AFC Energy Quarterly Newsletter - June 2017
Dear Shareholder,
I am pleased to provide an overview of the Company's activities for the quarter ended 30th June 2017. In summary the main highlights are as follows;
Highlights
· Fuel Cell Development and Deployment Progress
· Covestro - 1MW proprietary fuel cell system
· Strengthened Leadership Team
In themselves, these three bullet points seem too succinct a summation of the effort that is ongoing at AFC Energy as we continue to press forward with the three-year accelerated path to commercialisation.
At the AGM, I presented a clear vision of the path forward in terms of ongoing development of the fuel cell and I also outlined the immediate prospects that were in the pipeline and where we were having positive client engagements.
A more detailed summary of the Company's activities and outlook are contained in the AFC Energy Interim Results released yesterday (29th June 2017) and I would encourage all shareholders to take note of the progress made by the Company as outlined in the release.
The key message within the Interim Results release is that AFC Energy remains on target to reach initial demonstration of commercial fuel cell operation by the end of 2017. This fact alone summarises the degree of effort going into delivery of the Company's three-year roadmap for commercialisation announced back in 2015 and which concludes at the end of 2017.
Fuel Cell Development and Deployment Progress
As announced prior to the AGM, AFC Energy and Industrie De Nora S.p.A. ("De Nora") made the joint decision to expand the scope of its Joint Development Agreement ("JDA") into Phase 2 based on the success of a joint Gateway Business Case Review.
The significance of that step may have been lost in the day but it is something I feel needs to be re-iterated as it is worthy of mention.
I believe that our collaboration with De Nora not only affords credibility and validity to AFC Energy's roadmap to commercialisation, but also affords us a distinct competitive advantage in the commercial deployment of our technology platform in conjunction with the world's leading supplier of electro-chemistry solutions, which is well respected and trusted as a supplier of electrodes to many of AFC Energy's potential international partner.
As such we are, even as I write, focused on the following outcomes that we want to establish at the end of the Phase 2 of the JDA by the end of 2017;
· Achieve full integration of commercial fuel cell electrodes into the AFC Energy stack design
· Validate this integration into our commercial-scale stack at Stade, Germany
· With successful integration, finalise our design for a commercial fuel cell electrode architecture and stack design that is capable of mass production with warranted performance metrics
· Develop dialogue with De Nora for the terms related to a mass electrode manufacturing agreement
These four points will represent a very major technological advancement for the AFC Energy fuel cell system and will provide the pathway to commercialisation of AFC Energy's technology platform.
At the AGM I also spoke about the performance metrics 'PLACE' (Power, Longevity, Availability, Cost, Efficiency) that we need to achieve as part of our final design criteria for a commercial fuel cell electrode and stack. As an acronym, these five letters provide a clear basis against which AFC Energy needs to be measured so that potential partners can clearly recognise the benefits our technology platform will deliver. These are not easy barriers to knock over, some of them take time, for example proving longevity, but since the AGM we have been diligently working at all aspects of the testing / design and validation process to demonstrate the progress we require to be measured against. Indeed, since the AGM, we have seen further advances in electrode longevity and performance, which is a great outcome.
At the Stade facility in Germany, I can report that we have now defined and completed the design modifications we felt were necessary to the Balance of Plant design so that we can introduce the revised fuel cell stacks for our validation runs in the next quarter. Mechanical sub-contractors will next month commence on making the minor modifications needed prior to introduction of the stacks. Thereafter, we will commission and run the modified system.
The outcome of the validation runs will be used to cross-check the design criteria (and therefore costing basis) for the scoping study that is currently ongoing with Covestro.
Covestro - 1MW proprietary fuel cell system
Aside from the headline that AFC Energy has commenced engineering works in respect of deployment of an initial 1MW proprietary fuel cell system at the Covestro Industrial Park in Brunsbüttel Germany, there is a lot more to consider below the surface of this headline announcement.
Firstly, the AFC Energy fuel cell is well placed, due to its ability to accept industrial grade hydrogen, to be considered for deployment in a scheme such as this one. Being capable of running with this grade of hydrogen, whilst advantageous, is by itself not enough. AFC Energy's technology also must live within the constraints that industry has for project progression, for example, is the project consistent with hydrogen by-product utilisation for the site, does the project deliver at commercial level, does the project meet with core business needs? These considerations will always bring us back to "PLACE", which is why I felt the need to emphasise, again, the importance of the work we are undertaking with De Nora.
The work on the Covestro scoping study is progressing well and we hope to be through most of this phase by the middle of August for internal review and assessment. As we develop the basis against which deployment would proceed we will be buoyed by the empirical data that will start to flow from the operation of our Stade fuel cell facilities. Using the Stade validation data will provide much confidence that the basis for our scoping study is based upon strong running performance. I cannot say more than this now as we are still mid-project.
However, it is worthwhile noting that the same running data from Stade, used to verify our design basis for Covestro will also be applied to other opportunities currently in development but as yet unannounced. The importance of this validation data from Stade will provide the unarguable evidence needed to support our position as we engage with these other commercial opportunities.
Strengthened Leadership Team
I am delighted to welcome three new highly experienced and well-respected directors to the Board of AFC Energy. John Rennocks has joined as Non-Executive Chairman, Richard Tuffill as Chief Financial Officer and Lisa Jordan as Non-Executive Director.
John's extensive experience of growing large publicly listed power businesses will be invaluable to us as we approach a transformative period in the Company's history. Richard's extensive background in the power and energy sectors is a welcome addition to the management team. Lisa is a representative of Ervington Investments Limited and replaces Eugene Shvidler, who has rotated out of the role. With a strong background in the industrial gases subsector and experience of investing in the alternative energy space, Lisa will assist greatly with the oversight and governance of the Company.
Tim Yeo, who steps down as Chairman, remains on the Board as a Non-Executive Director. Tim, who has served as our Chairman for over a decade provided invaluable expertise, insight and guidance throughout. I would like to again express my utmost gratitude to Tim for his assistance and advice since my joining AFC Energy and on behalf of the entire Board and team at AFC Energy.
I would also like to thank Eugene Shvidler once more for his great work in assisting the Company as a Non-Executive Director. Since joining the Board in 2012, Eugene has been, and continues to be a great supporter of AFC Energy and we wish him all the best in his future endeavours.
I wish you all a pleasant summer.
Yours sincerely,
Adam Bond
Chief Executive Officer
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The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ('MAR). Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.
