Altair Nano: Advanced Battery Sellout

by Debra Fiakas CFA

Advanced battery developers have not had an easy time of it in recent years, or at any time for that matter.  There have been three bankruptcy declarations this year alone.  Ener1 and A123 Systems (AONE:  OTC/PK) were rescued by deep-pocketed buyers, who scooped up technology, contracts and relationships.  In this second post in the series we look at another advanced battery sellout.

Altair Nanotechnologies (ALTI:  Nasdaq) has managed to avoid court rooms.  However, it did have to put itself up on the block, selling a majority of its shares to China-based Canon Investment Holdings.  Its operations will ultimately be moved to China, where the company plans to establish a manufacturing capacity.

Some investors might think there is no rush to lease a facility.  So far Altairnano has recorded only nominal product sales.  That said, the company does have customer relationships. Altair has a development agreement with AES Energy Storage, a subsidiary of AES Corporation (AES:  NYSE), and put two 1-megawatt large-scale battery systems for electrical grid applications.  The success of the demonstration helped Altair win two orders in the frequency regulation market.  Altair was chosen to supply a turn-key 10 MW advanced battery system for frequency control at a power station in El Salvador.  The project is waiting for regulatory approval.

Altair also has a long-term agreement with Proterra, Inc., the maker of heavy duty drive systems, to supply advanced lithium-ion battery modules for Proterra’s all-electric and hybrid-electric buses.  Proterra has big plans to scale production capacity to 1,500 buses per year.

Proterra accounts for a significant portion of Altair’s sales, which were $2.9 million in the twelve months ending June 2012.  The balance of sales was to Yintong Energy Company Ltd. in China.  YTE had been buying Altair’s proprietary nano lithium titanate materials and battery cells and purchased a one-megawatt ALTI-ESS system.  Materials purchases have been suspended indefinitely, but the agreement can come back to life with minimum materials purchases.

Altair recently entered into a joint marketing agreement with Indiana-based EnerDel, now privately held by a Russian investor.   The idea is to leverage respective contacts and product capabilities.  EnerDel’s claim to fame is a prismatic cell design and modular stacking architecture for its batteries.  Altair uses a proprietary nano-scale processing technology to create lithium titanate materials for battery anodes.  The chemistries lead to a battery life as much as ten times longer than conventional lithium ion batteries.  It also makes possible faster discharge and charge sequences.

Investors should note that Altair reports a deficit of $214 million, suggesting that it has managed to let slip through its fingers nearly all of the $246 million in capital investors have put into Altair.  The company has spent a pinch over $80 million to perfect its lithium titanate technology since the company’s inception in 2000.  The balance of the loss is associated with production, selling and administrative activities.

Altair has been awarded twelve U.S. patents and 42 foreign patents.  They are evidenced on the balance sheet at a whopping $312,000 in value.  With so little visibility in future sales and cash flows, that amount may not be far off the mark.

The company still has a bit of time to drum up new business and make good on its technology investments.  Based on cash usage in the last twelve months, it appears Altair needs approximately $15.0 million a year to stay in business.  Altair has $35 million in cash on its balance sheet, providing it with support for another two years.
 
Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.