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FUEL CELLS – INTRODUCTION 1

CERES POWER HOLDINGS 3

CMR FUEL CELLS 10

ACTA S.P.A. 16

CERAMIC FUEL CELLS 22

Sector: Alternative

Energy

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Pef

Fuel Cells - Clean Energy Here and Now

April 2008


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INTRODUCTION

The principle of the fuel cell was discovered around 170 years ago and the first

fuel cell was developed by Sir William Grove in 1843. While they reached

prominence in the Apollo moon landing project, providing the astronauts with

electricity, heat and drinking water, the commercialisation of fuel cells started in

2007 according to industry analysts Fuel Cell Today. Last year saw a 75%

increase in unit shipments to around 12,000, and an estimated global

manufacturing capacity of the order of 100,000 units per annum.

Fuel cells are seen as offering an important option for improving the sustainability

of energy use and reducing GHG emission, and in portable consumer electronics

the appropriate technology offers cost-effective replacements for batteries.

Fuel cells are silent devices that generate electricity and heat electrochemically

from fuel efficiently and cleanly, and with no moving parts. Typically they run off

a fuel, for example hydrogen, and an oxidant, e.g. oxygen, and operate when

these reactants are supplied to them and while the electrolyte. The fuel cell

consumes the reactants, which therefore need to be continually supplied during

operation (unlike batteries which chemically store electrical energy). An individual

cell produces a voltage and heat, and water. Cells are generally assembled into

stacks to provide larger voltages and power, and designing for reliable and

efficient stacking is emerging as a key factor to commercialising the technology.

Within a cell, there are two electrodes (the anode and cathode), an electrolyte

that carries charged particles from anode to cathode, and a catalyst to accelerate

the reactions at the electrodes.

Currently they are regarded as offering an important option for improving the

sustainability of energy use and reducing GHG emission, and in portable

consumer electronics the appropriate technology offers cost-effective

replacements for batteries.

A number of fuel cell types have been developed based on a range of different

fuels, including hydrocarbons, methanol and carbonates. Of this range of fuel cell

types, the proton exchange membrane (PEM) type has been prominent in the

“hydrogen economy”, and there are many examples under development in the

automotive and transport sectors. At the other end of the size spectrum the direct

methanol fuel cell (DMFC) is receiving a lot of attention among mobile phone and

portable computer manufacturers. These fuel cell technologies are expected to

show rapid growth in the short term future.


30th April 2008

Equity Development contact

Andy Edmond

020 7405 [email protected]

Hannah Crowe

020 7405 [email protected]

Low Carbon and Fuel Cell KTN

2 www.equity-development.co.uk

In general, the low temperature fuel cells are better suited to battery replacement

in mobile and portable applications, while the high temperature types are most

appropriate for stationary power and CHP (combined heat and power) applications

where rapid start-up and load-following are less of an issue. Importantly, the heat

generated can be utilised in these applications.

On the other hand, the high temperature solid oxide fuel cells, SOFCs, are far

better positioned for co-generation given their longer operating life and higher

operating temperatures. An advantage of the high temperatures SOFCs operate

at is that they can run directly on natural gas, propane or other readily available

fuels without need for reforming to provide hydrogen.

European governments are keen to see micro-CHP systems deployed in order to

meet international and domestic targets on carbon emissions. In particular, the

UK government wants all households to reduce carbon emissions by 60% by 2050

and has lowered VAT from 17.5% to 5% for homes that install micro-CHP

systems. In Holland the government is also backing micro-CHP deployment with

similar initiatives to the UK and public funding is available for companies

developing mass-market CHP systems. The last few months have seen a

significant involvement of utilities in this area, indicating a strong probability that

volume markets will develop in the near future.

Materials are a crucial element in the commercialisation process, with strong

moves to seek alternative catalysts to Platinum, and to find lower cost

membranes for PEM cells.


www.equity-development.co.uk 3

CERES POWER HOLDINGS

Ceres Power (“Ceres”) is an AIM-listed company involved in the development of

solid oxide fuel technology. Applications of the company’s products include

combined heat and power units (CHP) for domestic, commercial and industrial

use, on-site power generation and auxiliary power units for transport. Ceres

continues to build its intellectual property portfolio. Ceres has a market

capitalisation of £95m based on a share price of 142p.

INVESTMENT HIGHLIGHTS

Increasing demand for clean, low-cost energy

Rising oil and coal prices and rising demand for electricity will drive demand for

fuel cell products. Fuel cells are considered to be more efficient at generating

electricity than burning fossil fuels and emit significantly lower levels of

greenhouse gases.

The UK Government has estimated that micro-power products have the potential

to supply over one-third of Britain's total electricity needs in the future.

Superior product features

Fuel cells developed by Ceres are able to run on a range of feedstocks, including

natural gas, propane, LPG and hydrogen. This flexibility provides an excellent

platform for the development of a range of closely related products.

Relationship with Centrica (British Gas)

Ceres recently entered into an agreement with Centrica plc (trading as British

Gas) which involved a £5m funded trialling program and volume forward order for

a minimum of 37,500 of Ceres’ residential CHP units. In addition, Centrica

invested £20m in Ceres at a price of 300p/share.

Funding in Place

Following Centrica’s cash investment, Ceres has cash and cash equivalents of

almost £30m. This should provide the business with sufficient funding over the

medium term.

Significant Intellectual Property Portfolio

Ceres has built up a significant portfolio of intellectual property in the form of

patents and trademarks. This enables Ceres to enter into supply chain and market

channel relationships from a position of strength.

Figure 1: Price performance

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Apr-07 Jul-07 Oct-07 Jan-08 Apr-08

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OVERVIEW Ceres is a developer and manufacturer of fuel cells and integrated product

systems, which can be applied to deliver significant economic and environmental

benefits for a range of global market applications.

Ceres was founded in 2001 to commercially exploit the revolutionary fuel cell

technology originally developed within Imperial College during the preceding 10

years. The company’s core technology was developed and incubated within

Imperial College by a renowned founding group of fuel cell and materials experts.

Ceres’ aim is to build a successful growth business offering world-class power

generation solutions tailored to the needs of the customer.

Ceres has now developed and aims to commercialise its patented fuel cell

technology. This will involve manufacturing core fuel cell components in-house, as

well as leading the system’s integration of its fuel-cell components into finished

products in conjunction with the support of supply chain partners.

