TIDMAFC
RNS Number : 0040T
AFC Energy Plc
30 December 2016
AFC Energy plc
("AFC", "AFC Energy" or the "Company")
Quarterly Newsletter - December 2016
Dear Shareholder,
I am very pleased to provide an overview of your Company's
activities for the quarter ending 31st December 2016. As we
approach the end of the year, it is worth reflecting not just on
the previous quarter but also review highlights throughout 2016.
The pace of progress this year has been relentless and while there
have been a number of significant RNS announcements, I'd like to
also use this opportunity to tell you more about some of the
progress that we have achieved behind the scenes. I also intend to
update the market fully on progress against the eight corporate
milestones for 2016 in the New Year.
Agreement with Peel Environmental for Assessment of UK's largest
Hydrogen Fuel Cell Project
AFC Energy is proud to be a UK company, which unfortunately over
the years has found itself focusing on opportunities for medium and
longer term deployment in other corners of the globe. However, in
November this year, following meetings with Peel Environmental in
Manchester, AFC signed an agreement to assess a substantive fuel
cell development opportunity in the heartland of the UK's Northern
Powerhouse. The location for the assessment was Peel's Protos
Industrial Park located in Chester. The importance of this site for
AFC's fuel cell potential lies in a number of areas: firstly, there
are a number of industrial hydrogen sources in the Protos vicinity
which lends itself to a scalable fuel cell opportunity. Secondly,
as owner of the Protos site, Peel, together with its regional
contacts and first class permitting and consenting capability,
lends itself as an ideal partner for AFC to explore this
opportunity and collaborate in the assessment of the UK's largest
fuel cell development project at the moment.
Like all of AFC Energy's commercial power development
opportunities, the first logical step in advance of deployment is
to conduct a holistic scoping of the opportunity before conducting
front end engineering studies and ultimately detailed engineering
studies leading to procurement and construction. AFC's scoping
agreement with Peel will be the first full engineering study
conducted by AFC Energy since its founding and will provide the
basis for a number of other studies for commercial opportunities
internationally which are currently in discussion.
As a UK company, we were looking for the right opportunity to
position ourselves in the UK and the Protos project with its
proposed phasing of fuel cell projects commencing at 1MW through to
an estimated 35MW to 50MW of installed capacity could see not only
the development of the UK's largest stationary fuel cell project
but also one of the largest in the world.
In time, this could potentially lead to a range of new
investment and employment creation opportunities consistent with
the UK Government's Northern Powerhouse initiative, which
represents a recognition of the scale and potential of the Northern
economy, and the objective to achieve significant growth to
rebalance the UK economy.
The focus on low carbon generation technologies clearly
identifies the region as a national hub for renewable energy and
associated supply chains, and the integration of hydrogen fuel
cells into the UK regional energy mix creates further opportunities
for decarbonisation of the national power sector and clean energy
generation in the long term.
AFC Energy has already, in conjunction with Peel, commenced
dialogue with stakeholders in the project and will be commencing
the detail of the study in January 2017. We look forward to
providing you with further updates into next year.
Delivery of Generation 2 Fuel Cell System
On 14 November, AFC announced the successful completion of
testing and development of its Generation 2 ("Gen2") fuel cell
system and in so doing, delivering the key technical Milestones 1
and 2 of the 2016 Strategic Milestones.
The Gen2 design significantly builds on the system employed in
Stade back in January 2016 and incorporates design changes to
extend the operating life of the fuel cell stack, while increasing
stack availability and reducing stack cost. These features
represent three of AFC Energy's key commercialisation metrics.
Evidence of progress in this regard was achieved when the fuel
cell system operated continuously for a period in excess of one
month and subsequently, for a period in excess of 1,000 hours with
a very high availability level at AFC's industrial test facility at
Stade.
Hydrogen Quality Requirement Lowered
Since its inception in 2006, AFC Energy has utilised at its
Dunsfold offices high quality laboratory grade (99.999%) hydrogen
in the development and trialling of its fuel cell systems. It
became apparent however following financial modelling that one of
the key drivers of economic performance in any fuel cell project
was the price paid for hydrogen at the industrial facility. To this
extent, it made imminent sense that part of AFC's trialling should,
indeed must, include testing the utilisation of hydrogen at lesser
grades reflective of industrial hydrogen availability. To the
extent AFC's fuel cell was able to utilise lower grade hydrogen, it
not only had a potentially significant impact on project economics,
but would also materially increase the size of AFC's market
potential where hydrogen was produced at source at a lower grade.
As part of the Gen2 system testing, we therefore chose to utilise
hydrogen at a lower grade to demonstrate one of the key advantages
to AFC Energy's fuel cell relative to its competitors.
The successful trial of lower grade hydrogen completed in
November 2016 now leads AFC to consider further potential
reductions in hydrogen grade to further enhance the commercial
opportunities available to us going forward.
