Israeli thermal energy storage company Brenmiller Energy (TASE: BNRG) is riding the wave of positive sentiment sweeping world markets towards renewable energy companies.
In 2020, Brenmiller's share price has jumped phenomenally. Following a weak start to the year, when the company reached a low point with a market cap of around NIS 40 million only, it is now traded at around NIS 450 million. Yet last year the company had a going concern qualification attached to its financial reports, following a failure to meet the financing conditions that had been established for it by Bank Leumi (TASE: LUMI), and accumulated losses.
Now that the "valley of death" has been crossed, according to Avi Brenmiller, the company’s founder, CEO and controlling shareholder, he is able to say that "there was a point when I feared I was going to lose the company. What was going through my head at the time were discussions I had held with strategic advisors, who had told me that the chance of transitioning from the idea stage to the stage of an industrial company successfully making large sales, was near-zero.
"I thought maybe they were right about the chance that something like this could succeed a second time around, after I had heard the same things while leading the solar energy company Solel. But our stubbornness, determination and strength, along with everything that was happening around us, proved that we were on the right path this time as well."
Brenmiller emphasizes that "nothing is certain yet, but we have crossed the company’s crisis, and we are now on the way up, and even what we have now doesn’t yet reflect the strength we’ll see in our activity in the not-too-distant future. If someone had asked me a year ago what my dreams were, I couldn’t have imagined such an amazing dream as what happened to us in the past year."
Nir Brenmiller, Avi’s son, who serves as an executive VP in the company, adds that "not for a single moment did we ever doubt our technology, and the strength that guided us out of this crisis was the fact that, in each moment, we knew that we have a game changer in the energy industry - since otherwise, we would have cut our losses long ago. As people with background in the energy industry, we understand our technology and its tremendous potential - and that’s what gave us the strength to withstand this crisis".
According to Brenmiller, one of the key factors leading to the change in direction was the addition of financial strategic partners to the company - the businessman Rani Zim and More Investment House, "who helped us solve the company’s financing problem, since the financing issue was significantly impeding the young company’s progress."
Another process noted by Brenmiller as a key factor in the change was "Brenmiller’s focus on being a technology company dedicated to building energy systems based on our technological development. We are focused on the industrial-commercial sector, resulting in sales in smaller amounts, but faster sales. We left the very large projects segment, in which tremendous sums of money change hands, but only after several years, with many risks and changes along the way. This choice of focus has been good for us."
Nir Brenmiller adds that "beyond the fact that the company has financially and strategically recovered in terms of its business model, 2020 was a year in which we "sowed seeds", by granting distribution rights for our product in Europe, South America and Israel, and establishing pilots in leading companies around the world as show rooms, to demonstrate how our technology works. These foundations will bear fruit, in terms of revenue, beginning in 2022".
"The Rotem 1 project is no longer so critical to the company’s success"
Brenmiller Energy, which was founded in 2012, is defined as a "technology company focused on thermal energy storage", based on an idea which was developed "in light of the rich experience of the company’s executives, led by Avi Brenmiller."
The systems produced by Brenmiller range from the size of a container to 15x15 meter towers, reaching 10 meters in height; however, in conceptual terms, as explained by Brenmiller, "the technology and principles will work for very small sizes as well", including a water heater the small size of a 40cm2 box.
He further explains, "In Israel large power stations are still being built, but we provide the solution of decentralized, small power stations, located near the customer and better meeting their needs, including a supply of electricity, steam, hot air, or a combination of the above - and that’s the future." Initially, Brenmiller focused on a relatively large project - the development of the Rotem 1 project, considered its flagship project at the time, involving the construction and operation of a hybrid electricity power station from solar energy and natural gas, for sale to the Israel Electric Corporation. This venture is located in Rotem Industrial Park, near Dimona.
This project, which required the majority of Brenmiller’s resources, impeded its operations to the point where it encountered difficulties in financing it, and it eventually reached a stage where it breached the terms of the financing agreement it had signed with Bank Leumi. To date, NIS 40 million has been invested in the project, and according to the company’s estimate, NIS 35 million more is required to complete it.
