Wind-down most likely option for Ceres Power, Peel Hunt says

The future is looking bleak for cash-strapped Ceres Power, the fuel cell technology developer, as it has been unable to secure sufficient funding to keep the business going.

The future is looking bleak for cash-strapped Ceres Power, the fuel cell technology developer, as it has been unable to secure sufficient funding to keep the business going.

The group had hoped to secure a new tranche of funding before the end of September to enable it to pursue its goal of delivering a "global cost leadership" mass market small combined-heat-and-power product.

The company will continue to explore all strategic options, including a sale of the business, cancellation of the listing and, in the absence of any alternative proposals, commencement of an orderly wind down of the business.

Broker Peel Hunt fears it is the end of the road for Ceres, after "eight years raising money on the back of over-promising."

The broker has reduced its target price from 4p to zero. "A fresh approach from a new CEO [Chief Executive Officer] improved things but there was insufficient potential in the business to make it worth backing, in our view. Investors, who had put in £65m to date, apparently agree and have finally drawn the line."

Peel Hunt notes that the firm's flagship product is still four years away from first commercialisation, and field trials have yet to start. On top of that, "technical progress still needs to be made, there is major uncertainty over manufacturing cost, the economic case for product adoption is limited and there was still a large quantum of funds needed to reach cash break-even," explains Peel Hunt's Andrew Shepherd-Barron.

While Peel Hunt thinks there is sufficient cash for an orderly wind-down of the company the broker is not optimistic that shareholders will see any of it.

"There is a chance that a third party buys the assets, or indeed the business as a whole, but we see a wind down as the more likely outcome," Shepher-Barron concludes.

The shares plunged to a 52-week low 2.05p in morning trading before recovering a little to 2.6p; less than a year ago the company was trading above 30p a share.

JH

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