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Friday, February 08, 2008

Valence Technology: A Green Stock with Potential

Valence (VLNC Charts) will be a key player in reducing carbon footprints thought to cause global warming. Its safe batteries are also a strong candidate for laptop computers and other portable devices you don't want to burst into flames.

Thursday, February 7th, Valence announced a $70 million order with The Tanfield Group Plc (London Stock Exchange: TAN ) to manufacture and supply safe, Lithium Phosphate energy storage systems to power zero emission, all-electric commercial delivery vehicles. The Valence battery systems will be installed in leading-edge vans and trucks produced by Tanfield’s UK-based trading division, Smith Electric Vehicles, the world’s largest manufacturer of electric vans and trucks.

The stock jumped on the news and rewarded those of us who had been accumulating the stock in hopes they would commercialize their technology.

Click the charts, courtesy of, to see full sized

Last quarter, Valence reported a loss of $5.7 million, or 5 cents per share, for the three-month period ending Dec. 31. For the first nine months of fiscal 2008 ended Dec. 31, Valence reported a net loss available to common shareholders improved to $15.0 million, or $0.13 per share on total revenue of $13.0 million.

Going from maybe $20 million a year to perhaps $100 million a year will not be an easy task but it is a problem everyone wishes to have.

From the Pres Release:

Under the agreement, Tanfield will purchase up to $70 million of Valence products in the contract’s first phase and Valence has already received a firm purchase order for the first calendar quarter.

The agreement will also result in Tanfield becoming the first volume customer for Valence’s third generation Lithium Phosphate Epoch™ technology, a battery system equipped with an advanced management system that monitors and automatically adjusts cell performance so battery packs operate at their optimum performance capacity. Epoch benefits include a fail-soft capability that is designed to eliminate system failure caused by a single cell and to have a life cycle comprised of more than 2000 charge cycles when deep discharged in demanding electric vehicle applications.

“The Valence Epoch System which we introduced at the December 2007 EVS-23 show has the potential to move the industry closer to the tipping point when EVs and plug-in HEVs will be broadly adopted and deployed,” said Robert L. Kanode, president and CEO of Valence. “We believe that Valence is the first Lithium Phosphate battery producer to have the sourcing and manufacturing capability and start-to-finish infrastructure to immediately ship safe, reliable, Lithium Phosphate energy storage systems in the quantities demanded by the electric vehicle market. For the past six months we have been working to scale up our proven operational capabilities to meet anticipated demand.”

Darren Kell, Chief Executive of The Tanfield Group Plc, said “We are constantly looking for new, cost-effective technologies that can improve our zero emission commercial electric vehicles and broaden our customer base. The Valence battery pack is an efficient, inherently robust and reliable system that gives us greatly increased flexibility in vehicle design.”

From Valence's web site:

"Our phosphate-based Saphion® Lithium-ion technology is a break through battery chemistry for mobile computing and for large format applications such as back up power supplies and electric vehicles.

Saphion® technology, is safe and stable. It delivers high cycle life, great energy density, no maintenance, superior rate capability and long service life. These characteristics make Saphion® technology suitable for not only the traditional Lithium-ion markets such as the consumer and computer industries, but also for emerging markets not currently served by Lithium-ion technology, such as the telecom, utility and motive markets. Saphion® technology offers the power of Lithium-ion with the safety, environmentally friendly and cost benefits of phosphates

Warning: Valence has had its optimists in the past as the price volatility shows. I like to buy stocks like this AFTER they have crashed with the hopes they eventually bring their technology to market. With this $70M order, it looks like I may have done so again.

Disclaimer: I have been accumulating VLNC in my newsletter portfolio and my personal accounts with some trading around the core position. I have a gain at the current price with plans in place to take profits as it goes higher and protect profits should something happen.

Kirk Lindstrom's Investment Letter Performance

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