AFC Energy plc (LON:AFC), a leading provider of hydrogen power generation technologies, has announced:
· the expansion of its existing strategic partnership with ABB, the provider of electric vehicle charge points, electrification and digitalisation technologies, through the signing of a new Development Agreement for the integration and supply of fuel cells to the global data centre market. Further details of this relationship are being released in a separate announcement this morning;
· equity investment received from commercial partners, ABB (£3.25 million) and Dutco (£1.5 million), by way of a subscription of 7,364,340 new Ordinary Shares raising in aggregate £4.75 million; and
· a placing of approximately 46,899,225 new Ordinary Shares with institutional investors.
The issue price per new Ordinary Share to be issued pursuant to the Subscription and the Placing is 64.5 pence per share which represents a discount of approximately five per cent. to the closing mid-market price of 68 pence per Ordinary Share on 15 April 2021, being the latest practicable date prior to the publication of this Announcement.
The Directors have concluded that proceeding with the Fundraising is the most suitable option available to the Company for raising additional funds through the issue of new Ordinary Shares and that issuing the new Ordinary Shares at a discount is fair and reasonable so far as all existing Shareholders are concerned.
The Placing is to be conducted by way of an accelerated bookbuild process which will commence immediately following this Announcement and will be subject to the terms and conditions set out in Appendix III to this Announcement and will close later today.
Gary Bullard, Chairman and Non-Executive Director of AFC, and Joseph Mangion, Non-Executive Director of AFC, intend to subscribe for an aggregate of 45,000 new Ordinary Shares at the Issue Price.
· Fundraising by way of the Placing and the Subscription to raise in aggregate approximately £35 million (before expenses) through the issue of an aggregate of approximately 54,263,565 new Ordinary Shares at the Issue Price.
· The Company has raised £4.75 million (before expenses) through the Subscription of 7,364,340 new Ordinary Shares at the Issue Price.
· The Placing will be conducted via an accelerated bookbuild process of new Ordinary Shares at the Issue Price.
· The Issue Price represents a discount of approximately five per cent. to the closing mid-market price of 68 pence per Ordinary Share on 15 April 2021, being the latest practicable date prior to the publication of this Announcement.
· The Fundraising Shares, assuming full take-up, will represent approximately 7.4 per cent. of the Enlarged Issued Share Capital.
· The net proceeds of the Fundraising will be used to support (i) the continued product development of AFC Energy and ABB’s next generation high power sustainable electric vehicle (EV) charging solutions; (ii) the development of new power solutions utilising AFC’s alkaline fuel cell technology platform, including the high growth global data centre market in collaboration with ABB; and (iii) the continued development of the Company’s scalable manufacturing capacity to address possible future growth in system demand.
The Fundraising comprises the Placing and the Subscription of approximately 54,263,565 new Ordinary Shares (the “Fundraising Shares”) and will utilise the Company’s existing shareholder authorities to issue the Fundraising Shares on a non-pre-emptive basis for cash (the “Fundraising”).
WH Ireland Limited (“WH Ireland”), M C Peat & Co LLP (“M C Peat & Co”) and Zeus Capital Limited (“Zeus”) are acting as Joint Bookrunners in connection with the Placing. The Placing Shares are being offered by way of an accelerated bookbuild (the “Bookbuild”), which will be launched immediately following this Announcement, in accordance with the terms and conditions set out in Appendix III to this Announcement and is expected to close later today.
The timing of the closing of the Bookbuild and the allocation of Placing Shares to be issued at the Issue Price are to be determined at the discretion of the Company and the Joint Bookrunners.
A further announcement will be made following the close of the Bookbuild, confirming final details of the Placing.
The Placing is not being underwritten.
The expected timetable of principal events is set out in Appendix I to this Announcement.
The Joint Bookrunners are playing no role in connection with the Subscription.
The Placing is conditional upon (amongst other things) the Placing Agreement not having been terminated prior to Admission and the Subscription. The Subscription is not conditional on the Placing. The Fundraising is not conditional on a minimum amount being raised.
