precise for certain design and materials changes but we believe they are reasonable from our experience. 8

9 Technology Electrode development has been a key focus for past 12 months and current performance now significantly improved from 18 months ago. Current research and development shows significant potential for further enhanced performance from new materials. These offer cheaper costs and an extended life thereby reducing the cost per kwh throughput significantly. These are currently undergoing laboratory tests. Further cost reductions expected as majority of the remaining components are plastic which has a universal low cost to manufacture per kilogram. Target cost reduction of at least 40% by end of Combination of lower costs and longer life should result in a compelling energy storage proposition. (Calculated) 9

10 Current system integration partners In mid 2013, RedFlow and Emerson Network Power entered into an agreement to incorporate Redflow s ZBM into Emerson s energy storage products. Emerson Network Power is a business of Emerson, and a global leader in maximising reliability, deployment speed and efficiency of telecommunications networks. Raytheon has developed 2 prototype energy storage systems containing RedFlow ZBMs and have released a product sheet for 1 of them (RK30). Performed a trial with Sprint in Tucson, Arizona and this was successfully completed. Trial incorporated solar charging of the ZBM during the day and discharging in the evening, precharging the ZBM in off peak and storing all PV energy to 100% state of charge then floating until peak demand. Further follow on trials have been confirmed. SMS Global technologies Philippines is trialling a system for Globe Telecommunications, the second largest mobile phone operator in the Philippines. Higher voltage large scale support from S&C Electric Company, a major USA based utilities service provider. We are currently in discussions with other system integrators. 10

11 Total Potential Market Opportunity The energy storage market is rapidly evolving and Lux Research has estimated the following : a potential $114 billion energy storage market by 2017, and zinc bromide flow batteries will have a 19% market share equating to a USD$21 billion market opportunity. The McKinsey Global Institute lists energy storage as 1 of 12 potentially disruptive technologies. The Boston Consulting Group predicts the market for solar integrated energy storage alone to be 15 billion by Intermittent renewable energy sources, led by wind and solar photovoltaics (PV) figure prominently in many countries energy plans. for that to happen, a key part of the puzzle has to fall into place: energy storage. Given its indispensable role, we expect global demand for energy storage to soar over the next two decades, as intermittent renewables becomes increasingly prevalent and core technologies increasingly cost competitive. Many storage technologies are still developing. Others have not proven themselves on a large scale, do not have a positive business case, and are not yet ready for commercialisation. There is, however, an emerging exception to the rule: solar PV paired with battery storage. Driven largely by its increasingly favourable economics in some locations, the technology is now on the cusp of viability. Source : Boston Consulting Group,July

12 Targeted Market Opportunities Potential Relevant ZBM Applications 1. Telecommunications infrastructure Powering the large number of mobile phone towers already in existence in offgrid, micro grid or fringe of grid areas is an attractive relevant market. 2. Renewable integration Smooth and shift intermittent renewable energy generation, increasing utilisation of renewable energy sources. The use of solar and wind energy generated can be increased by storing energy for times of demand. 3. Remote power opportunities Powering remote areas not currently connected to the electricity grid as well as reducing the need for diesel generation. 4. Sustainable solution sustainable alternative capable of being retrofitted to existing applications where environmental issues exist. 5. Residential applications with the large installed solar capacity, our DC battery is well suited to the residential market and uptake will be a function of lower costs and a financing partner. 6. Microgrids with their smaller footprints, they avoid most transmission and distribution losses as well as eliminate the waste of energy associated with the conversion of AC to DC required for an increasing portion of todays load. 12

