Ceres Power shares slide on China talks, delay to royalties

Shares in Ceres Power were sliding on Wednesday, after it announced the failure of joint venture talks in China in 2023 in a trading update, as well as delays to expected royalties from its fuel cell systems.

The London-listed firm said it was unable to conclude the joint venture as originally planned in 2023, adding that it was exploring alternative options with Weichai to address the China market.

Financially, the company reported revenue for 2023 in line with guidance, within the range of £21m to £22m, compared to the £22m it recorded in 2022.

The gross margin for the year was expected to be around 60%, up from 59% in 2022, while Ceres held cash and short-term investments of £140m as of 31 December.

In terms of current trading and its outlook, Ceres Power announced a significant new fuel cell and electrolysis licence agreement with Delta Electronics on 18 January.

The agreement would include staged revenue of £43m to Ceres through technology transfer and licensing, with about half of that expected to be recognised as revenue in 2024.

Initial production by Delta was anticipated to begin by the end of 2026.

Ceres said its electrolysis programme was progressing positively, with a 1MW-scale electrolyser successfully completing testing in Germany and en-route to Shell's site in India.

The company said it was also in the process of developing the next product concept for a 4MW to 5MW modularised system to enable larger-scale installations.

While construction of the Bosch and Doosan factories was continuing, the board said the launch of commercial fuel cell systems was now expected to take longer, with initial royalties projected to start from 2025 onwards.

“It is great to kick off the new year with a significant new licence deal with Delta, our first to include SOEC, and further validation of our strategy to invest in our green hydrogen technology,” said chief executive officer Phil Caldwell.

“We start 2024 with a strong cash position and a growing pipeline of opportunities to work with progressive partners to adopt our technology to decarbonise our global energy systems.”

At 0938 GMT, shares in Ceres Power Holdings were down 17.31% at 209.2p.

Reporting by Josh White for Sharecast.com.