AFC Energy Plc - Investment in new facility

The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

23 November 2020

AFC Energy PLC

("AFC Energy" or the "Company")

Investment in first H-Power^TM Assembly and Commissioning Facility

AFC Energy (AIM: AFC), a leading provider of hydrogen power generation technologies, is pleased to confirm it has secured a long term lease over new premises at its Surrey headquarters at Dunsfold Park, to serve as the Company's first large scale H-Power^TM, assembly and commissioning facility.    

Highlights

·      A 30,000 square feet facility has been secured at Dunsfold Park to facilitate the scale up of fuel cell system assembly and commissioning.

·      The facility housed British Aerospace's original manufacture of the Harrier aircraft with a long and distinguished history in high tech British engineering and innovation, which AFC Energy is proud to continue. 

·      Containerised balance of plant from BK Gulf and electrodes from De Nora will be received at the site for complete assembly and on-site system commissioning before providing a logistics hub for customer dispatch.  

·      An initial investment of £300,000 will be made into the facility with the aim of  accommodating the eventual dispatch of up to 100 hydrogen generator systems per annum with capacity for further growth. 

·      The facility will also accommodate an additional 40 office desks for manufacturing and engineering staff.

·      Growth potential exists for the facility to assemble up to 200MW per annum of H-Power systems when the Company releases its new high-density alkaline fuel cell system anticipated from the end of 2022.

·      Mass production potential of AlkaMem® at site also exists as demand for the membrane grows. 

·      The new facility will be utilised immediately for the final assembly and commissioning of the Extreme E, ACCIONA and Juelich systems and expects to be fully retrofitted and operational by end of March 2021. 

·      Investment in the facility represents excellent value for money for shareholders, avoiding an otherwise sizeable investment in new customised facilities, through adoption of AFC Energy's current low-cost manufacturing strategy.    

AFC Energy today announces a further step towards mass production of its H-Power^TM fuel cell power generators with the signing of a long-term lease over assembly and commissioning facilities adjacent to its Surrey headquarters on Dunsfold Park. 

AFC Energy's manufacturing strategy is predicated on the outsourcing of key component manufacturing for its H-Power^TM system with a view to leveraging existing supplier purchasing power, maximising the use of existing large scale manufacturing and fabrication yards, and accordingly, driving down cost. 

Key components of the H-Power^TM system will continue to be outsourced including electrodes from De Nora and more recently, containerised balance of plant fabricated by BK Gulf in Dubai.  The new facility will provide the space necessary for AFC Energy to assemble fuel cell systems of any scale, up to multiple 40ft shipping containers at any point in time, before commissioning and dispatch to customers.  Office space for an additional 40 desks will also exist to accommodate increased numbers of manufacturing and engineering staff on site.

The current pipeline of projects will all be assembled at the new facility, along with future orders into 2021.  The site is expected to accommodate the assembly of over 100 systems per annum with scope for growth, allowing AFC Energy's assembly capacity to meet customer demand without the need for further investment.

It is expected to also accommodate manufacturing and assembly of the "S" Series high energy density fuel cell system from late 2022.  The "S" series fuel cell is expected to match energy density of PEM systems with up to 2MW of clean generation capacity expected within a 40ft shipping container, meaning assembly capacity from the site should facilitate over 200MW per annum of alkaline fuel cell systems to be assembled and deployed from Dunsfold Park in accordance with future growth in customer orders. 

Importantly, the Company's scale up and manufacturing strategy for the AlkaMem membrane remains under review, however, the scale of the new hanger facility means AFC Energy will have the flexibility to manufacture and prepare for dispatch, large volumes of membranes for alkaline water electrolysis and other applications alongside customer orders. 

AFC Energy reviewed alternative, customised sites outside of Dunsfold Park for its first assembly plant in the UK, however, following an internal review, the material reduction in capital cost (versus a new facility), plus the proximity of the facility to AFC Energy's existing headquarters without the need to duplicate staffing, and the potential to access further low cost assembly and manufacturing capacity on site to facilitate growth, means the new facility offers significantly enhanced value for money for shareholders with an estimated £300,000 budget delivering a fully functioning site by the end of March 2021.

Going forward, AFC Energy's manufacturing strategy means it could consider the creation of regionalised hubs for system assembly and commissioning to further reduce logistics, assembly and commissioning costs where regional customer interest in our fuel cell system is prominent. 

Adam Bond, Chief Executive Officer of AFC Energy, said "We continue to deliver on our strategy for an asset light manufacturing programme with key assembly, commissioning, and logistics hubs remaining internal to our business, whilst outsourcing component manufacture.  Access to a new world class assembly facility at Dunsfold Park takes us one step further in the execution of our manufacturing strategy at excellent value for money for shareholders.  With room to grow, we believe this presents us with a low cost, low risk solution as we continue to consolidate the growth in our commercial pipeline and prepare ourselves for larger scale system deployment in the future".     

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About AFC Energy

AFC Energy plc is commercialising a scalable alkaline fuel cell system, to provide clean electricity for on and off grid applications. The technology, pioneered over the past twelve years in the UK, is now deployable in electric vehicle chargers, off-grid decentralised power systems and industrial gas plants as part of a portfolio approach to the decarbonisation of local electricity needs.