NRGV - Energy Vault Keeps Delivering

2023-11-24 08:08:39 ET

Summary

• Energy Vault has developed EVx, a gravity-based energy storage solution, with the first project delivered in China and 7 more projects on the way.
• The company also delivers hybrid energy storage projects on time and it has a full pipeline to keep it busy for a long-time.
• Energy Vault's revenue streams include building and operating energy storage projects, recurring software revenue, and intellectual property licenses and royalties.

Energy Vault (NRGV) is a small energy storage solutions provider that has come up with EVx, their proprietary long-duration gravity-based energy storage solution producing royalty income.

But they also serve as architects of hybrid energy storage projects in an EPC (engineering, procurement, and construction) partner capacity and provide hardware and software.

Both of these planks have gotten off to a blistering start with the first EVx project having been delivered in Rudong, China (it's presently being connected to the grid) and 7 more projects on the way in China (5 of which recent signings).

They also delivered hybrid projects on time (hence the huge jump in Q3 revenues), and have a growing pipeline of projects which should keep them busy for years and could well take them to cash flow positive territory.

The shares have fallen back on an insider sale, which we think offers an opportunity to load up again.

EVx

• EVx is a gravity-based proprietary storage solution similar to hydropower (it works by moving heavy blocks up and down). The economics are progressively better the larger the scale of the system, and a main advantage is the 35-year guaranteed durability as batteries start to degrade pretty fast.
• EVx can be made with 100% local content, in the US that maximizes IRA benefits.
• Management argues that it's more scalable and economical than hydroelectric plants.
• The first 100MWh project in China at Rudong is commissioned and now being connected to the grid.
• Five new EVx projects announced in China, 1.2GWh. There are now 7 projects totaling 3.2GWh+ (that's 32x Rudong) in just 18 months of partnership with CNTY (China Tianying) its local partner, and they're not even up and running with the first one so adoption is fast in China
• More projects are in the works, in South Africa, India, and the US.
• Many are in the wings, waiting for the first performance metrics out of Rudong
• EVx will produce a 5% royalty stream (except the one EVx that the company will own in Snyder, Texas, where it creates tolling revenue).

Hybrid projects

• There is a list of project wins in our previous article .
• There is no shortage of demand, and most demand is still in short-duration, that is, battery storage.
• Delivering on time is a key differentiator for the company: fast turnaround for complex projects in challenging timelines.
• Energy Vault is the only company with short, long, and ultra-long storage projects, and of course, its unique proprietary EVx system.
• The company delivered the hybrid 275MWh battery system in Southern California with Wellhead fully in service and a happy Wellhead CEO.
• The Jupiter Nevada project is likely to follow in Q4.
• 440MWh second Jupiter project moved from award to booking.
• Green hydrogen project underway with Pacific Gas & Electric; 48-72h, going live in June of next year 2024.

Pipeline

• Additions become clear when compared to last quarter figures:

• While the submitted proposals and short-listed funnel decreased (but these are lumpy quarter-to-quarter), there was a huge jump in awards +153% y/y to 9GWh or $3.3B bookings.
• Signed contracts increased by 800MWh (y/y) bringing that total to just over $840M.
• Some of NRGV's partners are already involved in the DoE $7B dash for green hydrogen hubs.

Revenue streams

The company normally relies on third-party EPC (engineering, procurement, construction) firms to construct the storage systems, but they do so under the company's supervision with dedicated teams tasked with project management. Revenue streams, per the 10-K :

• Building, operating, and transferring energy storage projects to potential customers,
• Building, operating, and holding energy storage systems as equity (co-) sponsor that may provide recurring revenue in the future,
• Recurring software revenue through licensing software for asset management and use case applications,
• Recurring service revenue through long-term service agreements, and
• Intellectual property licenses and royalties associated with our energy storage technologies may provide recurring revenues in the future.

For further details see: