More annual reports from AFC Energy PLC:
2023 ReportAFC ENERGY PLC
ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED
OCTOBER 31, 2018
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AFC ENERGY PLC ANNUAL REPORT & ACCOUNTS 2018
TABLE OF CONTENTS
Contents
Strategic Report:
Chairman’s report ................................................................................................................................................................................................ 3
Chief executive officers report ............................................................................................................................................................................. 5
Governance:
Chairman’s Statement on Corporate Governance ............................................................................................................................................... 8
Board of directors .............................................................................................................................................................................................. 15
Directors' Interests and their Remuneration ..................................................................................................................................................... 17
Directors’ Report ................................................................................................................................................................................................ 20
Statement of Directors’ Responsibilities ............................................................................................................................................................ 22
Financials Statements:
Independent Auditor’s Report ........................................................................................................................................................................... 23
Statement of Comprehensive Income ............................................................................................................................................................... 26
Statement of Financial Position ......................................................................................................................................................................... 27
Statement of Changes in Equity ......................................................................................................................................................................... 28
Cash Flow Statement .......................................................................................................................................................................................... 29
Notes Forming Part of the Financial Statements ............................................................................................................................................... 30
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AFC ENERGY PLC ANNUAL REPORT & ACCOUNTS 2018
Chairman’s report
My second year as Chairman of AFC Energy has seen substantial change and progress as the company begins marketing its fuel cell technology as
well as identifying new addressable market sectors and applications of our technology outside our target markets. Despite these positive
developments, certain potential commercial opportunities have developed slower than we had hoped and we, like many others, are being hindered
with the current economic and political uncertainties, including Brexit that exist. However, I am pleased that AFC has secured a further £4m of
funding to part finance our commercial strategy.
The transition from the development phase to the commercial phase is always a challenging one for technology companies. In the case of AFC Energy
this has necessitated a product re-engineering over a three-year period. Our technology in 2015 was functional and delivered the proof of concept.
However, as we have stated before, the technology was not ready for commercial manufacture, with both component longevity and cost issues
hampering the potential commercial exploitation.
ENGINEERING FOCUS
Through a successful three-year re- engineering programme, AFC Energy has significantly reduced the bill-of-material costs while increasing the
lifetime of electrode components to acceptable commercial levels. Under the direction of the board, the past 12 months have seen the scientists and
engineers at AFC Energy work diligently in the finalisation of product design in preparation for manufacturing. We now believe that we have a product
that is manufacturing ready and our engineering team is currently designing a containerised solution to enable rapid cost-effective deployment for
off grid applications. We also have the partners to see us into volume manufacture.
COMMERCIAL STRATEGY
We have identified several target off-grid diesel replacement markets to complement our existing target to supply the grid using vented hydrogen
from chlor-alkali plants and other industrial processes. Our focus on the year ahead is to monetise our technology through sharing joint development
costs and technology licensing. We have already announced our negotiations with Southern Oil who are making major modifications to one of their
re-refinery plants in Australia. We have delivered the engineering study contracted with the aim to negotiate the delivery of our fuel cell system to
them once they have concluded the technical specifications of the plant.
Our commercial strategy will be conducted in three phases:
Joint development cost sharing and technology licensing to industrial manufacturing partners for global roll-out.
1.
2. Commercial trial sites directly supported by AFC Energy across target sectors to mitigate risk and provide an engineering learning base.
3. Appoint regional distribution partners who know the markets and customers and have the financial capacity to fund deployment and sales
coverage.
This approach will enable us to focus on the core R&D strength of AFC Energy while ensuring that our product manufacturing remains asset-light and
partner-driven.
Traditionally, the principal target application for our fuel cells has been in the generation of electricity for grid systems. We envisaged that these will
typically be located at either chlor-alkali plants or oil refineries, where hydrogen is a by-product of other processes. According to the Fuel Cell &
Hydrogen Energy Association, the waste or by-product hydrogen represents over 100,000 MW of power that could be used to generate electricity
through fuel cells.
We announced in 2018 that we would also be targeting the market for static auxiliary power and seeking to displace the current generation of
polluting diesel gensets. This is a market that is worth in excess of $20bn today with very strong growth forecast, yet the emissions from diesel
gensets cause serious illnesses and premature deaths. In the UK alone, the Government estimates that 23,500 people die prematurely each year
through air pollution related illnesses. In the city of Gurugram in India for example, where diesel gensets are extensively used, 30% of the diesel
particulate is from diesel gensets, according to the Centre for Science and Education report from June 2018. It is our belief that growing awareness
of the scale of the pollutant problem from diesel gensets will lead to their rejection by developed and developing countries alike and replacement
with clean efficient hydrogen fuel cells. AFC Energy is in the vanguard of this movement.
In 2018 we defined a new market for AFC Energy; the fuel cell powered Electric Vehicle (EV) charging station. Developed in house by our own
engineering team, the AFC Energy CH2ARGE is the world’s first integrated EV charging station. A proof of concept system has been built at our facility
in Dunsfold, Surrey, and this was demonstrated in January this year. It also opens a substantial new market opportunity for us as the global numbers
of EVs on the road is expected to mushroom to hundreds of millions over the next decade. The growth in EVs alone will exceed the ability of most
national grids to support the recharging demands, and supplementary auxiliary power will be required in high density locations. Given that this
supplementary power must be both clean and dependable, fuel cells would be the ideal solution to this challenge.
MANAGEMENT
We are pleased that the role of CFO (non-board) has now been taken by Graeme Lewis, who replaces Richard Dunkley and who brings significant
relevant experience from senior finance roles in the distribution of diesel combustion products globally.
At the board, we have bid farewell to Eugene Tenenbaum as well as Richard Tuffill as they stepped down during 2018 and I would like to personally
thank them for their service and contribution to AFC Energy. We welcome to the board Percy Hayball who has been appointed as a non-executive
director and is a representative of Ervington Investments Limited, which originally invested in AFC Energy in 2012 and has supported it since then.
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AFC ENERGY PLC ANNUAL REPORT & ACCOUNTS 2018
FUNDING
The financial markets are extremely risk averse in this period of Brexit uncertainty and, as a pre-revenue company, like many of our peers, we have
witnessed this uncertainty first-hand. To counter-balance the macro political and economic uncertainties, we have focused on building long term
relationships with industrial partners which will demonstrate their belief in the commercial future of our technology. Going forward, through these
relationships we expect to share product development and distribution costs lowering funding requirements. To conclude these actions, we have
arranged a convertible loan facility for up to £4 million and an equity placement of £ 0.8 million to finance working capital and pursue our strategy
to commercialise our fuel cell technology.
FUTURE
This has been another challenging year for our employees and on behalf of the Board I thank them for their dedication and commitment to serving
the scientific and commercial needs of our company. They have and will be the driving force for the future success of our business.
The role of the management team and the board of directors is to lead and commercialise what is now a proven and fit for manufacture product and
execute on a sales and marketing strategy to bring this product to world. After 10 years of painstaking diligence, and sometimes frustrating R&D the
technology work and the markets are calling for our product.
Today we can state that we have engineered the right product to take to market, we have the right people on board to make this happen and we
have identified the right market opportunities to build a successful and profitable company.
