ESS’ historic IPO: Who made it happen?

BY ROBERT MALTHOUSE AND BEN COOK

  • $1.1bn ESS has become the first long duration storage manufacturer to go public
  • The company was founded in a garage ten years ago
  • But funds backed by Bill Gates and Jeff Bezos have turned ESS into a powerhouse

Long-duration energy storage systems provider ESS has made history.

Following a merger with special purpose acquisition company (SPAC) ACON S2 Acquisition Corp, it recently listed on the New York Stock Exchange and, in doing so, pronounced itself as the first long-duration storage manufacturer to go public.

ESS is now valued at $1.1 billion – the ACON S2 merger raised $308m and the company has also benefited from a private investment in public equity (PIPE) deal involving a range of institutional investors.

Energy Storage Report charts the progress of ESS since it’s foundation ten years ago and identifies the factors that contributed to its rise. It’s a story that began a garage, ended in a ground-breaking IPO, and features a cast of characters that includes cameo appearances from billionaire investors such as Bill Gates, Jeff Bezos, Richard Branson, Charles Koch and Abigail Johnson among others.

What does ESS do?

ESS builds and deploys “environmentally sustainable, low-cost, iron flow batteries for long-duration commercial and utility-scale energy storage applications.” Long-duration means the technology has flexible energy capacity of between four and twelve hours.

Iron flow batteries circulate liquid electrolytes to charge and discharge electrons via a process called a redox reaction. The word “redox” comes from the words “reduction,” which represents a gain of electrons, and “oxidation,” or a loss of electrons. ESS says it “uses the same electrolyte on both the negative and positive sides of the equation, eliminating cross-contamination and degradation”.

The company now provides two product lines, the ‘Energy Warehouse’ and the ‘Energy Center’, both turnkey energy storage solutions that help developers, utilities and EPCs build out their decarbonisation projects.

Who are the key individuals at ESS?

ESS was founded in 2011 in Craig Evans’ garage with co-founder Julia Song, while the pair worked in the research and development team at ClearEdge Power. Evans now acts as the company’s president, while Song works as CTO. The duo led the company through several rounds of investment – totalling $47m – prior to the company listing, and also helped build and commercialise the company’s technology.

Evans began his career at United Technologies Corporation (UTC) where he held technical leadership positions in their fuel cell business and, prior to that, he was as a project engineer in the Pratt & Whitney aircraft engine business. Meanwhile, Song started her career at Milliken & Co as an industrial research chemist.

But earlier this year, it was decided that the company needed a new figurehead to lead the business during its next phase of growth. Enter Eric Dresselhuys, who became the company’s CEO in April. Dresselhuys had exactly the type of track record ESS was crying out for. In 2002, he had co-founded Silver Spring Networks, a business specialising in smart grid networking and data solutions. His 15-year spell at the company included a variety of executive roles as the company underwent an IPO on the NYSE and was eventually sold to Itron, Inc.

Dresselhuys has repeated the feat again, this time leading ESS to an IPO and NYSE listing.

Who are ESS’ key investors?

As previously mentioned, the company received PIPE investment as part of the public listing. This PIPE was led by Fidelity Management & Research Company, Koch Industries, Tortoise Capital Advisors, SB Energy Global Holdings, Breakthrough Energy Ventures, and BASF Venture Capital. So what stature do these investors have and who are the key individuals?

Fidelity Management & Research Company
Assets under management (AUM): $4.2 trillion
Based in Boston, US, Fidelity is one of the largest asset managers in the world. The company has been privately held for nearly 70 years and has been headed by CEO Abigail Johnson since 2014. Johnson is reckoned to have a net worth of around $24.6billion – she holds a 24.5% stake in the firm, which has $4.2 trillion in managed assets.

Koch Industries
Technology-related investments: $30 billion
Based in Kansas, US, Koch Industries is a multinational conglomerate run by CEO Charles Koch – who has a net worth of around $52.2 billion – since 1967. Koch has been somewhat of a prolific investor in potentially disruptive energy storage technologies, with recent investments in Li-cycle and Eos Energy Enterprises.

