- Unique and cost-effective technology
- Blue-chip partners
- Revenue-generating business
What it does
Ceres’ core SteelCell technology overcomes two problems traditionally associated with other solid oxide fuel cells: cost and lack of robustness. SteelCell can use a variety of fuels - natural gas, hydrogen, biofuel - that can be manufactured from widely available materials, making it the most cost-effective solution on the market. “This scalability is Ceres’s key competitive advantage, in our view,” broker Berenberg said recently.
Progress to date
It has an impressive roster of partners. Key among them are Chinese engines giant Weichai Power, German engineering firm Bosch, US engine maker Cummins and Japanese carmakers Nissan and Honda. Ceres also has a sixth partner, which the company can't name due to confidentiality reasons.
In March it said it expected revenues for the year to double to £15mln, driven by the Bosch and Weichi deals. Interest in the technology translated financially into revenues of £8.3mln in the six months to December 31, up from £3.1mln. The latter has spent £48mln amassing a 20% stake Ceres.
As of December 31 it had cash of £78.4mln, which funds the business to break-even. And it also has £30.5mln of contracted future revenues “with significant licence deals, leading to potential future royalties”.
• In July Ceres signed a collaboration agreement with South Korean conglomerate Doosan to develop a solid oxide fuel cell power system for the commercial building market
• The company expects its results for the financial year ended 30 June to be ahead of market expectations
• In June the firm launched the first fuel cell system using its technology into the Japanese market as part of a partnership with boiler maker Miura
What the brokers say
Price targets: 230p (Berenberg); 250p (Investec); 300p (Liberum)
The company is making exciting progress, delivering on targets with its partners building up their activities and thereby accelerating technology development. Furthermore, the trajectory for the market opportunity appears to be growing rapidly as the technology matures and demonstrates its potential against pollution reduction and decarbonising agendas – Investec
The cash position on the balance sheet is estimated to be enough to fund the development of the business through to commercialisation. There are very few disruptive technology businesses with this level of strength and visibility in its funding position. In unison with the commercial progress, financially the business has seen an improvement with the trading update in early December leading to revenue upgrades on the back of the Bosch and Weichai agreements - Zeus Capital
[The Doosan deal] is interesting for a few reasons. Firstly, it is further validation that Ceres technology is technically ready. Secondly, it broadens Ceres market reach to Korea following deals with China, Japan and Europe domiciled license partners. Thirdly, it is a collaboration with one of the fuel cell industry’s biggest and best respected existing players - a leader in PAFC stationary power systems with US$850mln orders from Korea, USA and [the rest of the world] - Liberum
Speaking to Proactive in July, Ceres chief executive Phil Caldwell said that the company was at the forefront of a “transition towards more renewable energy” around the world, although it wasn’t as easy as just flicking a switch.
However, he said Ceres was one of the only companies to provide fuel cell technology that allows organisations to swap from fossil fuels to renewable energy that can be commercialised straight away.
“There’s a big trend toward decarbonisation…we’re starting to enter a post-combustion era”, Caldwell said, with Ceres fuel cells ready to act as an “enabling technology” for this shift.
With the shares trading at around 186p as of 18 July, Ceres Power holds a market cap of £281.9mln.