JOHN RENNOCKS
Chairman
12 April 2019
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AFC ENERGY PLC ANNUAL REPORT & ACCOUNTS 2018
Chief executive officers report
The three key criteria for the commercial success of AFC Energy are our ability to have the:
• Right product
• At the right price
•
For the right markets
In 2018 we saw strong progress on all these fronts.
The commercialisation of the fuel cell has required a multi-year re-engineering approach to deliver a product that can both provide the efficiency in
operation demanded by customers and the reduction in build costs to make the CAPEX affordable. Very significant progress was made in 2018 on
the engineering front and the year culminated with the construction of a prototype commercial pilot recharging station for electric vehicles.
AFC Energy has also progressed its commercial relationships with the announcement of negotiations to deploy in Australia, the development of plans
for a diesel displacement pilot and the identification of other opportunities to monetise our intellectual property and know how.
Commercial and engineering progress has been matched by the development of the market during 2018; alongside the existing markets to sell
electricity to the grid and the use of fuel cells to reduce emissions by replacing diesel gensets, we saw the evolution of EV charging as a new and
sizeable premium priced application of fuel cells.
ENGINEERING PROGRESS
The first half of 2018 saw completion of the detailed engineering work on the individual flow plates and finalisation of stack design specifications.
The new stack design operates a single multi-dimensional plate that is better positioned to optimise fuel cell operation and lowers cost to
manufacture and assemble. The engineering of the new plates and stack necessitated the extensive testing of small stacks with a variety of alternative
plate designs.
A specification for the mass manufacture of the plates was issued to three companies in October 2018 and in March 2019, and a preferred
manufacturer was identified, Advanced Plastics. AFC Energy has successfully, with Advanced Plastics, conducted prototype manufacturing and plastic
welding of the plates, removing a lot of the risks to commercial operation and are now finalising quality assurance and control procedures. Upon
successful completion of this phase a contract with Advanced Plastics as preferred mass manufacturer will be agreed.
The re-engineering of the flow plates also required redesign of the cartridge and specifically the gas inlet and outlet ports. This work was completed
in early March. Adjustments to manifolds, tie bars and location of fluid nozzles were also considered necessary and have now been completed.
Throughout 2018 the engineering and design work has necessitated an iterative process through the stages of concept, prototypes and final
manufacturing specifications. This work is now completed.
DE NORA
The relationship with De Nora continues to evolve ahead of the commencement of manufacturing and AFC Energy now has a reliable source of
electrodes that have both longevity and economy.
The result of the joint development work has seen progress in both the longevity and cost-efficiency of electrodes. Electrode pairs that were proven
for a two-year lifecycle at the end of 2017 have now been engineered as large-scale electrodes with a tested two-year lifecycle and our target is to
achieve four-year lifecycle electrodes in the short term. Solid progress has been made towards this target in 2018 through further electrode
optimisation activities conducted between De Nora and AFC Energy.
De Nora has proven to be a highly reliable and contributory partner to the engineering success of AFC Energy. Following the successful trials in 2017
and 2018, AFC Energy is looking to move ahead with an Electrode Manufacturing Agreement with De Nora for the volume supply of the optimised
electrodes. Looking towards the future, discussions have begun on new joint research objectives for the next generation of electrodes.
CUSTOMER DEMAND
In July 2018 we announced an engineering study to scope the customer needs in order to deliver our first commercially operating fuel cell in Australia.
The plant will use an AFC Energy fuel cell system to convert surplus hydrogen from the refinery into electricity for use at the Southern Oil Refinery in
Queensland. Given that world-wide hydrogen waste is calculated by the Fuel Cell & Hydrogen Energy Association to be in excess of 100,000 MW – or
enough to power the UK twice over – this project demonstrates how surplus hydrogen from an industrial process can commercially deliver electricity
to the grid. AFC Energy expects to agree final terms and deliver a fuel cell system to Southern Oil’s Gladstone refinery once they have finished the
design of their plant modifications and confirmed the volume of hydrogen available for the fuel cell system.
The Middle East showed renewed interest in alkaline fuel cells during the year. AFC Energy’s technology has enabled us to be shortlisted for a series
of potential deployments in the region.
The use of fuel cells to displace diesel gensets has turned from a potential market to an addressable opportunity. A static auxiliary power market that
is forecast to be worth $20bn by 2021 is under pressure to change as regulators take steps against diesel emissions. AFC Energy is well-placed to
enter this market and is working with our partners to use fuel cells in place of diesel gensets for a major construction project in Surrey.
NEW MARKET OPPORTUNITY
The primary target markets for AFC Energy’s products – sell electricity to the grid using vented hydrogen and static power systems to displace diesel
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AFC ENERGY PLC ANNUAL REPORT & ACCOUNTS 2018
gensets – were joined during 2018 by a new market opportunity; the charging of electric vehicles. The EVs, as they are known, are about to spiral in
numbers from the two to three million in the world today, to 100 million by 2030 and over 400 million in 2040, according to forecasts by Bloomberg
New Energy Finance. Charging these vehicles will require the building of significant new power station infrastructure.
The confluence of massive energy demand and under-provision of grid supply provides fuel cells in general, provides AFC Energy the opportunity to
develop hydrogen powered recharging systems. These will operate to provide supplementary power to the grid or directly where demand is
concentrated, such as refuelling at supermarkets or sports stadiums.
AFC Energy has taken the initiative in this new market and has developed a prototype hydrogen powered EV charging system.
HIGH POWER DENSITY ALKALINE FUEL CELL
In response to growing customer and partner interest in a higher power density iteration of AFC Energy’s alkaline fuel cell,research time has been
invested over the past 18 months in the design and development of a solid membrane fuel cell which exhibits all the benefits of the incumbent
alkaline system, whilst reflecting a materially higher power density as exhibited by other membrane fuel cells in the market today.
The new technology has potential use in applications where space and weight of power generation are important considerations and dictate choice
of power generation technology. To this end, the new system is entirely complementary to the existing liquid electrolyte system.
The new alkaline fuel cell platform will enable quicker response times, far greater power density facilitating reduced system weight, smaller volume
and footprint whilst still maintaining high efficiency all whilst being able to accept lower grade hydrogen fuel sources as compared with alternative
membrane technologies on the market today.
This fuel cell system will open up new markets for AFC Energy where high-power density and reduced weight, volume and footprint is beneficial to
customers’ needs. The technology will also be able to integrate into AFC Energy’s Electric Vehicle recharging and e-mobility solutions as well as
supporting smaller scale off-grid power generation and system backup.
AFC Energy has developed a large portfolio of know how around the new system, much of which has the potential to be transferable to other
applications such as alkaline water electrolysis. Initial testing has been completed using the anion exchange membrane in non-core fields and
discussions are underway with potential partners to jointly commercialise elements of the technology in applications unrelated to fuel cells.
HYDROGEN ECONOMY
A major and enduring challenge to the success of fuel cells has been in the availability and cost of hydrogen. The economics of fuel cells can make
sense for premium priced off-grid applications with today’s costs and where the concept of the Hydrogen economy is supported by government
policy and markets. With downward legislative pressure on emissions at point of use from conventional technologies and an increasing need for
energy storage it is likely that the applicability of fuel cells will broaden. As the use of intermittent renewables increases and the drive to de-carbonise
the public electricity supply matures, it is expected that new sources of hydrogen such as electrolysis will gather pace, fulfilling hydrogen on demand
functionality and driving development of innovative storage solutions. Together, the emerging Hydrogen economy model coupled with
environmental drivers is likely to widen the demand for fuel cells in the near future.
