CFU - Ceramic Fuel Cells

I've bought in and am thinking this has got to be a pretty good climber in the long run. It's still below the initial offer price and hasn't begun the climb.

I mean Oil is in the 70's, market will spotlight alternative energy related shares like this one sooner or later. Has got impressive patented technology on the globally hot topic of fuel cells and some commercial steps already progressing with sales talk to NZ and Germany. So the market frenzy of when the transition from a CSIRO venture to a commercially operating business takes place is just around the corner. Long term supporters like Energex are at the shareholder list. Even BHP Billiton and Mitsui & Co. are holders.

Any comments?

Re: CFU

dagrizzbear said:

I've bought in and am thinking this has got to be a pretty good climber in the long run. It's still below the initial offer price and hasn't begun the climb.

I mean Oil is in the 70's, market will spotlight alternative energy related shares like this one sooner or later. Has got impressive patented technology on the globally hot topic of fuel cells and some commercial steps already progressing with sales talk to NZ and Germany. So the market frenzy of when the transition from a CSIRO venture to a commercially operating business takes place is just around the corner. Long term supporters like Energex are at the shareholder list. Even BHP Billiton and Mitsui & Co. are holders.

Any comments?

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I don't know anything about the fundamentals dagrizzbear but the chart for CFU is apalling in my view, long downtrend apart from a couple of blips, in another weak phase now.Wouldn't touch it with a barge pole.

So it will probably shoot up.

Re: CFU

Thanks Porper.

I am not a day trader and invest in the medium to long term so it's interesting to hear your opinion from a charts point of view. I guess I should have waited a little before I jumped in. Hopefully seeing gains two days in a row is a sign of a stop in the losing streak.

Should be a stock to watch on Monday.

A couple of days ago CFU announced that they would build a volume manufacturing plant in Germany to make solid oxide fuel cells for micro-combined heat and power (CHP). The first stage will see a production line capable of producing 50,000 1KW full cell stacks per year with the line running 24/7. The second stage will see the factory expanded to produce 150,000 1KW fuel cell stacks per year.

CFU who has a number of demonstration units in field trials has said they are not interested in building the CHP systems themselves. They would much rather build the stacks and work with existing appliance manufacturers to integrate the stacks into their products.

After the Australian market closed last night, CFU announced a product development agreement with Gaz de France, Europe's leading distributor of natural gas, and De Dietrich Thermique, to develop a fully integrated m-CHP unit for the French residential market.

CFU is dual listed on the ASX and AIM. This announcement pushed CFU's AIM price up 15% overnight.


I had an oportunity to have a tour through CFU's Nobel Park (Melbourne) facilities a week and bit ago. It's certainly impressive the gains they are making in size and efficiency every year. It was only in June 2005, they launched the first fuel cell powered CHP the size of a two door wardrobe. Then they brought out the NextGen, which was half the height of the first demonstrator. Many of the NextGen units are in the field, including 10 with a German utility, EWE.

In September CFU announced newer square ceramic stacks and improved other key components such as a 50% smaller steam generator, a 40% smaller heat exchanger, and a 75% reduction in the airflow through the system. They had a Nextgen chassis fitted up with the new square cells, and the stack was only half the size with all this wasted space in the top of the cabinet. I can only imagine what size the unit will be next year . .

We also saw the Zircon Powder plant ready to be shipped to a factory they are setting up in the UK. This was announced earlier this year and should be operational in April 2007. The Zircon Powder also has uses in other industries and hence there is a an oportunity for this plant to bring in revenue through the sale of the powder to third parties.

I think the announcement of the Zircon Power plant, Fuel Cell Factory in Germany and the overnight announcement of the product development agreement with Gaz de France shows the commercialisation is now full stream ahead and there should be good things happening over the next few years.

I'm not totally convinced CFU is good value, though the recent announcements will probably push the share price up at least in the short term.

At 150,000 1kw ceramic stacks p.a., what revenue stream are we looking at?

If a 1kw generator can retail at around $US550, ie. $A700 Yamaha EP1000 Generator, then the wholesale price of a 1kw micro-CHP ceramic stack (not the whole unit) is unlikely to exceed say $A150.
So we are looking at maybe 150,000 * $A150 = $A22.5m pa revenue. If profit margin is 50% (generous?) then annual profit is $A11.25m, and if the company is growing strongly p/e might be as high as 30, giving a market cap of $A338m. But this production level isn't reached till phase 2, and phase 1 goes to 2009. Discounting say 5 years at 15%, we get NPV15 = $A168m, or at 10% NPV10 is $A210m. I think those figures are reasonably generous.
Market cap is currently $A232m.

The project is to be funded by a combination of debt and equity, so there is also some dilution to come. In addition, competition and improving technology are likely to push prices down over the intervening years, and CFU is not the first cab off the rank.

The Gaz de France deal obviously adds value, but it is unclear how much, and any profits are still years away.

