T1 Energy Inc. (TE) Earnings Call Transcript & Summary

Good morning, everyone. Everyone here in the room at the ONS in Stavanger at 8 a.m. on the 30th of August 2022. Today is a milestone and a very important day for FREYR. We are here to announce, I would say, a groundbreaking step forward in unlocking clean battery solutions for a decarbonizing planet. With me today, I have Laurent Demortier of Nidec Corporation, and we are today announcing the establishment of a joint venture between Nidec and FREYR where we're going to manufacture world-leading utility-grade battery storage modules and packs, leveraging FREYR's decarbonized battery solutions to be produced in Mo i Rana. We want to take you through the basis for this agreement, which is 1 of the largest contracts entered into by a Norwegian company onshore in modern history in Norway. And we are extremely proud to be here with Nidec on this joyous event. Let me just take you through the main points of the agreement. We are joining forces with Nidec, 1 of Japan's largest companies to establish what we believe is the largest joint venture for world-leading low carbon energy storage solutions. The JV combines FREYR's clean next-generation low-carbon battery solutions with smart modules and packs, delivered by Nidec and we're integrating them into ESS solutions for industrial and utility grade customers. We will supply 38 gigawatt hours under a legally binding contract from our Giga Arctic facility to this joint venture between 2025 and 2030. With an option to increase it to 50 gigawatt hours, which basically will take up half the production capacity of Giga Arctic in the period. This sales contract has a gross value for FREYR in excess of USD 3 billion, so NOK 30 billion. So I think it's fair to say that this is a large and important event, not only for FREYR, but also for the Norwegian battery industry, and I dare say, for the Norwegian industry as a whole. This is one of the largest, if not the largest, ESS contract so far. And I think it represents a very large step forward in the decarbonization of energy systems globally. Nidec, which we are extremely proud to be partnering with is a leader in the energy storage system space across multiple geographies and close to 10% of the current ESS market globally. They are, furthermore, one of the largest producers of electric motors globally, if not the largest. And Laurent will take you through some of the excellent characteristics of this multibillion-dollar Japanese company with a very high credit rating. The joint venture will be located in Mo i Rana. We will produce modules and packs next to our battery cell manufacturing facility inside Giga Arctic. So this is truly a strong step forward in enabling low-cost renewable energy to all. Let me talk a little bit about the market, and this was also a topic here at the ONS yesterday, where, among others, Mr. Musk talked about the need for accelerating decarbonization, not only to decarbonize transportation sectors by having a lot of electric vehicles on the road, but it's equally important to decarbonize the energy system. And in a world that runs on renewable energy and also provides affordable electricity for all. Electricity generation globally will probably need to triple over the next 20 to 30 years. That will have to happen with renewable energy, and that renewable energy will also need to replace the existing predominantly fossil-based energy generation or power generation, which means that we will more than 20-fold variable energy production globally. When we're 20 folding renewable energy production, the amount of storage needed is exponentially growing. And you can see on the charts here that it's highly underestimated how much storage capacity is needed to balance out a renewable electricity system globally. And for FREYR, to partner with such a prestigious company as Nidec, who has world-leading experience in electric engines and motors and also is a global leader in the ESS market space, could not have become a more fundamental partnership for FREYR. So with that, let me then say what FREYR brings into this. So FREYR through its Giga Arctic facility and through our mission based on speed, scale and sustainability will be producing world-leading battery cells based on next-generation technology, which builds larger and thicker electrodes. This is an example of such an electrode. You can see the size of it, but we could probably also double or even triple the size of this and future generations of how we produce batteries. This is obviously critically important to put as much energy storing capacity into and energy storage solutions as possible. But besides that, we obviously need to wrap that with the relevant equipment and the relevant solutions, which is modules and packs and battery management systems. So partnering again with Nidec, in this regard, is an ideal fit to our production of battery cells. We are basing our production of battery cells based on 100% renewable energy in Northern Norway. As many of the viewers and people here might know, we have entered into a long-term power purchase agreement with Statkraft with dedicated hydropower for our facilities in Northern Norway, based on power prices, that I think, most other battery industry players would really envy us if they knew the sort of number we're talking about. This gives us an opportunity to be at the absolute left-hand side of the cost curve, not only because of the low energy prices but also because we have a superior technology that has dramatically lower capital expenditures. We use much less people per batteries we produce. In fact, we have 50% lower capital expenditures than the average of battery facilities in Europe, and we can produce 3x as much batteries per employee as anyone else. So this is a fundamentally important point, but the low-cost renewable energy also puts us on the left-hand side of the carbon curve, which in a world that is decarbonizing is going to be extremely important. FREYR is targeting an initial 80% reduction in CO2 footprint along the entire value chain of battery cell manufacturing, and our ultimate ambition is to go to 0. And I'm not talking about net 0, I'm talking to absolute 0, and this is an ambition that we are well advanced in being able to accomplish. And in a world where decarbonization is key, this is something that we're very proud of having as an ambition, and we're more than halfway to the target, ladies and gentlemen. So we're extremely proud with that. So with that, as you can see, quite excited today. But let me now hand it over to Laurent to take you through Nidec, our now most important partner in this electrification journey.

