CBI low-carbon business breakfast: Rex Vevers, Ceres

Distributed generation products for global energy markets

CBI low-carbon business breakfast

April 2010

© Ceres Power 2010 2

Disclaimer

This presentation is directed at institutional investors in Ceres Power Holdings plc (the “Company”). The presentation does not constitute a recommendation regarding the shares or other securities of the Company or any of its subsidiaries nor a representation that any dealing in those shares or securities is appropriate. The Company accepts no duty of care whatsoever to the reader of this presentation in respect of its contents and the Company is not acting in any fiduciary capacity.

No offer or invitation or solicitation of any offer to acquire shares or other securities of the Company or any of its subsidiaries is being made now nor does this presentation constitute or form part of any invitation on inducement to engage in investment activity as referred to in Section 21 of the Financial Services Markets Act 2000 or otherwise. No reliance may be placed for any purpose whatsoever on the information contained in this presentation or any assumptions made as to its completeness and no warranty or representation is given by or on behalf of the Company or any of its subsidiaries nor their respective directors, employees, agents and advisors as to the accuracy or completeness of the information or opinions contained in this presentation and no liability is accepted by any of them for any such information or opinions, provided that nothing in this paragraph shall exclude liability for any representation or warranty made fraudulently. The information and opinions contained in this presentation are provided as at the date hereof.

This presentation contains certain forward-looking statements with respect to the financial condition, results, operations and business of the Company. These statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. The key risks to the business are set out in the section headed “Principal risks and uncertainties” in the Directors’ Report contained in the Company’s Annual Report for the year ended 30 June 2009. The Company’s Annual Report can be found on its website (www.cerespower.com)

The contents of this presentation are confidential and must not be copied, published, reproduced, distributed or passed in whole or in part to others at any time by recipients. This presentation is being provided to recipients on the basis that they keep confidential any information contained herein or otherwise made available, whether oral or in writing, in connection with the Company or any of its subsidiaries.

In particular, this presentation should not be distributed, published or reproduced in whole or in part or disclosed by recipients and, in particular, should not be distributed to United States residents, corporations or other entities, US Persons (as defined in Regulation S promulgated under the United States Securities Act of 1933 (as amended)), persons with addresses in the United States of America (or any of its territories or possessions), Canada, Japan, the Republic of Ireland, the Republic of South Africa or Australia, or to any corporation, partnership or other entity created or organised under the laws thereof, or in any other country outside the United Kingdom where such distribution may lead to a breach of any law or regulatory requirement. Notwithstanding the foregoing, the Company can distribute this document to US Persons (as defined above), persons with addresses in the United States of America (or its territories or possessions), United States residents, corporations or other entities if the Company is satisfied that an applicable exemption applies. Distribution of this document in the United States in the absence of such an applicable exemption may constitute a violation of United States securities law.

By agreeing to receive this presentation you agree to be bound by the foregoing restrictions.

http://www.cerespower.com/

Ceres Power Overview

• The organisation is focussed on:- Exploiting market-led opportunities in volume sectors- Value-engineering fuel cell systems to meet market needs- Securing strong B2B market channel and supply chain partnerships

• ~100 staff focussed into product teams, including experienced application development and manufacturing engineers from global product sectors (e.g. automotive, HVAC)


• Commercialising unique fuel cell technology within alternative energy products for global markets

• UK-based Company with world-leading position • Company founded in 2001

- Original IPR transferred from Imperial College, London- Floated on AiM in 2004 (Mk Cap ~£100m) CWR.L- Key shareholders include Oppenheimer, British Gas, I G Investment Management

The Ceres Power DG Proposition

• Distributed Generation (DG): generate power at point of use, in the home

• Use a highly efficient process to reduce generating, transmission and distribution losses

• Capture heat output to drive further savings

• Package into a wall mountable consumer product

• A generation asset and demand reduction device


Fuel Cell microCHP in the Home


Unique Technology Delivers Maximum Energy Savings• Low heat to power ratio:

- Enables all year round operation

- Minimum heat output matched to summer

hot water requirement

- Maximum heat capture (electrically-led

thermally capped)

• Load following & cycling enables

‘smart grid’:

- Delivery of high value electricity during

peak demand

- Compatibility with existing and future grid

infrastructure

- Can be turned up & down, on & off as

required

- Controllable on-site generation asset for

demand management


Integrated CHP unit delivers all central heating & hot water year round


Predicted carbon savings

• Independent confirmation by Oxera

• Macro economic consultancy specialising in energy sector

• Model of actual UK energy system including individual power plants (used by industry & Government)

• Oxera confirmed carbon savings potential for example product (Ceres CHP) based on

• Predicted decarbonisation of grid (incl. large-scale deployment of renewables and nuclear)

• Likely response of central generation to mass deployment of fuel cell microCHP

• Resultant likely CO2 savings (taking into account current and projected ‘merit order’)

• Annual CO2 savings of 1 to 1.5 tonnes p.a. up to 2020

• Relative to high efficiency condensing boiler and grid-supplied electricity

• Based on actual power plants displaced in the merit order

• Potential for significant additional benefits to UK energy system

• Reduces peak demand and generation investment requirements

• Reduces capex requirements for grid network

http://www.oxera.com/main.aspx

8

Energy Market Context Favouring Micro CHP

• The Global Energy Challenge

- Rising electricity demand

- Major investment required in new power generation and grid infrastructure

- Need to focus on more efficient use of energy resources like natural gas

- Need to reduce carbon emissions from power generation and the ‘built environment’

• Micro CHP can help address climate change..

- Cost effective CO2 reduction for difficult to address residential sector

• Retrofit of existing homes

- A major potential impact on CO2 reduction by 2020

• Can be quickly deployed, compatible with majority of UK homes

- Persistent CO2 savings even as the electricity grid decarbonises

• Displaces peaking/mid-merit fossil plant

- Compatible with other carbon reduction measures (e.g. nuclear, renewables)

- Enables ‘smart grid’ with controllable embedded on-site generation

© Ceres Power 2010

Market Opportunity

Country Wall Hung as % of Boiler Sales

UK 85%

Netherlands 96%

Germany 58%

France 75%

Italy 84%


Source: Frost &

Sullivan, 2003

Source: Delta Energy & Environment / BSRIA 2003-2005

• Global annual ‘boiler’ sales >30m/a – Goldman Sachs

• An integrated wall mountable product is a pre-requisite for mass

market adoption across European markets

UK Mass Market Potential


Source: Energy Saving Trust 2007 (study sponsored by UK government)

“Over 6 million fuel cell CHP units installed by 2020 (30% of the market…)”

2008 Element Energy Report for BERR

Fuel Cell CHP optimises electricity savings and CO2 emissions savings due to :

• All year round operation• Load following capability

Benefits of CHP


Utility ConsumerDirect Sales Model Increased gas sales for homes (nationally

decreases overall) Annual energy savings (>25%)

Opportunity to sell high margin installation, maintenance & services

Attractive payback

Helps meet CO2 reduction targets Earn FIT revenues

Meets CERT supplier obligation (e.g. £200m/a)

Reduce home’s CO2 emissions

Wall-mounted, easy to install, uses same connections as a boiler

No need for a separate boiler (CHP product delivers power, hot water & heating)

Improved Energy Security

Lease / rental Model Lower CO2 emissions Lower or nil upfront capital cost

Reduced customer churn Share annual energy savings

Enables profitable Energy Services Model Transfers all the costs & responsibilities of asset ownership to utility

Lower transmission & distribution charges

Load following/peak shaving delivers higher value energy sales

Reduced central capex

12

Ceres ‘go-to-market’ Commercial Partners

Company Total cash payments to Ceres

Cash payments received to date

Forward order volumes

Exclusivity granted

Target date for start of sales

British Gas £5 million £3 million 37,500 UK for 4 years H2 2011

Calor Gas £2.5 million £1 million 20,000 UK for 5 years T+12mths

Bord Gais £1.6 million £1 million 16,000 Island of Ireland for 4 years

T+6mths

• Ceres has secured commercial partners that provide:• Funding for development and trialling programme• Market-leading channels for mass market deployment• Volume forward orders for mass market uptake of Ceres CHP product with

minimum annual volumes• Right for Ceres to use their well-established retail energy brands• Buying power with Ceres supply chain partners

© Ceres Power 2010

http://www.calor.co.uk/


UK Natural Gas CHP Programme

• mCHP programme with British Gas

- Funded development & trialling programme (£5 million total, £3m paid

to date)