Ceres is targeting a range of global market applications for its technology

including residential CHP, portable power generation and auxiliary power units for

transport. In January 2008 Ceres entered into an agreement with Centrica plc

(trading as British Gas) which involved a funded trialling program and volume

forward order for Ceres’ residential CHP product. In addition Centrica acquired

10% of Ceres, investing £20m in Ceres at a price of 300p/share.

BUSINESS MODEL Ceres business strategy remains driven by global market opportunities for

alternative energy products which can reduce carbon emissions and address the

issues of energy savings, energy security and fuel poverty.

Ceres is focusing on the development of CHP market applications based on the

Ceres fuel cell. Ceres has demonstrated a wall-mountable CHP unit that is suitable

for on-grid and off-grid mass-market use, both in the UK and overseas.

The CHP units have the potential to deliver significant energy savings, and

combined with their wall mountable format should enable mass-market adoption

at attractive prices. Ceres expects significant revenue growth from the sales of

the CHP products.

Ceres is establishing its own mass manufacturing capability to produce fuel cells

in volume, and is partnering with other companies for final assembly of CHP units.

A Product Facility has commissioned to validate key manufacturing processes

ahead of the planned scale-up into the Mother Plant. Ceres has developed supply

chain partnerships with upstream suppliers as the company makes the transition

to volume manufacturing.

The agreement entered into with British Gas is part of Ceres’ strategy of building

the necessary channels to deliver its product to the mass market. A relationship

has also been established with EDF Energy Networks to address the market for

energy security products.

Ceres also continues to register, protect and exploit its intellectual property

assets, which form the basis of its unique technology and product range.



PRODUCT/TECHNOLOGY Ceres is developing a product range based around a common core technology –

the fuel cell module. Fuel cells are devices that produce electrical power from a

variety of inputs, such as natural gas, hydrogen, renewables etc. They use

chemical processes to create electricity, heat and water vapour at a very high

efficiency with significantly reduced greenhouse gas emissions.

The Ceres fuel cell has the proven ability to run on widely available fuels such as

natural gas, propane, LPG and hydrogen. This flexibility provides an excellent

platform for the development of a range of closely related products for global on-

grid and off-grid applications including:

CHP products for boiler replacement in private residential housing, as well as

installation in new homes, operating on mains natural gas or packaged fuels;

Portable products providing back-up power and prime power, as alternatives to

generators and batteries, operating on packaged fuels including LPG, propane

and butane; and

Products providing auxiliary power in transport sectors including automotive,

marine and aerospace.

The logic behind CHP products is illustrated in the figure below - essentially the

large energy losses that occur at the power station and via transmission are

eliminated.

Figure 2: CHP rationale

Ceres 2007 Annual Report



VALUE DRIVERS Ceres has set a number of milestones it intends to achieve in 2008. Achievement

of these milestones is expected to drive the value of the business.

Value engineer the CHP Unit: Ceres is focusing on performance

improvements with reductions in part-count, cost, size and weight;

Validate key mass manufacturing processes: Ceres is using statistical

process trials in the Product Facility in preparation for volume scale-up;

Complete planning for the Mother Plant: On completion of planning, Ceres

will aim to secure an appropriate site for construction of the Mother Plant;

Deliver contract milestones: Ceres needs to deliver on contract milestones

set out under existing collaborative programs with British Gas, EDF Energy

Networks and other partners; and

Grow revenues: Ceres is aiming to grow revenues from existing partners and

establish new market channel relationships.

Longer term, the UK Government has estimated that micropower products have

the potential to supply over one-third of Britain's total electricity needs and will

help the country improve its energy security, meet its environmental obligations

and deliver energy savings to consumers. The Energy Saving Trust, in a report on

micro-generation published in December 2007, recognised that a 1kW fuel cell

CHP is an important technology in delivering CO2 savings in the home.

RESULTS In the 6 months to 31 December 2007 Ceres grew commercial revenues to

£279,000 compared with £98,000 over the 12 months to 30 June 2007. The

growth in revenue was achieved through the continued technical progress and

successful delivery on commercial contracts.

Research and development expenditure remained the largest expense item,

consistent with a business in the development stage of its business.

Ceres held £9.4m of cash and cash equivalents as at 31 December 2007. There

were no major fund raising activities in the 6 months to 31 December 2007.



Current assets totalled £9.9m compared with £1.4m of current liabilities.

Shareholders equity totalled £10.4m.

Operational highlights during the 6 months to 31 December included:

Successful demonstration of an integrated wall-mountable CHP Unit;

CHP product value engineering program commenced;

Product design concept completed for residential energy security application

with EDF Energy Networks;

Volume cell manufacturing processes established in the new Product Facility;

and

Volume component and equipment suppliers were selected for CHP Product

manufacture.

Post balance date highlights include:

Centrica (trading as British Gas) has invested £20m in Ceres for a 9.99%

equity stake at 300p/share;

Receipt of a volume forward order for a minimum 37,500 CHP products from

British Gas; and

£5m funded development and trialling program secured with British Gas with

£1m already received for the first phase.

Table 1: Profit & Loss 30 June Year End FY06 FY07 HY08

£ 000’s £ 000’s £ 000’s

Turnover 110 98 279

Research and development expenditure (3,495) (4,922) (2,606)

Administration expenditure (1,139) (855) (1,421)

Other operating income 636 970 431

Operating profit (loss) before share based payments charge (3,888) (4,709) (3,317)

Share based payments charge (601) (1,170) -

Operating profit (loss) (4,489) (5,879) (3,317)

Net interest 630 597 300

Net profit/(loss) before tax (3,859) (5,282) (3,017)

Company Data



Table 2: Balance Sheet 30 June Year End FY06 FY07 HY08

£ 000’s £ 000’s £ 000’s

Cash and cash equivalents 14,021 11,142 9,357

Other current assets 554 628 540

Total current assets 14,575 11,770 9,897

Non-current assets 1,923 1,895 1,889

Total assets 16,498 13,665 11,786

Current liabilities 438 788 1,351

Non-current liabilities - - 32

Total liabilities 438 788 1383

Shareholders equity 16,060 12,877 10,403

Company Data

Table 3: Cash Flow 30 June Year End FY06 FY07 HY08

£ 000’s £ 000’s £ 000’s

Cash from operations (3,613) (3,400) (1,887)

Cash from investing activities (469) 20 (173)

Cash from financing activities 1,059 501 275

Net cash flow (3,023) (2,879) (1,785)

Cash and cash equivalents at end of period 14,021 11,142 9,357

Company Data

MANAGEMENT The majority of Ceres senior management has held high positions in various fuel

cell related industries with the Nigel Brandon, the Chief Scientist, being a world-

renowned figure in the fuel cell industry.

