AFC Energy boss says "keep the faith"
By Harriet Mann | Fri, 11th September 2015 - 10:45

AFC Energy boss says "keep the faith" After its meteoric re-rating earlier this year, AFC (AFC) has gone from bombed-out AIM reject to a stockmarket darling. The alkaline fuel cell company has turned the technology used in space missions into a commercial power supply after unveiling a new, accelerated timeline at the end of last year. With the technology under its belt and its pipeline beefing up, it's no surprise the shares surged by as much as 771% this year.
But the group hasn't been immune to global market weakness, although boss Adam Bond assures investors that the firm has little exposure to China. AFC's shares have had a rough ride over the last couple of weeks, losing 44% of their value from July-highs at over 60p, no doubt some of that due to profit-taking. They're down 30% in the past ten days.

"The share price has been hit quite hard over the last couple of days for reasons we don't really know," chief executive Adam Bond told Interactive Investor. "I think the market was wondering whether there was something going on they didn't know about. All is still on plan; there is no reason for this fall that we are aware of. Keep the faith."

Since we first met with the newly appointed CEO last December, Bond has been pushing AFC to achieve each of its 11 milestones, introduced to accelerate the firm to commercial production. Targeting 1 gigawatt (GW) of capacity by 2020, the group is on track to have its 240 kilowatt (kW) German Power Up producing by the year end. It's also signed three commercial deals in Korea, Thailand and Dubai before the half year, for 50 megawatt (MW), 10MW and 300MW plants respectively.

"We remain confident that the scope of the company's pipeline, being an expected 1GW of capacity under development or in operation by the end of 2020 will be delivered and indeed, most likely exceeded," said the company.

Bond has kept his foot on the gas, and it's paid off. AFC signed its first commercial power purchase agreement with the local utility company Stadtwerke Stade at the end of July and its first KORE fuel cell system achieved operation in Germany.

"The intention is not to drive a profit [from its Stadtwerke PPA], the intention is not to make millions of dollars," explains Bond. "In ter=ms of revenue we are probably looking at tens of thousands of euros per annum, so this is not going to move the share price and it is not designed to. Given that we are producing power, we might as well sell it and generate some revenue. But operating a fuel cell gives us the opportunity to learn how to operate a fuel cell in a commercial power market."

With his eyes set firmly on the final two milestones, AFC reckons it will have sold its first power to the grid within the next month, with its 240kW KORE plant operating at full capacity by the year end. Of its targeted 1GW capacity, the group also has its 360MW pipeline and Bond has bought a new commercial director on board to transition these agreements into binding contracts.

"We don't want to go down the path of having a gigawatt of memorandum of understandings (MoUs) and have not delivered anything. It becomes one of the typical AIM tricks where you pump the share price but don't deliver anything. I don't think that adds any value to us, so it's getting that balance between delivery and pipeline development."

Still, the boss is confident AFC will be profitable by the end of the 2016 financial year, although he notes that as the number of opportunities grow, so will its cost base. The group received monthly derivative swap payments from Lanstead Capital, which the group will continue to receive for another eight months, and has £3 million cash in the bank. To expand, it will need more money, and there a number of options AFC is considering, including strategic partnerships, licence agreements or, of course, coming to the market.

While it wants to keep its intellectual property under wraps, the group is in talks with manufacturers to outsource some of the building process. Bond doesn't want to rush the decision, but hopes an agreement will be made by the end of the year.

"We are being very aggressive in our go to market strategy. We are creating timelines that are very tight, but we are delivering against all of them at the moment. When you set timelines you create expectations and the challenges then become how to deliver against that timeline. We are working bloody hard to hit all of our milestones, and so far so good."
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10 September 2015 - AFC Energy PLC
Progress Update

Highlights
· AFC remains on target to deliver on each of its two final Milestone's at Stade, namely Milestones 10 and 11, in accordance with earlier timeframes
· The Company continues to develop its commercial pipeline of opportunities with its current and prospective partners internationally

AFC Energy plc (AFC.L), the industrial fuel cell power company, is pleased to announce the following progress update. AFC can confirm that at this time, following the successful commissioning of the KORE system in Stade, Germany on 31 July 2015 and the associated power output achieved at the time of commissioning, it remains on target to achieve Milestones 10 and 11 of the 11 Milestone programme announced to the market on 8 December 2014. These Milestones, including the generation and sale of power into the German electricity grid, and for the first time, generation of the full nameplate capacity of the KORE system (240kW), are expected to be achieved in accordance with earlier announced timeframes in 2015. The Company's staff and subcontractors are currently on site in Stade finalising works necessary to deliver Milestone 10 and at this time, there is no reason to suspect this will not be achieved within the announced timeframe.

The Company also wishes to confirm that it continues to make progress in the development of its fuel cell catalyst and at this time, has seen further recent improvements in the power output generated from the cells as compared with that currently being trialled in Stade; this provides further confidence that the AFC fuel cell will be in a position to achieve its targeted capacity output of the KORE by the end of 2015.

Furthermore, ongoing dialogue is occurring with existing and prospective commercial partners and at present, we hope to be able to make further updates to the market on the progress across these opportunities over the coming months. We remain confident that the scope of the Company's pipeline, being an expected 1GW of capacity under development or in operation by the end of 2020 will be delivered and indeed, most likely exceeded.

Mr Adam Bond, AFC's Chief Executive Officer, said: "At this time, we wish to reassure shareholders that AFC remains on target to deliver on its key milestones announced in December 2014. We will provide further updates to the market on the KORE system at Stade and other commercial developments in the near future."