EnSync Energy Systems Company Update March 12, 2018
Forward Looking Statements 2 THIS PRESENTATION INCLUDES FORWARD-LOOKING STATEMENTS THAT ARE MADE PURSUANT TO THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS INVOLVE INHERENT RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS, AS A RESULT OF VARIOUS FACTORS INCLUDING THOSE RISKS AND UNCERTAINTIES DESCRIBED IN THE RISK FACTORS AND IN MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SECTIONS OF OUR MOST RECENTLY FILED ANNUAL REPORT ON FORM 10-K AND OUR SUBSEQUENTLY FILED QUARTERLY REPORTS ON FORM 10-Q. WE URGE YOU TO CONSIDER THOSE RISKS AND UNCERTAINTIES IN EVALUATING OUR FORWARD-LOOKING STATEMENTS. WE CAUTION READERS NOT TO PLACE UNDUE RELIANCE UPON ANY SUCH FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE MADE. IN THIS DOCUMENT, WE REFER TO INFORMATION REGARDING POTENTIAL MARKETS FOR PRODUCTS AND OTHER INDUSTRY DATA. WE BELIEVE THAT ALL SUCH INFORMATION HAS BEEN OBTAINED FROM RELIABLE SOURCES THAT ARE CUSTOMARILY RELIED UPON BY COMPANIES IN OUR INDUSTRY. HOWEVER, WE HAVE NOT INDEPENDENTLY VERIFIED ANY SUCH INFORMATION. This presentation copyright 2017 by EnSync, Inc., dba EnSync Energy Systems
Massive Disruptions are Destroying the Traditional Industry Models for Music and Cable TV 3 Digital and streaming fragmented and democratized music recording and distribution By the end of 2017, more than 22 million viewers age 18 and older are expected to have cut the cord, according to emarketer
Destruction of the USA Utility Model will Follow the Pattern of the Destruction of the Legacy Music Business Model (Inflation Adjusted USA Sales) 4 The record labels had all the power until digital music and downloading broke the business model Single song downloads have replaced buying the entire CD Competition through ease of artist access to the end market has driven down value per song...and it gets worse. This is only through 2013, so data is largely pre-streaming
What s Driving the Fracture of the Traditional USA Utility Business Model? 5 1. Reductions in the cost of solar modules 2. Transition to electric vehicles and massive production scale-up of lithium ion energy storage batteries that can also be utilized for stationary energy storage systems. 3. Regulations and incentives at the Federal, State and Local Government levels 4. Drive to increase overall grid system efficiency vs. deployment of large, new generation assets smaller sources of generation located closer to demand. 5. Retirements of coal and nuclear generation assets driven by government policy For the Utility Business Model, it is like 1999 was with the Music industry business model. It will be destroyed / remade over the next 10-15 years
Massive Cost Reductions in Solar Modules and Li Ion Batteries are Changing the Energy Market 6 Cost of a Fully Installed PV System from 2010 to 2030 (Forecast) Battery Prices Keep Tumbling Bloomberg: Li Ion Forecast $109/kWh by 2025 Source: GTM 2017 Source: BNEF April 2017 Massive Scaling of PV and Li Ion Battery Production is Driving Large Scale Cost Reductions for Generating and Storing Clean Electricity The Fragmentation in Generation, Distribution and Consumption of Electricity will Create Huge Business Opportunities
A Transformation of the Grid Network is Occurring in the United States 7 The Grid Network is Transitioning to a Hybrid Grid, with Centralized Generation and Distributed Energy Resources (DERs), Utilizing Bi-Directional Power Flow Source: EPRI, EnSync This Transition is in the Early Stages and will Drive Massive Market Opportunity for the Next 10 15 Years
Distributed Energy Resources are Driving the Transition to the New Energy Economy 8 What is a Distributed Energy Resource (DER)? A Power Generation Source, typically <5MW, and usually solar power An Energy Storage System An Energy Management System controls the power delivery An Internet of Energy (IOE) software and control platform integrates the DER to the grid network and communicates with the electricity market EnSync Provides a Completely Integrated and Bankable DER Solution
Customer and Market Drivers Solar + Storage DERs vs. Solar Distributed Generation 9 DERs Provide Significant Revenue Making and Cost Savings Opportunities Compared to DG Systems
