19 October 2021
AFC Energy*
AFC LN Renewable Energy
Attractive ahead of COP26
The forthcoming UN Climate Change Conference (known as COP26) should
result in an acceleration of governments’ actions to reduce CO2 emissions.
This will result in an acceleration of customer end-user adoption rates which
would be positive for AFC Energy which is developing zero-emission
solutions for the EV-charging, construction, data centre and marine markets.
- COP26 - in Glasgow from 31 October to 12 November 2021 – has a primary
goal to “Secure global net zero by mid-century and keep 1.5 degrees within
reach”. This will require countries…“to come forward with ambitious 2030
emissions reductions targets that align with reaching net zero by the middle of
the century” and to “speed up the switch to electric vehicles”. While most
governments have such measures in place, they are expected to improve
these plans over time - the so-called “ratchet mechanisms” – so COP26 could
deliver concrete news rather than just fine words.
- Transport arrangements. While most people attending the conference will
stay in Glasgow, heads of state will stay 46 miles away in the Gleneagles Hotel
in Perthshire, presumably for security reasons. Transport to Glasgow – and for
delegates in the city - will be provided by Jaguar Land Rover with a fleet of 240
I-PACE BEVs.
- Diesel generators. Social media talk that the Scottish government had spent
£2m on a fleet of 20 Tesla cars has been debunked by Reuters but it confirmed
that, due to lack of charging infrastructure at Gleneagles (just two charge points)
it would use diesel generators there to charge the electric vehicles. While these
will be fuelled by recycled vegetable oil – and so reduce carbon emissions –
the story highlights the inadequacy of EV charging infrastructure in the UK.
- AFC Energy is developing a high capacity EV charging product with ABB which
will be ideal for grid constrained environments such as Gleneagles Hotel. It
delivered a fuel cell system to ABB in August for operational integration with
ABB's high power EV charging system for…“final validation in advance of
marketing an integrated system to customers”.
- Development of next generation ‘S-series’ fuel cell. Reduced complexity
and ability to scale up mass-production should give significantly better
economics for S-series fuel cells – utilising AFC Energy’s proprietary AlkaMem
solid membrane – than those projected for the L-series; it should transform
sales and profit prospects. A demonstration unit should be ready by the end of
the 2021 calendar year and the first commercial stacks by end-2022.
- Our note on 13 September (A Solid future) highlighted the enormous potential
for the group’s products in Data Centres and Maritime markets but our 188p
per share valuation is currently based on projected sales for high power EV
charging in a handful of major markets and Distributed Power for customers
such as the construction industry. The potential could be greatly enhanced by
the improved economics of the S-series product.
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