AFC Energy and HiiROC Agree on Terms to Unlock Natural Gas as Zero Emission Hydrogen Fuel

AFC Energy (AIM: AFC), a leading provider of hydrogen power generation technologies, is pleased to announce it has entered into a binding Heads of Agreement (“Heads of Agreement”) with UK based green hydrogen generation technology developer, HiiROC Limited (“HiiROC”). 

HiiROC’s plasma-based technology has proven its ability in early testing, to extract Hydrogen from methane and biomethane, readily available from incumbent gas networks, without the emission of CO₂ or other harmful greenhouse gases.  The green Hydrogen produced from this technique has in turn the possibility of fueling AFC Energy’s H-Power fuel cell systems, thereby opening up methane as a candidate carrier of green Hydrogen for AFC Energy’s low-cost power generation.       

Highlights 

• HiiROC’s technology platform looks to, as distinct from steam methane reforming, produce clean, zero CO₂ emission hydrogen through a unique plasma process fuelled by natural gas or biogas, converting hydrocarbons (CH₄) into a clean hydrogen stream and a high value solid carbon (“carbon black”).
• Under the binding Heads of Agreement, AFC Energy and HiiROC have agreed to enter into a Commercialisation Agreement intended to include the following provisions:

o  AFC Energy to obtain global preferential rights to integrate HiiROC’s plasma-based technology with the Company’s proprietary H-Power fuel cell, including an initial reduction in Hydrogen cost to AFC Energy derived from the system cumulatively valued at £2m.

o  AFC Energy to also be granted exclusive rights to HiiROC’s technology in key regions, including the UK, Europe and Australia, in the field of electrified transportation, including electric vehicles.

o  Integration of the HiiROC and AFC Energy technology platforms, which if successful, has the potential to unlock natural gas as a zero-emission, low cost hydrogen fuel carrier.

•  It is anticipated that the Commercialisation Agreement will contain full commercial terms and principles that the parties intend to be bound based on the ongoing development work conducted in 2020.   
•  AFC Energy is investing £100,000, payable in AFC Energy shares, into HiiROC’s scaling up programme, which were allotted to HiiROC on 24 January 2020 conditional on admission to trading on AIM. AFC Energy also intends to make up to £300,000 of “in-kind” contribution to HiiROC over 12-18 months to support the development of a prototype unit.

Over recent years, AFC Energy has evaluated several emerging green, low cost hydrogen generation technologies for integration with its proprietary H-Power^TM fuel cell systems. 

For the past 9 months, the Company has been in discussions with HiiROC regarding the potential for natural gas to be utilised as a clean, zero CO₂ emission fuel, into the AFC Energy fuel cell through adoption of HiiROC’s unique plasma process.  HiiROC’s plasma-based process acts to convert natural gas into a clean hydrogen stream for the fuel cell, alongside gaseous carbon that can then be quenched as a high value solid carbon (“carbon black”). 

Independent analysis of gas samples derived from HiiROC’s plasma process in 2019 confirmed the potential for this technology, initiating plans for a strategic partnership between the two companies.  With the objective of bringing to market a unique, natural gas fueled, zero emission fuel cell system, successful scale up of the HiiROC process could allow AFC Energy and its customers to take advantage of low cost natural gas and existing distribution pipelines to access one of the world’s most readily available fuels, without greenhouse emissions. 

It is intended that under the terms of the Commercialisation Agreement, AFC Energy will work alongside HiiROC to deliver a prototype unit through 2020 which it is supporting through an investment of £100,000 into HiiROC’s scaling up programme, payable in AFC Energy shares, plus up to £300,000 worth of engineering, instrumentation, testing and associated support over eighteen months. In return, AFC Energy will have pre-defined rights including an initial reduction in hydrogen cost from the system, cumulatively valued at £2 million, and access to the technology for deployment in a number of applications, including exclusively in EV charging across the UK, Europe and other locations.

Under the proposed terms of the Commercialisation Agreement, HiiROC will work with AFC Energy on a preferential basis in the development of an integrated zero emission power generation solution and within the prototype system development, will assess and confirm the technical and economic viability of the system.  Based on initial economic analysis, the HiiROC system has the potential to offer a cost competitive alternative hydrogen source and complement the Company’s ammonia and direct hydrogen opportunities, building a portfolio approach to fuel for its customers and partners.      

The £100,000 investment will be paid via the issue of 526,316 ordinary shares of 0.1 pence each in the capital of the Company at the closing price on 24 January 2020 of 19 pence per share. Application will be made to the London Stock Exchange for the new Shares to be admitted to trading on AIM shortly (“Admission”). A further announcement detailing when the shares will be admitted to trading will be made in due course. The Shares will be issued credited as fully paid and will rank in full for all dividends and other distributions declared, made or paid after the admission of the Shares, respectively and will otherwise be identical to and rank on Admission pari passu in all respects with the existing Ordinary Shares.

Following Admission, the Company will have 462,878,812 Ordinary Shares in issue, none of which will be held in treasury.  Accordingly, the total number of voting rights in the Company will be 462,878,812 and shareholders may use this figure as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the FCA’s Disclosure Guidance and Transparency Rules.  

Adam Bond, Chief Executive Officer at AFC Energy, said “Evaluation of low-cost hydrogen has been a key part of AFC Energy’s commercialisation strategy over recent years.  HiiROC’s innovative new technology platform not only has the potential to open up new green hydrogen sources but could do so whilst utilising existing natural gas distribution infrastructure, making access to hydrogen fuel more readily available and affordable in developed and urban areas.  While we look forwards to the results of prototyping our H-Power^TM system with that of HiiROC, we are also aware of several blue ribbon partners developing project opportunities with HiiROC which may leverage new opportunities for AFC Energy to open new markets reaffirming the future role of hydrogen as a key element of the world’s future energy mix.”

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