REG - DG Innovate PLC - Strategic Update & Investor Webinar

DG InnovateAnnouncement

11/10/2022 07:00

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RNS Number : 3905C  DG Innovate PLC  11 October 2022

11 October 2022

DG Innovate plc

("DG Innovate" or the "Company")

Strategic Update

 

Investor Webinar

 

DG Innovate (LSE: DGI), the advanced research and development company
pioneering sustainable and environmentally considerate improvements to
electric mobility and energy storage, is pleased to provide an update on the
Company's development and commercialisation strategy for its suite of
technologies.

 

Highlights

 

Enhanced Drive Technology (EDT)

 

·    Further significant progress made with the development of the
Company's Pareta® electric drive platform in conjunction with its partners,
the UK Ministry of Defence and Meritor

 

·    Successful development of the advanced prototype Pareta® concluded
and as planned the focus is now on testing to develop a final design prototype

 

·    Clear staged roadmap set out for the Company to enter Pareta® pilot
production in 2024 and full scale commercial sales targeted for Q1 2025

 

·    Ongoing commercial discussions with collaboration partners and other
potential end users in a variety of markets, with plans to roll out the
Pareta® product suite more widely

 

·    Significant revenue opportunity within aftermarket integration
services identified, with a targeted acquisition strategy being adopted both
to accelerate growth and complement the existing product offering

 

Enhanced Battery Technology (EBT)

 

·  DG Innovate's hard carbon anode materials have demonstrated commercially
attractive performance characteristics, in line with the best performing
sodium-ion batteries currently available

 

·  DG Innovate is working with a number of battery manufacturers to enable
further cell manufacturing development to be carried out in collaboration with
them

 

·    The Company is planning to increase the scale of its in-house
material production capability

 

·    The Company has recently won an Innovate UK grant of £170,000 to
carry out a feasibility study for the evaluation of manufacturing its
sodium-ion anode material at scale in the UK

 

·    The Company intends to primarily pursue a licensing model to bring
its battery technology to the market

 

Enhanced Drive Technology

 

The Company's electric drive technology platform, Pareta® consists of a
motor, high power inverter and control electronics, with a novel 'multi
motor/inverter' architecture and a number of fundamental and patent pending
innovations.  This technology has been developed over a number of years via
the Company's ongoing work to build ultra high performance and durable
electric drives for the UK Ministry of Defence, with the resulting product
family currently in its third iteration.

 

The Pareta® platform has most recently been extended to deliver its
associated performance and durability parameters at a competitive cost point
for volume manufacture for commercial electric vehicles, initially for the
Company's collaboration partner Meritor, the US-headquartered global
commercial vehicle components company.  The advanced prototypes produced in a
scalable 250kW/400kW format, aimed at bus and HGV applications, have already
shown good performance versus electric motor systems from global motor
manufacturers.

 

To develop this new offering from its current advanced prototype phase to
final product release and volume manufacture, the Company plans to take a
staged approach.  Having successfully produced an advanced prototype design,
work is now ongoing to progress to a final design prototype.

 

As previously announced, testing of the 250kW Pareta® prototype drive is
ongoing.  Performance results to date are encouraging, and in line with
concept expectations.  The current cycle testing programme is expected to
continue to the end of Q4 2022.  Further cycle testing, including in the
400kW configuration, is then expected to be undertaken to establish and
validate endurance requirements.

 

Following the successful completion of the final design prototype stage the
Company intends to undertake a phase of pilot manufacturing and industrial
engineering.  Whilst the current version is already well developed, further
prototypes will enable the design to be optimised, particularly regarding
performance and costings, in order to progress to the pre-production stage.

 

As announced on 9 September 2022, the Company has been awarded funding from
the UK Government's Advanced Propulsion Centre ("APC") through their Scale-up
Readiness Validation competition, part of the Automotive Transformation
fund.  The APC funding of approximately £600,000 will cover circa 50% of the
eligible costs of the Company's 'Scale up Readiness Validation of Parallel
Motor for Automotive Applications' ("SUPAR") project.  The SUPAR project,
which will involve the establishment of a pilot production facility, is
designed to optimise Pareta® to enable the most appropriate cost of
production using lean manufacturing techniques, enabling substantial upscaling
to commercial scale production and demonstrating the attractiveness of
Pareta® drives to commercial partners.

