16 December 2020

AFC Energy forms strategic partnership with ABB

AFC has moved strongly since an RNS yesterday announcing a tie-up with the Swiss-Swedish engineering giant ABB . It was trading at 50p earlier this morning, vs the 16p offering price last summer, in a deal in which LGB clients participated, and LGB acted as co-book runner.

 

The agreement gives AFC a three year right of first refusal to supply their fuel cell charging points to ABB customers who cannot access adequate power supplies for conventional recharging points. AFC have observed that the local grids very often lack the capacity to supply the very high energy requirements for rapid recharging of an increasing number of vehicles - not everyone has an 11kV line passing close by - and clearly ABB see the same problem, with the experience of already having sold 17,000 fast chargers worldwide.  

Encouragingly the agreement is not just for cars, but covers also logistics hubs, urban transport centres such as bus depots, ports and marinas, and even vertical take-off and landing craft!  

AFC’s fuel cells will be packaged with ABB’s controls and charge point. It seems that ABB are looking to extend the agreement into data centres and power supplies. ABB have big contracts in the power recharging area including a $2bn deal with Electrify America, with Octopus Energy in the UK, and Ionity across 24 countries. They are a highly credible partner. AFC anticipates a launch (and therefore that revenues will be booked) in H2 2021.

AFC, unlike for example Ceres Power (with Weichai and Bosch) or ITM (with Linde and JCB) has lacked a “big brother” to help with market access and although this deal has not come with ABB taking a stake (as has been seen elsewhere) it is both a product validation and a big move towards commercialisation.

AFC’s brokers have reacted positively: Zeus who had a 68p valuation said (see attached) that they would “review [their] forecast assumptions and valuation in due course, but believe the risk/reward profile remains firmly on the positive side following this latest exciting news”.

The deal is not exclusive on either side, though the right of first refusal of supply is in AFC’s favour, and there are no guaranteed revenues, but it is none the less a highly encouraging development.

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