ITM Power Plc

and welcome to the ITN Power Final Results Investor Presentation. Throughout this presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time via the Q&A tab situated on the right-hand corner of your screen. Please just simply type in your question and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. These will be available via your InvestorMeet company dashboard And you'll be notified by email when they're ready for your review. I'd also like to remind you that this presentation is being recorded. Before we begin, we would like to submit to the following poll. And if you'd be so kind as to give that to your attention, we would be most grateful. And I'd now like to hand over to Dr. Graham Cooley, CEO and Andy Allen CFO from ITM Power. Good afternoon to you both.

Good afternoon. Thanks very much. And thanks to everybody in the audience for joining this call. So, we're going to be presenting to you the final results for the year ending April 2021. So, just a very short slide on positioning, first of all. As you probably all know, ITM Power is an electrolyser manufacturer. We manufacture PEM electrolysis equipment, and we've been developing and deploying PEM electrolysers now for the last 20 years. We are scaling electrolyzer manufacturing and deployment. And we moved into the world's largest electrolyzer factory at the beginning of this year. And we have a strong collaboration with Linda Engineering. So ITM Power is doing the scaling in terms of manufacturing and Linda Engineering in terms of deployment. Why is our electrolyzer so interesting right now? Actually, the world is moving towards net zero and an essential piece of equipment to achieve net zero is the electrolyzer. Because electrolysis equipment is used to couple to renewable power and make green hydrogen, which is the only net zero fuel, the only net zero energy gas. So incredibly important for the energy transition. And what we've seen is a major acceleration in the market over the last year or two. Certainly over the last year, the acceleration has taken the whole industry by surprise. And you've seen industrial companies, governments and policy makers announcing electrolyzer targets all over the world. So, perhaps if I can give you a bit more colour on that. We had a very important report that was announced in May of this year. It was the IEA report, and it identified that to get to net zero by 2050, the world needs 3,500 gigawatts of electrolysis. That's a very, very large number. That's about three centuries of the current production in the world's largest electrolyzer factory here in Sheffield. 3,500 gigawatts at half a million pounds a megawatt is 1.75 trillion pounds. A very large and significant market. And that's over the next 29 years. And the Aurora report also came out in May. and interestingly identifies 200 gigawatts of electrolyzer projects that are already in development. In fact, 85% of them have been identified as being in Europe. And if you look at the national electrolyzer targets worldwide, these are targets for deploying electrolysis equipment over the next decade. So they are targets for deployment to 2030. And they total 144 gigawatts. And there are many more hydrogen strategies, national strategies being announced all of the time. We also, in June, have the U.S. DOE's Earthshot. which is the five major projects that the U.S. is going to enter into to get them to net zero by 2050. And the first announced earth shock was green hydrogen. And actually, the Green Hydrogen Shot Summit was last week, was chaired by John Kerry and actually attended by Bill Gates. And you can see a great emphasis now on green hydrogen also in the US. So, an increasing emphasis on the need for green hydrogen to achieve net zero. Some achievements from ITM Power then. We reported this morning a record backlog of 310 megawatts, a record tender pipeline of 1,011 megawatts, which is just above a gigawatt. We have now moved into the Gigafactory in Sheffield, which is fully operational. We delivered the 10 megawatts at the Rhineland Refinery. and was really pleased to get the announcement from Shell that they're expanding by 100 megawatts. And we'll be doing that with ITM and Linda. And we also completed the feed study in Humberside for 100 megawatts. And what we increasingly see now is interest in the class of electrolysers around 100 megawatts in size. And I'm going to show you more about that dynamic when we look at the tender pipeline. So, first of all then, the results. The results, we're looking at three levels, work in progress, contracts backlog and tender pipeline. And at each level we're going to drill into more detail about unpacking those numbers. The work in progress is up 125%, contracts backlog up 45%, and the tender pipeline is up 94%. And you'll note now that all the numbers, including the tender pipeline, are reporting the ITM portion of the value only. So if we begin then with the backlog, So both of these graphs, you can see five half year results and then a final bar, which is related to the current position. So the penultimate bar is H2 2021. So the backlog is made up of under contract in the final stages of negotiation and preferred supplier. contracted is 43 megawatts in negotiation 169 and preferred supplier with SNAM is 98 megawatts. So you can see that for the first time contracted plus negotiation has now gone over 200 megawatts in size and in fact if you look at the blue line on the right hand chart you can see the tender pipeline So the tender pipeline is the number of quotations we've made against commercial tenders over the last 12 months. And it has increased radically since June. Back in June, it was 600 megawatts. It's now 1,000 megawatts. Actually, if you go back two years, the tender pipeline was around 200 megawatts in size, which is what we now see in the backlog. So the trend in both cases is following a rapid growth, the backlog lagging the tender pipeline by about two years. The other