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Fluence IPO ‘can open investment doors for energy storage and renewable energy industry’

Fluence’s Cube, part of the 6th generation tech stack the company launched in mid-2020. Image: Fluence.

Fluence’s initial public offering (IPO) and NASDAQ Global Select Market listing could be a “landmark” event that opens doors for the energy storage and renewable energy industries, a clean energy finance expert has said. 

The energy storage system technology provider’s announcement earlier this week is also not surprising, due in large part to the rapid growth of the industry, Charles Lesser, a partner at Apricum, an advisory firm to the renewable energy and cleantech sectors, told

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“Energy storage [industry] landmarks pass with such regularity that they’re barely remarkable now – this IPO will be another,” Lesser says.

Fluence has filed a Form S-1 with the US Securities and Exchange Commission (SEC) for the IPO. While the price of its Class A Common Shares which will be traded and the total value of the transaction hasn’t yet been determined, the Form sets the proposed maximum aggregate offering price at US$100 million. 

In the S-1, the company notes its positioning at the heart of an energy storage sector which has gone from “a few deployments of single-function systems under 10 megawatts, to multiple deployments of systems over 100MW with broad functionality optimised by advanced software and digital intelligence”. 

Created as a joint venture (JV) between Siemens and AES Corporation and officially launched in early 2018, the groundwork before the launch of the Fluence brand was done by both companies’ respective energy storage businesses, and leadership includes some of the AES Energy Storage founding team that deployed the world’s first grid-connected lithium-ion battery storage system back in 2007. 

The company’s sixth generation energy storage technology stack, launched last year, likewise builds on the years of development and experience that went before it. The stack combines energy storage hardware and software, from the modular energy storage system (ESS) ‘Cube’ hardware, to the Fluence OS operating system and the artificial intelligence-enabled digital platform, called Fluence IQ. 

In addition to its deployment of 0.9GW of energy storage assets and a 1.9GW contracted backlog as of the end of June worldwide, Fluence has more recently bolstered its digital software platform capabilities. 

The acquisition of the software and digital intelligence platform of fellow industry pioneer Advanced Microgrid Systems, enabled in part by a US$125 million investment from Qatari sovereign wealth fund QFH, has led to the creation of the Fluence Bidding Application. 

Integrated into the Fluence IQ platform, this allows renewable energy assets as well as energy storage systems to be controlled and dispatched to provide maximum value for asset owners and maximum benefit to energy networks and Fluence has rolled that out as a standalone offering.

The Form S-1 refers to an aggregate of 2.5GW of renewable energy assets using Fluence Bidder already and a contracted backlog of 1.3GW of renewables and storage assets set to join, as of 30 June this year. The company has previously said that some 20% of all utility-scale wind and solar capacity being traded in Australia’s National Electricity Market (NEM) is onboarded to Fluence platforms

Fluence also reveals in the form that it has around 20GWh of contracted battery supply through 2024 from “leading battery manufacturers around the world”. With its products designed to work with numerous battery types, Fluence believes it is not “exposed to significant risk from changes in battery technology or shifts in market share between different manufacturers”.

Siemens and AES ‘ready to give Fluence more independence’

With the company’s stated mission being “to transform the way we power our world for a more sustainable future,” its success will be tied to the future of the global energy transition.

That said, Fluence’s IPO itself could be a catalysing event in that transition, Apricum’s Charles Lesser says. 

“As a result of the IPO research and roadshow, US institutional investors will become more informed about not just the global utility-scale storage industry, but also the software that manages renewable energy assets’ interaction with their markets. In this regard, Fluence’s IPO will pay dividends for other companies,” he says. 

According to Lesser — and other sources has spoken to — signposts that an IPO was on the horizon have been visible, particularly since Fluence took on QFH’s investment which valued the company at more than US$1 billion. 

Lesser says that decision in 2020 to “bring on board significant passive investment capital,” demonstrated that parent companies Siemens and AES were “ready to give Fluence more independence”.

