Ceramic Fuel Cells Releases Preliminary Results for the 12 Months Ended 30 June 2008

Ceramic Fuel Cells Limited (AIM / ASX: CFU), a leading developer of high efficiency and low emission microgeneration products for homes, today announces its preliminary results for the  year ended 30 June 2008.

Highlights in the period and year to date

Customers and Products

In July 2007, signed product development agreements with major energy company customers and appliance partners, E.ON UK and Gledhill Water Storage Ltd for the United
Kingdom market, and Nuon and Remeha / De Dietrich Thermique for the Benelux markets

In January 2008, entered the Japanese market through a product evaluation and development agreement with the Paloma Group

In February 2008, announced first volume order for 50,000 mCHP units from Nuon, based on meeting agreed performance and price targets

By June 2008, installed six NetGenPlusTMunits with European customers and partners

Manufacturing and Supply Chain

Built and commissioned a £3.1 million plant in Merseyside, UK, to make high quality ceramic powders using the Company's proprietary technology

Confirmed investment of 12.4 million for a large scale fuel cell plant in Heinsberg, Germany.

Secured long term supply agreements for fuel cell components with two leading German advanced ceramics suppliers, HC Starck and CeramTec

Entered commercial relationships with suppliers of mCHP balance of plant components, achieving significant cost savings and size reductions

Technology

Obtained European `CE' safety approval for the NetGenPlusTMunit

Strong progress in cell power density, efficiency and fuel cell stack lifetime

Extensive intellectual property portfolio supplemented with further patents granted

Financial

Sales revenue from customers up 42% to A$617k / £288k (2007: A$435k / £203k)

Operational cash outflow increased by A$834k / £389k to A$19.8 million / £9.3 million to fund expanded product development, supply chain and manufacturing scale up

Net loss increased by A$4 million / £1.8 million to A$23.7 million / £11.1 million, largely due to a non-cash impairment charge and staff option expenses

Raised A$14.7 million / £7 million in a placement of new shares in May 2008

Total cash and investments at 30 June 2008 of A$43.3 million / £20.3 million (30 June 2007: A$60.2 million / £28.2 million)

Brendan Dow, Managing Director of Ceramic Fuel Cells, said:

"This has been another year of considerable progress for CFCL. We have continued to make
progress in developing products with our partners and, significantly, have received our first volume
order with agreed targets from Nuon. Our progress in increasing our manufacturing capacity and
enhancing our supply chain gives us confidence that we can transition from product development to
commercialistion from the second half of 2009."

Operational Review Introduction

CFCL is continuing to deliver on a clear and focused strategy, by developing mCHP products with leading energy customers and appliance partners in five large markets.

Significantly, CFCL's first volume order was secured during the year with partner Nuon, based on  meeting agreed targets. During the financial year the Company opened a new plant in  Bromborough to produce high quality ceramic powders, and entered into partnerships to outsource volume component manufacturing, to increase capacity and reduce unit costs. The Company also confirmed a 12.4 million investment in a new plant in Heinsberg, Germany. The Company has continued to develop its technology, with further advances in fuel cell power density, efficiency and lifetime.

The Company raised £7 million in a placement of new shares in May 2008, with a good response from existing andnew investors. The Company is now designing and developing fully integrated mCHP units with its European appliance partners. The Company expects to complete its first fully integrated products by the end of 2008 and is on track to produce units from its Heinsberg plant from the second half of 2009.

Customers and Products

The first product to be powered by CFCL fuel cells will be combined heat and power (mCHP) units for homes. The product will replace a standard home heating system, using the existing natural gas network to provide high efficiency and low emission power and heat, as well as exporting excess power to the electricity network.

The Company is developing mCHP products with leading utility customers and appliance partners in five key markets: Germany, France, the United Kingdom, the Benelux markets and Japan.

In February 2008 the Company announced that leading Dutch energy supplier Nuon had agreed to place an order for 50,000 mCHP units, on the achievement of agreed performance targets. These targets encompass physical weight and size, power and heat output, efficiency, lifetime, CO2savings and selling price of the mCHP unit. The Company has made strong progress toward meeting key technical targets and in July 2008 announced further advances in fuel cell stack efficiency and lifetime. This agreement with Nuon is a milestone achievement for the Company, with the potential to deliver significant revenue over many years.

During the financial year the Company continued to make progress with its product development projects.

In late 2007 the Company obtained European `CE' approval for its NetGenPlusTM units, and then shipped units tothe Company's appliance partners in Germany and the UK. By the end of the financial year a total of six NetGenPlus units were installed with the Company's European partners, as follows:
·Two units installed at EWE's facilities and one unit with Bruns Heiztechnik in Germany.
·Two units installed with De Dietrich Thermique in France (one each for the projects with Gaz de France and Nuon).
·One unit installed with Gledhill Water Storage Ltd in the UK.

These NetGenPlus units are connected to existing heating units and tested and operated in real world conditions, using existing natural gas, water and telecommunications connections and the local electricity grids. Theseprograms allow the Company and its partners to monitor the performance of the units in order to optimise the design of the fully integrated unit and commercial products.

In January 2008, the Company entered the Japanese market through a product evaluation and development agreement with Paloma Industries Ltd.