Brian Count, Chairman; Following his education, Brian joined the UK’s Central

Electricity Generation Board and rose to become Director of Power Generation in

National Power. He was appointed CEO of Innogy plc and subsequently Chief

Executive of RWE Trading in Germany. Brian became a director of Ceres Power in

2007 and Chairman in Jan 2008.

Peter Bance, Chief Executive Officer; Peter has a Ph.D. in physics from Oxford

and is a Rhodes Scholar. His experience includes building a successful corporate

venturing practice while employed with PA Consulting and Generics. Since joining

Ceres Power as CEO in 2003, Peter has been active in advising government on

energy policy and is now Chairman of the UK’s Fuel Cell Industry Association.

Rex Vevers, Finance Director; Rex received an economics degree from

Newcastle Upon Tyne University before joining Arthur Andersen where he

qualified as a Chartered Accountant. He held Divisional and Group FD roles in

sectors spanning high technology, manufacturing and finance with companies

including Elders Resources, Avon Cosmetics and Pechiney. Rex joined Ceres

Power in 2006 as the Group’s Financial Director and Company Secretary and is

responsible for finance and administration.



Andrew Baker, Operations Director; Andrew has a Ph.D. in engineering from

Imperial College London and an MBA from Cranfield. He has Board experience in

the automotive and engineering services sectors and has extensive experience in

developing and managing international manufacturing businesses. He is a past

director of Ricardo Consulting Engineers where he was responsible for the power

generation business. Andrew joined Ceres Power in 2004 and is responsible for

technology, product engineering and manufacturing.

Nigel Brandon, Chief Scientist; Nigel has a Ph.D. from Imperial College London

and spent 14 years with BP and Rolls-Royce in fuel cells and related R&D areas.

He is now the Shell Professor of Sustainable Development in Energy at Imperial

College. Nigel is a world-renowned figure in the fuel cell community and a founder

of Ceres Power Limited.

Bob Flint, Commercial Director; Bob has an engineering degree from

Cambridge and an MBA from Imperial College London. He has spent 20 years in

the commercialisation of innovative technology through new services and

products, venture creation and intellectual property licensing. Bob became

Commercial Director of Ceres Power Limited in 2005.

Alan Wood, Non-Executive Director; Alan holds an honours degree in

Mechanical Engineering from Manchester University and an MBA from Harvard

University. He joined Siemens in 1981 and following a number of senior

management positions including Group Managing Director roles, he became Chief

Executive of Siemens plc in 1998. He has chaired various CBI councils, the EEF

Economic Policy and the Wood Review into EU Public Procurement for HM

Treasury in 2004. He joined Ceres Power in February 2008 as a non-executive

director and is currently Chairman of Siemens UK.

Sir David Brown, Non-Executive Director; David received a degree in

Electrical Engineering from Portsmouth, holds four honorary doctorates from Bath,

Kingston, Portsmouth and Surrey universities and was knighted in 2001 for his

services to British Industry. David is a prominent figure in the electronics industry

having started his career as an engineer with Plessey followed by management

positions at STC, ICL and Nortel. David joining Motorola in 1991 and has acted as

Chairman of the UK Trade and Investment Board, Chairman of the Ofcom

Spectrum Advisory Board and was also non-executive director of P&O. David

joined Ceres Power in February 2008 as a non-executive director and is currently

Chairman of Motorola UK.



CMR FUEL CELLS

CMR Fuel Cells (“CMR”) is an AIM listed developer of fuel cell ‘stacks’ for portable

and small stationary power generation applications. CMR is targeting the

consumer electronics industry where there is growing demand for power solutions

that are smaller and longer running than the conventional batteries that are

currently available. CMR has a market capitalisation of £4m based on a share

price of 20p.


Increasing demand for alternatives to conventional batteries

The energy storage of conventional lithium ion and lithium polymer batteries as

failed to keep pace with the growing power consumption rate of consumer

electronic devices such as laptop computers and mobile phones. Demand for

alternatives will drive interest in CMR’s fuel cell technology.

Established agreements with several major OEM manufacturers

CMR has currently has product trials underway with a number of OEMs, including

Samsung SDI of Korea.

Successful Product Demonstration

CMR raised their industry profile by demonstrating two prototype fuel cell stacks

for use in the PDA and laptop computer markets at the Tokyo Fuel Cell Expo.

Such demonstrations assist in attracting new joint venture partners.

Low Market Capitalisation

CMR’s current market capitalisation of £4m compares with its cash holdings of

£8.4m as at 31 December 2007. CMR therefore offers investors significant ‘bang

for their buck’ should there be success in further developing the technology and

obtaining commercial agreements.

Tight cost control

CMR is aware of its need to conserve cash and has been operating well within its

budget. CMR has sufficient funding for its operations until early 2010.


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OVERVIEW CMR is a UK based, AIM-listed developer of fuel cell 'stacks' for portable and small

stationary power generation applications. CMR was incorporated to exploit

technology from Sagentia (formerly Generics Group) and listed on the AIM in

2005.

CMR is targeting the consumer electronics industry where there is growing

demand for new power solutions, which are smaller and longer running than

today’s Lithium batteries.

Demand is being driven by the increasing power requirements of portable

electronics devices, which have outgrown incremental improvements in the

performances of conventional batteries where regular recharging is required.

CMR is developing Direct Methanol Fuel Cell (DMFC) stacks – which are the heart

of the fuel cell system that produce 5 to 50 Watts of electrical power. This power

range is suitable for powering a range of applications from media players through

to laptop computers and remote monitoring devices. DMFC power systems can

deliver longer electrical equipment run-times than conventional batteries as well

as features such as instant recharge. DMFC stack prototypes have been

demonstrated to potential customers around the world.

