# AFC Energy expands strategic partnership with ABB

- Link: https://www.directorstalkinterviews.com/afc-energy-expands-strategic-partnership-with-abb/412978079
- Published: 2021-04-16T07:10:53+01:00
- Author: Giles

**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 Highlights_

·    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**

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.

**Additional Information**

**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-Power^(TM) 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.

**The Subscription**

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. 

**Highlights**

·      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](https://www.directorstalkinterviews.com/sustainability-green-stocks-news)
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”. 

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