ESS Tech, Inc. (“ESS Inc.”, “ESS” or the “Company”), a manufacturer of long-duration iron flow batteries for commercial and utility scale energy storage applications, and ACON S2 Acquisition Corp. (NASDAQ: STWO), a publicly traded special purpose acquisition company, announced they have entered into a definitive agreement for a business combination that will result in ESS becoming a publicly listed company.
ESS was founded in 2011 with a mission to develop the cleanest, lowest-cost long-duration energy storage systems on the market. ESS developed an iron flow battery technology with innovative technological breakthroughs that is built to transform the utility grid by enabling safe, environmentally-friendly, long-duration storage. Unlike traditional lithium-ion batteries that are made from hazardous and costly materials, ESS’ patent-protected battery solutions use abundant iron, salt and water, making them environmentally safe and cost-effective energy storage systems.
Renewable energy deployment is increasing dramatically, with installation records set each year and now surpassing other forms of new generation coming online. In the long run, grid scale energy storage will need the capabilities of long-duration storage to pick up the load for four to twelve hours when variable generation wanes, yet be flexible enough to support fast changing grid needs. The total addressable market for energy storage systems is expected to grow at a 34% CAGR from $8 billion in 2020 to $56 billion in 2027, driven primarily by growing deployments of solar and wind power, as well as a desire to increase the power grid’s resiliency. ESS’ energy storage systems provide an optimal solution for utilities, independent power producers and microgrids seeking a reliable, safe and durable solution for four- to twelve-hour power storage that doesn’t degrade over time. That is the capability that ESS iron flow battery technology can deliver.
“The goal of ESS from its inception has been to develop a fundamentally new, highperformance battery technology,” said ESS CEO Eric Dresselhuys. “Our team has delivered on that goal over the last decade by developing patent-protected iron flow battery technology that is well-suited for the grid and the environment. Unlike currently available approaches, our solution offers a green, lower lifecycle cost, energy storage system with performance that doesn’t degrade over time. We’re excited about today’s announcement as it marks the beginning of our next chapter to capitalize on burgeoning opportunities in the long-duration energy storage market. We are thrilled to team up with ACON S2 to deliver long-term value for our customers, partners, employees, shareholders and the planet as a public company.”
Craig Evans, ESS President and Co-founder stated, “Our team worked diligently for the last decade to create a storage solution that could provide a meaningful addition to the world’s transition to a renewable future. We have made incredible strides to that end and I am very excited about the next phase for ESS and our ability to accelerate our growth.”
“ESS offers a remarkable technology that is a game-changer in the world’s transition to clean energy,” said Adam Kriger, CEO of ACON S2 Acquisition Corp. “With its tremendous market opportunity and leadership position in cost, performance and sustainability, ESS has a clear trajectory for growth as it scales. We are thrilled that this transaction aligns with our mission of
combining with a leader in Strategic Sustainability; when a business’ pursuit of sustainability—environmental, social and/or economic—is central to driving its performance and success. We look forward to collaborating with Eric, Craig and the entire ESS team.”
The business combination values the combined company at a $1.072 billion pro forma enterprise value. The transaction will provide approximately $465 million of pro forma net cash to the combined company, assuming no redemptions by ACON S2 shareholders. Assuming no public shareholders of ACON S2 exercise their redemption rights, ESS’ existing shareholders, including its founders, will own approximately 64% of the combined company. As part of the transaction, ACON S2 raised a $250 million fully committed PIPE from institutional investors including Fidelity Management & Research Company LLC, SB Energy Global Holdings Ltd, a wholly-owned subsidiary of SoftBank Group Corp., Breakthrough Energy Ventures and BASF Venture Capital. In total, investors in the PIPE will own approximately 16% of the issued and outstanding shares of common stock of the combined company at closing. The net proceeds from this transaction will be used to increase manufacturing capacity globally and invest in extending ESS’ technology advantage. The Boards of Directors of ESS and ACON S2 have unanimously approved the transaction. The transaction is expected to close in the third quarter.