CMR has liaised closely with the portable electronics and fuel cell industries with a

view to implementing clear strategies to develop and deploy products that are

competitive. As a result, CMR is pursuing an over-lapping, two phase strategy

which will allow it to meet the needs of near-term ‘early adopter’ markets as well

as mid to long-term mass markets.

CMR currently has trials underway with a number of OEMs, including Samsung

SDI of Korea.

BUSINESS MODEL CMR is currently aiming to develop its DMFC stacks technology to a stage where it

can be commercially used in consumer electronic appliances.

CMR’s focus is on building commercial traction and revenue in emerging Asian

markets, where the majority of consumer electronic manufacturers are based. In

addition to permanent representation in Japan, CMR has active commercial

programs in Korea, Taiwan and China.

Major consumer electronic OEMs recognise the benefits of using portable fuel cells

for forthcoming products, however at this early stage of development they need

comfort that all aspects of deploying fuel cells are known and feasible. To provide

improved understanding, CMR is actively promoting its in-depth knowledge of all

aspects of fuel cells as an integral part of its commercial offering, alongside

conventional and mixed reactant DMFC stacks and demonstration systems.

CMR believes that many OEMs plan to field-trial fuel cell systems in Asian markets

in 2008/9 ahead of mass-market launches from 2010 onwards. CMR anticipates

that 2008 will see early deployment of its stacks based on ‘acid’ chemistry in trial

systems, building towards mass markets emerging from 2010 onwards. CMR

believes that it is well placed to service this market.

CMR’s long-term strategy is to develop the companies ‘stack’ technology to a

stage where they can be produced under ‘toll’ manufacturing (as opposed to



licensing), as components for battery replacement products. The OEMs will then

package the stack technology into cost-effective products. CMR’s aim is to retain

control of its core expertise but avoid the large expenditure involved in finalising

design, packaging and production phases of new products.

CMR recognises the value of developing a strong brand position and is the only UK

Company that exhibits portable fuel cells at all the major fuel cell exhibitions

around the world.

PRODUCT / TECHNOLOGY CMR is developing fuel cell technology at the micro end i.e. portable fuel cells that

have a power output below 1kw (but mainly in the 5 – 50 Watt range). The aim is

to develop these fuel cells to a stage where they can be used to power consumer

electronic devices such as media players and laptop computers.

To date most research at this level has focused on DMFC as it is expected the first

generation of micro fuel cells will use this technology. These fuel cells use an acid

membrane (electrolyte) and some Platinum catalyst.

CMR has a broad, unique knowledge of all aspects of portable fuel cells, including

Platinum free catalysts, membrane electrode assemblies, mixed and separated

reactant stack architectures, DMFC systems and specialist testing. While acid

membrane based first generation products will enable CMR to build early market

presence in less price sensitive applications, CMR is also developing Platinum-free,

alkaline membrane based technology which will allow CMR to follow-up with lower

cost products for later mass market applications.

Figure 4: Stack

CMR 2007 Annual Report

VALUE DRIVERS Milestones that are expected to drive the value of CMR’s business during 2008 are

summarised on the next page:



Obtain additional commercial agreements: It is clear that the major

consumer electronic OEMs recognise the benefit of portable fuel cells.

However, as with any new technology they require comfort that all aspects of

the technology are known and feasible. Through the winning of additional

commercial agreements, CMR will have the opportunity to demonstrate the

benefits of their technology to various industry players;

Further product development: CMR will continue to address key technical

targets of its technology, including efficiency and cost; and

Securing patents in key markets: As CMR continues to develop its

technology, they will seek to protect their intellectual property by securing

patents in key markets. Patents have already been granted in China and

Australia.

In the medium term CMR’s value will be driven by the award of initial contracts

with OEMs to supply first generation acid fuel cell stacks. These stacks may be

used in less price sensitive products until lower cost, Platinum-free, alkaline

membrane based technology is available.

The worldwide market for rechargeable batteries is estimated to be approximately

US$4.5b, rising to US$5.7b by 2010. The laptop computer battery market is

currently estimated at approximately 50 million units pa. It is clear that the

portable micro fuel cell industry only requires a small penetration rate to achieve

a large revenue base.

RESULTS At this time, CMR is a pure technology development company and as such did not

receive any product sales revenue in the year to 31 December 2007.

Administration expense, which includes research and development costs remained

the primary expense item, consistent with a business in the development stage of

its business.

CMR held £8.4m of cash and cash equivalents as at 31 December 2007. There

were no major fund raising activities in the 12 months to 31 December 2007.

Current assets totalled £8.9m compared with £0.2m of current liabilities.

Shareholders equity totalled £9.3m.


Entering into a Joint Development Agreement (`JDA') with Samsung SDI;

Active commercial programs in Japan, Korea, Taiwan & China;



Development of stand-alone demonstration systems tailored for specific

market opportunities;

Entering into Collaborative DTI funded development partnership with Johnson

Matthey Plc and Accelrys Inc; and

Continuing to operate well within budget, with strong cash reserves.


Announcing the development two new application specific, portable fuel cell

demonstration systems which were unveiled at the Fuel Cell Expo in Tokyo;

and

The announcement of a Joint Collaboration Agreement with Acta S.p.A. to

accelerate development of Platinum-free, alkaline membrane fuel cells.

Table 4: Profit & Loss 31 December Year End FY06 FY07

£ 000’s £ 000’s

Revenue - -

Other income - 125

Administration expense (1,825) (2,747)

Operating income before share based payments (1,825) (2,622)

Share based payments (726) (950)

Operating income (2,551) (3,572)

Net interest 523 524

Net profit/(loss) before tax (2,028) (3,048)

Company Data

Table 5: Balance Sheet 31 December Year End FY06 FY07

£ 000’s £ 000’s

Cash and cash equivalents 10,587 8,437

Other current assets 167 425

Total current assets 10,754 8,862

Non-current assets 580 582

Total assets 11,334 9,444

Current liabilities 163 161

Non-current liabilities - -

Total liabilities 163 161

Shareholders equity 11,171 9,283

Company Data



Table 6: Cash Flow 30 June Year End FY06 FY07

£ 000’s £ 000’s

Cash from operations (2,000) (2,435)

Cash from investing activities (53) 285

Cash from financing activities - -

Net cash flow (2,053) (2,150)

Cash and cash equivalents at end of period 10,587 8,437

Company Data

MANAGEMENT CMR’s management team have a broad range of commercial and development

experience, in particular electronic engineering experience and large scale project

management experience.

