TIDMCWR
RNS Number : 5112T
Ceres Power Holdings plc
04 July 2018
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THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO
CONSTITUTE INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE
MARKET ABUSE REGULATION (EU) NO. 596/2014. UPON THE PUBLICATION OF
THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE
IN THE PUBLIC DOMAIN
4 July 2018
Ceres Power completes GBP20.0 million fundraising
Ceres Power (AIM: CWR, "Ceres Power", "Ceres"), developer of the
SteelCell(R), a world-leading, low cost Solid Oxide Fuel Cell
(SOFC) technology, is pleased to announce that further to the
Company's announcement yesterday, the accelerated bookbuild has now
closed raising GBP20.0 million (before expenses) by means of a
conditional placing and subscription of 132,625,994 Ordinary Shares
in aggregate ("Fundraising Shares") with an Issue Price of 15.08
pence per share, representing approximately 13.0 per cent. of the
Company's current issued Ordinary Share capital (the
"Fundraising"). The Issue Price represents a discount of 2.7 per
cent. to the mid-market closing price on 3 July 2018. The
Fundraising was significantly over subscribed with several material
new investors participating in the Placing.
The Fundraising is in addition to the Weichai Subscription
announced on 16 May 2018 which will (following adjustment for the
issue of the Fundraising Shares) raise approximately GBP19.3
million (before expenses) by means of a subscription for
approximately 127,760,800 Ordinary Shares, representing
approximately 12.6 per cent. of the Company's current issued
Ordinary Share capital. The Weichai Subscription is also priced at
15.08 pence per share, an 18 per cent premium to the mid-market
value at the date of the announcement of that deal. The value of
the Weichai Subscription has increased compared to the Company's
announcement on 16 May 2018 as the number of Initial Weichai Shares
at the Issue Price has been increased to reflect the conditional
issue of the Fundraising Shares.
Zeus Capital Limited and Joh. Berenberg, Gossler & Co. KG
acted as the joint bookrunners in relation to the Fundraising.
The Placing was subject to the terms and satisfaction of certain
conditions set out in the Appendix to the announcement of 3 July
2018. No element of the Fundraising is being underwritten. Certain
investors including IP Group Plc through its subsidiary IP2IPO
Portfolio LP have participated in the Fundraising by way of a
subscription directly with the Company on terms substantially the
same as the Placing.
The Fundraising Shares will rank pari passu with the existing
Ordinary Shares.
The Fundraising is subject to the passing of certain resolutions
at a general meeting of the Company. A notice is being sent to
Shareholders today convening a general meeting for 11.00 a.m. on 20
July 2018 at Powerscourt, 1 Tudor Street, London EC4Y OAH.
Admission of the Fundraising Shares and the Initial Weichai Shares
is expected to occur on 27 July 2018.
Background to the Fundraising and the Weichai Investment
Ceres Power is a world leader in next generation fuel cell
technology with its low-cost Solid Oxide Fuel Cell (SOFC),
SteelCell(R). Currently, the Company's technology is being applied
by its partners in the development of distributed power and
automotive products that seek to reduce operating costs, lower CO2,
SOx and NOx emissions and improve energy security. The Company
intends to license its SteelCell(R) technology to OEM partners, who
develop power systems and products, and also to manufacturing
partners to produce the SteelCell(R) in volume.
The Company is benefitting from the twin drivers of an
increasing emphasis on distributed generation combined with the
rapid acceleration towards the electrification of vehicles.
Distributed generation is increasingly seen as a solution for
homes, businesses and data centres as the conventional central
power grid is facing the growing pressures of intermittency due to
more renewables combined with the growing electricity demands of
electric vehicles. The increase in the electrification of vehicles
is the result of increasing emissions regulations to improve air
quality in countries and major cities worldwide. The SteelCell(R)
is one of the few technologies that can provide a highly efficient,
low to near zero emission power generation alternative to
conventional power generation and combustion engine technology.
This has driven a high level of interest in the SteelCell(R)
technology from leading power system and engine manufacturers.
These trends are most evident in the rapid emergence of China as
one of the leading markets for fuel cell technology. Accordingly
the Company is delighted to include Weichai Power, one of the
leading engine manufacturing companies in China, as a strategic
partner in this fundraise. Weichai Power's positioning and
experience provides direct access to one of the fastest growing
fuel cell markets in the world. Initial plans are for Ceres Power
and Weichai Power to jointly develop and launch an SOFC fuel cell
range extender system for China's fast growing electric-powered bus
market with the potential to add further stationary power products.
As part of this partnership the Company intends to enter into a
joint venture in China from 2020 to manufacture firstly systems and
ultimately SteelCells(R).
Weichai Power is initially investing GBP19.3 million to
subscribe for 10 per cent. of the Enlarged Issued Share Capital,
being the current issued share capital as enlarged by the
Fundraising Shares and the Initial Weichai Shares. In addition, it
has agreed a further investment of GBP26.3 million conditional on
the signing of further commercial agreements to increase its
holding to 20 per cent. of the Company's issued share capital by
the end of November this year. This strategic relationship is a key
milestone for Ceres Power as it continues to deliver on its
strategy of licensing system and manufacturing of the SteelCell(R)
technology to companies who are leaders in the power generation and
automotive sectors.
