18th Aug 2009 07:00
18 August 2009
CERAMIC FUEL CELLS LIMITED
PRELIMINARY RESULTS
12 MONTHS ENDED 30 JUNE 2009
Ceramic Fuel Cells Limited (AIM / ASX: CFU) a leading developer of high efficiency and low emission power products for homes, today announces its preliminary results for the year ended 30 June 2009.
The full results are also available at www.cfcl.com.au.
Highlights in the period and year to date
Customers and Products
Deployed and successfully operated prototype micro combined and power (m-CHP) products with leading partners in Europe and Japan
Now developing fully integrated m-CHP products
Developed and launched "BlueGen", a high efficiency power and heat generator product
Signed memorandum of understanding with VicUrban to install the first BlueGen unit in a showcase sustainable home in November 2009
In positive discussions with prospective sales and distribution partners, and building a strong pipeline of customer interest for BlueGen and m-CHP products, in Europe, North America, Japan and Australia
Manufacturing
Built a large scale fuel cell plant in Heinsberg, Germany, on schedule to be opened in October 2009, at a final cost of almost three million Euros under budget
Ceramic powder plant in Merseyside, UK, is making high quality ceramic powders using the Company's proprietary technology, for internal use and for customer sample products
First customer order received for ceramic powder for a biomedical application
Formalising commercial supply chain partnerships for fuel cell components, balance of plant components and BlueGen
Technology
Achieved world-leading electrical efficiency of 60 percent from its natural gas powered fuel-cell home generators while exporting electricity to the grid
Obtained European 'CE' safety approval for demonstration BlueGen units, targeting full CE approval for BlueGen in January 2010
Continued strong progress in fuel cell stack reliability and lifetime
Extensive intellectual property portfolio supplemented with further patents granted
Financial
Sales revenue from customers up 172 percent to A$1,679K (£840K)
Operating costs (before impairment charge) down 12.2 percent to A$21,208K (£10,604K)
Operational cash outflow reduced by A$3.3 million (£1.6 million) to A$16.5 million (£8.3 million)
Losses on financial investments required significant impairment charges, leading to an increase in net loss to A$42.2 million / £21.1 million
Raised A$32.2 million (£16.1 million) in a placement and rights issue in April 2009
At 30 June 2009 the Company had cash of A$25.5 million (£12.8 million) and held investments valued at A$4.3 million (£2.1 million).
ENDS
Managing Director Mr Brendan Dow discusses the preliminary results in a webcast interview on Boardroomradio, available at www.brr.com.au/cfu.
For further information please contact:
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Ceramic Fuel Cells |
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Andrew Neilson |
Tel: +61 3 9554 2300 |
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Email: [email protected] |
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Nomura Code Securities |
Tel: +44 (0) 207 776 1200 |
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Juliet Thompson / Chris Golden |
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Australia Media enquiries Richard Allen, Oxygen Financial Public Relations Tel: +613 9915 6341 |
About Ceramic Fuel Cells Limited
Ceramic Fuel Cells Limited is a world leader in developing solid oxide fuel cell technology to provide highly efficient and low-emission electricity from widely available natural gas. The company is developing micro combined heat and power and distributed generation units that generate electricity and heat for homes and other buildings. Ceramic Fuel Cells is developing products with leading appliance partners and utility customers in Germany, France, the United Kingdom and Japan. In May 2009 the company launched its BlueGen gas-to-electricity product.
Headquartered in Melbourne, and with operations in the UK and Germany, Ceramic Fuel Cells is listed on the London Stock Exchange AIM market and the Australian Securities Exchange (code CFU).
www.cfcl.com.au
Operational Review
Introduction
Ceramic Fuel Cells is a global leader in fuel cell development. We are developing low emission electricity generation units to be installed into homes and other buildings. The units convert natural gas into electricity and heat through ceramic fuel cells. The process is highly efficient and can significantly reduce carbon dioxide emissions and energy costs.
