Ceres Power revenues on strong upward path

What it does


Ceres’ core SteelCell technology overcomes two problems traditionally associated with other solid oxide fuel cells (SOFC): 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


Ceres 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.





How it’s doing


In July, Ceres said it ended the last 12 months in a strong position with operational momentum maintained against the headwinds caused by the coronavirus (COVID-19) outbreak.


The clean energy specialist said revenue for the period to June 30, 2020, will be in the region of GBP20mln, representing year-on-year growth of 20-25%.


Cash and short-term investments were GBP108mln as of that date.


Looking ahead, the fuel cells specialist said it expects to sign new customer partnerships “as commercial demand remains strong”.


Longer-term, the environment appears to be supportive of companies such as Ceres, whose SteelCell technology can efficiently turn biogas, ethanol, or hydrogen into power.


The company received two major votes of confidence during the year just gone with German giant Bosch investing GBP38mln to increase its stake in the business to 18% and China’s Weichai putting up GBP11mln to stay at 20%.


The former has now begun manufacturing Ceres’ technology at its pilot facility.


The firm said the commissioning of its new Redhill manufacturing site began in January, and while ramp-up was, slower than anticipated (not surprising given the current challenges), the facility delivered record production last month.


Assessing the impact of COVID on the business, Ceres said it adapted well to lockdown, with the full onsite team returning in early May.


Some orders have been deferred, it said, but “results remain in line with market expectations”. Supply chain hiccups have been “managed well”, it added.


Ceres said it plans to invest GBP5mln to develop solid oxide electrolysis for hydrogen and potential synthetic fuels over the next 18 months. Plans are also in train to expand the Redhill facility.


What the boss says: Phil Caldwell, chief executive


“If anything, the current pandemic has only intensified the urgency for climate action and I believe Ceres has a no-regrets fuel cell technology for power generation that is highly complementary to today’s energy infrastructure, is hydrogen ready for the future, and can form a critical building block in achieving a net-zero carbon future.”


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What the brokers say


Berenberg – July


Investor interest in the hydrogen and fuel cell sector has moved beyond how the technology works and is now focused on competitive dynamics, market opportunities and electrolysis.


In this scenario, Ceres offers one of the best opportunities for equity investors, argues Berenberg.


In numerous business segments, Ceres screens very favourably, Berenberg says, particularly in stationary power applications and based just on existing partnerships it estimates an addressable market of 500GW.


In revenue terms, that amounts to a more than GBP950mln a year opportunity or 32 times this year’s forecast.


On a modestly favourable penetration rate of SteelCell in the stationary power market, Berenberg gets to a price target of 580p, but full penetration moves the number to 2,000p.




Inflexion points


  • In March, Ceres raised GBP49mln in total from share subscriptions by existing investors German firm Bosch and Weichai Power of China
  • In June, former Vodafone man Warren Finegold became chairman.
  • Ceres forecast revenues to rise by 20-25% to GBP20mln in the year to June

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