CALL.L Regulatory News (CALL)

Embargoed Release: 07:00hrs Tuesday 22 March 2011

Zenergy Power plc

('Zenergy Power' or 'the Company' or the 'Group')

Preliminary Announcement of Results for the Year Ended 31 December 2010

Chairman's & Chief Executive's Statement

Results

During the year the Company continued to pursue, and make good progress with, its objectives of developing a process for the industrial production of 2G wire and of commercialising industrial equipment using superconductor technology.

In 2010 we received two important orders: a repeat order for a Magnetic Billet Heater from WeserAlu and the first order for a medium voltage Fault Current Limiter for the UK distribution grid. Overall order intake was weaker than expected and backlog at year end was relatively unchanged at €1.7m from €1.6m in 2009.

2010 commercial and financial results were, however, disappointing. Revenue (€2.6m) increased modestly over that generated in 2009 (€2.4m), but increased cost of sales and overheads pushed the Company into an increased operating loss of €9.9m compared with the prior year €8.3m. Net loss was €10.1m (2009: €8.5m).

The Company has taken steps to reduce its cost base but these efforts have, to an extent, been frustrated by the need to devote resources to dealing with the issues described below. Nevertheless there will be some benefit in the current year.

Following the fund raising of €22.4m in January 2010, net cash flow in the year of (€13.4m), and opening cash of €6.9m the Company had net cash resources of €15.8M at year-end and approximately €13m at the date of this report.

The Board

During the year the structure of the Board was changed to be more appropriate for a plc. Following my appointment in May 2010, David Jeffcoat was appointed to the Board in November 2010.

Karen Chandler, CFO since September 2006 and Director since July 2008, has decided not to seek re-election to the Board at the AGM in May. She has accepted another position, but has agreed to make time available to Zenergy Power on a contract basis until the end of the year. The Board is grateful to Ms Chandler for being able to maintain this involvement.

The Future

The Board has spent much time considering the future of the Company. At the interim stage we confirmed the intention that the commercialisation of 2G wire should be conducted by a third party. This remains the strategy.

At the same time we indicated that the Company could not address the Fault Current Limiter market directly. The long timescales and conservatism associated with purchases of capital goods for use in the electricity supply industry require organisations with the product range, geographical reach and reputation needed to achieve successful market penetration.

The Board further examined the likely timescales of sales of the Company's products and the possibility of separating the different activities. It concluded that the Magnetic Billet Heater, which is a demonstrably successful product despite recent setbacks, is likely to be of insufficient scale to be the main driver of the Company's growth.

The Board believes that the Company's technology and engineering is undoubtedly successful and of high value. Within the year we increased our patent portfolio (patents and patent applications) covering our key product areas to more than 300, thus augmenting the substantial strength of the Company in superconductor energy technology.

External intelligence suggests that the market for electrical equipment will grow strongly over the next decade and the Board believes that superconductor-based equipment has a valuable part to play in this market. However, although the Group is funded on its present cost structure for the next twelve months, the Board concluded that shareholders' (and employees') interests are best served by seeking a buyer on a timely basis for the whole Group.

Current Activities

Magnetic Billet Heaters ('MBH')

The repeat order from Weseralu in January 2010 was significant as, with this second unit, Weseralu will have fully converted to Zenergy's MBH technology.

The first MBH operating since 2008 at Weseralu continues to perform in line with customer expectations and to deliver the real commercial benefits anticipated. Approximately half a million billets have been processed so far at Weseralu.

There were at the end of 2009 three units scheduled for installation and commissioning in the latter months of 2010. The first of these, delivered as planned in September 2010, experienced some operational problems associated with the handling of heated billets. Shorter billets require the clamping mechanism to operate within the magnetic heating field and the billet clamping flanges proved to be insufficiently isolated. Modified flanges have since been fitted and the unit is operating on a three shift basis with different length billets. Production output is increasing but is not yet at maximum levels.

The other units in the order book, in the main now delivered to customers' premises, await final conclusion of the remedial actions described above. Having regard also to the seasonal manufacturing patterns of the customers, these units are expected to be commissioned during the second half year.

In February 2010, Zenergy and Bültmann received the innovation prize from the German Federal Ministry for the Environment together with The Federation of German Business and in June 2010 by the European Commission environmental prize for sustainable production technology.

