1 May 2009 07:00
Embargoed Release: 07:00hrs Friday 1 May 2009
Zenergy Power plc (`Zenergy' or the `Group') Preliminary Results for the Year Ended 31 December 2008 (`the Period')
2008 Highlights
* Commercial upgrade order for superconducting hydro-generator received from E.On AG; * Installation of world's first superconductor induction heater into commercial premises; * Establishment of Honeywell joint development program for superconducting wires; * Successful testing of superconducting electromagnetic coils for renewable energy; and * Successful testing and delivery of Smart Grid device.
2008 Awards
* Winner 2008 Hermes Award; * Winner 2008 AIM Award for Best Technology; and * Winner 2008 Monaco CleanEquity Award.
2009 Momentum
* Successful installation of smart grid device into U.S. electricity grid; * Commercial contract for development of further smart grid device from The Consolidated Edison Company of New York; * Commercial contract for superconductor hydro power evaluation from RWE AG; and * Institutional fundraising of £9.5 million to support commercial expansion in the United States.
Analyst Presentation
Zenergy today also announces that it will hold an analyst presentation at 09:00hrs on Monday 18 May 2009. Interested parties should email Andrew Tan at andrew.tan@zenergypower.com for further details and to register for attendance.
Further informationAndrew Tan Zenergy Power plc + 49 2226 9060 668 Vikki Krause/Kirsty Corcoran Hansard Group + 44 207 245 1100 Adam Pollock/Katherine Roe Panmure Gordon & Co + 44 207 459 3600 Kam Bansil/Rory Scott Mirabaud Securities LLP + 44 207 866 0244 Chairman's Statement
It is with great pleasure that I present my report on a year that has been shaped by some of the Group's most significant technical achievements to date. Looking over the year the cumulative impact of these achievements has been to establish a growing recognition of the substantial improvements in energy efficiency and electrical performance that can be gained through the adoption of our superconductor technology. This recognition is testament to our world class in-house engineering capabilities that we continue to focus on the practical and commercial needs of our end-customers. Moreover, our strategy of focussing on the development of high-value superconductor components, employed at the heart of a number of industrial applications, has enabled us through the year to remain on track with our commercialisation objectives. Accordingly, we have continued to work closely with our collaborative partners to rapidly commercialise and bring to market a range of highly competitive energy efficient products that are capable of delivering measurable, proven and value-enhancing energy performances to our customers.
Perhaps most significantly, we saw in the Period the first installation of one of our superconductor products into a customer's commercial premises. The installation of our superconductor induction heater also marked a first for our industry, as never before had an industrial-scale device employing superconductor technology been adopted into an existing large-scale manufacturing operation. Subsequent to this landmark achievement, we were further encouraged by the machine's operating performance which exceeded all expectations of the customer and ourselves by delivering not only dramatic energy savings, but also significant productivity increases.
Elsewhere, the Group made significant progress in the development of both its Smart Grid Technology products and its Renewable Energy Technology products. In relation to both of these product areas, I was delighted to see us achieve the all important third party validation of our technology. Building on these success we have now progressed to delivering what will be the first full scale units of both these products. In relation to our Smart Grid Technology we successfully tested our first full-scale Fault Current Limiter (`FCL') under the observation of a number of the largest U.S. utility companies and were subsequently invited to deliver the device for installation into the Californian electricity grid. Within our Renewable Energy Technology activities we had our first full-scale superconductor coil tested and validated by our development partner, Converteam SAS, and we are now on course to deliver the remaining coils that will be used to construct a hydro-generator for installation by E.On AG into a commercial hydro site located in Bavaria, Germany.
But in reviewing the year it is equally important, and encouraging, to note the fundamental and profound shift that has occurred within our target markets as a result of a worldwide ubiquitous government-led push for renewable and clean energy solutions. The routes of this shift are perhaps embedded in the events of 2007 that saw the world's financial markets begin to unravel amid a well publicised global credit crunch. As we progressed through 2008, we witnessed these events begin to impact on the real economy as economic growth quickly receded into recession and productivity contracted. This rapid and severe contraction in the private sector has brought the world's governments to the forefront of our economies and they in turn have focussed on developing the renewable and clean energy industries. As we progress, there is little doubt that government intervention and government spending will play the defining role in driving the economy through the current financial turmoil and even less doubt about the new enlarged role that clean energy will play within our economy as it emerges from this recession.
