http://www.afcenergy.com/

Dawnay, Day Corporate Broking Research Note

Aim Admission Document

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!

Re tonights presentation.

As the presentation is open to both private and retail investors, fund managers, hedge funds and of course the media, I would think that this won't just be a 'we are doing well, progress is proceeding as expected, report re testing' and similar, I have a strong feeling that IW would not be presenting unless there was something very important to announce.

As the presentation starts at 1800hrs, there would be no problem re any sp influencing information being released, as obviously the markets that deal in AFC shares are closed.

Details of the presentation will be on the companies web site after the meeting has closed (hopefully being updated as it happens).

I also feel that a RNS will be released at 0700 hrs tomorrow on an sp moving event.

I have no other info to point to an RNS, so my only reasoning for thinking such is purely down to my earlier comment re IW timing of the presentation.

Presentation to Proactive Investors One2One Investor Forum

MPs learn about potential of fuel cells

Ian Williamson, Chief Executive of AFC Energy (AIM: AFC), the industrial fuel cell power company, was one of several panellists at a seminar in Parliament organised by the UK Hydrogen Fuel Cell Association (UKHFCA), the Parliamentary Renewable and Sustainable Energy Group (PRASEG) and All Party Parliamentary Group on Intelligent Energy (APPGIE).

At the seminar MPs and peers heard that the Feed-In Tariff should be expanded to enable fuel cells to revolutionise the energy industry and bring green manufacturing jobs to the UK.

Over 80 attendees, including parliamentarians and industry representatives, gathered in Portcullis House in Westminster. In a lively debate, Ian Williamson and representatives from other leading UK fuel cell and hydrogen companies explored the role of hydrogen and fuel cells in delivering a low carbon economy, the competitiveness of hydrogen and fuel cells relative to alternative options, the nature and scale of the hydrogen and fuel cell opportunity for and how this opportunity can be realised. The event coincided with a series of one-to-one meetings with MPs and Government Officials aimed at gathering support for the UKHCFA's new Feed-in Tariff Campaign.

Most posters on here think I am too impatient re AFC, and I agree with them.

So I decided to take a cold hard look at what AFC have achieved in the last 12 months.

Looking at their progress since Feb 2012, I was drawn to the following conclusions.
I appreciate all the below is obvious, but sometime the obvious sometimes needs re-visiting (well it helps me if no one else)

Strength of the company.

Increased cash position by a substantial amount.
Cash flow in (increase) out (decrease).
Increased experties.
Strenght of Patents portfolio.
Intellectual property (as above).
Stronger links with partners.
Increase in both fuel cell technology and life of same.
And obviously far nearer to full commercialisation.

There are a few more strenghts, but don't want to ramble on.

Weaknesses.

Still no large contracts signed.

I mention this as a weakness, as obviosly when such contracts are signed, AFC will be far stronger than at present, but for a company at the stage of AFC, the above is not realy a problem in the short to medium term.

And finally I looked at the sp.

Feb 2012
32.00p

Currant sp.
34.25p.

And that is alowing for the extra shares in issue.

And remember in Feb 2011 the sp was 68p.

So if the market put the company value (forget mkt cap) at 32p per share 12 months ago, why is the share value of 34.25p considered a fair value now, especially as AFC's financial and interlectual position being greatly enhanced.

The only conclusion I can draw is that the lack of contracts is having a 'very over heavy effect'.

I am not one to state a valuation of a share, as often its just pulling numbers out of a hat, BUT surely as a what has now moved from a very high risk v high reward to a medium risk v high reward, the current sp is far below true value.

So just opened another box of patience pills hopeing it will last at least another 12 months.

NOTE. The results certainly helped.

Greekman - have these on me.

Blimey Skinny,

That was quick, you must have had your fingers already frexed.

AFC will stay depressed and worse until such a time as their (very interesting) much vaunted technology passes the commercial and practical tests - rather like CRA