AFC Energy (AIM: AFC), a leading provider of hydrogen power generation technologies, is pleased to announce the signing of its Joint Venture Agreement (the "JVA") with Speedy Hire Plc ("Speedy"), for the formation of a dedicated hydrogen powered generator plant hire business, Speedy Hydrogen Solutions Ltd ("SHS").      

Highlights

Background

Speedy Hire is the UK and Ireland's leading provider of tools, specialist equipment and services and is seeing strong demand from its customers for sustainable portable power solutions.  This demand is driven by tendering requirements and emission regulations with UK projects such as HS2 targeting the removal of diesel generators from all sites by 2029. 

On 28 July 2023, Speedy and AFC Energy announced the proposed launch of a dedicated hydrogen powered generator plant hire business servicing the UK and Irish construction and temporary power markets. Since the announcement, strong interest has been confirmed from Speedy's customers with a growing pipeline established.      

Today, both companies are pleased to announce the launch of Speedy Hydrogen Solutions.       

Key Terms

SHS is a newly incorporated joint venture to be owned equally by Speedy and AFC Energy and is positioned to be the market leader in the UK and Ireland's hydrogen generator hire market.    

SHS is governed by a newly executed JVA and will purchase H-Power Generators from AFC Energy for hiring to Speedy on commercial terms.  Speedy will on-hire the H-Power Generators, on a three year exclusive basis, to its customers in the UK and Ireland. 

AFC Energy will sell H-Power Generators and services to SHS under a Supply and Maintenance Agreement ("SMA"), also executed, which will include the procurement and sale of hydrogen fuel, as well as site surveys, technical and operational support to Speedy and its customers.  Incremental revenue opportunities arise from the provision of ancillary support and equipment under the SMA.   

Speedy will in turn, under a separate agreement, provide marketing, accounting and logistical support to SHS and its own customers.

The H-Power Generators will be available for hire exclusively in the UK and Ireland from late this year through Speedy for an initial three-year period.    

Speedy and AFC Energy shall each have the right to appoint two Directors to the Board of the JV. 

Order

Under the SMA, SHS commits to an initial order from AFC Energy, for delivery throughout the first six months of 2024, of generators at a committed value of £2m with the intention to increase orders up to c.£4.7m across the first full contract year (commencing 1 Nov. 2023).  The delivery profile of generators above the committed value is subject to performance and market uptake consistent with the business plan.    

A minimum order quantity is provided for under the Supply and Maintenance Agreement between AFC Energy and SHS, which increases annually, in order for SHS to maintain exclusivity in the UK and Ireland.  The minimum order quantity is phased over three years, with potential for further growth to meet customer demand at the time. 

Joint Venture Funding 

To fund the first contract year's orders, an initial total equity injection into SHS (as a subscription for shares) of £1.25m (£0.625m each) shall be made upon formation of SHS.  This injection shall be funded out of each company's respective cash reserves which, in the case of AFC Energy, stood at c.£27m at 31 October 2023. 

Subsequent tranches of funding will become payable into SHS  in the form of commercial interest bearing loan notes from each of Speedy and AFC Energy to support the increased number of H-Power Generators deployed into SHS.  Payment is expected to be made from existing cash resources of each company.  Future payments into SHS shall be predicated on satisfaction of certain operational milestones in accordance with the JVA.   

Dan Evans, Chief Executive at Speedy Hire, said:

" Our JV with AFC Energy further strengthens our market leadership in combining product innovation and sustainability solutions that are increasingly critical and in demand from our customers. We continue to make progress in the delivery of our ambitious plan to be a net zero business by 2040 and, together with other recently announced developments like the acquisition of Green Power Hire, provide strong and unique evidence of our Velocity strategy in action."

Adam Bond, Chief Executive at AFC Energy, said: 

"We are pleased to announce this exciting collaboration with the UK's leading sustainable plant hire business, Speedy Hire.  We have every confidence that SHS will support the UK and Irish construction sector's transition away from diesel towards its ambitious decarbonisation targets, representing a game changer in the way sustainable off-grid power is delivered to industry.  With strong interest already evidenced from contractors and at industry events, we expect this venture to now raise the bar in the delivery of sustainable off-grid power."