Shares in Advanced Engine Components have surged as much as 60 per cent after it signed a funding agreement with an Indian company for the development of engines for Tata Motors.
Shares in Advanced Engine Components have surged as much as 60 per cent after it signed a funding agreement with an Indian company for the development of engines for Tata Motors.
AEC today said it had signed a technical assistance agreement and a development and supply agreement with SHIGAN Quantum Technologies.
The agreement will help fund development of naturally aspirated and turbo charged, natural gas, four and six cylinder engines for buses and trucks.
The deal sent AEC shares flying to a high of eight cents before settling at 7.2c at 11:59 AEDT, a 2.2c gain on yesterday closing price.
The announcement is below:
Advanced Engine Components Limited ("ACE") is pleased to announce signing of a Technical Assistance Agreement and a Development & Supply Agreement ("the Agreements") with SHIGAN Quantum Technologies Pvt Ltd ("SQT") of India.
The Agreements assist ACE in funding development of the Tata Motors Limited ("TML") naturally aspirated and turbo charged, natural gas, four and six cylinder engines for buses and trucks. The Agreements also satisfy TML's localisation requirement for Indian production of the ACE compressed natural gas system components
Over the past nine months ACE and TML have made significant progress with the TML engine developments. TML and SQT personnel recently visited ACE's premises in Perth. The visit was in preparation for performance and emission testing of the engines in India, planned for November 2009. Completion of the engine developments, including final vehicle testing, is scheduled to coincide with India's regulatory requirement that all new trucks and buses, in eleven major centres, be Euro 4 emission compliant by 1 April 2010.
Pursuant to the Agreements:
(a) As agreed development milestones are achieved, SQT will part fund ACE development costs and pre purchase ACE manufactured injectors and fifth generation electronic control units ("ECU 560/580");
(b) With TML start of production, SQT will purchase ACE manufactured injectors and ECU 560/580, for sale to TML, until such time as SQT commences licensed manufacture of those components in India;
(c) SQT is licensed to manufacture ACE injectors and ECU 560/580 in India, for SQT sale to TML, for a ten year period commencing with SQT's commercial production of those components;
(d) ACE will receive a royalty payment on all ACE injectors and ECU 560/580 sold by SQT for a period of 10 years from SQT's commencement of commercial production;
(e) ACE will provide technical assistance to SQT throughout the development and license periods; and
(f) Ownership of all existing ACE intellectual property, including all future ACE improvements thereto, is retained by ACE.
ACE's arrangement with SQT, for the TML engines, enables ACE to concentrate on the technical aspects of the engine developments; the initial manufacture and sale of its proprietary protected products to TML; and subsequent licensed use of its intellectual property, without a requirement on ACE for significant capital or labour intensive investment in India.