Tritium charges to $2b Nasdaq listing

Home-grown electric vehicle fast-charger Tritium, backed by coal entrepreneurs Trevor St Baker and Brian Flannery, is set for a “double unicorn” listing on NASDAQ after signing a deal with a so-called blank cheque company in the US that looks set to put a rocket under its growth ambitions.

The deal with Decarbonization Plus Acquisition Corporation II, a special purpose acquisition company, will allow Brisbane-based Tritium to go public with an enterprise value of about $2.2 billion and armed with about $390 million on the balance sheet.

It will propel the high-tech start-up, which only sold its first system in 2014, to the position as the world’s only listed direct current fast-charger maker, primed to tap accelerating electric car growth across major markets in Europe and North America, and inevitably Australia longer term.

“We consider this to be a ‘fortress balance sheet’ for Tritium. It is as much money and more than we need,” chief executive Jane Hunter said of the deal ahead of the announcement.

“It’s a great sign of confidence in where we are. We’re already very established, so even if we just retained our market share at the current growth we’d do phenomenally, and with this cash injection we hope to both maintain and grow it.”

Tritium, already the world’s second-biggest fast-charging company after Swedish engineering giant ABB, has deployed about 4400 of its units worldwide, providing more than 2.7 million charging sessions for EVs across 41 countries to major customers including Shell. The robust design of the units, which are typically installed at shopping centres or motorway rest stops, have seen them successfully deployed both in sub-zero Nordic conditions and California’s ultra-hot Death Valley.

Charging times vary with the size of the unit but Tritium quotes a time of 10 minutes or less to provide up to 350 kilometres of range to an EV with its “heavy lifter”, 350 kilowatt charger.

It is a unique technology that is giving us the edge that we’ve got.
— Jane Hunter, Tritium chief executive

Founded in 2001 by three former engineering students from the University of Queensland – David Finn, James Kennedy and Paul Sernia – Tritium attracted early seed funding from engineering firm Varley Group, led by CEO Jeff Phillips, then growth funding from Mr St Baker, who later brought in fellow coal investor Mr Flannery.

Mr St Baker, a founder of ERM Power, which was sold to Shell, initially invested $1.1 million in 2013 to allow Tritium, then a backyard operation in the Brisbane suburb of Tennyson, to match a Manufacturing Commercialisation Grant it had been offered by the federal government. The government grant, to develop an EV direct current fast charger, needed to be matched with private funding.

St Baker Energy Innovation Fund, a private vehicle, later took up a one-third interest in Tritium and has since invested about $40 million in the operation.

Mr St Baker and Mr Flannery, managing director of White Energy, famously bought the Vales Point coal power station from the NSW government in late 2015 for just $1 million, a valuation that subsequently skyrocketed to $800 million before being partially written down. The pair will remain on the board of Tritium after the merger, as will Tiger Financial Group founder Kara Frederick and Ms Hunter, a former Boeing executive who headed up the aerospace major’s Phantom Works prototyping arm in Brisbane.

Decarbonization Plus chairman Robert Tichio, who will also join the board after the deal completes, said that as the wave of investment capital being directed to advance low-carbon goals picks up pace, “we believe a publicly traded Tritium will serve as a valuable core holding for ESG [environmental, social and governance] investors”.

Tritium’s technology is based around a unique liquid-based cooling system rather than air-cooled system in which a build up of dust hampers performance and longevity. Dr Finn said the result of the sealed system was higher reliability and longer durability, providing lower-cost charging and allowing Tritium to win market share from its competitors.

“That’s what’s enabled us to grab this market share through Europe, through America, and to establish ourselves in that market,” he said, declining to comment on the cost of a system.

“It is a unique technology that is giving us the edge that we’ve got,” Ms Hunter said, pointing to projections for a nearly 20 per cent compound annual growth for the company over the next 20 years.

US growth prospects
Growth prospects in the US have been enhanced by supportive policies under US President Joe Biden, whose $US1.9 trillion infrastructure plan includes a pledge to install half a million new chargers over the next 10 years.

The combining companies are citing projections for growth in passenger EVs of 19 per cent a year compound through to 2040, while EV charging hardware sales are expected to see growth of 25 per cent compound from 2020 to 2026 as infrastructure is put in place early to meet the needs of the growing EV fleet.

Under the deal announced late on Wednesday, Tritium’s existing shareholders will own 70 per cent of the combined company, while Decarbonization Plus holders will own 30 per cent. Tritium shareholders are subject to a six-month lock-up of their shares, with 12 months for Decarbonization investors. The transaction values Tritium, which is forecasting 2021 revenues of $US84 million, at $US1.2 billion ($1.55 billion).

The pro-forma enterprise value of the combined company of $US1.4 billion excluding cash to go onto the balance sheet implies a ratio between enterprise value and estimated revenues in 2025 of 0.9 times and EV to EBITDA of four times.

The listing will result in a paper windfall for Mr St Baker, the biggest investor in Tritium with about 25 per cent, whose stake in the merged company on listing will be about $385 million.

The funding from the deal will be used to expand Tritium’s manufacturing operation, including a ramp-up of its US factory in Torrance, Los Angeles, and to establish a European facility. Its existing factory in Brisbane will be used as its Asia-Pacific manufacturing hub.

Source www.afr.com/companies/energy/tritium-charges-to-2b-nasdaq-listing-20210526-p57vda

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