The Best Battery Gigafactory Stock You’ve Never Heard Of

When it comes to the companies that produce batteries for electric vehicles (EVs) and industrial users, many investors don’t think very far past Tesla (TSLA) and its famed gigafactories.

But the industry is a lot more than just Tesla—in fact, it’s filled with a number of exciting young companies.

One of the most exciting is FREYR Battery SA (FREY), a Norwegian company with the goal to produce green battery cells to accelerate the decarbonization of both energy and transportation systems globally.

FREYR went public via a SPAC (Alussa Energy Acquisition) and began trading as FREY on the New York Stock Exchange in July 2021.

Nidec Deal

What brought FREYR to my attention was the deal it announced on August 30 with Nidec (NJDCY), a major ($37 billion market cap) Japanese firm. This company is the world’s largest precision high-efficiency small motor manufacturer in the automotive, industrial, and appliance sectors globally.

Nidec is a growing player in the EV space. It recently announced a joint venture with Stellantis (STLA) for EV drive trains. Nidec is also a leading company in the exponentially growing ESS (energy storage system) sector.

Here are the highlights of the agreement from the companies’ joint press release:

  • FREYR and Nidec have jointly agreed to convert and expand the previously announced 31 gigawatt (GWh) conditional offtake agreement between the companies to a binding sales agreement under which FREYR will supply 38 GWh of cells from 2025 to 2030, with an option to upsize the volumes to 50 GWh in the period and potentially add volumes beyond 2030.
  • Based on projected raw material prices subject to pass-through mechanisms, the binding 38 GWh sales contract has an estimated gross value to FREYR in excess of $3 billion from 2025 to 2030, representing one of the largest ESS battery cell contracts globally to date.
  • FREYR and Nidec have agreed to form a joint venture to combine FREYR’s clean, next-generation battery cells, with modules and packs, into integrated downstream ESS solutions for industrial and utility grade customers.

The signing of this agreement is a major step forward in FREYR’s future plans. It represents a key project financing milestone for FREYR’s 29 GWh Giga Arctic development in Mo i Rana, Norway, with total firm and optional volume comprising 50% of planned production volumes from Giga Arctic.

FREYR’s Gigafactories

The company has started building Giga Arctic, the first of its planned factories. Its start-up period is set for the first half of 2024.

FREYR has also finalized its previously announced long-term physical supply agreement with Statkraft, Europe’s largest producer of renewable energy. This secures the hydropower renewable electricity needed for Giga Arctic.

Giga Arctic is serving as a blueprint for an idealized and modularized battery cell manufacturing facility, which FREYR can rapidly replicate in other locations around the world.

Already, FREYR has announced potential development of industrial scale battery cell production in Vaasa, Finland as well as the United States. FREYR intends to deliver a minimum of 50 gigawatts (GWh) of battery cell capacity by 2025, more than 100 GWh of annual capacity by 2028, and more than 200 GWh of annual capacity by 2030.

FREYR’s Other Deals

All of this production will be needed, because Tier 1 battery cell producers are struggling to keep pace with electric vehicle demand. This, in turn, is exacerbating the shortfall of available supply to the energy storage (ESS) market. That is especially good news for FREYR as its current ESS customer base comprises more than 2/3 of the global ESS players.

One example of such a customer is Honeywell International (HON), which continues to expand into the rapidly growing energy storage business with its agreement to purchase 19 GWh of lithium-ion battery cells from FREYR Battery.

The deal, announced Jan. 19, 2022, includes the supply of Honeywell manufacturing tools for Freyr’s battery cell production. The companies plan to use the cells in energy storage systems for commercial, industrial, and utility-scale customers, including projects coupled with renewable energy projects.

In addition, FREYR has a joint venture with Koch Strategic Platforms LLC, whose goal is to manufacture lithium-ion cells in the U.S. (Giga America) for electric vehicles and energy storage systems as early as 2024. FREYR plans to develop Giga America with a targeted capacity of 35 GWh with generation 3 technology, which it is licensing from 24M Technologies.

It’s worth noting that the investment arm of Koch Industries Inc. was the lead investor in a $600 million SPAC transaction associated with FREYR’s public listing.

FREYR’s Future

I believe the deals with the likes of Nidec and Honeywell bode very well for the future of FREYR.

And consider this: in a terrible year for technology-related stocks, FREYR’s stock has held up nicely. It is up more than 10% year-to-date and 45% over the past year.

The FREY stock is a buy in its current range in the $12 to $13 area.

— Tony Daltorio

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Source: Investors Alley