TIDMCWR
RNS Number : 1960O
Ceres Power Holdings plc
16 May 2018
16 May 2018
CERES POWER AND CHINA'S WEICHAI POWER ANNOUNCE STRATEGIC
PARTNERSHIP AND POTENTIAL EQUITY INVESTMENT
Ceres Power (AIM: CWR, "Ceres Power"), developer of the
SteelCell(R), a world-leading, low cost Solid Oxide Fuel Cell
(SOFC) technology, announces a strategic collaboration with China's
Weichai Power ("Weichai") one of the leading automobile and
equipment manufacturing companies in China producing 600,000
engines per year and whose business covers complete vehicles,
powertrains, intelligent logistics, parts and components.
The long term strategic relationship provides Ceres Power with
access to the Chinese market, the world's fastest growing market
for fuel cells. Initial plans are for Ceres Power and Weichai to
jointly develop and launch a SOFC fuel cell range extender system
for China's fast growing electric powered bus market. Weichai has a
wide network of customers in China with sales volumes of c.30,000
buses per year.
The agreement potentially provides significant staged revenues
to Ceres Power through engineering services and technology
transfer, licence and royalty payments and a longer term share in
the profits from a proposed manufacturing Joint Venture.
The agreement includes a potential initial GBP17.0m equity
investment by Weichai in Ceres Power and a potential further equity
investment of GBP23.2m, which is triggered on signing further
commercial agreements before 30 November 2018, both subject to
approval by provincial PRC (People's Republic of China)
governmental authorities and Ceres Power shareholder approval.
Weichai is listed in Hong Kong and Shenzhen with a market
capitalization of c. US$10bn. It has a strong track record of
making strategic investments in businesses around the world, such
as its investment in Société Internationale des Moteurs Baudouin in
France, Power Solutions International lnc. in the U.S., Linde
Hydraulics GmbH & Co. KG and KION GROUP AG (MDAX-listed) in
Germany, etc.
Phil Caldwell, CEO said:
"We are delighted to be working with Weichai in a partnership
that provides access to the Chinese market for our SteelCell(R)
technology and also scale-up capital for our growth in the UK.
Weichai has a successful track record of partnerships with
international companies and shares our ambitious growth plans.
Working with Weichai provides demand for a variety of applications,
driving significant volume and cost reductions for the SteelCell(R)
and helping to establish the technology as an industry standard.
This is a key milestone for Ceres Power as we continue to deliver
on our strategic plan of licensing our technology to a leading OEM
which if successful could lead to a high volume manufacturing JV
for the Chinese market with a very strong partner."
Tan Xuguang, Chairman and CEO of Weichai said:
"China has set very ambitious targets to significantly reduce
air pollution and our bus transportation system is key to this. We
believe there is considerable scope to develop a compelling range
of new power system products for the Chinese market and in Ceres
Power, we are confident we have found the right partner in the
field of solid oxide fuel cell, with globally leading technology to
bring our vision to fruition. The SteelCell(R) is highly robust,
responsive, efficient and fuel flexible and why we feel so excited
about our collaboration. We look forward to progressing our
partnership towards commercial launch and to working closely with
Ceres Power as a strategic investor."
Commercial Details
The strategic collaboration with Weichai includes:
An initial Joint Development Agreement (JDA) involving a
multi-million pound fee. The parties will work together to develop
a 30kW SteelCell(R) SOFC fuel cell range extender system for
demonstration in an Electric City Bus application for the Chinese
market in early 2019 utilizing Compressed Natural Gas ("CNG") fuel
which is widely available in China. This includes technology
transfer and the licensing of system-level technology to
Weichai.
A Framework Agreement, which includes the key terms of the
following agreements:
-- A commercial License Agreement, for the phased technology
transfer and a mixture of exclusive and non-exclusive rights to
manufacture systems for the commercial vehicle, bus and certain
stationary power markets in China.
-- A Joint Venture Agreement, to be established upon successful
completion of the system development jointly by Weichai and Ceres
Power. As part of the JV, the two parties would manufacture in the
Shandong province in China and sell fuel cell systems into the
Chinese market.
-- These agreements are intended to be signed before 30 November
2018 and are subject to completion of the initial subscription.
Equity agreements, which include
-- A subscription agreement to invest GBP17.0m for a 10% equity
holding in Ceres Power, to be priced at 15.08p/share, an 18%
premium to current market value.
-- An additional GBP23.2m subscription by way of warrant at an
exercise price of 16.45p/share, a 29% premium on the current market
value, will allow Weichai to hold, together with the 10% acquired
under the subscription agreement, a 20% equity holding in Ceres
Power. This will be automatically exercised on the signing of the
further commercial agreements expected later in 2018, subject to
certain conditions.
-- The Weichai initial investment price and warrant exercise
price are respectively based on a 10% and 20% premium to the 90-day
volume weighted average price.
-- These equity investments are subject to provincial PRC
governmental approval and Ceres Power shareholder approval which
will subsequently be sought.
