Hello, welcome to the Ceres Power-Bosch collaboration. My name is Jess, and I'll be your coordinator for today's event. For the duration of the call, your lines will be on listen only. However, there will be the opportunity to ask questions. This can be done by pressing star one to register your question at any time. If at any point you require assistance, please press star zero on your telephone keypad, and you will be connected to an operator. I will now hand you over to our host, Phil Caldwell, CEO of Ceres Power, to begin today's call. Thank you.
Hi, everybody, and thank you for joining the call today. This is probably one of the most significant milestones in the company's history. We're very pleased to talk you through the announcement this morning that Ceres and Bosch are progressing towards mass production of the Ceres technology by 2024. I'm going to be referring to some slides that you can download from our website. Then after we've talked through the shape of this announcement, this deal, we're happy to take questions through Patrick. Just going into the slide deck, slide number two. This really is a key milestone for Ceres, and those of you that know the company will know that we've been working with Bosch for about three years now.
This morning, we've announced that Bosch plans to scale up its production in Germany of the SteelCell, reaching a target of 200 MW by 2024. For Ceres, in terms of near-term value, that's worth about GBP 23 million of commercial revenue, GBP 6 million of which is conditional on certain performance KPIs. I think what's probably more significant is it now shows the scale and the value to the business of future royalties coming from Bosch as a key manufacturing partner. The production of stacks and systems will take place across multiple sites in Germany. Bosch, as you may know, have developed a very highly efficient system that we'll talk about in a minute, and they are firm believers in decentralized power, using this for things like powering data centers, EV charging, businesses, factories, et cetera.
It really is an exciting product development as well as the manufacturing side. As I mentioned, coming pretty soon after the recent announcement from Doosan, it's another big validation of how our business model scales towards royalties. Just moving on to slide three. Here you can see a picture of the system that we just talked about. Bosch's own estimates are that the market for decentralized power will reach EUR 20 billion by 2030. They obviously now believe that SOFC systems will be a key technology for Bosch in meeting demand for this distributed power.
I think a key thing as we think about the energy transition, this technology is one of the few technologies that can work on fuels that we have today, including natural gas, can work with biogas and eco-friendly fuels, and is also hydrogen compatible for the energy system of the future. It's obviously a key thing for Bosch that they're staying at the forefront of being able to deploy products today and have readiness for a net zero future. Currently, there's more than 250 Bosch employees supporting the development and manufacturing of the SOFC systems, and that's on top, obviously, of significant team at Ceres that supported this joint development over the past few years.
I don't think you should underestimate the endorsement that this provides for the Ceres team, because I think there's no higher quality partner than Bosch, really, when it comes to the standards for engineering, for quality, for manufacturing. The fact that Bosch are putting more people on this, putting significant investment in here, and today they've actually said they're now investing hundreds of millions of euros in this next phase by 2024, I think that's probably the strongest endorsement of the capability of Ceres, not just the technology, but the quality of our engineering and technology teams that we can partner with a company like Bosch. We move on to slide four, just a brief timeline. We started working with Bosch officially in January 2018, after some no-name type evaluation, which is fairly typical with Ceres first stages.
In August 2018, we announced the collaboration and license agreement, which was this initial GBP 20 million, two-year technology transfer phase with joint development. Also at that stage, Bosch took an equity stake in the company of around 4%. Late 2019, early this year, Bosch started initial low volume production of pilot systems in Bamberg, Germany, and also of our stack technology for the first time outside of Ceres. That was a key milestone again being able to successfully transfer the Ceres technology into a Bosch facility, and for Bosch to be able to produce the Ceres technology to ISO standards at Bosch of the high quality that they need.
That, I think, triggered further investment to increase the stake in Ceres to 18%, Bosch appointed to the Ceres board, Uwe Glock, who is one of their senior leadership team who looks after Thermotechnic. Then we have the announcement today, which is, we always said that the first stage of the collaboration license agreement was about a two-year deal with a key milestone coming up at the end of this year. We are very happy to say we have now obviously passed that milestone, and we are now going into this next phase, which is the scale-up phase of the relationship. Just moving on to slide five. The structure of the deal. We have now completed the successful manufacturing prototype phase, and Bosch is now planning to manufacture the station power fuel cells based on the Ceres technology.
This is going to be produced in several sites across Germany, including the Bamberg facility, Wernau and Homburg production sites, and supported with development continuing in facilities in Stuttgart and Feuerbach and Renningen. This really is across several of the major Bosch facilities in Germany. I think it's worth pointing out that Germany is really at the forefront of the energy transition in Europe, having recently announced something like EUR 9 billion of targeted subsidies, framework for hydrogen production and hydrogen related technologies. Again, a very key partner for us in probably the leading market for this in Europe. We are also optimistic that this production from Bosch, not only will it potentially satisfy the Bosch demand for their own products that you saw in the earlier slides, but could also expand to meet future third-party demand for the Ceres technology.