EnSync Products, Capabilities and Business Models have Completely Transitioned through Excellent Innovation 10 Products Added ZnBr Flow Battery Business Models Power Electronics M&A Auto Sync DC-Bus IP for Power Electronics Li Ion Battery Partners Hybrid Battery Control Matrix Energy Management system Modular, Scalable Power Electronics DER Flex IOE Control Platform EV AC and DC Chargers Schneider specific Matrix DER SuperModule EnSync True Peer-to-Peer TM Battery Sales System Sales PPA Sales DER and Independent Utility System Sales Capabilities Added Direct Sales Manufacturing in Low-Cost Battery design, Region / Strategic Partners assembly and test System Design and Basic procurement Integration Applications Development ESS Systems ESS + PV Systems Distributed (PV) Generation Systems Pre-2013 2013-2015 Project Development Project Management Structured Finance System Energy PPA Financial Modeling EPC Contracting and Management O&M Services Sales Channel Partners 2016 ISO / Wholesale Market Expertise Billing and Enrollment Selectively entry of EPC space DER Aggregation Bi-Directional electricity management Peer-to-Peer Control Technology 2017-2018
EnSync Pioneered the PPA Sales Model for Solar + Storage in the USA Market 11 2015: EnSync is first to sign a Solar + Storage PPA in Hawaii, and first in Hawaii to get a behind the meter Solar + Storage system permitted in the state. 2016: EnSync is first in the USA to sell a Solar + Storage PPA to a 3 rd party for behind the meter installation 2017: EnSync signs first PPA in California EnSync signs and sells first PPA for Community Solar; a single PPA for >200 individually metered units in Hawaii EnSync signs and sells first Data Center system PPA EnSync is first to implement fully commercial Internet of Energy (IOE) monitoring and control for a Solar + Storage PPA 2018: EnSync has signed PPAs for 22 installations, half of which are fully in service; EnSync has sold PPAs to (9) different buyers
Market Segments for EnSync Products and Services 12 EnSync Commercial Systems EnSync Independent Utility Systems
EnSync Commercial Systems Business Addressing Key High Growth Markets 13 Commercial and Industrial Buildings Data Centers and Power Security Applications EV Charging Stations EnSync DERs and DG Systems are Innovative, Commercially Proven and Bankable
EnSync DER Value Proposition The EnSync DER SuperModule 14 Market worth ~$175B, with a ~40% CAGR over the next 10 years, according to Navigant EnSync DER SuperModule product All elements to turn a PV installation into a high-value DER: Energy storage portfolio that covers any application. Matrix Energy Management System is modular can expand as new capabilities or applications are desired DER Flex TM Internet of Energy control platform unlocks additional economic value streams with seamless connectivity from the DER to the grid network Bankable for PPA or Direct Sale business models One Architecture for Commercial and Industrial Building, Data Center, and EV Charging markets Matrix 50kW x8 PV DC-DC Converter 100kWh Li Ion Energy Battery with DC-DC s 250kW Matrix DC-AC Module
Frequency of Use Infrequent Occasional Frequent EnSync Storage Portfolio Covers All C&I Applications with Hybrid Storage Systems Delivery of Best Possible Economics for All Applications 15 Li Ion Power Battery, < 60 Min. Use Cases Li Ion Energy Battery, 1-6 Hrs. Use Cases Flow Battery, > 6 Hrs. Energy Use Cases Freq. Reg. Load Following Renewables Smoothing Peak Demand Charges Time of Use / Rate Shifting Power Quality DR Revenues DER to Grid Electricity Sales Fuel Cost Savings Resiliency Short Medium Long Discharge Duration EnSync Differentiated by Ability to Simultaneously Perform Multiple, Optimized Applications with Different Storage Technologies Source: GTM, ESNC
Matrix Energy Management Platform Family 16 Modules Available from 9kW to 1000kW Standard Matrix Energy Management Platform Proprietary Auto-Sync DC Bus Technology Large Capacity Matrix Energy Management Platform LI ION POWER BATTERY LI ION ENERGY BATTERY Matrix Auto-Sync DC Bus is Key IP in American, Europe and Asia Markets
EnSync Partners with Schneider Electric on Distributed Energy Resource Market Opportunities EnSync Energy and Schneider Electric to Explore Distributed Energy Resource Technology and Market Opportunities Collaboration to harness the latest energy management technologies to develop reliable, clean energy networks and reduce costs for customers For Immediate Release 17 MILWAUKEE, June 13, 2017 /PRNewswire/ -- EnSync, Inc. (NYSE MKT: ESNC). EnSync Energy Systems, a leading developer of innovative distributed energy resource (DER) systems and Internet of Energy (IoE) control platforms for the utility, commercial, industrial and multi-tenant building markets, today announced it will work with Schneider Electric to explore technology and opportunities in the DER market. After reviewing the EnSync Matrix Energy System, the two companies identified areas of mutual interest