Source - RNS
RNS Number : 0699L
Ceres Power Holdings plc
28 September 2016




28 September 2016

This announcement contains inside information.

Ceres Power Holdings Plc

("Ceres Power" or the "Company" or the "Group")

Ceres Power Proposed Placing to raise £20 million

Ceres Power Holdings plc (AIM: CWR) announces a proposed placing to raise approximately £20.0 million, (£19.4 million net of estimated expenses), by way of the conditional placing ("Placing") of up to 228,603,083 Placing Shares at a price of 8.75 pence per share (the "Issue Price") with existing and new institutional investors and certain Directors. The Placing Shares to be issued pursuant to the proposed Placing will represent approximately 23 per cent. of the Enlarged Issued Share Capital of the Company. The Placing Shares will rank pari passu in all other respects with the Company's Existing Ordinary Shares.

It is expected that the finalisation of the proposed Placing will commence immediately following this announcement and a further announcement will be made to confirm its completion in due course but no later than 29 September 2016.

The proposed Placing is subject to the passing of certain resolutions for which Shareholder approval will be sought at the General Meeting of the Company, which is expected to be convened by the publication of a Shareholder circular to be published not later than the 29 September 2016.

The Board believes that the Net Proceeds of the Placing, being approximately £19.4 million, along with the Company's existing cash and cash equivalents, will provide sufficient capital to fund the Group and in particular to:

(i)     maintain the Company's financial strength through the next critical commercial phase;

(ii)    mature the 1kW residential offering through field trialing prototype products in 2017 and securing system development with OEM partners;

(iii)   increase multi kW capability to open new markets;

(iv)   complete the scale-up of all major manufacturing process steps for manufacturing partners and meet near-term customer demand; and

(v)    provide general working capital to maintain its technology leadership position with its experienced R&D and engineering teams.

The Board further considers that the Net Proceeds of the Placing will allow the Company to advance through the important negotiation stages with its partners, from product development through to entering commercial launch programmes, which it considers to be the key steps towards commercial profitability.

Phil Caldwell, Ceres Power's Chief Executive Officer said:

"The proposed funding will put us in a strong position at a key stage of the company's growth as we develop our commercial engagements with some of the world's leading companies. This proposed funding combined with recent technology gains enables the development of higher power applications alongside our residential offering, opening up significant new market opportunities in the commercial and transportation sectors."

For further information please contact:

Ceres Power Holdings plc

Phil Caldwell, CEO

Richard Preston, CFO

Tel: +44 (0)1403 273 463

Zeus Capital Limited (Nominated Adviser and Broker)

Phil Walker/Andrew Jones

Tel: +44 (0) 20 3829 5000


Mike Bartlett/James Collins

Tel: +44 (0) 20 7920 3150

1.    Background to and reasons for the Placing

1.1.  Background and business strategy

Ceres Power is a world leader in low cost, next generation fuel cell technology for use in distributed power products that have the potential to bring cheaper and cleaner energy to homes and businesses.

The Company is working with some of the world's leading companies in order to create mass market fuel cell products for multiple markets worldwide.

The Company currently manufactures and supplies its fuel cells ("SteelCells") to partners wishing to use Ceres Power's technology as the foundation for their power products and offers its integration and engineering expertise as part of joint development programmes.

The Company has progressed significantly both commercially and technologically since it last raised funds in July 2014. Over the last two years the Company has made significant advancements in the technology which have opened up new market opportunities. Increases in efficiency are now enabling the Company to develop power-only applications for commercial and data centre markets. Additionally, the SteelCell's robustness to cycling potentially enables the technology to be applied to the portable generator market and as range extenders in electric vehicles.

Ceres Power is now beginning the next phase of its commercialisation. The Company is targeting having five global engineering companies as customers in joint development agreements by the end of 2017 in order to achieve traction in multiple markets in the major regions across the world, with the intent to be in two commercial launch programmes by the end of 2018. The Board believes the Company's existing relationships with Honda, Nissan and Cummins show that it is well on the path to achieving this.

1.2.  Progress since the last fundraising

Two years ago Ceres Power's key technical objective was to improve the electrical efficiency of the SteelCell and its system in order to access new markets for the technology. The Company targeted achieving 45 per cent. net electrical efficiency for residential CHP applications and greater than 50 per cent. for multi kW systems. The Company has surpassed these objectives having achieved greater than 50 per cent. in CHP and 56 per cent. in initial tests of a multi kW system. In addition, Ceres Power has improved power density of its SteelCells by 40 per cent., further enhancing the cost effectiveness of products using the technology.

These technical improvements have allowed the Company to make significant commercial progress. After two years of testing with Honda, in January 2016 Ceres Power announced a follow-on joint development agreement with them. The Company's recently announced agreements with Nissan and Cummins are as a result of technical progress having opened up new higher power multi kW markets, and as a result Ceres Power is developing a 5 kW modular stack and system platform alongside its existing 1 kW residential CHP platform.

