AFC Energy Quarterly Newsletter – December 2017

AFC Energy Quarterly Newsletter – December 2017



Dear Shareholder,


I am pleased to provide an overview of the Company’s activities for the quarter ended 31 December 2017.


This quarter has been an important one insofar as we have achieved very significant improvements in our fuel cell system, which we now believe demonstrates a platform for future commercial deployment with projected performance of the system well in excess of the objectives we set for ourselves in 2017.


The successful results from early operation in late December 2017 and into January 2018 are continuing to validate this work, underpinning the merit of our vastly improved fuel cell system.


AFC Energy’s fuel cell system is now at a point where the increasing level of operational data gained, both at the electrode and system level, is building a compelling case for commercial deployment of the system.


Over the past twelve months, in expectation of these positive results, AFC Energy’s management has held advanced talks with several third-party technology providers where integration of the AFC Energy fuel cell system creates a near-term commercial deployment opportunity. Whilst the chlor alkali and similar industrial processes that vent hydrogen remain key markets for AFC Energy’s fuel cell system, the Company’s management has also spent the past twelve months assessing and entering dialogue with new and innovative hydrogen generation companies for integration with our proprietary clean energy fuel cell technology. In some cases, these negotiations have advanced to agreement of terms which are now being progressed towards binding commercial agreements.


AFC Energy’s management is confident that, with the progress made at the base technology level, integrated with upstream hydrogen generation and downstream power generation technologies, the market for the Company’s fuel cell will open into previously unexplored market segments in 2018. I am looking forward to introducing to you several of these new products and applications throughout the course of 2018.


Importantly, each of these new products and applications build on the existing AFC Energy proprietary fuel cell technology and for the most part, do not result in the need for new research and development into new fuel cell technologies, further demonstrating the flexibility and adaptability of the Company’s alkaline fuel cell technology platform.


Fuel Cell Development


On 8 January 2018, the Company released to the market an update on the material improvements made to the fuel cell system and electrode performance, with our target milestones set for 2017 being exceeded through collaboration with our technology partner, Industrie De Nora (“De Nora”).


Without wishing to merely restate the content of that announcement, I’d like to emphasise that the progress made in enhancing the fuel cell system should not be underestimated.


The single most important element in the commercialisation of a fuel cell system is the ability of the technology to reduce the overall cost structure of the system in parallel with increasing the longevity of electrode operation. The work that has been conducted by the Company over the past twelve months has principally focussed on these two factors – both of which had been limiting us under previous fuel cell system designs.


De Nora Joint Development Agreement (“JDA”) – Update


As reported in the September 2017 Quarterly Newsletter, the JDA with De Nora continues to deliver dividends for the commerciality of the AFC Energy fuel cell system.


The collaboration with De Nora in developing a cathode and anode pairing (collectively “the electrode”) has provided increasing confidence that not only is the AFC Energy fuel cell capable of operating for a period of 12 months – 2017’s target – but for periods greater than 24 months and in due course, up to and in excess of 48 months. This confidence has been achieved through extensive trials of a very wide range of electrodes under the Joint Development Agreement with a gradually refined choice of electrode pairings chosen to meet the specifications of AFC Energy’s fuel cell system. After testing over 200 alternative electrode pairings in collaboration with De Nora, we have subsequently narrowed these to a select few that we believe are capable of delivering the life cycle we require.


To put this into context, an AFC Energy fuel cell system (incorporating electrodes) capable of operating for a period of four years, has the potential to drive the conversion cost of electricity down to between US$0.05 and US$0.10 per kWh (excluding the cost of hydrogen which varies from project to project) – this should be one of the cheapest forms of base load clean energy generation in the market today – which unlike solar and wind, does not require energy storage to balance intermittencies.


With our technology partners, we believe this is deliverable with our enhanced fuel cell system.


Throughout the course of Q4 2017, AFC Energy was required to freeze the choice of cathode and anode to be used in its December 2017 testing programme. The choice of electrode pairing provided evidence of an electrode capable of operating for a period in excess of 12 months – the target set for 2017.


