Interim results for the six months ending 31 December 2005

Highlights

   • Key milestone achieved with a compact, lightweight 1kW fuel cell

   • British Gas relationship extended with £2.7 million part-funded programme

   • Second BOC contract secured and successfully delivered

   • Income of £562,000, up by 13% compared to the six months ended 31.12.04

   • Strong balance sheet with cash and short term investments of £15.4 million

   • Cash outflow from operating activities during the period of £1.6 million

   • Management team strengthened through key director appointments

   • Enhancement of market applications engineering capability

   • New contract awarded to accelerate mass-manufacturing capability

   • Prestigious role in the UK Government's Energy Research Partnership

Philip Holbeche, Chairman, commented:

"I am very pleased with the significant progress Ceres Power has made in the
first half of the year towards delivering cost-effective, efficient and reliable
commercial solutions using our advanced fuel cell technology. We recently
achieved a key technical milestone: the delivery of a production engineered 1kW
fuel cell, suitable for domestic CHP and many other applications. The £2.7
million programme with British Gas reinforces the commercial transformation of
our business. Ceres Power's clear competitive advantage is now becoming more
evident to industry partners, financial backers and Government."

For further information contact:

Philip Holbeche, Chairman
Peter Bance, Chief Executive                    +44 (0) 1293 400 404
Ceres Power

Patrick d'Ancona / Charlotte Kirkham            +44 (0) 207 153 1533
M: Communications

David Poutney                                   +44 (0) 207 776 1517
Numis Securities
 

Chairman's Statement

Introduction

Ceres Power made significant progress in the half year ended 31 December 2005
towards delivering cost-effective, efficient and reliable commercial solutions
using its fuel cell technology. Investment in our product engineering and
manufacturing capabilities has enabled achievement of a major technical
milestone. The Group continues to build commercial partnerships in the UK and
internationally.

The energy industry is currently the focus of much debate. Ceres is pleased to
participate and contribute to the debate at the highest levels, as the only fuel
cell company in the UK's Energy Research Partnership, reflecting Government
interest in micropower generation as part of a coherent national energy policy.

Financial results

The Group's balance sheet remains strong, with £15.4 million in cash and short
term investments allowing the Group to fund immediate growth plans and take
advantage of emerging opportunities. Income for the six months totalled
£562,000, of which interest on cash balances provided £334,000, income from
government contracts was £148,000 and revenue from development contracts was
£80,000. In total this represents a 13% increase compared to the six months
ended 31 December 2004.

Operating costs increased by 19% over the comparable period last year, due in
large part to the strengthening of the skill base in line with the Group's
commercialisation plans. Administration overheads decreased to efficient levels,
in the absence of the exceptional costs incurred in association with admission
to AIM in November 2004.

Capital expenditure during the period totalled £665,000, significantly above the
£163,000 during the prior interim period, reflecting investment in the Group's
design, testing and manufacturing capabilities, including the building of
complete fuel cell systems.

The cash outflow from operating activities during the period was £1.6 million,
with cash outflows attributable to capital expenditure totalling £596,000. There
were cash inflows of £173,000 from the exercise of warrants and employee share
options, in addition to the £562,000 income highlighted above.

Commercial engagement

Based on the Group's proven technology and product capability, major new
commercial engagements have been successfully secured.

Our relationship with Centrica plc (trading as British Gas) has been further
enhanced with the announcement of a £2.7 million programme, part funded by the
DTI, to design, build and evaluate domestic fuel cell Combined Heat and Power
(CHP) units. The Group's products are designed to deliver electricity, heating
and hot water to the home, substantially reducing both energy bills and CO2
emissions. British Gas estimates that the Ceres technology is accessible by 14.5
million British homes.

Ceres has extended its relationship with The BOC Group plc ("BOC"), successfully
securing and completing a second significant contract. This contract builds on
previous work and focuses on using Ceres fuel cell products to provide
electrical power from LPG and propane fuels, which are distributed by BOC to
millions of customers in over 50 countries.

During the period the Group successfully completed an important Government
programme for the DTI, continuing our exemplary delivery record in such
contracts. The Group's close relationship with Government and other agencies
continues, highlighted by the recent announcement of a further £0.5 million
contract with The Carbon Trust to assist development of mass production
processes for Ceres fuel cells.

Technical review

Ceres has recently achieved a key technical milestone: the delivery of a
production-engineered 1kW fuel cell, suitable for domestic CHP and many other
applications. This fuel cell successfully passed multiple tests for performance
and fuel flexibility. We continue to expand the Group's engineering resources to
successfully integrate fuel cell technology into complete products for a range
of markets.

The Group's innovations in materials and engineering have continued to drive up
fuel cell performance to levels required for market applications. Recent
investment in analytical and testing equipment further supports this important
activity and enhances our excellent facilities.

We have continued to invest to ensure that the newly-established manufacturing
team has the necessary skills to deliver high quality product in large volumes.
Recent progress includes successful adoption of proven manufacturing processes
for the deposition of fuel cell layers.

The Group is capturing a very rich stream of intellectual property (IP),
building a substantial portfolio of patents, trademarks and trade secrets. To
support this activity, we have retained the services of a firm of highly
experienced patent attorneys with an outstanding pedigree in IP protection,
commercialisation and litigation.

Ceres has continued to receive awards and recognition from major organisations.
The Group received the Frost & Sullivan Technology Innovation Award, and took a
leading role in the formation of the UK Fuel Cell Industry Association.

People

During the period the Group recruited 10 new members of staff, increasing our
skill base and depth of experience. Important new directorships also reflect the
successful transformation from an R&D focused company to a commercially driven
market-led business.

Andrew Baker, Operations Director, is appointed to the board of the Group (see
Note A) with responsibility for technology, engineering and manufacturing. He
has previously held a number of international board-level directorships within
major organisations such as Calsonic and Ricardo.

Professor Nigel Brandon moves to the newly created role of Chief Scientist,
leaving the board of the Group but remaining on the operating company board.
Nigel focuses on technology foresight, Government programmes and liaison with
academic research institutions, combining his role at Ceres with the prestigious
position of Shell Professor of Sustainable Development in Energy at Imperial
College London.

We recently welcomed Bob Flint as Commercial Director of Ceres Power Limited,
with responsibility for deal-structuring, partnership negotiation and marketing.
He has over 15 years experience in business development, technology licensing
and corporate venturing, specialising in building businesses from platform
technologies.

Outlook

During the last six months Ceres has put more essential elements of the Group's
development platform into place. The Group's clear competitive advantage, as
demonstrated by the delivery of a compact, highly engineered 1kW fuel cell, is
now becoming more evident to industry partners, financial backers and
Government.

I am immensely pleased that our relationships with key partners continue to
strengthen, for example through contracts with British Gas and BOC. Ceres now
has a proven ability to win and deliver contracts in order to achieve key
technical, commercial and financial goals. I believe this to be an indicator of
future commercial success in other geographic and market sectors.

As is usual in high growth companies in emerging industries, there are a number
of significant challenges and hurdles to overcome to reach our ambitious goals.
In order to address the execution risks inherent in the Group's strategy, we are
continuing to build top-class capabilities in all areas of the business.
Finally, and as ever, the demands of a rapidly growing company place substantial
burdens on all employees and their families. I wish to thank each one of them
for their commitment to making Ceres such a success.

Philip Holbeche
Chairman