Lithium Power International’s Andrew Phillips discusses the environmental and economic benefits of investing in green technologies.
Investing in green technologies is essential to ensuring the battery revolution and the delivery of clean, green energy that the world is eagerly awaiting. Thankfully, finance is being made widely available to support the soaring growth plans of established companies and start-ups alike.
Yet the world is also experiencing tightening monetary conditions as interest rates rise and reign in early signs of inflation. Considerable support is still required from banks, government agencies, equity markets and private players for electric vehicles (EVs), and battery storage to achieve aspirations to decarbonise. The environmental and economic benefits for the world to embrace green technology is obvious, and plenty of prominent names have made big commitments.
Financing green technologies
Influential financiers are speaking out about the opportunities at hand and their plans to participate. S&P Global’s president, CEO and executive director, Douglas L Peterson, told a capital markets conference in March 2022 that his company saw the transition away from carbon fuels as being absolutely critical. The information his business harvests provides him with unparalleled insights into what is taking place in lithium markets. “I can not have a conversation with a client when we do not talk about ESG or climate,” he said. “We have projected this demand based on speaking with customers, looking at markets, understanding how this will flow into banking, into asset management, into corporations. This is going to grow fast. And we are very well positioned to continue with a leading position.” He talks about reaping S&P’s information banks to provide critical information about EVs and transportation networks. With ESG issues, business has the ability to track and score how individual businesses report on their climate impact.
Peterson’s views are supported by recent comments made by Larry Fink, chairman and CEO of the world’s largest investment management group, BlackRock. He told The Bid podcast recently: “The amount of money that has moved into more sustainable strategies is just the beginning. If you are a company that is not winning those flows because you are not moving fast enough, you are going to be seeing money outflow from your shares and money inflows into a competitor or to another industry. I am saying that we need to move faster. But the only way is working together and trying to find a pathway that is fair and just in going forward. I ask every business leader, are you going to be a leader or a dodo?”
Green technology: a growing market
The European Investment Bank, a regional lending arm, is investing record sums to support innovation in technologies, such as the development of batteries that are needed to realise a green world. It cites the backing of Northvolt as an example of what it wants to achieve. One of its first deals was in this Swedish lithium battery start-up. Northvolt has now signed deals to supply large European EV makers including Volvo, BMW, and Volkswagen to use batteries from its first gigafactory in northern Sweden. It recently announced its third such factory, in Germany, increasing capacity under development to in excess of 170GWh.
One of Europe’s leading commercial banks, Spain’s Banco Santander, is collaborating with a large electric power company, Enel, to support businesses to transition from fossil fuels. It says they will accelerate their clients’ initiatives by supplying and financing solar facilities, lithium batteries and energy efficiency solutions. Santander will play its part by raising €220bn by 2030 to support the push. The bank is already carbon neutral in its own operations and says that it will reach net zero emissions by 2050.
With President Biden at the helm, the US Government is talking up its commitment to ensure the security of critical supply chains to support the green energy transition. He says that a domestic supply chain is required for the US to realise the promise for lithium, particularly Li-ion batteries. Investing will be guided by the ‘National Blueprint for Lithium Batteries,’ which includes supporting manufacturing for EVs and grid storage. It accepts that the global battery market will expand by a factor of five to 10 in the next decade. It is being spurred on to maximise its rewards, because the market would otherwise be supplied by Asia and Europe.
Capital markets are becoming another significant source for funding by supporting listed battery, auto, and lithium companies. One of China’s largest battery makers, China Aviation Lithium Battery Co, recently filed to raise $1.5bn on the Hong Kong Stock Exchange. If it hits the mark, it would be the largest offering so far this year in that market. In South Korea, LG Chem cut the strings to its battery arm, LG Energy Solution, when its offshoot gained its own listing. It is expected for immediate earnings in the latest quarter to double.
One notable niche to emerge in frothy US capital markets has been battery storage companies, including an IPO by Fluence Energy which raised nearly $1bn. UBS has predicted that the US storage market could grow to something like $426bn in the next 10 years. Experts, including BloombergNEF and Wood Mackenzie, are also optimistic about storage in the long term as demand grows. No doubt they have seen the surge in private equity start-ups, including the support for a group called SES. It raised $139m in recent weeks to develop a hybrid lithium metal battery with support from GM. Solid Power reaped $130m in a raising backed by Ford, BMW, and Volta Energy.
How is Lithium Power International contributing to the green energy transition?
Lithium Power International is proposing a plan to spin-off its Western Australian lithium development business in a new company on the Australian Securities Exchange, fitting neatly into this trend. Subject to regulatory approvals, a prospectus for a new ASX listing will soon be issued. The funds raised will enable work to be sped up on its development projects, one of which adjoins the world leading Talison lithium mine. This will focus LPI on its Maricunga lithium project in Chile, with its post-tax NPV of $1.4bn. Financing negotiations are currently being finalised before development of the project commences, with Mitsu advancing on its internal processes related to the previously announced non-binding Memorandum of Understanding. LPI has also received unsolicited approaches from other interested parties, attracted to the solid financials associated with the Maricunga project, which include options for production off-take.