Joint Development Agreement with De Nora
Whilst AFC has been in development of its second generation fuel
cell technology ("Gen 2") through the majority of 2016, the Company
has also been in parallel focussed on a range of incremental
enhancements through its Joint Development Agreement with
Italy-based Industrie De Nora S.p.A. ("De Nora"). Only a few months
after signing the JDA in August 2016, we have successfully
undertaken joint testing at AFC's Dunsfold facility of several
incremental improvements to the fuel cell based on De Nora's world
leading electro-chemistry capability.
De Nora's experience in alkaline electro-catalysts and
electro-chemistry, and AFC's experience in alkaline fuel cells are
wholly complementary with the Joint Development Agreement
benefitting both parties. Several new electrodes have been trialled
at Dunsfold and had their short-term power performance evaluated
before the programmes moves into durability testing.
De Nora's electrodes have operated for many years in industrial
environments globally. We believe the outcomes of this joint
collaboration will therefore deliver a technology platform that
further enhances the commercialisation timeline and success in the
alkaline fuel cell space.
Importantly, De Nora have had two of the world's leading
electro-chemists working on this collaboration since August with
positive results already beginning to be evidenced. The
collaboration continues into 2017 and we look forward to providing
further updates on the progress of this workstream in due
course.
Funding
AFC's funding has been closely monitored over the past year with
increasing opportunities to trim cash burn without affecting
technical progress identified month on month. The cash position was
further enhanced during Q4 2016.
For our EU-funded project Power-Up initiative, AFC received a
further payment from the EU's Fuel Cell and Hydrogen Joint
Undertaking ("FCH JU"), amounting to EUR791,000.
We also received EUR111,000 in new funds related to German VAT
paid in previous periods and have outstanding claims in respect of
VAT recoverable expected in Q1 2017.
The cash position therefore remains sound going into 2017 with
further cash receipts expected from the EU and the UK's R&D tax
credit regime throughout the course of the next twelve months.
A snapshot of 2016
Before I go into our intentions for 2017, it would be worth
stopping for a minute and reviewing the highlights for the year as
a whole. In 2016, we announced a successful Shareholder Offer,
appointed a new Nomad and Joint Broker, successfully delivered
gross electrical output in excess of 200kW at the KORE fuel cell
power plant in Stade, Germany, signed a strategic engineering
partnership and services agreement with Germany-based engineering
consultancy plantIng to support the optimisation and rollout of
AFC's alkaline fuel cell system, announced our Strategic milestones
and outcomes to progress towards the commercial deployment of AFC's
fuel cell system, we completed the Lanstead equity swap agreement,
which combined with our equity placing saw AFC receive a total of
GBP4.7m, received a net cash payment from the European Union's Fuel
Cells and Hydrogen Joint Undertaking of EUR2.052m, completed the
design and basic engineering of the Company's new 10kW fuel cell
system and, as mentioned above, announced the Strategic Technology
collaboration with De Nora; one of the Company's most important
collaborations entered into to date.
None of this would have been possible without the selfless
commitment of the fantastic team at AFC to whom I extend a sincere
thanks for their efforts.
2017 Commitment to Technical Development, Commercial and
Strategic Relationships
So next year, we expect to continue to make sound progress with
Italy's De Nora and to provide further updates in the New Year. I
remain firmly of the view that this collaboration presents a
significant opportunity to both parties for the enhancement of
respective shareholder value. At the same time, AFC Energy is
continuing to progress dialogue with existing, as well as
prospective new global industrial partners, which we will announce
in due course.
AFC Energy is also excited to be collaborating with Peel Land
& Property Group. The Protos strategic site will provide the
ideal opportunity for a scaled and commercial hydrogen fuel cell
facility that will play an important part in the sustainable
powering of the UK's Northern Powerhouse. I am confident that with
the mix of skills and capabilities of AFC and Peel, we will deliver
a world-class innovative fuel cell project, here in the UK.
While we continue to strive to meet the commitments as
stipulated within the milestones set for 2016, talks remain at a
highly sensitive stage. Our achievements to date nicely position
AFC Energy for delivery of commercial transactions and in turn
provide the traction needed with our partners for the deployment of
units.
I would like to take this opportunity to thank you, the
shareholder, for your continued support and wish all our
stakeholders a happy festive season and prosperous 2017.
Yours sincerely,
Adam Bond
Chief Executive Officer
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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
UPDLLFEAFDLAFIR
(END) Dow Jones Newswires
December 30, 2016 02:00 ET (07:00 GMT)
Afc Energy (LSE:AFC)
Historical Stock Chart
From Mar 2024 to Apr 2024
Afc Energy (LSE:AFC)
Historical Stock Chart
From Apr 2023 to Apr 2024