for collaboration. Starting in June 2017, Schneider Electric and EnSync Energy Systems will jointly explore market opportunities and technology advancements required to best serve markets utilizing distributed energy resources. The grid landscape is changing rapidly and DER deployments are challenging incumbent grid operating models, said EnSync Energy executive vice president, Dan Nordloh. Both companies feel that we are in the early stages of transformational grid edge market opportunity. We look forward to strengthening our relationship with Schneider Electric to explore these areas of collaboration. The growth in distributed solar generation enables decentralization of the grid and bidirectional power flows from all DER. This provides an opportunity to integrate DER control and use it to the benefit of the overall electrical network. Nordloh continued, We are transitioning from simple distributed generation into an era of integrated distributed energy resources, where renewables, storage, energy management systems and IoE control capabilities replace solar-only installations. These distributed energy resources are an efficient and economical way to solve the shortcomings of the antiquated grid network and benefit the asset owner, enabling them to participate in the capacity and EnSync Recently Secured a Repeat Order for Matrix from Schneider Electric
EnSync DER For Data Center Application at Spectrum Time Warner, #3 USA Multiple System Operator 18 EnSync Energy to Provide Electricity to Oceanic Time Warner via Power Purchase Agreement Solar + Storage Project in Hawaii Utilizes EnSync s Matrix Energy Management and SuperModule Energy Storage Platform Under Construction September 2017 MILWAUKEE, Feb. 13, 2017 /PRNewswire/ -- EnSync, Inc. (NYSE MKT: ESNC), dba EnSync Energy Systems, a leading developer of innovative distributed energy resource systems (DERs) and internet of energy (IOE) control platforms for the utility, commercial, industrial and multitenant building markets, today announces a power purchase agreement (PPA) with Oceanic Time Warner, to include a comprehensive EnSync DER system. The system, comprised of EnSync s Matrix Energy Management, EnSync s SuperModule containerized energy storage and approximately 400 kw of solar, will provide electricity to dedicated loads at the Oceanic Time Warner office and operations center in Kailua-Kona, HI. November 2017: System includes 400kW of PV and (2) EnSync SuperModule Systems We are appreciative of the relationship we re developing with Oceanic Time Warner, and are looking forward to beginning construction in March. said Dan Nordloh, Executive Vice President of EnSync Energy. This distributed energy resource system is primarily designed to store excess solar energy generated during the day, and shift it for use in the evening hours when the overall demand for electricity peaks. The system will serve office loads, as well as what is known as a head-end facility, which is a critical operating facility that takes TV signals from satellites, processes them into cable quality and distributes them throughout networks and into homes. Nordloh concluded, Resiliency is often an important concern for our customers, and this system is designed so that the operation will be able to use the solar and storage in the event of a grid outage. About EnSync Energy Systems EnSync, Inc. (NYSE MKT: ESNC), dba EnSync Energy Systems, is creating the future of electricity with innovative distributed energy resource (DER) systems and internet of energy (IOE) control platforms. EnSync Energy ensures the most cost-effective and resilient electricity, delivered from an electrical infrastructure that prioritizes the use of all available resources, such as renewables, energy storage and the utility grid. As project developer, EnSync Energy s distinctive engagement methodology encompasses load analysis, system design consulting, and technical and financial modeling to ensure energy systems are sized and optimized to meet our customers objectives for value and performance. Proprietary direct current (DC) power control hardware, energy management software, and extensive experience with numerous energy storage technologies uniquely positions EnSync Energy to deliver fully integrated systems that provide for efficient design, procurement, commissioning, and ongoing operation. EnSync Energy s IOE control platform adapts easily to ever-changing generation and load variables, as well as changes in utility prices and Spectrum Time Warner PPA Project Sold to Global Infrastructure Company
