New British Gas CHP agreement
Ceres Power Holdings plc
14 January 2008
Ceres Power Holdings plc
('Ceres Power', 'Ceres' or the 'Company')
Ceres Power and British Gas enter development, supply and
distribution agreement for UK residential CHP
Ceres Power, the AIM-quoted fuel cell group, today announces that it has signed
a major new agreement with Centrica (trading as British Gas) including a funded
trialling programme and a volume forward order for residential combined heat
and power products ('CHP'). In addition, and subject to the approval of Ceres
Power shareholders, Centrica will subscribe for new shares representing 9.999
per cent of the Company's enlarged issued share capital at a price of 300 pence
per share, equivalent to a cash investment of around £20 million.
This agreement follows the successful recent demonstration of Ceres Power's
industry-leading wall-mountable fuel cell CHP unit, which was one of the key
milestones of the Company's current CHP programme with British Gas.
Under the terms of this new agreement, British Gas will pay £5 million to the
Company in staged milestone payments over an initial phase ('Initial Phase'),
with the first payment of £1 million to be made following Ceres Power's
shareholder approval and the remainder subject to achievement of certain
technical milestones. During the Initial Phase, which is expected to be
completed in 2011, Ceres will complete the value engineering of the CHP Product
and, together with British Gas, conduct commercial in-field trials with
residential customers and commence initial sales. British Gas is committing its
operational resources to support the roll-out of CHP Products including
training, installation, servicing and logistics.
British Gas has also placed a forward order to purchase in aggregate a minimum
of 37,500 CHP Products on an escalating basis over a four-year period. This
order is conditional upon the successful completion of the Initial Phase and on
the companies agreeing standard commercial terms including the price for supply
of the CHP Products. Both Ceres and British Gas have agreed to promote the
Ceres CHP Product with the intention of achieving substantially greater levels
of annual sales over the four-year period. Approximately 1.5 million boilers
are installed each year in the UK and it is forecast by industry and
governmental bodies that residential CHP could take 30 per cent of this market
by 2015 (see SBGI 2006).
For the duration of the agreement, British Gas has the exclusive right to supply
and distribute the Company's CHP Products to the residential UK market subject
to British Gas purchasing at least the minimum annual order volumes for each
year of the forward order. Ceres Power retains the right to supply and
distribute CHP Products anywhere else in the world and the right to exploit its
innovative fuel cell technology in other applications globally including in the
UK.
Peter Bance, CEO of Ceres Power, said:
'The investment Centrica is making in our business reflects the success of our
collaboration over the last two years and the confidence both companies have in
Ceres Power's fuel cell technology. We are delighted to continue our close
relationship with British Gas and are excited about the prospect of taking our
innovative CHP Product to market with the UK's largest boiler installation
company.'
Sam Laidlaw, CEO of Centrica, said:
'Fuel cell technology has the potential to transform the domestic central
heating market, enabling our customers to generate cheap, reliable and
low-carbon electricity in their own homes. This agreement with Ceres Power will
help us deliver our strategy of investing in low carbon technology development.'
The issue of the new shares is subject to the approval of Ceres shareholders at
the general meeting of the Company to be held at 10:30am on 1st February 2008.
The supply and distribution agreement is conditional upon the allotment of the
new shares to Centrica.
The Company will shortly be posting the shareholder circular convening the
general meeting to its shareholders. A copy of the shareholder circular, which
also contains further details of the transaction, is available at
http://www.cerespower.com/investor/shareholder.htm
For further information contact:
Peter Bance, Chief Executive, Ceres Power: +44 (0) 1293 848 641
Patrick d'Ancona / Charlotte Kirkham, M: Communications +44 (0) 207 153 1531
Alisdair Gayne, Morgan Stanley +44 (0) 207 677 5044
Notes to Editors:
Today's announcement follows the Company's recent achievement of a major
technical milestone: the successful demonstration of an industry-leading fuel
cell CHP Unit. Ceres Power's unique wall-mountable CHP Unit is designed to
produce electricity and meet all of the hot water and central heating needs of
a typical UK home. The CHP Unit is designed to substantially reduce residential
energy bills and carbon emissions, by avoiding much of the energy losses in
generation and transmission associated with centralised power generation. The
technology has the potential to reduce a typical British Gas customer's
household CO2 emissions by up to 2.5 tonnes per year when replacing a standard
boiler, and to lower annual energy costs by several hundred pounds.
Government is also strongly supportive of micropower generation, which
represents an industry shift to the production of energy at the point of use
rather than relying entirely on centralised generation. The UK Government has
estimated that, over time, micropower products have the potential to supply over
one-third of Britain's total electricity needs and to help the country improve
its energy security, meet its environmental obligations and deliver energy
savings to consumers. The UK Government has implemented legislation driving
the new build sector towards greener homes and has also put in place fiscal
measures including VAT reduction to 5% and capital grants to accelerate the
uptake of residential CHP.
This information is provided by RNS
The company news service from the London Stock Exchange
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