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Zinc battery storage player Eos addresses backlog after reduced Q2 activity

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Zinc battery firm Eos Energy Enterprises saw reduced activity in Q2 as it transitioned to its Z3 product, while CEO Joe Mastrangelo discussed its backlog, the subject of a recent short-seller note.

The company saw US$0.2 million of revenue in the second quarter of 2023, compared to US$5.9 million in the same period last year, down 97%. The company attributed this to its transition to manufacturing Eos Z3 energy storage system from its earlier Gen 2.3 system. Cost of goods fell 69% to US11.2 million while operating expenses fell 11% to US$23.6 million.

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Eos manufactures a stackable long-duration energy storage system based on proprietary zinc hybrid cathode tech which it sells to to system integrators and EPC firms. It booked US$86.9 million of orders in the first half of the year, resulting in an order backlog of US$533 million, or around 2.2GWh, of activity.

However, its net loss has more than doubled from US$56.7 million in Q2 2022 to US$131.6 million in Q2 2023, largely due to a ‘change in fair value of derivatives’ of US$74.6 million. However, excluding non-cash items the net loss was US$28.9 million, a 44% fall – i.e. improvement – on last year.

The company’s backlog was called into a question in a short seller note recently which, based on the day’s trading activity, may have caused Eos’ share price to as much as halve before recovering, though it is still down 23% compared to its open on the day the note was issued (27 July). A big part of that recovery appears to be related to its Q2 results.

Speaking to analysts, Eos CEO Joe Mastrangelo discussed its backlog in more detail, including its orders with a company called Bridgelink which the short seller note cast doubt on.

“We first signed a master supply agreement (MSA) with Bridgelink Commodities LLC back in March of last year. This was a multiyear MSA where Bridgelink locked in the price of 240MWh of storage over a three-year period and then increased the overall size of the MSA to 1GWh in June of last year.”

“Bridgelink is a developer of solar and storage projects and has informed us that… some of these projects have received interconnects, while others are well into the interconnection queue. This is important because an interconnect approval is essential for a project to be able to deliver power to the grid.”

“In today’s environment, an interconnect can take years to secure, meaning that these types of projects have a certain amount of intrinsic value, and we believe a number of them will ultimately be built. We were informed by Bridgelink management that its affiliate has reached a confidential settlement with its lender, and the related assets were not sold at auction. Bridgelink recently confirmed that they are actively seeking alternative financing for these projects.”

Mastrangelo also discussed its other main customers whose orders comprise the largest part of the backlog, including International Electric Power (IEP), Carson Hybrid, an unnamed “leading Northeast developer of solar and storage projects” and another unnamed “very large utility and one of the largest operators of energy storage in the US”.

IEP has two projects in ERCOT, Texas, totalling 100MWh which were recently transferred to a large North American infrastructure fund and Eos anticipates breaking ground on the first project later this summer with delivery in Q4.

A project with Carlson Hybrid that will be co-located with an active gas turbine peaker plant on which construction should start this fall, he added, and another 300MWh project with the company recently got an interconnection.

Meanwhile, a 47MWh project for the second unnamed customer is expected to be delivered this year, while other projects are at an earlier stage.

The company is guiding for US$30-50 million in revenues in full-year 2023, after US$9.1 million in the first half.

Eos continues to progress through the Department of Energy (DOE) Loan Programs Office’s (LPO) process for a Title XVII loan.

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