Quarterly Cashflow Report

31 January 2014

Cashflow Report for the December Quarter

Ceramic Fuel Cells Limited (AIM/ASX: CFU), today released its quarterly cashflow report for the period ended 31 December 2013.

The Cashflow Report is available at www.cfcl.com.au

Highlights

· Agreement signed with Baltic Distributor for 1,000 BlueGENs on a take-or-pay basis over CY2014 and CY2015 worth in excess of A$30M (£17M).

· Sales volume - 75 units sold this quarter, 124 units sold year-to-date.

· Assets of powder plant sold for circa A$1.9M (£1.2M).

· Share Purchase Plan and Overseas Offer raised A$5.8M (£3.3M) before expenses. Of the amount raised, A$4.2M (£2.4M) was received in December 2013 and A$1.6M (£0.9M) in early January 2014.

· Research and development taxation refund of A$4.02M (£2.3M) received.

· Cash position at 31 December 2013 A$9.0M (£5.3M)

Operational Review

Introduction

CFU makes small scale generators that use proprietary fuel cell technology to convert natural gas into electricity and heat for homes and small commercial buildings. CFU has commercialised its technology into products and is now focused on selling these products to commercial customers in Europe.

Market Developments and Sales

As announced on 28 November 2013, CFU entered into an exclusive distribution agreement with Synergy International OÜ (SI) for the Baltic States and Scandinavia. Under this agreement, a minimum of 1,000 BlueGEN m-CHP units, valued in excess of A$30M (£17M), will be sold to SI over the next two calendar years. The agreement has the option to be extended for a third year.

SI will be responsible for arranging the distribution and servicing of CFU's BlueGEN units across its distribution region. Under the agreement SI will purchase from CFU, on a take-or-pay basis, 500 BlueGEN units in CY2014 and a further minimum 500 units in CY2015. The first 100 systems are scheduled to be delivered in the first quarter of CY2014. CFU is working with SI to receive the upfront payment as soon as the necessary banking formalities are complete. Further payments will be received quarterly in advance for units to be delivered during the forthcoming quarter.

On 13 November 2013 the Company announced it had received an order for 45 BlueGENs to be installed on the Dutch island of Ameland. The first 5 BlueGENs were despatched in December with the remainder to be installed by the end of June 2014.

In the same announcement, CFU advised it had formed a partnership with National Grid Affordable Warmth Solutions (National Grid AWS) for the delivery of ten BlueGEN m-CHP systems for installation at social housing partners in the UK over this financial year. Under the agreement, National Grid AWS will gift BlueGEN units to Housing Provider partners on the basis of receiving feed in tariff payments, which will fund future projects aimed at reducing fuel costs for social housing tenants. In return, the Housing Providers and their residents will benefit from the low cost electricity generated by the BlueGENs.

CFU also received an order for 5 BlueGENs from Liander, in the Netherlands, and these were despatched in December 2013.

On 18 December 2013 the Company announced that it had sold its powder plant assets to a subsidiary of ICL-PP Europe. A change in production process had resulted in CFU no longer utilising the powder from the plant, hence, the Company realised a surplus asset for circa A$1.9M (£1.2M) which will have no detrimental production or financial effect on the Company. These assets were fully impaired. The cash proceeds arising from this sale were received in December 2013.

A summary of the Company's sales performance since FY11 is as follows:

http://www.rns-pdf.londonstockexchange.com/rns/9431Y_-2014-1-30.pdf 

Monthly sales for the 6 months to 31/12/13 were as follows:

http://www.rns-pdf.londonstockexchange.com/rns/9431Y_-2014-1-30.pdf 

Sales by geographical region for the six months to 31 December 2013 were as follows:

http://www.rns-pdf.londonstockexchange.com/rns/9431Y_-2014-1-30.pdf 

During the December quarter the major customers were: EWE (23 units); "Innovation City Ruhr" in NRW (12 units); National Grid AWS (10 units); Jurgen Hohnen (7 units); Cool Endeavour BV (Dutch Island of Ameland) (5 units); and Liander (5 units).

Financial Review

December Quarter Cash Flows

Net operating cash outflow for the December quarter was A$1.22M (£0.7M). This compares to the previous quarter's net operating cash outflow of A$6.0M (£3.5M) and the June 2013 quarter's pre-tax outflow of A$6.2M (£3.6M). The Company received a tax refund of A$4.02M (£2.3M) for its research and development expenditure for FY2013 in November, hence the operating cash outflow before the tax receipt was A$5.24M (£3.0M).

Net investing cash flow for the quarter was an inflow of A$1.96M (£1.1M). The inflow was mainly due to the receipt of the proceeds of the sale of the powder plant assets referred to in the operational review above.

Net financing cash flow for the quarter was an inflow of A$3.93M (£2.3M). On 4 December 2013, the Company announced that it was undertaking a Share Purchase Plan and Overseas Offer which closed on 20 December. The Company raised A$5.8M (£3.3M) from these offers before expenses. Of the amount raised, A$4.2M (£2.4M) was received in December, with the remaining A$1.6M (£0.9M) received in early January 2014.

Cash on hand at 30 September 2013 was A$4.1M (£2.4M).

Cash on hand at 31 December 2013 was A$9.03M (£5.3M).

About Ceramic Fuel Cells Limited:

Ceramic Fuel Cells 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 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 is now focusing on markets in Germany, the United Kingdom, Benelux and the Baltic States and is 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

www.bluegen.info