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All Charged Up - Battery power plays worth exploring

September 4, 2008, Delta BC - Green Investor at Investorideas.com
http://www.investorideas.com/gi/
By Paulo Nery

Batteries are becoming increasingly important to our lives. Not only to sustain our rapidly expanding wireless technology requirements, but also to support our need to travel about. With hybrids, plug in hybrids and fully electric vehicles beginning to provide us with more cost effective transport, we’re bound to depend more and more on batteries. And at a larger scale, as we integrate more renewable sources of energy into our electricity grid, we’ll need to manage supplies with more uncertainty. So, there is likely to be an increased need for energy storage solutions to help temper the ups and downs of power supply irregularity.

Lithium Ion batteries seem to get a lot press for their higher storage capacity per pound, but the more traditional lead-acid batteries are likely to be with us for a long time to come, particularly in the many industrial applications the use them.

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The biggest maker of industrial lead acid batteries is Enersys (ENS).  They make batteries for forklifts and for back up power systems, over 60% of which is overseas.  They’re selling into markets like global logistics, telecoms companies and the military.

Enersys has a proprietary technology that means their batteries last longer and are smaller than the average lead-acid battery. They call it "thin pure plate lead" or TPPL.  According to their last conference call, demand for these batteries is more than they can keep up with. So they’re expanding the plant that makes them.

But Enersys is not just about old battery technology. They also have a lithium-ion battery technology which they sell primarily to military, telecoms and specialty industries. So this steady tech company is well positioned for near term as well as longer term growth. (www.enersys.com)

Another large maker of lead acid batteries is Exide (XIDE) who make batteries for cars, bikes, boats, agricultural equipment, construction vehicles etc. They also sell specialized batteries for forklifts and other industrial equipment including the military.  Like EDS, over half of their sales come from overseas.

Only yesterday I had to put a new battery in my wife’s car. And where do you think the old one went? Yep, Exide, who happen to be the largest recycler of lead batteries in the U.S. That means they’re getting better value than buying lead on the open market, and saving a bundle in the process of being green.

Their market cap, at $837 million, is about 25% less than Enersys. But their sales are considerably higher and their p/e ratio is slightly lower, so I’m inclined to like them a bit more.  (www.exide.com)

Axion Power International (AXPW) is developing a proprietary technology they call PbC – perhaps because it’s a hybrid of lead-acid and carbon. See their website for more details on how it’s made (www.axionpower.com). Axion aims to sell the batteries made with PbC as an upgrade to conventional lead-acid batteries in industrial applications. This is an enormous broad-based potential market that will likely respond to more efficient batteries.

They’ve been focused for over two years on refining their manufacturing methods as well as continuing with performance testing on the pre-production prototypes. These tests have shown that their PbC batteries have considerably longer cycle-lives, faster recharge rates and more power than conventional lead acid batteries. But then, a lot can change between pre-production and real world production.

If you’re in the mood for more speculative plays, Ener1 (HEV) is a good start. They don’t have significant sales yet, but are developing Lithium-Ion batteries that have been delivered as prototypes and successfully tested in a Th!nk EV (electric vehicle).  They’ve already built a manufacturing and testing facility and expect to begin manufacturing by the end of this year. So they might actually be the first to offer a production Litium-Ion battery to the auto industry. 

For the long term, Ener1 is developing nano-materials for better battery storage. That’s very intriguing with oil prices high, but not something to hold your breath for.

And, you have to like the fact that they’ve shifted from the OTC market to the AMEX, which makes the company seem that much more credible.  (www.ener1.com)

If you’re a fan of Lithium-Ion batteries you could do worse than to look at Sociedad Quimica y Minera de Chile S.A. (SQM) the Chilean mining company that produces potassium nitrate, iodine and lithium carbonate other specialty products. They just happen to also be the world’s biggest producer of Lithium, a business that was 15% of their revenues last year but is expanding fast and expected to approach 40% by the end of this year.  Clearly, they will be a big benefactor of any significant increase in demand for Lithium from whichever battery maker, or makers, succeed in launching real-world products. (www.sqm.com)

Some other battery technology companies to keep an eye out for include:
Maxwell Technologies, Inc. (MXWL)  - supercapacitors  (www.maxwell.com)
Energy Conversion Devices (ENER) - nickel metal hydride (NiMH) battery technology (www.ovonic.com)
Advanced Battery Technologies, Inc (ABAT) - polymer Lithium-Ion (www.advancedbatterytech.com)

While the Lithium-Ion batteries seem to get most of the star attention, the advantages, mainly smaller size, relative to the cost only pay off for mobile devices right now. So the old-fashioned lead-acid battery is likely to continue to hold on to a big piece of the market for a long time yet. But the lead-carbon hybrid concept offers bankable advantages like faster charge, longer life and higher power. So it may find a significant market once production begins in earnest.

Disclaimer:  Nothing in the above article in no way constitutes a recommendation to buy or invest in these or any other stocks. You should always seek professional financial advice when planning your investments or trading in the stock markets.  Paulo Nery is an independent columnist for Green Investor at Investorideas.com Paulo J. Nery writes about green business, green investing and green lifestyle. www.InvestorIdeas.com/About/Disclaimer.asp. InvestorIdeas is not affiliated or compensated by the companies mentioned in this article.

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