RNS Number : 5034F
Ceramic Fuel Cells Limited
27 April 2011
27 April 2011
Ceramic Fuel Cells Limited
Quarterly Cashflow Report and Trading Update
Ceramic Fuel Cells Limited (AIM / ASX: CFU) a leading developer of high efficiency and low emission power products for homes, today released its quarterly cashflow report for the period ended 31 March 2011.
The cashflow report is available at www.cfcl.com.au.
Highlights
-- Started deploying integrated home power and heating products with EWE as part of the order for up to 200 units
-- Further BlueGen sales in Germany, United Kingdom and Australia
-- Progress towards MCS accreditation in United Kingdom
-- Robust and repeatable performance - all BlueGen units have achieved electrical efficiency of 60 percent
Operational Review
Order for 200 integrated products
In December the Company received a conditional order for up to 200 integrated power and heat generators from German energy service provider EWE. This is the largest order the Company has received, with total revenue of up to EUR 4.9 million over two years. The order is conditional on EWE receiving partial funding under the German government's national hydrogen and fuel cell technology innovation program. This Government program is providing EUR 700 million between 2008 and 2018.
The Company is pleased to announce that EWE has received a letter of intent from the funding body confirming the intention to fund the project. Based on this letter of intent, EWE and CFCL have begun installing integrated units in homes as part of the project.
Subject to formal funding approval and to the units meeting agreed performance targets, EWE will order 72 units for delivery in 2011 and 130 units for delivery in 2012. The Company will update shareholders further when a final response is received from the funding body.
The integrated units use Ceramic Fuel Cells' patented technology to convert natural gas into electricity, hot water and space heating, with the world's highest level of electrical efficiency in small scale generators.
Ceramic Fuel Cells will supply the core Gennex fuel cell module and related components. Ceramic Fuel Cells and its local manufacturing partner, Gebruder Bruns Heiztechnik GmbH, will integrate the fuel cell module with a boiler into an integrated power and heating product for supply to EWE. EWE will then install the units in homes in the Lower Saxony region in northern Germany.
This is a significant follow-on order from EWE, the Company's longest standing utility customer. EWE is one of the largest utilities in Germany, with 6,400 staff and revenues of EUR 5.8 billion. Based in Northern Germany, EWE also has operations in other German states as well as Poland and Turkey.
Further BlueGen sales
Apart from the integrated product, the Company has also developed a modular power and heat generator called BlueGen, to provide low emission power plus heat for hot water. One BlueGen can provide about double the electricity the average home needs - excess power can be exported to the grid - plus hot water for an average family's needs.
Like the integrated product, BlueGen uses the Company's Gennex fuel cell module to achieve electrical efficiency of 60 percent - far higher than any other small scale generator. The Company believes this very high electrical efficiency will deliver significant value to BlueGen customers, and will create a significant competitive advantage in the fast growing global market for small scale power generation.
During the March quarter the Company continued to make sales of BlueGen units to leading energy companies and other foundation customers in several markets. For confidentiality and competitive reasons the Company is unable to reveal the identity of some of its customers at this time.
As at 27 April 2011 the Company has received orders for 70 BlueGen units, from a total of 31 customers in Europe, Japan, Australia and the USA.
Highlights during the March quarter and up to date include:
BlueGen installed in Amsterdam
A consortium of innovative companies has installed a BlueGen in a 17th century canal house "De Groene Bocht" in the centre of Amsterdam. BlueGen is expected to produce all the electricity the site needs whilst reducing carbon emissions by more than 50 percent compared to the local power grid.
The members of the consortium, which has a strategy to accelerate the transition to clean energy, include Cool Endeavour, which initiates the rollout of sustainable technologies, and Amsterdam Smart City, a joint venture between the Municipality of Amsterdam and leading Amsterdam companies.
