Analyst presentation

Ceres Power Holdings plc will be hosting a live webcast for analysts and investors on 27 September 2024 at 09.30 GMT. To register your interest in participating, please go to: https://www.investormeetcompany.com/ceres-power-holdings-plc/register-investor.

For further information visit www.ceres.tech or contact:

About Ceres

Ceres is a leading developer of clean energy technology: electrolysis for the production of green hydrogen and fuel cells for power generation. Its asset-light, licensing model has seen it establish partnerships with some of the world's largest companies, such as Bosch, Doosan, Delta, Denso, Shell, Thermax and Weichai. Ceres' solid oxide technology supports greater electrification of our energy systems and produces green hydrogen at high efficiencies as a route to decarbonise emissions-intensive industries such as steelmaking, ammonia and future fuels. Ceres is listed on the London Stock Exchange ("LSE") (LSE: CWR) and is classified by the LSE Green Economy Mark, which recognises listed companies that derive more than 50% of their activity from the green economy. Read more on our website www.ceres.tech or follow us on LinkedIn.

Chief Executive's statement

The undeniable effects of climate change continue to impact lives around the world on an increasingly regular basis, including the dislocation of communities fleeing floods and extreme weather events in Asia or the devastation to forests, farmland and buildings caused by wildfires that have been sweeping across parts of the US, Europe and Australia.

Many governments have responded with decisive action on decarbonisation, putting in place specific hydrogen strategies to incentivise the production, infrastructure development and adoption of green hydrogen. For example, the EU is targeting the deployment of 40GW of green hydrogen electrolysis by 2030, committing up to €470 billion in investments up to 2050 for the hydrogen economy; Japan aims to generate public and private investment in hydrogen worth 15 trillion yen over the next 15 years, with specific reference to the hard-to-abate sectors; and South Korea's Hydrogen Economy Roadmap to develop its hydrogen infrastructure and commercialisation strategies is being backed by around $35 billion of government funding.

Ceres is committed to working in partnership with global OEMs and systems design companies to help nations decarbonise as they strive towards their net zero targets. These strategies will take time and resources to bring into effect, especially in the complex industrial sectors where value chains are long and where fossil fuels and feedstocks are well entrenched. A move towards decarbonisation requires disrupting the status quo - leveraging more advanced technologies, putting in place new supply chains and redesigning complex industrial processes. After an extended period of industry stagnation in the wake of high fuel costs, rising rates of inflation and elevated interest rates, confidence now appears to be returning as these effects moderate. In 2023 the number of announced green hydrogen projects grew by about 35% from 1,050 in January 2023 to over 1,400 at the end of the year, with a value of over $570 billion. Solid oxide technology offers significant efficiency advantages particularly when coupled with waste heat from industrial processes.

Ceres's solid oxide technology also has a role to play in decarbonising energy systems. As some nations transition away from coal to liquefied natural Gas (LNG) for their power needs, Ceres' SOFC technology can enable more efficient power generation from a range of fuels. Closures of coal plants are offset by increases in nuclear, gas and renewable output. This transition is seen in regions such as South Korea, China, India and Taiwan, supported by various government initiatives. Currently the adoption of lower carbon and zero carbon power generation is being further driven by the ramp in energy demand for applications such as AI and datacentres alongside existing opportunities in areas of stationary power generation and grid reinforcement. In its Global Energy Perspective 2024 report, McKinsey estimates that the rise of cloud solutions, cryptocurrency, and AI could see datacentres accounting for 2,500 to 4,500 terawatt hours (TWh) of global electricity demand by 2050 (5-9 percent of total electricity demand). This demand creates greater need for gas or other firming sources of energy to balance out the intermittency of renewable energy sources.

Ceres is rapidly becoming the technology of choice for leading companies adopting solid oxide as the licensing model enables rapid adoption as the pace for change picks up across the global green hydrogen and power generation markets.

