TIDMCWR
RNS Number : 0699L
Ceres Power Holdings plc
28 September 2016
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS
RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN
WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE
UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH
AFRICA, THE REPUBLIC OF IRELAND, NEW ZEALAND OR ANY OTHER
JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION
WOULD BE UNLAWFUL.
THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT
CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMATION,
OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE
OR DISPOSE OF ANY SECURITIES IN CERES POWER HOLDINGS PLC OR ANY
OTHER ENTITY IN ANY JURISDICTION. NEITHER THIS ANNOUNCEMENT NOR THE
FACT OF ITS DISTRIBUTION, SHALL FORM THE BASIS OF, OR BE RELIED ON
IN CONNECTION WITH ANY INVESTMENT DECISION IN RESPECT OF CERES
POWER HOLDINGS PLC.
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 GBP20 million
Ceres Power Holdings plc (AIM: CWR) announces a proposed placing
to raise approximately GBP20.0 million, (GBP19.4 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 GBP19.4 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 Tel: +44 (0)1403
Phil Caldwell, CEO 273 463
Richard Preston, CFO
Zeus Capital Limited (Nominated Tel: +44 (0) 20 3829
Adviser and Broker) 5000
Phil Walker/Andrew Jones
Tavistock Tel: +44 (0) 20 7920
Mike Bartlett/James Collins 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
applications.
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 GBP2
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 GBP20 million,
(GBP19.4 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 GBP5 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 GBP20 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 GBP1.45 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 GBP20,000 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.
DEFINITIONS
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 (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 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
END
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September 28, 2016 07:05 ET (11:05 GMT)