REG - AFC Energy Plc - Year End Operating Statement

AFC EnergyAnnouncement

16/12/2021 07:01

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RNS Number : 8027V  AFC Energy Plc  16 December 2021

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16 December 2021

AFC Energy PLC

("AFC Energy" or the "Company")

 

Year End Operating Statement and Launch of New Hybrid Fuel Cell Technology
Platform

 

AFC Energy (AIM: AFC), a leading provider of hydrogen power generation
technologies, is pleased to provide its Year End Operating Statement for the
year ended 31 October 2021.

 

Commercial Highlights

 

 •    Commercial agreements worth £4.5m signed as at the time of this Operating
      Statement (incl. post year end agreements).

 •    Strong pipeline of system sales and lease opportunities, underpinning future
      revenue growth.

 •    Strategic partnership with global leader in electrification technologies, ABB,
      for e-Mobility and data centre applications, culminating in first commercial S
      Series fuel cell and ammonia cracker order post year end.

 •    Successful entry into international maritime sector with world class partners.

 •    Signed commercial lease agreement with Urban-Air Port for the supply of fuel
      cell systems in 2022 for charging ground based infrastructure in and around
      eVTOL facilities in Coventry, UK.

 •    Engagement with MACE, one of the UK's leading construction contractors, has
      seen review of different real time construction site power scenarios
      incorporating crane environments.

 •    Signed Memorandum of Understanding with leading diesel generator hire
      business, Altaaqa Alternative Solutions, for an exclusive dealership proposal
      for the Saudi and MENA regions.

 •    ACCIONA delegation visit to AFC Energy offices in November to review new
      product roadmap and revised system requirements for system deployment in
      Spain.

 •    Strong engagement with Forschungszentrum Julich ("Julich") in new product
      roadmap with review of system requirements for their Living Lab Energy Campus
      showcase in Germany.

 

 

Product Highlights

 

 •    AFC Energy today announces a new Hybrid Fuel Cell ("HFC") technology platform
      developed and confirmed within the "S" Series range, set for initial
      deployment in early 2022.

 •    HFC platform builds on air cooled Anion Exchange Membrane ("AEM") "S" Series
      fuel cell stack architecture but with ability to accept fuelling from both
      hydrogen or reformed Methanol, further enhancing the "flex fuel" offering of
      AFC Energy.

 •    First prototype "S" Series stack build completed this month on schedule.

 •    Significant concept design and engineering of new marinised 600kW + ammonia
      cracker design concept in a single 40ft container for Norwegian ZeroCoaster
      collaboration with VARD and ABB.

 •    VARD ZeroCoaster design incorporating AFC Energy's AEM maritime solution with
      ammonia storage and cracker awarded by global certification agency, DNV, with
      AiP, unlocking potential for the design's commercialisation across maritime
      sector.

 •    New customer led product roadmap and roll out schedule from early 2022
      completed internally, highlighting new product platforms within AFC
      Energy.

 

Operational Highlights

 

 •    Successful integration of AFC Energy "L" Series fuel cell system with ABB
      energy storage and rapid electric vehicle ("EV") charging infrastructure in
      Europe over the summer.

 •    Purchase and commissioning of first item of semi-automated manufacturing
      equipment for mass production of "S" Series fuel cell system.

 •    Successful on-time deployment of fuel cell technology alongside partner,
      Extreme E, charging all-electric Championship eSUVs in Saudi Arabia, Senegal,
      Greenland and Sardinia.

 •    New commercial scale Ammonia Cracker received and installed currently
      producing Hydrogen for use in AFC Energy's alkaline fuel cell technology
      platforms.

 

 

Corporate Highlights

 

 •    Concluded oversubscribed £36m institutional fundraise (before expenses)
      cornerstoned by ABB.

 •    Investment in new office and manufacturing facilities in Dunsfold UK completed
      in the Summer 2021.

 •    Investment in new engineering, manufacturing, commercial and research teams to
      support the Company's route to market map.

 •    Appointment of new Non-Executive Chairman to the Board, Mr Gary Bullard and
      Non-Executive Director, Dr Monika Biddulph (post year-end).