Tortoise Capital Advisors
Assets under management: $1.5 billion
Founded in 2002, Tortoise Capital Advisors areas of expertise include energy and power infrastructure. Managing Directors Brad Adams and Vince Cubbage lead the company, which has made energy investments across the entire energy sector including energy storage, wind, solar and water infrastructure. Adams has been with the company for 15 years and was formerly COO at Jones & Babson. Cubbage was formerly CEO at Lightfoot Capital Partners.

SB Energy Global Holdings (a wholly-owned subsidiary of SoftBank Group)
Revenue: SoftBank Group Corp’s revenue was $56.8 billion in 2020
Established in 2011 by SoftBank Group and based in Tokyo, SB Energy is led by director and chairman Masayoshi Son and representative director and CEO Shigeki Miwa, who have cited Japan’s Fukushima nuclear disaster and the global Paris Agreement as key reasons for investing in decarbonisation assets. SB Energy co-led ESS’ Series C funding round back in 2019.

Breakthrough Energy Ventures
Capital raised: $2 billion
Founded in 2016, Bill Gates created the investor-led fund to build innovative companies to help stop climate change. Other leading private investors include Jeff Bezos, Richard Branson, Michael Bloomberg and Jack Ma, to name a few. Alongside SB Energy, Breakthrough Energy Ventures co-led ESS’ Series C funding round, raising a total of $30 million.

BASF Venture Capital
Evergreen fund: €250 million
Since 2001, BASF Venture Capital, the corporate venture capital company of the BASF Group has been investing worldwide in young, fast growing companies and funds. Run by CFO Nils Christoph Koehler, who has been with the business for 10 years, and managing director Markus Solibieda, BASF invested in ESS’ early Series B funding round, which totalled $13 million. Solibieda was a partner at Mandarin Capital Partners and head of the company’s Frankfurt office. Prior to that, he co-founded Baigo Capital.

Why has ESS been so successful?

Dresselhuys believes ESS’ differentiated technology will give them a first mover advantage in the rapidly expanding market. And the proceeds gained from its SPAC deal will help the company scale its operations to meet growing global demand.

The technology’s iron flow chemistry provides a host of advantages over conventional battery systems, according to ESS, which says its battery can last for more than 20 years with no capacity fade or degradation, compared to an average of seven to ten years for traditional batteries.

Furthermore, its simple ingredients of iron, salt and water – which are found in abundance – means the battery is affordable and reduces environmental harm throughout the product’s entire life cycle. Such materials also provide benefits in terms of durability, performance and safety, considering the flow battery presents no fire, chemical or explosive risk.

ESS have also developed a streamlined ‘Gen2’ module that has enabled the batteries to be stacked for scalability purposes.

What does the future hold for ESS?

The small Wilsonville, Oregon battery manufacturer – which currently has only 165 employees – was initially planning to raise $465 million, but most of the SPAC investors opted to cash out their shares at the last minute.

However, despite the wobbly start, the company still managed to raise a hefty $308 million, and the company’s shares – labelled under the ticker “GWH” – more than doubled from $9.94 on opening day to $23.80 just 12 days later.

The price had fallen back to around $17 as of 19 October 2021.

ESS has recently announced two new deals, one to supply 2GWh of batteries to SB Energy, and another for the supply of 17 iron flow battery systems to Enel Green Power España. Yes, the company is still building out demand for its products, but there is every confidence among management that this will happen quickly.

It’s true that the company is not expected to record its first profit until 2023 and ESS’ forecast for sales this year is just $2 million. But sales are expected to jump to $37 million next year, $300 million in 2023 and to an enormous $3.6 billion by 2027.

It’s an ambitious growth plan, but with the backing of some of the biggest-hitters from the world of investment, it would be foolish to bet against ESS soon hitting the heights.

Image (clockwise from top left): Abigail Johnson (Fidelity); Bill Gates (Microsoft founder and entrepreneur); Eric Dresselhuys (ESS); Jeff Bezos (Amazon); Michael Bloomberg (Bloomberg co-founder); Craig Evans (ESS); Charles Koch (Koch Industries); and Julia Song (ESS).

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