13 Sales Telecommunications Our initial targeted market is focussed on the telecommunications segment. This is a significant opportunity as it is estimated there are an estimated 5 million cell towers worldwide, of which 640,000 are off grid and increasing at a rate of around 50,000 per year as cell tower network infrastructure is rolled out to remote locations in the developing world. The vast majority of these off grid cell tower sites are powered by diesel generators or many suffer from unreliable grid power and rely on generators to fill the gaps. This fuel bill is a heavy load for telecoms companies financially, and contributes to carbon emissions. In India alone during 2011, telecom tower sites consumed an estimated 3.2 billion litres of diesel fuel. At the current rate of expansion that could reach 6 billion by In Africa, more than 50% of towers are off grid and the majority of the rest being on unreliable grid power. Many African tower sites are in remote and hard to reach locations. The cost in Namibia for example is $8,000 USD per kilometre to run power from the grid. This can make it very cost effective to install alternative energy such as solar power (and batteries). There is also a change in the architecture of the mobile networks as operators gravitate towards smaller distributed cell sites (distributed antenna systems or DAS). These smaller sites have lower power requirements and are an attractive proposition for solar power (and batteries). (Source : AKCess Pro * Italics added 13

14 Sales Telecommunications In the telecommunications segment we are currently engaged with : Emerson Asia Pacific are developing 2 systems for the South East Asian market and 1 of these systems will also be used by Emerson USA for the USA telecommunications market. Raytheon has developed 2 prototype energy storage systems containing RedFlow ZBMs. SMS Global Technologies are trialling a system with Globe Telecommunications in the Philippines. Initial Sprint trial success has lead to an extended trial of a further 5 sites. This is expected for a July/August time frame. Other discussions are being held and are in early stages. Redflow s ZBM offers the following benefits to telecommunications customers with off grid or unreliable grid supply to their base stations: Reduced fuel consumption; Longer operating life than modern lead acid systems, with the added benefit of a greater output; No need for air conditioning to keep batteries in operating range Wider operating variables (salt, humidity challenges, temperature); Reduced requirement for maintenance, and hence cash savings; and, Reduced theft. 14

15 Sales Off Grid Opportunities The next targeted sector is the rural, remote and off grid segment (RROG) and we are well placed to enter into this market. Current systems already developed for the telecommunications market also suitable for smaller RROG applications. Additional capacity for larger energy requirements and higher voltages now available with the imminent successful completion of Cleantech funded development. Container of batteries now able to be connected in series and in parallel to a single inverter allowing efficient supply of DC energy for this market segment. Multiple containers can also be connected in parallel providing scaled expansion to suit a specific larger application. Segments available after this will include DC only microgrids, residential systems, distributed generation and possibly utilities and UPS applications. The market will continue to evolve quickly and we will be flexible on what we target depending on regulators, demand and cost of the product. 15

16 Manufacturing In early 2014, RedFlow announced the appointment of Flextronics as its manufacturing partner. Flextronics is one of the world s largest end to end supply chain solutions companies, with facilities in over 30 countries and turnover of nearly US$25billion. This was finalised after an extensive review of potential partners who could provide the precision and experience in plastics engineering and manufacture. This agreement provides scalability, quality assurance, repeatability and consistency to the product. Flextronics have a energy focussed division and this is thus mutually beneficial. Manufactured in North America Currently in process of transitioning to Flextronics. Reduced counterparty risk for system integrators and increased confidence in the product Provides a mechanism for medium to long term cost reductions Currently planning towards establishing facilities for 250 batteries per month production with scale up available at Flextronics Product specific machinery funded by Redflow and to incrementally increase production requires an investment of approximately $500K in machinery. 16

17 IP Protection The current electrode, cell stack, hydraulic system, leak proof design and manufacturing methods is all protected by patents and our overall IP position is sound. In addition, some innovations have not been patented on the advice of our patent attorneys. o o o Currently have 9 patent applications registered in 7 jurisdictions. Of these applications, 3 patents have been granted in some of these jurisdictions. Protection being sought in main markets including: USA Europe China Australia India Japan Patent applications have been filed for new electrode surfaces Very high service life Low cost materials Ease of manufacturability 17

