Here is the latest review (2nd Nov)by Nomura Code in London. This is an overview of a complete assessment of the CFU ceres and mCHP tariffs etc sitch in UK etc.
A MUST read
If you email me I'll forward a copy. [email protected] If loads of people want one can somebody else circulate please.
Heat & power fuel cell update
Volume production converging with new UK FIT
Both Ceramic Fuel Cells and Ceres Power have made significant progress in the commercialisation of their CHP products since we published our last heat and power fuel cell update in July 2008. Furthermore, the market environment for Solid Oxide Fuel Cell based mCHP (micro-Combined Heat and Power) has improved significantly with UK committing to introduce feed-in tariffs (FIT) for m-CHP from April 2010. However, with both companies yet to sell a volume manufactured product we again focus on the current state of development of each company, the development risks left, and the commercial strategy and timeline leading to revised forecasts for both companies. We retain our Buy recommendation for Ceramic Fuel Cells and Neutral on Ceres Power.
The UK is expected to introduce feed-in tariffs for m-CHP in April 2010. The tariffs offered have yet to be decided but as an electrical energy generation based incentive, it is expected to be generous for high electrical efficiency SOFC based m-CHP units such as those being developed by Ceramic Fuel Cells and Ceres Power. The current assumption is that exported energy will receive the same export tariff as other micro-generating technologies £0.05/kWh. This compares with Germany which offers €0.05/kWh as well as a capital subsidy.
Ceramic Fuel Cells to sell its first commercial product from early CY10. Following the completion of its volume manufacturing facility in Germany and CE certification, expected in February 2010, we expect Ceramic Fuel Cells to begin commercial sales; we forecast sales of just over 200 BlueGen units in CY10. With a world beating 60% electrical efficiency we expect it to generate significant commercial interest and should encourage utilities and other partners to strengthen commitments with Ceramic Fuel Cells in order to secure access to future productionand retain exclusivity. The BlueGen co-generator also overcomes some of the barriers to entry associated with the m-CHP product, is suited to other wider global markets, and could be assignificant as the integrated m-CHP boiler. With a pipeline of BlueGen opportunities already identified, we have raised our expectations for this product, but this is tempered by a reductionin m-CHP income as utility programs have been slower to progress than expected. We continue to forecast profitability in FY12 and with £14.2m cash and a burn of £2.3m, expected to reduce with commercial production, we believe that the next fund raising will be for new production lines and forecast this in FY12. We retain our Buy recommendation.
Ceres Power is behind schedule in its beta development as it now expects commercial field trials to begin in 1Q10, versus the original expectation 3Q09. In addition, the data presented showed the alpha unit did not quite achieve the ‘go to market’ specification. These two key points highlight the challenges in turning a promising electrochemical cell technology into a commercial product that meets the key criteria of electrical efficiency, longevity and cost. Whilst these delays are generally expected in developing such groundbreaking technology, it draws into question the risks involved in trying to accelerate the product development process by trying to perform a number of tasks simultaneously; we believe that Ceres is more or less tryingto perform the balance of plant development and optimisation, field trials, CHP boiler product development and manufacturing scale-up simultaneously. With profitability forecast in FY15, £23m cash, burn increasing to £11.5m, and £4.5m of capex in FY10, we expect Ceres to require further funding in FY11, FY12 and FY13. Despite the product development challenges ahead, we retain our Neutral recommendation as we continue to believe in the long term potential of the Ceres Power technology.
CFU Price at posting:
21.3¢ Sentiment: Buy Disclosure: Held
