NEW CASTLE, Pa., Nov. 6, 2014 /PRNewswire/ -- Axion Power International, Inc. (Nasdaq: AXPW, AXPWW), a developer of advanced lead-carbon PbC® batteries, energy storage systems and frequency regulation systems, today released the following letter to shareholders.
To Our Shareholders,
Axion Power has recently completed an essential round of financing and concurrently uplisted to the Nasdaq Capital Market. Both of those events were critical milestones in Axion's path to potential future success; we needed the money for operations, and we needed the Nasdaq listing for our shareholders. Although we had to overcome challenges in both the timing and nature of the financing itself, we got it done. If you recall we first filed our S-1 on Friday Aug 8th, 2014. And through our diligent efforts, the fundraising finally closed on Oct 29th, 2014. Now we have some runway to go forward, and to make the most efficient use of the funds raised, we have revised our business plan to focus more closely on fewer markets, while keeping the longer reaching R&D programs intact. We will keep two goals squarely in front of us as we go forward, PbC revenue growth and total supply chain expense control.
You have probably read the news about our designation as the supplier of energy storage and frequency regulation for the Coatesville Solar Initiative (CSI). CSI is a major project that is about midway between Philadelphia and Lancaster in the town of Coatesville. When it is completed it is our understanding that it will be, at 9.1 megawatts, the largest solar farm in Pennsylvania.
The Coatesville solar farm will be about 285 times the size of the Navy Yard Net Zero Project, which was installed in 2012. The first Axion "mini-Cube" ever installed at a customer location is in the Net Zero Project at the Visitors Center in the Washington DC Navy Yard, and as the name indicates, the Net Zero building generates all the energy it needs – or more. It is connected to a 32kW PV solar array. Also, the CSI project is considerably larger than the solar PV system in New Jersey for which Axion has supplied energy storage, and is in the final stages of bringing frequency regulation online. That gives you an idea of the upward trajectory our capabilities are taking.
The Coatesville solar farm will be empowered by its Axion PowerCube to tie directly into the PJM grid, which powers all or part of 13 states and the District of Columbia. PJM is widely considered to be the "gold standard" of power grids in the United States. The PowerCube and direct PJM access will enable CSI to participate in "frequency regulation," which is often referred to as the "Demand Response" or "DR" market. We believe the DR activities will shorten the payback time of the CSI project as a whole, because it will create a revenue stream from PJM in frequency regulation. Frequency regulation corrects for short-term changes in electricity use that might affect the stability of the power system. It helps match generation and load and adjusts generation output to maintain a desired frequency.
Simply speaking, you could think of frequency regulation as keeping your electrical power at exactly the right strength to optimize everything you want to plug into a power source.
As we go forward, frequency regulation will be one of our most important markets. If you search "frequency regulation" on bing.com, you'll find over 7 million hits. It is a big market that involves every private and public electric utility, as well as every entity that generates electricity, no matter how they do it. Our PbC technology is ideally suited for frequency regulation because of its inherent strengths in areas such as speed of charge and discharge, its built-in capability to equalize loads, its comparatively long battery life, and the ability of the batteries to operate in a partial state of charge. We can house the battery system in a cube, or configure it in a building.
Of course we will also be working on the renewable energy market – solar energy being the main focus for now. We anticipate that solar energy may very often be coupled with frequency regulation – but there will be frequency regulation opportunities that do not include energy generation, just as the PowerCube at our headquarters in New Castle is not partnered with energy generation.
In addition, we have established two potential opportunities in transportation, upon which we intend to focus in the upcoming months as an adjunct to our frequency regulation and renewable energy initiatives. The railroad industry is an ideal market for PbC batteries, and we believe Norfolk Southern when they say in their annual report that they intend to build more hybrid electric locomotives powered by PbC batteries. This has been slow to develop but there is one locomotive still being tested in their Altoona, PA rail yard.
Our work with ePower Energy Systems on heavy duty trucks has proven that a hybridized truck "tractor" can save meaningful dollars by increasing MPG of diesel, while reducing CO2 emissions. More importantly, we believe PbC can accomplish that goal with a specific design that would conveniently fit in the heavy duty truck.
The plan will be to focus sales on working with renewables and those potential customers who see the financial advantages of frequency regulation. We are considering and evaluating the identified targets to pursue. I expect we will need a partnership approach to be successful, and I am personally spearheading our efforts to build the best team of partners possible and to focus their efforts on the projects described in this letter.
I want to assure you that we understand the value of our current financial resources. We are going to focus our attention on PbC revenue, manufacturing, customer engineering, and trying to develop strategic partnerships. Expense control means we are bringing down the burn rate significantly. The contract manufacturing that we have been doing for a major lead-acid battery company ended in the second quarter of 2014. We anticipated that would happen, and reduced the workforce accordingly. We have not heard of other opportunities to contract lead-acid batteries in recent months.
Our overall revenue – which had been largely from that contract manufacturing – will diminish. Our intent is to build revenue back up with PbC and PowerCube system sales in order to establish the value proposition of the Lead Carbon technology in the global battery industry.
We will be going forward with an Axion Power team that will be leaner and more focused on being a technology company in the power storage and frequency regulation markets. Don't think of Axion Power as a battery company. Our differentiation is not the batteries – it is the IP inside those batteries to be manufactured. We can and will consider license opportunities to other battery companies. The thought all along was to be the "activated total carbon electrode" company that sells a high-value component to battery companies all over the world.
I look forward to communicating with you regularly. Our third quarter results will be released on the morning of November 14, and I'll be conducting a conference call at noon that day to discuss the company status. I look forward to that, and I hope you will join us.
Best regards,
David T. DiGiacinto
Chairman & CEO
Axion Power International, Inc.
About Axion Power International, Inc.
Axion has developed and patented a next generation energy storage device that won the prestigious Frost & Sullivan Technology Award for North America in the field of lead-acid batteries.
Axion Power International, Inc. believes it is an industry leader in the field of lead carbon energy storage technologies. Axion believes its new PbC battery technology is the only class of advanced battery that can be assembled on existing lead-acid battery production lines throughout the world utilizing Axion's proprietary activated carbon electrodes. Axion's primary goal is to become the leading supplier of carbon electrode assemblies for the global lead-acid battery industry.
For more information, visit www.axionpower.com
Forward-looking Statements
Certain statements in this Press Release are "forward-looking statements" within the meaning of the Private Securities Litigation Act of 1995. These forward-looking statements are based on our current expectations and beliefs and are subject to a number of risk factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Such risks and uncertainties include the risk for the Company to complete its development work, as well as the risks inherent in commercializing a new product (including technology risks, market risks, financial risks and implementation risks, and other risks and uncertainties affecting the Company), as well as other risks that have been included in filings with the Securities and Exchange Commission, all of which are available at www.sec.gov. We disclaim any intention or obligation to revise any forward-looking statements, including, without limitation, financial estimates, whether as a result of new information, future events, or otherwise.
Contacts
Axion Power International, Inc.
David T. DiGiacinto, CEO
info@axionpower.com
Allen & Caron, Inc.
Rudy Barrio (Investors)
r.barrio@allencaron.com
(212) 691-8087
Len Hall (Media)
len@allencaron.com
(949) 474-4300
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SOURCE Axion Power International, Inc.