As we look to 2009 we can only do so with confidence and anticipation. It has now been two-and-a-half years since the Group listed on the London Stock Exchange and very few could have predicted the huge shifts that have taken place within the world's economies since that time. These have placed the renewable energy industry in the centred and formidable position that it finds itself today. 2008 can be defined as the year in which a paradigm shift occurred in the perception of the renewable and clean energy industries which in turn led to a fundamental increase in the importance now being conferred upon them to provide the means of sustainable economic and social development. This move from the periphery to mainstream consciousness and commercial industry is today manifesting itself in the type of capital investment, public policy commitment and regulatory change that will lay the foundations from which our target industries can flourish.
Institutional Fundraising
Following the close of the Period we approached a number of new and existing institutional investors to raise further capital in response to the commercial opportunities we can see arising as a consequence of the U.S. and other government spending on stimulus packages aimed at the clean energy sectors. Accordingly, I am pleased to report that we were successful in raising an additional £9.5 million for the Group by way of a Placing. As reported at the time, the main rationale behind this Placing was to enable the Group to take full advantage of two particular stimulus proposals within the American Recovery and Reinvestment Act of 2009 that we anticipate will have a direct impact on the Group's sales efforts.
1) The U.S. Government's commitment to provide a 50 per cent. funding programme for electricity utility companies investing in smart grid technology; and
2) The U.S. Government's commitment to provide a 50 per cent. funding programme for industrial businesses making investments in energy efficient technology capable of reducing energy consumption by 25 per cent..
It is the belief of Zenergy's Director's that these two U.S. Government funded schemes will have clear implications for commercial prospects of the FCL and the induction heater. Our engagement by The Consolidated Edison Company of New York shortly after the close of the Period also highlights the commercial opportunities we have in the United States and our ability to raise these funds at this time clearly demonstrates the wider support that exists for the exciting work that we are doing in the field of superconductivity.
I would like to thank everyone who has contributed to the progress that we have made in these past two-and-a-half years which has placed us in the advantageous position we find ourselves today, from where we can fully benefit from the huge growth occurring within the global clean energy markets. I have no doubt that we are, with the additional funds now available to us, better placed than ever to realise our great potential as we begin to deliver superconductor based energy solutions to our target markets.
Michael FitzgeraldChairman30 April 2009
Core expertise, key focus and commercial strategy
At Zenergy we focus on engineering and patenting clean energy solutions centred on the exploitation of the incredible electrical properties of superconductive materials. The Group's key value proposition is to develop a range of patented technology solutions and engineering know-how that define the means with which to enable quantum leaps in the efficiency and performance of industrial scale electrical equipment. By focussing on the design and creation of core superconductive components, Zenergy's commercial strategy is to enter into collaborative partnerships with established industry participants with whom it can rapidly develop and deploy highly competitive energy efficient products into multi-billion dollar global markets.
Chief Executive's Report 2008
Summary
Overall, 2008 can be considered to be the year in which our technology left our research and development facilities and entered into the real commercial world.
As I go into more detail below we will see that this was achieved through both commercial sales and rigorous third party testing and validation. In both instances, the outcome underlines the same significant fact; that our technology has proven itself capable of living up to, and beyond, our expectations in both laboratory and real-world conditions. The importance of this 'real-world' operation cannot be overstated and already we have been able to progress a number of commercial discussions as a direct result of the technical achievements of 2008.
Our corporate drive and motivation is based around our technology's capability to lead a revolution in the electrical performance of industrial scale equipment and throughout 2008 we continuously demonstrated and documented the impact that superconductors can have on the economic viability of a clean energy economy. To this end, it is highly encouraging to see that in every instance in which we have subjected our technology to third party validation it has performed at least as well as we had anticipated and proven in real terms the significant implications of its electrical properties.
