Solid Oxide Fuel Cell Developer Ceres Power Posts Interim Results

Interim results for the six months ended 31 December 2008

Ceres Power Holdings plc (“Ceres”, “Ceres Power” or “the Group) announces its interim results for the
six months ended 31 December 2008.

Highlights

• Successfully tested 1kW Fuel Cell Module meeting Alpha performance, size and weight targets

• 1kW CHP products built under Alpha phase of the British Gas programme

• On track to complete all Alpha milestones under British Gas CHP programme

• Continued strong growth in commercial revenues to £0.5m

• Strong balance sheet with £24.4m in net cash and short-term investments at 31 December 2008

Since the period end:

• 1kW CHP product testing commenced under British Gas Alpha programme

• £2.5m funded development and trialling programme secured with Calor Gas for LPG CHP

• Volume call-off order from Calor Gas for 20,000 CHP products

• 50,000 sq ft manufacturing facility secured for fuel cell mass production

• Procurement of manufacturing equipment for Mother Plant underway

• Former FTSE 100 Finance Director appointed as Non-Executive Director and Audit Committee

Chairman’s Statement

Introduction

I am pleased to report that Ceres Power has continued to make significant progress in the half year ended
31 December 2008 achieving the milestones set out in the roadmap communicated to investors in June
2008. The Group is on track to complete the deliverables under the Alpha phase of the CHP programme
with British Gas. In accordance with the roadmap, the Group anticipates achieving the sign-off of the
Alpha phase of the programme during Q2 2009 that will trigger the next milestone payment of £2 million
by British Gas.

Since the end of the period, the Group has secured a £2.5 million funded trialling and development
programme with Calor Gas Limited and a call-off order for 20,000 LPG fuelled CHP products for the UK
market. The new LPG CHP product variant, generating electricity and all of the home’s heating and hot
water, will initially address the more than 2 million homes and small businesses that are not connected to
the mains gas grid in the UK. The LPG CHP product will also enable the Group to address other
territories where the mains natural gas network is less prevalent, including Europe where there are more
than 100 million such properties off mains gas.

The Group has now secured the Mother Plant facility for the mass production of fuel cells. The site was
identified and negotiations finalised during late 2008, enabling the lease to be signed and initial
procurement of machines during March 2009. This facility will be fitted-out, and manufacturing
equipment installed and commissioned with initial manufacturing operations commencing during H2
2009.

The global drivers for widespread deployment of microgeneration solutions such as the Group’s
residential fuel cell CHP products continue to improve with governments setting specific fiscal incentives
to stimulate mass market uptake. The enabling legislation for feed-in tariffs recently passed in the UK
should help stimulate rapid uptake of energy efficiency technologies that offer consumers attractive
payback periods and use existing infrastructure.

Financial Results

The group continues to maintain a strong financial position. At 31 December 2008, the Group held
£24.4 million in net cash and cash equivalents and short-term investments. As previously reported, the
Group’s Board-approved treasury policy is to invest all surplus funds in short-term, low-risk, triple Arated
money market funds focussed on preserving the Group’s capital. During October 2008, the board
approved the purchase of £10 million of short-dated UK Government gilts to further diversify the credit
risk. The Board and Audit Committee regularly review the Group’s cash management and investment
policy.

Revenue for the six months ended 31 December 2008 increased 73% to £482,000 (2007: £279,000)
reflecting part of the £1,000,000 Alpha phase payment received from British Gas and the completion of
technical milestones on the Group’s other commercial contracts. Other operating income arising from
public sector contracts fell by £318,000 to £113,000 (2007: £431,000).

The Group has continued to invest throughout 2008 in both human resources and capital equipment to
build product development, manufacturing and supply chain capability. This investment, together with the
product development expenditure incurred in the Alpha phase of the programme with British Gas, has
resulted in an increase in expenses of 18% to £4,760,000 (2007: £4,027,000). Interest income rose 102%
to £605,000 (2007: £300,000) directly related to the £20 million raised in February 2008 through the issue
of new shares to British Gas. The purchase of £10 million of UK Government gilts in October 2008 has been recorded on the balance sheet as short-term investments at 31 December 2008 at fair value and the
gain of £258,000 (2007: £nil) included in the income statement. The loss for the period attributable to
shareholders increased by 9% to £3,302,000 (2007; £3,017,000).