The Company has achieved electrical efficiency of 60 percent whilst exporting power to the grid - so far as the Company is aware, this is the highest electrical efficiency ever achieved, worldwide, from any technology, including other fuel cell technologies, that convert hydrocarbon fuels into electricity.
These results reflect the significant portfolio of highly specialised knowledege and intellectual property which the Company has built up over 17 years. This knowledge and experience extends from the basic raw materials of the Company's fuel cells, through to complete power generating products and provides a valuable competitive advantage.
In early 2009 the Company developed and launched a new modular co-generation product called BlueGen. In parallel, the Company continues to develop micro combined heat and power products (m-CHP) with leading utility and appliance companies in Germany, France, the United Kingdom and Japan.
During the financial year the Company achieved significant progress in its transition from a company researching and developing technology to a company earning revenue from making and selling products. In particular, the Company built a large scale manufacturing plant to make the important step from pilot production to volume production. The investment in this facility allows the Company to meet the projected large demand for small scale low emission power generation products using the Company's fuel cell products.
Market conditions continue to be attractive for low emission energy products, with several large markets including Germany, the United Kingdom and California introducing or announcing policies specifically to recognise the benefits of small scale distributed generation products.
Customers and Products
The first products to be powered by CFCL fuel cells will be small scale combined heat and power (m-CHP) units and the BlueGen modular generator.
The Company is pursuing these parallel products to cater for different customer segments and different markets. BlueGen is a modular product, which can be installed just as a power generator, or coupled with a hot water tank and as a co-generation system to provide power and hot water. This modular product suits applications and markets that require an alternative product approach to fully-integrated mCHP systems.
Both products will use the Company's Gennex fuel cell module and will share many 'balance of plant' components, allowing the Company and its partners to create different products and customer offerings from the same core technology platform.
BlueGen
During 2009 the Company developed and launched a new modular gas-to-electricity generator product. The new product - called BlueGen - is a 'mini power station' for homes and other buildings. BlueGen converts natural gas to low emission electricity and hot water, reducing greenhouse gas emissions and saving on home energy bills.
BlueGen was displayed at the Hannover Fair in Germany in April and then formally launched in May 2009 by the Premier of Victoria, John Brumby, at Ceramic Fuel Cells' head office in Melbourne. The launch featured a live demonstration of BlueGen, connected to a hot water unit producing electricity and hot water.
BlueGen - about the size of a dishwasher - will allow homeowners to reduce their homes' carbon dioxide emissions and save on energy bills. In the United Kingdom each BlueGen can reduce carbon emissions by three and a half tonnes per year compared to the current power grid. In Victoria the savings are far higher, of up to 18 tonnes per year compared to brown coal power generators.
Each BlueGen can produce up to 17,000 kilowatt hours of power per year - more than twice the electricity needed to power an average home in Europe or Australia. Surplus electricity can be sold back to the power grid. BlueGen can generate electricity with up to double the efficiency of the current power grid.
At the BlueGen launch the Company also announced a Memorandum of Understanding with the Victorian Government's sustainable urban development agency, VicUrban, to showcase BlueGen in VicUrban housing developments. Subject to agreeing final terms, Ceramic Fuel Cells will install the first BlueGen in VicUrban's Sustainable and Affordable Living Centre in Dandenong to be opened towards the end of 2009, and will install more demonstration units in other VicUrban developments in 2010.
The Hannover and Melbourne launches of BlueGen have generated significant interest from potential buyers, manufacturers and distributors of the product. The Company is building a pipeline of sales opportunities and plans to start delivering BlueGen products from early 2010.
The Company intends to outsource the manufacturing of BlueGen to selected appliance partners. The Company will make the fuel cell module, which is the core of BlueGen, at its manufacturing facility in Germany. The Company is in positive discussions with prospective BlueGen manufacturing partners.
