Ip Group Regulatory News (IPO)

IP Group plc - Portfolio company Ceres Power announces strategic partnership with China's Weichai Power; potential initial £17m equity investment

IP Group plc (LSE: IPO) ("IP Group" or "the Group" or "the Company"), the developer of intellectual property-based businesses, is pleased to note that its portfolio company Ceres Power Holdings plc (AIM: CWR) has today announced a strategic collaboration with China's Weichai Power ("Weichai") comprising both product development and launch as well as a potential initial £17.0m equity investment by Weichai in Ceres Power.

The long term strategic relationship provides Ceres Power, in which IP Group holds a direct undiluted beneficial stake of 25.4%, with access to the Chinese market, the world's fastest growing market for fuel cells. Initial plans are for Ceres Power and Weichai to jointly develop and launch a SOFC fuel cell range extender system for China's fast growing electric powered bus market. Weichai has a wide network of customers in China with sales volume of c.30,000 buses per year.

The agreement potentially provides significant staged revenues to Ceres Power through engineering services and technology transfer, licence and royalty payments and a longer term share in the profits from a proposed manufacturing Joint Venture.

The agreement includes a potential initial £17.0m equity investment by Weichai in Ceres Power and a potential further equity investment of £23.2m, which is triggered on signing further commercial agreements before 30 November 2018, both subject to approval by provincial PRC (People's Republic of China) governmental authorities and Ceres Power shareholder approval.

Weichai is listed in Hong Kong and Shenzhen with a market capitalization of c. US$10bn. It has a strong track record of making strategic investments in businesses around the world, such as its investment in Société Internationale des Moteurs Baudouin in France, Power Solutions International lnc. in the U.S., Linde Hydraulics GmbH & Co. KG and KION GROUP AG (MDAX-listed) in Germany, etc.

The full announcement follows. 

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Notes for editors

About IP Group

IP Group is a leading intellectual property commercialisation company which focuses on evolving great ideas, mainly from its partner universities, into world-changing businesses. The Group has pioneered a unique approach to developing these ideas and the resulting businesses by providing access to business building expertise, capital (through its 100%-owned FCA-authorised subsidiaries IP Capital and Parkwalk Advisors), networks, recruitment and business support. IP Group has a strong track record of success and its portfolio comprises holdings in early-stage to mature businesses across life sciences and technology. IP Group is listed on the Main Market of the London Stock Exchange under the code IPO.

Group holdings in portfolio companies reflect the undiluted beneficial equity interest excluding debt, unless otherwise explicitly stated.

For more information, please visit our website at www.ipgroupplc.com.

ENDS

CERES POWER AND CHINA'S WEICHAI POWER ANNOUNCE STRATEGIC PARTNERSHIP AND POTENTIAL EQUITY INVESTMENT

Ceres Power (AIM: CWR, "Ceres Power"), developer of the SteelCell®, a world-leading, low cost Solid Oxide Fuel Cell (SOFC) technology, announces a strategic collaboration with China's Weichai Power ("Weichai") one of the leading automobile and equipment manufacturing companies in China producing 600,000 engines per year and whose business covers complete vehicles, powertrains, intelligent logistics, parts and components.

The long term strategic relationship provides Ceres Power with access to the Chinese market, the world's fastest growing market for fuel cells. Initial plans are for Ceres Power and Weichai to jointly develop and launch a SOFC fuel cell range extender system for China's fast growing electric powered bus market. Weichai has a wide network of customers in China with sales volumes of c.30,000 buses per year.

The agreement potentially provides significant staged revenues to Ceres Power through engineering services and technology transfer, licence and royalty payments and a longer term share in the profits from a proposed manufacturing Joint Venture.

The agreement includes a potential initial £17.0m equity investment by Weichai in Ceres Power and a potential further equity investment of £23.2m, which is triggered on signing further commercial agreements before 30 November 2018, both subject to approval by provincial PRC (People's Republic of China) governmental authorities and Ceres Power shareholder approval.

Weichai is listed in Hong Kong and Shenzhen with a market capitalization of c. US$10bn. It has a strong track record of making strategic investments in businesses around the world, such as its investment in Société Internationale des Moteurs Baudouin in France, Power Solutions International lnc. in the U.S., Linde Hydraulics GmbH & Co. KG and KION GROUP AG (MDAX-listed) in Germany, etc.

Phil Caldwell, CEO said: "We are delighted to be working with Weichai in a partnership that provides access to the Chinese market for our SteelCell® technology and also scale-up capital for our growth in the UK. Weichai has a successful track record of partnerships with international companies and shares our ambitious growth plans. Working with Weichai provides demand for a variety of applications, driving significant volume and cost reductions for the SteelCell® and helping to establish the technology as an industry standard. This is a key milestone for Ceres Power as we continue to deliver on our strategic plan of licensing our technology to a leading OEM which if successful could lead to a high volume manufacturing JV for the Chinese market with a very strong partner."

Tan Xuguang, Chairman and CEO of Weichai said: "China has set very ambitious targets to significantly reduce air pollution and our bus transportation system is key to this. We believe there is considerable scope to develop a compelling range of new power system products for the Chinese market and in Ceres Power, we are confident we have found the right partner in the field of solid oxide fuel cell, with globally leading technology to bring our vision to fruition. The SteelCell® is highly robust, responsive, efficient and fuel flexible and why we feel so excited about our collaboration. We look forward to progressing our partnership towards commercial launch and to working closely with Ceres Power as a strategic investor."

