It might sound like a character from the Asterix the Gaul books, but micro combined heat and power (mCHP) boiler developer Energetix (EGX:AIM) looks today, more like one from The Clangers. Telling investors that its chief executive has walked is not good, saying unit volumes are being delayed by up to a year, a massive blow. But hinting that it might not have enough cash to keep the business going, that's down right scary.


'These factors indicate the existence of a material uncertainty which may cast significant doubt about the group's ability to continue as a going concern,' says the company. This could sound like a flash warning to its current institutional shareholders; stump up or else, the else being kiss your cash goodbye. Yet the reality is a little different.


This doomsday comment was demanded by auditor PwC, but it's a worst case scenario that looks very unlikely, a point that has been made to Aviva, Henderson Global Investors and Blackrock, some of its bigger backers.


Selling its compressed air technology development arm Pnu Power is possible, but that's not to say Energetix won't need a fresh cash injection. Energetix had £12.1 million of cash at the end of December, with cash burn running at £5.4 million for 2012. That's likely to rise this year (Cenkos estimates £2 million of cash come year end) thanks to extra production unit testing, which cuts to the chase of the problem.


While unit testing has gone very well, most of it has been focused on lab units, not production boilers that might actually end up in our home. Industry experts and management's own demands for robustness want to get more performance evidence than can be provided by the current eight units in tests homes.


'I can categorically say that there is no technology problem,' Tony Stiff told me today. He's the man charged with running the show now that former Dyson executive Peter Richardson has gone, a consequence of certain jobs not getting done, according to my information.


Stiff's comment tally with Richardson's own departing words: 'Energetix has a very strong technology platform that I have every confidence can be converted into volume roll-out, delivering an exciting business for the benefit of all shareholders.’


Chester-based Energetix has spent several years trying to get its mCHP boiler technology ready to go. The aim has always been to deliver not only mCHP boilers that work, but are affordable too.


Energetix's unique business model will see these mCHP boilers supplied for free to customers willing to sign a five-year dual-fuel contract with the company's supply business, Flow. What's more, by taking advantage of its mCHP technology and government feed-in tariffs, Flow will be able to guarantee lower gas and electricity prices for customers over those five years, and beyond.


New customers will pay around £1,000 for installation, but this will be charged over the five-year term, so will be little barrier to new sign-ups. At last count units cost around £1,600 each to manufacture but Energetix reckons production scale will slash manufacturing to around £800 per unit boosting margins, while it also expects to make £100 per installation and further profits on warranties.


All well and good, sceptics might say, but isn't this the sort of waffle that Ceres Power (CWR:AIM) and Ceramic Fuels Cells (CFU:AIM) have been pitching for donkey's years, yet neither seems any closer to making real money. In fairness to Stiff, he accepts that these comparisons will be drawn, but as the new chief executive he's in the position to make the difference. At a fundamental level, the story hasn't changed, it's just moved further out, and Stiff must now demonstrate that he's not just another energy talker, but a genuine walker.


Let's face it, technology development is a tricky business, developing then commercialising intellectual property (IP) usually takes longer and more money that expected. Investor patience is being sorely tested and many may justifiably feel that the time has comes to pull the plug, for now anyway. But the company's prospects are capable to changing fast in future, and this may yet turn out to be a money-spinner for investors willing to roll the dice on a Flow mCHP boiler revolution.

Issue Date: 01 May 2013