I think Bosch are a trusted manufacturing partner who very often operate as a Tier 1 to others in the industry. As I mentioned, it builds on the initial two-year collaboration to actually produce the five kilowatt technology with manufacturing. I think we move on to slide six. Some of you may have seen this before, but we've said recently, we've successfully grown our revenues through engineering services, through licensing, and a key for the company is to work with our partners to bring to market mass production, and therefore, that's when we get royalties. In the past month, we announced a special Doosan, but now with this agreement, particularly with Bosch, you can see that our partners are now investing significantly in the mass production facilities, which should come on stream by 2024, and that then leads to recurring royalties for the company.
That's really where the company scales. Just moving on to slide seven. If you think about the licensing model as a company, what we're doing at Ceres is we're building more and more of an ecosystem, if you like, more and more demand for the core technology through lots of different system applications. Things like data center applications, Combined Heat and Power, power for buildings, distributed power, more recently moving up in power to utility scale and potentially into new applications like marine. All of those partnerships drive more and more demand for manufacturing of core cell and stack. That's where trusted partners like Bosch come in, who are not just looking at this for production for their own means in Germany, but are a global company with operating sites in many different countries.
What we see is a number of trusted partners who can manufacture and scale the Ceres technology to meet demand of a growing number of system partners that takes this technology into more and more applications and really does establish this as the standard, if you like, in solid oxide globally. To summarize, this really is a major milestone for the company as they've moved towards mass manufacture with Bosch. It's significant value creation to Ceres near term of GBP 23 million over the next three years. Particularly important is this anticipated move towards royalties for 200 MW of targeted production by 2024. It's a big validation of the Ceres license and business model, with now two global manufacturing partners committing to mass production of the SteelCell, Bosch at 200 MW and Doosan at 50 MW.
If you combine that together, that's a quarter of a gigafactory, but it's being done in a different way. We're doing it in an aggregated way in different parts of the world where demand is required. We're very excited to hit this milestone today, and I'm happy to take any questions you may have.
The first question comes from the line of Lacie Midgley from Panmure Gordon. Please go ahead.
Morning, Phil. Can you hear me?
Yes. Hi, Lacie. Go ahead.
Hi, Phil. Firstly, congratulations. Great news again this morning. Three questions from me, please. Firstly, you mentioned, in the announcement and the presentation, that in time you could expand to meet this growing global demand in multiple third-party systems. I wonder if you could give any more color on that, who those third parties might be and what applications, et cetera. Secondly, perhaps there's a couple of sub-questions in here, but on the Bosch production sites, you mentioned that that's over multiple sites. Can you give us any more detail on where Bosch is thinking of those being, how that 200 MW will be split, and potentially time frames on getting up to 200 MW? Lastly, just be interested to get any color on Weichai's reaction to this deal. Obviously, Doosan and Bosch have now steamed ahead with scaling this up.
It'd be just interesting to know what their thoughts are. Thank you.
Okay. Yeah. On the third-party demand question first. We have two types of licensees. We have system level, and we have stack level. For example, Miura in Japan is a system-level licensee, and we provide them with stacks or one of our partners could in the future. Similarly, with Weichai, they have a system-level license for some aspects, and as does Doosan. We obviously work with other partners as well, such as Honda in Japan, we've named before. Then there's a growing level of interest, I think, as we've mentioned here, just in all things distributed power and more and more partners wanting to take this into new applications. We had the recent announcement with Doosan on a marine application, which is a totally new area for us.
As we go up in power levels towards hundreds of kilowatts, towards megawatt scale applications, then demand rises significantly. I think what you can expect really is the manufacturing partners will benefit from an economy of scale, and in some ways aggregating demand either for their own products and/or third parties as well. It's not just a case of every single system provider will take a manufacturing license, because very often their demand alone may not provide the scale. It's that aggregation with key trusted manufacturing partners that can provide potential supply to different third-party system licenses. That's how we see it.
Okay.
In terms of the split of production, that's not really for me to share. I think this is a joint announcement with Bosch. I think there'll be more information coming from Bosch this morning and in general. I think what we can say about the effort with Bosch in the last couple of years, it has been split across several sites, just as it has with Ceres across functions in terms of their engineering people, their manufacturing people at Bamberg, et cetera. Obviously, they will decide how they will scale that production across different sites. I think your question about the progress towards 2024, this really is a ramp-up of scale.
Obviously, Bosch are capable now of producing the stacks to the cell quality, but obviously the next stage of scale-up requires a lot of work still ahead on ramping up supply chain, quality, manufacturing, and that takes several years to do to get to this kind of level of scale. I think from now onwards, we're going to continue to develop that manufacturing capability with Bosch. Response from Weichai, obviously Weichai is a very important partner for us and also is a board member. They obviously know progress with the company, and I'm sure Weichai want to see Ceres grow into the global company that we are becoming. I think that's probably what we can say about that.
Understood. Thanks, Phil. Thank you.
The next question comes from the line of Maggie [audio distortion] from Stifel. Please go ahead.
Morning. Hi, Phil. Thanks for taking my question. I just had one. Ceres has significantly grown this year as an organization, adding lots of engineering skills from a lot of people to work. Against that, you've had quite a lot of licensing momentum. Can you give us an update, in terms of your internal capacity or speak further about the potential engineering deals that you've spoken of in the past to allow you to accelerate your ability to go out and continue this licensing momentum and not butt up against engineering capacity?