OUTLOOK
We believe, confirmed by the regulatory support provided by many governments, that hydrogen fuel cells will become an important and growing
part of the energy infrastructure of the world. Three forces are aligned to accelerate this inevitability:
• The growing lobby to eliminate diesel from auxiliary power systems
• The emergence of new markets such as EV charging and datacentre backup power that demand clean energy sources
• The innovation in hydrogen energy storage and distribution
Already countries such as Australia, South Korea and Japan have committed to a strong hydrogen programme. Major companies such as Hitachi,
Shell, Mitsubishi, Bosch, BMW and Toyota see hydrogen as a key component of their futures. But perhaps most important is the cohort of hugely
innovative technology companies that are turning to hydrogen as the fuel of the future.
In August 2018, AFC Energy became a supporting member of the Hydrogen Council, the global initiative of leading energy, transport and industry
companies that fosters the energy transition to clean hydrogen energy. AFC Energy is now in discussions with several members of the Hydrogen
Council about potential strategic partnering with particular interest coming from Japanese industrials due to the low cost and scalability of AFC
Energy's fuel cell solutions.
FINANCIAL OVERVIEW
AFC Energy’s EU grant-funded projects have completed.
Overall expenditure on research and development qualifying for R & D tax credits was £1.5 million (2017: £1.6 million), demonstrating our continued
commitment to develop the fuel cell system. An operating loss to 31 October 2018 of £5.0 million (2017: £5.5 million) has been recorded.
Cash balances at 31 October 2018, excluding restricted cash, were £2.6 million (2017: £6.7 million). Continued tight control on spend has reduced
cash outlays on operating activities to £4.6 million from £4.7 million with the main saving being in wages and salaries without compromising ongoing
product development projects. Cash outflows were further reduced by £0.6 million through the receipt of EU grant funding which had not been
collected at 31 October 2017 and a further £0.6 million has been collected after 31 October 2018 for the R and D tax credits due at the year end.
Expenditure on fixed assets includes £92,000 spent to protect our intellectual property and a further £97,000 principally on equipment supporting
the flow plate productivity improvements and test benches to demonstrate product reliability.
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AFC ENERGY PLC ANNUAL REPORT & ACCOUNTS 2018
On 11 April 2019 a three-year £4 million convertible loan facility was concluded with an institutional investor and the following day an equity
placement raised £ 0.8 million which are described in more detail in note 24 Post balance sheet events. Based on internal cash forecasts management
believe that this provides sufficient time to conclude certain commercial negotiations and pursue our strategy of commercialising our fuel cell.
ADAM BOND
Chief Executive Officer
12 April 2019
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AFC ENERGY PLC ANNUAL REPORT & ACCOUNTS 2018
Chairman’s Statement on Corporate Governance
Our governance principles are:
• Equitable treatment of shareholders – We respect the rights of shareholders and help shareholders to exercise those rights by openly and
effectively communicating information.
• Responsibility to other stakeholders – We recognize that we have legal, contractual and social obligations to non-shareholder stakeholders,
including employees, suppliers, local communities and policymakers.
• Role and responsibilities of the board – We ensure that the Board has appropriate levels of independence and sufficient skills and
understanding to review and challenge management.
Integrity and ethical behaviour – Integrity is a fundamental requirement in choosing Executive and Non-Executive Directors.
•
• Disclosure and transparency – Material matters concerning the Company are disclosed in a timely manner to ensure that all investors have
access to clear, factual information.
It is the responsibility of the Chairman to oversee the Company’s adoption, delivery and communication of appropriate corporate governance
arrangements and to check that those arrangements are effective and efficient through regular review. Prior to 2018, as an AIM-listed
company, AFC Energy was not required to comply with any specific corporate governance code. The AIM Rules changed in 2018 and the
Directors subsequently elected to adopt the principles of the Quoted Companies Alliance Corporate Governance Code for Small and Mid-
Sized Companies (the “QCA Code”) to the extent that the Directors consider it appropriate, and having regard to the Company’s size, board
structure, stage of development and resources. The QCA Code, sets out ten principles to be followed for companies to deliver growth in long
term shareholder value, encompassing an efficient, effective and dynamic management framework accompanied by good communication
to promote confidence and trust in the ten principles of the QCA Code and the relevant section in this Annual Report that explains the
Company’s application of these principles are shown below:
A STRATEGY AND BUSINESS MODEL WHICH PROMOTES LONG-TERM VALUE CREATION FOR SHAREHOLDERS.
The objective of AFC Energy is to install, own, operate and maintain stationary alkaline fuel cell systems that generate durable power at the
highest levels of fuel efficiency for the future. AFC Energy seeks to be a world-class energy company that deploys low cost, high performance
alkaline fuel cell technology to the global market.
AFC Energy is primarily targeting large-scale industrial applications for the fuel cell system but is also considering distributed and related
applications (such as water treatment), which has tremendous potential to serve communities. AFC Energy also highly values the
relationships it has with those parties with common interests in our project locations and seeks to maintain a positive dialogue and
transparency with its local communities and neighbours. Ultimately, the creation of sustained long-term shareholder value will be driven by
the pace and scale of AFC Energy’s technology deployment and by maintaining a broad-based competitive advantage over substitute or near
substitute offerings. Further detail of AFC Energy’s business model is set out at: https://www.afcenergy.com/about-us/strategy/
The strategy, objectives and business model of AFC Energy are developed by the executive directors and the senior management team, and
then approved by the Board. The management team, led by the Chief Executive Officer, is responsible for implementing the strategy and
managing the business at an operational level.
AFC Energy has a substantial and diverse portfolio of pipeline project opportunities for its alkaline fuel cell technology. However, the
Company continuously looks for new partners and potential revenue streams to help grow and diversify the business and deliver sustainable
growth in value for shareholders.
UNDERSTAND AND MEET SHAREHOLDER NEEDS AND EXPECTATIONS.
AFC Energy seeks to maintain a regular dialogue with both existing and potential shareholders in order to communicate its strategy and
progress and to understand the needs and expectations of shareholders.
Beyond the Annual General Meeting, the Chief Executive Officer, Chief Operating Officer and, where appropriate, other members of the
senior management team meet regularly with investors and analysts to provide them with updates on the business and to obtain feedback
regarding the market’s expectations of AFC Energy.
AFC Energy’s investor relations activities encompass dialogue with both institutional and private investors. The Board also endeavors to
maintain a dialogue and keep shareholders informed through its public announcements and Company website. AFC Energy’s website
provides not only information specifically relevant to investors (such as the Company’s annual report and accounts, investor presentations,
regulatory announcements and share price information) but also regarding the nature of the business itself, the technology, key projects and
background to AFC Energy’s target markets and non-regulatory press releases.
The Annual General Meeting of the Company, normally attended by all Directors, provides the Directors the opportunity to report to shareholders
on current and proposed operations and developments, and enables shareholders to express their views of AFC Energy’s business activities.
Shareholders are encouraged to attend and are invited to ask questions during the meeting and to meet with the Directors after the formal
proceedings have ended.
