Separator Business CaseSOTERIA BATTERY INNOVATION GROUP

OutlineProcess & companies contributing

Raw material supply & costs

Production process & cost contributors

Cost model

Market prices

Cost cases with payback time◦ Gold◦ Cellulose-based◦ Discussion of other cost drivers

Cost contributions to lithium ion battery production costs

Market size & 10 year goal opportunities

Summary

Process & Companies ContributingPROCESS

Interviews & Inputs◦ Fiber suppliers

◦ Machine manufacturers

◦ Competitive material producers

◦ Avicenne Market Study

◦ Needed:

Cost Model◦ Spreadsheet modeled on equipment mfg

◦ Inputs from all interviews, highlighted in sheet

COMPANIES CONTRIBUTING

Raw Materials Supply & CostsRAW MATERIALS & SUPPLY

Lyocell Fibers◦ Lenzing & others very large supply for apparel

market

◦ EFTec Fibrillated: only a few million kg/year existing capacity

Aramid Fiber Pulp◦ From DuPont or Teijin, 75,000 T market size

PET microfibers◦ Commodity 0.3 dfp from many suppliers

◦ Specialty <0.1 dpf from Eastman, Teijin, $10/kg

RAW MATERIAL COSTS

Lyocell Fibers◦ Fibrillated from EFTec: $12/kg

◦ Staple: <$4/kg

Aramid Fiber Pulp◦ $25-35/kg

PET Microfibers◦ Commodity: $6-7/kg

◦ Specialty: up to $10/kg

Production ProcessOverview:

◦ Stock prep to include fibrillation in double disc refiners

◦ Papermaking on flat or inclined wire, typically 2-3 m running at 150 – 300 m/min continuous

◦ Supercalendering, full width, 150-300 m/min

◦ Slitting: full or ½ width, same speed

Cost drivers◦ Materials

◦ Depreciation/CapEx

◦ Labor: 5 operators paper, 2 calendering, 1 slit, 1 stock prep for total of 9

◦ Energy & water very low

Cost ModelInputs

◦ Machine usage & production availability

◦ Material, labor & energy costs (for all processes combined)

◦ Paper basis wt & material mix

◦ CapEx, interest & depreciation schedules (for all processes combined)

◦ Market price

Outputs◦ Annual production capability

◦ Cost contributions

◦ Total cost & specific cost/m2

◦ Gross margin & payback time

Model is only direct costs◦ Ignores plant overhead, building, SG&A, etc.

◦ Payback time assumes 22% overhead & SG&A

CONFIDENTIAL

Market PricesBare Film (1st Generation)

◦ Dry Process: $0.95 / m2

◦ Wet Process: $1.20 / m2

◦ Material produced in China has lower costs, discount by 25-30%

Ceramic Coated◦ Add $0.15 – 0.20/m2

◦ Dry Process: $1.10 – 1.15 / m2

◦ Wet Process: $1.35 – 1.40 / m2

◦ Again, Chinese-produced material discounted by 25-30%

Separator Costs

20% aramid, 60% lyocell, 18 gsm substrate, 150 m/min, 5 year dep, 5% int

CONFIDENTIAL

Summary• $0.23/m2 cost• 72% gross margin• 50% net margin• 142M m2 production• 6 month payback time

Major contributions• Materials• Basis weight• CapEx & interest

Separator Costs High

30% aramid, 50% EFTec, 20 gsm substrate, 12% loss 100 m/min, 5 year dep, 5% int

CONFIDENTIAL

Summary• $0.51/m2 cost• 44% gross margin• 22% net margin• 95M m2 production• 16 month payback time

Major contributions• Materials• Basis Wt• CapEx & interest

Separator Costs Low

15% aramid, 65% lyocell, 15 gsm substrate, 8% loss 200 m/min, 5 year dep, 5% int

CONFIDENTIAL

Summary• $0.16/m2 cost• 79% gross margin• 57% net margin• 190M m2 production• 4 month payback time

Major contributions• Materials• Basis Wt• CapEx & interest

Separator Costs Aramid

100% aramid, 18 gsm substrate, 8% loss 150 m/min, 5 year dep, 5% int

CONFIDENTIAL

Summary• $0.73/m2 cost• 22% gross margin• 0% net margin• 142M m2 production• 62 month payback time

Major contributions• Materials• Basis Wt• CapEx & interest

Production Parameters

These figures refer to direct costs only. Overhead & SG&A additional. Payback time includes 22% overhead & SG&A.

CONFIDENTIAL

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Cost, Margin & Payback Time for Separators

Production Cost Net Margin Payback Time

Cost DriversMaterial

◦ Buy pre-fibrillated lyocell, or develop refining process. $12/k ➔<$4/kg. Save $0.11/m2.

◦ Aramid content, 15-25% vs 100%. Save $0.50/m2.

◦ Basis weight, 15 gsm vs 20 gsm. Save $0.05/m2.

CapEx◦ Existing (fully depreciated) equipment w/ $10M upgrade vs new. Save $0.05/m2.

Sales Ramp-up Time◦ Costs to ramp up sales are large, one-time expense

Cost Contributions to LIB Costs

COSTS & EFFECT ON CELL COSTS LITHIUM ION CELL COST STRUCTURE

Separator:◦ Estimate 20% cost savings vs incumbent separators

◦ Includes 5% royalty on materials (~0.3% of cell cost)

Current collector◦ Estimate 40% cost savings of 7% in “other materials”

◦ Includes 5% royalty on materials (~0.2% of cell cost)

◦ Metal alone reduces by >$4/kWh

Total Effect◦ ~30% material cost savings on separator, current collector◦ Estimate 4% cost savings on cell cost

◦ Calculated after royalty of ~0.5%, reducing to 0.3% with volume

◦ $2-400 savings per EV

◦ Additional savings at module & pack level due to reduced need for accessory safety materials

20-40% savings on foil, separator

Expensive copper and membranes are eliminated in the Soteria architecture.

CONFIDENTIAL

Market Size & 10 Year Goal Opportunities LITHIUM ION BATTERY MARKET SIZE

Assumptions◦ 10% automotive penetration at 60 kWh/vehicle

◦ Auto is 60% of market

Market size◦ ➔total market is 1 TWh, or 1000 GWh

◦ Today about 160 GWh, so 6x growth

◦ 10m2/kWh of separator➔ 10 B m2 separators

◦ 5 B m2 of each of Cu and Al current collectors

10 YEAR GOAL OPPORTUNITIES

Goal: 25% market penetration in 10 years

Separators◦ 2.5 B m2, $2.5 B/year

◦ 37,500 T at $65,000/T

Equipment & Materials◦ Lyocell: 22,500 T/year, $90 M/year

◦ Microfibers: 7,500 T/year, $75 M/year

◦ High Temp Fibers: 7,500 T/year, $225 M/year

◦ Paper Machines: 5/year, $200 M (@20% growth)

SummaryLarge, growing market exists: 10 year goal of $2.5 B can support multiple licensees

Cost structure allows for large 50% net margins◦ May allow for price concessions to achieve market share.

CapEx is an important cost parameter. ◦ Companies with existing equipment that needs only modest upgrades will have an advantage.

Material cost is the dominant long-term driver to profitability. ◦ Products need to be engineered with this in consideration