1.3.  Reasons for the Placing

The Placing is necessary for the Company to continue as a going concern and will enable further investment to grow the business as follows:

(i)      maintain the Company's financial strength to engage with world-leading OEMs through the next commercial phase;

(ii)     mature the 1 kW platform for residential applications through field trialling prototypes, and secure development partnerships;

(iii)    develop a 5 kW modular platform at stack and system level to capitalise on the technical and commercial progress made for higher power applications in order to open up new markets  further;

(iv)    maintain its technology leadership position through continually advancing its core SteelCell technology in performance and maturity; and

(v)    advance its manufacturing readiness levels to meet customer demand and scale supply of the SteelCells for future manufacturing partners.

Maintaining financial strength for the growing number of customer commercial engagements

The Placing is critical to help secure a strong commercial position for Ceres Power at an important stage of the Company's growth.

Maintaining the strength of the Company's balance sheet is key to commercially engage with its existing customers and attract additional global leading OEMs. As the fuel cell industry continues to consolidate it is essential to continue to position Ceres Power as one of the winners in this sector, having the financial strength to bring through this technology to market over the long term. 

1 kW platform maturity

In the past year, Ceres Power incorporated the latest version of the SteelCell technology with further system engineering advancements into its 1 kW residential system, (the "SteelGen"), which the Company intends to field test with British Gas in the UK later this year. Field testing SteelGen is intended to demonstrate the technology's maturity and reliability to the Company's OEM partners and potentially shorten the time to market which should lead to increased opportunities for Ceres Power to take on further partners. Experience gained from field testing will also be valuable for higher power applications.

While part of the cost of this is offset by committed EU funding through the ene.field programme, some additional investment is being made by the Company in system development and to support these customer trials.

High power multi kW applications

In June 2016, the Company announced the commencement of a programme with Nissan UK to develop a stack for use as a range extender for electric vehicles. The Company also announced in September 2016 that it will enter into a higher power programme with Cummins and the US Department of Energy to develop a high efficiency modular platform targeting data centre applications.

In order to address these significant commercial opportunities and others in the pipeline the Company is developing a 5 kW platform at stack and system level.

Although the Company's partners contribute significant funding towards these developments, the Company will need to invest in its own capabilities specifically in development, test and manufacturing capability to further address these markets.

Maintaining technology leadership

Over the past two years, Ceres Power has significantly increased the performance of the core SteelCell technology in terms of power density and efficiency and has increased the number of patent families filed from 39 to 47. The Company continues to improve the SteelCell performance to maintain its technology leadership position, specifically focusing on the following areas:

(i)  improving lifetime, quality and maturity;

(ii) increasing performance through higher power density; and

(iii) improving efficiency targeting up to 60 per cent. net electrical efficiency for high power 

It is fundamental to the future value of the Company that it continues to improve its technology. Working capital is required to maintain suitably experienced R&D and engineering teams, and also to continue to work alongside the world's leading engineering companies and academic partners.

In order to manage the Company's cash burn it will focus its resources by using the same core SteelCell technology in its two platforms (1 kW and 5 kW) to be able to address multiple applications.

Investing in manufacturing and test capability

The Company is following a phased approach to manufacturing scale-up over the coming years to:

(i)    meet growing customer demand and internal development;

(ii)    be able to produce cells and stacks to meet the multi kW applications; and

(iii)   have a truly scalable manufacturing process that can be transferred to selected  commercial manufacturing partners.

In addition to the successful deposition scale-up project as announced in February 2016, Ceres Power has a number of manufacturing projects which will enable it to complete scale up of key process steps and demonstrate processes that can be replicated with manufacturing partners.

As customer demand grows, the Company will further invest in manufacturing capability in order to maximise the value capture of the Company's manufacturing intellectual property, and provide near term capacity to meet customer demand for SteelCells.

2.    Current Trading and Prospects

As indicated above, the Company is starting to benefit from engagement with its commercial partners and the Board expects revenue and other operating income to increase significantly going forward.

In the next phase of the Company's growth, with an already healthy pipeline of commercial opportunities (the order book of revenue and income for future years is currently over £2 million), the Company expects to continue to grow its revenue and other operating income thereby reducing net cash outflow from the year ended 30 June 2017 onwards.

The Company is targeting securing five global engineering companies as customers in joint development agreements by the end of 2017 in order to achieve traction in multiple markets in the major regions across the world, with the intent to be in two commercial launch programmes by the end of 2018. As the Company increases the number of global partners and those partners move through from evaluation to product development and to commercial launch, the Board anticipates each progression will increase the revenue contribution to Ceres Power.