 

 

Adam Bond, AFC Energy's Chief Executive, said: "2021 has been a transformative
year for AFC Energy, supported by a strengthened balance sheet, the successful
first high profile product deployment with Extreme E, investment from and
global partnerships with ABB which continue to expand, and the all-important
commencement of work into the global maritime industry.  That, alongside the
new talent entering the business, advancement of high energy dense polymer
fuel cell technologies and an increase in contracted revenue continues to
drive AFC Energy forward.  We are highly motivated by what 2022 is to bring
with a number of company firsts expected, as we continue to deliver on a
technically and commercially viable transition initially away from the $20bn
diesel generator market, underpinned by the collective aim of achieving a near
term Net Zero future."

 

 

 

Increasing Awareness of Benefits of Alkaline Fuel Cells

Hydrogen continued to take centre stage throughout 2021 as a key fuel in the
decarbonisation of industry and played a prominent role at the UN Climate
Conference, COP26, in Glasgow.  With the opportunity to represent AFC Energy
at the COP26 conference, our CEO engaged in several meetings during the event
which saw, amongst other things, a high-level Memorandum of Understanding
signed with Her Highness Sheikha Shamma bint Sultan bin Khalifa Al Nahyan, CEO
of Alliances for Global Sustainability and member of the Royal Family of the
United Arab Emirates, in support of the growth potential of the hydrogen
economy in the UAE.

With customers and partners becoming increasingly aware of the challenges
hydrogen presents as a viable gaseous fuel in remote off-grid environments,
the importance of hydrogen carrier fuels such as Ammonia and Methanol, and AFC
Energy's ability to leverage its technology to capitalise on such fuels, is
becoming increasingly understood.

This, coupled with AFC Energy's unique approach to system integration of both
upstream fuelling technology (such as ammonia crackers) and fuel cell power
generators, continues to highlight and raise awareness of the role we expect
to play in disrupting the US$20bn a year diesel generator market.

With news of AFC Energy's recent success in being integrated into the >1MW
maritime market, we are now confident of our abilities to capitalise not only
on the sizeable stationary power market, but increasingly on arguably the
largest market for alkaline fuel cells, international shipping.

 

Strengthened Contracted Revenue and Pipeline

Commercial agreements currently worth £4.5m (at the time of this statement,
including post year end contracts) reflect an increase from last year.
Throughout the course of 2022, we expect this to further increase as
commercial interest in our technology continues to rise in off-grid power
systems.

Commercial agreements for 2022 are expected to take several forms, including
outright fuel cell system sales or leases, funded customer product development
programmes, and engineering fees.

Through our strategic partnership with ABB, we are engaging with several
e-Mobility and data centre customers across the US and Europe and see the
first £4m order placed by ABB last month as a true sign of the market demand
for zero emission off-grid power solutions fuelled by hydrogen and hydrogen
carrier fuels.  ABB took the early decision that its product demand was to be
focussed on the "S" Series AEM fuel cell system and that across its portfolio
of use cases, it was the highest energy density system that would provide the
greatest go to market opportunity.  The £4m order received from ABB last
month therefore highlights not only an early product sale of the "S" Series
platform, but also fast-tracked development that will provide ABB with the
operating data upon which to package fuel cell systems for client deployment.

In our 2021 interim report, we highlighted some of the challenges that
quantifying our pipeline can bring in properly representing the value of
projects under development by AFC Energy.  Clearly, working with world class
partners such as ABB means the market deployment potential is material and to
put an estimate on this can be misleading, both to the positive (in
overstating) and the negative (in understating).  For this reason, we
continue to refrain from quantifying a pipeline at this stage, however, we
remain confident of achieving published analyst market forecasts for revenue
generation this year.

The size of the off-grid power market, both in stationary and mobile
applications, should not be under-valued and, when considered in the light of
the maritime market alone, which is measured in thousands of megawatts, we
continue to believe the strength in AFC Energy's addressable markets is
weighted heavily towards its technology's ability to accept low grade / low
cost hydrogen with a focus on that derived from hydrogen carrier fuels such as
ammonia and going forwards, methanol, discussed in more detail below.

 

Strategic Partners

The quality and number of strategic partners has also strengthened throughout
the year with a focus not only on ABB, but also several other announced
collaborations during the course of 2021.

