http://www.afcenergy.com/

Dawnay, Day Corporate Broking Research Note

Aim Admission Document

Re: Investor day

richlist
23UP
Thanks to Jimmynan for feedback from the Investor's day yesterday. I also went and have a few more bits of observation, comment for the information hungry among us. Again, I was struck by the optimism and enthusiasm I saw. There has been huge progress since the Investors Day a year ago and our spot checks are just little windows of the ongoing fast moving progress they are making.

On the topic of when will we hear about the akzo trial. It sounds as if the lab test bench already has a newer recipe for electrodes, which was said to have increased longivety and power output. Numbers were not specified, but I imagine we are already ahead of the projected timeline graph in the Peat report. This is very exciting. This has not gone to Akzo yet.

This is not 'delay to get to the perfect product'. It is an ongoing process of iterations. Microsoft have had many of these to keep ahead. Any new recipes will just be new electrodes which need replacing every few months anyway. It is all very good news.

When we visited the running cartridges IW said that the hydrogen costs upto £1500 per day to run tests at Dunsfold. With two test beds at Akzo on free hydrogen, the testing there is therefore worth £1m per year of AFC (and our) money. (Might have been more, I was not sure if this was for testing with a full stack of electrodes).

This means that time at Akzo is very valuable. IW specified that it is used to collect a lot of different kinds of data of use to the company. I got a new insight into why they would not choose to carry on with a longivety test there when they already have something better in the pipeline. I felt very reassured that progress is very good and the absence of an Akzo trial '3 month' rns is not because there is anything wrong.

Regarding any RNS about a contract with Korea, it was said that they have not yet chosen their definitive partner, so not about to get this any day probably. However, IW said this was 'complicated'. The Peat report mentioned that companies cannot operate in Korea without a partner and not clear how a deal should be organised. This may give an insight into how the structure of any agreement needs to be right. It suggests there may be more than one partnership option. It is important for the longer term that the deal is the best for AFC. I felt reassured that there are options there and they will end up with what is best for AFC and not rush into anything.

We saw the new production facility. (I had not seen it before). We were shown the rubbery 1cm diameter pellets of the secret recipe. There were two enthusiastic people operating the rolling machines. One machine was called a 'dough' something. They were said to be used for making pancake roll casings. There seemed to be repeated rollings between transparent non stick sheets (computer aided, so I imagined that accurate and even thickness is important). The recipe seemed to have the properties of a rich shortcrust pastry or shortbread, in that it rolled with a bit of crumbling at the edges. So looked to have capacity to crack if not treated properly. Possibly the 'lightness' and therefore gas permeability would be affected if the 'pastry' is rolled with too heavy a hand. The pieces of 'rolled dough' were then transferred to an oven to dry for 4 hours. We did not see the part where they are attached to the metal plate with a layer of glue or the electrodes assembled.

The process is being managed by a very enthusiastic production managed who is maintaining consistency and not letting the scientists alter things and tinker with the recipe. This a a marked step change from lab excitement to real production.

The process looked very time consuming. It is easy to see that this could be automated using the type of machine that would produce lasagne sheets (eg) but also the need to be careful of thickness, lightness and cracking to get a uniform quality product. I am sure they will be able to scale this up without difficulty, but are ta

:01
Re: Thanks for feedback.,

polterlooser
7UP
First let me endorse the various reports on the BB in last 2 days.

As for the mass production, though we were not told this some asides with their Landlord in the local council it appeared to me that AFC are haggling with the airport for more space. That will be needed for the mass production. In the meantime they are obviously learning a lot from running the smaller unit. For instance they havve had to try several mixers for the catalyst paste. The current macine that presses the paste on to the metal electrodes does so by passing them both between two rollers. For mass production the will need a much longer machine with mulitple rollers. Also they want to do automatic stacking. That is going to involve much more mechanical handling and will also need much more space.
There is no doubt in my mind that GL and his boys can manage all this but they will want to learn as much as possible from the smaller set up.
I will say the even though the current set up is in buildings that look very unpreposessing fro the outside all is very slick, very clean and very professional inside. It reminded me of plants I have seen to manufacture nulear fuel elements.

Just to add my thanks to those who attended and posted.