A Relationship Agreement where Weichai has an eighteen month
standstill under which it agrees not to acquire more than 20% of
Ceres Power's issued share capital and includes an eighteen month
hold period on the proposed shareholding. Weichai will have the
right to nominate a non-executive director to the Board of Ceres
Power, after the exercise of the warrant.
Both parties have agreed key licence and future royalty terms in
principle which would provide significant value to Ceres Power as
key milestones are met over the next five years, as well as the
potential value created longer term through a share in a Fuel Cell
system manufacturing JV established between Ceres Power and Weichai
which would have exclusive access to the SteelCell(R) in certain
markets and has the potential to become a leading player in the
Chinese market.
Benefits to Ceres Power
The agreement provides Ceres Power with access to the Chinese
fuel cell market with one of the leading automotive OEM's with a
track record of successful collaborations with international
companies. Access to the high growth high volume market and Chinese
supply chain enables significant cost down and economies of scale
for the SteelCell(R) technology providing a substantial competitive
advantage. A proposed Joint Venture with Weichai provides a staged
path to high volume manufacturing of the SteelCell(R) under licence
validating the Ceres Power business model, which is based on a
licence and royalty revenue strategy.
The agreement also provides growth capital for Ceres Power as
its scales up its operations in the UK and generates near term
demand for its 5 kW stack supply from the UK. It has the potential
to provide significant staged revenue to Ceres Power through
engineering services and technology transfer, licence and royalty
payments and longer term share in the profits from the JV.
The low-emission public transport market in China represents a
major commercial opportunity. This is being driven by the Chinese
Government, who are stimulating this sector through subsidies and
Zero-Emission Zones, designed to reduce air pollution, carbon
emissions, and road noise while increasing public health and lower
operating costs. In addition to these benefits and increasing the
operational range of electric buses, the Ceres Power range extender
has the advantage of being able to run on widely available fuels
such as CNG and does not rely on the roll out of hydrogen
infrastructure. This is a significant market opportunity for
Weichai.
The strategic collaboration is currently expected to progress
with the following steps:
1. Initial Fuel Cell System technology transfer to Weichai in
2018 for the initial development and demonstration of CNG fueled
SteelCell(R) SOFC hybrid electric buses in China by 2019.
2. Further trial of multiple buses and SteelCell(R) SOFC stack
supply by 2020, after which the Joint Venture will be created.
3. Phased technology transfer from system to SteelCell(R) stacks
planned over a number of years to the JV, enabling phased
manufacture in China.
4. Further JDAs to develop further the 30kW range extender
system for buses and other applications in the future.
This is the sixth partnership signed by Ceres Power in addition
to its strategic JDA partnerships with Honda, Nissan, Cummins and
two additional unnamed global OEMs. Ceres Power is working with
these world-class companies to embed the SteelCell(R) technology
into power systems for the Residential, Business, Data Centre and
Electric Vehicle markets.
- Ends -
The information contained within this announcement is deemed by
the Company to constitute inside information stipulated under the
Market Abuse Regulation (EU) No. 596/2014. Upon the publication of
this announcement via the Regulatory Information Service, this
inside information is now considered to be in the public
domain.
For further information please contact:
Ceres Power Holdings plc
Phil Caldwell, CEO
Dan Caesar, Communications & Marketing
Director +44 (0)1403 273 463
Zeus Capital - Nominated Adviser
and Joint Broker
Giles Balleny / Andrew Jones /
Hugh Kingsmill Moore +44 (0)20 3829 5000
Berenberg - Joint Broker
Ben Wright / Mark Whitmore / Laure
Fine +44 (0)20 3207 7800
Powerscourt
Peter Ogden/Andy Jones +44 (0) 20 7250 1446
About Ceres Power
Ceres Power (http://www.cerespower.com/) is a world leader in
low cost, next generation fuel cell technology for use in
distributed power products that reduce operating costs, lower CO2,
SOx and NOx emissions, increase efficiency and improve energy
security. The Ceres Power unique patented SteelCell(R) technology
generates power from widely available fuels at high efficiency and
is manufactured using standard processing equipment and
conventional materials such as steel, meaning that it can be mass
produced at an affordable price for domestic and business use.
Ceres Power offers its partners the opportunity to develop power
systems and products using its unique technology and know-how,
combined with the opportunity to supply the SteelCell(R) in volume
through manufacturing partners.
About Weichai
Weichai is a Chinese state-owned enterprise listed on the Main
Board of both the Hong Kong Stock Exchange and Shenzhen Stock
Exchange with a market cap of over USD$10 billion. With over 74,000
employees and sales of more than 150 billion yuan in 2017, Weichai
is one of the most competitive automobile and equipment
manufacturing companies in China, producing more than 600,000
engines, 830,000 transmissions, 150,000 heavy duty trucks and
200,000 forklift trucks in 2017. Over 43% of its revenue comes from
overseas market.
This information is provided by RNS
The company news service from the London Stock Exchange
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