Yes. Thank you. Thank you, Tom, and good morning, everybody. So let me go through a little bit who is Nidec. Nidec, we're a young company, I think 1973 by Mr. Nagamori-san, who is still our Chairman and CEO today and very present on driving the development of the company and very excited by this joint venture. So we are basing -- we are listed in Q2, in Japan. We have $74 billion business, and we are all in the same thing, which is we are a leading company in Energy Solutions. We do generator, we do battery storage, and we do plenty of things that goes around the electrification of the world. So next. Okay. We have a global reach, 1 feature, I said, we are Japanese, but we have a pretty impressive set distribution of factory, R&D center, sales development around the world. We have more than 300 different companies in the portfolio of the group, all doing the same thing. We are present in 46 countries around the world. And with this joint venture, we had 1 country to our portfolio that the 47 countries. So Norway is the newest countries so Nagamori-san was quite excited to put the Nidec flag in Norway and very proud to do it with FREYR. And with 4,500 people around the world. So a pretty global reach. I just highlighted here, U.S. and Europe, which are going to be the key assets for this joint venture to develop and enable the fast and rapid development and development of solutions that we will be here in Mo i Rana. Next slide. Now what is this joint venture about? I think it's -- at the beginning, when we met with Tom, which was a long time ago, a long time ago. We were developing a lot of ESS solution around the world, battery storage to basically help the utilities and help customers to build the storage of electricity. And we were buying the battery spot on the market, okay? And who do we buy that? We buy to people that have built batteries for what? For the automotive industry. And automotive is fine, but battery storage, when you talk to an automotive guy, compared to battery storage, if you talk to the utility, which is the market we target, you get a ratio of 100. So a battery for utilities scale is 100x bigger than the 1 from the [ automotives ]. So you might understand that when you build this large battery storage with these batteries made for the automotive, you assemble 100 pieces together. If you assemble, you put cable in the middle, you put an envelope, that another envelope, that another envelope. And at the end, you get a very costly solution. So the vision we had, we said, hey, we chose FREYR and we scoot all around the world. Again, we have been working with almost all the battery suppliers around the world. And we wanted -- we said we need to design a product that will fit this industry, this growing industry, which is still big, 40 gigawatt of battery today, it's still a big business, but it's going to explode. But to explode, we need to ensure that we have a cost-effective solution, performance solution. So performance, high density of power and lower cost to produce and Tom explain some of the sale. FREYR, we were impressed by the technology of FREYR, okay? So the semi solid, which is also another innovation, I think, that when it will come to the market, that will enable us to deliver this and maybe bigger sales, which will even simplify the problem. From our side, Nidec is going to bring all this knowledge on the electronics side, I think on the installation, but first on the electronic in the JV. So we are going to create not only a sale or we are not going to assemble sales. We are going to create module, which will be smart module that will be able to be integrated into the energy network. So you can monitor this reserve of battery as a generation asset. So it's going to be very helpful and is going to be very efficient. And we will create some new product, and the JV will create some new products that will be plug-and-play modules that we will distribute to the market. We might distribute to Nidec as a manufacturer of installation of solution we might integrate, but we will also sell that to the open market worldwide because we believe that those modules will become a reference point in the industry.

So this then sort of concludes the press conference today. Again, I'm extremely proud and amazed for this joint venture. This really marks the start of FREYR's commercialization journey. We have announced a number of so-called conditional offtake agreements to date. This represents our first firm offtake agreement and with the optional volumes, 50% of the volume in Giga Arctic. So that's obviously a massive milestone for us in terms of unlocking the project finance at favorable rates, which by the way, is also going very well to those who are listening. We believe that this is just the start of an exponentially interesting journey for FREYR. Giga Arctic is our first massive facility. We have previously announced that we will leverage those blueprints and replicate such facilities in the U.S. market. And I can just confirm to everyone tuning in that we will shortly be coming with news also around our site selection process in the U.S., which basically will be a replica of Giga Arctic. But today, we are proud, honored and privileged to be standing here with Nidec all for dreams. We had a dream when we started FREYR and today, it's becoming a reality. So thank you very much for your attention. And hopefully, you will tune in next time. There is more massive news to come from FREYR.