The Company's sales strategy for BlueGen will be tailored to match the requirements of the many markets available to it (and customer segments within each market). For most customers and markets the Company plans to sell BlueGen through local sales and distribution agents who would also install and service the product. The Company has been approached by several potential sales agents. The Company is in positive discussions with prospective partners in several markets, including Europe, Australia and North America.
Over the next few months the Company plans to finalise its manufacturing and sales partnerships and finalise the BlueGen product offering and pricing, continuing to build the sales pipeline ahead of sales from early 2010.
The Company is also obtaining relevant safety approvals for BlueGen. In early August the Company successfully underwent European 'CE' safety approval for the demonstration units it has built, and plans to obtain full CE approval for BlueGen in January 2010. This CE approval will be used to obtain local approvals in other markets, including Australia (in early 2010) and North America (likely in Q3 2010). The Company is familiar with the demanding and rigorous CE requirements and process, having obtained CE approval for each of its prior field trial units since early 2006.
Integrated mCHP Product
The Company is also continuing to develop fully integrated mCHP products with our utility and appliance partners in Europe. Like BlueGen, the fully integrated mCHP product uses natural gas to produce power and heat. The mCHP product also includes an additional high efficiency boiler to provide additional heat for space heating. These hydronic heating systems are common in many European markets but are less common in warmer climates and outside Europe.
In Germany, France and the United Kingdom, the Company is working with leading utilities and appliance companies to develop mCHP products.
In each market the Company has successfully developed, built and operated 'semi integrated' units, comprising a fuel cell power unit connected to a separate boiler, controlled and operated together. Six semi integrated units have been installed - three in Germany, two in France and one in the UK. In total these units have been operated for over 52,000 hours (8,760 hours is equal to one year).
The Company is now progressing to the next stage of developing fully integrated units, comprising a Gennex fuel cell module physically integrated with a high efficiency boiler into a single unit. Ceramic Fuel Cells will supply the fuel cell module to its appliance partner in each market which will build the complete units, for deployment by the utility customer, starting later this year. These units will demonstrate the functionality of the integrated unit. The final stage of the product development is to make these units smaller and cheaper.
The status of the projects in each market is described below:
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Market |
Partners |
Status |
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United Kingdom |
E.On UK Gledhill Building Products |
semi integrated unit installed in June 2008, still operating Agreed in February 2009 to the next stages of product development and to a future order profile of 100,000 units from 2012 (subject to performance targets and project milestones). First fully integrated unit to be delivered in Q4 2009 |
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Germany |
EWE Bruns Heiztechnik |
semi integrated units installed in March, April and August 2008 and are still operating First fully integrated unit to be delivered in Q4 2009 Discussing and planning the next stage of product development, including timing, volumes and costing |
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France |
GdF Suez De Dietrich Remeha |
semi integrated unit installed in April 2008, agreed shut down in August 2009. In July the partners agreed to the next project stage. The first fully integrated unit to be delivered in late November 2009. |
The Company is also in positive discussions with prospective utility customers in the Benelux markets and other European markets, for both an integrated m-CHP product and the modular BlueGen product.
In Japan the Company is working with Paloma, a leading global home heating manufacturer and owner of the Rheem, Solahart and Raypak brands. In September 2008 the Company installed one of its NetGen+ demonstration systems at Paloma's facilities in Nagoya. The unit was successfully operated on one fuel cell stack for the agreed six month trial, until the end of March 2009. The unit exported power to the local grid and met all of Paloma's technical performance requirements, including daily modulation (where the power output of the unit is turned up and down each day, to mimic the power needs of the average Japanese home). The Company is in discussions with Paloma about the next stage of product evaluation and development for the Japanese market.
Fuel Cell Manufacturing and Supply Chain
The Company is completing the construction and commissioning of its fuel cell stack manufacturing plant in Heinsberg, Germany. The plant is on schedule to be opened and operating in October 2009. The Company currently employs 4 staff in Germany.
