What does $1.5 billion buy?

How much would you value a developing technology company with a product you have never seen nor ever tested? $1.5 billion dollars??

That’s what an implied valuation of the company EEStor equates to using their minority shareholder Zenn Motors for the valuation.  Zenn Motors, a Toronto based EV firm, owns 10.7% of EEStor and after recently ceasing operations to produce an electric vehicle seems to be focusing their efforts now solely on supplying EV drive-trains based on EEStor ultra-capacitor batteries. Using the market cap of Zenn at about $169 million, this implies a $1.579 billion valuation of EEStor while giving little value to the other components of Zenn Motors. Zenn is the only publicly available equity for EEStor while Kleiner Perkins and other, unnamed private parties played a key role in the firm’s early development.

Zenn Motor Vehicle

Zenn Motor Vehicle

EEStor is an upstart firm in Austin, USA developing an ultra-capacitor for transportation, military and grid storage applications. “Their (EEStor) unique technology capacitor-based battery, in theory, is far more energy dense and low weight than lithium ion, is cheap to produce out of unlimited natural resources, suffers no degradation, and can be recharged in minutes.” “EEStor says its energy storage technology for vehicles can provide 10 times the energy of lead-acid batteries at one-tenth the weight and half the price, and move a car 400 kilometers after a five-minute charge.”  The company is a legend of sorts with two entire websites dedicated by fans of the company to speculate about company developments(http://theeestory.com/, http://bariumtitanate.blogspot.com/).

Reducing the cost of energy storage, reducing charge times and switching to domestic materials would have a significant effect on the economics of hybrids, electric vehicles, and grid based energy storage used in cooperation with wind energy. It is not often products are enticing firms to more than double their performance and halve their costs. As much as these claims would revolutionize an entire industry or two, they have never been proven nor demonstrated to the public.

Similarly to EEStor, IBM, is currently working on a project called “Battery 500” using lithium air technology. This is not an ultra-capacitor but an advanced variation of lithium batteries with cathodes that use oxygen from the atmosphere (instead of phosphate or manganese) which enable these batteries to have a charge density ten times as dense as the best current standard Lithium Ion technology. Electric vehicles would be able to travel 500 miles on a single charge with a battery that was not dependent on rare Earth metals. However, like EEStor, this project is under works, and may or may not be an eventual success. “IBM estimates that it will take two years to determine if the goals of The Battery 500 Project can be met with lithium-air battery technology.”

The “what if” technologies of EEStor and IBM are vastly superior in performance and cost to the current Lithium Ion technologies being offered by Valence Technologies, LG Chem, A123 Systems and Ener1. However, what these lithium ion producers have that the two emerging technologies don’t are supply agreements, manufacturing and supply infrastructure and a history to prove the technology actually works. Oh, and revenues. (Yes, IBM sells a few other products.)

So, why is EEStor valued at $1.5 billion? Is it a validation of the importance of the energy storage sector? Do some people know that the ultra capacitors actually work? Or is this the result of hype built upon by a community of investors anxious for a technological breakthrough? While few people will doubt the importance and the expected growth of the energy storage sector, watching which particular firms emerge as the winners or losers will certainly be exciting.

1) http://www.allcarselectric.com/blog/1035989_did-eestor-certify-its-eesu-in-september

2) http://earth2tech.com/2009/01/08/john-doerr-mentions-kleiners-stealthy-lithium-ion-battery-startup/

3) http://www.wired.com/autopia/2009/10/eestor/

4) http://taintedgreen.com/batteries/eestor-watch-out-ibm-is-building-a-next-gen-battery-too/000351

5) http://www.smartertechnology.com/c/a/Technology-For-Change/Battery-500-Project-Charged-Up-over-AllElectric-Cars/

Darryl Siry, former Chief Marketing Officer for electric car maker Tesla originally implied this EEStor valuation, shown on source #3, implying that Zenn is worth nothing if EEStor is unsuccessful. Author owns shares of Ener1.

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6 comments

  1. brettalan · October 23, 2009

    As a side note- Zenn invested $2.5MM for a 3.8% share in 2007, and more recently $5MM to be at 10.7% ownership of EEStor. This last investment in EEStor implies a valuation of $72.4MM- so clearly there is a huge difference on valuations and/or people are giving Zenn an extremely high valuation. Some folks I have heard said that if the EEStor technology works- this is an undervaluation. But I believe that given the very high technology risks, and very high valuation- it’d be better to wait to buy once the technology is proven further.

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