The Board intends to announce the detailed results of shareholder voting in its announcements to the market.
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AFC ENERGY PLC ANNUAL REPORT & ACCOUNTS 2018
CONSIDER WIDER STAKEHOLDER NEEDS AND SOCIAL RESPONSIBILITIES AND THEIR IMPLICATIONS FOR LONG-TERM SUCCESS.
Due to the very nature of AFC Energy’s technologies and the potential solutions these provide, not least in respect of decarbonisation, these benefits
will potentially extend beyond the client to the wider society and our environment.
In terms of the global fuel cell market, there are three key areas to consider: (1) international co-operation; (2) national government policies; and (3)
global industry.
International Co-operation
Governments are increasingly globally co-ordinated in tackling climate change (e.g. the Paris Agreement) through the adoption of decarbonisation
policy agendas – this is evidenced by the targeting of large-scale, efficient energy integration. Hydrogen storage solutions, when combined with
electrolysis and AFC technology can potentially provide a significant hydrogen battery solution for integration with intermittent renewable energy
sources.
National Government Policies
Governments are utilising fiscal incentive structures to prioritise the improved utilisation of limited resources. By-product hydrogen, vented as a
waste product, is gaining increased scrutiny. For example, there is recognition of the need to significantly reduce oil-fired power generation in Saudi
Arabia, with the utilisation of hydrogen from the petrochemical industry, with AFCs offering one such solution. Japan, Korea and the United States
are also firm advocates with fiscal incentives seeking to improve hydrogen utilisation.
Global Industry
Energy intensive sectors are increasingly exposed to government carbon policy and rising power prices. Many international industrial groups now
seek cleaner, off grid and long-term affordable energy solutions. The use of by-product vented hydrogen through the adoption of fuel cells will enable
industry to mitigate the risk of rising power prices and Government policy.
AFC Energy’s aim is to install, own, operate and maintain stationary alkaline fuel cell systems that generate durable power at the highest levels of
fuel efficiency for the future. AFC Energy seeks to be a world-class energy company that deploys low cost, high performance alkaline fuel cell
technology to the global market.
AFC Energy is primarily targeting large-scale industrial applications for the fuel cell system but is also developing distributed and related applications
(such as water treatment), which has tremendous potential to serve communities. AFC Energy also highly values the relationships it has with those
parties with common interests in our project locations and seeks to maintain a positive dialogue and transparency with its local communities and
neighbours.
The Board is aware of its corporate social responsibilities and the need to maintain effective working relationships across a range of stakeholder
groups. These include AFC Energy’s employees, clients, suppliers and shareholders. The Company’s operations and working methodologies take
account of the need to balance the needs of all these stakeholder groups while maintaining focus on the Board’s primary responsibility to promote
the success of AFC Energy for the benefit of its members. AFC Energy endeavours to take account of feedback received from stakeholders, making
amendments to working arrangements and operational plans where appropriate and where such amendments are is consistent with the Company’s
longer-term strategy.
The Company takes due account of any impact that its activities may have on the environment and seeks to minimise this impact wherever possible.
Through the various procedures and systems, it operates, AFC Energy ensures full compliance with health and safety and environmental legislation
relevant to its activities and is currently undergoing a programme to become ISO 9001, 14001 & 45001 certified.
EMBEDDED AND EFFECTIVE RISK MANAGEMENT CONSIDERING BOTH OPPORTUNITIES AND THREATS, THROUGHOUT THE ORGANISATION.
The Board is responsible for the systems of risk management and internal control and for reviewing their effectiveness. The internal controls are
designed to manage rather than eliminate risk and provide reasonable but not absolute assurance against material misstatement or loss. Through
the activities of the Audit Committee, the effectiveness of these internal controls is reviewed annually.
A summary of the principal risks and uncertainties facing AFC Energy, as well as mitigating actions, are set out in the Risk Management overview.
A comprehensive budgeting process is completed once a year and is reviewed and approved by the Board. This budget is maintained and updated
where required throughout the year. Performance against the budget and forecasts is reviewed by the management team on a monthly basis and by
the Board at each Board meeting.
The Company maintains appropriate insurance cover in respect of actions taken against the Directors because of their roles, as well as against material
loss or claims against the Company. The insured values and type of cover are comprehensively reviewed on a periodic basis.
Further details of key risks facing the business are set out later in this Governance Report.
A WELL-FUNCTIONING AND BALANCED BOARD.
AFC Energy’s Board currently comprises 2 Executive Directors and 4 Non-Executive Directors (2 of whom are not considered to be independent). The
Board includes an independent Non-Executive Chairman who is responsible for leadership by the Board and ensuring all aspects of its role.
All the Directors are subject to election by shareholders at the first Annual General Meeting after their appointment to the Board and will continue
to seek re-election at least once every three years.
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AFC ENERGY PLC ANNUAL REPORT & ACCOUNTS 2018
The Board is responsible to the shareholders for the proper management of the Company and meets at least six times a year to set the overall
direction and strategy of the Company and to review operational and financial performance. All key operational and investment decisions are subject
to Board approval.
The Board considers itself to be sufficiently independent and adheres to the QCA Code recommendation that a board should have at least two
independent Non-Executive Directors. Two of the four Non-Executive Directors who currently sit on the Board are not regarded as independent.
BOARD EXPERIENCE, SKILLS AND CAPABILITIES.
The Board considers that all the Non-Executive Directors are of sufficient competence and calibre to add strength and objectivity to its activities, and
bring considerable experience in scientific, operational and financial development of clean technology products and companies.
The Board regularly reviews the composition of the Board to ensure that it has the necessary breadth and depth of skills to support the ongoing
development of the Company.
The Chairman, in conjunction with the Company Secretary, ensures that the Directors’ knowledge is kept up to date on key issues and developments
pertaining to the Company, its operational environment and to the Directors’ responsibilities as members of the Board. During the year, Directors
received updates from the Company Secretary and various external advisers on a number of corporate governance matters.
Directors’ service contracts or appointment letters and the terms of reference of the sub-committees of the Board make provision for a Director to
seek personal advice in furtherance of his or her duties and responsibilities.
PERFORMANCE OF THE BOARD AND CONTINUOUS IMPROVEMENT.
The Company’s Directors are evaluated each year by way of peer appraisal. The appraisal seeks to determine the effectiveness and performance of
each member with regards to their specific roles as well as their role as a Board member in general.
The appraisal system seeks to identify areas of concern and make recommendations for any training or development to enable the Board member
to meet their objectives which will be set for the following year. The appraisal process will also review the progress made against prior year targets
to ensure any identified skill gaps are addressed.
Whilst the Board considers this evaluation process is currently best carried out internally, the Board will keep this under review and may consider
independent external evaluation reviews in the future.
As well as the appraisal process, the Board monitor the Non-Executive Directors’ status as independent to ensure a suitable balance of independent
Non-Executive and Executive Directors remains in place.
The Board may utilise the results of the evaluation process when considering the adequacy of the composition of the Board and for succession
planning. Succession planning is formally considered by the Board on an annual basis, in conjunction with the appraisal process.
CORPORATE CULTURE BASED ON ETHICAL VALUES AND BEHAVIORS.