At Zenergy we focus on the development of core high-value superconducting components designed and engineered to be adopted into multiple product applications for commercial exploitation in a number of different energy markets. There are numerous advantages to this focussed approach and in 2008 we achieved significant progress across all of our commercialisation activities as a result of them:
Assessing this focussed approach from a technology development perspective we see the main advantage as being the emergence of a growing overlap of know-how and expertise between different products as we focus on the core components common to those products. This focus on core superconducting component engineering has enabled us to develop a number of different clean energy applications without overstretching our internal resources. In fact, what we have experienced in 2008 is that the technical progress achieved over a number of years during the development of one application can often mean de facto progress on other applications in the future. Accordingly, we achieved some of our most significant technical breakthroughs during the year that led to not only the launch of our second commercial product, but also the technical validation of our third. Both of these achievements were especially important to the Group as they involved a substantial level of third party evaluation of our technical abilities by not only by our commercial partners and end customers, but also by industry regulators, analysts and standard bearers. The cumulative impact of this progress has been to position us as one of the most accomplished experts in the field of developing and commercialising superconductor energy technology whilst at the same time also conferring a substantial level of credibility upon our commercial products.
Moving on to assess our focussed approached from the perspective of an overall commercial product development strategy we note the main advantage as being our ability to enter into several different global product markets in quick succession. 2008 witnessed a deepening recession in which we immediately began to reap the benefits of our ability to address multiple markets. Looking to our first commercial product, the induction heater, we can expect a slower than hoped for uptake in the short-term as industrial businesses assess their capital expenditure plans. However, looking to our second commercial product, the Fault Current Limiter, we can now expect a much faster than expected uptake in the short-term as a result of the substantial proposed stimulus packages in the United States and their specific focus on clean energy and electrical grid expenditure. In this respect, our focus on developing the core superconducting components has led to the mitigation of the slow down in the metals industry by our ability to capture the significantly enlarged opportunity within the Smart Grid industry in the United States. Looking to our third product, the superconductor hydro-generator (due for initial installation into E.On AG's commercial hydro-power dam in Bavaria December 2009) we can also expect the growing regulatory pressure on renewable energy production levels to benefit us in the short- to medium-term.
Looking from a corporate development perspective we see the advantage of our focussed approached manifesting itself in a growing level of recognition, trust and faith that we and our technology receive from industry participants, regulators and government bodies. It is worth noting that in this respect it is not just the fact that we focus on superconducting components that is important; but more that these components govern the fundamental performance characteristics of the products that they are used in. For instance, it is our patented superconducting coils used in the induction heater (developed in conjunction with our manufacturing partner, B¼ltmann GmbH) that enable the 50% reduction in electricity consumption and the 25% increase in productivity; it is our patented superconducting coils used in the FCL's (developed in conjunction with our manufacturing subcontractor T&R Electric Inc) that enable the handling of huge power surges multiple times a second; it is our patented superconducting coils used in the hydro generators (built in conjunction with our collaborative partner, Converteam SAS) that enable the significant increases in electrical efficiency and power output of hydro-dams; and, it is our patented superconducting coils used at the heart of wind generators (also being developed in conjunction with our collaborative partner Converteam SAS) that will enable the cost reduction of offshore wind power production by 25%. It is the fact that our patented components have the ability to bring about these substantial improvements in electrical performance of industrial equipment that has led to us being able to establish numerous valuable collaborations and partnerships with some of the world's most established and revered global companies.
Overall, as we review 2008 we can see that our strategy of focussing on core superconducting components is bringing about the rapid emergence of our first set of industrial products employing superconductive technology. Below I focus on our 3 main product areas and briefly summarise the main points of progress made through the year.
Smart Grid Technology
During the course of the year we saw the launch of our second commercial product, the Fault Current Limiter. This was a particularly important milestone for the Group because of the tremendous commercial potential that is currently emerging in the United States as a result of the huge amounts of investment and government funding that grid technology is now receiving.