3.    Key elements of the Placing

3.1.  Placing

The Company is proposing to raise approximately £20 million, (£19.4 million net of estimated expenses), by way of the conditional placing of 228,603,083 Placing Shares at the Issue Price with existing and new institutional investors and certain Directors. The Placing Shares to be issued pursuant to the Placing will represent approximately 23 per cent. of the Enlarged Share Capital. The Placing Shares will rank pani passu in all other respects with the Existing Ordinary Shares. The Issue Price represents a discount of 16.7 per cent. to the mid-market closing price on 27 September 2016 (being the Latest Practicable Date).

The Company has received non-binding indications of interest from potential institutional investors for the Placing during a pre-marketing process.

On 28 September 2016, the Company entered into the Placing Agreement with Zeus Capital pursuant to which Zeus Capital has agreed to use reasonable endeavours to place the Placing Shares at the Issue Price. Under the Placing Agreement, the Company has given Zeus Capital customary warranties and indemnities. Zeus Capital also has customary termination rights in certain circumstances, including, inter alia, where there is a material breach of any of the warranties or for force majeure.

The Placing is conditional upon, inter alia:

1.      the Placing Agreement having become unconditional in all respects;

2.      the Company having performed, in all material respects, its obligations under the Placing Agreement and not being in material breach of the Placing Agreement;

3.      legally binding commitments being received in respect of all of the Placing Shares.

A further announcement will be made to confirm its completion in due course, but by no later than 29 September 2016.

Assuming that the Placing Shares are fully subscribed for, the Placing is expected to be in two consecutive tranches, with the First Placing Shares issued to certain VCT and/or EIS investors and the Second Placing Shares to the remaining investors. Assuming that the Placing Shares are fully subscribed for, applications will be made for admission of the First Placing Shares and the Second Placing Shares to trading on AIM, with Admission expected to become effective and dealings to commence in the First Placing Shares at 8.00 a.m. on 17 October 2016 and in the Second Placing Shares at 8.00 a.m. on 18 October 2016.

4.    Enterprise Investment Scheme and Venture Capital Trusts

On issue, the Placing Shares will not be treated as either "listed" or "quoted" securities for relevant tax purposes. The Directors believe that the First Placing Shares should be eligible (subject to the circumstances of investors) for tax reliefs under EIS and for investment by VCTs.

Companies can raise up to £5 million from State Aid investment sources, including under the combined EIS and from VCTs, in any 12 month period. However, in order to comply with the £20 million cap for knowledge intensive companies, the amount that may be raised by the Company under the EIS and VCT schemes in connection with the Placing is limited to £1.45 million.

5.    Related Party Transaction

5.1.  IP Capital Letter of Engagement

IP Capital is considered to be a related party under the AIM Rules due to it being a wholly owned subsidiary of IPG and within the same group of companies as IP2IPO, a Substantial Shareholder. As such the engagement of IP Capital pursuant to the IP Capital LOE is considered to be a related party transaction.

Under the proposed terms of the IP Capital LOE, the Company has agreed to pay IP Capital, subject to and conditional upon completion of the Placing, a fee of £20,000 and a commission of 3 per cent. of all funds raised from investors introduced by IP Capital. The Company has agreed to pay the fee and commission in cash upon receipt of a duly presented invoice. Accordingly, by reason of their connection with IP Capital being that (i) Alan Aubrey is a director of IP Capital and a director and Chief Executive Officer of IPG, IP2IPO's and IP Capital's parent company, and (ii) Robert Trezona is an employee of IP2IPO, neither Alan Aubrey nor Robert Trezona is considered to be an Independent Director for the purposes of the related party statement below.

The Independent Directors having consulted with the Company's Nominated Adviser, Zeus Capital, consider the terms of the IP Capital LOE to be fair and reasonable insofar as Shareholders are concerned.

6.    Market Abuse Regulation

The Market Abuse Regulation ("MAR") became effective from 3 July 2016. Market Soundings, as defined in MAR, were taken in respect of the proposed Placing with the result that certain persons became aware of inside information, as permitted by MAR. That inside information is set out in this announcement and has been disclosed as soon as possible in accordance with paragraph 7 of article 17 of MAR. Therefore, those persons that received inside information in a Market Sounding are no longer in possession of inside information relating to the Company and its securities.