The net cash used in operating activities increased during the period to £3,420,000 (2007: £1,887,000)
mainly due to the increase in operating loss. Cash outflows attributable to the purchase of plant and
equipment increased to £647,000 (2007: £474,000) reflecting the investment in manufacturing and test
equipment. As disclosed in note 5, the Group’s overall cash and cash equivalents and short-term
investments reduced by £ 3,115,000 (2007: £1,785,000) during the six month period.

Commercial

Since the end of the period, the Group has secured a £2.5 million funded development, manufacture,
supply and distribution agreement with Calor Gas Limited (‘Calor’) for residential CHP products
operating on liquefied petroleum gas (‘LPG’). Under the terms of the agreement, Calor will pay milestone
payments to Ceres during the development and trialling phase, including an up-front payment of £1
million. Ceres has also secured a volume call-off order from Calor for 20,000 LPG CHP products in
aggregate over a five-year period for the UK market. Subject to successful completion of the development
and trialling phase, and the parties agreeing standard commercial terms, Ceres will sell the LPG CHP
product to Calor for the UK market on an exclusive basis for a five-year period anticipated to begin in
2012.

Ceres and Calor intend to maximise sales of the LPG CHP product by addressing both the existing LPG
customer base and also the substantial number of homes and small businesses using oil, solid fuel or
conventional electrical heating (more than 2 million in the UK alone). Calor is the UK’s leading LPG
supplier with over 70 years experience and its parent company, SHV Gas, is the world’s largest
distributor of LPG with operations in over 27 countries over 3 continents. Ceres Power retains the right
to supply and distribute LPG CHP products anywhere in the world outside the UK (e.g. more than 100
million properties are off mains gas across Europe) and the right to exploit its innovative fuel cell
technology in other applications globally including in the UK.

The Group is continuing to meet its obligations under the commercial contract with EDF Energy
Networks Limited and has successfully delivered and commenced testing a prototype energy security
product during March 2009.

The Group is also exploring other markets for CHP products and is pursuing new international growth
opportunities.

Technology and Product Engineering

The Group is on track to complete all Alpha milestones under the CHP programme with British Gas
during Q2 2009.

During the half year, the Group has successfully built and tested a 1kW Fuel Cell Module meeting the
performance, size and weight requirements under the Alpha Phase of the CHP programme with British
Gas. The Fuel Cell Module was operated on three different fuel types, mains natural gas, methane and
propane and delivered a maximum electrical output of just over 1kW and was operated across a broad
range of power outputs. The core Fuel Cell Stack within the Fuel Cell Module demonstrated a heat to
power ratio of better than 1:1. In Q4 2008, the Group has successfully built a number of wall-mountable
1kW CHP products with the same natural gas, water and electricity connections as existing boilers and
has met size, weight, installation, service and maintenance requirements with a product width of less than
60cm, small enough to fit between standard kitchen units.

Since the period end, the Group has been testing the complete grid-connected Alpha CHP products, being
the final deliverable under the Alpha phase of the programme. Completion of the CHP product testing and
audit of the Alpha deliverables by British Gas is anticipated during Q2 2009, which will trigger the
payment of £2 million by British Gas for successful completion of the Alpha Phase. The Beta phase of the
British Gas programme has commenced with the design iteration work underway.

