Quarterly Cashflow Report and Trading Update

29 April 2010

Ceramic Fuel Cells Limited

Quarterly Cashflow Report and Trading Update

Ceramic Fuel Cells Limited (AIM / ASX: CFU) a leading developer of high efficiency and low emission power products for homes, today released its quarterly cashflow report for the period ended 31 March 2010.

Operational Review

Integrated mCHP

During the March quarter the Company continued to operate complete integrated power and heating (mCHP) units with its appliance partners in Germany, the United Kingdom and France. In these partnerships Ceramic Fuel Cells supplies its Gennex fuel cell modules to appliance partners, which integrate them with high efficiency boilers into single units which convert natural gas into power, hot water and space heating for homes. These units are highly efficient and have low emissions.

BlueGen sales

In parallel with the integrated mCHP product, in 2009 the Company developed a modular product called BlueGen. BlueGen uses the same Gennex fuel cell module to generate power and heat for hot water. It is ideal for customers and markets that do not need space heating, or already have an adequate space heating solution. One BlueGen unit can provide about double the power the average home needs - excess power can be exported to the grid - plus hot water for an average family's needs.

During the March quarter the Company received a number of orders for BlueGen units from a range of leading energy companies and other foundation customers. This very strong interest in the BlueGen product has continued in April.

As at 29 April the BlueGen order book is:

During the quarter the Company received particularly strong interest from energy companies in Germany.

In addition to the orders previously announced, in March the Company secured orders for two BlueGen units from institutes of the German Gas Association (DVGW). One BlueGen will be demonstrated at the "primary Energy House" of the Gas Wärme Institut (GWI) in Essen and another BlueGen will be tested at the laboratory of the Gastechnologisches Institut (DBI-GTI) in Freiberg. The demonstrations of BlueGen units are part of the German Gas Association's "Innovation Campaign for Gas technology", which aims to promote the use of highly efficient and lower emission natural gas products. The membership of the German Gas Association comprises more than 1700 utilities, 1300 companies from the gas and water industry, 200 research institutions and 9000 personal members.

The Company will continue to announce future BlueGen orders which are material or price sensitive, including orders in larger volumes or new markets or with strategically important customers. Any other orders which are not announced when they are entered will be reported in quarterly updates.

The Company continues to receive very strong interest from prospective BlueGen customers and sales partners in many markets around the world. There are large global markets for highly efficient home power and heating products. By way of illustration, each year there are more than 6.5 million home hot water units sold in Europe, more than 4 million sold in Japan, and almost 8 million sold in the USA. There are also very large markets for home power and heating units in developing markets such as India and China.

The Company has installed its first BlueGen with VicUrban in Melbourne. VicUrban and the Company have finalised the site preparation and BlueGen connections and expect to start up the unit shortly.

The Company is now building additional BlueGen units for delivery to customers from May.

BlueGen CE approval

In early April the Company announced that it had obtained 'CE' safety approval for BlueGen, after undergoing rigorous testing at the laboratories of independent certification specialist Kiwa Gastec in The Netherlands. This is a significant achievement for the Company. Once a product has 'CE' safety approval it can be sold to customers and put into service throughout Europe. The Company has now received the formal CE certificate for the BlueGen product.

UK Feed-in Tariff

During the quarter the United Kingdom Government announced a feed-in tariff for small low-emission electricity generators, including small scale power and heating products. Under the feed-in tariff, energy retailers are required to pay homeowners ten pence for every kilowatt hour of electricity generated by small scale power and heating products, plus an additional tariff of three pence for every kilowatt hour of electricity exported to the local power grid.

The UK tariff came into force on 1 April 2010 and will last for ten years. The tariff is available for the first 30,000 micro power and heating products that generate 2 kilowatts of power or less, with a Government review when 12,000 units have been installed. To be eligible for the tariff, the power and heating product must be certified under the Microgeneration Certification Scheme (MCS). The Company is working with industry partners to apply the relevant MCS standards to the Company's products.

As with existing feed-in tariffs in many other markets (including Germany, France and The Netherlands), the Company believes the UK feed-in tariff will help accelerate the market entry of Ceramic Fuel Cells' low emission power generation products.

Financial Review

Underlying net operating cash outflow for the March quarter was AUD 4.5 m (GBP 2.7 m) which is higher than last quarter due mainly to the costs of buying components to meet BlueGen sales orders.

Receipts from customers for the quarter were AUD 0.5 m (GBP 0.3 m) including initial payments by customers on the signing of BlueGen orders.

During the quarter cash outflow from investing activities was AUD 1.4 m (GBP 0.8 m) for payments relating to the commissioning of automated manufacturing equipment at the Company's manufacturing plant in Germany.

The net cash outflow for the quarter was AUD 6.6 m (GBP 4.0 m). This includes AUD 1.4 m (GBP 0.9 m) 'outflow' resulting from the impact of translating foreign currency cash balances in EUR and GBP back to AUD for reporting purposes. The AUD has appreciated strongly against both currencies during the quarter.

The Company expects that in the June quarter receipts from customers will be higher and expenditure on inventory purchases and capital expenditure on the Heinsberg plant will be significantly lower than in the March quarter.

Cash at the end of the quarter was AUD 16.8m (GBP 10.1m).

The quarterly cashflow report is also available on the Company's website at www.cfcl.com.au.

Managing Director Brendan Dow discusses the quarterly review in a webcast interview on Boardroomradio - available at http://www.cfcl.com.au/webcasts/ 

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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 2009 the company launched its BlueGen gas-to-electricity product. Ceramic Fuel Cells is headquartered in Melbourne, and has operations in the UK and Germany. The company is listed on the London Stock Exchange AIM market and the Australian Securities Exchange (code CFU).

www.cfcl.com.au