18 Corporate Overview Board Profiles Role Name Previous Experience Chairman Howard Stack Previous directorships of listed companies include Bow Energy, Flight Centre, Data#3 and Australian National Industries. A partner of Allen, Allen and Hemsley until 2001, and corporate advisor to one of Australia s largest electricity generators until Managing Director Stuart Smith A Chartered Accountant with previous experience as Chief Executive Officer and director of Cellnet Group. Previous experience with AAPT Mobile (Cellular One), Pacific Star (a joint venture between Bell Atlantic and Telecom New Zealand) and Ernst & Young in London. Independent Non Executive Director Bruce Brown Previously Managing Director and Chief Executive of Campbell Brothers Limited (now ALS Ltd), a Director of ALS Ltd and Transpacific Industries Limited, and previously Chairman of Flight Centre Limited. Non Executive Director Richard Aird RedFlow s Chief Operating Officer from early 2010 until July A professional operations manager with over 20 years experience in commercial development and operations. Key Personnel Role Name Previous Experience Chief Engineer Dr Alex Winter Previously with Schlumberger and experience includes over 9 years experience in fluid dynamics and mechanical design. Significant experience in various consulting and managerial roles in Austria and Argentina. Chief Technology Officer Dr Mike Giulianini Over 13 years experience as a systems engineer in development, management and executive positions with Solar Farmers, Integral Electric Technology and SELEX Communications Group in both Italy and Australia. Business Development Manager Bruce Ebzery Over 20 years business development experience in selling engineering services and products with large multinational companies and electricity utilities such as Energex. 18

19 Cash Position RedFlow currently has approximately $5.0m cash on hand (Post Placement and Pre Rights Issue) and is debt free. Large orders are not expected to require any working capital investment by Redflow. Sustainable Cost Base Operating overheads are stable at approximately $500K per month which are not expected to increase as production increases. Staff numbers are currently 46. Market Capitalisation The Company is currently capitalised at approximately AUD$25 million (at $0.13). Over $38m of capital and grant funding has been invested in developing the ZBM to the stage of having a commercial offering. 19

20 20 Thank You

21 21 Appendices

22 Frequently Asked Questions How does a ZBM work? The RedFlow ZBM is a zinc bromide flowing electrolyte battery. It comprises three main components: the electrolyte tank, the electrode cell stack and the electrolyte pumps. During charge, the electrolyte is circulated through the electrode stack, and zinc is plated on to the conductive plastic electrodes, while bromine is complexed in the electrolyte. The electrodes do not form part of the chemical process. During discharge, the plated zinc is removed from the electrodes, returning the electrolyte to its initial state. Every few cycles, the ZBM needs to perform a short maintenance cycle, whereby any residual zinc is removed from the electrodes, returning the ZBM to an as new condition. 22

23 Frequently Asked Questions How does a ZBM differ from a conventional lead acid battery? RedFlow s ZBM is a flow battery so it has flowing electrolyte and stores energy by plating conductive plastic electrodes. Furthermore, ZBMs can be completely discharged without any adverse effects on cycle life. ZBMs can also utilise full 100% depth of discharge, compared to lead acid s recommended 40 50%. In terms of size and energy density, the usable energy storage of 1 ZBM would require approximately double the ZBM size and weight in lead acid batteries. Redflow s ZBM is also an intelligent battery being able to inform the operator about its status: state of charge, state of health, operating warnings and temperature are all information that can be accessed remotely at any time. How proven is RedFlow s ZBM technology? RedFlow s ZBMs have been deployed in the field since 2009 and to date, have cumulatively cycled over 150MWh. Over 600 have been manufactured. The ZBM has also been independently tested and verified by Sandia National Laboratories, and assessed by independent energy storage expert Garth Corey. Reports from both assessments are available on the RedFlow website at Long term testing and laboratory testing show a technology readiness level (TRL) as ready for commercialisation. How easily available are the components of a ZBM? The ZBM is primarily made from readily available plastics and metals. All the chemicals used in the electrolyte (including zinc and bromide) are easily accessible and no rare earth metals are used in any part of a ZBM. 23

24 Frequently Asked Questions What is the nominal and peak current during charge and discharge? The ZBM s maximum charge current is 40 A DC (at 54 57V DC) and maximum continuous discharge current is 70A DC (at 42 57V DC). The ZBM is capable of peak discharge currents of 120A DC. What are the energy and power densities of the ZBM? The ZBM s energy density is 33Wh/kg and the power density is 13W/kg. This includes the total weight of the electrolyte and battery components. 24