The Board seeks to maintain the highest standards of integrity and probity in the conduct of the Company’s operations. These values are enshrined
in the written policies and working practices adopted by all employees in the Company. An open culture is encouraged within the Company, with
regular communications to staff regarding progress and staff feedback regularly sought. Senior management regularly monitors the Company’s
cultural environment and seeks to address any concerns than may arise, escalating these to Board level as necessary.
AFC Energy is committed to providing a safe environment for its staff and all other parties for which the Company has a legal or moral responsibility
in this area. The Company has a Health and Safety policy which is enforced rigorously.
EFFECTIVE GOVERNANCE STRUCTURES WHICH SUPPORT GOOD DECISION MAKING.
The Board has overall responsibility for promoting the success of the Company. The Executive Directors have day-to-day responsibility for the
operational management of the Company’s activities. The Non-Executive Directors are responsible for bringing independent and objective judgment
to Board decisions.
There is a clear separation of the roles of Chief Executive Officer and Non-Executive Chairman. The Chairman is responsible for overseeing the running
of the Board, ensuring that no individual or group dominates the Board’s decision-making and ensuring the Non-Executive Directors are properly
briefed on matters. The Chairman has overall responsibility for corporate governance matters of the Company. The Chief Executive Officer has overall
responsibility for implementing the strategy of the Board and managing the day-to-day business activities of AFC Energy. The Company Secretary is
responsible for ensuring that Board procedures are followed, and applicable rules and regulations are complied with.
The Board has established an Audit Committee and a Remuneration Committee with formally delegated duties and responsibilities. Joe Mangion
chairs the Audit Committee and Lisa Jordan chairs the Remuneration Committee. The Board has also established a nominations committee chaired
by John Rennocks.
The Audit Committee meets formally twice a year and at other times if necessary and has responsibility for, amongst other things, planning and
reviewing the annual report and accounts and interim statements involving, where appropriate, the external auditors. The Committee also approves
external auditors’ fees and ensures the auditors’ independence as well as focusing on compliance with legal requirements and accounting standards.
It is also responsible for ensuring that an effective system of internal control is maintained. The ultimate responsibility for reviewing and approving
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AFC ENERGY PLC ANNUAL REPORT & ACCOUNTS 2018
the annual financial statements and interim statements remains with the Board. The Company’s external auditors are invited to attend meetings of
the Committee on a regular basis.
The Remuneration Committee, which meets as required, but at least once a year, has responsibility for making recommendations to the Board on
the compensation of senior executives and determining, within agreed terms of reference, the specific remuneration packages for each of the
Executive Directors. It also makes recommendations to the Board concerning employee incentive schemes including setting performance conditions
for share options granted under the schemes.
Further details on Board remuneration is set out in the Directors Remuneration section of this Annual Report.
COMMUNICATION OF COMPANY GOVERNANCE AND PERFORMANCE.
The Board places a high priority on regular communications with its various stakeholder groups and aims to ensure that all communications
concerning the Company’s activities are clear, fair and accurate. AFC Energy’s website is regularly updated, and announcements or details of
presentations and events are posted onto the website.
AFC Energy’s financial reports can be found on our website.
The results of voting on all resolutions in future general meetings will be posted to AFC Energy’s website, including any actions to be taken as a result
of resolutions for which votes against have been received from at least 20 per cent of independent shareholders.
THE ROLE OF THE BOARD
The Board is collectively responsible for the long-term success of the Company and is ultimately responsible for its strategy, management, direction
and performance. The Board sets the strategic aims, ensures that the necessary financial and human resources are in place for the Company to
meet its objectives, reviews progress towards the achievement of objectives and reviews the performance of management.
The Board establishes the values, culture, ethics and standards of the Company and sets the framework for prudent and effective controls which
enable risks to be assessed and managed.
The Company does not comply with the UK Corporate Governance Code (the “Code”) and has adopted the QCA Corporate Governance Code
instead.
The Board has delegated authority to its Committees to carry out the tasks defined in the Committees’ terms of reference. The Committees are:
the Audit Committee; the Remuneration Committee; and the Nominations Committee. The Board has delegated the day-to-day management to
the Chief Executive Officer.
The table below shows the number of Board and Committee meetings of the Company held during the year, and the attendance of the individual
Directors. It should be emphasized that this information does not fully reflect the contribution made to the Company’s business by many of the
Directors, who have also attended other meetings and events relating to the Company’s business and activities during the year.
Chairman
John Rennocks
Adam Bond
Jim Gibson
Joe Mangion
Lisa Jordan
Percy Hayball
Eugene Tenenbaum
Richard Tuffill
Tim Yeo
Board meeting
attendance
John Rennocks
Audit committee
attendance
Joe Mangion
Remuneration
committee
attendance
Lisa Jordan
Nominations
committee
attendance
John Rennocks
10/10
10/10
7/7
9/10
9/10
5/5
0/5
3/3
1/1
2/2
1/1
1/1
1/1
2/2
1/1
1/1
1/1
1/1
1/1
It should be emphasised that this information does not fully reflect the contribution made to the Company’s business by many of the Directors,
who have also attended other meetings and events relating to the Company’s business and activities during the year.
AUDIT COMMITTEE
The Audit Committee’s principal responsibilities are:
• To monitor the integrity of the financial statements of the Company
• To review the annual and interim financial statements to ensure that they present a balanced assessment of the Company’s position
• To review accounting policies and their application within the Company’s financial statements
• To review with the executive management and the Company’s external Auditor the effectiveness of internal controls
• To review with the Company’s external Auditor the scope and results of their audit; and
• To oversee the relationship with the external Auditor.
11
AFC ENERGY PLC ANNUAL REPORT & ACCOUNTS 2018
The external Auditor attends meetings of the Committee except when their appointment or performance is being reviewed. Other Non-Executive
and Executive Directors attend as and when appropriate.
The Audit Committee meets at least twice a year, on dates linked to the Company’s financial calendar, and at any other time when it has been
appropriate to discuss audit, accounting or control issues.
REMUNERATION COMMITTEE
The Remuneration Committee’s role is to determine and recommend to the Board the scale and structure of the remuneration of the Executive
Directors and the basis of their service agreements. In determining remuneration, the Committee seeks to enable the Company to attract and
retain executives of the highest calibre. In doing so, the Committee takes advice as appropriate from external advisers on executive remuneration.
The Committee also makes recommendations to the Board concerning employee incentive schemes and award of shares or share options.
No Directors participate in discussions or decisions concerning their own remuneration. Other Non- Executive Directors attend as and when
appropriate.
NOMINATIONS COMMITTEE
The Nominations Committee is responsible for nominating candidates, for the approval of the Board, to fill either Executive or Non-Executive
vacancies or additional appointments to the Board. The Nominations Committee meets as appropriate.
EMPLOYEES
The Company’s organizational structure has clearly been documented and communicated identifying levels of responsibility, delegated authority
and reporting procedures. The professionalism and competence of employees is maintained through recruitment, performance appraisal, written
job descriptions, personal training and development plans. The Board supports the highest levels of commitment and integrity from employees.
Expected standards of behaviour are set out in the Staff Handbook, a copy of which is given to all employees.