“If you combine that with the capital requirements to satisfy the pace of industry growth, December’s announcement always looked like the precursor to a public listing.”

Indeed, in 2021, analysis and research group Wood Mackenzie Power & Renewables has forecast that battery storage representing about US$5 billion investment could be deployed in the US alone, with 345MW installed during the second quarter of the year. Similarly, the US Department of Energy’s Energy Information Administration (EIA) said in August that 10,000MW of grid-connected battery storage is set to come online in utility service areas the next two years.

Within that market, Fluence has been involved in a couple of major milestone projects: it provided engineering work on Vistra Energy’s Moss Landing Energy Storage Facility in California, the world’s largest BESS project to date and supplied technology to AES’ Alamitos project, the first time batteries went up against new-build gas peaker plants in a competitive solicitation and won

And that’s just the US: other markets where Fluence is already active like the UK and Australia are logging a big upturn in energy storage deployment and investment. The company has also delivered its first projects of a 470MW / 470MWh portfolio deal in the Philippines and recently brought online Lithuania’s first grid-scale ESS project. In Germany, a market which has been undergoing something of a downturn in its energy storage market — at least at utility-scale — Fluence and Siemens said in July that they will build a 100MW / 200MWh battery storage system.

Fluence quotes BloombergNEF figures on its Form S-1 that the global annual energy storage market — excluding residential — went from 0.6GW a year in 2015 to 3.8GW in 2020 and is forecasted to become 34.2GW a year by 2030. Fluence said it believes that is likely an understatement of the market opportunity. 

Work underway to install a Fluence Gridstack utility-scale project. Image: Fluence.

‘Industry expects IPO to be well-received’

Fluence has been rated among top players in the industry in sheer number and scale of projects brought online and in its backlog of projects to come, as well as for its execution by analysis firms like Guidehouse Insights and IHS Markit.

However, some of its rivals have been successful too in bringing on board major investment in the past few months, as that value of battery storage’s “broad functionality” becomes more widely recognised. 

Oregon-headquartered system integrator and manufacturer Powin Energy netted an investment for a undisclosed sum “in excess of US$100 million” in February this year. Company founder and chairman Joseph Lu said the equity funding investment from Trilantic North America and Energy Impact Partners would enable Powin to “to execute our planned innovations within our integrated software and hardware platform”.

US$150 million of equity investment was raised by North Carolina-headquartered FlexGen Power Systems in August. Company CFO Yann Brandt told then that the investment came at the perfect time to serve a growing market and growing customer base

Others, like Finland’s Wärtsilä and Tesla can lean on their existing scale and presence within the thermal power generation and electric vehicle (EV) markets respectively. 

Nonetheless, Apricum’s Charles Lesser believes Fluence’s IPO will not only stand out in the wider investment landscape but can benefit diverse clean energy industry players.

“The industry expects the IPO to be well received, so as a direct result, institutional public capital may become a more compelling option for Fluence’s peers in hardware or software.”

Interestingly, several energy storage industry entities’ stock have found their way onto exchanges in the last year or so through special purpose acquisition company (SPAC) mergers. Thought of as a fast-track to listing versus the more traditional IPO route, Charles Lesser wrote about how the phenomenon was colliding with the growth of renewables and energy storage in a Guest Blog for earlier this year.

Lesser wrote that the rapid growth in US SPACs was “not far from mania”. A risky if fast route to raising cash, SPAC mergers nonetheless can have merit for companies with good fundamentals and strong leadership, he argued.

High-growth spin-outs from established businesses, like Fluence, could be among those which held the lowest-risk starting point for investors, Lesser wrote. However, in announcing an IPO instead, Fluence has eschewed “the SPAC Track,” as Lesser called it. 

“Fluence was doubtless courted by innumerable SPACs, but that tide has turned, and the decision to eschew a SPAC is both a practical response and a statement of maturity,” Lesser says. 

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