John Halfpenny, Chief Executive Officer; John has a Masters in Engineering

Science from Cambridge and is an experienced entrepreneur with significant

experience in the consumer electronics sector. He founded Micrologic Solutions,

ARM plc, Telephone Solutions Ltd, HII Ltd and Enterprise Network Sciences Ltd,

which he subsequently sold to various trade buyers.

Tim Curtis, Non-executive director; Tim was previously Chief Executive of

Telemetrix plc, a manufacturer of analogue semiconductors and portable

telecommunications test equipment. He is currently Chairman of AIM quoted IBS

OPEN Systems plc, a leading supplier of software systems to UK local government

and housing associations, and a non-executive director of Herald Investment

Trust plc. Tim has a BA from Cambridge in Economics and an MBA from Harvard.

Professor Gordon Edge, Non-executive Director; Gordon is one of the leading

business and technology figures in Britain. He is a Chartered Engineer, a Member

of the Institution of Electrical Engineers (MIEE), and a Fellow of the Royal Swedish

Academy of Engineering Sciences (IVA). He is also a member of the Advisory

Board of Cambridge University, Department of Materials Science, The Cambridge

University – MIT Institute and The Cambridge University Technology Transfer

Group.



ACTA S.P.A.

Italy based Acta S.p.A (“Acta”) is an AIM listed company involved in the

development and manufacture of unique patented catalysts for the hydrogen

generation, portable power and waste to energy markets. Acta has developed a

patented catalyst technology called HYPERMEC, which is a platinum free catalyst

that enables fuel cells to use bio-fuels, such as ethanol and glycerol, or other fuels

such as ammonia. Acta has a market capitalisation of £12m based on a share

price of 29p.






greenhouse gases.


Acta’s HYPERMEC technology does not require Platinum, a clear differentiator

from other catalysts in the market. Platinum has been suffering from high price

inflation, which threatens the price competitiveness of some fuel cells.

Relationship with Sumitomo

Acta has entered into a 10-year marketing agreement with Sumitomo Corporation

for the promotion of its products in Asia, and this agreement has culminated in

Sumitomo investing approximately £4.6m in Acta at 115p/share. Under this

agreement Sumitomo will promote Acta’s products in Asia while offering Acta

access to a first class commercial team in Asia.

Low Market Capitalisation

Acta’s current market capitalisation of £13m compares with its cash and financial

assets holdings of approximately £8m following the most recent placing of shares

to Sumitomo. Acta therefore offers investors significant ‘bang for their buck’

should there be further success in developing the HYPERMEC technology and

moving it towards commercialisation.

Acta believes they have sufficient funding for their operations until early 2010.


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OVERVIEW Acta was incorporated to exploit a breakthrough in catalyst technology and listed

on the AIM in 2005. Acta has developed a range of low cost Platinum-free catalyst

technologies called HYPERMEC catalysts. HYPERMEC catalysts allow the use of a

range of base metals in place of Platinum. The elimination of Platinum significantly

reduces the cost of production.

The HYPERMEC catalysts have applications across the markets of portable power,

hydrogen generation and waste to energy markets.

Acta’s catalysts also allow Hydrogen to be extracted from liquid ammonia at room

temperature, potentially allowing automobiles access to practical hydrogen power.

Acta’s technology is gaining traction with customers and as a result the customer

base has grown from 57 to 82 over the past 2 years.

Acta’s catalysts are currently being developed to:

Introduce high performance, low cost catalysts in fuel cells;

Allow new low cost hydrogen generation for fuel cells and other uses, through

the electrolysis of ammonia; and

Convert captured CO2 to liquid fuels such as ethanol.

Acta has commissioned a pilot plant in Italy, which has sufficient potential

capacity to allow the business to move into profit.

BUSINESS MODEL Acta’s strategy is to catalyse the hydrogen economy by introducing breakthrough

products and to exploit opportunities for these products in other markets, which

will:

Lower the cost of fuel cells;

Allow the use of practical fuels in fuel cells; and

Deliver cost effective and practical hydrogen supply.

Additionally, Acta intends to explore other applications its catalyst technology in

selected high growth or high margin markets such as battery technologies and the

conversion of captured CO2 to fuel.

Acta aims to generate revenue from the manufacture and sale of HYPERMEC

catalysts to fuel cell developers for both medium sized and portable applications.

The manufacturing processes of the catalysts are Acta’s core intellectual property

and Acta has implemented the operational structure required to serve large

electronics and automotive OEMs.

Acta intends to serve a global customer base by a direct sales team in the US and

European markets and through Sumitomo Corporation as a partner in the Asian

market. Acta has entered into a long-term marketing agreement with Sumitomo

for the promotion of its products in Asia, and this agreement has culminated in

Sumitomo investing £4.6m in Acta.

The Sumitomo relationship offers Acta access to a first class commercial team in

the Asian region and access to customers at a high level whilst providing a

solution to the cultural complexities of doing business in Asia. The agreement is



for an initial 10-year period whereby Sumitomo will promote Acta’s products in

Asia.

Acta's strategy with regard to its pilot plant is to:

Fully commission the pilot plant with up to one ton of capacity - sufficient to

take the company into profit;

Establish a full time operations team to create the processes for

manufacturing, quality control, logistics, purchasing etc; and

Analyse each stage of the manufacturing process at scale, understanding and

controlling key variables and preparing for ISO certification.

PRODUCT / TECHNOLOGY Acta was founded to develop a unique method of manufacturing fuel cell catalysts

so as to produce high performance without the use of Platinum. After several

years of development, Acta now has a number of patent protected technologies

for Platinum-free power. The technology has been named HYPERMEC.

HYPERMEC catalysts have demonstrated excellent power performance with a very

wide range of fuels, including ethanol, and offer significant cost advantages

against the current Platinum technology.

Acta's catalyst products are being targeted at applications within three main

markets, which have been selected for their high growth rates and openness to

new technologies. These markets are:

Hydrogen generation: catalysts for affordable hydrogen generation from

practical feedstocks are essential to enable the hydrogen economy;

Portable power: Platinum free catalysts for fuel cell and battery technologies to

provide affordable, clean, high energy density portable power; and

Waste to energy: the conversion of waste products to energy in order to

reduce emissions and increase margins.

