First published in the Quoted Cleantech newsletter - January 2010

by Andrew Hore

Although the Alternative Investment Market’s cleantech sector recovered well in 2009, it still failed to outshine AIM as a whole, which rose more than twice as much. Fuel cell companies were major contributors to the cleantech recovery during the year, but these firms still have much to prove.

The last Sigma Capital Cleantech index published during 2009 was for the period up to 18 December 2009. Over the twelve months the index rose a creditable 26.6%, which compares with a rise of 59.7% for the FTSE AIM 100 index. After an initial period of underperformance, the Sigma Capital Cleantech index caught up during the summer. However, the gap between the two indices widened again during the autumn.  

The fuel cells sub-sector rose by nearly 107% over the year, but fell back during the last few weeks of 2009. This strong performance by fuel cell companies would not have been predicted one year ago, when CMR Fuel Cells left AIM because it felt it was being undervalued by the market.

AFC Energy, whose share price has risen by 344% over twelve months, is the best performing cleantech share in the index. Catalysts developer Acta is also among the top ten performers, following a 163% rise. Shares in Ceramic Fuel Cells (CFC) more than doubled, whilst Ceres Power’s shares rose 86.5%. Ceres dominates the fuel cells sub-sector and represents 6.5% of the whole Sigma Capital Cleantech index.

The only significant faller in the fuel cells sub-sector was Proton Power Systems, whose share price declined by nearly one quarter.  

All of these companies are nearing the point when they should have commercial products. After years of cash outflows, they will need to show that these products will be successful and capable of generating revenues and profits.
 
Ceres, AFC and CFC have all raised cash over the past year, so their coffers are full and they have no short term worries about funding. Generating cash from their operations, however, is a lot further off.

AFC delivered a 3.5kW fuel system using waste hydrogen from chlorine manufacturing to AkzoNobel at Bitterfeld in Germany on 16 April 2009. On 22 June the system produced its first electricity. AFC has subsequently signed up INEOS, but the company will need to roll out these plants over a number of sites before it starts to make money. AFC also has an exclusivity agreement with ASX-listed Linc Energy, which wants to use AFC’s technology in underground coal gasification projects.

Near the end of the year, Ceres raised £31.4 million through a share placing at 165p per share. The cash will be used to fund the trialling of the company’s micro-CHP boiler in 2011. Centrica has exclusive UK rights to the Ceres micro-CHP boiler technology.  Although progress has been slow over the years, Ceres has been meeting its targets in recent times.

Like its micro-CHP peers, CFC was frustrated by the slow progress made by its boiler manufacturing and utility partners and decided to develop a device that it could sell itself. BlueGen, which is the size of a dishwasher, can work with an existing or new boiler and can produce up to 17,000kWh of power per year. That is enough electricity to power a home, and any surplus can be sold to the grid. VicUrban, the Victorian Government’s sustainable urban development agency, has installed a BlueGen unit at its sales office in the Aurora Housing Development in Melbourne, and plans to install two other BlueGen units at its housing developments.

CFC continues to work with boiler manufacturers who will incorporate the fuel cell technology in their boilers, although this will take longer to generate revenues.

Proton has chosen to focus on a fuel cell-based power pack that has a number of different uses, rather than a large number of different products. Production, which is outsourced, is expected to commence in the spring.

All of these companies should discover over the next couple of years whether they really have products that can be sold in volume.