The Company is an equal opportunities employer and it is our policy to ensure that all job applicants and employees are treated fairly and on merit,
regardless of their race, gender, marital status, age, disability, religious belief or sexual orientation. In common with many organisations we
operate a performance appraisal system, the aim of which is to support employees to contribute fully to the organization and to assist them to fulfil
their potential. The Company encourages the involvement of its employees in its performance through both Save As You Earn scheme and its Share
Option plan.
RELATIONS WITH SHAREHOLDERS
The Board considers effective communication with shareholders to be very important and encourages regular dialogue with investors.
Shareholders will be given at least 21 days’ notice of the Annual general Meeting, at which they will have the opportunity to discuss the Company’s
development and performance.
The Company’s website www.afcenergy.com contains full details of the Company’s activities, press releases, Regulatory News service
announcements, share price details and other information.
MAINTENANCE OF A SOUND SYSTEM OF INTERNAL CONTROL
The Directors have overall responsibility for ensuring that the Company maintains a system of internal control to provide them with a reasonable
assurance that the assets of the Company are safeguarded, and that shareholders’ investments are protected. The system includes internal controls
appropriate for a company of the size of AFC Energy, and covers financial, operational, compliance (including health and safety) controls and risk
management.
Such systems are designed to manage, rather than eliminate, the risk of failure to achieve business objectives; any system can provide only
reasonable, and not absolute, assurance against material misstatement or loss. The process in place for reviewing AFC Energy’s system of internal
control includes procedures designed to identify and evaluate failings and weaknesses, and to ensure that necessary action is taken to remedy the
failings. The Board has considered its policies regarding internal controls, as set out in the Code, and undertakes assessments of the major areas of
the business and methods used to monitor and control them. In addition to financial risk, the review covers operational, commercial, regulatory
and health and safety risks. The risk review is an ongoing process with reviews being undertaken on a regular basis. The key procedures designed to
provide an effective system of internal controls that are operating up to the date of sign-off of this report are set out below.
CONTROL ENVIRONMENT
There is an organizational structure with clearly defined lines of responsibility and delegation of accountability and authority.
12
AFC ENERGY PLC ANNUAL REPORT & ACCOUNTS 2018
RISK MANAGEMENT
The Company employs Directors and senior personnel with the appropriate knowledge and experience for a business engaged in activities in its
field of operations and undertakes regular risk assessments and reviews of its activities. Details of risks to the business which the Board considers
to be potentially material are
Risk
Access to finance
The risk the Company has insufficient
capital to fund technology and early
project development – this may
require additional equity funding to
achieve commercialisation.
Intellectual property
The Company’s competitive
advantage is at risk from a loss or
breach of its intellectual property
rights.
Mitigation
The Company adopts a budgeted technology development plan,
supported by prudent budgetary controls that can be measured and
monitored to provide a robust means of mitigating risk of insufficient
working capital.
The Company is targeting meeting its financing needs from a mix of
grant funding, tax credits, borrowing and equity funding, which may
be sought from institutional, retail or strategic sources. Once it
reaches project deployment, additional sources of equity or debt
funding, such as project finance, will also be considered.
The Company benefits from external advice provided by qualified
patent attorneys. The integrity of the Company’s IP management and
the manner in which all contractual negotiations with third parties
take place to ensure IP protection and compliance, are of critical
importance to maintaining shareholder value. IP registers are
reviewed regularly both in terms of existing patents, and in terms of
future and unregistered protection.
Change during
the year
Increased
Risk owner
CFO
Unchanged
COO
Key personnel
The risk that key technical personnel,
who possess critical design know-
how, depart the Company.
Key technical staff possess significant know-how regarding the
ongoing development of the Company’s technology. Loss of these
staff members may adversely affect the ability of the Company to
progress its research and development in a manner which is likely to
achieve commercialisation.
Unchanged
CEO
Technology
The risk is that we will not be able to
successfully develop and apply the
Company’s Alkaline Fuel Cell
technology to potential products at
the right cost or performance. The
risk that technology is successfully
developed but slower than
anticipated. The risk that technical
failure at product trials could affect
ability to provide a product to
customers.
Competition and market
opportunity
The risk that the advantages of our
technology are eroded by
competitors which impacts
the Company’s future profitability
and growth opportunities.
Design and quality
The risk of design and quality issues
with our Alkaline Fuel Cell
technology.
The Company actively monitors remuneration levels to ensure that
staff are incentivised to remain with the Company. The Company
requires current and former employees and directors to comply with
stringent confidentiality obligations.
The Company has implemented a robust control of technological
progress against a budgeted plan, adopting principles of “technology
readiness levels.”
External partners have also been identified and where relevant,
engaged to support the development plan with transparent KPIs and
roadmaps to develop a product that meets commercial product
metrics, relating to power, longevity, availability, cost and efficiency.
The Company is targeting different regional markets and we are
broadening the application of our product in order to minimise the
risk of failure in a single market or product.
We continuously monitor market developments, and competitor
activity.
The strategy for transition from technology development to
commercial deployment focuses on long-term partnerships and
collaboration with industry leading companies. Our partners and
specialist external advisers are identified to complement AFC Energy’s
project execution capability, both in terms of understanding local
regulatory environments, through to construction, funding,
operational and logistical support. This strategy will be employed over
the short to medium term by the Company.
As the Company progresses towards product commercialisation,
design defects and poor-quality management within the
manufacturing processes, could have a direct impact on the
13
AFC ENERGY PLC ANNUAL REPORT & ACCOUNTS 2018
Unchanged
COO
Reduced
CEO
Reduced
COO
Company’s market reputation, with consequential loss of value. The
Company adopts a high standard of manufacturing process and quality
control to mitigate to a large extent the risk of product quality issues
and failure.
Health and safety
The risk of health and safety incidents
or breaches.
Robust health and safety management, and continuous improvement
and reinforcement of a safety-first culture in all workplace
environments, is paramount for the Company and enforced at all
levels.
Unchanged
CEO
Adherence to codes and standards surrounding health and safety
provides a transparent framework to minimise the risk of incidents
and ensures the integrity of AFC Energy’s health and safety remains
intact for the sake of our employees, partners, contractors and
shareholders.
Operational
There is a risk that the Company has
insufficient operational capability and
capacity to deliver project contracts
in compliance with contractual
commitments.
The strategy for transition from technology development to
commercial deployment focuses on long-term partnerships and
collaboration with industry leading companies. Our partners and
specialist external advisors are identified to complement AFC Energy’s
project execution capability, both in terms of understanding local
regulatory environments, through to construction, funding,
operational and logistical support. This strategy will be employed over
the short to medium term by the Company.
Unchanged
COO
Regulatory and compliance
The risk that the Company or its staff
breach applicable regulations.
The Company is publicly listed on the AIM market, which results in
significant disclosure and reporting obligations to the regulator,
investors and other stakeholders.
Unchanged
CFO
The Board and management, in consultation with its nomad and legal
advisors, seek to ensure that applicable legislation is complied with.
FINANCIAL INFORMATION
The Company prepares detailed budget and working capital projections which are approved annually by the Board and are maintained and updated
regularly throughout the year. Detailed management accounts and working capital cash flows are prepared and compared to budgets and
projections to identify any significant variances.
MANAGEMENT OF LIQUID RESOURCES
The Board is risk averse when investing the Company’s surplus cash. The Company’s treasury management policy is reviewed periodically and sets
out strict procedures and limits on how surplus funds are invested.
