AFC Energy signs order and exclusivity agreement for fuel cell systems with Linc Energy
AFC Energy (AIM: AFC) has entered into a binding heads of agreement with Linc Energy (ASX: LNC) to integrate the AFC Fuel Cell System for use in Linc Energy’s Underground Coal Gasification projects, to tap into what AFC called a “rapidly emerging” and the largest potential market for power generation from underground coal.
AFC’s Alpha fuel cell system will be installed at Linc’s operating UCG plant in Chinchilla, Australia for demonstration and later install the larger 50 kW (kilowatt) AFC fuel cell system following the development of Alpha. The fuel cell systems will use synthetic hydrogen produced at UCG as their feed source.
Multiple installations of AFC’s 50 kW system for full scale commercialisation are anticipated.
According to the terms of the agreement, Linc will get worldwide exclusive rights to utilise and operate AFC fuel cells in conjunction with any UCG application for a period of 24 months and purchase the first fuel cell system for £200,000 with delivery anticipated in the next five months. Linc also has the option to extend the period of exclusivity for another 24 months by investing £2.3 million in AFC Energy.
AFC will be entitled to an upfront payment calculated on the cost of delivery of fuel cell systems and a royalty based on profits from the use of its fuel cells.
Linc said that the project capital expenditure for power stations using AFC Energy’s low cost fuel cell system is forecast to be less than that of conventional coal/IGCC (integrated gasification combined cycle) power stations.
“Whilst our primary focus remains firmly on the chlor-alkali market, we now have access through B9 Coal to the rapidly emerging market for power generation from underground coal. This opportunity is by far the largest potential market for AFC Energy that we identified and is operational practically anywhere in the world where there are deep coal deposits. The implementation of this programme can create a ‘Holy Grail’ for future coal utilisation with low-cost, highly efficient conversion of coal into power and through the process of CCS it can turn the dirtiest fossil fuel into the cleanest,” said Chief Executive of AFC Ian Balchin.
As the introducer and broker of the transaction, B9 will receive 2% of the net profits from the use of AFC fuel cells.
Shares in AFC rose 7% on the news this morning.