 

The pilot manufacturing will be carried out in parallel with continued
Pareta® development.  The pilot facility, when fully developed, is expected
to have a capacity of approximately 2,500 Pareta® units per annum and be
revenue generating for the Company.  The planning phase for the pilot
facility is underway and the Company expects to start ordering longer lead
time items and site preparations later in Q4 2022 and into Q1 2023.  The
target is for the facility to be completed early in 2024.

 

Once the pilot plant has been established, the Company intends to carry out a
period of industrial engineering on the pilot production line during 2024.
Following industrial engineering and with the achievement of a final
commercial scale ready Pareta® design, the Company is currently targeting
full scale commercial sales by Q1 2025.  As noted, the latest Pareta® drives
have been designed from the outset to be compatible with volume manufacture.

 

The Company is exploring multiple potential routes to market and continues to
progress commercial discussions with its existing collaboration partners and
other potential launch customers.  The Company is encouraged by the progress
of discussions to date and is confident that this will translate into
commercial supply agreements in due course.

 

The Company believes that Pareta® can address requirements within multiple
electric vehicle segments and potentially additional stationary applications.
 Pareta® has been designed to be scalable to a range of vehicle sizes, from
e-bike size to large marine drives.  To date the Company's focus has been on
the military, heavy goods vehicle and bus segments and these are expected to
remain a priority given the Pareta® units inherent suitability for these
applications and the shorter expected timescales for these sectors to adopt
new technology.

 

Following completion of the pilot scale production programme and in order to
accelerate the Company's ability to secure commercial scale sales, the current
intention is for the Company to commence development of a volume manufacturing
facility with a capacity to produce approximately 10,000 Pareta® units per
annum.  Commissioning of such a facility is targeted for 2025, at a capital
cost currently estimated to be approximately £5 million, with the potential
for this to be funded through loans, further grant funding and/or investment
from a commercial partner.  Additionally, the Company sees the potential for
commercial agreements in the form of licenced manufacture, joint ventures or
further direct supply agreements in order to increase the volume of units
produced and sold.

 

In addition to demand from OEMs, the Company views the aftermarket as a
substantial opportunity for sales.  With an increasing number of emissions
regulations being introduced and the long useful life of heavy vehicles and
buses, the Company expects there to be an increasing demand for aftermarket
electric vehicle conversions.  The Company would expect to service this
demand from in-house manufactured units, with the Company also providing
integration expertise and services.

 

In order to develop a full-service capability within the electric vehicle
drive market, particularly to enable aftermarket integration, the Company is
considering appropriate acquisitions and intends to take advantage of any
compelling opportunities presented.  The Company intends to fund these
acquisitions through a combination of equity and debt depending on the nature
of the acquisition.

 

Enhanced Battery Technology

 

The Company's proprietary energy storage technology encompasses a family of
hard carbon anode materials produced from a sustainable bio waste product,
specifically developed for use in sodium-ion batteries, with potential
applications in existing lithium-ion battery production.  Sodium-ion
batteries offer an attractive alternative to lithium-ion batteries, using
materials that are more abundant, with lower carbon footprints, and which
circumvent natural resource constraints involved in the production of
lithium-ion batteries.

 

DG Innovate believes that its battery partners consider the Company's
technology to be a disruptive alternative in their aspiration to reduce
dependency on hydrocarbon-derived anodes for both sodium and lithium-ion
battery technologies.  The Company's hard carbon anode materials have already
demonstrated commercially attractive performance characteristics, particularly
enabling significant energy densities, in line with the best performing
sodium-ion batteries currently available, in battery cells manufactured at a
small scale in the Company's own facility.

 

Further scale up of material production will involve an iteration of process
engineering to maintain the desired performance and material characteristics
in high volume.  Additionally, integrating the material into commercial scale
battery cell production will require a parallel process of optimising cell
design and large scale production engineering.

