The Case For $eose And The Biden Policies

This is my first analysis and it happens to be in a market I'm familiar with, so let's take a deep dive into EOS Energy (EOSE). I started looking at this company after another thread https://www.reddit.com/r/wallstreetbets/s/U3CPHwXDRW

piqued my interest, so I took a look at the company.

First of all, it looks like EOS started off with pretty low end PbA (lead acid) type batteries in the past and got into their core IP zinc hybrid battery the past few years. Why is this important and how does this separate EOS from other types of batteries for their specific niche (BESS - battery energy storage system), let's take a bit of a lesson on battery technologies.

There are a few dominant battery technologies in the world today. Most of you know about lithium type batteries which we'll talk about in a minute, but prior to the ubiquity of lithium powered batteries, lead acid (PbA), nickel cadmium (NiCd), and nickel metal hydride (NiMh) batteries dominated the world's rechargeable energy storage market. There are of course drawbacks to all of these which I won't go into details here, but in essence is all about energy density.

Lithium on the other hand, provides much higher energy density both in terms of gravimetric (Wh/kg) and volumetric (Wh/L), and as you can see over the last two decades, lithium powered batteries became cheap enough to replace just about every imaginable rechargeable battery applications.

There are different lithium cathode chemistries but the two that dominates the world today are lithium ion (including lithium polymer) and lithium iron phosphate (LFP) batteries. Lithium ion batteries can be seen in your laptop, drones, mobile phones, cars, and airplanes, and LFP batteries are mainly in cars (Tesla Model 3 and Y base) and more commonly in portable and stationery energy storage for homes and grid.

Lithium batteries offer high levels of dependability, cost effectiveness, reliability (mostly), and portability. There are two major issues though: biggest issue is lithium is highly reactive and if shorted can cause thermal runaway events and fires - Boeing 787 for example caught on fire multiple times. The incidents of exploding personal devices are countless.

The second issue is more of a political issue: the Chinese government made a strategic decision more than 20 years ago to dominate the world's lithium battery production and technology. They invested heavily in domestic capabilities, and both the Japanese and American businesses were more than happy to teach the Chinese how to make great lithium batteries while moving production and know-how to China. Fast forward to today, China owns more than 85% of the global lithium battery output, CATL and its former parent ATL are the 800lb gorillas in the battery space. It's really not an issue if our government didn't decide that China is now more of a threat to our global hegemony, but we've always made the rules and if the rules didn't work in our favor, we'll just change the rules.

So here comes Biden's signature IRA with billions of dollars of funding to foster and rebuild domestic energy storage production capabilities, the decree that no Chinese batteries are allowed on federal spending both civilian and military, and now the huge tariffs that will be slapped on Chinese batteries.

What does that have to do with EOSE? Well first of all EOS has a technology that, while not unique, is way better than legacy techs, is way safer than lithium batteries, has a much longer life, and has the backing of the DOE and access to the loan programs that, if you ever read the fine print you'll realize it's not only non-dilutive, you don't really need to pay it back at all. Basically the loan allows only CapEx - meaning the government theoretically owns the equipment you borrowed money to buy for the factory, but after a few years of depreciation it becomes written off the books.

Second, if you really looked around, we really don't have advanced battery production capabilities in this country. Giga factory is for Tesla, Ultium is for GM, and the rest are PbA or exotic primary battery makers (East Penn, Enersys, etc)

So that really leaves EOSE in a pretty unique position if what they claim recently are true, that FAT is complete on their new factory, that they'll be profitable this year, and that they have a huge backlog. I believe they're true because Duke Energy has been frantically looking for domestic supplier of batteries for government and military installations, other regional power players like PGE, Constellation, etc are all looking for ways to take a slice of that sweet IRA pie and get muchos dineros from Uncle Jose Biden.

Knowing the industry, knowing how desperate DOE is to get wins and dish out money, and knowing where billions of sweet tax dollars will be going to in the next few years, I'm very bullish on EOSE.

My position: 10k shares of EOSE at an average of $0.71/share