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CWR had a JV with Weichi power prior to Wechi taking a stake in the business. I don't think number 1) is therefore applicable and De Nora could purchase a percentage of the business at this stage due to the nature of the joint development agreement.
Maybe someone else can clarify ?
Great posts Blue Horizon!
Thinking this through I may have answered some of my own questions:
If De Nora wanted to take a stake in AFC (and they deserve it after all their hard work).
1) At the moment we know they are party to inside information on testing in Germany prior to completion of the JDA. Also likely they are testing alkamem. With all this inside information perhaps they can't take part in this fundraising and any buy in needs to wait until they are able to even if any price is then higher than it is now.
2) If any agreement includes a warranty, we have been told that a De Nora warranty will only cover the electrodes, so AFC need to have funding to honour any warranty of BOP. This could be a reason why the current fundraise needs to be in place before any De Nora warranty agreement.
All conjecture, but could make sense of a plan.
In this case, even with 900m shares in issue I agree that the combination of two deals could make sense and be transformational for AFC. I have no objection at all to AFC making massive strides forward whatever that takes. Unfortunately some history in my long contact with AFC does not inspire trust and taking things at face value. Just pipeline of agreed sales in place would complete the jigsaw!
Perhaps a strategic partnership (De Nora or whoever) is dependent on us having a strengthened balance sheet - hence the Fundraise and resolution 1.
With the balance sheet looking healthier then resolution 2 paves the way for a partnership, with resolution 3 being a cash sweetener to tie up the deal. Notice that resolution 2 doesn't mention cash but resolution 3 does?
Remember De Nora haven't (to my knowledge) been paid for their efforts so far. Perhaps this was always the plan, take a stake in the company if you successfully assist in developing the product. Time will tell, and I'm probably completely wrong, but I'm more confident success is now just over the horizon... just need a sale to light the fuse.
Totally agree with your analogy FCI - better to have half a loaf than none, particularly when the loaf could be very sizable.
Chippyjo. I am sure it is out of our hands but if the market perception of AFC becomes very positive due to the initial funding and subsequent capital will be or should be at a much higher price. In which case the additional dilution will have little affect on the end result if buying in at these prices.
Look at Ballard Power. $4.3bn MCap. Revenue around $120m per annum with a loss of approximately 30%.
If AFC can crack it with the initial funding and infiltrate the market with gensets and EV chargers there should be cash positive as they have taken years to develop a low cost solution for customers.
This can only drive the price up by increasing the MCap. 33% dilution by way of a placing at a very enlarged MCap is a whole lot more cash in the bank to move to phase 2.
All we can do is wait and see if AFC have attracted a strategic partner from the fundraise and that will provide more indication of the intention of how they will play out their new holdings in the company.
Take a short sighted 10% or let it run to 1000%
Once they have the headroom, it’s out of shareholders hands how and at what price any dilution happens.
Now, what would a comoany with £200m in the bank and a sales pipeline for locomotive and shipping power supplied through the 2MW megabox be worth ?
Not forgetting a string of customers that want the Alkamem membrane for alkaline water electrolysis
Oh, and the genset rental companies and construction firm that must comply with regulation on emissions
And the fleets of EVs that cannot connect to the grid supply but need ralid chargers.
Would 900million shares be so bad in this instance ?
900 million shares is still not horrific prociding that when/if they raise the capital to a maximum of 33% of the mew increased share capital in tranches of £2.2m, each time they do this the SP is significantly higher than it is today and not at a discount.
Raising this additional 33% at todays price would give them another £30m.
If the SP is higher (£1) or the MCap is £679m (SP being £1) then the additional 33% limit would be £226m.
Now just think what could be done with that!!
You could flood the market with your 2MW x 40ft containerised high density system and take over the hydrogen fuel cell market.
This would be my stipulation on this resolution. SP and MCap must be over £500m to ensure shareholder value is returned before any further raise of capital can be permitted.
Look at this as phase 1. Roll out, sales, manufacture and deployment of liquid system for EV and diesel generator replacment. Success equals free cash flow within 24 months
Phase 2 would be the same for the solid system and may require additional funds to give it a kick start. Much bigger project but much bigger potential.