Our superconductor FCL represents one of the few technology solutions that can directly protect electricity grids from damaging power surges and during the year was approved for installation into the United States electricity grid. Accordingly we delivered the first unit to Southern California Edison ('SCE') who, following rigorous rounds of pre-installation tests, cleared the unit for installation in the first quarter of 2009. This unit has now been successfully installed into the Avanti distribution circuit of SCE's electricity grid and is the first such superconductor FCL device to ever be installed and operated in the United States grid. Since this landmark installation we have now been contracted under commercial terms by Consolidated Edison of New York (the Unites States' largest investor owned utility company) to build and test a demonstration device specifically for the needs of their New York City grid system.
Renewable Energy Generators
Our business proposition within renewable energy production is a simple one; as is our technology's value add. In summary, we are using our core high performance superconducting coils to replace the bulky and inefficient copper coils found in existing generator designs. In doing so we enable a new class of electricity generator capable of significantly reducing the cost of producing renewable energy. We are able to achieve this by exploiting the incredible current carrying capability of superconductive materials - which can carry over 100X the amount of electricity as compared to copper - to produce generators that are substantially smaller and lighter than those produced today. The significance of this is substantial when it is considered that a conventional 6MW direct-drive copper generator used in offshore wind turbines weighs over 400 tonnes and is approximately 9 metres in diameter. In contrast, generators developed using superconducting coils will be just one sixth of the weight of and one third of the size. Particularly important when considering the logistical challenges of constructing and maintaining offshore wind turbines.
Collaboration
In 2007 we entered into an exclusive co-operation agreement with Converteam SAS (formerly Alstom Power Conversion) to jointly develop superconductor generators for the hydro-power and wind power markets. Since that time we have enjoyed numerous development, engineering and design success as a result of our collaborative efforts and are due to install the world's first superconductor hydro-generator into E.On's commercial hydro-dam during December 2009. Of particular significance to our development efforts, was E.On's decision during the year to upgrade the generator to be the pole position generator in its commercial dam; thus it will be responsible for the base-load generation of electricity for over 3,000 of E.On's customers. E.On's willingness to entrust its reputation in our technology is taken as a significant endorsement not just of our superconducting technology but also of our design and engineering capabilities.
2G Wire Development
With regard to the massive growth in demand we expect for renewable power generation, Zenergy has been committed to the development of proprietary lower-cost production techniques for a second generation of superconducting wire know as 2G wire. Unlike existing 1G wire, 2G wire will not use silver, and in the case of Zenergy's proprietary `all chemical' process, will be mass manufactured using continuous thin film production techniques. 2008 was another progressive year for our research programme during which we achieved significant improvements in wire quality and consistency. Most significantly during the year, we entered into an exclusive joint development agreement with Honeywell Specialty Materials (`Honeywell'). Under the agreement, Honeywell will now work with us to develop a number of the chemical precursors that we will be required in the volume production of our 2G wire.
This agreement is particularly important to our 2G strategy as, when combined with our existing exclusive arrangement with ThyssenKrupp VDM, it secures us the volume supply of all the highly specialised chemical and raw materials required for our intended mass manufacturing of 2G wire.
Induction Heaters
The third and most mature of our current commercial products is the superconductor induction heater which is used within the metals industry to heat (and therefore soften) metal billets prior to extrusion. Our superconductor induction heater continues to represent a substantial commercial opportunity to the Group despite the current downturn in the metals industry. But of equal importance to the Group is the role that the induction heater has played in demonstrating the commercial viability of industrial scale devices based upon superconductor technology. The order for our first induction heater in the third quarter of 2007 represented the first ever sale of a commercial industrial scale device based upon superconductor technology. The significance of this cannot be overstated as the single most important validation for any emerging technology is to achieve initial commercial traction and deployment into real world operating environments. In both of these respects 2008 has, in spite the tough economic environment, been our most progressive year to date for the induction heater.
The momentum for our induction heater in 2008 began in March when we were successful in securing our second commercial sale to a prominent multi-billion Euro global copper producer. This sale was then followed by the completion of the installation of the first ever superconductor induction heater into our first customer's industrial premises. The result of this is that as of July 2008, we have been able to show potential customers our ground-breaking machine in operation in commercial premises. This is a significant factor in de-risking our technology in the minds of those customers. To date, we have received requests from over 25 major metals producers to visit the machine in Weseralu's facilities and have entered into a number of commercial discussions as a consequence. These are ongoing and I expect them to make a positive impact during the course of 2009.