Recent progress
The Company continues to grow to address increasing demand for
its technology, adding new partners and progressing with existing
partners towards commercialisation. Today the Company has six
partners at the JDA stage of which, to date, two have strong intent
to go to market with products based on licensing the
SteelCell(R).
Two years ago the Company made the strategic decision to target
higher power applications such as data centres, commercial scale
applications and transportation in addition to its home
applications. In order to do this it invested in the development of
larger 5kW fuel cell stacks and higher efficiency power modules to
address the larger-scale power markets (from 5kW to hundreds of
kW).
The development has been successful and the Company has early
prototypes that demonstrate the capability of the 5kW stack going
into several of its larger-scale power customer programmes. The
Company's next step is to develop the 5kW platform further and
invest in manufacturing equipment so the stacks can be produced and
assembled at the cost and quality required by its OEM partners. The
development of the larger stacks is key to unlocking value in most
of our markets as over 80 per cent. of our customer programmes
require this platform including Cummins, Nissan and Weichai
Power.
In the next 12 months the Company expects several of its OEM
partners to move towards field testing of multi-kW products,
including a commercial scale partner which is due to start field
trials later this year, the other confidential partner looking at
10kW scale products, and most recently Weichai Power, which has
already started to develop a 30kW product suitable for many of the
power markets across China, with the range extender for electric
bus market as the first market to address.
Reasons for the Fundraising and use of funds
The Company is raising new equity in order to enable the Company
to continue to grow and commercialise the SteelCell(R). The Board
believes that the proceeds of the Fundraising along with the
proceeds of the overall Weichai Investment, along with the Group's
existing cash and cash equivalents, will provide sufficient capital
to fund the Group and it intends to use the proceeds of the
Fundraising and the Weichai Investment to:
-- provide working capital to fund the business through to
commercial launches with OEMs from 2020/2021;
-- finance a new manufacturing facility in the UK to provide
near term capacity for the next 3-5 years. The new facility will
phase the increase in annual capacity from 1 to 3 MW initially,
potentially growing to 10 MW over the next 5 years, which will
provide a platform for licensing to the Company's manufacturing
partnerships for higher volume. The Company is very close to
committing on a new site within commuting distance to Horsham,
where its current facility will remain as its Technology Centre of
Excellence;
-- enable the Company to industrialise the 5kW stack, which is
the key technology platform for most of its current demand. This
work will build on the early prototype 5kW stacks the Company has
developed in 2017/18. It enables approximately 30 per cent. reduced
cost/kW compared to the equivalent 1kW stacks and will ready these
products for anticipated market launches;
-- provide initial funding of the proposed manufacturing JV with
Weichai Power, which would be required from 2020; and
-- strengthen the Company's balance sheet to support the multiple ongoing customer programmes.
Alongside the above, the Company will continue to invest in the
technology to continuously improve and maintain its competitive
advantage and will investigate additional strategic uses of the
core technology to enable additional long term value creation.
Current trading and prospects
Ceres Power has reached a new phase of its business - having
secured six partners at the development stage, it is now seeing
several of these relationships moving towards field trials with the
intent to launch commercial products under licence.
With these higher levels of commercial activity in new countries
and broadening markets, the Directors anticipate revenue and other
operating income for the year ended 30 June 2018 will be
approximately GBP7 million, up c.70 per cent. from the prior year.
The Board is confident that the Company can maintain this trend of
strong revenue growth as it secures more technology transfer and
licence revenues in addition to its current engineering services
and 2019 revenues are expected to be ahead of current market
expectations. The order book is currently GBP5.1 million, up from
GBP3.2 million as published last year, and the Company has a strong
commercial pipeline with several opportunities at an advanced
stage, including a potential substantial grant award.
Outlook
The next year will be extremely exciting for Ceres Power, as it
expects field trials to start across a number of applications: 5kW
commercial CHP with its confidential customer starting later this
year, the first 30kW system being run on a bus in China with its
new partner Weichai in 2019, and it expects 10kW power only systems
to start being trialled later in 2019. These initial trials will no
doubt provide new challenges for the Company servicing several
different OEMs in different markets. The Company's focus remains on
getting to the SteelCell(R) products to market under licence with
leading OEMs and proving out the technology and business model in
several different applications.
Of primary importance, later this year the Company is working
towards completing the joint venture and licensing agreement with
Weichai Power which will allow it to work towards a manufacturing
joint venture in China and which triggers a further equity stake in
the Company to increase Weichai Power's holding in the Company to
20 per cent. The Company also continues to target an additional
strategic manufacturing partner within the next 12 months and it is
in discussions with a partner regarding a broad strategic
collaboration, including manufacturing, however negotiations are at
an early stage.
The Board intends to continue to scale and develop the business
to be able to deliver these new opportunities and completion of the
proposed fundraise would put the Company in a strong financial
position through this key period of growth and commercial
launches.
