Newsletter 1

Dear Shareholder,

It gives me great pleasure to introduce myself and to update you on the progress of AFC Energy (AFC) over the past quarter.

As many of you will know, I took over as Chief Executive Officer of AFC on 1 December with the primary objective of driving a renewed and intense focus on the commercialisation of AFC’s technology platform and to capitalise on the immediate opportunities for AFC within the emerging hydrogen economy.

Some of you will also be aware that I’ve been a Non-executive director at AFC for a couple of years and most recently, in executive positions at Linc Energy Ltd, where I was responsible for the commercial deployment of the company’s world leading underground coal gasification technology, so rest assured, none of this is new to me.

I am acutely aware, both from feedback at the Company’s AGM, and through other means, that many shareholders feel that our corporate communications needed improving so one of my first initiatives has been to introduce the first of our quarterly newsletters. With the amount of news you can expect over the coming months it makes sense for me to relate to you a summary of recent updates and help bring you up to speed with key developments.


In October, AFC announced the successful completion of a conditional placing with institutional and other investors as well as an open offer to all qualifying shareholders. Despite tough market conditions, the Company raised £5.2 million in the placing and an additional £920,000 from the open offer to shareholders.

This funding will enable us to deliver our POWER-UP programme and continue our plans to open new commercial markets for the AFC fuel cell.  Interestingly, despite only having recently closed the placing, AFC has received several approaches in the last few weeks from potential investors enquiring how the recent set of RNSs released to the market impact on the timing of commercialisation and the market’s interest in making new investments into AFC stock.  We will be following up with these prospective investors in the new year.


POWER-UP represents our key strategic focus over the next 12 months and when successfully deployed, will demonstrate the world’s largest alkaline fuel cell system (the “KORE”) at Air Products’ industrial gas plant in Stade, a city in Lower Saxony, Germany. It is worth emphasising that this represents the final phase of AFC’s pre-commercialisation technical development programme and creates the platform for the Company’s global commercial fuel cell deployment.

Following my appointment in December, I announced a number of key developments, namely that we were able to identify opportunities to fast track the date for demonstration of 240kW from the KORE to December 2015, representing an acceleration of over 18 months.  This has come about through the review of testing parameters leading up to the 240kW KORE in parallel with the rapid deployment of our in-line volume fuel cell fabrication processes, which will enable more cells to be produced than was originally anticipated.

Between now and then, I’ve stated 11 project milestones over the next 12 months (see RNS dated 8 December). This represents a highly ambitious technical programme for AFC; but one which I have every confidence in achieving.

Two days later, I announced that we had successfully completed the first of the above project milestones: our latest 25 cell stack trial which sought to affirm that our cartridges could achieve operating temperatures (from ambient) using heat produced solely from fuel cell reactions without a loss in cell performance.  The results were very encouraging with the latest 25 fuel cell stack trial significantly outperforming earlier trails with a total improvement of 11.09% (thank you for those who pointed out the slight mathematical error in the RNS) in electrical output relative to the two earlier successful 25 cell stack trials. As stated at the time, this latest test represents a huge stride forward towards the validation of the KORE system technology as a prelude to commercialisation next year.

We also announced the appointment of Artelia, a leading European engineering, consulting and project management firm, and their sub-contractors, PlantIng, a leading German process engineering consultancy, for the undertaking of all engineering and design works associated with the delivery of the POWER-UP programme on site in Stade.  This work has now commenced following a “kick off” meeting in the second week of December and at this stage, we remain confident, subject to permitting, of delivering a facility by May 2015 capable of accepting the KORE.

So what can we expect in the first quarter of 2015?

In early 2015, we will be looking to commence operational performance monitoring of a 51 cell stack within an industrial gas plant environment.  And by March, we will have commenced operational performance monitoring of a 101 cell stack for the first time within the new KORE cartridge. This will involve the automated manufacture of fuel cell stacks to be used in the KORE POWER-UP programme utilising the newly commissioned stack assembly robot.

I look forward to communicating our progress to you all.

Importantly, I am already in discussions with several prospective major partners who have expressed an interest in working with AFC to further accelerate our commercialisation programme.  For those of you who have experience in pre-revenue, research and development organisations, you will know one of the hardest cultural changes for any company in its evolution is the transition to being a commercially focused business whose objective is to return tangible value to shareholders.  It is this transition that AFC is making, and we are assessing a range of alternative technology deployment models and opportunities which will see value delivered to shareholders in the shortest possible timeframe.  I hope to have a lot more to say in this regard over the coming months.

Recently, I’ve been particularly enthused by my meetings with the various teams at AFC. We have just over 50 employees and their dedication to the tasks at hand has been infectious. It has really been down to them that we’ve been able to fast track the delivery of the KORE and POWER-UP by 18 months, no mean feat.

As I have previously said, I strongly believe that this demonstrates the strong drive and focus that exists within AFC to commercial-scale fuel cells operating in the global market place as soon as possible.

Some of you have had the chance to meet members of the AFC team during the Investors Day and it is my intention to meet more of you at the next Investor Day and at the various presentations and conferences in London and elsewhere.

I think you’ll agree that this is an exciting time to be a shareholder in AFC. I strongly believe that this Company will become a huge success and have put my own skin in the game to the extent that I agreed to have a large part of my salary paid in shares in lieu of cash.

I’d like to wish one and all a very Merry Christmas and a Happy New Year!

Adam Bond
Chief Executive Officer