Intelligent Energy’s AGM statement notes significant progress since the commencement of FY16 with regard to executing its operational strategy and securing the funding required to fully realize the value of its innovative fuel cell technology.
In our December note, we discussed management’s tripartite funding program to resolve what our estimates calculate as a £65m/$92m funding gap. All three parts: arranging a convertible loan note; disposing of a significant stake in the Indian DP&G operation and securing c $85m Indian bank debt as part-payment of the GTL deal are moving ahead. Management intends to complete all three tasks by the end of CY Q116, as originally indicated. Successful completion will remove the potential for a discounted funding round and associated dilution, which has weighed down the share price. Management is supplementing its original funding discussions with an IP licence for an existing industrial partner, with an upfront consideration >£10m/ $14.1m. Our estimates model £45m/$64m licence fees in FY17, none FY16. We leave them unchanged until there is more clarity on funding and licensing.
The DP&G division is preparing to transition the interim GTL contract to a longterm, higher-margin energy management agreement generating £120m/$170m annual revenues for a 10-year period. The division has received regulatory approval from the Indian government for the deal, which is the final hurdle other than completing funding. The CE division has signed a joint development agreement (JDA) with an emerging smartphone OEM for embedded fuel cell technology, validating the switch in business model. The Motive division continues to deliver on existing JDAs with OEM customers and government part-funded programs. Net cash reduced from $34.8m at end September to $24.6m at end January, benefiting from the receipt of R&D tax credits.