INTERVIEW WITH BRENDAN DOW, MANAGING DIRECTOR OF CERAMIC FUEL CELLS LIMITED (CFU)

“2008 Preliminary Financial Results”

http://www.brr.com.au/event/50280

THURSDAY, AUGUST 28, 2008, 10:00 AM.

            BRR    Today on Boardroom Radio I’m speaking with the Managing Director of Ceramic Fuel Cells, Mr. Brendan Dow. Brendan, thanks for joining us today.

10        CFU     Thanks, James. It’s nice to be talking to you again.

            BRR    Now, you’ve released the Ceramic Fuel Cells Preliminary Results. I’d like to start by asking you to give us an overview of the financial results for the year.

            CFU     Okay. Well briefly our revenue from customers is up 42%. Our cash burn is

15                    up around 4%, but importantly we did a heck of a lot more than we did in the previous 12 months in terms of our activity. Our loss was up primarily because of noncash charges, which included an impairment charge, option expenses, and the expenses incurred on the capital rating that we did back in May this year.

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            BRR    Now Brendan, you’ve just mentioned the impairment charge, could I ask you to give a bit of detail and flesh around this?

            CFU     Yes, sure. We hold the portfolio within investments that give us some income. They’re all rated by S&P at A or above. So certainly they’re all investment

25                    grade. One was downgraded by S&P to below investment grade. So we thought that it was prudent to write that investment, write down. It’s still paying interest, but we’ve written down most of it value as an impairment charge.

30        BRR    Brendan, the book show that you have $43 million cash investments at the 30th of June, how is this broken up and what is the nature of the investment?

            CFU     Okay. Well we’ve got $13 million in cash in term deposits. There’s about $30 million in our investment portfolio. The investments are a range of interest-bearing securities fit with various maturity dates and further details of larger

35                    investments will be disclosed in the audited statutory accounts, which we’ll provide at the end of September. All of the securities pay interest and apart from the one we’ve written back, they all retained their original credit ratings as they are above. In fact, during the past 12 months we’ve liquidated a little over $90 million of these progressively into cash.

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            BRR    And, Brendan, could I ask you to comment on your current cash burn and if this is likely to increase?

            CFU     Okay. Well operating cash burned during the course of the year was $19.8 million. As I said at the start of the interview that was about 5% higher than

45                    last year and that was really to fund our expansion of activities. We built more units, fully deployed our NetGenPlus program, product development, our powder plant, operational activities in our German factory have ramped up. Our cash burn -- our operating cash burn is likely to be broadly in line with this year as we move through our product development program and begin to deploy the first fully-integrated micro-CHP products late this year.

            BRR    Okay. If we now take this step away from the financial side, could I ask you to

5                      touch on what you had been the main achievements of Ceramic Fuel Cells this year?

            CFU     We’re looking back, James, an incredibly busy year. We’ve signed product development agreements in the UK, in Holland, and then subsequently in Japan. We’ve got our first volume order with a great target from our Dutch

10                    partner Nuon. The powder plant was completed. We’ve started to supply powder for fuel cell manufacture back here in Melbourne. And we’ve also continued to developed powders for new customers in Europe. We’ve signed outsourcing contracts with HC Starck and CeramTec for the outsourcing of our fuel cell ceramic chips. We’ve begun our Heinsberg investment in scaling

15                    up our high-volume plant. All of our partners in Europe have had their NetGenPlus units installed and are operational. And of course we’ve had further advances in our fuel cell power density, efficiency and, of course, most importantly, our lifetime.

20        BRR    Now Brendan, if we can just briefly touch on Japan. You said that the unit would be shipped in August, can you give us an update on this?

            CFU     Yeah, James, the unit will be shipped this week. We’ve been running over the course of August free delivery test, which have been included a number of fairly rigorous operational tests. Paloma is busy preparing the site for the unit,

25                    and we’ll be updating shareholders with progress on that trial when we install and start operating the unit in the next weeks.

            BRR    And just to wrap things up, can you give us a snapshot or an overview of what’s to come in the year ahead?

30        CFU     Well the year ahead is going to be as busy as this one, and this is really going to be a fantastic year of achievements for Ceramic Fuel Cells. We moved from semi-integrated into fully integrated units and now they’ll start to be deployed in Europe early in the new year. Our Japanese unit will be operational, and we’ll at look at how we can ramp up further the powder plant.

35                    And of course we’ll have Heinsberg operational by June next year. And finally, I think, I mean, most importantly we’ll continue to make advances and have a technology performs and we’re confident that we’ll meet the targets of all of our utility partners. So that’s a really important part of next years’ activities.

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            BRR    Well, Brendan, we really appreciate you taking the time to speak with us on Boardroom Radio today. If listeners, shareholders and interested parties want to get in touch with Ceramic Fuel Cells, what’s the best way for them to get in touch with you?

45        CFU     The best way as always is www.cfcl.com.au. There are some direct contacts to us there. There’s a whole lot of links and there’s a whole lot of downloads that hopefully we can provide people with a lot more information, we have the company and our activities.

            BRR    Brendan, well congratulations on a very productive and progressive year and best of luck in the year ahead.

            CFU     Thanks, James, talk to you soon.

5          BRR    Cheers!

INTERVIEW CONCLUDED

Contact brr@brr.com.au for more information

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