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Considering taking a new position,from the above,seems the EEC Grant is imminatent?
If so i can see a spike in the SP,although i feel this is still couple years away from
proving it's tech,with regards to longativity of life? Something which is imho the
real test,along with cost of the feul cell?

only thing you guys are ignoring is the lead time to when there is something commercially and economically viable in production - still 3/5 years?

http://www.dailymail.co.uk/money/investing/article-2237613/INVESTMENT-EXTRA-Put-energy-AFC-shares.html

http://www.proactiveinvestors.co.uk/companies/news/50838/afc-energy-fuelled-by-hydrogen-and-powerful-backers-50838.html#

AFC Energy fuelled by hydrogen and powerful backers
Tue 11:50 am by Ian Lyall AFC’s fuel cell technology works a little like a large alkali battery that is able to use hydrogen created from chlorine production, biomass and coal.AFC’s fuel cell technology works a little like a large alkali battery that is able to use hydrogen created from chlorine production, biomass and coal.

AFC Energy (LON:AFC) has changed the purpose of a great deal of equipment to produce its state-of-the-art hydrogen fuel cells.

It is unlikely to have repurposed anything quite so bizarre as the croissant maker that became a talking point between management and the company’s new cornerstone investor, Roman Abramovich.

“Roman walked in and immediately recognised the piece of kit,” recounts chief executive Ian Williamson.

“A lot of the expertise we intend using is based in the food industry as our electrode resembles short-crust pastry.”

It may go down as the most oddball use of kitchen equipment, but the Chelsea FC owner wasn’t put off by the revelation.

His investment vehicle Ervington later acquired a 15% stake in AFC Energy, via a share placing that injected £8.7 million into the business.

Williamson describes AFC’s fuel cell technology as working a little like a large alkali battery that is able to use hydrogen created from chlorine production, biomass and coal.

“You have a continually producing battery,” he adds. “There are different ways of producing power using a reaction.

“We have centred on the alkaline one because it is the oldest and the most trusted and tried. There are more costly modern alternatives such as proton exchange membranes and solid oxide fuel cells.”

The challenge is getting the cost down to be competitive with traditional energy sources. The company is confident it can do this.

AFC won’t simply be a fuel cell maker; there have been too many failures in this endeavour, chief executive Williamson points out. The business will make its money as a generator.

It is partnered with the Dutch chemicals giant Akzo Nobel at a site in Germany where the fuels cells are being used to turn waste hydrogen from chlorine production into electricity.

AFC estimates that if plants such as Akzo’s used all the hydrogen this way they would get back 17% of the power used in the process.

Williamson calls the collaboration at the Bitterfield facility “a technical demonstration and proof of concept”.

The commercial application of AFC’s technology will occur in Essex.

Earlier this month it received a £4.9mln European Union grant to create the world’s largest alkaline fuel cell energy generation system.

It will be built in Thurrock on the site of a new plant owned by Industrial Chemicals Limited.

The low-cost fuel cell system will be installed in stages at the ICL facility with the aim of eventually generating around one megawatt of electricity, or enough energy to power 500 homes.

“Our main partner is Akzo and we are in negotiations to make that happen on a bigger scale,” says Williamson.

“We have what I would call a technical demonstration with them; a tech proof of concept.

“We are moving to the next stage – a scale up from technical demonstration - to a commercial demonstration. We are going to install a slightly different chor-alkali plant at ICL in Essex.

“In West Thurrock they have Europe’s newest chlorine plant that delivers enough hydrogen to produce a megawatt of power.

“This scale-up is interesting for us. We are putting the first fuel cells in at ICL at Christmas time, and scaling over a period.”

Now this brave new world of generating electricity from hydrogen (be it from chlorine, waste products or the gasification of coal) is not without its challenges.

The first and most obvious is being able to produce the electricity at a competitive rate. The City research firm MC Peat believes AFC is “on track” to produce electricity at 4 pence per kilowatt hour or lower.

To put this in context, industrial power users pay around 40% more for their energy, while you or I (the Great British consumer) are charged around 60% more for our electricity.

So there is a margin to be had here in the UK if AFC is able to produce at 4p per kilowatt hour.

Key to getting those costs down is the longevity of the electrodes and the power extracted from them.

AFC is aiming to increase the lifespan from three to 12 months, along with a 75% improvement in power output.

“But we do have to go along our development curve for all of this,” Williamson cautions.

“Currently we sit in the lab at three months electrode length, and in order to be commercial in the UK I need to get it to 12 months.

“In terms of output we have to go on a transition for an improvement of another 75%. We have already improved 150%. So we don’t see this as a problem.”

