Clean Power Hydrogen Plc

Regulatory Filings • Jan 17, 2022

National Storage Mechanism | Additional information

RNS Number : 5593Y

Clean Power Hydrogen

17 January 2022

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This announcement is an advertisement and not an admission document or a prospectus.  This announcement is not and does not constitute or form part of, and should not be construed as, an offer of securities for subscription or sale in any jurisdiction nor a solicitation of any offer to buy or subscribe for, any securities in any jurisdiction, nor shall it or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with, any contract or commitment whatsoever.  This announcement does not constitute a recommendation regarding any securities.  Prospective investors should not subscribe for or purchase any securities referred to in this announcement except in compliance with applicable securities laws and regulation and on the basis of the information in the final admission document ("Admission Document") to be published by the Company, and any supplement thereto, in connection with the proposed admission of the its issued and to be issued ordinary shares ("Shares") to trading on the AIM market of London Stock Exchange plc.  A copy of the Admission Document will, following publication, be available for viewing on the Company's website at https://www.cph2.com/.

17 January 2022

Clean Power Hydrogen Plc

("CPH2", the "Company" or the "Group")

Intention to Float on AIM

CPH2, the UK-based green hydrogen technology and manufacturing company that has developed the IP-protected Membrane-Free Electrolyser ("MFE"), is delighted to announce its proposed admission to trading on AIM (the "Admission").

The Group designs and manufactures hydrogen production units and is focused on the commercial production of green hydrogen in a simple, safe, and sustainable manner. The Group intends to raise approximately £50 million by way of a placing of new Ordinary Shares on Admission ("Placing"). Cenkos Securities plc has been appointed as Nominated Adviser ("NOMAD") and sole broker to CPH2.

Highlights

·    Flexible route to market - In addition to the Group being a developer and seller of the MFE technology through traditional product sales channels, the intellectual property protection obtained by the Group enables it to pursue international joint venture and licensing arrangements. Resultingly, the Group has the potential to offer a low-cost business model combined with the potential to scale in the short term.

·    Opportunity to penetrate a very fast-growing market - The development of the hydrogen economy is forecast to lead to a 650x increase in European demand for electrolysers by 2030, with an EU electrolysis capacity target equivalent to 40GW. This requires investment of up to c. €47bn towards electrolysers producing 10 million tonnes/year of renewable hydrogen. The Group aims to become a globally recognised and highly-profitable designer, manufacturer and licensor of its MFE technology and is targeting 4GW production capacity by 2030. Meeting this target would be equivalent to a 10 per cent. market share of the projected EU market, albeit the Group is aiming for traction with customers across the global marketplace, where required electrolyser capacity is estimated to reach 100GW within the same time frame.

·    High-calibre customer base - The Group has an existing blue-chip customer base and a contracted orderbook of 4MW of unit production for delivery in 2022, providing an excellent platform for future growth. Beyond this, the Group has an established pipeline of new opportunities at varying stages of development, including active discussions with current and quoted customers in respect of potential orders in excess of 160MW.

·    Acting as a disruptive fast follower - In a rapidly-developing market place, the Directors believe CPH2 is well placed to benefit from the favourable commercial and regulatory drivers as hydrogen becomes increasingly central to the delivery of global 'net zero' commitments.

·    Lowering the cost - The Group's product design underpins its ambition to offer end customers the lowest Levelised Cost of Hydrogen ("LCOH") on the green hydrogen market and to help establish hydrogen as a viable source of power in the future. When coupled with renewable electricity as a power source, the CPH2 electrolyser is capable of producing cheap, green hydrogen and medical grade oxygen.

·    The Membrane-Free Electrolyser has many benefits:

‒     Increased uptime and efficiency - By removing the need for a membrane in the electrolyser unit, MFE units have (a) a reduced risk of failure and downtime for maintenance purposes and (b) reduced production costs. Both these factors combine to contribute to a lower anticipated LCOH for the end customer and increase the economic viability of hydrogen as an alternative power source. In addition, whilst electrolyser efficiency typically reduces over time due to membrane and catalyst poisoning resulting in the reaction sites becoming blocked, this degradation risk is avoided by CPH2's membrane-free design. Consequently, the MFE design has the potential for lower lifetime costs than membrane-based designs. By removing the membrane, the stack efficiency is also improved, and the Group's small-scale stacks have achieved 74-80 per cent. efficiency without a catalyst.