Several leading energy companies in The Netherlands are also members of the consortium: Eneco generates, distributes and sells electricity, gas, heating and cooling to approximately two million business and residential customers; Liander is a distribution company with 2.9 million electricity customers and 2.1 million gas customers; and GasTerra is an international natural gas trading company with revenues of EUR 18 billion. GasTerra is owned by Royal Dutch Shell, Exxon Mobil and the Dutch Government. A BlueGen unit is also installed at the home of a Director of GasTerra.
Durham University, UK
During the quarter a BlueGen unit was chosen as an integral component of Durham University's GBP 54 million low-carbon Smart Grid project. The Smart Grid project involves 14,000 homes and businesses and will assess the impact of low carbon distributed generation technologies such as BlueGen on the low voltage electricity grid. The project is designed to help shape the future for a low-emission, more efficient power grid across the United Kingdom. The BlueGen will be housed in the Durham Energy Institute research laboratory where the impact on the low voltage grid of different microgeneration technologies will be assessed.
German Sales
The energy companies WINGAS GmbH and Technische Werke Ludwigshafen (TWL) AG have ordered a BlueGen for installation in a house in Ludwigshafen, Germany.(1)
WINGAS is active in natural gas trading and distribution in Germany, Belgium, France, Great Britain, Austria, the Czech Republic and Denmark. WINGAS operates over 2,000 kilometers of natural gas pipelines and operates the largest natural gas storage facility in Western Europe. Its customers include municipal utilities, regional gas suppliers, and large-scale industrial users. WINGAS is a joint venture of Germany's largest crude oil and natural gas producer, Basf subsidiary Wintershall Holding GmbH, and Russia's OAO Gazprom.
TWL is the local "Stadtwerke" (city utility) in the Ludwigshafen region, providing a range of services, including electricity, natural gas, heating, cooling and water, to residential and business customers.
In addition, two BlueGens were sold to an innovative distributor and retailer of new energy products. One BlueGen is installed with the retailer and the second unit is installed with a leading German provider of services to the energy and telecommunications industries.
In April a further BlueGen unit was sold to Fachhochschule Koln, the Cologne University of Applied Sciences.
Australian Sales
In the March quarter the Company sold a BlueGen unit to GV Community Energy Pty Ltd (GVCE) for installation in a nursing home in Kyabram (Warramunda Village), in regional Victoria, in a project funded by Sustainability Victoria. GVCE is a community not-for-profit company, assisting residents, businesses, community organizations and government authorities to reduce their carbon footprint through the introduction of renewable and low emission energy technologies and adoption of energy efficient practices.
Over the last two and a half years, GVCE has successfully deployed solar hot water units and solar PV units to more than 2,800 homes and small businesses through community purchasing schemes. GVCE is supported by the local Councils of Greater Shepparton City Council, Rural City of Benalla, Campaspe, Moira, Strathbogie and Murrindindi in regional Victoria.
The Company has also sold a BlueGen to the local head office of one of the world's largest manufacturers and distributors of motor vehicles and power products. The Company is in discussions to secure further Australian orders and will make further announcements in due course.
_______________ (1) http://www.wingas.de/1723.html?&L=1
Victorian Government Project
During the quarter the Company continued to work with the Victorian Government Office of Housing to deploy their order of 30 BlueGen units. All the sites in Melbourne and Shepparton have been selected and inspected. Three units have been installed in homes, and the remaining units will be installed in this quarter.
One of the BlueGen units has been installed in a three bedroom house in Melbourne as part of the AusZEH project. This project is to upgrade an existing housing property to a zero net emissions standard. The results of the upgrade will be used to improve the Environmentally Sustainable Design aspects of existing residential housing stock.
The Company is also working with the Office of Housing and leading Australian energy retailer Origin Energy, who is providing the Office of Housing clients with a one-for-one feed in tariff for the electricity generated by the BlueGen units. This means that an Office of Housing tenant who exports power to the grid will get a credit on their bill equal to the normal retail rate of electricity.
