• New order for wind power turbines worth MSEK 70
• Strategic order for fuel cell plates for GPS systems from a leading producer
• The Board proposes a new share issue with preferential rights for existing shareholders (1:10). At an issue price of SEK 10 this will mean that the company will be injected, at full subscription, with approximately MSEK 112.5 before issuance expenses
• The Board proposes a direct (placement) issue that will, at full subscription, inject MSEK 33 before issuance expenses.
• Process initiated for move to the Nordic List during the 2007 calender year.
MSEK 70 order for wind power turbines
Morphic Technologies’ subsidiary, DynaWind AB, has received an order for the company’s largest wind power turbine. The order, the largest in the company’s history, pertains to two units with a rated output of 3 MW. The order is estimated to be worth MSEK 70 million. Delivery of the wind power turbines is planned for the first quarter of 2008. The order will serve as an important reference in the current launch of DynaWind’s most prominent product, the ”WWD 3 MW”. This is the second order within a short period. On December 20, DynaWind AB received three orders for 1 MW wind power turbines with a total order value of MSEK 45.
Strategic orders for fuel cell plates for GPS systems
Morphic Technologies’ subsidiary Cell Impact AB has received a test order for fuel cell plates, so-called flow plates, intended for fuel cells to power GPS systems. The customer is a leading manufacturer that has plans to develop a GPS system powered by fuel cells instead of batteries. A successful test will pave the way for an introduction of fuel cells on a broad scale in future GPS systems.
In the past year, Cell Impact has received a number of orders for test series of flow plates intended for fuel cells for a number of different purposes. For example, on December 15, a world-leading mobile telephone manufacturer placed an order for flow plates for fuel cells to operate mobile telephones. Cell Impact is also in the process of producing a test series of flow plates for fuel cells within a number of areas; fuel cells for vehicles, reserve power and laptop computers. The purpose of the test series is to adapt the customer’s flow plates in preparation for future mass production in Cell Impact’s production facilities.
The Board proposes new issue with preferential rights for existing shareholders
Demand for wind power turbines, as well as fuel cells, is growing exponentially. Morphic finds itself in a unique market position with good conditions for profitable expansion. In order to meet market demand, there is a need, however, for investment in additional production capacity within both the wind power and fuel cell areas. Meeting market demand is also the overall reason for the currently proposed new share issues.
With the proposed issuance, it is estimated that the financial resources will be enough to make the necessary investments that are required in order to reach the overall growth goals for the financial year 2008/2009. At the same time, the company’s position will be strengthened as a stable and long-term partner for industrial players. Aside from increased production capacity, the purpose of raising capital is to ensure continued acquisition capacity.
Investments in wind power operations
Morphic is currently investing in order to meet the large demand for the company’s high-technology wind power turbines especially adapted for the Nordic climate. One of the primary reasons for raising capital is to enable the current investment in increased production capacity. Some of the necessary investments include building a factory for wind tower and creating a strategic sourcing operations and technology support center in order to ensure delivery capacity as of 2007 and onwards.
Wind power is growing exponentially in Sweden and is expected to be the largest percentage of the increase within renewable electricity production over the coming years. According to the industry organization Svensk Vindkraft (Swedish Wind Power), at least 50 billion Swedish krona will be invested in wind power from now until 2015. Morphic offers both single wind turbines and comprehensive wind-power parks. The goal for the next three years is to expand its operations en par with the market growth. The ambition is to retain the current market share of 20-25 percent in Sweden.
Investment in the fuel cell operations
Morphic has, in a short period of time, received two large test orders for fuel cell plates for mobile phones and GPS systems that are powered by fuel cells rather than batteries. Compared to traditional batteries, fuel cells offer a much longer longevity. Since fuel cells run on methanol, they are not dependent on a power supply for charging.
The market for fuel cells is undergoing a strong growth phase. With close to no negative environmental impact and a superior energy efficiency, fuel cells have the potential to replace most of today’s energy systems.
According to reports from the automotive industry, more than SEK 30 billion has been invested annually on fuel cell research, of which the automotive industry represents almost three quarters. The total fuel cell market is currently expected to increase by 30-50 percent per year.
Morphic’s patented technology makes it possible to manufacture key components for fuel cells considerably cheaper, quicker and of higher quality than ever before. Cell Impact AB needs to develop a marketing organization in Asia and also in Europe and North America. The aim is be a leading supplier of fuel cell plates worldwide with a market share of 50 percent.