To round off another great year for the induction heater, we were delighted in October of 2008 to receive from our first customer a summary of the installed machine's operational performance that showed it had reduced its energy consumption by 50% and also increased the productivity of its extrusion line by 25%. These results from Weseralu GmbH exceeded our expectations and spell out clearly the economic and environmental benefits of our superconductor induction heater.
2009 Outlook
As summarised at the beginning of my report, 2008 can be seen as the year in which our technology commercialised and gained widespread third party validation. Looking to 2009 I expect the proven capability of our ground-breaking superconductor energy technology to gain growing commercial traction within all of our target markets. Looking at the levels of activity within our target markets, and especially in relation to the clean energy markets, I expect this commercial traction to lead to further commercial sales, further collaborative partnerships and possible new ventures for the Group.
Dr. Jens MuellerChief Executive Officer30 April 2009
Preliminary Results for the year to 31 December 2008
Consolidated income statement
for year ended 31 December 2008
Year ended 31 December Year ended 31 December 2008 2007 €000 €000 Revenue 2,028 268 Cost of sales (1,580) (221) Gross profit 448 47 Other operating income 842 578 Distribution expenses (876) (519) Administrative expenses (3,934) (2,703) Strategic marketing (691) -project Research & development (3,028) (2,644)expenses Loss before one off (2,478) (1,586)expenditure, research & development, depreciation & amortisation & equity settled share based payments Strategic marketing (691) -project Research & development (3,028) (2,644)expenses Depreciation & (699) (603)amortisation Equity settled (343) (408)share-based payment expenses Operating loss (7,239) (5,241) Financial income 1,974 295 Financial expenses (47) (554) Net financing costs 1,927 (259) Loss before tax (5,312) (5,500) Taxation 40 263 Loss for the period (5,272) (5,237)attributable to equity holders of the Parent Earnings/(loss) per share (Euros) Basic and fully diluted (0.12) (0.13)loss per share
Consolidated statement of recognised income and expense
for year ended 31 December 2008
Year ended 31 Year ended 31 December 2008 December 2007 €000 €000 Foreign exchange translation (2,407) (338)differences Net expense recognised directly (2,407) (338)in equity Loss for the period (5,272) (5,237) Total recognised income and (7,679) (5,575)expense Total recognised income and (7,679) (5,575)expense for the period attributable to the equity holders of the parent Consolidated balance sheetat 31 December 2008 2007 €000 €000 Non-current assets Investment in subsidiaries - - Property, plant and equipment 2,685 1,671 Goodwill 1,341 1,303 Other intangible assets 5,174 3,176 Total non-current assets 9,200 6,150 Current assets Inventories 508 543 Trade and other receivables 1,902 753 Research & development tax credit receivable - 150 Cash and cash equivalents 6,797 17,746 Total current assets 9,207 19,192 Total assets 18,407 25,342 Current liabilities Trade and other payables (1,978) (1,966) Non current liabilities Deferred tax liabilities (660) (653) Total liabilities (2,638) (2,619) Net assets 15,769 22,723 Equity attributable to equity holders of the parent Share capital 649 645 Share premium 32,050 31,672 Translation reserve (2,792) (385) Warrant reserve 200 200 Retained loss (14,338) (9,409) Total equity attributable to shareholders 15,769 22,723
Consolidated cash flow statement
for year ended 31 December 2008
Year ended 31 December Year ended 31 2008 December 2007 €000 €000 Cash flows from operating activities Loss for the period (5,272) (5,237) Adjustments for: Depreciation and amortisation 699 603 Foreign exchange gains/(losses) 2,128 12 Gain on sale of fixed assets - (39) Financial income (1,974) (295) Financial expenses 47 554 Equity settled share-based payment 343 408expenses Taxation (40) (263) Operating loss before changes in (4,069) (4,257)working capital and provisions Increase in trade and other (392) (167)receivables (Decrease)/increase in stock 35 (420) Increase in trade and other 4 801payables Cash absorbed by operations (4,422) (4,043) Tax received 133 86 Net cash (outflow)/inflow from (4,289) (3,957)operating activities Cash flows from investing activities Interest received 614 237 Investment in