thing that we see in the tender pipeline is an increased weighting towards larger projects. And I'm going to explain that a bit more now in a couple of slides. So when we look at the projects, we're looking at the products that are deployed in projects of a given size. And we divide the tenders up into projects between nought and four megawatts in size. And all of these are plug-and-play containerized units, which are deployed by ITM. And you can see a picture of those products at the top right-hand side of the slide. From 4 to 20 megawatts, there's a crossover between plug-and-play containerized products and those that are integrated with an EPC contract by ITM Linda Electrolysis. And from 20 to 80 megawatts, those projects are deployed using the two megawatt module. And above 80 megawatts, we deploy using five megawatt modules. And at both those levels, those are integrated with an EPC contract by Lynda. So if you look at the tender pipeline then, you can see how many projects and the total number of megawatts in each of those classes of project. So projects that are between 0 and 4 megawatts, where the deployment is done by ITM, there are 87 megawatts in total across 42 projects. If you go to the next level, up to 20 megawatts in size, fewer projects, 13, but more megawatts, 154. And as you increase down, between 20 and 80 megawatts is 190 megawatts with only five projects. And at the very largest class deploying our GigaStack five megawatt module is more than half of the tender pipeline with only three projects. So we have a very significant move and an increased weighting in the tender pipeline towards larger projects deploying the five megawatt stacks with a Lynda Engineering EPC. In terms of where the projects are in the world, you can see the pie chart divides up into EMEA, APAC and the Americas. And actually, the EMEA territory is leading, particularly Europe. And you can see a very significant amount projects in Europe. If you go to APAC then, particularly Australasia, you see a fast follower, and the projects are building there, particularly very large-scale projects. And then the US, where we were very pleased to announce a four megawatt electrolyser at Niagara, in the results. America, after the announcement of the Earthshot, is just getting started with large-scale industrial electrolysis. And we see this as a very significant growth area. And actually we have quite a significant positioning in the US because of Lynda. and their deal a couple of years ago with Praxair. So, we feel very encouraged, not only by our first major reference plant in the US, but also Linda's presence there. So, that's locations. In terms of applications and end use, you can see that the most significant application is energy. This is power to gas energy storage working with renewable energy companies. In APAC, the most significant market is industrial. So, this is looking at things like refineries, ammonia and methanol production. And the third and smallest category is in mobility. So what is it exactly that customers are looking for? So when we have negotiations with customers about electrolysis equipment, all customers are looking for the same thing. They're looking for the lowest levelized cost of hydrogen or the lowest total cost of ownership of the equipment. And to achieve the lowest levelized cost of hydrogen, the most important thing is the production costs. Because when you look at the revenue model for green hydrogen, the most significant cost is the renewable power. So that relates directly to the performance of the electrolyser. So that's key and that's the most significant. Second is the full system price to the customer. So that's the capital outlay and it has to be full system. And then the after sales support. that's looking at not only the lifetime and the performance, but sharing performance data with the customer so that they can operate the electrolyser in an optimal fashion. And at all three levels, we look at optimizing our electrolysis equipment and there are sources at all three levels of competitive advantage. And we work by investing in R&D and continuous improvement on the performance of the electrolysers. We have a very aggressive cost reduction program for the lowest full system price, and we're working closely with Linda in that area. And also, we've been developing remote monitoring and excellence in after-sales support. So we feel that we have a competitive advantage at all three levels of reducing the levelized cost of green hydrogen. And then finally, my last slide about partnerships. At ITM, we spent most of the life of ITM developing long-term productive partnerships. So, we started deploying electrolysis equipment on Shell Fort Courts, now back, well, our first announced collaboration with Shell was back in 2015. We started deploying 100 kilowatt units back in 2017. Fast forward to this year, and we've announced 100 megawatts with Shell. That project is going to be deployed with Linda, and we've been on the whole journey with Shell, also with Linda. So that's more than half a decade. Linda and recently SNAM became strategic investors in ITM Power, and we've also developed a strong relationship with Scottish Power, who are part of the Iberdrola Group, and also with Orsted working on the Humberside project and also on the Oyster project, also collaborating with Siemens Gamassa in that project. And then last but not least with Sumitomo, and we were delighted to announce the first large-scale electrolyser to be imported into Japan. It's the first non-Japanese electrolyser to be imported into Japan, and it's working not only with Sumitomo, but also Tokyo Gas. So, I think an important announcement for that territory. So, going forwards then, partnering particularly with renewable energy companies and the oil and gas industry, is going to be a significant part of our strategy. So I'll hand over now to Andy, our Chief Financial Officer, who's going to take you through the financials.