‒     Absence of rare materials - The design of the MFE is based on the use of ubiquitous materials and means high value, platinum group metals are not used in its production. This feature decouples the materials cost of the electrolysers from the volatile precious metals market with its limited supply and reduces the LCOH for the end customer by reducing the unit cost price. It also aids in the contribution of the MFE in meeting net zero targets by reducing the initial impact on the environment through the mining, refining and sourcing of platinum products.

‒     Cryogenic separation - The design of the MFE has challenged the market view that mixed gases must be avoided for safety reasons by removing all potential sources of combustion, including heat, dynamic pressure fluctuations and friction, with separation of the gases then following by utilising cryogenic separation. This secondary process is an established technology used in other industries and has a number of benefits when used in the MFE. By cryogenically separating gases, the end products of hydrogen and oxygen have improved purities, with effectively zero catalytic impurities or contaminants. As a result, the oxygen produced through the MFE is of medical grade and therefore has an increased market for sale. Furthermore, the liquification of the hydrogen is easier because the end product is produced at a lower temperature, reducing the level of cooling, and associated cost, required to achieve liquification.

‒     Feed source flexibility - The CPH2 electrolyser is capable of utilising potable water, also known as drinking water, as its feed product, removing the requirement for any pre-treatment and creating a potential cost saving. By removing the grey or wastewater end product, the CPH2 electrolyser removes the need for certain planning requirements and improves the environmental benefits. Traditional electrolysis technology has been heavily dependent on the availability of specific water sources to feed the electrolyser and can result in the production of grey or wastewater, which has environmental and planning implications.

‒     Enhanced protection - The MFE uses a simplified stack which enables a simple and shortened production process, resulting in a reduced cost of spare parts and maintenance. As a result, the Group is able to offer a 25-year warranty on the stack, in conjunction with a service and maintenance contract, and produce the initial product at a lower cost and lead time.

‒     Scalable - The modular design of the MFE allows for all components to be built on modular process skids and for the units to be more easily transported and assembled in the required scale and specification for the end customer.

·    ESG embedded across the business and products

‒     As a Group targeting high-growth ambitions by pursuing the decarbonisation of the energy system, the Group's intention is that ESG considerations will be embedded across the business and products

‒     The Company will be awarded the London Stock Exchange's Green Economy Mark at Admission, which recognises companies that derive 50% or more of their total annual revenues from products and services that contribute to the global green economy.

‒     CPH2 has implemented supply chains with the aim of sourcing key components from local suppliers where possible, such as the steel used in the MFE, in an effort to reduce the carbon footprint of the supply chain.

‒     The MFE is designed to be manufactured using up to 98 per cent. recyclable or reusable materials.

‒     Following Admission, the Group intends to regularly disclose key non-financial performance indicators aligned to their approach to ESG and to the expectations of stakeholders and which will include metrics on carbon emissions, health and safety, diversity and community investment.

Jon Duffy, Chief Executive Officer of CPH2, said:

"We are delighted to announce our proposed placing and Admission to AIM, to support the rapid growth of CPH2. Our approach to electrolyser technology is based on challenging long held market views for the benefit of our customers and the market as a whole, and the result is a lower cost, simple, much more durable electrolyser to separate hydrogen and oxygen from water. The new capital raised from a listing on AIM will position the Group well to become a globally recognised and highly profitable designer, manufacturer and licensor of the membrane free electrolyser with at least a 4GW production capacity by 2030.

"Hydrogen is central to Governments' strategies to decarbonise the economy. This drive to net-zero is changing the way that electricity is generated, stored and managed. We are aiming to be at the forefront of the technology enabling this transition."

For more information, please contact:

Clean Power Hydrogen Plc	via Camarco
Jon Duffy, Chief Executive Officer
Cenkos Securities plc - NOMAD & Broker
Neil McDonald	+44 (0)131 220 9771
Peter Lynch	+44 (0)131 220 9772
Adam Rae	+44 (0)131 220 9778
Camarco PR	+ 44(0) 20 3 757 4980
Billy Clegg
Owen Roberts
Monique Perks

The Company's ISIN is GB00BP371R64 and its SEDOL is BP371R6;

To find out more, please visit: https://www.cph2.com

Overview of CPH2

CPH2 is the holding company of Clean Power Hydrogen Group Limited ("Clean Power") which has almost a decade of dedicated research and product development experience. This experience has resulted in the creation of simple, safe and sustainable technology which is designed to deliver a modular solution to the hydrogen production market in a cost-effective, scalable, reliable and long-lasting manner. The Group's strategic objective is to deliver the lowest LCOH in the market in relation to the production of green hydrogen. The Group's MFE technology is already commercially available and demonstrating cost efficiencies and technological advantages.