Brenmiller observes, "The energy sector is very conservative, with very large companies operating in it, and it is not open to innovative technologies, despite the fact that renewable energy is now changing the picture. What we did with Rotem 1, in what we considered at the time to be smart move, though in hindsight it turned out not to be the case, was to go to a commercial bank and finance a project of our initiative, in order to prove the quality of our technology to the market."
"However," according to Brenmiller, "things happen in an initial project - there are problems and exceptions, which the bank will not tolerate, and that put us in a tough spot. Today the project is around 70% complete, after we repaid our debt to the bank and reached an arrangement with it, and we are preparing to refinance the project. However, at this point Rotem 1 is no longer so critical for the company, because we’ve received many other opportunities to prove our technology. Rotem 1 is a very worthwhile project, but we’re no longer putting all our eggs in one basket just in order to finish it, because it’s no longer the critical factor in the company’s success".
Brenmiller says that the company is now making progress on smaller projects. The company recently announced the completion of a project involving the development and production of a storage-based steam production system, intended for Brazil, as well as negotiations towards the sale of storage systems to another Brazilian company, and a binding agreement for marketing its products in Germany and Spain. In Israel, term sheets have been signed for the installation of thermal energy storage systems in the Galilee Medical Center in Nahariya, and in Yotvata Dairies in the Negev.
On the Brazilian market, Brenmiller says, "We identified this market as an immediate target market, and joined forces with a local strategic partner. There’s been a good change in direction there over the last two years, and tremendous market potential. We commenced business activity there, and it’s a very important business leverage point for supplying systems and receiving orders. We view this as a good direction, and I’ve been appointed President of the Israel-Brazil Chamber of Commerce and Industry, a position in which I’ll try to promote our technology, as well as other technologies."
From "the worst IPO of the year" to a dramatic turnaround
Brenmiller held its IPO on the Tel Aviv Stock Exchange in August 2017. The share price quickly fell by 80%, making it the worst IPO of that year. It was not until this year that sentiment changed and in total, Brenmiller's share price has risen around 25% since its IPO.
Besides Brenmiller himself, whose 44% stake in the company has increased, thanks to the stock’s rise, to the current value of around NIS 200 million, the company’s most prominent investors this year - Rani Zim, who invested almost NIS 20 million in the company, and More Investment House, with around NIS 6 million, also recorded return of hundreds of percent on their investment.
Regarding Zim, who made the investment through a private company, and not through the stock exchange-listed company he controls, Rani Zim Shopping Centers, Nir Brenmiller stated that "Zim’s public company is an entrepreneurial company that wanted to develop energy operations, like other revenue-generating real estate companies who have taken similar steps, and it viewed Brenmiller as a springboard to the big leagues. We were just a few days away from closing the deal with them when then the coronavirus crisis began, and overturned the whole process. Suddenly it became clear in the new situation that the investment did not match the risk profile of Rani Zim Shopping Centers - opening up to new operating segments during the peak of the crisis."
"We transitioned from the dream phase to the materials and supply stage"
Despite the optimism reflected in the stock’s performance and in Brenmiller’s financial statements, the company’s position remains challenging. In its latest reports, summarizing the first half of 2020, the company has not yet presented revenue, after presenting negligible revenue, around NIS 330,000 in 2019. Net loss in the first half of 2020 was NIS 4 million, after accumulated losses of NIS 63 million in t2018-2019, affected by the decline in value of the Rotem 1 project.
Although a going concern qualification is no longer attached to its reports, the company’s auditors draw the attention of investors to cash outflows from operating activities of NIS 3 million in the first half of the year, and to the fact that, according to the assessment of company management, Brenmiller has "sufficient resources to finance its continued operations for a minimum of 12 months."
To what extent do you owe your recovery on the stock exchange to the positive momentum currently enjoyed by green energy companies? Avi Brenmiller: The momentum is a big part of it. A complete turnaround has taken place here. Many investors understood what was happening to the oil and energy companies, and saw how, during the coronavirus crisis, when electricity consumption decreased in Europe, the oil and gas companies were forced to absorb the decline in demand, while the revenues of the green energy companies were not affected. The investors saw that renewable energy was getting priority, and we are benefiting from this trend both in our market activities, and in the capital markets."