The plant has been designed with the capacity to make 10,000 fuel cell stacks per year. The building works and all of the equipment, including the major cost items of furnaces, ink skid works and robotic assembly units have been designed to meet this capacity. All of the major pieces of equipment have been installed and are currently being commissioned on-site. More details of the plant, including an overview of the manufacturing process and details of the main items of equipment will be provided when the plant is officially opened.
For future growth the plant can be expanded to a capacity of up to 160,000 stacks per year in the same building. The Company also holds an option over a nearby greenfield site.
The managed scale up of the plant capacity has achieved cost savings of approximately three million Euros. The final cost of the plant is expected to be approximately 9.5 million Euros.
During the financial year the Company also developed partnerships with leading global suppliers to establish the supply chain for the Heinsberg plant. In particular the Company is working with its fuel cell component suppliers - CeramTec and HC Starck in Germany - to reduce unit costs whilst maintaining commercial performance targets.
Ceramic Powder Plant
The Company's ceramic powder plant in Bromborough, UK, is making zirconia powder for use in the Company's pilot manufacturing plant in Melbourne. . Zirconia is a key input into the Company's fuel cell components, and is also used in a wide range of other products and applications.
The UK plant has successfully made zirconia powder that meets the Company's demanding quality requirements, using the Company's patented process.
As previously announced the Company is in discussions with potential customers looking to buy ceramic powders. During the financial year the Company received its first order for zirconia, to be used in a biomedical application.
The Company is providing product samples to prospective customers for a range of high value ceramic powder products.
Technology
During the financial year the Company achieved significant breakthroughs in the performance of its fuel cell technology, meeting or exceeding commercial targets. Notably, the Company achieved world-leading electrical efficiency.
In late 2008 the Company achieved electrical efficiency of 50 percent from its natural gas powered fuel-cell home generator while exporting electricity to the grid.
In February 2009 the Company announced that it had achieved electrical efficiency of 60 percent while exporting electricity to the grid. Because the unit will be installed in homes, there are no electricity transmission or distribution losses. So far as the Company is aware this is the highest electrical efficiency ever achieved, worldwide, from any technology - including other fuel cell technologies - that convert hydrocarbon fuels into electricity. For example, a 2007 study of other microgeneration technologies by the UK Carbon Trust, based on a trial of 70 units (including Stirling engines and internal combustion engine) found average electrical efficiencies to be less than 10 percent. A Japanese Government-sponsored trial of Polymer Electrolyte Membrane (PEM) fuel cell home units showed average electrical efficiency of about 30 percent. The next best publicly reported result from another solid oxide fuel cell company is an electrical efficiency of 45 percent while exporting electricity to the grid.
The Company believes that achieving the industry's highest electrical efficiency is a compelling competitive advantage in the very large emerging market for products that generate electricity in homes and other buildings.
This very high electrical efficiency and maturing of the Company's technology also created the opportunity to develop new products such as BlueGen.
BlueGen was developed quickly to seize this opportunity. The initial design drawings for BlueGen were done in January 2009, the first prototype was built in March and by April 2009 the Company had built and installed a complete operational unit, generating power and hot water.
The Company also continued to extend the lifetime of its fuel cells. The Company has individual fuel cells that have been generating power in a test station for 20,000 hours (more than two years), and complete fuel cell stacks have been operating for 13,000 hours (one and a half years).
Market Developments
There is a continuing strong momentum in many markets towards supporting the deployment of smaller scale 'distributed generation' units in order to meet increasing demand for energy whilst reducing carbon emissions.
Notably, the UK Government has announced that from April 2010 a feed-in tariff will be paid for small low emission generators, including natural gas mCHP products.
A consultation paper released by the UK Government in July 2009 sets out the key aspects of the proposed feed in tariff. The tariff comprises a fixed payment from the electricity supplier for every kilowatt hour (kWh) generated plus another payment for every kWh exported to the power grid. The generation tariff will be set at different levels for different technologies and installation sizes. The proposed generation tariffs range from 4.5 pence per kWh (larger hydro and wind) up to 36.5 pence per kWh (small solar PV). The fixed export tariff is currently proposed to be 5 pence / kWh for all technologies. The rates for gas-fired mCHP are being developed along with the Government's heat and energy saving strategy and renewable heat incentive and will be announced later in 2009 - but still with the objective of starting in April 2010.