REVIEW OF CORPORATE GOVERNANCE
The Board strives to comply with the key principles of the Code given the size of the Company and the nature of the operations. These have not
been formally reviewed by the Company’s auditors. The auditors’ responsibility extends only to reading this report as part of the Annual Report and
Accounts and considering whether it is consistent with the audited financial statements.
14
AFC ENERGY PLC ANNUAL REPORT & ACCOUNTS 2018
Board of directors
JOHN RENNOCKS
Non-Executive Chairman Year appointed – 2017
Relevant skills and experience
A wealth of public markets and energy market experience
Broad experience in conventional and renewable electricity generation and biotechnology, support services and manufacturing
Fellow of the Institute of Chartered Accountants of England and Wales.
Previous appointments
Finance Director of three FTSE 100 companies: Smith and Nephew plc, PowerGen plc, British Steel/ Corus plc
Non-Executive Director or Chairman: Inmarsat plc, Babcock International Group plc, Diploma plc.
Other current appointments
Non-Executive Director and Chairman: Bluefield Solar Income Fund Ltd and Utilico Emerging Markets Ltd.
ADAM BOND
Chief Executive Officer Year appointed – 2014
Relevant skills and experience
Over 19 years’ experience operating within the international energy sector both in executive management positions for listed energy companies,
and in advisory capacities to both governments and the private sector
Adam is well networked internationally across the conventional and unconventional energy sectors and has a strong understanding of energy
markets and deal making within that sector
Qualified with Bachelors’ degrees in Commerce and Law and a Master in Laws (Taxation).
Previous appointments
Director of JS Yerostigaz (Uzbekistan)
Previously Non-Executive Director of AFC Energy plc from 2012.
JIM GIBSON
Chief Operating Officer Year appointed – 2017
Relevant skills and experience
Thirty years’ experience in operations management and business development roles within the engineering contracting sector.
Previous appointments
Twenty-three years at Foster Wheeler working in operational, business and commercial roles
Two years at ThyssenKrupp working in process technology/business development.
LISA JORDAN
Non-Executive Director Year appointed – 2017
Relevant skills and experience
Over twenty years’ experience of business development in the industrial gases and renewable energy space.
Previous appointments
Director of Air Products Renewable Energy Limited (part of Air Products and Chemicals Inc), a global industrial gases business providing
atmospheric and process gases where she led the development of its European energy from waste business which was focused on the use of
advanced gasification technology to produce electricity and renewable hydrogen.
Other current appointments
Business Development Director at MHC (Services) Ltd responsible for managing a portfolio of energy related investments
Representative of Ervington Investments Ltd which originally invested in AFC Energy plc in 2012.
15
AFC ENERGY PLC ANNUAL REPORT & ACCOUNTS 2018
PERCY HAYBALL
Non-Executive Director Year appointed – 2018
Relevant skills and experience
Percy brings to the Board a wealth of legal experience, currently being Legal Counsel at MHC (Services) Limited and a representative of Ervington
Investments Limited, a long-standing investor in the Company.
He is also a member of the board of directors of Medical Excellence International LLC, a New York based health- management company.
Prior to joining MHC, Percy worked at the London offices of the law firm Skadden, Arps, Slate, Meagher & Flom, where he specialized in advising
companies and ultra-high net worth individuals involved in high-value international commercial arbitration and cross-border litigation. He has
advised clients in some of the world’s largest and most complex disputes, including a number of “bet the company” litigations and arbitrations
involving claims in excess of US$1 billion
Percy is qualified as a solicitor in England and Wales and has a first-class degree from the University of Cambridge (Queens’ College).
JOE MANGION
Non-Executive Director Year appointed – 2017
Relevant skills and experience
A Chartered Accountant with over 20 years of operational experience within the environmental services and alternative energy sectors.
Previous appointments
CEO of Swiss listed Leclanché, S.A. – a developer and producer of large format lithium-ion energy storage and energy management systems
Chairman of Solel Solar Systems Ltd., a private equity backed solar company
A board member of Airtricity Plc., a private equity backed wind developer.
Other current appointments
He is Chairman of Labrador Ltd.
16
AFC ENERGY PLC ANNUAL REPORT & ACCOUNTS 2018
Directors' Interests and their Remuneration
INTRODUCTION
The Company is committed to maintaining high standards of corporate governance and has taken steps to comply with the principles of best
practice in so far as it can be applied practically given the size of the Company and the nature of its operations. Since it is not a requirement for
companies which have securities listed on the AIM market of the London Stock Exchange to comply with the disclosure requirements of the
Directors’ Remuneration Report Regulations 2013 or to comply with the UKLA Listing Rules and the disclosure provisions under schedule 8 to SI
2008/410 of the large and medium-sized companies and groups (accounts and reports) regulations 2008, certain disclosures are not included.
DIRECTORS AND THEIR INTERESTS
The Directors who served during the year and during the period up until the signing of these financial statements were:
John Rennocks
Adam Bond
Jim Gibson
Mitchell Field
Percy Hayball
Lisa Jordan
Joe Mangion
Eugene Tenenbaum
Richard Tuffill
Tim Yeo
Non-Executive Chairman (appointed 8 June 2017)
Chief Executive Officer
Chief Operating Officer
Non-Executive (resigned 5 December 2017)
Non-Executive (appointed 2 May 2018)
Non-Executive
Non-Executive
Non-Executive (resigned 2 May 2018)
Chief Financial Officer (resigned 23 March 2018)
Non-Executive (resigned 5 December 2017)
In accordance with the Company’s Articles of Association, a Director appointed during or after the year must stand for re-appointment at the first
Annual General Meeting after such appointment. Consequently, Percy Hayball offers himself for re-election. Further, any Director who was not
elected or re-elected at either of the two preceding Annual General Meetings must stand for re-appointment at the Annual General Meeting. Adam
Bond was not elected or re-elected at either of the two preceding Annual General Meetings and therefore offers himself for re-election are not
required to stand for re-appointment.
On 31 October 2018 the beneficial interests of Directors and their families in the equity share capital of the Company were:
Adam Bond
Jim Gibson
On 31 October 2018 the Directors’ interests over share capital of the Company were:
Number of
Ordinary shares
of 0.1p
2018
3,000,000
90,000
Number of
Ordinary
shares
of 0.1p
2017
3,000,000
90,000
Options/
Warrants
granted in
year
–
Options/
Warrants
exercised/
lapsed in
year
–
1 November
2017
6,000,000
31 October
2018
6,000,000
Exercise
price
£0.510
Date from
which
exercisable1
17/07/2015
Expiry
date
17/07/2025
Type
Unapproved
Option
-
-
-
2,500,000
£0.088
14/08/2019
14/08/2028
Adam Bond
Jim Gibson
Note:
1
Warrants/Options exercisable from/after 14 April 2013 are subject to achievement of performance conditions.
None of the other directors had a direct interest over share capital during the reporting period.
17
AFC ENERGY PLC ANNUAL REPORT & ACCOUNTS 2018
DIRECTORS’ REMUNERATION
The remuneration policy has been designed to ensure that Executive Directors receive appropriate incentive and reward given their performance,
responsibility and experience. When assessing this, the Remuneration Committee seeks to ensure that the policy aligns the interests of the
Executive Directors with those of shareholders. The Company’s remuneration policy for Executive Directors is to:
• Consider the individual’s experience and the nature, complexity and responsibilities of their work to set a competitive salary that attracts and
retains management of the highest quality
Link individual remuneration packages to the Company’s long-term performance through long-term share-based plans
•
• Provide post-retirement benefits through payment into defined contribution pension schemes
• Provide employment-related benefits including company car and medical insurance.
