Ceres Power - the unanswered questions...

It’s fair to say that this mag has been a big advocate of Ceres Power, based around the potential of its technology and high expectations of the new management headed by David Pummell. Here’s a link to our postulations underpinning the investment case (page 16) - http://issuu.com/spreadbetmagazine/docs/spreadbet-magazine-v6_generic 

Regular readers will also know that we are not afraid to stand up and make our voice heard when we think a “wrong” is occuring against shareholders as we did with Plus Markets in particular, and the blogs we have posted on all that is wrong with corporate management in the UK.

It is with a heavy heart that we find ourselves having to be galvanised once again, this time in relation to the Ceres issue. I for one am simply not buying the story that they cannot raise the finance to continue with the commercialisation programme and am now, unfortunatley, actually questioning the integrity of the Board of Ceres, and wondering just why David Pumell will not return our calls…

Leading up to last Wednesdays shock and surprisingly curt announcement were a number of RNS that confirmed the exceptional progress that had been made in bringing the product to a point where it was commercial with stand out progress on the degradation rates. Only on the 26th of July, an RNS was released headed “Commercialisation remains on track”. Field trials were also lined up for 2014 with British Gas and in the Benelux region with Itho-Daalderop. The comment in particular from their anchor shareholder British Gas, Managing Director Phil Bentley seems at odds with their “unwillingness” to participate in a new fund raising - 

“Ceres has continued to make good technical progress under the new leadership of David Pummell. We are looking forward to participating in the next phase of trials and laying the groundwork to market the product in preparation for Ceres’ planned manufacturing scale-up.”

I note that in last weeks announcement there is no comment either regarding the 2.4m euro’s of European Commission Framework 7 funding too - just what has happened to this monies?

Look closely at the statements made to shareholders in the announcement of 26 July 2012 - 

1. Flagship UK and Benelux commercial product launch programme remains on track to deliver the mass volume low cost micro-CHP for 2H 2016

2. Independent review by Booz & Company and AEA Technology confirms low-cost capability of the Ceres micro-CHP product design

3. Independent review of Ceres core fuel cell technology by a globally recognised SOFC expert commissioned

Fast forward just 2 1/2 months and there was some heavy turnover in the shares in recent weeks too that took them up to 15p - not the type of turnover by private shareholders but sustained purchasing. Who was this purchaser(s) and what did they think they knew at the time?

We also ask key questions like why did Mr Pummell (a) not look to cut costs to mitigate the cash burn in recent months, (b) go to shareholders with a rights issue before throwing in the towel,  (c) attempt to partner with another company, (d) look to license the technology etc…? In fact, any one of a number of potential scenarios that would have not simply thrown shareholders under a bus. It smells distinctly rotten to us and I wouldn’t be surprised if BG, Itho- Dalladerop or GE are lined up to buy the company’s technology and reap the substantial rewards themselves. The non exec’s should put their heads above the parapet at this stage and probe the fund-raising exercise.

The “shiny, happy” (unlike his shareholders!) David Pummel, CEO of Ceres Power

David Pummell’s comments of the 18th Sep coming on the back of an independent expert report by Dr Nguyen Minh a former Chief Scientist at GE Global Research that the product was “likely to exceed the requirements for residential CHP” raise even more questions for shareholders. Here is his remarks - 

“We continue to make positive progress in improving the durability performance of our core technology.  The assessment report prepared by Dr Minh gives the Board significant confidence that Ceres core technology is on track to achieve the degradation requirement of residential CHP by 2016.  It also concludes that Ceres has the potential for cost leadership in mass manufacturing of cells and stacks, a key strategic advantage.”

The Board of Ceres Power now have an obligation to their shareholders to explain just why they have been unable to raise the finance, confirm who was approached, why they have not cut costs recently and, as is the general case these days with small cap management, just how Mr Pumell can justify his £250k salary this last year when it seems he has simply poured more shareholders cash down the drain…?

Editor