subsidiaries - - Proceeds from the sale of fixed - 307assets Acquisition of property, plant and (1,539) (1,275)equipment Development expenditure (2,196) (1,426)capitalised and acquisition of other intangible assets Net cash outflow from investing (3,121) (2,157)activities Cash flows from financing activities Proceeds from the issue of share 30 21,739capital Equity settled share based 352 -payments Net cash inflow from financing 382 21,739activities Net (decrease)/increase in cash (7,028) 15,625and cash equivalents Cash and cash equivalents at 1 17,746 2,722January Effect of exchange rate (3,921) (601)fluctuations on cash held Cash and cash equivalents at 31 6,797 17,746December NotesEarnings per shareBasic earnings per share
The calculation of basic earnings per share at 31 December 2008 was based on the loss attributable to ordinary shareholders of €5,272,000 (Year ended 31 December 2007: €5,237,000) and a weighted average number of Ordinary Shares outstanding during the period of 44,042,000 (Year ended 31 December 2007: 39,198,000), calculated as follows:
Year ended 31 Year ended 31Thousands of shares December 2008 December 2007 Issued ordinary shares at start of period 39,198 36,091 Placing - May 2007 1,432 2,853 Placing - December 2007 3,317 254 Options exercised 79 - Shares issued in settlement of fees 16 - Weighted average number of ordinary 44,042 39,198shares at 31 December
On 29th April 2009 the Company announced a placing raising £9.5m (€10.6m) (£ 9.1m (€10.2m) net of expenses) by way of placing 7,916,667 new Ordinary Shares at a price of 120p with a number of new and existing institutional investors.
Diluted earnings per share
Share options and warrants have not been included in the calculation of fully diluted earnings per share since these are anti-dilutive. The instruments that could potentially dilute the basic earnings per share in the future, but were not included because they were anti-dilutive for the periods presented are:
Year ended 31 Year ended 31 December 2008 December 2007 Thousand of shares Warrants 160 160 Share options 1,858 1,346 Total potential dilutive instruments 2,018 1,506
Basis of preparation
The statutory accounts for the year ended 31 December 2008 have not been finalised but the financial information set out in this preliminary results announcement has been prepared by the directors based upon the results and position which they expect will be reflected in the statutory accounts.
This announcement was approved by a Committee of the Board of Directors on 30April 2009. -Ends- About Zenergy Group plc
Zenergy Power plc is a superconductor energy technology company, listed on the AIM market of the London Stock Exchange and comprising three operating subsidiaries located in Germany, USA and Australia. By innovating superconductor based technology solutions, the Group provides patented clean energy devices that greatly improve the efficiency with which customers generate, distribute and use electrical energy.
To date, the incredibly energy efficient superconductive components at the heart of Zenergy's products have successfully delivered industrial customers significant reductions in energy consumption and provided utility companies with cutting-edge smart gird solutions. Looking to the near future, the Group is also developing a range of highly-energy efficient superconductor components for electricity generators capable of greatly reducing the cost of producing offshore wind power. All of which leads to the production of fewer carbon emissions in the world and a more sustainable economic growth path. In 2007 Zenergy achieved the world's first sale of an industrial scale commercial application incorporating superconductor technology and has subsequently developed products capable of addressing multi-billion dollar global markets.
About superconductivity
Superconductive materials are capable of conducting electricity without any resistance and were first discovered in 1911 in what was to prove to be one of the most significant scientific breakthroughs of the 20th century.
Superconductors enable:
(a) Induction Heaters to be twice as efficient for the metals industry
(b) Fault Current Limiters to protect power grids from blackouts
(c) Direct-drive wind generators to be significantly reduced in size and weight allowing the operation of wind generators in excess of 8 MW
(d) Existing hydro-power sites to increase energy efficiency and electrical power output
vendor