As Brenmiller states in its reports, since the crisis, and due to the decline of oil prices and the adverse effects suffered by traditional energy companies, "There has been a clear trend of investors transitioning to the renewable energy industry in general, and to the storage sector which is the company’s focus in particular."
Brenmiller adds, regarding the progress of the company, "We transitioned from the dream phase to the materials and supply stage. In the coming weeks we will deliver two commercial projects - one in Brazil, and another in New York. We are currently working hard on building a flagship project with the world’s largest energy company, the Italian company Enel, and the market is observing closely, and pricing us accordingly. The company still has many dream elements, but at this point there are also many elements that are moving and taking shape in the real world.
What is the company’s current scope of activity, and what are your projections for the future?
"Like any young company, we will grow from revenue of hundreds of thousands of Shekels to millions, and hopefully much more in the future. 2021 will be a year of new large projects, and 2022 will continue this trend. We have many projects of significant scope in our pipeline. We hope in the coming months to close on projects in Brazil, Europe and Israel, which will help us expand our production opportunities, and move forward."
Brenmiller stresses, "Each completed project is important, because it serves as proof that the technology we developed works, and is economical. Each of the projects is therefore a milestone in another market." Brenmiller Jr. adds that "we are industry men, and are currently building a company based in Israel. We consider Ormat as a model for the Israeli industry, with sales around the world, and know-how and production in Israel."
How did the coronavirus crisis affect you?
"At the start of the crisis we pretty much froze, and our situation wasn’t that great before then. We considered freezing our operations and laying off employees, but in the end, we decided to keep the employees on, and to move full speed ahead on operations. We built a production system, and hired around 60 employees in the middle of the crisis."
"I wouldn’t want to end up like Solel"
Brenmiller is a veteran industry man, and one of the pioneers of the solar energy sector in Israel. Already in the early 1990’s he was one of the founders of Solel Solar Systems Ltd., and later led it to what was at the time the largest solar energy exit in the country’s history, with its sale to Siemens for $420 million in 2009.
He recalls, "Solel was a small company, with annual sales of around $2 million in 2006, but it grew tremendously and won projects in Spain, leading to sales of around $200 million and profit of around $50 million in 2009, when it was sold to Siemens. After Siemens decided to focus on gas, and not solar, I decided to resign and go my own way."
How did you come up with the idea for Brenmiller Energy?
"The initial seeds of the idea began for me in 2007, when I realized that solar and wind technologies were already in the game, but there was difficulty in finding a solution for energy in periods without sun or wind. I began seeking out energy storage ideas in different places around the world, which led me to develop the idea that eventually developed and became a reality."
Looking back, would you take the same path, or would you do without the IPO?
"The stock exchange is a very important tool, and anyone who wants to establish industrial activity in Israel has no reason not to raise funds on the stock exchange and build their company that way. When we conducted our IPO there was less openness to new technologies and to clean-tech, which made us pioneers. However, after investing over NIS 100 million of my family’s funds in the company, and reaching a stage where the technology has been proven as functional, I didn’t see a reason not to grow the company with the funds of Israeli investors.
"The date of the IPO was perfect, and gave us what we needed. Getting listed creates order in a company, and forces it to organize better. Although it could be viewed as a burden, I believe it’s the right path. I wouldn’t want this company to end up like Solel, which was swallowed up by a mega-corporation."
68 years old • Widower + 3 children • Lives in Ramat HaSharon • Former CEO of Siemens CSP and CEO of Solel Solar Systems • Recently appointed President of the Israel-Brazil Chamber of Commerce • Avid hiker
Founded: 2012 • Activity: Construction and development of thermo-solar fields, production and sale of thermal energy storage products • Controlling shareholders: Avi Brenmiller (44%), Rani Zim (17%), Migdal (13%), Meitav DASS and More Investment House (around 4%) • Employees: 80 (including 60 in the Dimona production plant) • Location: Offices - Park Afek, Rosh Ha’ayin, Dimona production plant) • Current company value: NIS 450 million
Published by Globes, Israel business news - en.globes.co.il - on December 22, 2020
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