Grid-scale battery maker ESS Inc. plans to go public through a SPAC merger that values it at nearly $1.1 billion, the Wilsonville company announced Friday.
It’s a transformative move for the 10-year-old startup that has little revenue but is scaling up and looking to widely deploy its “flow battery.”
The technology is billed as a better alternative to lithium-ion batteries for long-duration storage — from 4-12 hours — that can help smooth the way for more intermittent renewable energy on the grid.
ACON S2 Acquisition Corp. (Nasdaq: STWO) is the SPAC partner that plans to bring ESS (officially ESS Tech Inc.) to the public markets in a deal expected to close in the third quarter.
“ESS offers a remarkable technology that is a game-changer in the world’s transition to clean energy,” Adam Kriger, ACON S2’s CEO, said in a statement. “With its tremendous market opportunity and leadership position in cost, performance and sustainability, ESS has a clear trajectory for growth as it scales.”
Short for "special purpose acquisition company," a SPAC raises money in an initial public offering and then acquires an existing business. It’s a shortcut route to taking a company public that has taken off in the last year or so, becoming more common than traditional IPOs.
In the deal, ACON S2 raised $250 million from various investors, including SB Energy Global Holdings and Breakthrough Energy Ventures, who led ESS’s last big investment round, a Series C in late 2019 that brought in $30 million.
Net proceeds of $465 million are expected in the deal. In an investor presentation, ESS said it would use the money to boost its manufacturing capacity from 250 megawatt-hours this year to 16 gigawatt-hours in 2025 — a 64-fold increase — as well as expand its sales footprint and improve the technology further.
The company said it has booked $2 million in revenue this year, and projected a jump to $37 million in 2022, $300 million in 2023 and on up to $3.5 billion by 2027. Expansion into Australia in 2023 and Europe in 2024 is planned.
If it all comes to pass, it would be the first big breakthrough for flow batteries, which despite high hopes, have remained an outsider looking in on a fast-growing market beguiled by lithium-ion batteries and their ever-shrinking prices. Several companies in the category have come and gone over the past several years.
But there are signs things could be changing as deep decarbonization drives a need for longer-duration storage.
Unlike conventional batteries that come in a self-contained package, flow batteries rely on separated tanks of electrolyte fluid that is pumped into a reaction chamber to generate a charge. (ESS uses non-toxic iron in its electrolyte solution, which it sees as a key advantage over other flow-battery competitors.) In a process known as "redox" — reduction and oxidation — electrons flow one way during the charge phase, then the process reverses during discharge.
ESS was founded by Craig Evans in his garage with Julia Song, the company's chief technology officer, in 2011.
Evans headed the company until just last month when ESS Inc. announced the hiring of Eric Dresselhuys, a co-founder and former longtime executive at Silver Spring Networks, a smart metering and grid networking company. Evans stayed on company president.
ESS recently put its employee count at around 100, double what it was 18 months ago and continuing to rise.
