CAP.L Regulatory News (CAP)

7 Aug 2007 07:01

Clean Air Power Limited07 August 2007 For immediate release 07 August 2007 Clean Air Power Ltd ("Clean Air Power" or "the Company") Trading Update Clean Air Power plc (AIM:CAP) the developer of Dual-FuelTM combustion technologythat enables heavy-duty diesel engines to run on a combination of both dieseland natural gas provides an update on its 2007 activity. Dual-FuelTM Technology Clean Air Power is pleased to announce the completion of its new enginemanagement system project. Completed in July 2007 and developed with engineeringsupport from Ricardo Plc, this new software will allow Clean Air Power'sDual-FuelTM technology to integrate with the latest heavy duty diesel enginetechnology on the market today. The integration of the software into an engineis already under way and it will be used in all future Clean Air PowerDual-FuelTM products, whether developed in conjunction with an OEM or solely bythe company. Entering into a cooperation agreement with a major truck or engine manufacturerremains the number one priority for Clean Air Power. However, the Company hasmade progress in its development of its Dual-FuelTM technology leading it tobelieve that a Euro V solution may well now be possible without a formal OEMagreement. Clean Air Power's activities with truck manufacturers in Europe continue withthe Board being confident of developing cooperation during the coming year. In Australia, the Company has strengthened its commercial and engineering teamto facilitate the continued development of the Dual-FuelTM technology. Animportant engineering development project has been taking place in Australia inrecent months, mainly funded by the truck operators and Australia GreenhouseOffice (AGO), a government body. This project has resulted in many improvementsto the Company's Australian software. January 2007 saw the announcement of a major contract when Mitchell CorpAustralia Pty Ltd, a bulk logistics solutions provider, ordered 50 systems wortha total of approximately £1.5m. Prior to placing this order, Mitchell tookdelivery in 2006 of 14 Clean Air Power Dual-Fuel vehicles which had beenconverted by a third party. These have proved to be unreliable and have requiredreworking to meet the Clean Air Power specification as confirmed by thedevelopment project. This has resulted in delays to the installation programmeand a lack of confidence within Mitchell Corp. Clean Air Power has now takencontrol of the whole installation process and will ensure adherence to the exactspecification set down in the recent development project. The company's largest Australian customer, Murray Goulburn, is in the process ofhaving an additional 12 Clean Air Power systems installed and installations havealso started on the £0.25m order from Kleenheat Gas Pty Ltd which was announcedin May. However, delays resulting from the development programme and issues withMitchell means that year end sales projections are significantly below marketexpectations. The Australian truck market is one of the most demanding in the world with veryheavy gross vehicle weights and extreme ambient temperatures. The company hasrecently completed the development of an optional secondary intercooler to dealwith these extreme temperatures. The Company continues to view Australia as an important market with strongproduct awareness and strong financial benefits for the operators. In the UK sales of the Genesis product to date have been significantly belowexpectations. While a number of blue chip organisations have trialled theproducts, decision making and due diligence within these organisations continuesto be a long drawn out process. A number of these trials have the potential to generate sales in the remainderof the year. However, due to the low year to date sales UK Genesis revenue forthe whole of 2007 is expected to be significantly below expectations. Components Business Clean Air Power manufactures some of the components incorporated in thecompany's Dual-FuelTM technology. A number of these components are also used inspark ignited gas engines, hydraulic gearboxes and certain other applications. With sales mainly in Europe and the USA, growth in demand for gas enginecomponents during 2007 continues to be strong. Revenue for this division remainsin line with expectations. Emissions Reduction Business This area of the business provides solutions to large stationary diesel enginessuch as those used in pumping stations. The current market is mainly in the USand we provide a service whereby the emissions from new installations aretreated to meet local legislation. Although revenue to date is below expectations the Company anticipates theconfirmation of a major contract shortly which should produce year end revenuesin line with expectations. Summary Clean Air Power is well placed to take advantage of the growing momentum forreduced climate change emissions, whilst also delivering considerable costreductions. The company expects demand to develop in the coming year. As highlighted above, Company sales have been lower in key regions, which leadsthe Board to anticipate that results for the full year will be well belowexpectations. The slower than anticipated increase in sales of the Dual-FuelTM products hasled to a greater than expected cash burn. As a result the company will beconsidering its options for raising further funds during the remainder of thecurrent year in order to fund the development of a Euro V solution and toprogress activity with manufacturers. John Pettitt, CEO, says "With increasing fuel costs and increasing awareness ofcarbon emissions the drivers for operators to invest in Clean Air Power'stechnology continue to grow stronger. Early adoption has proved much slower thananticipated but the fundamentals of the technology remain very persuasive. TheBoard remains confident that discussions with truck manufacturers and largefleet operators will lead to good progress during 2008 and 2009" For further details please contact: Clean Air Power Tel: +44 (0) 1494 527110 John Pettitt, Chief ExecutivePeter Rowse, Finance Director Buchanan Communications Tel: +44 (0)20 7466 5000 Charles Ryland/Ben Willey Canaccord Adams Ltd Tel: +44 (0)20 7050 6500 Robert Finlay/Erin Needra This information is provided by RNS The company news service from the London Stock Exchange