Shares digital

The green boiler battle heated up this week when, coincidentally or not, both Ceres Power (CWR:AIM) and Energetix Group (EGX:AIM) announced utility partnerships for their competing products. Ceres stole the show in terms of share price impact with a 30% jump to 290p compared with a 3% rise to 118p at Energetix.

Long-term backer Centrica (CNA) has committed itself to Ceres by agreeing to buy a 10% stake in the company for £20 million at 300p a share and contributing a further £5 million in milestone payments to fund the final stages of developing the fuel cell combined heat and power (CHP) unit.

Trading arm British Gas will buy a minimum of 37,500 units between 2011 and 2015. Both companies hope it will be several hundred thousand units as 1.5 million boilers are sold annually in the UK and Ceres should be able to grab a 10% market share by 2015.

Its boiler should cut fuel costs by around £200 a year by providing hot water and electricity from gas at near 100% efficiency. The problem is the cost, which is still over £2,000. Some analysts also doubt the longevity of Ceres fuel cells, which must last at for least ten years.

The Energetix offering is much simpler. It is a CHP system using the excess heat produced by a boiler to generate electricity rather than a fuel cell. It is the smallest CHP unit developed, can be wall mounted, will cost under £1,000 and save around £150 a year on fuel bills.

Huge German utility company E.ON, which owns Powergen, is backing the development.

E.ON will fund the testing and evaluation of the unit by July 2008 and it could even go on sale by Christmas some three years ahead of Ceres.

Shares says: Undoubtedly other competitors will emerge. For the moment shares in both companies look good value. Morgan Stanley thinks there is just a 20% chance of Ceres failing and has 380p price target.

BUY Ceres

BUY Energetix

by: Timon Day