Acta was granted its first patent in the EU in December 2006 for its core

templating technology and has a further 18 patent applications pending.

Figure 6: Markets

Acta 2006 Annual Report



VALUE DRIVERS Acta has set a number of milestones it intends to achieve in 2008. Achievement of these milestones is expected to drive the value of the business.

Drive revenue growth: Revenue growth is expected to be driven by

increased product sales and development revenues;

New customer trails / development contracts: Acta will seek to

commence new customer trials and/or development contracts in the hydrogen

generation and waste to energy markets;

Further product development: Acta will continue to research new or

improved catalysts in targeted technical markets;

Obtain grant funding: Acta will seek new grant funding for commercially

promising development projects;

Secure additional patents: Acta will continue to enhance its intellectual

property portfolio by filing patent applications where necessary; and

Increase revenue capacity: Acta is expanding its operational capacity with

an aim of achieving annualised revenue capacity of €6m by December 2008.

RESULTS In the 12 months to 31 December 2007, Acta posted revenue of €0.6m compared

with €0.07m in the previous corresponding period, reflecting both increased

shipments of sample products and development contract income from a

commercial customer.

Personnel costs remained the largest expense of the business.

Acta held €4.4m of cash and cash equivalents as at 31 December 2007 along with

€3.5m of financial assets. €5.0m of cash was raised during the year through

share issues, of which Sumitomo invested €2.9m to become a 4.9% shareholder.

Current assets totalled €9.0m compared with €1.7m of current liabilities.

Shareholders equity totalled €9.0m.




Strong growth in revenues following increased product sales, the launch of

new products and the targeting of new markets;

First major development contract announced with a global manufacturer;

Commercial traction gained in core markets of hydrogen generation and waste

to energy;

Strategic investment in Acta with Sumitomo Corporation subscribing for 4.89%

of the share capital, with a further 4.89% to be subscribed for after balance

date;

Technical milestones achieved and seven new patent applications filed; and

Operational targets achieved with commissioning of pilot production plant.


Sumitomo subscribing for a second tranche of shares in Acta at 115p/share,

providing Acta with sufficient cash to continue operations into 2010 and lifting

Sumitomo’s stake in Acta to 9.78%;

Collaboration agreement signed with Tokuyama Corporation a leading

membrane maker, to coordinate development activities; and

The announcement of a Joint Collaboration Agreement with CMR Fuel Cells to

accelerate the launch of Acta's fuel cell catalysts in portable electronics

applications.

Table 7: Profit & Loss 31 December Year End FY06 FY07

€ 000’s € 000’s

Revenue 70 600

Other operating revenue 2 -

Raw materials and consumables used (142) (290)

Personnel expense (3,088) (3,506)

Depreciation and amortisation expense (269) (326)

Other operating expenses (1,625) (2,097)

Operating income (5,052) (5,619)

Net interest 224 132

Net profit/(loss) before tax (4,828) (5,487)

Company Data

Table 8: Balance Sheet 31 December Year End FY06 FY07

€ 000’s € 000’s

Cash and cash equivalents 7,049 4,442

Other current assets 866 4,535

Total current assets 7,915 8,977

Non-current assets 2,623 2,750

Total assets 10,538 11,727

Current liabilities 1,225 1,678

Non-current liabilities 717 1,077

Total liabilities 1,942 2,755

Shareholders equity 8,596 8,972

Company Data



Table 9: Cash Flow 31 December Year End FY06 FY07

€ 000’s € 000’s

Cash from operations (3,902) (4,105)

Cash from investing activities (888) (3,779)

Cash from financing activities 555 5,277

Net cash flow (4,235) (2,607)

Cash and cash equivalents at end of period 7,049 4,442

Company Data

MANAGEMENT Acta’s executives have extensive experience in the management of companies in

the development stage of their business model. Several key executives have also

been employed with the Acta since its foundation.

Paolo Bert, Chief Executive Officer; Paolo’s previous career was in the yarn

extrusion industry where he founded Filteco, a leading global supplier of yarn

extrusion equipment. In 2000 Paolo’s interest moved to membranes and catalysts

and their use in fuel cells and in partnership with Alessandro Tampucci he has

developed the HYPERMEC technology, filing patent applications to protect the

development work undertaken. Since mid-2003 Paolo has dedicated himself full-

time to Acta and its opportunities within the field of fuel cell catalysts.

Toby Woolrych, Chief Operating Officer; Toby was educated at Cambridge

and is a chartered accountant. He joined Acta in 2005 after eight years with

Johnson Matthey, where he was employed in a number of senior management

roles including Managing Director of the company’s Speciality Coatings business

and Finance Director of the global Colours & Coatings division.

Robert Drummond, Non-executive Chairman; Robert’s experience is in

venture capital and he is very experienced in guiding young companies through

their early growth phases. He is a previous Managing Director of NatWest

Ventures and Grosvenor Capital and was Chairman of the British Venture Capital

Association. He is currently Chairman of Chrysalis VCT.

Fabio Mastrangelo, Non-executive Director; Fabio is an Italian chartered

accountant and auditor. He has been a member of the Council of Rome Chartered

Accountants and Chairman of the Income Tax Commission. He is Chairman of the

audit committees of several major Italian companies, including the Italian

subsidiaries of multinational public companies.

Geoff Bicknell, Non-executive Director; Geoff is a chartered accountant in

England and in Canada, and has held senior financial and general management

positions in Rockwell International Corporation, Lucas Industries, TI Group PLC

and Northgate Information Systems. He is currently a consultant to Maxima

Holdings Plc.

Marco Chiarion Casoni, Non-executive Director; Marco is an Italian chartered

accountant. In 1998 he founded Studio Casoni & Associati and today he is one of

the partners. In 2005 Marco provided extensive consultancy support to Acta as it

established its infrastructure and systems and in January 2006 he was appointed

as a Non-executive Director.



CERAMIC FUEL CELLS

Ceramic Fuel Cells Ltd (“CFCL”) is an AIM and ASX listed company involved in the

development of solid oxide fuel technology, which can provide efficient, high

quality and low emission electricity from widely available natural gas and

renewable fuels. CFCL is well positioned to benefit from the strong forecast

growth in Europe of domestic micro combined heat and power (m-CHP)

generation. CFCL has a market capitalisation of £70m based on a share price of

23p.






greenhouse gases.

