ESD UPDATEAugust 16, 20221. Can you provide an update on the...

ESD UPDATE

August 16, 2022

1. Can you provide an update on the plans of Energy Supply Developers (ESD) to develop Battery Super Sites across North America?

In late March, ESD’s real estate development partner signed a Letter of Intent for the initial plot of land to be developed in a Midwestern state in the United States of America (USA), which will most likely be the location of ESD’s first Super Site. This land is intended for the use of the cell producer that we expect to be the “Anchor Tenant” at the Super Site. The senior management of the cell producer has since met with the Governor and Commerce Secretary of the Midwestern state, as well as with officials from the economic development authority. The visit and the meetings went well, and the senior management of the Anchor Tenant are very satisfied with the arrangements that are being made. The Anchor Tenant has been approved for substantial funding from the Federal Government of the USA, and once the funding is made available, the project will move forward quickly.

2. Currently, how many letters of intent (LOIs)/agreements are signed with prospective tenants?

To date, ESD has signed LOIs with one dozen prospective tenants. Apart from the LOI signed with the Anchor Tenant referenced above, the rest of the prospective tenants are companies that expect to supply the Anchor Tenant. Understandably, these prospective tenants are waiting for the project with the Anchor Tenant to proceed before moving forward with their own facilities. In addition to the LOIs that have been signed, ESD is working closely with five additional cell makers, which for a variety of reasons, are considering ESD’s site in the Midwestern state, as well as other sites within the USA.

3. How many cell makers are signed-up and could you characterize their respective technology offerings?

As a result of RSD’s wide network of contacts throughout the global battery industry and the unique set of capabilities which we offer, ESD is being contacted by battery cell producers and their suppliers from around the world. With the announcements by the major automakers and the various development initiatives being undertaken by the USA government, ESD has found that the level of interest in producing batteries in the USA has increased significantly in recent months. As a result, ESD is working closely with at least five other lithium ion battery producers on their USA production plans.

While the Midwestern site that ESD believes will be its first Super Site is of interest to most of these cell makers, they are also interested in exploring sites located in other states. In most cases, the proximity of a site to key customers is a major consideration. However, in all cases, ESD’s ability to offer site location, facility design, construction and financing services is compelling. In addition, the cell producers we are working with are very interested in ESD providing its “turnkey” services to their respective suppliers.

4. Has the level of interest in partaking in the ESD initiative been impacted by the various battery joint ventures and foundry announcements?

As mentioned previously, interest in establishing battery facilities in the USA has picked up substantially in recent months. ESD’s Midwestern site continues to be attractive to prospective battery producers due to its proximity to major battery users; excellent highway, rail and water transportation alternatives and access to human and technical resources. Having said that, the USA is a big country, and sites in other states have their own unique advantages. That is why ESD’s strategy is to develop a series of Super Sites throughout the country. This would offer suppliers in any of ESD’s sites the ability to supply cell producers located in the same site or at other sites. Whether a supplier establishes several sites in the USA, or supplies the USA market from one site, will depend on the product, the cost of establishing manufacturing facilities and a variety of other factors.

5. How are things going with land acquisition?

Land acquisition has not proven to be a problem. At the Midwestern site, the decision was made to negotiate an LOI for the initial parcel of land in order to start the process, with the understanding that this parcel is only the first piece in a much larger project. The state and local development officials understand and support ESD’s plans, and we don’t expect land acquisition at the Midwestern site to be an issue. Meanwhile, our real estate development partner has been busy gaining access to land at other potential locations for an ESD Super Site.

6. Are there facets of ESD that people may not be aware of given its North America focus?

As everyone knows, the development of the battery industry has been led by China. Most recently, battery production has picked up substantially in Europe. At long last, America has joined the electrification trend. While large companies such as LG, Samsung and Panasonic are very experienced at setting up production facilities in all parts of the world, most of the companies seeking to establish manufacturing facilities in the USA are either early stage companies with limited resources devoted to facility design and construction, or international companies with little experience in the USA market. In this context, ESD’s ability to introduce prospective partners and customers, as well as to provide turnkey services with respect to facility construction, is a very attractive value proposition. As a result, ESD management has never been more excited about the prospects for the North American market.