In addition to a contracted orderbook of 4MW for delivery in 2022, the Group has an established pipeline of new opportunities at varying stages of development, including active discussions with current and quoted customers in respect of potential orders in excess of 160MW.

The Group designs and manufactures hydrogen production units that incorporate its MFE technology which, in combination with cryogenic gas separation, delivers hydrogen and oxygen in separate streams. When the Group's MFE is supplied by renewable electricity it delivers green hydrogen with a purity of up to 99.999% and medical grade oxygen.

The Group's products have the potential to deliver:

‒     hydrogen as an energy source;

‒     pure hydrogen;

‒     hydrogen as a process enhancer; and

‒     medical grade oxygen.

The Group's business began with the establishment of Clean Power Hydrogen Limited in the republic of Ireland in 2012 by Joe Scott and Dr Nigel Williamson. UK operations were established in 2016 with completion of a demonstration to evidence proof of concept showing that hydrogen and oxygen could be separated by using a simple liquid nitrogen-cooled cryogenic system.

The Group is currently producing its MFE220 product which runs with 1MW of input power and is capable of producing 450kg/day of high purity green hydrogen. The MFE220 is designed to be 'plug and play' with any end user required only to provide the relevant hard standing pad, electricity and water supply. The MFE220 is designed around the principle of being simple to build, operate and maintain. The Group is in the final stages of concept design and layout for its MFE440 product, which will operate on a 2MW input power and will be capable of producing 900kg/day of green hydrogen.

On 14 January 2022, CPH2 entered into a non-binding letter of intent with Kenera Energy Solutions Limited ("Kenera"), part of the KCA Deutag group, pursuant to which Kenera indicated its intention to participate in the Placing and to subscribe for or acquire such number of Shares at the placing price as will equate, in aggregate, to the amount of US$10 million.

In parallel, CPH2 and Kenera entered into a letter which confirmed the parties' non-binding objective to negotiate and agree the terms a global technical cooperation agreement (the "Technical Cooperation Agreement") to enable Kenera to assemble CPH2's proprietary products at any of its manufacturing facilities on terms to be agreed. Pursuant to the binding terms of the letter, CPH2 has (i) granted Kenera a period of exclusivity in respect of the matters to be covered by the Technical Cooperation Agreement until 30 April 2022 or, thereafter, whilst negotiations are continuing between the parties, and (ii) agreed to establish an advisory committee composed of representatives from both CPH2 and Kenera, if Kenera does participate in the Placing for an amount not less than US$7.5 million.

The KCA Deutag group is a leading drilling, engineering and technology company headquartered in Aberdeen. KCA Deutag has over 130 years of experience, with roughly 9,300 skilled employees operating across 20 countries worldwide. In 2020, the KCA Deutag group generated revenue of US$1,169 million and EBITDA of US$253 million.

Use of proceeds

The funds raised through the Placing, along with the Group's existing cash resources, will allow CPH2 to undertake capital investment in the Group at two key levels; to build out manufacturing operation including assembly, logistics and stack automation; and, to complete the identification of a potential site for a Northern Ireland factory and complete the fit out of the identified site and implement operations at the new factory. The funds raised will also be used to continue investment in the Group's research and development capability, enhance the existing intellectual property protection of the Group, provide working capital to enable the Group to establish a stock of completed units and with capital for investment in potential acquisitions to complement current Group operations, invest in the sales and marketing capability of the Group and provide contingency funding.

Market Overview

The development of the hydrogen economy is forecast to lead to a 650x increase in European demand for electrolysers by 2030, with an EU electrolysis capacity target equivalent to 40GW requiring investment of up to c. €47bn towards electrolysers. The addressable global green hydrogen market is predicted to be worth €10 trillion by 2050, with Europe accounting for in excess of €2 trillion of the total market, by which time green hydrogen is expected to supply 24 per cent. of the world's energy needs and to become the largest electricity customer.

There is considerable market anticipation that the potential for green hydrogen is not only in the scope to be a low carbon source of power, but also in that it has the potential to be the cheapest form of hydrogen produced globally. This is driven by the increasing prevalence of onshore and offshore wind and solar generation offering the cheapest method to produce a megawatt-hour of electricity in most major economies, with costs only expected to decrease as the technologies continue to improve and the efficiency and utilisation of renewable energy sources increases. The International Energy Agency ("IEA") estimates that the cost of producing hydrogen from renewable electricity could fall by 30 per cent by 2030, whilst mass manufacturing of the technology involved will reduce this further.

