Zenergy Power plc Audited preliminary results

Zenergy Power plc Audited preliminary results

Highlights

  • Exit from cash-hungry superconductivity operations completed
  • Revised strategy focusing on non-Superconducting mFCL product in place
  • Orders for mFCLs anticipated during 2012
  • Continuing operating loss of £3.2m before impairment charge
  • Year end cash reserves of £5.3m
  • Accounts are now reported in Sterling
  • 2010 and 2009 comparatives restated in Sterling from Euros

The Chairman made the following statement:
As expected the results for the year show a significant loss of £20.6million which includes the loss of £10.5million from the Group's discontinued German superconducting operation and an impairment charge of £7.9million (less related tax credit of £0.6million). Before which, the loss from continuing operations was £2.7million (2010: £3.8million). 

Cash and net liquid resources at 31 December 2011 is £5.3million (2010: £13.6million).

Following our appointment to the Board of Zenergy in April 2011, the current Directors' focus has been on stabilising the business and halting the long term decline in shareholder value whilst at the same time laying a foundation for re-building the business in future years.

Zenergy's challenges were well understood and the initial months were spent in seeking strategic partnerships with numerous global players to support the funding required to bring the Group's core products to market, while in parallel, investigating all alternative commercial and strategic strategies that would either reduce cash burn or assist in raising further cash.  We received considerable interest in the Magnetic Fault Current Limiter technology whereas some of Zenergy's other products were less well received.

This process confirmed there were significant commercial questions around Zenergy's ability to deliver superconductor technology; notably the time and further investment still necessary to reach full commercialisation.  This, together with the on-going running costs of the superconducting operations, was such that the Board concluded the pursuit of superconductor technology was not commercially feasible for Zenergy.

Other than the mFCL technology, Zenergy's product portfolio was largely tied to the success of its superconductor technology.

As a result, the Board decided to focus on the mFCLs and not to continue to support the German based superconductor technology.  Zenergy Power GmbH entered into administration on 22 September 2011.  A full and final settlement was reached with the Administrator of Zenergy Power GmbH on 22 December 2011 in which all obligations between Zenergy GmbH and the rest of the Group were settled for a one-off payment of €150,000 to the administrator.  No other claims are anticipated in respect of Zenergy Power GmbH ceasing to trade. 

In addition to the above the Board negotiated a 10 year royalty from any sales derived from the 2G HTS wire programme should it be successfully developed and commercialised.

Our US and Australian business units, who are responsible for mFCL development, had for some time believed that it was possible to manufacture lower voltage mFCLs using simple copper magnets, but this was not pursued by the previous board due to its focus on superconducting technology.

Once tests on non-superconducting mFCLs were approved, it soon became apparent that it was possible to design mFCLs with simple copper magnets for all voltage classes up to, and including, transmission voltages and in autumn 2011 a small prototype was built and successfully tested.

In addition to the acknowledged strengths of the superconductive FCL's, the new, non-superconductive generation FCL's have a number of specific advantages over its superconducting equivalent;

  • Technology that is understood by GRID operators;  iron with copper magnets:
  • Robust design;  they run at ambient temperature so no cooling needed:
  • Cheaper to build; 50% of the cost of the equivalent superconducting mFCL:
  • Smaller footprint; For 11kv, total footprint reduced from 32 m2 to 10 m2 :
  • Simpler and quicker to build; reduced turnaround time:
  • Essentially maintenance free;  similar operating and maintenance profile as transformers:
  • Efficiency of design means that at lower voltages the new mFCL consumes less energy:

These improvements represent a step change in the commercial prospects of the mFCL program.  Indeed, during the last few months there have been promising initial discussions with over a dozen potential customers in US, Australia, Europe and Russia. 

Whilst, at the time of writing, there are no firm orders in place, the Board currently believes that a number of these discussions should develop into profitable orders sometime in the course of 2012.

In the meantime, a previously sold superconductive mFCL is in the course of being installed in the UK grid and discussions are continuing to deliver a previously specified superconductive mFCL which could also be installed in the UK grid in 2012.

Whilst the Board is excited about the level of interest it has seen in the new non-superconducting mFCLs, it remains mindful of the risks facing the Group and so will continue to keep the commercial progress and remaining resources of the Group under close review during the year.

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