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Ceres Power sees strong demand for £20mln share issue

The company intends to complete the joint venture and licensing agreement with Weichai Power later this year, which will allow it to work towards a manufacturing joint venture in China

Ceres Power SteelCell's technology
Ceres is in early-stage discussions with a partner regarding a broad strategic collaboration, including manufacturing

Ceres Power Holdings PLC (LON:CWR) has raised gross proceeds of £20mln through a conditional placing and share subscription at 15.08p per share.

The issue price represents a 2.7% discount to Tuesday’s closing mid-market price of 15.5p per share, with the stock holding steady at that level in late afternoon trading.

READ: Ceres Power announces partnership with China’s Weichai Power and £17mln potential equity investment

The shares issued represent around 13% of the current issued share capital of Ceres, and the company said it could have issued more shares, such was the demand.

IP Group Plc (LON:IPO), the developer of intellectual property-based businesses which has a stake in Ceres, said it committed a total of £4.0mln to the placing and, following completion, will hold a total of 284,063,394 shares, or 22.2% of Ceres Power’s equity.

Ceres said the fund-raising is in addition to the shares Weichai Power, one of China’s leading car and equipment manufacturing companies, has agreed to purchase, which will raise roughly £19.3mln before expenses. The Weichai subscription has also been priced at 15.08p.

The value of the Weichai subscription has increased compared to the company's announcement on 16 May 2018 to reflect the conditional issue of the fund-raising shares. Once all the share issuing has been done and dusted, Weichai will hold a 10% stake in Ceres Power.

As previously announced, in addition, Weichai has agreed on a further investment of £26.3mln, conditional on the signing of further commercial agreements to increase its holding to 20% by the end of November this year.

Ceres said it is raising new equity in order to enable it to continue to grow and commercialise the SteelCell technology.

READ: Ceres Power driving higher on the back of big name development collaborations

The funds are earmarked to provide working capital to fund the business through to commercial launches with original equipment manufacturers (OEMs) from 2021 and to finance a new manufacturing facility in the UK to provide near-term capacity for the next three to five years.

The new facility will phase the increase in annual capacity from 1 to 3 megawatts (MW) initially, potentially growing to 10 MW over the next five years, which will provide a platform for licensing to the company's manufacturing partnerships for higher volume.

Ceres is very close to committing on a new site within commuting distance to Horsham, where its current facility will remain as its Technology Centre of Excellence.

Ceres said the funds raised will also enable the company to industrialise the five kilowatt (5kW) stack, which is the key technology platform for most of its current demand.

Strong revenue growth

The proceeds will also provide initial funding of the proposed manufacturing joint venture with Weichai Power, which would be required from 2020.

Reporting on current trading, Ceres said the directors expect revenue and other operating income for the year to June 30, 2018, will be in the region of £7mln, up 70% or so year-on-year.

The board is confident that the company can maintain this trend of strong revenue growth as it secures more technology transfer and licence revenues in addition to its current engineering services and 2019 revenues are expected to be ahead of current market expectations.

The order book is currently £5.1mln, up from £3.2mln last year, and the company said it has a strong commercial pipeline with several opportunities at an advanced stage, including a potential substantial grant award.

“The next year will be extremely exciting for Ceres Power, as it expects field trials to start across a number of applications: 5kW commercial CHP [combined heat & power] with its confidential customer starting later this year, the first 30kW system being run on a bus in China with its new partner Weichai in 2019, and it expects 10kW power-only systems to start being trialled later in 2019,” the company said.

“These initial trials will no doubt provide new challenges for the company servicing several different OEMs in different markets. The company's focus remains on getting to the SteelCell products to market under licence with leading OEMs and proving out the technology and business model in several different applications,” it added.

 -- Adds share price, IP Group statement --

Quick facts: Ceres Power Holdings PLC

Price: 228 GBX

LSE:CWR
Market: LSE
Market Cap: £353.91 m
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