Background to, and reasons for, the Fundraising
When the Company last raised funds in June 2020, it indicated that it was entering into a new phase of its business as it plans to deploy its products commercially. This phase would require an increasing emphasis on the manufacturing scale up and commercial deployment of its fuel cell systems and the resources necessary to implement this. In addition, the Company believed that with systems built and available for deployment, the ability to meet customer demand would be accelerated.
In line with this strategy, the pace of the Company’s commercial development has accelerated substantially since the Company’s last fundraise. Highlights since that date include:
· in July 2020, announcing a commercial system order with global FIA accredited Extreme E to supply zero emission, hydrogen fuelled, off-grid power to Extreme E’s inaugural electric SUV racing series commencing in April 2021;
· in September 2020 announcing the sale of a 100KW H-PowerTM alkaline fuel cell system to Forschungszentrum Jülich (“Jülich”) for deployment at its Living Lab Energy Campus (“LLEC”) showcase in Germany;
· in November 2020, announcing the signing of a binding agreement with BK Gulf LLC (“BK Gulf”) (a member of the Dutco group) to support the immediate scale up of manufacturing capacity for delivery of its proprietary H-PowerTM fuel cell system;
· in November 2020, announcing a long-term lease over new premises at its Surrey headquarters at Dunsfold Park, to serve as the Company’s first large scale H-PowerTM, assembly and commissioning facility;
· in December 2020, announcing the signing of a strategic partnership with ABB, the worldwide electrification and digitalisation technologies business, operating in over 100 countries for the design and marketing of next generation high power EV chargers through ABB’s market channels;
· in January 2021, announcing the signing of a strategic engineering collaboration with Ricardo Energy and Environment, part of Ricardo plc, a global engineering consultancy with a strong specialisation in decarbonised transportation and clean power generation solutions across 55 offices worldwide, with a focus on the powering of maritime, rail and port infrastructure;
· in March 2021, announcing of a UK Strategic Partnership Agreement with international consultancy and construction business, Mace Group;
· in April 2021, announcing the signing of a Memorandum of Understanding to proceed with a new partnership with Altaaqa Advanced Solutions, a wholly-owned member of the Zahid Group, with the intention to progress discussions towards an exclusive dealership arrangement for the supply of AFC Energy fuel cells in Saudi Arabia and the wider Middle East and Northern Africa regions; and
· today, the announcement of the expansion of the strategic partnership with ABB to incorporate the sustainable powering of worldwide data centre opportunities.
The Directors consider that the potential opportunities afforded by these agreements and developments could be substantial and therefore the Company needs to be prepared to expand more quickly than anticipated last year. With the additional credibility of ABB and Dutco’s participation in the Subscription, the Directors believe this is an appropriate time to seek additional institutional support by way of the Placing and ensure that the Company has the resources to meet the potential opportunities that are expected to arise, as and when they do.
Use of proceeds
The proceeds of the Fundraising will be used to support the continued development of the Company as it moves from the development phase of its products and technology into the manufacture and commercialisation of them.
In particular, the proceeds of the Fundraising will facilitate:
· the continued product development of AFC Energy and ABB’s next generation high power sustainable electric vehicle (EV) charging solutions;
· the development of new power solutions utilising AFC Energy’s alkaline fuel cell technology platform, including the high growth global data centre market in collaboration with ABB; and
· the continued development of the Company’s scalable manufacturing capacity to address future growth in projected system demand.
The use of proceeds set out in relation to the Company’s fundraise in mid-2020 continues to be relevant insofar as the Company continues to make progress across each of these workstreams. These include (i) the funding of new fuel cell systems for deployment, (ii) employment of manufacturing, product engineers and commercial staff, (iii) investment into manufacturing scale up strategies and facilities, (iv) accelerated development of the Company’s AlkaMem® anion exchange membrane, and (v) the associated scale up of AFC Energy’s “S” Series high density fuel cell technology.
