CFCL AGM Chairman's Address to Shareholders

Market

Announcement

Wednesday 20 November 2013

 Chairman's Address

Annual General Meeting held on Wednesday 20 November 2013

INTRODUCTION

Good afternoon Ladies and Gentlemen, my name is Alasdair Locke and I am the Chairman of Ceramic Fuel Cells. On behalf of the Company's Board I welcome you to our 2013 Annual General Meeting.

Before we formally open the meeting, I would like to introduce your directors and then say few words about the Company's progress during the last financial year and the outlook for the next financial year.

I will now introduce your Directors:

· Mr. Bob Kennett - Managing Director

· Mr. Clifford Ashby - Director & Chief Financial Officer

In recent months the Board appointed Mr. Clifford Ashby as Director and CFO. Mr. Ashby, a chartered accountant, has over 20 years of extensive general and financial management experience and has previously served on the board of an ASX listed aquaculture company as managing director and as a non-executive director thereafter. He has also served on many private company boards and been company secretary and director of an ASX listed agribusiness company.

· Dr Peter Binks - Non Executive Director & Chairman of the Technical Audit Committee

MARKET OUTLOOK

We continue to see some significant changes in world energy markets. The increased availability of gas supplies, particularly in the US is balanced by an acceleration in demand for energy supplies from China and southern Asia and also in the last year or so by a number of countries reviewing their nuclear generation strategies, i.e. Germany. Energy prices continue to rise, which in the UK for example has increased the number of households in the classification of fuel poverty. In addition, many consumers are becoming more serious about energy efficiency for both financial and environmental reasons. In developed countries, whilst electricity demand continues to rise, new large-scale power plants are becoming increasingly difficult to operate on a commercially sound basis, and securing funding for new build projects is also extremely difficult in the current conditions. As a consequence there has been a step change in markets, particularly in Europe and Japan. Both areas are seeking to establish high efficiency alternative sources of electricity generation.

We strongly believe that this is providing tremendous potential for our BlueGen product since it produces both electrical and thermal energy (Combined heat and power) exactly where it is needed, with very high efficiencies and low emissions.

To remind you of the business opportunity for Ceramic Fuel Cells:

Ø BlueGen continues to demonstrate the highest electrical efficiency of any generation technology currently available. At 60 percent (delivered at the point of use) this is considerably ahead of any fossil fuel or renewable technology.

Ø Demand for electricity in both developed and developing countries continues to increase. Building new large-scale generation plant is becoming increasingly difficult in developed countries. Small-scale, in-home generators can readily bridge the gap in demand vs. capacity.

Ø BlueGen delivers substantial CO2 savings (in the region of 4 tonnes per year from each unit) and for example, more than triple the savings from a typical home solar installation in Australia.

Ø Distributed generation in homes and other buildings avoids the need for substantial investment in the reinforcement of transmission line capacity.

Ø The global market potential is very large. Germany alone (one of our key focus areas) provides the opportunity for the installation of several hundred thousand units. Other markets with similar potential include the UK, Netherlands, USA, Canada, China, Japan and Korea.

Ø BlueGen has the capability to provide grid stability in markets where renewable energy penetration is high. Its ability to modulate load allows us to potentially add substantial value in these markets.

SALES

As previously reported we have focused our resources on addressing the European market opportunities and specifically, Germany and the UK.

Following confirmation, earlier this year, of the fiscal incentives in Germany and the UK we have continued to build our sales teams and are now beginning to successfully secure orders for BlueGen from direct sales and through our distribution partners.

Over the past calendar year we have seen a steady acceleration in our sales as we have been able to increase our sales and marketing resources. We have also continued to progress negotiations with a number of organisations for large-scale orders, which we hope to secure in 2014.

I am personally satisfied that we have established a sales and marketing resource that can successfully penetrate the expanding markets for micro-generation and we are now experiencing increased success.

Our Managing Director, Bob Kennett, will provide you with more details on specific sales activities in his report.

PRODUCTION

We have established and developed a very successful relationship with CCTC and we are working with them on key component manufacture.

The company has also entered into supply agreements with other third parties with the aim of achieving significant cost reductions whilst maintaining high quality.