Commercial Details

The strategic collaboration with Weichai includes:

An initial Joint Development Agreement (JDA) involving a multi-million pound fee. The parties will work together to develop a 30kW SteelCell® SOFC fuel cell range extender system for demonstration in an Electric City Bus application for the Chinese market in early 2019 utilizing Compressed Natural Gas ("CNG") fuel which is widely available in China. This includes technology transfer and the licensing of system-level technology to Weichai.

A Framework Agreement, which includes the key terms of the following agreements:

· A commercial License Agreement, for the phased technology transfer and a mixture of exclusive and non-exclusive rights to manufacture systems for the commercial vehicle, bus and certain stationary power markets in China.

· A Joint Venture Agreement, to be established upon successful completion of the system development jointly by Weichai and Ceres Power. As part of the JV, the two parties would manufacture in the Shandong province in China and sell fuel cell systems into the Chinese market.

· These agreements are intended to be signed before 30 November 2018 and are subject to completion of the initial subscription.

Equity agreements, which include

· A subscription agreement to invest £17.0m for a 10% equity holding in Ceres Power, to be priced at 15.08p/share, an 18% premium to current market value.

· An additional £23.2m subscription by way of warrant at an exercise price of 16.45p/share, a 29% premium on the current market value, will allow Weichai to hold, together with the 10% acquired under the subscription agreement, a 20% equity holding in Ceres Power. This will be automatically exercised on the signing of the further commercial agreements expected later in 2018, subject to certain conditions.

· The Weichai initial investment price and warrant exercise price are respectively based on a 10% and 20% premium to the 90-day volume weighted average price.

· These equity investments are subject to provincial PRC governmental approval and Ceres Power shareholder approval which will subsequently be sought.

A Relationship Agreement where Weichai has an eighteen month standstill under which it agrees not to acquire more than 20% of Ceres Power's issued share capital and includes an eighteen month hold period on the proposed shareholding. Weichai will have the right to nominate a non-executive director to the Board of Ceres Power, after the exercise of the warrant.

Both parties have agreed key licence and future royalty terms in principle which would provide significant value to Ceres Power as key milestones are met over the next five years, as well as the potential value created longer term through a share in a Fuel Cell system manufacturing JV established between Ceres Power and Weichai which would have exclusive access to the SteelCell® in certain markets and has the potential to become a leading player in the Chinese market.

Benefits to Ceres Power

The agreement provides Ceres Power with access to the Chinese fuel cell market with one of the leading automotive OEM's with a track record of successful collaborations with international companies. Access to the high growth high volume market and Chinese supply chain enables significant cost down and economies of scale for the SteelCell® technology providing a substantial competitive advantage. A proposed Joint Venture with Weichai provides a staged path to high volume manufacturing of the SteelCell® under licence validating the Ceres Power business model, which is based on a licence and royalty revenue strategy.

The agreement also provides growth capital for Ceres Power as its scales up its operations in the UK and generates near term demand for its 5 kW stack supply from the UK. It has the potential to provide significant staged revenue to Ceres Power through engineering services and technology transfer, licence and royalty payments and longer term share in the profits from the JV.

The low-emission public transport market in China represents a major commercial opportunity. This is being driven by the Chinese Government, who are stimulating this sector through subsidies and Zero-Emission Zones, designed to reduce air pollution, carbon emissions, and road noise while increasing public health and lower operating costs. In addition to these benefits and increasing the operational range of electric buses, the Ceres Power range extender has the advantage of being able to run on widely available fuels such as CNG and does not rely on the roll out of hydrogen infrastructure. This is a significant market opportunity for Weichai.

The strategic collaboration is currently expected to progress with the following steps:

1. Initial Fuel Cell System technology transfer to Weichai in 2018 for the initial development and demonstration of CNG fueled SteelCell® SOFC hybrid electric buses in China by 2019.

2. Further trial of multiple buses and SteelCell® SOFC stack supply by 2020, after which the Joint Venture will be created.

3. Phased technology transfer from system to SteelCell® stacks planned over a number of years to the JV, enabling phased manufacture in China.

4. Further JDAs to develop further the 30kW range extender system for buses and other applications in the future.

This is the sixth partnership signed by Ceres Power in addition to its strategic JDA partnerships with Honda, Nissan, Cummins and two additional unnamed global OEMs. Ceres Power is working with these world-class companies to embed the SteelCell® technology into power systems for the Residential, Business, Data Centre and Electric Vehicle markets.

- Ends -

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

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About Ceres Power

Ceres Power (http://www.cerespower.com/) is a world leader in low cost, next generation fuel cell technology for use in distributed power products that reduce operating costs, lower CO2, SOx and NOx emissions, increase efficiency and improve energy security. The Ceres Power unique patented SteelCell® technology generates power from widely available fuels at high efficiency and is manufactured using standard processing equipment and conventional materials such as steel, meaning that it can be mass produced at an affordable price for domestic and business use. Ceres Power offers its partners the opportunity to develop power systems and products using its unique technology and know-how, combined with the opportunity to supply the SteelCell® in volume through manufacturing partners.

About Weichai

Weichai is a Chinese state-owned enterprise listed on the Main Board of both the Hong Kong Stock Exchange and Shenzhen Stock Exchange with a market cap of over USD$10 billion. With over 74,000 employees and sales of more than 150 billion yuan in 2017, Weichai is one of the most competitive automobile and equipment manufacturing companies in China, producing more than 600,000 engines, 830,000 transmissions, 150,000 heavy duty trucks and 200,000 forklift trucks in 2017. Over 43% of its revenue comes from overseas market.