CFU clearly has potential, but I wonder if it is really worth buying at the current share price. I would have thought there was better value out there.

Disclosure: I bought CFU late 2005 & early 2006 for average 0.55 and have since sold them all at average 0.75. I would buy again around the 0.55 mark.

EasternGrey1 said:

If a 1kw generator can retail at around $US550, ie. $A700 Yamaha EP1000 Generator[/URL], then the wholesale price of a 1kw micro-CHP ceramic stack (not the whole unit) is unlikely to exceed say $A150.

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I think you are looking at the product purely as electrical generation.

What its really about is energy efficiency, greenhouse gas reduction and decentralised electricity.

The fuel cell as purely an electrical generator is more efficient than today's more efficient Combined Cycle Gas Turbines (CCGT) found in some power plants around Australia. Ceramic Fuel Cells are aiming at 50 to 60% electrical efficiency. Then in a centralized model, you have losses in the transmission grid. With Fuel Cells, they will be installed in the home close to where the power will be used. Gas can be stored, electricity is harder.

However where the real advantages come in is with CHP (Combined Heat Power). When the fuel cell converts the Natural Gas into electricity, it will also produce heat. This heat can be used for other applications such as water or room heating and further increases the overall system efficiency.

CFU's main market is Europe where cold winters see a boiler unit in the basement running 24 hours a day all winter to keep the house warm. This is why they are targeting condenser boiler appliance makers. So you get electrical power, and the heat is practically free. The UK and parts of Europe are also very much more in tune with greenhouse gas emissions and energy efficiency. They have mandates and targets in for low emission housing and significant energy reduction targets.

Regarding who will buy them, the current indication from the market is the utilities would. EWE in Germany is trialling over ten MicroCHP units, and the announcement from Gaz De France demonstrates great interest from the major French utility.

What the utilities plan to do is purchase the CHP units, install them into customer's basements, but retain ownership. The utility (e.g. Gaz De France) will run the units on their own wholesale gas, while selling the Heat and Electricity to the end users. So the customer will have no upfront capital costs - in fact they don't even need to worry about buying a condensing boiler. They just buy heat and electricity.

The utilities gain a decentralised grid with less transmission infrastructure and greater efficiency. The other thing the utilities have their eye's on is grid stabilization. They will control all these decentralised units installed into peoples homes and have the ability to export extra power into the grid in area's where it is needed. Apparently the utilities have already got models of this scenario.


Ceramic Fuel signs European deal - Nine MSN

Australian-based Ceramic Fuel Cells says it has signed a deal to develop its cells in domestic boilers with utility giant Gaz de France and boiler maker De Dietrich Thermique, sending its shares surging.

Ceramic Fuel Cells makes cells which use natural gas to create heat and power inside boiler units.

...

Ceramic Fuel Cells' broker Ambrian Partners said the exclusive deal would give Ceramic a virtual monopoly in France because Gaz de France is the largest supplier of gas and the second largest supplier of electricity, while De Dietrich is the French market leader.

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The way you put it, it sounds great - but -
- there is competition and CFU hasn't won yet, so there is still a chance to be factored in that EWE, Gaz de France etc might not use CFU's stacks at all (which I didn't factor into my calcs).
- a key issue is just how much CFU will get paid for each unit. Just because it's G de F not the householder doesn't necessarily mean they'll be paid heaps.

For me, the figures don't yet add up to compelling value at the current share price, though I'm not saying that CFU won't be a great investment over the next few years. My calcs suggest that at the current level of information, the shares are not far off being priced for perfection.

I'm currently treating it as a spec to be bought low and sold high, rather than a solid long term investment. If it keeps going up from here, I'll most likely not be on board, but future announcements might change the picture of course.

Interesting - Seems to just keep gradually floating up. Yesterday on the ASX it closed 95c up 2.7%.

Overnight on the AIM, CFU closed up 6.76%.

Since the announcement AIM:CFU is up 31.6% and ASX:CFU is up 26.6%

It seems this stock has been given renewed interest by an American commentator Dan Denning now living and working in Australia. He rates this thing as a top pick and has sent out recommendations on it yesterday. Yesterday it was $1.12 today its 1.29.

Spoke to one CFU's directors yesterday. Seems things are moving well with their trials and the plans to produce in Europe around 2009. They are not planning to sell the units in Australia at present. Our electricity is too cheap.

There is a shareholder information day at the Noble Park factory on Wed March 28. Bookings must be made on 0395542300. Some non shareholders may be allowed to attend if space allows.

Hoody

I think the rerating is more a going back to the old price coupled with todays announcement showing the product going commercial at full steam.

I bought a few a while ago. Some risk but not compared to most technology companies in the ASX. Could get taken over by the Europeans who can recognise a good tech. company. Probably get slapped in a correction though.

Thanks Knobby. You are of course correct in saying the announcement is the likely reason for the rise today. I did ask the receptionist at CFU that I spoke to this morning if there was an announcement today but she had no news. I took her word for it and neglected to look it up.



