Phinergy prevented collapse of cellular networks on October 7

The murderous terror attack on the south of Israel on October 7 led to major disruptions in cellular communications in the Gaza border region, as the electricity grid collapsed in many places where fighting had broken out. With backup systems designed to provide only a few hours of service, most cellular communications sites in the area suffered a temporary electricity outage, leaving mobile phone users in the region unable to communicate in the critical hours at the start of the war.

However, the cellular sites at which Phinergy (TASE: PNRG) systems were installed were able to continue providing essential connectivity for tens of hours. Throughout the initial days of fighting, Phinergy’s green energy systems, based on innovative aluminum-air technology, made a huge contribution to efforts to maintain the operation of communications around Israel’s Gaza border region.

In a letter sent to Phinergy employees shortly after the war began, the company’s chairman and founder, Aviv Tzidon, wrote: "In the difficult hours of Saturday morning, when electricity and communications towers in the Gaza border region were cut off, our backup systems began non-stop operation for many hours, powering multi-channel communications that literally saved lives."

Tzidon added in the letter, "Our systems have already proven their effectiveness and resilience in day-to-day life, successfully backing up cellular infrastructures as needed from time to time. Now, the systems have also been proven to successfully provide tens of hours of continuous connectivity in emergency situations, enabling cell-phone service subscribers to stay in ongoing contact with their families and with rescue forces, even in the most difficult situations."

Founded in 2009 by Tzidon, a serial entrepreneur, and managed by CEO David Mayer, Phinergy has developed technology to produce metal-air batteries that release electric energy from aluminum and zinc. The company’s aluminum-air systems are intended to provide backup energy for critical infrastructure, such as telecom sites, hospitals, data centers, etc. as a standby for electricity grids. Phinergy is also focused on electricity production applications for electric vehicles.

Close client cooperation

Phinergy’s first client, a major local cellular network operator, has installed backup systems at more than 10% of its 2,500+ communications sites. In Phinergy’s financial report for 2022, CEO Mayer wrote that the implementation of the technology by this client represented a "springboard" for the company. Indeed, the connection between the two continues to develop, with an announcement by Phinergy in April 2023 of an agreement in which the operator purchased a further 350 backup systems.

Whereas, when the war broke out, the Phinergy backup systems were operating at some of this client’s sites near the Gaza Strip, most cellular communications in that area experienced severe disruption, due to the lack of a continuous electricity supply. Tzidon says that this situation put to the test the efficiency and flexibility of the system developed by the company, albeit in tragic circumstances. "

Phinergy’s system not only meets the regulatory requirements for two-hour backup for the electrical systems at the cellular sites, but in fact, at each site, the energy stored in the aluminum cells is enough to provide tens of hours of full power," explains Tzidon.

Remote management saves the day

Another factor that enabled Phinergy to function so well in this critical situation was its ability to remotely control electricity consumption at the communications sites. From the day fighting broke out, remote, smart management of the Phinergy systems made it possible to regulate the rate of electricity flow, so that it would last for much longer. "

In practice, our system stores a lot of energy at the (cellular) site itself, due to the aluminum components," says Tzidon. "By switching the system to savings mode, we were able to successfully reduce the load, and extend the electricity supply by several tens of hours during the attack. This remote management capability is something that all Phinergy’s employees are very proud of.

"The problem is that, when one communication tower falls, transmission by towers around it also stops. Communications towers use energy for many ancillary purposes, so by reducing all non-essential use to just 10% of the usual electricity requirements, we were able to extend the time for which the backup systems would last. Essentially, we prioritized the transfer of data from one communication tower to those around it."

Investor backing, despite financial losses

Phinergy is one of the Israel-based companies that held an IPO on the Tel Aviv Stock Exchange (TASE) during the technology wave of 2021. While the company’s system is clearly a success in itself, its share price has not satisfied investors since it began trading in February 2021. Since then, its value has dropped by nearly 80%: on its first trading day in Tel Aviv, the company was worth over NIS 1.1 billion; today its market cap is just over NIS 200 million. However, a 31% increase has been recorded since a low point over two weeks ago.

As with other technology companies that go public while still in their development phase, Phinergy’s revenue so far has not been significant. In the first half of 2023, revenue amounted to NIS 1.5 million, similar to the corresponding period of 2022. Total revenue in 2022 were NIS 2.8 million. But in the first half of 2023, the company reported an operational loss of NIS 23.7 million, due to heavy R&D spending and increased spending on marketing and sales, not to mention the costs of hiring new staff as well as implementing pilot projects for potential customers.

The bottom line is that the company ended the first half of 2023 with a loss of NIS 29.6 million, exacerbating the total loss of NIS 28 million in 2022. By the end of June 2023, the accumulated loss by the company since it was founded stood at around NIS 600 million. Phinergy had NIS 85 million (cash and deposits) remaining in its coffers at the end of the first half of 2023, down from NIS 137 million at the end of the first half of 2022.

Nevertheless, it seems that one of the company’s advantages is that its investors are prepared to go all the way with it, including the Indian Oil Corporation, the oil and gas giant controlled by the Indian government, which has a market cap of about $15 billion.

Phinergy’s biggest shareholder is founder Aviv Tzidon, with 19.7% of share equity - a stake that is worth just under NIS 40 million. Insurance company Migdal (through its profit-sharing policies) is a significant party-at-interest, with a 7% stake in the company.

The Indian Oil Corporation currently has a more modest stake of 5.4% of Phinergy’s share equity. However, at the beginning of the week, the company reported that the Indian energy giant intended to increase its investment. An agreement between the companies allows Phinergy to allocate shares to Indian Oil for an investment of between $10 million and $12.5 million. After this allocation, Indian Oil could significantly increase its holding in Phinergy to about 25%, an investment that will require shareholder approval.

Published by Globes, Israel business news - en.globes.co.il - on November 1, 2023.