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Zenergy Power Plc (LSE:ZEN) reported a £20.6 million loss with the release of its audited preliminary results for the fiscal year ending December 31, 2011.
What the Report Says
The £20.6 million loss was in part due to the loss of £10.5 million in revenues as a result of discontinuing its’ superconductor operations in Germany and a one-time impairment charge of £7.9 million to offset the decrease in goodwill.
What the Report Means
Chairman Simon Cleaver emphasised at the outset of the Board’s report that the operating loss was not unexpected. After the restructuring of the company, following the appointment of a new Board of Directors in April 2011, Cleaver reminded shareholders that”the current Directors’ focus has been on stabilizing the business and halting the long term decline in shareholder value whilst at the same time laying a foundation for re-building the business in future years.” He went on to say that the Board had been focusing on”seeking strategic partnerships . . . and investigating . . . alternative strategies that would either reduce cash burn or assist in raising further cash.”
Upon review of the previous Board’s strategy, the current board members determined that continued investment in the development of superconductor technology was not only consuming cash at an unacceptable rate, but that there was not sufficient certainty that the company was actually able to deliver to the standards necessary for successful commercialization.
Looking Forward
The company will now concentrate its efforts on development and delivery of its Magnetic Fault Current Limiter (mFCL) technology. The company cited several examples of the fiscal benefits of this strategy:
- mFCL’s have a more robust design which requires no additional cooling apparatus for installation and operation as do the superconductors
- mFCL’s can be produced at ½ the cost of equivalent superconductors
- mFCL’s are simpler to build and can be built in less time
- mFCL’s are essentially maintenance free
- mFCL technology is more readily understood by grid operators – the end users
- mFCL’s are more energy efficient that superconductors
With the divesting of interest in the German superconductor technology, the company negotiated a 10-year period during which it would receive royalties on any sales resulting from the use of its 2G HTS wire program.
Company revenue should benefit from a previous sale of a superconductor unit currently being installed. The company also expects to profit from the delivery of a “previously specified” superconductor unit expected to be installed in 2012.
The board believes that the change in strategy is already changing the commercial prospects of it mFCL commitment. Promising negotiations are already well underway with a number of potential customers in Europe, Asia, Australia, and the US.
Company Spotlight
Zenergy’s focus is on the development, production, and marketing of Magnetic Fault Current Limiters designed for installation on power grids to protect against power surges.
References
↑ Official Zenergy Website
