Shares in Ceres Power, the fuel cell innovator in solid oxide technologies, surged nearly 25% in the LSE this morning, on news that it has signed preliminary terms linked to two joint ventures in China.
The Surrey-based firm has added its shareholder Bosch to its existing partnership with Weichai Power, China’s giant engine & power train manufacturer. Under the non-binding deal, the trio will collaborate in technology licencing:
- Ceres and Bosch will licence their know-how to Weichai, the majority shareholder in a new China-based joint venture to build low-carbon solid oxide engines for vehicles and stationary power. Ceres will invest £20 million over time, in return for an immediate seat on the joint-venture’s board.
- Though not a direct shareholder, Ceres will licence its technology via its 28% German shareholder to a second Bosch-Weichai joint venture, intended to build stacks of solid oxide fuel cells. Ceres will receive royalty payments.
Ceres anticipates license fee income in the region of £30 million from both ventures over the next three years, in line with terms agreed in the original Weichai-Ceres agreement in 2018. Minimum payments and annual royalties will starting flowing, once each JV begins operations.
No production targets were disclosed in this morning’s announcement.
Detailed agreements are now being prepared, towards signing definitive contracts for both collaborations.
Ceres Power’s CEO Phil Caldwell couldn’t have been happier. “This exciting collaboration represents an important step in Ceres’ ambitions for the Chinese market and a critical part of delivering global manufacturing capacity for our technology,” he said.
“We have every confidence in our partnership with Weichai and with the addition of Bosch’s expertise in industrialisation and manufacturing have the potential to establish one of the strongest partnerships in the fuel cell industry.”
In January 2020, Bosch boosted from 4% to 18% its holding in the Surrey engineer.
Founded in 2002, Weichai Power is a Hong Kong-quoted offshoot of the Weichai Corporation. In 2019 it contributed earnings of 9.11 Billion yuan, or £ 1.06 Billion to its parent.
By mid-morning Ceres Power’s share price on the London Stock Exchange had risen over 24% to 642p, valuing the company at £ 986 million.
Hydrogen is a key potential output of Ceres’s solid oxide electrolysers. The carbon-free gas is made essentially by reversing the fuel cells’ function. “Ceres has a credible path to delivering hydrogen at scale”, said Caldwell in September 2020.