Ceres Power Holdings PLC (AIM:CWR, OTC:CPWHF) shares surged 27% after it revealed Bosch is joining its partnership with Weichai Power to target China’s fuel cells market.
Engine specialist Weichai and Ceres are already collaborating on a fuel cell for commercial vehicles, but German electrical giant Bosch’s addition broadens the scope to include stationary power applications, the UK company said.
WATCH: Ceres Power CEO Phil Caldwell hails 'massive step' with Bosch and Weichai partnership
Two separate joint ventures will be formed in Shandong Province through the new arrangement, it added in a statement.
One, the System JV, will develop and manufacture solid oxide fuel cell (SOFC) systems.
Bosch and Ceres will licence their respective SOFC system IP to the JV for mobile and stationary applications in China and will share royalties from the sale of products.
Weichai will be the majority shareholder with Ceres holding 10%.
A separate manufacturing operation will be established to supply fuel cell stacks to the other JV and potentially other third parties.
This Stack JV would be the second manufacturing facility using Ceres technology for Bosch, in addition to a 200MW German facility scheduled to come on stream in 2024.
Bosch will be the majority shareholder in the Stack JV with Ceres to provide the fuel cell technology and receive sale royalties, but it will not have a direct holding.
License fees of £30mln from the System and Stack JVs are expected to accrue to Ceres over the next three years, in line with the previous arrangement, while minimum royalties will be agreed for when production commences.
Phil Caldwell, Ceres chief executive, said: "This exciting collaboration represents an important step in Ceres' ambitions for the Chinese market and a critical part of delivering global manufacturing capacity for our technology.
“We have every confidence in our partnership with Weichai and with the addition of Bosch's expertise in industrialisation and manufacturing have the potential to establish one of the strongest partnerships in the fuel cell industry."
Bosch and Weichai are Ceres' two largest shareholders with stakes of 17.8% and 19.9% respectively.
Shares in Ceres jumped 27% to 655p by lunchtime on Wednesday.
"Today marks another major milestone in the Ceres investment case," said analysts at Berenberg, adding that this joint venture with Weichai had been "much-anticipated" and exceeded their prior expectations.
"With Bosch now also joining Weichai and Ceres in China, we believe Ceres’s probability of long-term success in the region has increased substantially. The beauty of Ceres’s licensing model is also clear to see – limited upfront capital costs (c£20m) for a pipeline of future high-margin royalties – while there are few better validations of its technology than Bosch and Weichai putting hundreds of millions of pounds towards scaling it."
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