SMALL CAP IDEAS: AFC Energy rally deal indicates ramp-up

A report this week that Britain alone will have 40 million electric vehicles on its roads in twenty years highlights why Tesla is now the world’s most valuable car company.

A question still to be convincingly answered, though, is where the power to fuel mass adoption of electrical vehicles is going to come from. Increasingly, fuel cells, especially those that use hydrogen, are being tipped as the answer.

AFC Energy is one of the UK companies leading the way in this field, but the AIM-listed group says the market is a lot bigger than just electric vehicles.

Other markets, such as off-grid, mobile power supply are arguably just as large and important, the group says.

Formula E, using electrically powered racing cars, is already well-established and watched by huge audiences worldwide. Extreme E is its sister company and has paired with AFC for an electrically powered SUV rally championship

Formula E, using electrically powered racing cars, is already well-established and watched by huge audiences worldwide. Extreme E is its sister company and has paired with AFC for an electrically powered SUV rally championship 

Currently, that is where AFC is focused and to help highlight the opportunity it has just signed a deal with sports group Extreme E.

Formula E, using electrically powered racing cars, is already well-established and watched by huge audiences worldwide. Extreme E is its sister company and has paired with AFC for an electrically powered SUV rally championship.

Adam Bond, AFC’s chief executive, believes that as well as the cars, the championship will showcase how hydrogen fuel power can be used where power is hard to get and as a replacement to the existing standard option of heavily polluting diesel generators.

The company will provide the power chargers for twelve electric SUVs as they race across some of the most challenging terrains in the world.

Bond says the challenge will be to keep the SUVs charged in environments as different as the deserts of Saudi, the Amazon jungle and Arctic Circle in Greenland.

That will not only mean providing hydrogen power to generate the electricity to run the vehicles, he says, but also to provide it in a sustainable, carbon-free way. Extreme E insisted on a zero-carbon emission option says Bond.

Hydrogen fuel cells use electrolysis to produce electricity with the by-products of just oxygen and water. Using electrolysis powered by solar panels means that the hydrogen to fuel the chargers for the SUVs can be generated on site. Recycling the water produced from the electrolysis process on site will make the system almost completely self-sustaining, adds Bond.

AFC will use a bespoke version of its HPower fuel cell system delivered to the site of each of the races.

Though it is a commercial transaction and will generate revenues, Bond says it is how it will raise the profile of Extreme E, AFC ‘s technology and also the impact climate change is having, that is just as important.

AFC chief executive Adam Bond believes that as well as the cars, the championship will showcase how hydrogen fuel power can be used where power is hard to get

AFC chief executive Adam Bond believes that as well as the cars, the championship will showcase how hydrogen fuel power can be used where power is hard to get

Bond notes the switch to green energy must involve not just changes to transport but stationary applications, where the use of off-grid diesel powered generators is one of the major contributors of greenhouse emissions.

In June, AFC partnered with Spanish construction giant Acciona to trial an alternative to the use of diesel-powered generators on its construction sites. A first trial gets underway next year at an Acciona site in Spain and if successful will form the basis of a more formal long-term relationship.

AFC is not yet at the point of generating revenues and posted a £2.1million loss in the latest half year to June, but the deals with Extreme E and Acciona are part of its ramp-up towards commercial scale products and operations.

Both its manufacturing capability and the size of its fuel cells are being expanded and AFC is now well-funded for the shift from research to a commercial footing.

A placing and retail offer in June was its largest funding round to date with the company raising £31.6million through a share issue that was heavily oversubscribed.

AFC has earmarked the cash for the next stage of its manufacturing upgrade and the development work required to boost its fuel cell systems into a viable option for its customers.

Bond believes the enthusiasm for the share offer was a recognition that it is now a financially attractive business that has seen its time arrive as hydrogen power grows in significance.

“For the first time in AFC’s history, the convergence of hydrogen economics, government policies, commercial interest and technology are aligning perfectly for companies like us to take hold of the market,” Bond says.

At a share price of 23p, the market cap is around £155million. Compared to other listed hydrogen and fuel cell groups that have seen their values surge higher once commercial agreements have start to feed through, that looks a good entry point to the hydrogen revolution.

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source: dailymail.co.uk

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