Sustainability, climate protection and decarbonization are currently among the most important topics in politics and business. Batteries can make an important contribution to this. It is therefore not surprising that demand for batteries is increasing worldwide, partly due to the need to reduce climate change through electrification of mobility and the broader energy transition. This is where FREYR Battery, which is relatively new to the market, comes in. Founded in 2018, the Luxembourg-based company specializes in the development of next-generation clean battery cells for future energy storage systems, e-mobility and e-vehicles.
FREYR is not a lone wolf in this endeavor. To make the world greener, the company has recently been trying its hand as a team player. A few days ago, the start-up forged strategic partnerships with four international giants. The quartet includes Glencore, Caterpillar, Siemens and Nidec Corporation. "Ultimately, the vision for this coalition is to accelerate the energy transition in key sectors by expanding the production of clean batteries from FREYR's gigafactories under development and jointly incubating and developing innovative technology solutions," CEO Tom Einar Jensen explains the strategy.
The fact that these renowned companies are getting involved with FREYR is a statement by itself, since the company is only at the beginning of its entrepreneurial development. To date, the company has only started building a factory in Norway. In addition, the company has announced its intention to start the development of battery cell production on an industrial scale in the USA and Finland. The goals sound ambitious: FREYR wants to achieve a battery cell capacity of 50 GWh by 2025 and an annual capacity of 100 GWh by 2028. By the end of the decade, the annual capacity should then already amount to 200 GWh.
A look at the potential market growth shows that FREYR certainly seems to be on the right track with its plans. The market researchers at McKinsey forecast that the entire lithium-ion (Li-ion) battery chain, from mining to recycling, could grow by more than 30% annually between 2022 and 2030. They put the market value at USD 400 billion by then, and the market size at 4.7 TWh of batteries for mobility applications such as e-vehicles, which will account for the largest share of demand at around 4,300 GWh by the end of the decade. Drivers include the European "Fit for 55" program and also the "Inflation Reduction Act" (IRA) in the USA.
Speaking of the IRA, to take advantage of the new law's tax credits, FREYR CEO Tom Jensen is accelerating his investment overseas. "The IRA incentives make production in the United States three times more profitable than in Norway, which increases pressure from investors to build where the returns are greatest," Jensen told Reuters in a recent interview. The tax credits amount to USD 37 million per GWh of capacity installed in the U.S., according to the company. Already planned by FREYR on the drawing board, the "Giga America" factory is expected to produce 34 GWh of battery capacity per year and could be operational by 2025.
FREYR is still barely generating any revenue, but at the same time faces immense expenses. That makes a look at cash on hand all the more important. As of Dec. 31, 2022, the startup had cash and cash equivalents of USD 563 million, roughly maintaining the previous year's level, thanks in part to share issues. Expenses amounted to about USD 270 million last year. "We ended the year with cash levels nearly identical to those at the start of 2022, and have made great progress across our value chain in the interim," CEO Tom Jensen was pleased to say in presenting the figures, adding, "We expect 2023 to be a truly exciting and transformative year for FREYR and our 24M licensing partners as we move into live battery production."
On the stock market, the newcomer has ridden a roller coaster in recent months. In the middle of last year, the share started a rally that catapulted the price from around USD 6 to almost USD 17 in a very short time. Afterwards, the share price dropped almost as steeply. The share price recently regained its footing in the area of the starting level and is currently attempting to bottom out. With a 1-month volatility of 65%, this is also very volatile.
From these dynamic price movements, double-digit percentage returns can be achieved with new softcallable barrier reverse convertibles. The CHF version offers an attractive interest rate of 13.00% p.a. with a maximum term of one year, while the USD-denominated product even comes with a coupon of 15.00% p.a., which are paid out quarterly. Furthermore, the products are equipped with comfortable risk buffers of 41%. The security level is still significantly increased due to the selected European barrier type. This means that the threshold is only active at the end of the term.
Even higher gains are possible if the battery specialist Varta from Germany is added to FREYR. The Softcallable Multi Barrier Reverse Convertbile on the energy charged duo comes with a coupon of 18.00% p.a.. In this case the European barrier offers an increased 51% cushion of protection.
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