Sure. That's a good question. This year-I think during the COVID lockdown alone, we've added 100 colleagues into Ceres Power, that's quite significant. We've grown from about 250 to more than 350 people now. We are investing obviously to support these major industrialization programs that we have with our partners. We are investing within Ceres ourselves. What we have mentioned before is, as we focus in making sure that our partners like Bosch, like Doosan, like Weichai are successful, we still want to grow this ecosystem, if you like, of new applications for the technology. That's still our intent and we'll have more to say on that in the near future, I think it's fair to say.
I think if you think about the business model, we're looking to scale obviously through collaborations and partnerships as well as supporting it internally. We're growing our internal capability ourselves, and also we are growing through partnerships.
Okay. Very helpful. Thank you.
The next question comes from the line of Sanjay Jha from Panmure Gordon. Please go ahead.
Hi, guys. Thank you for the question. I just had one question. You said that Bosch thinks that there's this huge demand for decentralized power generation. I just wanted to understand, are they talking mainly domestic heating, CHP, or are we talking something bigger here?
No, if you look at the Bosch product, it's predominantly prime power, so it's 60% efficiency or more, as a prime power unit without any heat recovery. That's interesting because at that point you are more efficient than most conventional thermal power plants. I think if you look at the trend towards electrification, you see more and more need for additional provision of power in general. I think what Bosch are strategically very focused on is this whole agenda of electrification, and therefore more and more distributed flexible power systems that are also compatible with a hydrogen future as well is the key thing that I think gives them confidence that there's a huge market potential for this technology.
It's interesting because you mentioned data centers, electric vehicle charging infrastructure. That implies that there's obviously going to be availability of natural gas and alternatives in these kind of locations, because at the moment, most of it is connected to the grid, isn't it? I'm guessing they have got products that can fit into the electric vehicle charging infrastructure where they can use your technology. Is that fair?
I think what the reference there is, if you think about, this is power generation, not distribution.
Right.
If you think that you need to reinforce, for example, substations or whatever it is to charge the final mile for electric vehicles, et cetera, you could be potentially thinking about that in a different way and actually generating power on site using natural gas or hydrogen.
Natural gas. Okay. Right.
Actually generate it. It's power generation. Don't think of it as power distribution because I think you're-.
Okay. Understood. Okay. You're generating power at the location. Okay. Understood. Okay. Thank you, guys.
The next question comes from the line of Edward [audio distortion] from Citigroup. Please go ahead.
Good morning. Thank you very much for taking my question. Just had a question around if there will be any CapEx/cost implications of the scale-up to Ceres Power directly, which you know about already, as a result of this deal. Can you talk about what the pipeline might look like? Because I guess after the Doosan announcement, Bosch was a little bit behind in not having a mass production agreement. Are there any other people that you're talking to who may not be where Bosch was up until today?
I can't really talk further about the pipeline on the manufacturing side. I think you're right. These two deals are very significant. If you think about that demand we just talked about for this technology and the global capacity that's required, we see that coming from key partners like Bosch scaling and continuing to scale, and that's a huge opportunity. Equally, it makes sense to have manufacturing partners localized to where that demand is. In the future, we will look at other manufacturing capability in key regions for fuel cell technology in the world to match up with production. I think that's the key. Sorry, can you repeat your first question?
The first question was just if there's any kind of known CapEx uplift-
Oh, yes.
directly to Ceres Power as a
No, not directly as a consequence of this. As a business, we're continuing to invest in the company. When we're talking about CapEx, we're talking about our own test and validation infrastructure and some of our manufacturing capacity as well to meet near-term needs of partners. That's kind of a continuous development and therefore continuous investment in the company. It doesn't suddenly trigger a significant CapEx investment. That's the whole beauty of this licensing model, is if you look at the announcement, Bosch are the company that's committing to the hundreds of millions of investment that's required to bring up that CapEx, to bring it to market. That's why, as a company, we enjoy probably the highest margins of any of our peers in the industry, because we have this asset-light model.
Another way of looking at this is people get very excited about gigafactory and gigafactory announcements. If you look at the last two announcements there, as I mentioned, that's 250 MW now that Ceres isn't investing in directly, but our partners are.
Yeah.
That means that we can scale this business, putting capacity in the places where it's required globally. That starts to aggregate quite rapidly now. I think this CapEx question is one that's worth reiterating is, this speaks to our asset-light model. It's not us putting in the CapEx, it's our partners.
Understood. Thank you.
There are currently no questions in the queue. So as a reminder, please press star one if you would like to ask a question. There are no further questions in the queue, so I'll hand back over to your hosts for any closing remarks.
Okay. Well, thank you everybody for joining the call today. As I said, we're very excited by this major milestone that we've achieved with Bosch today. It's a joint announcement, so there'll obviously be information as well coming from Bosch. It's significant near-term value, as we've said, but more significantly, it's a big validation of the royalty model and further validation of our whole licensing business. We still anticipate, as we mentioned, further progress this year, and hopefully we'll have further announcements in the future. Thank you for that.
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