The following definitions apply throughout this announcement unless the context requires otherwise:

"Admission"                                                 the admission of the Placing Shares (or of the First Placing Shares or the Second Placing Shares, as the context requires) to trading on AIM becoming effective in accordance with the AIM Rules

"AIM"                                                               the market of that name operated by the London Stock Exchange

"AIM Rules"                                       the provisions of the London Stock Exchange entitled "AIM Rules for Companies" as amended or reissued from time to time governing, amongst other things, admission to AIM and the continuing obligations of AIM companies

"Board"                                                           the board of Directors of the Company as at the date of this announcement

"CHP"                                                               combined heat and power

"Company" or "Ceres Power"               Ceres Power Holdings plc

"Directors"                                                     the Directors of the Company as at the date of this announcement

"EIS"                                                                 Enterprise Investment Scheme

"Enlarged Issued Share Capital"           the issued share capital of the Company as enlarged by the issue of the Placing Shares

"EU"                                                                  European Union

"Existing Ordinary Shares"                 the 777,857,841 Ordinary Shares in issue, comprising the whole of the issued share capital of the Company, as at the date of this announcement

"FCA"                                                               the Financial Conduct Authority of the United Kingdom

"First Placing Shares"                                the first tranche of Placing Shares to be issued to certain VCT and/or EIS investors pursuant to the Placing

"FSMA"                                                           Financial Services and Markets Act 2000 (as amended)

"Independent Directors"                         the Directors other than Alan Aubrey and Robert Trezona

"IP2IPO"                                                         IP2IPO Limited, a wholly owned subsidiary of IPG incorporated in England and Wales with company number 04072979

"IP Capital"                                                  Top Technology Ventures Limited trading as "IP Capital", a wholly owned FCA regulated subsidiary of IPG incorporated in England and Wales with company number 01977742

"IP Capital LOE"                                        means the letter of engagement dated 27 September 2016 made between the Company and IP Capital in respect of the provision of certain corporate finance and advisory services relevant to the Placing

"IPG"                                                                IP Group plc, a public limited company incorporated in England and Wales with company number 04204490

"Issue Price"                                                 8.75 pence per New Ordinary Share

"kW"                                                                kilowatt

"Latest Practicable Date"                   the latest date practicable prior to the publication of this announcement, being 27 September 2016

"Net Proceeds"                                            the Gross Proceeds of the Placing net of expenses

"OEMs"                                                           original equipment manufacturers

"Ordinary Shares"                                       ordinary shares of 1p each in the capital of the Company

"Placees"                                                        the persons with whom Placing Shares are to be placed

"Placing"                                                         the conditional placing of the Placing Shares

"Placing Agreement"                               the conditional placing agreement dated 28 September 2016 2016 between the Company and Zeus Capital and relating to the Placing

"Placing Shares"                                         the new Ordinary Shares which are the subject of the Placing comprising the First Placing Shares and the Second Placing Shares

"Prospectus Rules"                                    the rules made for the purposes of Part V of FSMA in relation to offers of securities to the public and admission of securities to trading on a regulated market

"Second Placing Shares"                          the second tranche of Placing Shares to be issued to investors pursuant to the Placing

"Shareholder(s)"                                         holder(s) of Ordinary Shares

"UK" or "United Kingdom"                     the United Kingdom of Great Britain and Northern Ireland

"VCT"                                                               Venture Capital Trust

"Zeus Capital"                                              Zeus Capital Limited of 82 King Street, Manchester, M2 4WQ, being the Company's Nominated Adviser and Broker 

Notes to Editors:

About Ceres Power

Ceres Power ( 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 unique patented SteelCell 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 SteelCell technology and know-how, combined with the opportunity to supply the SteelCell in volume through its manufacturing partners. 


Forward-looking statements

This announcement contains statements about Ceres Power Holdings plc that are or may be deemed to be "forward-looking statements".

All statements, other than statements of historical facts, included in this announcement may be forward-looking statements. Without limitation, any statements preceded or followed by, or that include, the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "should", "anticipates", "estimates", "projects", "would", "could", "continue" or words or terms of similar substance or the negative thereof, are forward-looking statements. Forward-looking statements include, without limitation, statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects and (ii) business and management strategies and the expansion and growth of the operations of Ceres Power Holdings plc.

These forward-looking statements are not guarantees of future performance. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of any such person, or industry results, to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on numerous assumptions regarding the present and future business strategies of such persons and the environment in which each will operate in the future. Investors should not place undue reliance on such forward-looking statements and, save as is required by law or regulation (including to meet the requirements of the AIM Rules, the Prospectus Rules and/or the FSMA), Ceres Power Holdings plc does not undertake any obligation to update publicly or revise any forward-looking statements (including to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based). All subsequent oral or written forward-looking statements attributed to Ceres Power Holdings plc or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statement above. All forward-looking statements contained in this announcement are based on information available to the Directors of Ceres Power Holdings plc at the date of this announcement, unless some other time is specified in relation to them, and the posting or receipt of this announcement shall not give rise to any implication that there has been no change in the facts set forth herein since such date.

This information is provided by RNS
The company news service from the London Stock Exchange

Related Charts

Ceres Power Holdings (CWR)

-0.22p (-2.10%)
delayed 18:15PM