World Recognised, proven technology

CFCL has a strong intellectual property portfolio, with 77 patents for 29 inventions

globally. Its solid oxide fuel technology is now proven and is internationally

recognised. CFCL have significantly mitigated technology, manufacturing, market

and supply risks.


CFCL’s fuel cells are able to run on a range of inputs, including natural gas, LPG,

bio-methane and ethanol. CFCL’s fuel cells ‘reform’ the fuel into hydrogen inside

the fuel cell stack itself, without external reformers or precious metal catalysts,

leading to higher electrical efficiencies.

Business Plan well funded and advanced

CFCL is now at an advanced stage of development and is moving towards

commercialisation of its technology. This is further confirmed by CFCL’s receipt in

February 2008 of an order for 50,000 m-CHP units from Nuon, based on agreed

specifications. CFCL now has product development agreements with leading

utilities and appliance manufacturers in four European markets, plus Japan.

CFCL is well funded with cash and financial assets of approximately A$39m (as at

31/03/08).


101520253035404550


pence

ADVFN



OVERVIEW Founded in Australia in 1992, CFCL has built up an extensive knowledge and

experience of solid oxide fuel cells, ceramics, powders, material science and

complete fuel cell systems. With a broad IP portfolio (77 patents for 29 inventions

globally) the company has established research, product development, testing

and pilot production facilities.

CFCL is a world leader in the development of solid oxide technology to provide

reliable, efficient, high quality and low emission electricity from natural gas and

renewable fuels. CFCL is using its solid oxide technology to develop small-scale

on-site m-CHP units that co-generate electricity and heat for domestic use.

CFCL is now at an advanced stage of development and is moving towards

commercialisation of its technology. CFCL is targeting the m-CHP market in

Europe and Japan, an emerging but potentially significant market. The m-CHP

unit is designed to be connected to the domestic gas supply and will be used to

generate highly efficient and low emission electricity and heat for the home.

Excess electricity will be fed into the electricity grid.

To assist in the commercialisation of the m-CHP unit, CFCL established an office in

the UK in September 2004 and in 2006 a subsidiary in Germany, the site of its

fuel cell manufacturing plant.

BUSINESS MODEL CFCL is aiming to be the supplier of choice for reliable and high electrically

efficient solid oxide fuel cell products, which manufacturers can easily integrate

into micro-generation appliances.

To implement this strategy, CFCL has carried out extensive development and

testing of its technology over the past 4 years. CFCL’s progress to date includes:

Successful development and testing of their fuel cells, as single cells and

integrated stacks;

Designed and built Balance of Plant systems. Balance of Plant systems

surround the fuel cell stack and control the inputs (fuel, air, water), outputs

(heat and electricity), timing and temperature controls;

Integrated the fuel cell stacks with their Balance of Plant into complete m-CHP

demonstration units;

Operated m-CHP demonstration units in field trials with customers in Australia,

New Zealand and Germany;

Designed, built and deployed a prototype ‘fuel cell micro-generator’ unit, called

‘Net~Gen™’;

Signing Product Development Agreements with leading utility customers and

appliance manufacturers in Germany, France, UK, Holland and Japan;

Shipping Net~Gen units to European appliance partners to integrate with

boiler units;

Established a plant in the UK to produce high quality ceramic powders, which

are a key component of solid oxide fuel cells, using the Company’s patented

technology;

Securing long term supply of fuel cell components from leading German

advanced ceramics manufacturers;



Securing a volume order for 50,000 units, based on agreed mCHP unit

specifications; and

Securing the site and commencing work on a large scale manufacturing plant

in Germany.

CFCL is also continuing to improve the reliability and lifetime of its fuel cell stacks,

including through a collaboration with leading fuel cell researchers at Germany’s

Julich research institute.

To date CFCL has earned the majority of its revenue from interest on investments

and field trial payments. Moving forward, CFCL intends to derive its principal

revenues from:

Sales of fuel cell modules (comprising stacks and associated Balance of Plant)

to appliance manufacturers; and

Sales of replacement fuel cell stacks.

Additional potential revenue streams include:

Field trial payments;

Sale of specialist ceramic powders;

Integration services to appliance manufacturers; and

IP licensing revenue.

PRODUCT / TECHNOLOGY During the past 8 months CFCL has been granted a further 4 patents bringing its

number of patents to 77 internationally for 29 inventions. A significant advance

was also made in its fuel cell output, with the module output doubling to 2kW

while using the same balance of plant, which significantly reduces the cost per

kW.

The first product to be powered by CFCL’s fuel cells will be m-CHP units for

domestic use. The unit will be connected to the existing natural gas network, to

provide high efficiency and low emission power and heat for the home, as well as

exporting excess power to the electricity network.

After conducting field trials in Australia, New Zealand and Germany from early

2006 to mid 2007, CFCL is now developing m-CHP products with leading utility

customers and appliance partners.

In the medium term CFCL will look to extend its technology into other

applications, such as remote area power units and auxiliary power units, as well

as products powered by a wide range of fuels such as LPG, ethanol, and other

fuels.

CFCL’s GennexTM fuel cell module and Net~GenPlus™ prototype ‘fuel cell micro-

generator’ unit, are illustrated here:



Figure 8: Gennex Fuel Cell module and NetGenPlus

CFCL

VALUE DRIVERS CFCL has set a number of milestones it intends to achieve in 2008. Achievement of these milestones is expected to drive the value of the business.

Further product development and deployment: Having developed its

business model on the introduction of m-CHP by utilities, CFCL intends to

move forward by developing and deploying semi-integrated products with its

partners;



Further demonstration of the m-CHP product through operating units

with appliance partners;

Continuing development of the fuel cell: CFCL continues to improve the

performance of its fuel cell, with a focus on improving lifetime and reliability;

Commence construction of German Plant: CFCL expects all equipment will

be installed by late 2008 with commissioning expected in June 2009;

Formalise the supply chain: CFCL is engaging with multiple global suppliers

of Balance of Plant components, ensuring dual-sourcing, to reduce unit costs;

and

Expand into Asian markets: in January 2008 entered the Japanese market

with leading gas appliance company Paloma (owners of Rheem, Solahart and

Raypak). CFCL expects to ship a Net~GenPlus unit to Paloma in mid 2008.