 

The Company intends to primarily pursue a licensing model to bring its battery
technology to the market, through licensing to sodium-ion battery
manufacturers, with the potential for in-house material production should that
prove commercially attractive.  Whilst there is currently limited volume
sodium-ion battery manufacture worldwide, a number of large global battery
manufacturers have recently announced plans to establish substantial
sodium-ion battery manufacturing capabilities.  As global sodium-ion battery
production increases in the coming years, the Company believes there will be a
substantial addressable market for its technology.

 

DG Innovate is already working with a number of battery manufacturers and
arrangements are being made to supply them with small sample batches of
material for further testing and to enable further cell manufacturing
development to be carried out in collaboration with them.  In parallel, the
Company is planning to increase the scale of its in-house material production
capability.

 

The Company has recently won an Innovate UK grant of £170,000 to carry out a
feasibility study for the evaluation of manufacturing its sodium-ion anode
material at scale in the UK, in particular to enable the Company to refine its
economic and technology model out to 10,000 tonnes-per-annum production of the
Company's hard anode material.

 

Due to the stage of development of the sodium-ion battery industry and the
complexities of cell manufacturing scale-up, the Company currently expects
that moving from the current pilot manufacturing phase to 'giga-scale'
manufacturing will take around 42 months from now, although there is the
potential for earlier deployment both in existing lithium-ion battery
manufacture, and sodium-ion battery manufacturing should commercial scale be
developed sooner.

 

Commenting, Peter Tierney, Chief Executive Officer of DG Innovate, said:
"Since I joined DG Innovate at the beginning of July, we have been reviewing
the Company's strategy in order to ensure that our world class technology is
appropriately exploited and brought to commercial scale production as quickly
as possible.  As set out today, we have a clear roadmap to commercialisation
for both our electric mobility and energy storage technologies to take
advantage of the numerous market opportunities we are seeing.

 

"This is a very exciting stage of development for the Company as we progress
the significant potential of our proven suite of new and disruptive
technologies.  I believe that with this clear strategy and route to market
for its technology, DG Innovate has a very bright future.  I look forward to
providing further updates as we progress."

 

Investor Webinar

 

DG Innovate's management will be hosting an online presentation and Q&A
session at 5.30 p.m. BST on Tuesday 18 October 2022.  This session is open to
all existing and prospective shareholders.  Those who wish to attend should
register via the following link where they will be provided with access
details:

 

https://us02web.zoom.us/webinar/register/WN_nPBNMLtIQqe7cXNWAUcV3w
(https://us02web.zoom.us/webinar/register/WN_nPBNMLtIQqe7cXNWAUcV3w)

 

Participants will have the opportunity to submit questions during the session,
but questions are welcomed in advance and may be submitted to:
dginnovate@investor-focus.co.uk (mailto:dginnovate@investor-focus.co.uk) .

 

For further information please contact:

 DG Innovate plc                            C/O IFC
 Peter Tierney, CEO

 Jack Allardyce, CFO

 IFC Advisory (Financial PR & IR)           020 3934 6630
 Tim Metcalfe

 Zach Cohen

 Grant Thornton UK LLP (Financial Adviser)  020 7383 5100

 Samantha Harrison

 Jamie Barklem

 Daphne Zhang

 Ciara Donnelly

 OvalX (Joint Broker)                       020 7392 1400
 Tom Curran

 Thomas Smith

 WH Ireland (Joint Broker)                  020 7220 1666
 Chris Hardie
 Megan Liddell

 

About DG Innovate

 

DG Innovate is an advanced research and development company pioneering
sustainable and environmentally considerate improvements to electric mobility
and storage, using abundant materials and the best engineering and scientific
practices. DG Innovate is currently developing its products alongside a number
of major manufacturers across the transportation and energy sectors, research
institutions and the UK Government, and has filed 18 patents worldwide. DG
Innovate's current research and development activities are broadly split into
two areas, focusing on novel electric motor technologies and energy storage
solutions. Its two main products are:

 

- Enhanced Drive Technology (EDT) - High efficiency, cost-effective electric
motors + power electronics; and

- Enhanced Battery Technology (EBT) - Sodium-ion batteries offering a
sustainable energy storage solution at similar/greater energy density to
incumbent technologies at a lower cost, increased safety with lower
environmental footprint.

 

Further information may be found at: https://www.dgiplc.com
(https://www.dgiplc.com)

 

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