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Ceres Power Holdings Plc

Ceres Power Continued demand for its technology

Ceres Power Holdings Plc (LON:CWR) General Meeting on Friday approved of the recent £20m fundraise and the first tranche of £19.4m of Weichai’s strategic investment, both at 15.08p. In addition, shareholders approved a ten for one share consolidation. The Board expressed a confident tone in Ceres’ update on 3 July, underpinned by JDA partnerships with six global OEMs, of which two already have strong intent to go to market via a licencing arrangement. The Company is well-balanced across its target markets, and following development in recent years it is now active in a range of power applications. Notably, its 5kW cell is experiencing good traction and further investment is earmarked to capture share of very large sectors such as data centres. Elsewhere, Weichai and an unnamed OEM are developing 10kW through to 30kW stacks for automotive and other high-power markets. We place our forecasts under review and look to update them in due course, reflecting the improved momentum in the business, the recent fundraise and associated planned investment, and the share consolidation.

Clear momentum in the business – The recent update pointed to continued demand for its technology. Management has delivered excellent progress against its milestones set three years ago, to secure five OEM partners. The Company now has six OEM clients: Honda, Nissan, Cummins, and two unnamed global OEMs, alongside the recently announced Weichai partnership from May 2018 (see below). In addition to expanding the OEM platform, two years ago the team also took the strategic decision to target higher power applications. These include data centres, commercial scale applications and transportation, as well as its previous home CHP applications. The portfolio has greatly broadened and includes stacks ranging from its original 1kW power through to 5kW. In the next twelve months, management expects that several of its OEM partners will move toward field testing of its multi-kW products.

A recap on Weichai – Ceres announced a very meaningful strategic partnership with, and investment from, Weichai Power in May 2018. Weichai is listed in both Hong Kong and Shenzen, employs 74k people, and is currently valued at c. $10bn. The agreement includes £40m of equity investment for a 20% equity holding payable in two stages; £19.4m today at a price of 15.08p and c.£26m later in 2018 at a price of 16.46p. Weichai is a leading automotive and equipment manufacturing company producing 600k engines, 830k transmissions, 150k heavy trucks and 200k fork lift trucks in 2017. In the first instance, the strategic partnership with Ceres will develop and launch a SOFC fuel cell range extender for the rapidly growing Chinese electric bus market.

Planned investment and targeting a manufacturing partner – The recent update points to planned investment in additional capacity in a new manufacturing facility that will support customer volume requirements over the next three to five years. Management also continues to seek an additional strategic manufacturing partner, and is targeting this within the next twelve months.