EnSync EV DER SuperModule Example >90% Commonality with C&I DER Product 19 2x 50kW Level 3 DC Fast Chargers (from DC-Bus) 3x 14kW Level 2 AC Chargers 2x EnSync EV DER SuperModule AC Panel 1 100kVA AC Panel 1 100kVA 2x250kVA Utility Meter 1 (PG&E) Site Load Utility Meter 2 (PG&E) 8x Li Ion Energy Batteries 17x PV DC-DC s 4x Li Ion DC-DC s 2x 250kVA DC-AC 2x 100kVA DC-AC DER Flex IOE Wholesale Meter (SCP) ~800kW PV
Market Segments for EnSync Products and Services 20 EnSync Commercial Systems EnSync Independent Utility Systems
4285 Independence Ave EnSync Independent Utility Systems Market Segments 21 Community Solar Micro-Utility Systems Imagery 2018 Google, Map data 2018 Google 100 ft Utility to DER Connectivity Systems IPP PV and Storage Systems
Micro-Utility Systems 22 Initial Micro-Utility System for East Africa Ships in 2018
Community Solar Systems 23 First Community Solar System Sale in Hawaii
Community Solar Systems EnSync Enters the High-Growth Illinois Market 24
The Future: True Peer-to-Peer TM from EnSync 25 DC Linked, Multi-Node Peer-to-Peer Energy Exchange Node 1 Node 2 Node n DC Link Option to Use Grid as Secondary or Back-up Source DER SuperModule DER Flex TM IOE Monitors Usage and Handles Billing and Settlement
26 EnSync Business and Scaling Model Focus on software control platforms, system engineering, project development, design and execution, and applications. Enable scaling through: Power electronics and battery engineering / OEM partners Manufacturing partners Development partnerships, with the following options: Formal development companies focused on opportunity identification Full JV s Subsidiary Companies Co-marketing arrangements Capability to scale >10X with minimal headcount increase. Ultimate target of >$1.0M per employee in sales
Q2 18 Earnings Call Highlights 27 Feb. 13, 2018 Revenue increased by 179% to $4.8 million compared to $1.7 million in the year ago period Gross margins improved to 24.3% compared to 0.3% in the year ago quarter, and gross margins of 12.5% in the immediately preceding quarter Closed the largest single sale in company history, a PPA for a large multi-residential property on Oahu; Completed commissioning of Time Warner project at a key data center site on the island of Hawaii and commenced operation of two additional projects on the island of Oahu; Signed PPA for three additional Hawaii projects including a PPA with the Polynesian Cultural Center, a top tourist attraction in Hawaii, operated by the Brigham Young University Hawaii campus; Received a purchase order for a Micro-Utility system that will ship to East Africa, the first order for EnSync in the Africa market; Shipped a repeat order Matrix Energy Management system to Schneider Electric; Signed a Partnership Agreement with Lower Electric LLC for rapid entry into the high growth Illinois renewables market. Increased Backlog to ~$13.0M
Historical Revenues, Gross Margin and Backlog Steady Progress on Operational Performance 28 $14.0 $12.0 $13.4 $13.0 $12.6 $13.0 30.0% 25.0% $10.0 $8.0 24.2% 20.0% 15.0% $6.0 $6.3 12.5% $4.0 10.0% $2.0 5.5% 5.0% $- < 0.0% < 0.0% Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Total Revenues Backlog Gross Margin % Linear (Total Revenues) 0.0%
Company Value Proposition 29 Summary Well positioned to capitalize on the massive reshaping of energy generation and distribution in the USA and other markets Entire bankable solution for DERs and Microgrids Proven PPA model Mass customizable solutions made possible by simplicity and intellectual property protected technology Scalable business model for supply chain and channels to the market Proven team for innovation and execution
Selected Financial Highlights 30 Six months ended December 31, Year ended June 30, ($ in Millions) 2017 2016 2017 2016 Total revenues $7.2 $9.4 $12.5 $2.1 Cost of product sales 5.7 9.5 12.6 3.5 Total costs and expenses 13.7 18.5 30.0 20.1 Loss from operations (6.5) (9.1) (17.5) (18.0) Total other income (expense) (0.1) - 13.1 (0.2) Net loss attributable to common shareholders (6.6) (9.1) (4.4) (18.2) Net loss per share (0.12) (0.19) (0.09) (0.39) ($ in Millions) Project backlog, reported February 13, 2018 (Unsold PPA project sale prices estimated based upon typical buyer IRRs) As of 12/31/17 Unless Noted ~$13.0 Cash and cash equivalents 5.9 Inventories 1.6 Costs and estimated earnings in excess of billings (underbillings) 2.3 Total assets 17.7 Accounts payable 1.9 Billings in excess of costs and estimated earnings (overbillings) 0.1 Total debt (excludes impact of mortgage payoff ($.4) from sale of corporate HQ in Q3 Total equity 12.0 0.9
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