A good friend of mine from the Street who is known for doing his homework before buying a stock is very high on Altair Nanotechnologies (ALTI). I have followed the company on and off for the past 5 years or so, since the publication of my book, Quantum Investing. While I’ve always been intrigued with what the company is doing, I’ve never felt compelled to own the stock. Altair’s stock price has taken it on the chin over the past year (see chart below). Apparently, Wall Street is not yet enamored with the company’s technology and business prospects.
I came across another opinion on Altair recently written by George Lewis at Hidden Buzz. Here’s what George had to say about ALTI:
Most people have heard of Nano-Technology and how it’s changing everything… Well, in terms of electric vehicles… it’s the missing link! Altair Technologies has done it… created the the perfect battery: The Lithium Titanate battery is safe (won’t explode or catch fire), can be fully recharged in as little as 6 minutes with a special charger and only 4 hours when plugged into a standard outlet. AND, be recharged as many up to 15,000 times! This is it! The battery we’ve all been waiting for!
I’m sure others like EEstor and others are developing similar technologies… so it won’t be long before we all switch to electric cars! FINALLY we’ll be able to get-off foreign oil!
George has a link to a video showing a vehicle powered by Altair’s nano-enabled battery that you can watch here.
I love George’s enthusiasm, but I have to wonder if Altair’s management has what it takes to be successful in the future. The mistake I see investors make time and time again is to bet on the best technology. The truth is the best technology does not always win. Betting on the best management team is a far wiser thing to do. All of my concerns about Altair right now are associated with the quality of its management team. I’m not convinced the company has the right team in place to succeed, although I am wide open to debate on this issue.
It’s also helpful to remember that the dynamics on any particular technology typically follows a power law (as discussed in Chapter 7 of Quantum Investing). In many instances, there are few winners and many losers. That’s why it pays to do ones homework before marking an investment.
I think electric vehicles have a bright future and I believe there are great investment opportunities associated with companies supplying the battery technology that will help power these vehicles. I just haven’t figured out yet what companies will prove to be the best investment in the future.
If any readers would like to chime in on Altair or other competitors in the battery/electric vehicle space, please do. We’d love to hear from you!
August 15, 2008 at 6:45 pm
I too have been following Altairnano for some time. Looking at the history of the company, what you see is are cycles of investment following flashes of innovation and PR - over the years playing into the hands of range traders hip to the pattern. Despite their chronic inability to score and become profitable, it nevertheless appears that many of the applications that present from Altairnano’s proprietary nano-fabrication methods are suitable for productizing and that they, along with partners, are in-process of bringing several lines to market. But the most compelling story is their energy storage technology that they, so far, have chosen to develop on their own.
At first blush Altairnano batteries can appear to be the holy grail, particularly when compared to what’s out there now. But what emerges is that the lithium titanate anode architecture, with all its breakthrough capability, may not be optimal for applications where energy storage-density is an important factor such as for light vehicle electrification. The 35kwh battery pack in the Phoenix S/U Truck weighs 1000 lbs that is, depending on the allowable depth of discharge, as much as twice the weight per kwh as the lithium phosphate chemistry being considered for the Chevy Volt Plug-in HEV. Still, for daily driving profiles that are <100 miles, the capital and operating cost savings for deep-discharge, high cycle-life powered pure battery electric vehicles are so overwhelming, particularly for fleet maintenance vehicle operators, that these trucks wind up being a smart investment - even at $45k. So that’d be a niche if Altar would go ahead and license the technology or invest in commodity production - but they’re heading in another direction for the time being. Here’s where the management’s judgment and the risk associated with their high working capital burn rate comes into focus.
What Nanosafe batteries do so much better that any known-real (there’s a lot of vapor and promising research out there) competitor is moving large amounts of power (relative to storage capacity or weight) and switching in milliseconds from full charge to full discharge, all with negligible heating - that is the key to their stunning longevity. This capability has far more value in industrial markets where there is a need for high power, fast response energy storage - this requirement is currently being met by using costly reserve generation techniques. Early last year, the AES Corporation (top 10 global utility power generation) bought $3M of Altair treasury stock and got a seat on the board. Their interest is power stabilization - gaining the ability to respond to instantaneous changes in demand on the power grid so they can maintain the required voltage and cycle rate of the power they generate within regulatory guidelines.
The current best-practice for utilities is to generate an extra ~3% over what’s being demanded (called the “active reserve”) that is mostly wasted as heating in the infrastructure equipment. Last December, Altair delivered two tractor-trailer sized 1MW battery packs to Indiana Power & Light for installation in one of their substations for testing. A third party consulting firm conducted tests over several months and confirmed that the batteries performed as expected without reservation, with over 90% efficiency most of the time and they recommended that AES proceed with long-term testing to further validate the product’s suitability for grid stabilization applications. What makes this compelling to AES is that by using a megawatt battery to respond to instantaneous changes in demand instead of generating an active reserve, they get a 3% fuel saving that pays for the megabuck battery in a few months. This is centerpiece of Altair’s Made in the USA, high-value strategy with no-brainer applicability to every fuel-fired power sub-station in the world.
And now the military applications are emerging. The navy is required to run a second generator at full power as back-up to keep their ships’ operational systems on-line if the primary generator falters. They’ve got a development contract with Altair because a megawatt back-up battery gives them ample time to start-up and stabilize a back-up generator that cuts their fuel utilization in half. The Army and Marines now have extensive field electronics including aiming systems for artillery that are battery powered. The Altair’s -40 to +260 degF operating range, comparative light weight, and extreme reliability make them ideal upgrades for what they have now. The Army has placed a $300k order to test these batteries because the value is obvious and nothing else is in second place.
The investor’s question’s are
1) Can Altair finance its burn-rate long enough to become profitable?
2) If so, how much additional dilution will that involve?
3) Will their technology continue to own the power-density, long cycle-life high ground where they are now unchallenged?
I conclude that because battery packs are assembled from modules made up of cells that all need to perform the same (the need for cell matching is a common stumbling block that has prevented high power applications for batteries in the past), if they don’t burn through their working capital first, Altair’s now well confirmed ability to deliver highly efficient, megawatt battery packs that provide unprecedented reliability and longevity qualifies them to innovate applications in industrial and military markets and that they will occupy that space by themselves long enough to become the benchmark for industry certifications and military specifications. This will become an increasing bar to entry for competing technologies that will give Altair sustained pricing power for the foreseeable future.