BlueGen Distribution and Service in Australia
As reported in the last quarterly trading update, in January the Company signed an agreement with Adelaide-based Hills Holdings Limited (ASX: HIL) for Hills to sell and service the BlueGen product. Hills will distribute BlueGen, initially in South Australia, and will also provide installation and after-sales service for BlueGen products Australia-wide. Hills is a leading manufacturer, distributor and installer of home products including premium solar hot water products. The company had revenues last financial year of AUD 1.1 billion.
United Kingdom Market
The Company is in advanced discussions with a prospective distribution, installation and service partner in the United Kingdom market, and will make a further announcement in due course.
During the quarter the Company continued to make progress towards having BlueGen certified under the Microgeneration Certification Scheme ("MCS"). All microgeneration products must be accredited under MCS in order to be eligible for the UK Government's feed in tariff.
The MCS accreditation process involves an extensive and rigorous third party review of all the procedures involved in manufacturing, installing and maintaining a microgeneration product. In many cases the MCS process requires additional procedures to be formalised, over and above the thorough procedures already in place for CE safety approval.
Over the last six months the Company has invested a significant amount of resources into meeting the MCS requirements. As part of the MCS process, more than 400 procedures have been written, more than 150 pieces of equipment have been tested and calibrated, and 15 test rigs have been built for quality control testing of subassemblies.
The Company expects the MCS accreditation process to be completed during the current quarter. We expect to be the first fuel cell manufacturer to have a product accredited by MCS and eligible for the UK feed in tariff.
Japan
The Company's current projects are progressing well with customers validating BlueGen's efficiency and performance characteristics. The Company is also working to secure additional sales of BlueGen to new long-term prospects who have a clear strategy for microgeneration products.
During the quarter the earthquake and tsunami tragedy in Japan, and the breakdown of the Fukushima nuclear power plant, has sparked renewed interest in small scale power generation and fuel cells.
BlueGen Performance Data
As at 27 April 2011, 43 BlueGen units are installed at sites in Europe, Japan, USA and Australia. In aggregate, these units have been operating for more than 156,000 hours (more than 17 years of collective operation). The earliest installed units have been operating for more than 11,000 hours.
All of these 43 BlueGen units have achieved starting electrical efficiency of 60 percent or more, demonstrating robust and repeatable performance in many different real world conditions. Over time the electrical efficiency reduces and the thermal output of the fuel cell stack increases. Electrical efficiency is also affected by how the customer wishes to operate the BlueGen unit: efficiency will be lower if the customer modulates the output of the unit or operates the unit at a lower power level. Even with these tradeoffs, the electrical efficiency of BlueGen is far higher than any other microgeneration product. The Company believes this presents a clear and sustainable competitive advantage in the growing global market for small scale power generation products.
Marketing
Over the last year the Company has invested in additional product marketing activities, in order to support the deployment of products and increase sales. During the March quarter several of these activities were finalised. The Company has appointed a Marketing Communications Manager to manage the Company's increasing marketing activities.
BlueGen Marketing
The Company has developed and now launched the BlueGen-net website. This is a web-based customer portal for monitoring BlueGen units installed world-wide. BlueGen customers can log-on and view their unit virtually anywhere, anytime. The website is now live at www.bluegen.net. The multi-language website contains aggregate data on all systems operating, which is available to the general public, and data on individual units, which is available to the particular customer.
CFCL product support engineers also use BlueGen-net to monitor the performance of each unit, remotely diagnose and pre-empt faults, and modulate the power output of the unit.
BlueGen-net is a very powerful and important tool to support the larger rollout of BlueGen units whilst reducing the cost of supporting each unit. All the BlueGen-net software has been developed in-house by CFCL. The Company will continue to enhance the website and add new functionality and features.
The Company has also launched a BlueGen product website, www.bluegen.info, initially in German language, and now also in English and Dutch. This website creates a portal for BlueGen product information separate to the Company's main corporate website. The Company will continue to enhance the functionality and features of the BlueGen website.
To support the BlueGen product rollout, the Company has developed user-focussed and language specific product documentation, including installation and user manuals, and is also developing maintenance manuals for external parties. This new documentation will be used to train local installation and service partners. This 'behind the scenes' documentation and training work is important to lay the groundwork for larger deployments of units.