- Significant operational resources committed by British Gas for CHP

trialling & product launch (e.g. marketing, logistics, procurement,

service, maintenance)

- Volume forward order (37,500 units minimum over first 4 years)

- Equity investment (~£20 million cash by Centrica for ~10% of Ceres

Power)

• Route to market for volume uptake of fuel cell mCHP established

- Ideal market channel partner for UK mCHP

- Agreement covers residential market in England, Scotland, Wales


Ceres Manufacturing Strategy

• Ceres manufactures IP-rich fuel cell technology in-house and partners with boiler assembly companies• Ceres owns & controls complete CHP design (incl. IP)• Ceres sells complete CHP products (captures ‘product-level’ revenues)• Leverages existing boiler design know-how and assembly capabilities• Controls BoP component supply chain but uses boiler partner ‘s supply chain for standard parts

15

Sheltered Field Trials Underway

• Sheltered field trials enable

• Learnings from operation in houses to be captured

• Optimisation of control systems under ‘real-life’ operating conditions

• Validation of logistics chain and customer support model including installation, service

and maintenance

• ‘CE’ marking process to be conducted in parallel

© Ceres Power 2010

16

Summary

• The key to engaging with investors and customers is..

- Adopt a market-led approach to exploiting the technology (not ‘technology-push’)

- Identify the market opportunity and a clear commercial route to market

- Select the relevant business model, based on • Position in the value chain

• How to maximise value capture

• IP

• ‘Make or buy’

- Clearly articulate the commercial proposition

- Develop strong links with relevant channel partners

- Adopt an active IR campaign with current and prospective investors

- Active engagement with other stakeholders (e.g. governments)

© Ceres Power 2010


Appendix

Fuel Cells

Fuel cells generate electricity & heat

• Operate on fuel and air

• Solid state reaction not combustion

• Near-zero NOx, SOx and CO

Fuel cell stacks are ‘electrochemical engines’ that are

• Reliable and quiet

• Highly efficient

• Low emissions

• Modular


1. Support (stainless steel)2. Anode

3. Electrolyte (CGO) 4. Cathode

3

4

21

19

Commercial – Off Gas Grid Residential CHP

• Major new agreement with Calor to bring Ceres fuel cell residential CHP Product to

customers not connected to the mains natural gas (NG) network (‘off gas grid’)

- UK's leading LPG supplier, over 70 years experience

- Part of SHV Gas, world’s largest distributor of LPG,

operations in 27 countries, annual turnover > €5 billion

• £2.5m funded development and trialling programme

• Covers supply & distribution of product in UK, with call-off order for an initial 20,000

units, over first 5 years post market entry in 2012

• Addressable UK target market under current Calor contract (> 2 million properties)

- LPG CHP represents a clean, convenient and cost-competitive energy option (lower carbon

than heating oil, with other functional benefits e.g. cooking)

- Replacing LPG boiler with Ceres LPG CHP delivers economic savings and environmental

benefits

- Ceres LPG CHP replacing heating oil boiler saves up to 50% CO2 emissions

• Ceres maintains full flexibility to develop and exploit LPG markets outside UK

• Potential European opportunity (> 100 million properties across Europe)

© Ceres Power 2010

http://www.calor.co.uk/

20

International Residential CHP

• New contract with Bord Gáis Éireann (BGE) to bring Ceres Power fuel cell residential CHP product to natural gas customers in the Republic of Ireland and Northern Ireland

• £1.6 million funded development and trialling programme

• Covers exclusive supply & distribution of product in Republic of Ireland and Northern Ireland, with call-off order for an initial 16,000 units, over first 4 years post market entry in 2012

• BGE corporate overview- Established in 1976

- A leading dual fuel all-island energy supplier of natural gas and electricity

- Supplies and distributes gas with majority market share

- Provides residential customers with gas appliance service and maintenance products

• Irish energy market- >2.5 million homes on the island of Ireland

- Smart meter trials launched in 2009

© Ceres Power 2010


Ceres Power Limited

Viking House

Foundry Lane

Horsham

West Sussex

RH13 5PX

United Kingdom

Phone: +44 (0) 1403 273463

Fax: +44 (0) 1403 327860

E-Mail: [email protected]

www.cerespower.com

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CBI low-carbon business breakfast: Rex Vevers, Ceres