The widespread availability and economically viable pricing of hydrogen is central to its broad adoption as a key component in the decarbonisation of economies. Once these key considerations are met, investment in the technology from an end user and intermediary perspective is expected to follow.

The low carbon hydrogen market is expected to develop over the next decade, with an initial movement likely to be projects of up to 20MW electrolytic hydrogen production. These projects need to be deployed at pace, with production and end use closely linked. As the industry understanding and experience grows, larger projects are expected to emerge with demand for 100MW of electrolytic hydrogen production. It is forecast that as these projects emerge, the end users that they are serving will expand to cover transport, industry and power generation.

The Group aims to become a globally recognised and highly profitable designer, manufacturer and licensor of its MFE technology and is targeting 4GW production capacity by 2030. Meeting this target would be equivalent to a 10 per cent. market share of the projected EU market, albeit the Group is aiming for traction with customers across the global marketplace. The EU has set a 40GW electrolyser capacity target by 2030, producing 10 million mt/year of renewable hydrogen and, globally, required electrolyser capacity is estimated to reach 100GW within the same time frame.

Board of Directors

Christopher (Chris) Train (Proposed Non-Executive Chairman)

Chris is an experienced board member and former chief executive officer with a demonstrated track record of delivery working in the energy and utilities industry. Chris has previously been the CEO of Cadent Gas Limited and National Grid Gas Distribution Limited and the Chair to the NetGas Health Safety and Environment Committee and is an Executive Director of CT Energy. Chris was formerly a director of Southern Gas Networks Plc and Scotland Gas Networks plc. Chris has extensive experience of working in the energy infrastructure industry having spent 9 years at National Grid in various senior positions. In addition, Chris holds an MBA from the University of Hertfordshire.

Jonathan (Jon) Duffy (Chief Executive Officer)  

Jon has over 25 years business leadership experience. Jon has helped to transform the performance of SME's, multi-national and FTSE 100 companies. Jon's background includes agriculture, food, drink, and he is currently a NED for UniBio, a biotechnology company with core competencies in fermentation technologies. Regarded as one of the leading experts in business turnaround and value creation with a reputation for dynamic leadership, Jon took up a full-time role at the Company in 2020 and is tasked with taking CPH2 from the start-up green technology company through to full commercialisation.

Clive Matthew Brook (Chief Financial Officer)

A chartered accountant and former board director at 3i plc, Clive has advised the UK government and other public sector bodies on SME development and venture capital. Clive also runs a FCA-regulated corporate finance business and is a Director of the North West Fund, a £155m venture capital fund which utilises ERDF and EIB money to be invested in the North West of England. Clive has been involved with CPH2 since 2016.

Natalie Jayne Fortescue (Proposed Non-Executive Director)

A chartered accountant and experienced capital markets professional, Natalie has a background in corporate finance and investor relations. Natalie had a long investment banking career at Investec and as a corporate partner at Oriel Securities (now Stifel Europe) prior to joining Genel Energy plc as their Head of Investor Relations. Following this, Natalie spent six years at Premier Oil Plc in various corporate finance roles. Natalie was appointed as a Non-Executive Director of Serinus Energy Plc in March 2021. She has spent over 20 years advising companies on corporate finance transactions, fundraising, strategy, debt refinancing and restructurings, investor relations and the impact of corporate transactions on stakeholders.

Ricki (Rick) Smith (Non-Executive Director)

An accountant by profession, Rick's background includes textiles, packaging, and recently consulting with Private Equity Houses, advising on their M&A activity across Europe and North Africa. Early in his career, he held various Managing Director roles integrating and turning around business. As CFO of Chesapeake, a multi-national packaging company, along with the CEO, he led a significant turnaround of the business, including numerous acquisitions, commercial development, and extensive pension scheme restructuring, leading to the secondary sale to Carlyle in 2013 for £460mn, raising £290mn in the process to support the sale. Subsequently, he was executive vice-president on the Board of Multi Packaging Solutions ("MPS") responsible for integrating their Asian Operations, Corporate Development, and the innovation group. The MPS board listed the business on the NYSE in 2015 following a successful merger with Chesapeake in a $1.8bn listing.

Important Information

The contents of this announcement, which has been prepared by and is the sole responsibility of the Company, has been approved by Cenkos Securities Plc ("Cenkos") solely for the purposes of section 21(2)(b) of the Financial Services and Markets Act 2000 (as amended). 

This announcement does not constitute, or form part of, any offer or invitation to sell, allot or issue, or any solicitation of any offer to purchase or subscribe for, any securities in the Company in any jurisdiction nor shall it, or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment therefor.

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