Japan is one of the world's leading and fastest growing markets for fuel cells, with over 2,000 residential low-temperature fuel cell systems installed, more than any other country in the world. The Japanese Government has a long term funding and strategic program to support the commercialization of residential solid oxide fuel cell (SOFC) CHP units. Japan is also a large market for home heating appliances, with approximately 4.2 million units sold per year into a market of 47 million households.

The Paloma Group is a leading global producer of gas appliances for residential and commercial applications, and owns the Rheem, Raypak and Solahart brands. The Group has annual revenues of approximately US$2.5 billion and serves more than 10 million homes in Japan.

Under the agreement, CFCL will supply Paloma with a NetGenPlusTM unit for Paloma to operate at its site inJapan. The unit is ready to be shipped to Paloma within the next week. Using the results of the real-world product operation, which is expected to run for up to 12 months, CFCL and Paloma will design and develop integrated mCHP products for the Japanese market.

The Company also continues to assess a range of opportunities to enter new markets and develop additional products.

Manufacturing and Supply Chain

In February 2008 and in line with CFCL's strategy, the Company announced that it is investing 12.4 million in the construction of a manufacturing plant in Heinsberg, Germany for the commercial production of its fuel cell systems. The plant will have an initial capacity of 10,000 units per year.

By June 2008 the Company had received full environmental and building permit approvals for the plant from the appropriate German government bodies. The Company had also signed contracts and placed orders for the three largest cost pieces of equipment, comprising furnaces, ink skids and robotic assembly units.

The project is on budget and on schedule for the plant to be operational by June 2009.

During the financial year the Company also developed partnerships with leading global suppliers to establish the supply chain for the Heinsberg plant.

Early in 2008 the Company signed long term fuel cell supply and co-operation agreements with each of H.C. Starck and CeramTec, leading German-based manufacturers of advanced ceramic components. Under each of these agreements, the companies will share relevant intellectual property and technical expertise to continually improve the performance of the supplier's cells, improve manufacturing processes and reduce unit costs. Each supplier has agreed to supply the Company with fuel cell components at fixed prices through to December 2011. The Company
will continue to produce fuel cells at its Melbourne R&D and pilot manufacturing facility to drive continued improvements in cell and stack performance.

The Company also entered commercial relationships with suppliers of the `balance of plant' components, which are integrated with the fuel cell stack to create CFCL's fuel cell module. The Company has developed and sourced compact and highly efficient components from low cost commercial suppliers, with significant cost savings and size reductions.

UK Powder Plant

In late 2007 the Company finished building and commissioning a plant in Bromborough, Merseyside, UK, designed to make high quality ceramic powders using the Company's proprietary technology. Since then the Company has been optimising the processes and equipment used at the plant to make zirconia powders. Zirconia is a key input into the

Company's fuel cell components and is also used in a wide range of other products and applications.

In early 2008 the first shipment of zirconia powder from the Bromborough plant was received in Noble Park, Victoria. The powder passed all the Company's quality control and powder characterisation tests and has been used to make the Company's fuel cells.

CFCL has also continued to develop powder samples for several potential customers.

The Company believes that the plant is capable of making a range of high quality powders for several large and growing markets, and that the plant and the associated intellectual property can provide a range of options to maximise shareholder value.

Technology

During the year the Company continued to improve the performance of its fuel cell technology to meet commercial targets. In early July the Company presented its latest technical advances at the 8th annual European Solid Oxide Fuel Cell Forum, including:
·a 50% increase in cell power density from June 2007 to June 2008;
·an increase in fuel cell stack lifetime. Degradation has reduced by 35%, from 1.53% / 1000 hours reported in February 2008 to less than 1% / 1000 hours, when operating a 1kW stack in a test station at 750oC on natural gas.

These results have been achieved through advances made in cells, glass technology, interconnect metals, protective coatings on metals and contact technology.

In July 2008 the Company was granted a further patent in Europe, for a way of reforming fuels for a fuel cell system. The patent is for an advanced fuel cell pre-reforming system. This system allows CFCL to control the proportion of methane and remove all higher hydrocarbons from the fuel used for the fuel cell. This invention allows CFCL to use a wide variety of fuels for its fuel cells, including liquid hydrocarbon fuels and bio-fuels, and also maintain a very high system efficiency. The invention is also patented in Australia and China, and applications are in progress in the USA and Japan.

ENDS

Managing Director Mr Brendan Dow discusses the preliminary results in a webcast interview
on Boardroomradio­ available at www.brr.com.au/cfu

Ceramic Fuel Cells Limited is a world leader in developing solid oxide fuel cell (SOFC) technology to
provide highly efficient and low-emission electricity from widely available natural gas and renewable
fuels. CFCL is developing SOFC products for micro combined heat and power (mCHP) and
distributed generation units that generate electricity and heat for homes.

CFCL is developing mCHP products with leading appliance partners and utility customers in Germany
(EWE and Bruns Heiztechnik), France (Gaz de France and De Dietrich Thermique), the United
Kingdom (E.On UK Ltd and Gledhill Water Storage Ltd), Holland (Nuon and Remeha), and Japan
(Paloma). CFCL is listed on the London Stock Exchange AIM market and the Australian Securities
Exchange (code CFU).

Source: Fuel Cell Today