Redflow Limited has today announced an Entitlement Offer to raise as much as $22.9 million before offer costs with an immediate target of around $6.25 million.
When the Board last raised capital from shareholders in April 2019 (by way of a 1:2 pro-rata non-renounceable entitlement offer) it noted that Redflow was well-positioned to gain sales traction and customer acceptance of its innovative zinc-bromine flow batteries.
Since that time, Redflow has:
- grown sales over the nine months to 31 March 2020 by 166 per cent to $1.7m versus the prior corresponding period;
- secured (after extensive trials) an initial order from Vodacom, which is part of one of the world’s largest telco groups, for nearly 30 telecommunication tower sites in South Africa (68 batteries);
- developed a close relationship with Mobax, one of Southern Africa’s largest field services companies for the telecommunications industry;
- been selected by New Zealand Rural Connectivity Group to provide energy storage for a number of off-grid sites with an initial order in December 2019 and repeat order in April 2020 (22 batteries in total) and have been advised that Redflow batteries are a reference technology in a closed tender to select an installation partner for all RCG’s remaining off-grid telecommunication towers;
- achieved ISO9001 accreditation for our Thailand factory and demonstrated the benefits of a wholly-owned flexible manufacturing capability (capable of quickly scaling to 250 batteries a month);
- proven the capacity, performance, structure and behaviour of our Thailand manufactured batteries after more than 600 cycles through an Australian government-sponsored independent testing program;
- captured a growing number of orders through a refreshed partner ecosystem in Australia – notably in the agricultural and commercial sectors;
- expanded into China via a Collaboration Agreement with ZbestPower Co – including the deployment of a 10 battery demonstration site in Qinghai Province; and
- secured material improvements in future input costs through key supplier negotiations.
Redflow’s principal focus has been on the telecommunications sector as that presents a large and growing market where Redflow’s unique battery characteristics provide real benefits to its customers, particularly in regions like Africa that have inconsistent mains power and serious battery theft issues.
Redflow’s progress is also reflected by a growing number of deployments in the field. Redflow now has more than 90 active deployments globally, which has grown by 40 per cent during the last 12 months. Redflow’s earliest telco reference site for Vodafone in New Zealand has now delivered more than 60 MWh (megawatt-hours) of energy since its commissioning in 2016.
As a direct result of the COVID-19 pandemic, key customers have (quite understandably) delayed critical investment plans which, combined with the inability to travel to our important international markets, has materially impacted realisation of some immediate sales opportunities and our broader pipeline across multiple markets. Our sales pipeline remains strong and underpins the potential for material growth for Redflow’s business once the pandemic ends.
Nevertheless, management and the Board have taken all possible action to continue with our sales efforts while reducing expenditure where we can. An underlying overhead cost reduction of over $2.1 million to the end of April FY20 has been achieved compared to the previous corresponding period in FY19. Further reductions in monthly costs are targeted.
Redflow is not wasting the period while we are impacted by the COVID-19 pandemic. Rather, we have decided to use this period to materially accelerate completion of our next generation zinc bromide flow battery (Gen3 Battery). The Gen3 Battery will include a new electrode stack design, a new electronics board and an updated tank design.
The Gen3 Battery will be delivered at a significantly lower cost than our current battery and will provide the platform for a volume manufactured battery and a better customer proposition in a competitive market. Critical insights from our partners and key telco customers generated over the last six months are also being integrated into the design to improve application-specific performance, installation and in-life management.
The current economic environment and a growing focus on renewable energy provide a unique opportunity for Redflow to focus on this critical program, that has already made significant progress over the past six months. Redflow’s Brisbane based engineering team will be accelerating this work over this COVID-19 impacted period with support from Redflow Thailand. We expect that our Gen3 Battery will deliver at least 30 per cent cost reductions versus current Thailand produced ZBM2 batteries, at reasonable volumes.
Shareholders will be updated with progress each quarter as the program achieves key milestones. This includes completion of retooling for Gen3 at the Redflow Thailand facility in October and commencement of initial customer trials by the end of this calendar year.
The Board continues to believe that the Redflow battery provides a technical and commercial value proposition in multiple industries where stable and cost-efficient power is critical.
Redflow believes that it requires new funding of around $6.25 million to fund this work over the next 12 months and to continue progressing Redflow’s growth strategy and is seeking shareholder support to raise the required additional capital. Accordingly, Redflow today announced a capital-raising via a non-renounceable 1:1 entitlement offer (Entitlement Offer). If fully subscribed, the Entitlement Offer would raise approximately $22.9 million before offer costs.
The Redflow board invites shareholders to examine the details of this offer, which can be downloaded from the Redflow website. These documents comprise:
- Entitlement Offer, June 11, 2020
- Investor Presentation, June 11, 2020
- Cleansing Notice, June 11, 2020
- Proposed issue of Securities – RFX, June 11, 2020
The Redflow Board fully supports the Entitlement Offer and the company directors have each agreed to participate in the rights issue.