TIDMCWR
RNS Number : 3442J
Ceres Power Holdings plc
04 December 2018
4 December 2018
CERES POWER AND WEICHAI FINALISE STRATEGIC COLLABORATION
AND JV AGREEMENT
Ceres Power (AIM: CWR, "Ceres"), a world-leading, low cost Solid
Oxide Fuel Cell company, and Weichai Power ("Weichai"), one of the
leading automobile and equipment manufacturing companies in China,
are pleased to announce the finalisation of their long-term
strategic collaboration first announced in May 2018. This includes
a Joint Venture Agreement with the commitment to create a fuel cell
manufacturing JV in China, a License Agreement to transfer key
technology to the JV and a new GBP9 million joint development
agreement. It also triggers a further GBP28m equity injection into
Ceres Power.
The JV will target the rapidly growing Chinese market
opportunity for fuel cells which addresses the decarbonization and
air quality needs in the transportation and power generation
markets. The bus market in China, along with the commercial vehicle
and stationary power markets, create a potential multi-billion
dollar market opportunity for the JV.
Highlights
-- A new Joint Development Agreement (JDA) worth GBP9m to Ceres
for the continued development of a first range extender product for
electric buses in China.
-- A Joint Venture Agreement for Ceres and Weichai to invest in
a major new fuel cell manufacturing facility in Shandong, China,
following successful trials.
-- A License Agreement which will result in significant staged
Technology Transfer payments of up to GBP30m, and ongoing future
royalties to Ceres.
-- Weichai will invest a further GBP28m in Ceres through the
exercise of its warrant at 164.5p per share to increase its stake
in Ceres from just under 10% to 20%. This brings its total equity
investment in Ceres to GBP48m.
Ceres Power CEO Phil Caldwell:
"This is a major strategic milestone for Ceres. Establishing
manufacturing capability in China with a partner as strong as
Weichai will enable our SteelCell technology to benefit from the
kind of economies of scale and significantly lower costs we have
seen in the solar and battery industries. Weichai is one of the
largest automotive and engine manufacturers in China. This
agreement represents a scale-changing opportunity for Ceres."
Tan Xuguang, Chairman and CEO of Weichai:
"We have made a strong start to our partnership with Ceres and
we are delighted to extend our relationship. We see significant
commercial potential for using the SteelCell to help us develop
cutting edge fuel cell power systems. We look forward to trialing
the new range extender and also to developing new products for the
transportation and stationary power generation markets in
China."
Commercial Details
The strategic collaboration with Weichai includes:
A new Joint Development Agreement (JDA) for GBP9m following on
from the initial JDA which the parties previously signed. This
accelerates development of the 30 kW SteelCell(R) SOFC range
extender system using widely available Compressed Natural Gas
(CNG), with systems for 10 buses set to be developed and trialed in
the next two years. Successful completion of the trials will lead
to the JV formation which is anticipated to be in 2020.
Joint Venture and Technology Transfer Upon successful completion
of field trials under the JDA, Weichai and Ceres will establish a
Fuel Cell Manufacturing Joint Venture in Shandong Province, China
with an initial 51%:49% respective shareholding. Weichai and Ceres
will fund pro rata shares of the JV in accordance with an agreed
business plan. Weichai will hold three of the five board seats and
Ceres will hold two with certain shareholder protection provisions
in place.
The JV will manufacture SteelCell(R) systems, stacks and fuel
cells in accordance with the License Agreement after their
respective technology transfers from Ceres. The Licence Agreement
provides a mixture of exclusive and non-exclusive rights for the
commercial vehicle, bus and certain stationary power markets in
China. Ceres will be paid up to GBP30m for the staged programme of
Technology Transfer as well as ongoing royalties and future
dividend payments.
Equity Investment Weichai will shortly exercise its warrant at
an exercise price of 164.5p per share, investing a further GBP28m
of equity in addition to its previous GBP20m investment. This
increases its shareholding in Ceres from just under 10% to 20%. The
use of funds includes investment in Ceres' core fuel cell business
and manufacturing scale up in the UK as well as the initial equity
investment in the JV.
In accordance with the existing Relationship Agreement, Weichai
has an eighteen-month standstill from May 2018 under which it
agrees not to acquire more than 20% of Ceres Power's issued share
capital and includes an eighteen month minimum holding period from
December 2018 on the proposed shareholding. Weichai will also
nominate a non-executive director to the Board of Ceres Power.
Benefits to Ceres
The agreement provides Ceres with access to the Chinese fuel
cell market with one of the leading automotive OEMs 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. The proposed Joint Venture with Weichai provides a
staged path to high volume manufacturing of the SteelCell(R) under
licence validating the Ceres business model, which is based on a
licence and royalty revenue strategy.
The agreement also provides growth capital for Ceres as it
scales up its operations in the UK and generates near term demand
for its 5kW stack supply from the UK. It has the potential to
provide significant staged revenue to Ceres 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 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 who has a wide network of customers in China with sales
volumes of c.30,000 buses each year.
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 Tel: +44 (0)1403 273
Phil Caldwell / Richard Preston 463
Zeus Capital (Nominated Adviser Tel: +44 (0) 20 3829
and Broker) 5000
Andrew Jones / Dom King
Berenberg (Joint Broker) Tel: +44 (0) 203 207
Ben Wright / Mark Whitmore / Laure 7800
Fine
Powerscourt Tel: +44 (0) 20 7250
Peter Ogden/ Niall Walsh 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,
whose business covers complete vehicles, powertrains, intelligent
logistics, parts and components, 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 news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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