Green hydrogen in hard-to-abate industries

Hard-to-abate industries such as steel production, chemical manufacturing and long-haul transportation, are characterized by their reliance on high-temperature processes, the need for energy-dense fuels, or the use of fossil fuels as feedstock. As a result, they are difficult to decarbonise using current renewable energy sources or electric alternatives alone. Green hydrogen offers a versatile alternative that can address many of these challenges as it can be produced in a zero carbon manner using renewable energy and electrolysis.

Hydrogen can be used as a fuel to generate power efficiently; as a feedstock to decarbonise industrial processes; and as an energy carrier. Importantly, it can be deployed using modified versions of existing industrial equipment, reducing transition costs and time-to-market. Bloomberg New Energy Finance believes that by 2050 around 49% of total green hydrogen consumption will be accounted for by the production of green steel, ammonia and sustainable aviation fuels, expected to be approximately 191 Mt per annum.

Ceres' SOEC technology, based on over 20 years of solid oxide innovation and development, enables the highly efficient production of hydrogen, particularly where by-product industrial heat can be harnessed for the electrolysis process. In tandem, the company's business model has been established to help accelerate decarbonisation across these hard-to-abate industrial sectors. As the partner of choice for leading global OEMs and systems developers, Ceres offers a faster route to market and efficient zero carbon hydrogen production. This saves our partners the time, effort and resource needed to develop their own solutions and allows them to focus on their strengths in industrial manufacturing and distribution. Ceres believes this synergy is key to enabling industrial decarbonisation at scale and pace.

Commercial acceleration into SOEC bearing fruit

In 2021, Ceres made the strategic decision to accelerate development of its electrolysis technologies to position the company in the rapidly expanding green hydrogen industry. Over the last three years continuing innovation of the company's core solid oxide technology has created a highly efficient and lower cost mode of hydrogen electrolysis for the hard-to-abate industrial sectors. At the same time the Company invested in its Commercial teams to implement new customer programmes for SOEC; this emphasis on building commercial relationships across the hydrogen industry is now starting to bear fruit.

In January 2024 Ceres and Delta Electronics signed a global long-term manufacturing collaboration and licence agreement for both SOEC and SOFC stack production. Headquartered in Taiwan, Delta employs over 80,000 people across approximately 200 facilities worldwide, with a Taiwan Stock Exchange market capitalisation of approximately US$23 billion. It provides solutions to customers across a range of sectors including chemicals, energy, transportation and steel.

This dual licence agreement is the first of its kind for Ceres, underlining the efficiency that Ceres' solid oxide stack technologies can bring to both power generation and green hydrogen production. These capabilities complement Delta's current expertise in mass manufacturing, power electronics and data centres for customers like Microsoft. The partnership also enables its move into turnkey decarbonisation solutions and the development of smart buildings, energy infrastructure, grid balancing and energy storage for customers such as Tesla. The deal will generate a total revenue of £43 million to Ceres through technology transfer, development licence fees, and engineering services, of which approximately half is expected to be recognised in 2024. Delta is expected to start manufacturing by the end of 2026 with strong ambitions for future scale-up. Royalty revenues are separately covered in the scope of the agreement and will be generated when Delta products are sold into their end markets.

In June 2024, the Company extended its relationship with Shell to design a SOEC demonstrator module for use in large-scale industrial applications such as synthetic fuels, ammonia and green steel. This builds on the initial contract to deploy a 1MW SOEC system at Shell's R&D facility in Bangalore, India focusing on the development of a 10MW pressurised module to produce green hydrogen at 36 kWh/kg. It is intended that this design can be scaled to hundreds of megawatts and be integrated with industrial plants to produce sustainable future fuels.

Separately, Bosch and Linde started work on a 1MW pressurised stack array module based on Ceres' SOEC technology. This will be a repeating unit and form a building block for larger scale electrolysis systems. The two-year demonstration project is anticipated to showcase that SOEC provides a highly efficient pathway to low-cost green hydrogen production for industrial applications.

