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AFC Energy PLC

AFC Energy Plc - Quarterly Newsletter

RNS Number : 1038K
AFC Energy Plc
24 December 2015
 

 

AFC Energy Quarterly Newsletter - December 2015

 

Dear Shareholder,

 

As 2015 comes to a close, we can be proud of what AFC Energy has achieved in the past 12 months and look forward to an exciting 2016.

 

When we sat down in December 2014 to devise an aggressive roadmap for the accelerated deployment of our first industrial scale fuel cell in Germany (POWER-UP Programme), we knew there would be challenges and obstacles we would need to overcome in order to achieve our goals.  But to continue to hit our targets and deliver on our commitments 12 months into the programme is a testament to the technology and to our team.

 

Twelve months ago, AFC had never operated a fuel cell cartridge greater than 25 cells operating at less than full loading.  Today, we can proudly say not only have we progressed from 25 cells per cartridge through to 51 and subsequently 101 cells but have also increased the power density and output of the fuel cells and delivered a complete, consented balance of plant where 8 of our cartridges have operated to sell power into the German grid.

 

We continue to push hard to achieve our ambitious goals and ensure the system we take to market achieves, not only short-term operational success, but also longevity, safety, stability and density of power supply across the life of project.  Our programme of work for next year will focus on these points. However, the recent announcements we have made should provide confidence and strong support to our ability to reach these goals. 

 

In particular, on 12 October, we announced the achievement of our penultimate Milestone 10 with the commencement of temporary operation of an entire tier of eight fuel cell cartridges on the KORE system, in Stade, Germany, where it achieved a maximum output from the tier of just over 40kWe.

 

The eight fuel cell cartridges used in this Milestone 10 trial have since been used to test the second and third tiers of the KORE system in advance of our final Milestone 11 - the achievement of first commercial scale operability of the KORE module, which will utilise AFC's state-of-the-art alkaline fuel cell technology.

 

Each tier (there are three in total) within the KORE fuel cell system is capable of operating independently of the other so the successful operation of a single tier of eight cartridges is a significant further de-risking of the system and in particular the Balance of Plant.

 

At present, all 24 cartridges for the KORE system have been relocated to Germany and are awaiting final pre-commissioning activities before operation of the full system in early 2016.  You may have noticed the announcement last week where we took the decision to delay commencement of the full system into January 2016; this decision was taken to give our technical team enough time to implement and effect a number of the valuable learnings gained since the commencement of trials in Stade and maximise the chance of a successful full system trial in January.   

 

Moving briefly away from KORE and the POWER-UP programme, 2015 has seen a strong interest in AFC's fuel cell across several of our key target regions, including Asia and the Middle East.  Last month, I had the opportunity to revisit South Korea with our Technical and Commercial Directors to further the development of opportunities in that country where interest in AFC's technology remains strong.  We expect to make further announcements from this region in 2016. 

 

We further announced another Heads of Agreement to develop a business plan for the large-scale deployment of AFC's fuel cells across the Middle East.  The business plan - to be developed alongside DNR Industries Ltd., part of the Dubai-based investment and project developer, Dutco Group of Companies ("Dutco") - will focus on defining a commercial strategy for what is expected to be a significant commercial fuel cell deployment opportunity and pending the outcome of the business plan, is anticipated to result in the formation of a joint venture between the two companies to execute the plan commencing in the first half of 2016. 

 

As alluded to in our announcement, based on initial estimates from market soundings, this could present an opportunity on its own to deliver a large percentage of AFC's targeted generation capacity over the next few years.  The business plan will also explore potential commercial models for the joint venture between the two companies with a long-term strategic view being taken regarding the prospect for a regional power utility.    

 

I've always long considered the Middle East to present AFC with an enormous near-term opportunity to deploy the Company's alkaline fuel cell technology into the growing clean energy portfolio of projects being supported in the region.  This opportunity sits alongside that signed earlier in the year with Dubai Carbon, where discussions continue to take place on joint development opportunities in the region.  

 

There are a number of additional opportunities currently being explored internationally with prospective "early adopter" partners and with the commencement of operations in Germany early next year, we expect this level of interest to remain strong.   

 

I think we would all agree that this is an exciting time for AFC, with the results of full commissioning expected to be announced prior to the end of January 2016.

 

In conjunction with the development of a commercial pipeline of projects, next year will see a stronger emphasis on system / cartridge cost reduction to ensure the technology is capable of operating in a competitive and efficient manner as compared with alternative clean energy technologies.  This process will not only look at the supply chain and reuse / recyclability of the fuel cells but also across possible second generation design of fuel cell components to capture improved learnings and areas identified for further engineering optimisation.     

 

Finally, on 17 December, we announced a subscription to raise approximately £2.47 million and shareholder offer to raise up to approximately £1.13 million. While the details can be read in full on the announcement, I do want to reiterate that due to the accelerated timetable towards achieving our final Milestone 11 and the first commercial scale operability of the KORE module, the Company incurred a large number of project-related invoicing commitments, in advance of funding being received from the EU's grant agency under the POWER-UP agreement. The Subscription therefore addressed any potential shortfall during this period as well as supports AFC Energy's short-term working capital requirements.

 

It has always been my intention that shareholders such as yourself, should be allowed to accrue value from AFC, which is why we extended the offer for subscription to qualifying shareholders, who will be entitled to subscribe for up to 5,631,551 Offer Shares.  As announced, details of the Shareholder Offer and application forms will have been sent to qualifying shareholders.

 

Also, as stated, the funds raised by the subscription (but not including any funds to be raised under the Shareholder Offer) will provide the Company with working capital at least to complete the pre-commissioning activities in relation to Milestone 11.  In addition, the Company expects to continue to receive additional funds during the first part of next year from its European Union grants and pursuant to the equity swap entered into by the Company with Lanstead, the final receipt in relation to which is due in April 2016.

 

On behalf of myself and everyone at AFC, I wish each of our shareholders and families a very Merry Christmas and relaxing holiday season.  I thank you for your continued support and look forward to further progressing AFC's commercialisation into 2016. 

 

 

Yours sincerely,

 

 

Adam Bond

Chief Executive Officer


This information is provided by RNS
The company news service from the London Stock Exchange
 
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