Whilst the eligibility criteria and tariff details are still being finalised, the Company believes that the UK feed in tariff could provide important financial assistance to help early product deployment.
Apart from the UK, in Germany fuel cell power and heat generators already receive a premium feed-in tariff of about 5 Euro cents per kWh (about 9 Australian cents) plus a capital subsidy of up to 3,300 Euros for a high efficiency 2kW unit (about $5,800).
California in the USA is also currently consulting on an appropriate design for a feed in tariff scheme for small combined heat and power generators.
In Australia, all States and Territories (except Tasmania) have introduced or are planning a feed-in tariff for small generators, however these tariffs are restricted to a few technologies (mainly solar PV). The Federal Government also has policies to support the deployment of renewable energy technologies.
The Company is putting its case to Australian State and Federal governments that in order to quickly reduce emissions from electricity generation, these policies should be expanded to support low emission small generators, including high efficiency fuel cell power generators.
The Company has made submissions to several Government and industry inquiries, including Parliamentary Committee inquiries in Victoria and Queensland and a Senate inquiry.
Financial Review
The summary financial results for the year from 1 July 2008 to 30 June 2009 are as follows:
(All currency figures are shown in thousands)
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Financial Highlights |
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12 months to: |
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30-June-2009 |
30-June-2008 |
Change |
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Income (Expense) |
A$000 |
£000 |
A$000 |
£000 |
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Sales Revenue |
1,679 |
840 |
617 |
309 |
172.1% |
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Operating Expenses |
(18,843) |
(9,422) |
(22,937) |
(11,469) |
-17.8% |
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Impairement Charge |
(27,460) |
(13,730) |
(3,267) |
(1,634) |
740.5% |
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Depreciation & Amortisation |
(2,365) |
(1,183) |
(1,220) |
(610) |
93.9% |
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EBIT - profit (loss) |
(46,989) |
(23,495) |
(26,807) |
(13,404) |
75.3% |
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Interest & Other Income |
4,813 |
2,407 |
3,128 |
1,564 |
53.9% |
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Net Profit (Loss) - after tax |
(42,176) |
(21,088) |
(23,679) |
(11,840) |
78.1% |
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Cash Outflow from: |
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- Operations |
(16,595) |
(8,298) |
(19,845) |
(9,923) |
-16.4% |
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- Capital Expenditure |
(8,232) |
(4,116) |
(6,883) |
(3,442) |
19.6% |
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Revenue
The Group's business revenues increased during the period by 172 percent, to A$1,679K (£840K) as the Group developed semi-integrated m-CHP units with its utility and appliance partners.
Interest and other income was A$4,812K (£2,406K) this year compared to A$3,128K (£1,564K) last year. The Group received A$865K (£433K) less in interest income for the year, due to lower interest rates and a decline in the level of funds invested over the year.
Expenses
The Group spent A$9,861K (£4,931K) on Research and Product Development (R&PD) activities which represented a net reduction of 19.9 percent from last year. The key reasons for this reduction were:
Last year the company built 12 NetGen Plus units for deployment with partners in field trials. After the success of the field trial programme the company and its utility and appliance partners have moved into the development of fully integrated units. Accordingly this expenditure has not reoccured;
Considerable planning and design work was undertaken last year before the start in Q1 2008 of the project to build the fuel cell plant in Germany.
This reduction in costs was partially offset by increased expenditure on the optimisation of the Gennex fuel cell module, the development of BlueGen and expanded work with appliance partners to develop integrated m-CHP units.
The Group employed 69 full time equivalent staff in R&PD and production activities, which was slightly lower than last year.
Sales and Marketing costs reduced by 19.5 percent, to A$1,731K (£866K). Most of these costs relate to business development and commercialisation activities, focused in Europe.