Our assembly plant in Heinsberg in Germany is fully commissioned and the 4*4 furnace is fully operational.

Our research and development facilities have been retained in Melbourne and whilst the resource has been reduced the team continues to provide very important technical input to both existing production activities and future development opportunities.

As reported previously, the company is committed to achieving major cost reductions through volume production, outsourcing to low cost/high quality suppliers, continued improvements in design and ongoing improvement to manufacturing process both internally and with our supply partners.

In the last year we have achieved a 25% reduction in costs of the BlueGen unit and that is based on comparatively small volumes.

Bob Kennett will give more detail in his report.

FUNDRAISING

As you are aware, we embarked on a fund raising exercise early in 2013. We were unsuccessful at that time for a number of reasons, primarily relating to our sales performance resulting from the year's delay in the formalisation of the NRW capital grant in Germany and the review of the feed in tariff in the UK. We subsequently sought to raise funds through an alternative mechanism and succeeded in securing £5M (A$8.3M) through convertible loan notes and an equity placement. In addition we also received a tax rebate of £3.1M (A$5.2M) against our research and development expenditure. This month we expect to receive a further £2.4M (A$4.0M) under the same tax rebate mechanism and additional cash from other activities. Consequently it is now our intention to seek additional funding through a number of channels to support the company's future activities through to a cash flow positive position. The Board intends raising funds via a Share Purchase Plan and Overseas Offer during December 2013 and details of this raising will be announced in the near future.

The Share Purchase Plan will be made available to all qualifying shareholders of the Company who have addresses in Australia and New Zealand. Shareholders eligible to participate will be offered the opportunity to subscribe for ordinary shares up to a value of $15,000 each. The Overseas Offer will be made available to existing shareholders with registered addresses in the United Kingdom and certain other jurisdictions into which the Company may lawfully extend the offer without the publication of a prospectus.

FY13 FINANCES

Key financial results for the year from 1 July 2012 to 30 June 2013 are as follows:

· Net Loss after Tax AUD 19.8M (GBP 11.9M) (decrease of 34% from FY12)

· Revenue from Operations AUD 4.3M (GBP 2.6M) (decrease of 37% from FY12)

· Net Operating cash outflow AUD 16.7M (GBP 10.0M) (decrease of 32% from FY12)

· Cash balance at 30 June 2013 AUD 10.0M (GBP 6M)

SUMMARY

To summarise, there continue to be enormous global opportunities for clean energy products. We are confident that our technology allows the company to be in an excellent position to profit from these opportunities with our BlueGen and integrated products.

This financial year we are confident that orders will grow steadily as we increase market awareness of our product and our sales teams secure increased success in our selected European markets. We are continuing to concentrate on fulfilling distributor orders and working together with them through the installation and operating phases.

As you will be aware, we have experienced a turbulent few years and like other comparatively small, developing high tech. companies we have been through some difficult times.

However I believe that we now have a very strong base to support our future strategic plans. We have a very committed and hard working team, spanning a comprehensive range of skills and expertise, which we believe represents the best in the world in our sphere of technology.

I am convinced that with the continued support of our shareholders, we will succeed in developing CFCL in to a highly successful company with the potential to achieve substantial growth on a global basis.

On Behalf of the CFCL Board I would like to thank you for your continued support of the Company and I looks forward to reporting to you on further significant progress during the coming year.

Alasdair Locke

Chairman

-End-

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About Ceramic Fuel Cells Limited

Ceramic Fuel Cells Limited is a world leader in developing fuel cell technology to generate highly efficient and low-emission electricity from widely available natural gas. Ceramic Fuel Cells Limited has sold its BlueGEN gas-to-electricity generator to major utilities and other foundation customers in Germany, the United Kingdom, Switzerland, The Netherlands, Italy, Japan, Australia, and the USA. Ceramic Fuel Cells Limited is also developing fully integrated power and heating products with leading energy companies E.ON UK in the United Kingdom and EWE in Germany. The company is listed on the London Stock Exchange AIM market and the Australian Securities Exchange (code CFU).

www.cfcl.com.au