Who knows. The 2Mw systems under development for release in 2022 along with Alkamem could be what makes AFC the largest fuel cell company in the world. Perhaps, just perhaps it could take the business into profitability and values in the £bns. 900 million shares then would really not be a problem as the SP would still potentially be in the £1s
Definitely need to have sales first !
What if there are sales in the pipeline along with the stake in ownership that catapults the SP into those seen with ITM and Ceres? Is this our only hope that any dilution is mitigated by sales revenue streams we’ve not contemplated ? We have the UK government announcement on hydrogen strategy hopefully in the next 3 weeks and of course we have the partnership with Acciona which should not be underestimated. Diesel genset replacement is a massive market for us to get into and we’re set to enter that market not only with any international construction firm but an organisation that has an expansive environment interests that could further provide additional revenue streams for us.
A deal with De Nora has always been inevitable in my opinion. They have invested time with AFC for a number of years and seem to have taken us in a direction where we now have a commercial and cost effective proposition. That time spent with looks now to be at the inevitable pay back stage potentially. Dragons Den springs to mind. De Nora and Acciona could be the making of AFC from this moment on if our SP suddenly becomes significantly higher than our current level. Just my thoughts, trying to process recent positive events. Thanks
With the current lack of shareholder value return I would be most upset with considerable further dilution. They have cash, now start selling.
Yes Blue Horizon this does add up, and this timing had also crossed my mind.
De Nora taking a stake seems a great step forward for AFC. They have taken a stake in companies they have assisted in the past, so it seems possible and the timing of the next stage of the JDA would fit with that.
However, if they know that De Nora want to take a 25 or 30% stake in AFC in a month, this should raise the sort of funds AFC need even at a bargain price of 16p a share. If this is the case why is there also need for the the current fundraise at a low price with heavy dilution for existing shareholders. If Resolutions 2 and 3 are passed we give AFC authority get over 900 million shares with no further consultation with shareholders. I feel concerned that we could find half the company has been disposed of at a very low price per share across two deals to raise a funding which does not seem immediately necessary. Far better to wait for some of this dilution until it is needed and fundraising shares can be sold at a higher price. If you are right and there is a second issue of shares for De Nora to take a stake of 25 or 30% of AFC at 16p, existing shareholders will be diluted to oblivion. Longstanding and long suffering shareholders will not be seeing anything like the share prices they are hoping for in a very long time if ever.
I’ve held AFC since October 2010, so I’d like to think of myself as a LTH, certainly long suffering!
First post, so be gentle.
With the latest fundraise having been successfully completed in very short order it’s hard to believe it wasn’t a done deal with ‘several leading institutions’ well in advance of the fundraising being announced. Is it possible therefore that the considerable further additional share issue authority the BOD is seeking (a further 256,876,060 shares in resolution 2 and 3), may already have an agreed destination too? And why such odd but precise values?
I’m intrigued with the following
From the ‘Result of Fundraising’ RNS – 01 July 2020
Adam Bond - “…We also expect the raise to support our credentials in future industrial and strategic partnering which could provide the basis for a transformational underpinning of the business today and into the future."
Am I putting two and two together and coming up with five? Odd that the shares from the current fundraise (assuming resolution 1 gets voted through) will all be issued by 31 July at the latest with the following month being the anniversary of the JDA with De Nora. Is there a clue here or am I getting ahead of myself?
From ‘Extension of Joint Development Agreement’ RNS – 29 August 2019
“… De Nora has agreed to extend its JDA with AFC Energy underlying its commitment to the electrode development for AFC Energy's fuel cell with the parties agreeing (i) specific cost and operational targets, (ii) confirmation of a scaled up 4-year electrode life (building on recent results) and (iii) a mass electrode manufacturing capability, which together will significantly reduce the levelised cost of energy for AFC Energy's fuel cell systems.
Majority of targets scheduled to be met within the first twelve (12) months of the agreement.”
The original JDA was signed between AFC and De Nora during August 2016. Not sure if there was a specific time period of three years on this original agreement and I can’t immediately see a time period for the extension. Just makes me wonder however with the mention in the extension RNS of ‘Majority of targets to be met within the first twelve months of the agreement’ and that twelve months being this August…