I'm going to the meeting and taking a tour of the factory at Noble Park on Wednesday 28th. Any others interested?
Cheers

Hoody

hoody,
I have done a bit of research on these .Fundamentally I think the company has HUGE potential.And just reaching the production phase with the plant in Germany.
Plenty of interest from European power companies.The French power company looks to be on board.
Just wondering if you are still on them and how the factory tour went.I just picked up a small parcel of them today .I know there is still a fair amount of spec surrounding CFU ,but the potential excites me!

Cheers Ya'll

Boyou said:

hoody,
I have done a bit of research on these .Fundamentally I think the company has HUGE potential.And just reaching the production phase with the plant in Germany.
Plenty of interest from European power companies.The French power company looks to be on board.
Just wondering if you are still on them and how the factory tour went.I just picked up a small parcel of them today .I know there is still a fair amount of spec surrounding CFU ,but the potential excites me!

Cheers Ya'll

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Ahoy Sea-Cadet Boyou

The Potential may excite you but I find the Technical much less flattering
I wish you Gods speed and Safe harbour

Any bounce will be a simple case of "Get-out Stakes" IMO

Salute and Take Care
and Please be quick and decisive when the time comes for ACTION!

Boyou said:

Just wondering if you are still on them and how the factory tour went.

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How did I miss the details of the factory tour. None the less, I visited them last December. My brother visited them the year before and comparing notes it appears the units just get smaller . . The decreases in size and increase in efficiency over time is quite impressive.

Of those ASF members that went on the 28th, did CFU have any clues lying around. On the tour on the 5th December, they had a condensing boiler being fitted out, but naturally couldn't comment much. The announcement came a week or two later . .

I still hold a parcel I brought during the IPO.

Hi responders!
Captain Chaza ,thanks for the warning.I do understand the risks.Could you expand on the Technical stuff? What don't you like about the system?
YChromosome ,thanks for your input .I live in Bris ,so it was not possible to attend the tours.I see you have been holding a while..still confident about them ,now they are reaching the next phase?

Cheers Ya'll

Boyou

No I'm not still in the stock. I bought at 1-20 and sold at 1-12. Glad I got out when I did but I still have the company in my watchlist as I'm very confident it will eventually produce an excellent return. But production and installation of units is over a year away so its not going to make money any time soon. I'm of the opinion there is lots of better value out there at present where your money can return a much faster profit.

Hoody

Thanks Hoody, I will just see how they run for a while....I don't mind waiting.

The next couple of years will be interesting for this type of technology as people begin to grasp the reality of LOCALISED energy generation.One small step toward lowering Greenhouse Gas emissions.

Bring it on ,I say!


Cheers Ya'll

Boyou said:

YChromosome ,thanks for your input .I live in Bris ,so it was not possible to attend the tours.I see you have been holding a while..still confident about them ,now they are reaching the next phase?

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I'm in Adelaide, likewise my Brother. We took the oportunity to go over to Melbourne for a look. But I understand, it's not like you can just take a few hours off work and drive down the road for the tour. .

Yes, I'm actually more confident now about the company than ever. When they first listed, while you could see some potential, it was hard to justify the economics which at the end of the day makes or breaks the product. Now with the interest and the large utility alliances in the UK, Germany etc I can really see a large market for them.

There was also the problem of convincing Joe Blogs, member of the public, why you would buy a MCHP system over something else. Now that the Utilities want to pay for them, install them at the customer premises and charge the customer for heat/hot water and electricity, while also using them to balance their power grids, the risks of poor customer takeup are also ellivated. I would imagine very little retail distribution, but a few large utility type orders, and hence this comes with less support costs.

While things look more rosy, it's still a long term play. It will still take a few years to see the start of commercial manufacture. While we wait, if there is little news, the share price could soften. CFCL looks like they are well positioned within the market, but other players could still come in and step on them.

Thanks for your input YChromozome,

Looks like the SP has taken another little run up.looking at the chart on ASX, I see it has been doing a bit of a Rhumba for a while.

Anyone care to speculate on the moves? Is it smart money doing a bit of massaging? Hope not .

Cheers Ya'll

Boyou said:

Anyone care to speculate on the moves?

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CFU always seem to have some speculation and rumor about future deals in the media, some turn out to be valid, others not.

Today it was a consortium of Middle East investors?

CFCL in demand on bid hopes - The Times, June 6th.

Heavy trading in Ceramic Fuel Cells Limited (CFCL) sparked talk that the boiler maker could have attracted a predator.

While the shares finished flat at 39 ½p, more than 13 million were exchanged, compared with an average daily turnover of less than a million. CFCL, which is running trials of an electricity-generating cell with power suppliers, has long been mooted as a potential target for a large white goods maker. Yet rumour has it that a consortium of Middle East investors has been showing interest in the group’s technology.

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