In addition, the Fundraising will also support and finance the warranties required in connection with systems deployed into commercial applications.
Information on ABB and its strategic partnership with AFC Energy
ABB provides electric vehicle charge points, electrification and digitalisation technologies operating in over 100 countries.
On 16 December 2020, AFC Energy announced the signing of the Company’s first strategic partnership with ABB. The strategic partnership aims to leverage respective company technologies in connection with AFC Energy’s zero emission, high efficiency fuel cell technology alongside ABB’s energy storage and DC high power EV charge points.
The suite of agreements that underpin the strategic partnership consist of a Commercialisation and Marketing Agreement and a Joint Product Development Agreement pursuant to which the parties intend to showcase the supply of secure, reliable and flexible on-site power generation in ultra-rapid EV charging.
The Commercialisation and Marketing Agreement focusses efforts on the joint marketing and deployment of integrated high power EV charging systems across key ABB markets including: private vehicle hubs; charge point operators; logistics hubs and distribution centres; public and private urban transportation (including bus depots); marine (including port and marina charging); and vertical take-off and landing craft (VTOLs).
The Joint Product Development Agreement (“JPDA”) sets out the activities to be undertaken jointly by ABB and AFC Energy in designing principles of system operability, proof of concept testing and productisation ready for customer sales. The final stage of work under the JPDA is expected to be competed in the second half of 2021. The Board anticipates that the JPDA will deliver a fully autonomous, high power EV charging system capable of deployment in the UK, Europe, United States and elsewhere, building on the system launched by AFC Energy in December 2019.
Under the Commercialisation and Marketing Agreement, AFC Energy is afforded a right of first refusal across multiple years to supply H-PowerTM fuel cell systems into ABB’s high power EV charging network of international customers where customer or site power demands are absent or require further resilience.
Both companies jointly market the integrated product across the key addressable markets and will collaboratively develop a communications strategy for system branding and deployment.
Following the development of this partnership across the e-Mobility space, AFC Energy commenced discussions with ABB’s global data centre team based in the United States pertaining to the provision of a novel fuel cell solution that integrates with ABB’s wider data centre power supply offering. As a long-term and trusted provider of power solutions to this high growth market, ABB is an obvious partner to explore this market further and to refine a fuel cell predicated sustainable power solution that meets the needs of the data centre market. With this in mind, the two companies chose to enter a further Development Agreement specially dedicated to the data centre market and to create new opportunities for the sale of AFC Energy’s fuel cell technology alongside ABB. Further details of this relationship will be released in a separate announcement this morning.
Information on Dutco
Dutco Group is a Dubai-based conglomerate with business interests in the sectors of construction, real estate, carbon and green energy, trading, freight and logistics, and hospitality. It has developed and grown its business operations through a philosophy of long-term strategic investments, often with joint venture partners. It has successfully delivered projects across the Middle East region for over 50 years.
In 2020, AFC Energy signed an agreement with BK Gulf, also a member of the Dutco group, for the mass fabrication of containerised and modular balance of plant for the fuel cell system. This agreement stemmed from a working relationship between AFC Energy and Dutco first confirmed in 2015 to review the emerging opportunities for the hydrogen sector across the Gulf region.
The Directors consider the participation of ABB and Dutco in the Subscription is a strong endorsement of AFC Energy’s achievements to date and the shared opportunities that the Board believes lie ahead.
Further details of the Placing
Pursuant to the Placing Agreement, the Joint Bookrunners, as agents for the Company, have conditionally agreed to use reasonable endeavours to procure subscribers at the Issue Price for the Placing Shares.
The Joint Bookrunners intend to conditionally place the Placing Shares with certain institutional and other investors at the Issue Price.
The Placing is conditional upon (amongst other things) the Placing Agreement not having been terminated, the Subscription Agreements becoming unconditional in all respects, save for admission, and Admission occurring on or before 8.00 a.m. on 23 April 2021 (or such later date and/or time as the Joint Bookrunners and the Company may agree, being no later than 8.00 a.m. on 30 April 2021).