However, since the decision to freeze the choice of electrode for the December testing – which was necessary to enable design progress to be maintained – further advances have been achieved which demonstrated the potential extrapolated operational life of the electrode to beyond two years – a 100% improvement on the target set for 2017.


The rate of progress being delivered under the JDA is testament to the value of collaboration between AFC Energy and De Nora and positions the two companies for negotiations into a longer-term mass electrode manufacturing agreement.


In December 2017, senior representatives from De Nora Italy, Germany and Japan visited AFC Energy’s offices in Surrey to commence plans to develop and deliver an electrode pairing that exceeds the four-year life span. Four-year electrode lives are a benchmark which De Nora readily achieves in the supply of electrodes to the chlor alkali market and is one which both companies are targeting for the AFC Energy fuel cell.


Fuel Cell Stack Design


Complementing the work jointly undertaken between AFC Energy and De Nora on the electrode, AFC Energy has revised and updated several other integral parts of the fuel cell stack which not only allows for the physical integration of the electrode, but also optimises the flows / pressures within the stack for all fluids i.e. hydrogen, air and electrolyte. This work has also incorporated significant developments to minimise / eliminate liquid / gas path deviation within the stack, which from our observations had created some detrimental legacy issues for the Company’s previous fuel cell system.


Over the past six months, an unprecedented amount of computer simulation utilising highly advanced computational modelling tools has allowed AFC Energy to design a revised, cost reduced fuel cell stack incorporating the new lower cost De Nora electrode. This new stack design was machined and fabricated in mid-December and put on test before the Christmas break. The results of the testing matched to a very high degree the predicted results taken from computer simulation and as a result of this breakthrough, provides the engineering design basis of a commercial fuel cell system.


It is now necessary, from the perspective of commercialisation, to demonstrate the success of the combined electrode / fuel cell stack design at the Company’s industrial facility at Stade in Germany. We are confident the results obtained at the Company’s Surrey offices will be mirrored at Stade, and this operational evidence base will further validate and enhance the credentials of the Company’s system to its current list of prospective system rollout partners. We remain confident this scale-up will confirm our testing conducted to date.


I’m happy to report that the parts and material orders necessary for the Stade demonstration are being placed this week and subject to the timely receipt of such parts, operation is expected towards the end of March / beginning of April 2018.



Presentation at De Nora Chlorine / Chlorate Seminar


In early October 2017, AFC Energy was invited to attend and present at the De Nora Chlorine / Chlorate Seminar in Cleveland, USA. This bi-annual event organised by De Nora for their customers in the chlor alkali sector, was attended by over 150 people representing approx. 50 chlor alkali operations internationally.


Following strong support for its collaboration with AFC Energy from De Nora’s Chief Executive in his opening keynote address, AFC Energy’s presentation was well attended and received by the industry. In an early polling of all those in attendance, the industry confirmed between 75% and 80% of hydrogen generated from chlor alkali plants internationally is either vented or burned inefficiently within on-site boilers. Whilst being an extremely conservative industry, it was clear from these statistics that, assuming a low cost alkaline fuel cell was available, there is a large-scale opportunity for deployment within the sector.

The relationships and contacts formed at this conference will prove invaluable in the deployment of the AFC Energy’s fuel cell system to one of the world’s most energy intensive industries.


In Conclusion …


AFC Energy starts 2018 in a very strong position.


With a technology platform well advanced, exciting new developments being made with our technology partners, new and emerging deployment opportunities in collaboration with third party technologies and innovations ready to consolidate, with £5.8 million in the bank at the end of 2017 and over £1 million in cash receipts due from EU grant-funded projects and UK R&D tax credits in the first half of 2018, I am extremely optimistic and excited about the prospects for a successful 2018.


I wish you all an equally successful 2018 and am looking forward to further elaborating on some of the emerging commercial deployment opportunities presenting themselves to AFC Energy throughout the course of 2018.


Yours sincerely,



Adam Bond

Chief Executive Officer



The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 (‘MAR).  Upon the publication of this announcement via a Regulatory Information Service (“RIS”), this inside information is now considered to be in the public domain.