Investment in Morphic’s energy systems based on renewable energy.
Morphic develops an environmentally friendly energy system based on renewable energy sources. The system is built on a technical construction in which electricity generated from solar, wind and hydro sources is fed into the company’s energy converter together with steam and carbon dioxide. Methanol is created through the chemical process that occurs as a result and can later provide energy for the fuel cell, when necessary. The energy system enables a cost-effective build up in large-scale electricity production as well as in production for private use. The technical construction is undergoing the process of patent application.
There is considerable global interest in the company’s energy system from the telecommunications industry, electricity producers and independent manufacturers. A demonstrative for hydrogen and methanol-based systems is under construction in Karlskoga. The current proposed new share issue entails the opportunity for investment partly in the development of the energy converter itself, and partly in smaller wind power turbines between 20 and 500 kW. The turbines shall principally be utilized in energy systems but are also intended for traditional industrial use. The proposed new issuance also indicates the advances in the commercialization of the complete energy system by, trough merger, entering into cooperation with other leading fuel cell companies.
Strengthened financial position and liquidity
Raising capital will also strengthen Morphic’s financial position and liquidity, and thereby ensure continued acquisition potential. The future ability to acquire is of great importance in order for Morphic to realize its growth strategy. The company has formed its own business development company that runs different development projects as well as evaluates potential acquisition candidates.
• The new share issue entails a maximum of 840,000 class A shares as well as 10,409,545 class B shares, resulting in an increase in share capital of not more than SEK 449,981.80.
• Ten (10) option rights entitle company shareholders to subscribe with preferential rights to one new share (1:10). Shareholders with class A shares have the right to subscribe to either class A or class B shares. Shareholders with class B shares have the right to subscribe to class B shares.
• Issuance price is proposed at SEK 10 per share. Share subscription supported by subscription rights shall be made via cash payment.
• Record date for share issue is proposed for 9 February 2007, the last day the shares are allowed to be traded, including subscription rights, is 6 February 2007.
• The subscription period is between 19 February and 9 March 2007.
1 February 2007: Extraordinary General Meeting
6 February 2007: Last trade date in the Morphic share including the right for participation in the new share issue
7 February 2007: First trade date in the Morphic share without right to participate in the new issue
9 February 2007: Reconciliation date for participation in the new issue
19 February – 9 March 2007: Subscription period
19 February – 6 March 2007: Trade with subscription rights
15 March 2007: Notification of outcome of new issue
A prospectus outlining the conditions for the new issue as well as financial and other information regarding Morphic will be distributed around 16 February 2007 to shareholders in Morphic. The prospectus will be made public and available in accordance with Swedish practice and appropriate regulation.
Shareholders in certain countries may be not be eligible to participate in the new issue. Information regarding this can be found in the prospectus.
Thenberg & Kinde Fondkommission AB is the financial advisors to Morphic Technologies in conjunction with the new share issue.
The Board proposes a directed new share issue
The Board proposes that a decision regarding the new issue without preferential rights for the company’s shareholders is made at an extraordinary general meeting and directs its focus on larger private and institutional investors. The reason that the Board suggests that the Meeting makes a decision regarding the deviation from preferential rights is that the Board considers this action to be to the benefit for the company and thereby the shareholders and that the company will be strengthened by the expansion of the ownership base. In the event of oversubscription, allocation of the shares shall be determined by the Board.
The new issue entails a maximum of 3,000,000 Class B shares, resulting in an increase of share capital by a maximum of SEK 120,000. The issuance price shall be SEK 11 per share. Full subscription will provide the company with SEK 33,000,000 before issuance expenses.
Process initiated to change over to the Nordic List during the 2007 calendar year
The anticipated continued high growth rate presumes satisfactory access to the capital market. In order to generate further interest in Morphic, increase the liquidity of the shares and thereby bring about a more effective pricing of the share, as well as attract new categories of shareholders, the company is now in the process of taking the natural step as a share holding company to make an application for listing on the Nordic list. The Board has decided that a structured process for changing listings shall be initiated. Listing is estimated to be in effect by the Autumn of 2007.
Karlskoga, 8 January 2007
The Board of Directors for Morphic Technologies AB