The Placing Agreement contains customary warranties from the Company in favour of the Joint Bookrunners in relation to, inter alia, the accuracy of the information in this Announcement and other matters relating to the Company and its business. In addition, the Company has agreed to indemnify the Joint Bookrunners in relation to certain liabilities that they may incur in respect of the Placing.
The Joint Bookrunners (acting in good faith) have the right to terminate the Placing Agreement in certain circumstances prior to Admission in respect of the Placing Shares, including (but not limited to): in the event that there is a breach, or an alleged breach, of any of the warranties in the Placing Agreement or there is a material adverse change affecting the condition (financial, operational, legal or otherwise), earnings, management, funding position, solvency, business affairs or operations of the Company, whether or not foreseeable as at the date of the Placing Agreement and whether or not arising in the ordinary course of business. The Joint Bookrunners may also terminate the Placing Agreement if there has been a material adverse change in certain international financial markets, a suspension or material limitation in trading on certain stock exchanges or a material disruption in commercial banking or securities settlement or clearance which, in the opinion of a Joint Bookrunner (acting in good faith), makes it impractical or inadvisable to proceed with the Placing.
The Placing is not being underwritten. The Placing is not conditional on a minimum amount being raised.
Under the Subscription, the Company has conditionally raised approximately £4.75 million (before expenses) by way of the subscription of 7,364,340 new Ordinary Shares at the Issue Price.
The Subscription is conditional upon admission of the Subscription Shares to trading on AIM occurring on or before 8.00 a.m. on 23 April 2021 (or such later date and/or time as the Joint Bookrunners and the Company may agree, being no later than 8.00 a.m. on 30 April 2021).
New Ordinary Shares
In addition to the Fundraising Shares, the Company is intending to issue 445,736 new Ordinary Shares in settlement of an adviser fee incurred in connection with the Subscription by capitalising the amount owed to such adviser.
The New Ordinary Shares, when issued, will be fully paid and will rank pari passu in all respects with the Existing Ordinary Shares in issue, including the right to receive all dividends and other distributions declared, made or paid after the date of issue.
Application will be made to London Stock Exchange for admission of the New Ordinary Shares to trading on AIM. It is expected that Admission of the New Ordinary Shares will take place on or before 8.00 a.m. on 23 April 2021 and that dealings in the New Ordinary Shares on AIM will commence at the same time.
Gary Bullard, Chairman and Non-Executive Director of AFC, and Joseph Mangion, Non-Executive Director of AFC, intend to subscribe for an aggregate of 45,000 new Ordinary Shares at the Issue Price.
The company also announced ABB’s commitment in making a strategic investment into AFC Energy and to strengthen the corporate partnership by the entering into a new Development Agreement specifically relating to the burgeoning global data centre market.
· ABB Schweiz AG invests £3.25 million into AFC Energy as a strong signal of corporate commitment across the international e-Mobility market.
· Investment follows the signing of commercial and product development agreements in December 2020 focussing on the design and engineering of an integrated high power EV charging systems, powered by AFC Energy fuel cells.
· ABB and AFC Energy sign new agreement to extend its partnership to now include the global data centre market, which currently consumes approx. 2% of worldwide power demand.
· ABB’s data centre power solutions currently support many of the world’s largest hyper data centre owners in their quest to achieve Net Zero emissions.
· With a strengthening commitment to sustainability and ESG targets, ABB and AFC Energy will be partnering on the trialling and integration of AFC Energy fuel cells as part of the wider power portfolio of modern-day data centres.
· Investment proceeds from ABB will support AFC Energy’s ongoing investment into the e-Mobility partnership and, from today, the international data centre solution market.
Strategic Investment in High Power e-Mobility Charging Applications
As announced by AFC Energy earlier today, ABB has invested £3.25 million into the Company pursuant to a Subscription Agreement in support of the multiple partnering initiatives currently in place across the international e-Mobility sector.