25 Frequently Asked Questions What are the ZBM s self discharge characteristics? Self discharge in the ZBM is limited to a maximum of 10%, which takes place over the course of about one day. After this time, there is no further significant self discharge since only the electrolyte held in the stack can selfdischarge, and only approximately 10% of the electrolyte is held in the stack at any one time. Auto/Self maintenance The Battery Management System will automatically perform a short maintenance cycle on the ZBM every 5 or so days of continuous operation. In order to do this, the ZBM will fully discharge. Therefore, after this time, there will be no energy left in the battery until it is charged again. What are the columbic and energy efficiencies of the ZBM? The ZBM s efficiencies greatly depend on the applications it is used in. In RedFlow s long term test facility, ZBMs are recording columbic efficiencies of approximately 90% and energy efficiencies of approximately 75% 80%. Optimal efficiencies are usually achieved when performing charge and discharge periods of 6 8 hours. Which communication protocols can be used with the ZBM s internal BMS? Modbus Protocol can be used to access the ZBM s internal BMS. For the specification of the interface and the protocol please refer to the ZBM Firmware Interface document. 25

26 Frequently Asked Questions What is the cycle life of the ZBM? We have calculated the equivalent of over 1,000 cycles of daily charging and discharging which equates to over 6MWh delivered per battery for the battery we will commence production with. We expect over 8MWh to be completed. The life of a ZBM is more dependent on the MWh delivered, rather than the number of cycles it performs which can vary from 0% to 100% depending on the application and the energy requirements. Therefore, if the ZBM is used at lower states of charge, it would be expected that it would deliver the same prescribed energy in terms of MWh, but would therefore perform more than the prescribed number of full 0 100% cycles. What is the lifetime expected for the ZBM (years)? The ZBM s battery life is dependent more on energy delivered than on calendar time. Since it is primarily made from plastics, material degradation over time is limited. Lifetime could extend beyond 3 years depending on the energy throughput during this time. What is the influence of temperature on the performance of the ZBM? The optimum temperature range for battery operation is 10 C 40 C. The ZBM will operate in temperatures from 0 C up to 50 C but will derate and impact performance and efficiency. Over 50 C, the battery will automatically shut down to avoid internal damage to the battery. The ZBM also includes a cooling fan, which will be automatically activated at temperatures above 30 C to cool the battery. 26

27 Frequently Asked Questions How is the ZBM s state of health monitored? Many operational and diagnostic points are checked by the ZBM s internal BMS. The BMS will immediately suspend operation in the event that incorrect operation is recorded. This information can be sent to the energy storage systems BMS via MODBUS communications, and sent to off site locations via an internet connection. What happens to the ZBM at end of life? When a ZBM has reached end of life, it requires correct disposal or recycling, conforming to any relevant local or international regulations and standards. The majority of ZBM components can be recycled. The electrolyte can be reused in other ZBMs as long as there has been no contamination. No heavy metals or toxic materials are used in ZBMs. Is there any additional information on safety and testing of a ZBM? ZBMs are constantly monitored for Battery condition, leak detection, temperature, internal resistance and other parameters via its internal BMS. This information can be relayed to an energy storage system s BMS via MODBUS communications. The internal BMS will suspend operation in the case of an operational issue, thereby stopping the flow of electrolyte and any chance of thermal runaway. The zinc bromide electrolyte has a ph 2 3 and the complex agent is an organic compound with an overall HazMat class of 8. Appropriate personal protective equipment (PPE) should be worn when coming into contact with the ZBM s electrolyte. This is not needed in the cases of normal operation and installation. Safety datasheets for the various states of ZBM electrolyte can be obtained from Redflow. 27

28 Frequently Asked Questions Can the ZBM be scaled up for use in large energy storage systems? RedFlow s ZBM is a 3kW/8kWh DC battery, which can be modularised to create larger energy storage systems. ZBMs can be connected in series, parallel, or a mix of the two. We do not scale up via larger tanks for electrolyte, but by increasing the number of ZBMs used. The ZBM requires only a DC connection. For applications which require AC power, RedFlow s ZBM can be connected to a range of inverters and other power electronics at either low or high voltages. What is the cost of a ZBM? The current price point for the 3kW/8kWh ZBM is USD$7,000 each. The current price point reflects a cost of USD$875/kWh. 28