Industry Events
During the quarter the Company exhibited at several industry events:
-- E-World Energy and Water, Essen, Germany: 544 exhibitors from the energy and water industries in 20 countries, with 19,700 visitors from the energy and water industries. A BlueGen unit was on display, and the website www.bluegen.info was launched.
-- Hannover Messe, Germany: The Hannover Messe is Europe's largest industry exhibition attracting over 230,000 visitors across 13 exhibition sectors. A BlueGen unit was on display at the booth sponsored by the Government of North Rhine Westphalia. Gebruder Bruns Heiztechnik GmbH was also displaying an integrated power and heating product using the Company's technology, of the type which is being installed in the EWE project.
-- Ecobuild, UK: Ecobuild is the world's biggest event for sustainable design, construction, and the built environment attracting over 55,000 visitors. A BlueGen unit was also on display here, at a booth sponsored by leading energy utility E.ON.
-- FC Expo in Japan: Part of Japan Renewable Energy Week, FC EXPO attracts over 90,000 visitors to see the latest cutting edge Fuel Cell technologies.
Dupont Innovation Award
In March the Company's achievements were publicly recognised when it was selected as a finalist in the 2010-11 Du Pont Australia and New Zealand Innovation awards. The DuPont awards recognise the commercialisation of outstanding science and technology. The Company's BlueGen product has been selected as one of three finalists in the 'Design for a Sustainable Future' category. The winner of the award will be announced on 13 May 2011.
RMIT report
During the quarter a team at RMIT University's Centre for Design, in Melbourne, compiled a report on the opportunities for the Company's products in the Australian commercial building sector. The Company will release the report shortly.
Manufacturing
The Company is currently making fuel cell stacks at its volume plant in Heinsberg, Germany, and in Melbourne. During the quarter the Company shipped three additional furnaces from Melbourne to Heinsberg, to increase furnace capacity. These additional furnaces are all fully operational.
As reported in previous updates, in order to further increase the volume of fuel cell stack production the Company intends to use larger furnaces already installed at the Heinsberg plant. During the quarter the Company worked with the furnace supplier to identify changes needed to ensure the furnaces will produce fuel cell stacks in larger volumes at acceptable quality standards. The parties have identified several ways of optimising the furnace operation, which the Company intends to implement during the June and September quarters. These large scale furnaces are not currently constraining production. The additional furnaces now operating at the Heinsberg plant have sufficient capacity to meet the forecast increase in production during this period.
The Heinsberg plant is now also making complete BlueGen units. During the quarter the Company completed the process of transferring the BlueGen assembly operation from its Melbourne research and pilot production plant to the Heinsberg plant, in the same building as the fuel cell stack assembly operation. The Company has expanded the Heinsberg plant, installed assembly and materials handling equipment and hired additional staff.
The first BlueGen unit made in the Heinsberg plant, installed with a fuel cell stack also made in the same plant, is installed and operating in the Heinsberg facility.
As noted in the last quarterly update, the Company has entered into a volume supply agreement with HC Starck for the supply of fuel cell components. During the March quarter the Company and HC Starck began implementing this supply agreement, with HC Starck providing production samples to ensure that it can continue to supply cells to meet the Company's quality requirements.
Financial Review
Net operating cash outflow for the March quarter was AUD 5.7m (GBP 3.7m) which was lower than last quarter due to the timing of inventory purchases partially offset by reduced receipts from customers.
Receipts from customers for the quarter were AUD 0.5m (GBP 0.3m).
The net cash outflow after investing and financing activities for the March quarter was AUD 6.3m (GBP 4.1m).
During the quarter cash outflow from investing activities was AUD 0.5m (GBP 0.3m) for payments relating to the Company's manufacturing plant in Germany including the establishment of the BlueGen assembly operations there.
Cash at 31 March 2011 was AUD 24.3m (GBP 15.7m).
The quarterly cashflow report is also available on the Company's website at www.cfcl.com.au.