Key amongst those in the temporary power and construction industry are Altaaqa
Alternative Solutions ("Altaaqa"), one of the world's largest distributors of
diesel generators based out of Saudi Arabia, and MACE, one of the UK's leading
construction contractors.

We are progressing well on negotiations with Altaaqa for a dealership
agreement across the Saudi and MENA regions based on their strong focus on
transitioning away from fossil fuels in remote power.  Altaaqa's current
market leading multi gigawatt fossil-based power generator business across
Saudi Arabia and surrounding regions fits very well with our aspirations for
targeting the Gulf region for fuel cell deployment.

Work has also been continuing constructively with MACE with the two companies
undertaking several work programmes since March, including engagement with
regulatory bodies, multiple site measurement and assessments of power needs
(considering variable power loads from cranes) in advance of system deployment
in 2022.

ACCIONA and Julich have been engaging with AFC Energy on our new product
portfolio expected for release in 2022.  Due to previously communicated
delays on each site, an opportunity has arisen to review product deployment
for each site with a particular interest in the new "S" Series systems which
are expected for early deployment in 2022.  A delegation from ACCIONA visited
AFC Energy in November 2021 with the intention of confirming their preferences
for system deployment with a focus on high energy density.

 

Technology and Product Range

AFC Energy's technology and product roadmap was for many years dominated by
the "L" Series, liquid electrolyte technology which has been in full operation
as part of the Extreme E racing series for the past 12 months.  The "L"
Series platform has highlighted the possibilities of alkaline fuel cells and
their fuel flexing capability across both Hydrogen and Ammonia.

With the incorporation of anion exchange membrane technology and its potential
through the "S" Series fuel cell to drive down costs, increase energy density
and reduce overall system footprint relative to the "L" Series, customers now
have a choice on technology platforms.

The AEM "S" Series platform is being accelerated through the ABB sale
agreement, across each of the "air cooled" and "liquid cooled" platforms with
early delivery of a 100kW liquid cooled system expected in late 2022, and a
200kW liquid cooled system deployment, integrated with an Ammonia cracker,
pencilled for early 2023.  It is this product platform which will form the
basis of all larger scale, high power dense systems expected to be delivered
across the "S" Series where Ammonia is considered the low-cost hydrogen
carrier of choice, including data centres and maritime.

 

Hybrid Fuel Cell Platform Launch (HFC)

The AEM "S" Series fuel cell platform affords customers with choice as it
relates to the adoption of both Hydrogen and Ammonia fuelling strategies.

However, it is important to note that the market for Hydrogen carrier fuels
focuses not just on Ammonia, but also on the adoption of Methanol.

As customers become increasingly aware of the benefits of hydrogen carrier
fuels, such as Ammonia and Methanol, versus high-cost direct hydrogen, it is
important that AFC Energy can secure its position as leader in off-grid power
by being relevant to both of the world's principal hydrogen carrier fuels.

Following months of analysis of the AEM "S" Series stack architecture,
designed for hydrogen or ammonia fuelling, it became clear that with nominal
changes to system chemistry and design, a further iteration to the "S" Series
was possible that would enable adoption of Methanol fuel (in addition to
hydrogen).  Whilst both utilise similar "S" Series stack architecture, the
Company decided to delineate the AEM platform from what is now regarded as the
"Hybrid Fuel Cell, or "HFC", platform.

 

                     "S" Series Platform

 Technology Choice   Anion Exchange Membrane ("AEM") Fuel Cell   Hybrid Fuel Cell ("HFC")

 Fuel Choice         Hydrogen or Ammonia                         Hydrogen or Methanol

 

 

Without the need for anion exchange membrane technology, proving times are
materially accelerated and the HFC platform can be more expeditiously deployed
to customer sites in commercial prototype form.

The HFC platform therefore provides added fuel flexibility in the product
platform AFC Energy will release and we expect to see first HFC systems
deployed in the first half of 2022 to customer sites.