As the Company has accelerated commercial delivery, the momentum of the first half of the year has continued into current trading. In July 2024, Ceres announced that it had signed a long term SOEC manufacturing licence with Japan's Denso Corporation, a Fortune 500 company employing over 160,000 people in 35 countries and regions worldwide. Denso aims to leverage the expertise of system control and thermal management it has built in automotive system development to develop technology in hydrogen production.

The partnership will enable Denso to produce Ceres' current and future generations of stack technology under licence, in line with its aim to establish a hydrogen supply chain. In common with other manufacturing licence partnerships, this agreement provides revenues for licence fees, engineering services and hardware over multiple years, as well as future royalty payments.

In addition to securing new manufacturing licences, Ceres also signed a new system licensing partnership with Thermax, one of India's largest process equipment manufacturers with an extensive industrial portfolio that includes clean air, clean energy, clean water and chemical solutions. The partnership is driven by accelerating system development for commercial use within the hard-to-abate green ammonia, petrochemical and steel industries in India where Thermax already has established market presence.

System licence fees are more modest than manufacturing licences, but this partnership is of high strategic importance for Ceres. First, it gives the company a foothold in the fast growing Indian hydrogen market, a major new territory for the Company that is well supported through India's $2.3 billion National Green Hydrogen Mission incentives. Secondly, the relationship will seed Ceres technology into the market with key end market customers, leveraging Ceres' highly differentiated electrolysis technology and Thermax's experience and market position in the industrial process market, to enable it to become a vertically integrated SOEC system solution provider.

As well as helping our partners to speed up market entry of their decarbonisation products, Ceres has been working with AtkinsRéalis, a world-leading engineering, procurement and construction (EPC) services group, to deliver the front-end engineering design (FEED) for a commercial multi-megawatt modularised hydrogen production system based on Ceres' SOEC technology. This design will provide commissioners of green hydrogen production plants with a blueprint of the optimum system architecture for a 100MW+ electrolyser system to produce green hydrogen. This will be a key building block for GW-scale plants based on Ceres' robust, low cost and highly efficient SOEC approach.

While Ceres has focused on generating commercial momentum in its electrolysis activities we continue to work closely with existing SOFC partners to support the implementation of their respective solid oxide cell and stack manufacturing facilities. Both Bosch and Doosan are progressing towards mass manufacturing and the Company continues to anticipate initial royalty payments from Doosan to be received by the end of 2025. We continue to support the system development of 75 kW power modules by Weichai who have a leading position in China's gas engine market and Delta is the latest addition to our SOFC licensees.

Financial review

The Company reported revenue for the six-month period ended 30 June 2024 of £28.5 million, compared to £11.7¹ million in the same period in 2023. Most of the revenue was from the technology transfer licence fees associated with the Manufacturing and Collaboration Agreement signed with Delta in January 2024, this revenue has no associated cost of sales. Revenue from existing partners Bosch and Doosan continued as we supported them through ongoing development activities leading up to commercial launch. Revenue from the Manufacturing and Licence Agreement with Denso signed in July 2024 will commence in the second half of the year as we anticipate record revenue for the financial year.

Gross profit of £22.9 million in the year (H1 2023: £7.2 million¹) increased when compared to the prior year due to the impact of increased licence revenue which has no associated cost of sales. Consequently, gross margins remain high at 80% (H1 2023: 62%¹), which illustrates the Company's asset-light, licencing business model.

Operating costs were comparable to H1 2023 at £37.9 million (H1 2023: £37.1 million) as Ceres maintained investment in core technology to drive future growth, including the development of the second generation of stacks to operate more effectively in electrolysis mode and further development in modular stack designs for output efficiencies. R&D costs of £23.3 million were lower than the £26.8 million in the prior year period, as the business achieved significant technology development milestones and passes peak investment needs.

Adjusted EBITDA loss for H1 2024 reduced to £9.0 million (H1 2023: £23.5 million¹). Adjusted EBITDA is a non-statutory measure and is detailed in the Alternative Performance Measures section in this review. The decreased loss is primarily due to the high margin revenue recognised explained above.