In the UK, green energy schemes are eligible for a form of subsidy called ROCs (renewable obligation certificates), which makes them more financially attractive.

However, the best geography in the world to build a project based around AFC’s fuel cell technology is Korea. “Their feed-in tariff is better than double ROCs,” said Williamson.

He also confirms the group is “seeking a commercial partner” in Korea.

So far we have only really addressed the potential of AFC’s technology in the chlor-alkaline plants such as Azko’s and ICL’s.

Abramovich has been quick to spot the potential opportunity here.

His Ervington Investments subscribed for 33m shares at 26.6p in a placing last month that leaves AFC £8.7mln richer. He has already made a profit on this investment.

The cash injection gave the group £11mln in the bank, which gives the company enough funds for almost four years based on the current rate of consumption.

But as we have hinted above, it might be deployed to use the synthetic gas that is now generated by the underground gasification of coal beds, or the hydrogen gleaned from recycling biomass.

Its 12% shareholder is Linc Energy, an oil and gas company with a focus on clean energy, while it is also a partner of and shareholder in Waste2Tricity, which is developing technology to turn municipal solid waste into energy.

All of this points to the huge latent potential of AFC’s fuel cell technology.

However, Williamson doesn’t want to expand on too many fronts.

“If you grow too quickly you can get those horrible growing pains that you can’t afford as a small company,” he says.

“I have seen fuel cell companies over-expand and find themselves simply supporting the products out in the marketplace as opposed to doing any development. We can’t afford that.”

RNS.

Two bits of good news,

An EU grant for the development of a ammonia fed alkaline fuel cell systems, coupled with the acquisition of Diverse Energy Ltd including all equipment and intellectual property, of Diverse Energy Ltd ("Diverse Energy").

Even more strings to AFC's armoury.

Greek - there's nothing like a mixed metaphor! :-)

Hi Skinny,

I knew someone would pick that up.
I just love mixed metaphors!

http://www.investegate.co.uk/afc-energy-plc-%28afc%29/rns/eu-funding-and-acquisition/201212170700116358T/

Had reached support yesterday and is bouncing today again with good volume buying.

took a punt earlier, hopping for the bounce from here

       

The GAP has been closed on reaching there yesterday

Re todays RNS.

Both new directors are on the board of Evraz plc.

EVRAZ plc is a large vertically-integrated steel, mining and vanadium business with operations in the Russian Federation, Ukraine, Europe, USA, Canada and South Africa and employs approximately 110,000 people. EVRAZ is among the top 20 largest steel producers in the world with 16.8 million tonnes of crude steel in 2011.

My understanding is that a vast amount of Hydrogen is produced as a waste product of steel making.

Anyone else see an opportunity for AFC.

Also worth a read, especially the bit about Tata and their R@D re Hydrogen and the comment re fuel cells being used in industry.

http://www.tata.com/media/articles/inside.aspx?artid=55R3uRP/hys=

Also.

http://www.worldsteel.org/dms/internetDocumentList/fact-sheets/Fact-sheet_By-products/document/Fact%2520sheet_By-products.pdf

Bottom of left hand column, second page.

Share price went well below lower Bollinger Band yesterday, and RSI is on the bounce

Not sure whether this is in anyway affecting AFC,BUT THIUGHT IT WORTH POSTING?

http://www.investegate.co.uk/cluff-natural-res-%28clnr%29/rns/awarded-uk-underground-coal-gasification-licences/201301140700084218V/

For anuone who belives in charting as a way of investing,,this has now closed the gap down of 30p? Many see this as a buy signal,especially if it starts to break out again?

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Sell Ceres power (CWR) 6.5p

When Ceres Power, the fuel cell technology company, was floated on AIM in 2004 , its fate was pretty much sealed by Tony Blair, who described it as a “world leader”.

Eight years, four Nomads, several directors and some £63mn later the company had run out of money and backers and was preparing for a wind down of the business, having failed to generate any meaningful sales.
Posted by ShareCrazy on Mon Jan 14, 12:28 PM in Comment
Comment

http://www.investegate.co.uk/afc-energy-plc-%28afc%29/rns/afc-extends-fuel-cell-electrode-life-beyond-6-mths/201301240700072492W/



AFC Energy (AIM: AFC), the industrial fuel cell power company, is pleased to announce that it has extended the longevity of its electrodes to more than six months of continuous operation at its laboratory in Dunsfold, Surrey.

Very encouraging!