The remuneration of the Non-Executive Directors is determined by the Executive members of the Board in consultation with the Chairman, based
on a review of current practices in other equivalent companies. The Non-Executive Directors do not receive any pension payments, nor do they
participate in any of the bonus schemes. Remuneration is based on a fixed fee, plus a separate fee for any additional consulting services.
Name
John Rennocks
Adam Bond
Jim Gibson
Joe Mangion
Richard Tuffill
Mitchell Field
Lisa Jordan
Eugene Shvidler
Eugene Tenenbaum
Tim Yeo
Percy Hayball
Share-
based
Payment
Expense
£
–
202,101
947
Other
Compensation
£
–
56,313
293,750
Company
pension
contributions
£
–
–
–
–
–
–
–
–
–
-
-
–
–
–
–
–
-
1,625
–
–
–
–
–
-
Salary
£
50,000
300,000
11,730
22,660
57,346
4,167
20,000
–
10,000
3,333
9,923
Total
2018
£
50,000
558,414
306,427
22,660
58,971
4,167
20,000
–
10,000
3,333
9,923
Total
2017
£
37,186
994,634
199,917
-
55,637
25,000
7,975
6,792
12,667
47,253
-
DIRECTORS’ SERVICE CONTRACTS
John Rennocks’ services as Chairman and Non-Executive Director are provided under a service agreement with the Company dated 7 June 2017 for
an indefinite term, subject to a minimum of three months’ notice. Under this agreement, John is entitled to a director’s fee of £50,000 per annum.
Adam Bond’s services as Chief Executive Officer and Director are provided under a service agreement with the Company dated 1 January 2016.
Under this agreement, Adam is entitled to a salary of £300,000 per annum plus payment or receipt of other benefits including a housing allowance,
private medical insurance and a company car. Adam’s share-based payment charge relates to 6,000,000 options granted in 2015. These options
have performance conditions attached to them; 3,000,000 of these options will only vest if specific operational targets for energy output are met.
The remaining options vest in equal portions if the share price achieves and sustains market quotation of £ 1.00, £ 1.50 and £ 2.00. The vesting
conditions for the options have not been reached and cannot be exercised.
Jim Gibson’s services as Chief Operating Officer and Director was provided under an agreement between the Company and iProcess Engineering &
Consulting Ltd. Under this agreement Jim was paid a daily fee for his services. On 15 October 2018 2,500,000 share options with an exercise price
of 8.8 pence of which 900,000 vests on 14 August 2019 and the remaining options vest in equal portions on 14 August 2020 and 14 August 2021
Richard Tuffill’s services as Chief Financial Officer and Director were provided under a service contract with the Company dated 1 June 2017 for an
indefinite term, subject to a minimum of three months’ notice. Under this agreement, Richard was entitled to a salary of £130,000 per annum plus
payment of other benefits including private medical insurance and a car allowance.
Mitchell Field’s services as a Non-Executive Director were provided under the terms of a letter of appointment dated 17 October 2013 for an
indefinite term, subject to a minimum of six months’ notice. Under this agreement, Mitchell was entitled to a director’s fee of £13,600 per annum.
Additional consultancy services were provided under an agreement between the Company and Richards & Appleby Ltd dated 17 October 2013.
Lisa Jordan’s services as a Non-Executive Director are provided under a service agreement with the Company dated 7 June 2017 for an indefinite
term, subject to a minimum of three months’ notice. Under this agreement, Lisa is entitled to a director’s fee of £20,000 per annum.
Percy Hayball’s services as a Non-Executive Director are provided under a service agreement with the Company dated 2 May 2018 for an indefinite
term, subject to a minimum of three months’ notice. Under this agreement, Percy is entitled to a director’s fee of £ 20,000 per annum.
Eugene Shvidler’s services as a Non-Executive Director were provided under the terms of a letter of appointment, dated 17 October 2013, for an
indefinite term, subject to a minimum of six months’ notice. Under this agreement, Eugene was entitled to a director’s fee of £11,200 per annum.
Additional consultancy services were provided under an agreement between the Company and Eugene dated 17 October 2013. During the year to
31 October 2017 Eugene did not charge the Company for any consultancy services.
18
AFC ENERGY PLC ANNUAL REPORT & ACCOUNTS 2018
Up until 30 August 2017, Eugene Tenenbaum’s services as a Non-Executive Director were provided under the terms of a letter of appointment,
dated 17 October 2013, for an indefinite term, subject to a minimum of six months’ notice. Additional consultancy services were provided under an
agreement between the Company and Eugene dated 17 October 2013. During the year to 31 October 2017 Eugene did not charge the Company for
any consultancy services. From 1 September 2017, Eugene’s services as a Non-Executive Director are provided under a service agreement with the
Company dated 1 September 2017 for an indefinite term, subject to a minimum of three months’ notice, which replaced all previous agreements.
Under this agreement, Eugene is entitled to a director’s fee of £20,000 per annum.
Up until 30 August 2017, Tim Yeo’s services as Chairman (prior to his resignation as Chairman on 8 June 2017) and Non-Executive Director were
provided under a service agreement with the Company dated 1 January 2012 for an indefinite term, subject to a minimum of six months’ notice.
Additional consultancy services were provided under an agreement between the Company and Locana Corporation (London) Ltd dated 1 January
2012. From 1 September 2017, Tim’s services as a Non-Executive Director were provided under a service agreement with the Company dated 1
September 2017 for an indefinite term, subject to a minimum of one months’ notice, which replaced all previous agreements. Under this
agreement, Tim is entitled to a director’s fee of £20,000 per annum.
19
AFC ENERGY PLC ANNUAL REPORT & ACCOUNTS 2018
Directors’ Report
The Directors present their report together with the audited financial statements for the year ended 31 October 2018. The comparative period was
from 1 November 2016 to 31 October 2017. Information required under the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations
2013 has been included within the Directors’ Report and accounts.
PRINCIPAL ACTIVITY AND REVIEW OF BUSINESS DEVELOPMENTS
The principal activity of AFC Energy plc (or “the Company”) is the development of fuel cells.
Reviews of operations, business developments and current projects are included in the Chairman’s Statement, the Strategic Report and Operational
Review.
RESULTS AND DIVIDEND
The results for the year are set out in the Statement of Comprehensive Income.
No dividends were paid in the year. The Directors do not intend to declare a dividend in respect of the year.
BOARD CHANGES
Details of changes to the membership of the Board are disclosed within the “Directors’ Interests and their Remuneration.
CAPITAL STRUCTURE
Details of the Company’s share capital are disclosed in note 17 to the financial statements.
Shareholder funds have been used for the development and testing of industrial scale fuel cell systems than can compete with conventional electricity
generation technologies.
On 8 April 2019, the Company was aware of the following holdings of 3% or more in the Company’s issued share capital:
Ervington Investments Limited
Schroder Investment Management Limited
Interactive Investor Services Nominees
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