Capital expenditure in the half reduced to £2.8 million (H1 2023: £3.1 million) as there was reduced requirement to invest in prototype manufacturing capacity and test stand infrastructure.  Capitalised development costs reduced to £1.3 million compared to £3.4 million in the prior year period mainly due to the second generation of stack design development working towards completion.

Cash outflow in the period (change in cash, cash equivalents and short-term investments) was £13.9 million (H1 2023: £21.1 million). This improvement was driven by customer receipts, reduced capital investments and increased finance income. Ceres therefore ends the period in a strong position with £126.1 million in cash, cash equivalents and short-term investments (H1 2023: £161.2 million, 31 December 2023: £140.0 million). This will support future investment as the Company drives revenue growth, maintains discipline over costs and expenditure and tracks towards profit and cashflow break‑even.

Principal risks and uncertainties

The Directors have reviewed the principal risks and uncertainties that could have a material impact on the Group's performance and have updated the risks from those described in the Ceres Annual Report, 2023. The Directors have determined that cyber security is now an elevated risk and that there is a risk that a cyber-attack or breach of system security could disrupt our operations, cause the loss of, destruction of, or unauthorised access to sensitive IP and trade secrets. The Directors have also determined that the risk of detrimental partner actions has reduced to no longer be considered a principal risk. A summary of the Group's principal risks can be found at the end of this report.

Restructuring and cost optimisation

Following significant investment in the development of SOEC and SOFC programmes in recent years, some projects have passed peak investment requirements and there is now a natural reduction of future investment requirements. Since the end of the period, management has reviewed roles and responsibilities across the company to ensure the business is optimised to accelerate its growth strategy and has implemented a new organisational structure to take it forward. The proposed changes will result in a headcount reduction of approximately 15% in Q4 2024, and also a reduction in the overall cost base by a similar level, whilst also delivering on our commitments to our partners and maintaining our strong competitive advantage as a leader in clean energy conversion technology.

Board change

In September 2024 the Company separately announced that Eric Lakin will step down as CFO and from the Board to pursue other interests, to be replaced by Stuart Paynter. These changes will become effective on 1 October 2024 and Eric will remain with Ceres for sufficient time to ensure a smooth transition of responsibilities. Previously CFO of advanced therapies innovator Oxford BioMedica plc, Stuart has extensive financial and commercial experience across a range of advanced technology sectors, as well as a strong capital markets, UK governance and transformation delivery track record.

Outlook: building commercial traction

Ceres is progressing well on the path to commercialisation with our partners. The biggest global manufacturers and systems developers looking to enter the dynamic hydrogen market have chosen to partner with Ceres to leverage our world-leading technology and a highly flexible licencing business model to gain rapid access to the growing hydrogen market.

In a short period of time Ceres has progressed from investment phase in SOEC to commercial partnerships, validating our business model and strategy. This acceleration of our commercial success is reflected in the recent upgrade to financial guidance and positions us well to deliver a record year in revenues for the Company. Record order intake of £103.3 million since the start of the year to 31 August 2024 was achieved by the Company due to the higher levels of commercial activity. Given the recent restructuring and commercial progress we are now well positioned for the future and expect continued momentum for the full year performance as we continue to grow the business to meet the needs for industrial decarbonisation and reliable clean power generation.

Phil Caldwell

Chief Executive Officer

Responsibility Statement

The directors confirm that to the best of their knowledge:

·    the condensed set of financial statements has been prepared in accordance with UK adopted IAS 34 'Interim Financial Reporting'; and

·    the interim management report includes a fair review of the information required by DTR 4.2.7 (indication of important events and their impact, and a description of principal risks and uncertainties for the remaining six months of the financial year) and DTR 4.2.8 (disclosure of related parties' transactions and changes therein).

The full list of current Directors can be found on the Ceres website at https://www.ceres.tech.