Fuel cell developer Ceres Power Holdings announced on Wednesday that it has entered into a strategic collaboration with leading Chinese automobile and equipment manufacturer Weichai Power.
AIM-traded Ceres said the collaboration will give it access to the Chinese market, the world's fastest growing market for fuel cells, and will see the companies jointly develop and launch a solid oxide fuel cell (SOFC) range extender system for China's fast-growing electric bus market.
SOFCs such as Ceres' SteelCell can use conventional fuels like mains natural gas and can therefore make an immediate improvement to energy costs, CO2 emissions and energy security for businesses, homes and vehicles.
Weichai currently has sales volumes of approximately 30,000 buses per year.
Tan Xuguang, chairman and chief executive of Weichai, said: "China has set very ambitious targets to significantly reduce air pollution and our bus transportation system is key to this. We believe there is considerable scope to develop a compelling range of new power system products for the Chinese market and in Ceres Power, we are confident we have found the right partner in the field of solid oxide fuel cell, with globally leading technology to bring our vision to fruition."
Under the terms of the agreement, Weichai will potentially make an initial equity investment of £17m in Ceres, with a further investment of £23.2m reliant on the signing of further commercial agreements before 30 November.
Furthermore, Ceres said it can expect to see revenue from engineering services and technology transfer, licence and royalty payments and a share in profits from a proposed manufacturing joint venture.
Ceres chief executive Phil Caldwell said: "Weichai has a successful track record of partnerships with international companies and shares
our ambitious growth plans. Working with Weichai provides demand for a variety of applications, driving significant volume and cost reductions for the SteelCell and helping to establish the technology as an industry standard."
In the past, Weichai has made strategic investments in companies such as Société Internationale des Moteurs Baudouin in France, Power Solutions International in the US, Linde Hydraulics and KION GROUP in Germany.
As of 0929 BST, Ceres Power Holdings' shares were up 8.59% at 13.90p.