A technology ahead of its time: the emerging world of flow batteries, page-30

I'm more hopeful about Redflow now than I have been since the heady days of ZCell-for-home-storage (which even had its own website zcell.com). That was an initiative of Simon Hackett, along with the ZCell enclosure, and the BMS to facilitate ZBM integration with inverters.

Back then Redflow batteries were cheaper per kWh than any lithium battery out there, and Redflow had outsourced manufacture to Flextronics, which everone assumed would lower the cost of manufacture. That all came crumbling down when Flex-made batteries turned out to have significant quality issues, but most importantly Tesla announced the Powerwall, which wiped out Redflow's cost advantage against Lithium batteries (and Tesla had a bit more star attraction than Redflow ).

Since then, Redflow has relied on cash from shareholders (especially Simon Hackett) to keep afloat, and hasn't come even close to selling enough batteries to break even. What they have done, though, is what is necessary to make the business viable - bring manufacturing back in house (40% cost reduction) and complete development of the follow-on Gen 3 product which they say will lower costs by at least 30%. I estimate this will bring the manufacturing cost below $3000, providing Redflow plenty of scope to expand sales by lowering prices while still being profitable.

Redflow also appears to have found a market (telco towers) where they have competitive advantage (theft-resistance and temperature tolerance), and is a large enough market for them to sell enough batteries to become profitable. If that happens, increased manufacturing volumes will reduce costs and improve competitiveness, and allow them to start investing more resources in developing other markets (such as RAPS, or having another crack at home batteries). (As an aside, under Simon's predecessor Stuart Smith, Redflow's main target market was telco towers in southern Africa. I think the decision to outsource manufacture to Flex was also taken under Stuart's watch).

So I hope they can do better than the last capital raise, which was less successful than they would have hoped. Some people have asked "why should I participate when I can buy for the same price (or a bit less) on-market". The answer is simple - if you buy on market, the money doesn't go to Redflow. Personally, I will be taking up all of my entitlement, and probably some more. I have sold all my current holdings at 25 cents, and will get them back in the raising knowing that the money will go to Redflow and therefore be of benefit to my investment longer term.