Longer term, the CFCL business will be driven by increasing demand for efficient

and clean energy, with energy companies and governments beginning to embrace

micro-generation.

The UK Government has estimated that micro-power products have the potential

to supply over one-third of Britain's total electricity needs and will help the

country improve its energy security, meet its environmental obligations and

deliver energy savings to consumers.

RESULTS In the 6 months to 31 December 2007, CFCL posted revenue of A$1.8m. Field

trial income rose 34% compared with the previous corresponding period, offset by

lower interest income.

Research and product development expenditure remained the largest expense

item, consistent with a business in the development stage of its business.

CFCL held A$1.6m of cash and cash equivalents as at 31 December 2007, along

with A$44.4m of financial assets. There were no major fund raising activities in

the 6 months to 31 December 2007. Current assets totalled A$6.2m compared

with A$3.1m of current liabilities. Shareholders equity totalled A$56.1m.


Signing of further product development agreements

• UK – E.On UK Ltd and Gledhill Water Storage Ltd

• Europe – Nuon and Remeha Group;

NetGenPlus units received ‘CE’ safety approval and were shipped to European

product development partners;

Commissioning of a plant in Bromborough, UK to manufacture high quality

ceramic powder using the Company’s proprietary processes;

Continued improvements in fuel cell stack performance and lifetime; and

Two further patents granted for inventions covering increased stack

performance and lifetime.




Entering the Japanese market with a partnership with Paloma Group: Paloma

services 10 million homes in Japan and is a leading producer of gas appliances

for domestic and commercial applications;

Volume Order from Nuon for 50,000 m-CHP units: The order is for 10,000

units per year over five years, beginning in H2 2009. The order is based on

commercial m-CHP unit specifications;

Fuel Cell module power output doubled from 1kW to 2kW;

Commenced capital works on the volume fuel cell plant in Germany: The plant

will have an initial capacity of 10,000 units/yr with completion in June 2009 at

a cost of €12.4 million; and

Five further patents granted

Table 10: Profit & Loss 30 June Year End FY06 FY07 HY08

A$ 000’s A$ 000’s A$ 000’s

Revenue from continuing operations 2,077 4,421 1,825

Other revenue 208 5 32

Research and product development expense (10,766) (12,050) (6,161)

General and administration expense (5,618) (7,113) (5,871)

Sales and marketing expense (1,247) (2,040) (988)

Net foreign exchange gain/(loss) 2,851 (2,901) 1,444

Net interest (822) - -

Net profit/(loss) before tax (13,317) (19,678) (9,719)

Company Data

Table 11: Balance Sheet 30 June Year End FY06 FY07 HY08

A$ 000’s A$ 000’s A$ 000’s

Cash and cash equivalents 11,367 3,658 1,627

Other current assets 30,468 9,226 4,620

Total current assets 41,835 12,883 6,248

Non-current assets 46,753 57,393 52,971

Total assets 88,588 70,276 59,218

Current liabilities 2,738 3,709 2,762

Non-current liabilities 96 224 339

Total liabilities 2,834 3,933 3,102

Shareholders equity 85,754 66,343 56,116

Company Data

Table 12: Cash Flow 30 June Year End FY06 FY07 HY08

A$ 000’s A$ 000’s A$ 000’s

Cash from operations (12,286) (15,335) (9,110)

Cash from investing activities (634) (7,501) (3,881)

Cash from financing activities 16,379 15,635 11,218

Net cash flow 3,459 (7,200) (1,773)

Exchange rate effect 2,438 (509) (258)

Cash and cash equivalents at end of period 11,367 3,658 1,627

Company Data



MANAGEMENT The management of CFCL has held senior positions in various industries, with a

wealth of experience in the fuel cell industry and renewable energy industries.

Jeff Harding, Independent non-executive director; From 1995 to 2005 Jeff

was Managing Director of Pacific Hydro Limited, Australia’s largest renewable

energy developer with wind and hydro energy projects in Australia, Asia and

Chile. During his tenure, Mr Harding oversaw the international expansion of the

business before its takeover by IFM Renewable Energy.

Brendan Dow, Managing Director; Prior to joining CFCL, Brendan spent almost

10 years as the Managing Director of the Australian subsidiary of global electrical

component manufacturer Ziehl Abegg AG. He has a wealth of experience in M&A,

market development, business strategy and operations.

Brendan Bilton, CEO, Ceramic Fuel Cells (Europe) Limited; Brendan has

combined his Masters qualifications in materials science with business

management skills. He was previously Business Development Manager for Morgan

Fuel Cells, where he managed major accounts with key international companies in

the development of fuel cell technology. Brendan is a member of the Fuel Cell

Councils of US, EU and the UK Government Fuel Cell Steering Group.

Dr Karl Föger, Chief Technical Officer; Karl is one of the initiators of solid

oxide fuel cell technology in Australia and has an international reputation in

research and development in the energy and environmental fields. He has

previously held various research and management roles in the areas of catalyst

and catalytic process development with the CSIRO, culminating in his

appointment as a Chief Research Scientist. He has been involved with CFCL since

its inception in 1992.

David Carruthers, Non-executive director; David previously served as CFO of

global operations with BP Finance and the European CEO. He is currently the head

of Corporate Finance at Tristar Corporate Advisers and CFO of Olympus Funds

Management.

John Dempsey, Non-executive director; John is a qualified Accountant and

has worked in public practice, commerce and the Queensland rural sector in

various positions. Previous appointments have included deputy Mayor of the City

of Cairns. John is presently a Principal of an accountancy practice in Brisbane and

has been a board member of Energex Ltd since 1999.

Michael Dureau, Non-executive director; Michael’s experience consists of

project management, production management, sales and marketing, supply

management and logistics, quality and risk management of international

companies in the water, power and process industries. He is currently an

Executive Director of the Warren Centre for Advanced Engineering, a leading

Australian engineering body.

Robert Kennett, Non-executive director; Robert was previously the Managing

Director of Powergen Combined Heat and Power Ltd and Chairman of PowerGen

Renewables Ltd. He is currently a consultant advising financiers and investors on

business opportunities in the UK Combined Heat and Power and Renewable

Energy markets.



I certify that this report represents my own opinions

Denis Gross, Senior Analyst

020 7405 7777

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