Fault Current Limiter ('FCL')

The 11kV FCL unit, ordered by ASL, is for ultimate delivery to CE Electric, UK and is undergoing the final stages of independent third party testing in the USA. Subject to the completion of this and of some outstanding contract formalities, we expect to deliver this unit to the user site in the coming months.

The 138 kV high voltage FCL which is being developed with the financial support of the US Department of Energy (DOE), for installation and operation into the grid of American Electric Power, continues to make good progress towards its planned completion date of end 2011.

The distribution voltage unit was installed in 2009 into the 'substation of the future' operated by Southern California Edison ('SCE'). In 2010 the FCL successfully maintained supply to 1,400 Los Angeles customers when the grid experienced several real life faults.

Motors & Generators

As recently announced, the hydro coils delivered in 2009 have been incorporated in a generator which has successfully completed static testing. The Company looks forward to the installation of this unit, but the timescale is obviously outside our control. The Company continues to work with electricity utilities and with Converteam to identify other opportunities for hydro generators.

2G HTS wire

The Company is working towards a continuous process for 2G wire manufacturing. Honeywell was qualified as a supplier of commercial chemical constituents in January 2010. In April 2010, the Company announced the successful application of ink-jet coating onto textured metal tapes. The development of the coating process was completed with this step.

The Company received industrially-produced textured nickel tape from ThyssenKrupp in October 2010. The results of experimental work on short lengths of this substrate material have been encouraging. A hydrogen furnace designed to process large scale lengths of wire being representative of the ultimate manufacturing environment is undergoing commissioning. Subject to repeatability trials, this will enable the ThyssenKrupp tape to be qualified.

The Company received two additional grants from the German government for its continuous all chemical process, 'Northsee' and 'Suprametal'. The second project is in conjunction with ThyssenKrupp.

John Poulter Jens Müller

Chairman CEO

21st March 2011

Further information:

Results for the year to 31 December 2010

Consolidated income statement

for year ended 31 December 2010

Consolidated Statement of Comprehensive Income

for year ended 31 December 2010

Consolidated balance sheets

at 31 December 2010

Consolidated statements of changes in equityfor the year ended 31 December 2010

The aggregated current and deferred tax relating to items that are charged or credited to equity is €Nil.

Consolidated Cash Flow Statements

for year ended 31 December 2010

Operating segments

The Group has four operating segments which are described below, which are the Group's subsidiary entities. The subsidiaries are managed separately and have separate functions within the Group. For each of the subsidiaries the Group CEO, who is considered to be the Group's Chief Operating Decision Maker (CODM) reviews the management accounts on a monthly basis as well as the annual budgets.

The operating segments are as follows:

·; Zenergy Power GmbH - is responsible for the manufacture of Superconducting Coils and Magnets which are used in all of the Group's products, as well as sales of the Group's products in Europe. Zenergy Power GmbH is also responsible for the Group's intellectual property strategy and management.

·; Zenergy Power, Inc. - is responsible, for the engineering of the Fault Current Limiter as well as for the integration and final assembly of the product which incorporates components from both Zenergy Power GmbH as well as third party suppliers.

·; Zenergy Power Pty Ltd - are responsible for the development and design efforts for the Fault Current Limiter including modelling and simulation experiments.

·; Zenergy Power plc - is the Group holding Company and is responsible for Group finances and Treasury, Investor relations and marketing as well as sales of the Group's products in the UK.

Information regarding each operating segment, which are also our reporting segments, is included below. Segments are assessed based on revenues and loss before tax, as included in the internal management accounts that are reviewed by the Group CEO. Inter-segment pricing is determined on an arm's length basis.

Information about reportable segments

Information about geographical areas

The operating segments identified above, being the Group's subsidiary entities are organised according to geographical locations, Zenergy Power GmbH is located in Germany, Zenergy Power Inc is located in the USA, Zenergy Power Pty Ltd is located in Australia and Zenergy Power Plc is located in the United Kingdom. The disclosures presented above therefore are also geographical disclosures. Additional geographical disclosures are noted below.

Revenue by location of customer

The Group does not hold assets in any countries other than those countries where the operating segments of the Group are domiciled. The assets of each operating segment are located solely in the country in which the subsidiary is domiciled.