In December 2020, AFC Energy and ABB signed a Commercialisation and Marketing Agreement in parallel with a Joint Product Development Agreement pertaining to the design and deployment of a next generation high power EV charging system utilising AFC Energy fuel cell technology. Since this time, both companies have been working constructively towards delivery of an integrated charging system in the second half of 2021 and are already engaging with prospective customers on the new product range.
ABB’s investment into AFC Energy demonstrates the corporate commitment both companies place in their e-Mobility partnership that seeks to set new standards in zero emission high power EV charging.
ABB’s investment will contribute towards the prototyping, engineering, scale up in production capacity and growth across high power e-Mobility applications to meet a growing pipeline of customers in this fast-growing sector.
New Partnering Opportunity secured in Global Data Centre Market
ABB and AFC Energy are pleased to announce the signing of a new Development Agreement to test, design and integrate AFC Energy’s alkaline fuel cell technology into ABB’s data centre system portfolio to provide a zero emission, sustainable turn-key power solution for the growing number of current and prospective data centres currently servicing the world’s data storage and processing requirements.
Over the past 25 years, ABB has been a key player in the design and delivery of innovative, efficient and sustainable data centre electrical solutions, working with many of the world’s largest hyperscale data centre operators to drive down energy consumption, improve security of power supply, whilst doing so in a more sustainable way. Many of the hyperscale data centres that ABB work with have shown strong industry leadership in committing to zero emission targets over the coming years.
While hydrogen-based fuel cells in data centre demonstrations is not new, positioning them as a commercially viable option could be enabled earlier through adoption of AFC Energy’s alkaline fuel cell solution, representing an important step in the decarbonation of data centres.
Today’s partnership confirms the potential role AFC Energy’s fuel cells can play as a key component of ABB’s overall data centre power solution.
Within the Development Agreement, the two companies will partner in the assessment of data centre power design principles and system operability, reviewing interfaces between fuel cell, energy storage, electrical equipment, switchgear and control infrastructure. Testing using real time data centre simulation techniques will be adopted. The work is expected to be conducted during the course of 2021 with likely engagement with the data centre industry throughout.
It is expected that once demonstrated, the alkaline fuel cell system will form an integral part of the portfolio of technologies available to ABB in meeting its data centre customer requirements and therefore provides a strong route to market for AFC Energy’s fuel cell platform in this sector.
The agreements, which do not involve licensing ABB or AFC Energy’s background technology, reflect a commercial model for system deployment leveraging the mutual capabilities of both companies working in partnership. There is no exclusivity afforded to either company under the agreements.
Frank Muehlon, Head of ABB’s global business for E-mobility Infrastructure Solutions at ABB, in relation to the investment into AFC Energy, said: “The investment in AFC Energy brings an opportunity to further the advancement of technologies that can ultimately enable a wider reach to remote off-grid locations. AFC Energy’s goals to deliver clean energy solutions perfectly align with ABB’s commitment to innovation and enabling low carbon societies, making them an ideal solution partner”.
Brian Johnson, Global Data Centre Leader at ABB, in relation to the data centre Development Agreement, said: “Embarking on this new collaboration with AFC Energy opens the possibility to integrate its impressive fuel cell technology with ABB’s strong data centre solutions. Partnering with like-minded companies such as AFC Energy further supports ABB’s dedication to delivering cutting-edge technologies to help data center customers meet their sustainability goals through a multi-fuel approach.”
Adam Bond, Chief Executive Officer at AFC Energy, said: “We are delighted that our partnership with ABB continues to expand into new and emerging fields such as e-Mobility and data centres. Through the investment made into AFC Energy today, we are confident that ABB’s position in these sectors will be further enhanced by the integration of our leading alkaline fuel cell technology. We continue to receive strong customer enquiries into our partnership from all over the world, confirming we are working with the right partners, on the right technology, at the right time to support society’s accelerated drive towards a more sustainable world”.