GWH - ESS Tech: Drones Vanquish Rumors

Summary

• Grizzly Research put out some short seller research on December 7, 2022, stating that ESS's Australian partner isn't in fact building a plant.
• Grizzly used very dated Google satellite images and a SPOT satellite image they claim is from November 1, 2022, to make their point.
• Much higher resolution drone footage from January 16, 2023, puts Grizzly's claims of "no building happening" in the penalty box.

ElectricPhred's thesis: ESS Technology (GWH) is having post SPAC merger problems, transition from R&D problems, explanation and validation of their technology problems, and short seller induced problems calling into question whether their Australian partner Energy Storage Industries - Asia Pacific ((ESI)) really is a standalone entity and whether ESI's proposed plant in Maryborough, Queensland, Australia is really being built. I have the stock as a hold in light of those many questions.

I've expressed some skepticism and concern about ESS in my previous articles dated 12/17/2022 and 12/7/2022 . If management answers my questions presented in my latest article and prints some revenue for the next quarterly report, my sentiment will shift to a buy. This article is intended to put to rest the rumors on whether anything is happening with the Australian plant. A couple of emails to Australia helped me realize there is likely real commercial effort and there is indeed activity going on at the proposed plant site. So I'm not buying that portion of the short sellers innuendo.

What is Grizzly's thesis? Grizzly Research put out a negative research report on ESS on December 7, 2022 titled:

Caught Red-Handed: We Present Evidence that ESS Tech Inc.'s Biggest Customer is Really an Undisclosed Related Party Without Operations

Where are we now? Here's a video released this week complete with ESI hardhats and vests in which company and government officials talk about the $70 mm battery plant. Of note in that piece is the segment which talks about Queensland's $500mm to purchase batteries and help facilitate infrastructure like this plant. Some of these government officials have heard about the supposed Grizzly scandal of "no plant being built" so I doubt they'd be standing in front of cameras and taking questions if there was indeed no effort underway.

And here's a piece on LinkedIn talking about the first ESS battery being commissioned by Australian partner ESI:

Energy Storage Industries Asia Pacific3

The ESI team is super-charged after completing the final stage of commissioning of the first large-scale iron-flow #battery in Australia. ESI's battery - the first of many to accelerate Queensland's #renewableenergy future - has been installed and commissioned at the National Battery Testing Centre at Banyo in Brisbane over the past two months. The battery will be put through its paces in coming months as it demonstrates its capabilities in Australia's harsh environment, ready to capture surplus energy and return it to the grid at peak times. This first battery was manufactured by our partner ESS, Inc. in the US, and is just one of the models we will be assembling in Queensland from 2024 for wholesale electricity generators, energy retailers and commercial and industrial customers. A big thumbs up and thanks to QUT (Queensland University of Technology) , which operates the testing centre, the Queensland Government for the funding they provide to the facility, and the Future Battery Industries Cooperative Research Centre for its support. One of many milestones to come for the ESI team and Queensland in 2023! Pictured are, left to right, ESI team members Nick Gresham, Dr Sabiha Akter Monny and Peter BRIEDE . Stuart Parry #ironflowbatteries #queenslandmanufacturing #ESIironflowbatteries #energystorage #energytransition

And what about those Grizzly high resolution satellite images? Grizzly makes a pretty bald faced assertion in their report:

We found evidence that the factory is not being built.

To make their case, Grizzly included in their report this satellite image which they date at November 1, 2022:

Grizzly probably used this date to go along with their narrative that nothing is happening at the site. In any event it appears to be too low resolution to be terribly useful.

They also used this aerial photo apparently grabbed from an ESI company video:

What about more recent and higher resolution images? Curious about what was going on in Maryborough, Queensland, Australia I went online and located a drone operator, and paid for some of his time for photographic flights from nearby public roads.

My new friend Bobby, the drone operator, sent me these January 16, 2022 pictures:

The grainy low res Grizzly satellite shot and the muddy aerial photo Grizzly supplied fit their narrative of "not much going on." By contrast, Bobby and Electricphred's aerial drone shots show paving, drainage, security fencing, construction trailers and fit what I think is the correct narrative and timeline: a plant just breaking ground that has been promised to be online by 2026. I don't think you leave construction trailers and security fences and install infrastructure if you aren't planning on coming back. Sure this is all site prep and is not yet construction per se. But it's a lot of work going on. To paraphrase Grizzly, "We found evidence that the factory is being built." (Author's emphasis added).

Conclusions. I was alarmed when the Grizzly report came out, and credit the company's several hundred million dollar decline in market cap in part to Grizzly's scary prose. But as the videos, LinkedIn posts, and current drone photos illustrate, large parts of the Grizzly thesis fall apart with the passage of time and a little poking around. Are other parts of the Grizzly thesis accurate? I intend to keep sniffing around. If Bobby's drone work down under is helpful maybe we can crowd source regular updates (which of course ESI and ESS should be doing to take control of the narrative.)

I'm currently underwater on this, my second, unprofitable outing in the stock and warrants. But I continue to think the world needs a grid scale storage solution. Australia also needs grid scale storage and, despite what Grizzly thinks, they may be getting it homegrown in Queensland on or near the schedule they've indicated.

I'm not an apologist for the company and think they must do a better job on disclosure in their next earnings release and answer the questions laid out in my previous SA article. The company continues to do a lousy job rebutting the Grizzly report. Let's hope they become more transparent and shareholder friendly.

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