Details of the Fundraising
The Company has raised approximately GBP20.0 million by way of a
conditional placing of 105,835,694 Placing Shares and Subscriptions
of 26,790,300 Subscription Shares both at 15.08 pence per share
with existing and new investors. The Fundraising Shares to be
issued pursuant to the Fundraising will represent approximately
10.4 per cent. of the Enlarged Issued Share Capital. The
Fundraising is conditional on (amongst other things) shareholder
approval of the Fundraising Shares and approval of the shares
resulting from the Weichai Investment and Admission and has not
been underwritten.
Related Party Transactions
IP2IPO Subscription
IP2IPO, a Substantial Shareholder (as defined by the AIM Rules)
in the Company and a wholly owned subsidiary of IP Group Plc
("IPG"), has conditionally agreed to subscribe for 26,525,100
Subscription Shares pursuant to the Subscription. Therefore,
following Admission, IP2IPO will have a shareholding of 284,063,394
Ordinary Shares, representing 22.2 per cent. of the Enlarged Issued
Share Capital.
The participation of IP2IPO in the Fundraising is a related
party transaction for the purposes of the AIM Rules.
IP Capital Letter of Engagement
The Company entered into a letter of engagement, dated 3 July
2018, with IP Capital in respect of the provision of certain
corporate finance and advisory services relevant to the Fundraise.
Under the terms of the IP Capital letter of engagement, the Company
has agreed to pay IP Capital, subject to and conditional upon
completion of the Placing, a fee of GBP20,000.
IP Capital is considered to be a related party under the AIM
Rules due to it being a wholly owned subsidiary of IPG and within
the same group of companies as IP2IPO, a Substantial Shareholder.
As such the engagement of IP Capital pursuant to the IP Capital
letter of engagement is considered to be a related party
transaction.
Accordingly, by reason of their connection with IP2IPO being
that (i) Alan Aubrey is an employee of IP2IPO Limited (a company in
the same group of companies as IP2IPO) and director of IP2IPO and a
director and Chief Executive Officer of IPG (IP2IPO's parent
company), and (ii) Robert Trezona is an employee of IP2IPO Limited
(a company in the same group of companies as IP2IPO), neither Alan
Aubrey nor Robert Trezona is considered to be an independent
director for the purpose of the related party statement below.
The Directors other than Alan Aubrey and Robert Trezona, having
consulted with the Company's Nominated Adviser, Zeus Capital,
consider the terms of:
-- IP2IPO's participation in the Fundraising to be fair and
reasonable insofar as Shareholders are concerned.
-- the IP Capital letter of engagement to be fair and reasonable
insofar as Shareholders are concerned.
Director's Fundraising Participation
Aidan Hughes, a Non-Executive Director, has agreed to subscribe
for 265,200 Subscription Shares in the Fundraising. The
participation of Mr. Hughes in the Fundraising constitutes a
related party transaction under the AIM Rules. The Directors,
excluding Mr. Hughes, having consulted with the Company's Nominated
Adviser, Zeus Capital, consider the terms of Mr. Hughes'
participation to be fair and reasonable insofar as Shareholders are
concerned.
For further information please contact:
Ceres Power Holdings plc Tel: +44 (0)1403 273
Dan Caesar 463
Zeus Capital (Nominated Adviser Tel: +44 (0) 20 3829
and Broker) 5000
Giles Balleny / Andrew Jones /
Dominic King
Berenberg (Joint Broker) Tel: +44 (0) 203 207
Ben Wright / Mark Whitmore / Laure 7800
Fine
Powerscourt Tel: +44 (0) 20 7250
Peter Ogden/Andy Jones 1446
Zeus Capital, which is authorised and regulated in the United
Kingdom by the Financial Conduct Authority ("FCA"), and Berenberg,
which is authorised by the German Federal Financial Conduct
Authority and subject to limited regulation by the FCA, are acting
exclusively for the Company and for no--one else in relation to the
Fundraising, and will not be responsible to any other person for
providing the protections afforded to their respective clients nor
for providing advice in connection with the matters contained in
this announcement.
No representation or warranty, express or implied, is or will be
made as to, or in relation to, and no responsibility or liability
is or will be accepted by Zeus Capital, Berenberg nor by any of
their respective affiliates, partners or agents (or any of their
respective directors, officers, employees or advisers), as to or in
relation to, the contents, accuracy or completeness of this
announcement or any other written or oral information made
available to or publicly available to any interested party or its
advisers, or any other statement made or purported to be made by or
on behalf of either of Zeus Capital or Berenberg or any of their
respective affiliates in connection with the Company or the
Fundraising, and any liability therefor is expressly
disclaimed.
Zeus Capital, Berenberg and each of their respective affiliates
accordingly disclaim all and any liability, whether arising in
tort, contract or otherwise (save as referred to above) in respect
of any statements or other information contained in this
announcement.
This announcement does not identify or suggest, or purport to
identify or suggest, the risks (direct or indirect) that may be
associated with an investment in the Placing Shares. Any investment
decision to buy Placing Shares in the Placing must be made solely
on the basis of publicly available information, which has not been
independently verified by Zeus Capital or Berenberg.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
ROIMMGGNGDFGRZG
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July 04, 2018 02:00 ET (06:00 GMT)
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