Manufacturing

In March 2009, the Group secured a Mother Plant facility for the volume manufacturing of its fuel cells.
The facility is located in Horsham, South East England and includes an existing building (formerly used
for a semi-conductor production facility) which is well suited to Ceres’ production requirements.
The 50,000 sq. ft. (5,000 m2) building has been secured on a long leasehold and is located within 10 miles
of Ceres Power‘s headquarters. The site’s convenient location helps to minimise logistics costs and
facilitate technology transfer from the existing Ceres pilot plant in Crawley. Ceres will use the new
facility to mass manufacture fuel cells and for volume assembly of fuel cell stacks and fuel cell modules,
using the scalable processes and machines developed and trialled at the Group’s existing pilot plant.
In accordance with the Group’s published CHP roadmap, during H1 2009 the facility will be fitted-out
and the key fuel cell manufacturing equipment procured. During H2 2009 an initial manufacturing line
will be commissioned and manufacturing operations will commence. Low volume beta units will be
produced in 2009 and into 2010 for sheltered field trials under the contract with British Gas and during
2010 additional equipment will be installed to deliver the higher volumes required for commercial field
trials and in preparation for volume launch with British Gas in 2011. The site is intended to provide the
potential for expansion beyond the previously indicated one million fuel cells per annum.

Ceres’ strategy is to manufacture in-house the intellectual property-rich fuel cell core technology and to
assemble the fuel cell module, the common ‘electrochemical engine’ platform across the Ceres product
range. Assembly of the CHP products in volume is intended to be completed by an assembly partner in
accordance with Ceres’ design.

The development of a UK-based volume fuel cell manufacturing facility will create a significant number
of new skilled ‘green-collar’ jobs both directly at the facility and in the surrounding area via the
Company’s extended supply chain.

Intellectual Property

The Group continues to invest in the protection, management and exploitation of its valuable intellectual
property portfolio. The Group’s IP portfolio (now containing more than 30 active patent families filed
and/or granted) covers a very broad spectrum including materials, component and product designs and
manufacturing machines and processes. The unique technology and the IP therein are protected through
patents, trademarks, know-how and trade secrets. This investment remains central to the success of the
Group and in all dealings with any third parties rigorous controls and procedures are in place to ensure
that all IP is properly protected.

People

During the half year, the Group has continued to recruit high calibre experienced personnel in
manufacturing, product development and testing and supply chain management. We will continue to
recruit during 2009 to build our volume manufacturing capability and prepare for the reliability testing
during the Beta phase.

We would like to thank Andrew Baker, who left the Group in December 2008, for his contribution to
Ceres over the last four years and in helping to develop a world-class product engineering and
manufacturing team. We would like to wish Andrew every success for the future.
The Board is pleased to welcome Jonathan Watkins as Chief Operating Officer. Jonathan joined Ceres in
November 2008 from Acument Global Technologies, a global leader in automotive engineered
components. Jonathan has considerable experience in leading global technology-led manufacturing
businesses and his delivery-focused approach will prove invaluable as we build our manufacturing and
supply chain capability in preparation for volume product launch.

The Board has been further strengthened with the appointment in February 2009 of John Nicholas as a
Non-Executive Director and Chairman of the Audit Committee. John was previously the Group Finance
Director of Tate & Lyle PLC, a FTSE 100 manufacturer of food ingredients and is currently the Non-
Executive Director and Audit Committee Chairman of Rotork plc, the world’s leading manufacturer of
industrial valve actuators. John’s broad business experience and financial background will complement
the Board. We would also like to congratulate Sir David Brown on his appointment as Senior Independent
Director of Ceres.

Outlook

The Group is on track to deliver the CHP programme with British Gas in line with the roadmap
announced in June 2008. The challenging milestones that were set out in the presentation to investors in
June 2008 have been met and I am confident that we will continue to deliver on our priorities going
forward.

For the next six months the focus of the business will be to achieve the following:

• Complete the Alpha phase CHP product testing under the British Gas programme

• Receive the next milestone payment of £2 million from British Gas for the completion of the
Alpha phase

• Complete the fit-out of the Mother Plant facility and procure, install and commission the key
manufacturing equipment to begin initial manufacturing operations

• Progress the Beta CHP phase with British Gas

• Target new international growth opportunities.

Dr Brian Count
Chairman

Editors Note: A pdf of the full results are available on Fuel Cell Today at: http://www.fuelcelltoday.com/online/financials

Source: Fuel Cell Today