The Group's expenditure on General and Administrative costs at A$9,615K (£4,808K) was in line with last year. This includes an increased charge for depreciation and amortisation - principally relating to the UK powder plant - of A$915K (£458K), which was offset by cost reductions.
In the interim financial statements at 31 December 2008 the Company took up an impairement charge of A$27,460K (£13,730K) in relation to its portfolio of financial investments. These investments had been severly impacted by the global financial crisis and the Board and Management considered that it was appropriate to value the investments based on indicative selling values obtained at that time. The Board and Management have obtained updated indicative selling values at 30 June 2009 and consider that no further impairment charge needs to be taken in relation to the portfolio in the second half.
Net Loss After Tax
The net loss for the year was A$42,176K (£21,088K), an increase of A$18,497K (£9,249K) over the past year.
The main reasons for the increased loss are outlined above and can be summarised as:
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£ equivalent
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·; Increase in Imapirement Charge
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A$24,193K
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(£12,097K)
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Offset by:
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·; Increase in revenue
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A$1,062K
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£531K
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·; Reduction in operating expenses
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A$2,949K
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£1,475K
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·; Increase in other income
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A$1,685K
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£843K
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The net loss represents a loss of 8.58 cents per share (4.29 pence) compared to 7.52 cents (3.76 pence) last year.
Cashflow and Balance Sheet
The Group's cash outflow from operations decreased by $3,250K (£1,625K) to A$16,595K (£8,298K), due to the reduction in Research & Product Development expenditure and Sales & Marketing expenditure outlined above.
Cash outflow from investing activities was A$8,232K (£4,116K) which was A$1,349K (£675K) higher than last year due to the construction of the fuel cell plant in Germany. At 30 June 2009 expenditure on the project amounted to €5.7m (A$9.9m, £5.0m) and it is expected to open in October 2009 with a final total cost of €9.5m (A$16.5m, £8.3m), which is around €2.9m (A$5.0m, £2.5m) under the original budget.
Cash inflow from financing activities was A$37,312K (£18,656K). This was largely due to a placement and rights issue in April 2009 which raised A$30,831K (£15,416K) net of costs by the issue of 685.1 million shares.
During the financial year the Company entered into an agreement with ASX-listed litigation funding company IMF (Australia) Limited to recover lost investment funds. The Company is taking legal action to recover losses suffered when the Company's funds were invested in a range of structured financial products. Under the funding agreement, IMF (Australia) Limited will pay the costs of Ceramic Fuel Cells' legal action, including all legal fees, in return for a success fee. The claim was filed and served on 12 August 2009.
At 30 June 2009 the Company had cash of A$25.5m (£12.8m) and held investments valued at A$4.3m (£2.2m).
Outlook 2009- 10
During the 2009-10 financial year a strong focus of the Company will be to generate sales revenue from selling BlueGen as well as developing and deploying more integrated mCHP products in Europe.
To achieve this goal the Company's targets for the next financial year include:
Finalising the BlueGen offering
Installing BlueGen with VicUrban and at other high profile demonstration sites
Entering agreements with appliance partners to make BlueGen
Entering agreements with BlueGen sales and distribution partners
Obtaining CE and local safety approvals for BlueGen
Developing and deploying integrated mCHP products in larger numbers with European utility customers
Deploying early BlueGens in the Japanese market
Completing the commissioning of the Heinsberg fuel cell plant, and formalising agreements with component suppliers to supply fuel cell modules and system components to manufacturers of BlueGen and integrated mCHP products.
The Board and Management are focused on achieving a 'cashflow breakeven' position as soon as possible, whilst managing the challenges of introducing a new product into the market, and in particular the transition from product development to manufacturing and sales.
In addition the Company will continue to enhance the technical performance of the fuel cell systems, focusing on reliability and lifetime. The Company will also look to generate revenue from selling advanced ceramic powder products from its UK plant.
ENDS
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Ceramic Fuel Cells