This development provides the following advantages:

 •    The "S" Series AEM fuel cell continues its development path, accepting both
      direct hydrogen and green ammonia as a hydrogen carrier as its primary fuel
      source;

 •    The HFC affords similar energy density to the AEM "S" Series, but in addition
      to direct hydrogen, will also accept hydrogen from Green Methanol (but not
      ammonia) - a fuel also under strong investigation as an effective carrier of
      hydrogen;

 •    The HFC will be deployable in Q1 2022 running off direct hydrogen;

 •    Later versions of the HFC will be integrated with methanol reformers to create
      complete off-grid power systems;

 •    Customers have already expressed interest in early deployment of the HFC.

 

Critically, AFC Energy has long held the view that one of its strengths versus
other fuel cell technologies available was its ability to be a "fuel flex"
platform capable of accepting lower grade (and therefore lower cost) hydrogen
as well as hydrogen derived from cracked ammonia. Adding methanol to its new
fuelling optionality further enhances this "fuel flex" philosophy to provide
maximum choice to customers along with the potential for earlier phase
deployment of the new energy dense platform.

First deployments of the HFC system are expected to take place in the first
half of 2022 to customer sites on lease terms. This way, the Company can begin
monetising its air cooled "S" Series technology in advance of the anion
exchange membrane being available later in 2022.

We are most excited about this new platform and believe it will further
establish AFC Energy as a leader in the off-grid power market as industry sets
about the transition away from diesel.

The S Series is set for validation at 100kW scale in the second half of 2022
as part of the ABB deployment announced a few weeks ago. Scale up of the
batch-to-batch manufacturing process is underway and is a precursor to a
larger mass produced "reel to reel" process.

 

Investment into Staffing and Scaled Up Manufacturing

With the proceeds from our capital raises in 2020 and 2021, AFC Energy has
seen an influx in high quality engineering, commercial, research and
manufacturing teams required to deliver the Company's business plan over the
coming years.

The engineering team has now moved into new offices as part of the upgrade to
local aircraft hanger facilities at the Company's head office in Surrey over
the summer, with the remainder of the hanger installation available for
manufacturing scale up.

Over the last 6 months, a mapping of the automated scale up infrastructure
required for stack deployment has been made and the first pieces of machinery
have started to arrive for site acceptance and commissioning.  These
semi-automated assembly lines are expected to facilitate delivery of the next
few years worth of fuel cell stacks for customer deployment.

 

Outlook

After a transformational year the outlook for AFC Energy is very strong. The
recent commercial orders from ABB and the certification of the Company's fuel
cell systems and crackers for maritime installation, the value of alkaline
fuel cell technologies across our key addressable markets is becoming
increasingly apparent.

2022 will see a number of new systems deployed to the market, many from the
Company's new product range.

With the introduction of the AEM and HFC "S" Series systems, AFC Energy is now
confident that it affords maximum optionality to its customers in fuelling in
a way that no other fuel cell technology can. We expect to leverage this "fuel
flex" approach to all our commercial partners and customers and believe with
this market offering, and the power density we expect to achieve from our "S"
Series platforms, that 2022 will see many new opportunities emerge for the
Company to capitalise on its leading position to displace diesel generators
within the next decade.

 

 

 

For further information, please contact:

 AFC Energy plc                                                         +44 (0) 14 8327 6726

 Adam Bond (Chief Executive Officer)                                    investors@afcenergy.com (mailto:investors@afcenergy.com)
 Peel Hunt LLP - Nominated Adviser and Joint Broker                     +44 (0) 020 7418 8900

 Richard Crichton / Tom Ballard / Alexander Allen
 M C Peat & Co LLP - Joint Broker                                       +44 (0) 20 7104 2334

 Charlie Peat
 Zeus Capital Limited - Joint Broker

 Daniel Harris (Corporate Finance)                                      +44 (0) 203 829 5000

 Dominic King (Corporate Broking) / Rupert Woolfenden (Head of Sales)
 FTI Consulting - Financial PR Advisors                                 +44 (0) 203 727 1000

 Ben Brewerton / Sara Powell / Dhruv Soni                               afcenergy@fticonsulting.com (mailto:afcenergy@fticonsulting.com)

 

About AFC Energy

AFC Energy plc is commercialising scalable alkaline fuel cell systems, 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 data centre
applications with emerging opportunities across maritime and rail as part of a
portfolio approach to the decarbonisation of local electricity needs.

 

 

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