Information about products and services

Revenue by product

Information about major customers

The Group has three customers (2009: Four) that each individually account for more than 10% of the Group's revenue. In reporting Segment GmbH, there are two (2009: Three) customers each accounting for more than 10% of total revenues as follows: €750,000 and €610,000 (2009: €1,275,000, €476,000 and €274,000). In reporting Segment Inc there are nil (2009: One) customers accounting for more than 10% of total revenue (2009: €259,000). In segment Plc there is one customer accounting for more than 10% of the total revenues of €1,064,000 (2009: nil).

All reporting to the CODM is prepared at the subsidiary level and are both the Group's operating segments and reportable segments. This is the lowest level of information reviewed by the CODM for the purposes of resource allocation. The Group has three end product areas, namely Magnetic Billet Heater, Fault Current Limiters and Renewables, however for all products Zenergy's component is Superconducting Coils and Magnets which are all produced by Zenergy Power GmbH. Revenues and gross margins are reviewed by product but this is not used for resource allocation purposes all other information is reviewed at a subsidiary level due to the current size of the Group.

Earnings per share

Basic earnings per share

The calculation of basic earnings per share at 31 December 2010 of €0.15 loss (2009:€0.17 loss) was based on the loss attributable to ordinary shareholders of €10,106,000 (Year ended 31 December 2009: €8,481,000) and a weighted average number of Ordinary Shares outstanding during the period of 68,025,000 (Year ended 31 December 2009: 49,531,000), calculated as follows:

Basis of preparation

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2010 or 2009 but is derived from those accounts. Statutory accounts for 2009 have been delivered to the registrar of companies, and those for 2010 will be delivered in due course. The auditors have reported on those accounts; their reports (i) were unqualified, (ii) except as noted below did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The audit report on the accounts for 2010 includes an Emphasis of Matter paragraph regarding the disclosures in the accounts about the ongoing applicability of the going concern basis in preparing those accounts.

The financial statements include the following note:

The accounts are prepared on a going concern basis.

The Group made a loss of €10.1 million in the year ended 31 December 2010 and is forecast to remain loss making in the year to 31 December 2011.

As at 31 December 2010 the Group had cash reserves of €15.8 million.

Cash flow forecasts for a period in excess of a year from the date of approval of these financial statements have been prepared. These forecasts show that both before and after sensitivities, the Group can continue to operate within the limits of the funds currently available for a period of at least twelve months from the date of signing these accounts.

These forecasts are consistent with those used in the impairment testing of intangible assets, except that no new orders have been assumed.

In preparing these forecasts the Directors have assumed delivery of current order book only. Personnel and overheads are based on existing levels adjusted as necessary for known or planned changes. Capital expenditure is based on critical items only using third party quotations for significant items. Government grants are based on existing grants in line with the project plan. Working capital assumptions are based on the Group's current experience. Foreign exchange rates are based on spot or forward hedged rates which are in place to cover the financing requirements for the subsidiaries over the period.

The Group has considered potential redundancy cost and other long term commitments in these forecasts. The sensitivities mainly relate to timing of cash inflows on existing contracts. In order to continue in the longer term the Group would however need to raise further capital.

The Board has concluded that Zenergy's business can best be developed as part of a larger group with access to the necessary funding and commercial relationships to enable commercialisation of Zenergy's unique IP and products. In the event that Zenergy is acquired by another Company it is anticipated that the new owners and management will provide finance in order for the group to continue its current activities. There is, however, significant uncertainty about whether new management will follow the existing plans in detail and whether they might transfer assets and activities out of Zenergy group entities.

In the event that a successful takeover and consequent refinancing is not achieved in the necessary timeframes set by the Board, the Directors will have to reconsider their strategy. The Directors have concluded that the decision to seek strategic alternatives together with other matters described above represents a material uncertainty that may cast significant doubt upon the Group's and Company's ability to continue as a going concern. The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate.

This announcement was approved by the Board of Directors on 21st March 2010. Statutory accounts for the year to 31 December 2010 will be delivered to the registrar of companies following the Company's Annual General Meeting.

-Ends-

About Zenergy Power plc

Zenergy Power is a superconductor energy technology Company comprising three operating subsidiaries located in Germany, USA and Australia. The Group's commercial focus is the innovation and manufacture of clean energy superconductor solutions that are capable of delivering energy efficiency improvements to the generation, transmission, distribution and consumption of electrical energy.

About superconductivity

Superconductive materials are capable of conducting electricity without any resistance and were first discovered in 1911.