Thanks, Graham, and good afternoon all. So I'm going to take you through the key drivers for the finances for the year ending April 21, and also take a look at the results snapshot, which you will have seen in this morning's announcement. Then I'll also be talking about the performance, revenue, EBITDA and cash, and also some guidance for the current financial year. So in terms of key drivers, the obvious one that we've spoken about before is the move into Bessemer Park. Bessemer Park opened in January 2021 and was officially opened more recently by the Secretary of State. And during the financial year, we fit out the factory with semi-automated plants. We've got the blueprint and the machinery for further expansion and can scale to a gigawatt within six months. And we're able to respond to demand that we see coming. In terms of partnerships, this was the first full year where we'd worked with ILE, which is the joint venture between ITM and Lynda. And ILE is really the sales quoting house for large-scale product that ITM would sell. And ILE is now up to 15 staff whose mission is to fill the factory. So not only We've got the sales team within ITM, but we've also got ILE. And whilst that hasn't impacted the numbers yet, what we're starting to see is the impact on the tender pipeline. We also had the partnership with STAM and the investment of £30 million, which formed part of a wider fundraise, totalling £172 million. We've also seen the refined commissioning. where ITM Power had a significant chunk of EPC scope as part of the project. That's going through the numbers. That was commissioned and inaugurated in July this year. And broadly, we're closing out that project now. And finally, in terms of partnerships, we had the GigaStack product program developments with Bayes, where we're developing our next generation products. You'll see from Graham's slides that we're now quoting that in many tenders going forwards. The other thing that's been a feature of the last financial year, global events, we all understand the pandemic and how that's impacted daily life. For ITM, it's been about how we get on-site and finish site works. Our revenue recognition is dependent on us completing the final milestone in our contract, and certainly for plug-and-play units, that includes on-site commissioning and installation. We've also had Brexit providing an element of disruption in terms of getting to site to conclude those works. And post year end, we've got a developing disruption within the supply chain, particularly around microchips, which affects our plug and play systems. This has been quite widely reported. Actually, ITM's demand is very, very low and only impacts one subsystem. But that is still something that could be a risk in the current year. So a results snapshot then. We had total income of £5.1 million, down 6% year on year. But what was up was the sales revenue. And sales revenue was £4.3 million, up 30%. This is where we start to see grant income being a smaller part of the income mix going forwards. ITM will still look to win grant income to develop the technology roadmap and have that subsidised and create innovation along the way. But equally, we're seeing more and more of a lean towards product revenue. Our adjusted EBITDA loss was £21.4 million. And that's characterised by a few features. The big one, we spoke about the refined projects being commissioned. That's one of a couple of legacy projects where we've incurred gross losses, mainly around the EPC bit of the scope, the on-site works, and was a key driver for the relationship that we've generated with Linda, where they would now take that work. And the other part about the loss was to basically set up to capture the one gigawatt of demand we see coming per annum for Bessemer Park. In terms of balance sheet, we had £176 million of cash at year end and a cash burn of £32.7 million, of which about a third of that was on capital equipment for Bessemer Park. So just on the revenue then, the The graph on the right-hand side tells us the picture about how this differs from the prior year. So the prior year was the grey bar on the left, 3.3 million of income, and the year ended April 21 is on the right-hand side, 4.3 million. You can see the first orange bar, the first dip, is in product revenue, and that's because we haven't been able to complete all of the on-site works that we might have expected to. Then you have an uptick in consultancy. And just to be very clear on what that is, that is money we've received for developing the GigaStack product. And so it's all about technology roadmap rather than ITM becoming a consultancy company. Maintenance is starting to tick up and we saw fuel sales also impacted by COVID to leave us with 4.3 million of revenue. In terms of EBITDA, you see the prior year 18.1 million of loss and April 21, 21.4 million of losses. The first orange bar, 0.7 million, was the difference between gross margins in the two years as we closed out those legacy projects. The next three orange bars represent investment. So we firstly have Payvon. I've got a slide coming up about resource in ITM. But we've brought in skilled manufacturing experience and project delivery experience for the company. We've then had 0.6 million of losses in ILE, the joint venture, as it starts to grow. And what we're expecting is we're expecting a need to support ILE until the end of calendar year 2022, at which point it ought to be self-sustaining. And then finally, we spent more on R&D than we did in the year before as we developed the GigStack products and the technology surrounding that. So really, the middle three bars are all about setting us up for the future. In terms of resources, then. As at the end of August, we had 305 full-time equivalents. And you'll have seen an R&S recently which said we filled COSEC and OPS director vacancies and we're now seeking a projects director as well. So we're strengthening the management team. Within the other recruits that we've had this side of year end, we've had a heavy emphasis on delivery. So 27 people within production and quality, 41 within R&D, ten within our sales and nine within projects. We've also added five people to the sales team but that doesn't include the impact of the ILE team and work we've done previously to bolster our business development exercise. And in terms of the balance sheet, we ended the year with a strong balance sheet with 176 million of cash at year end. And the bridge really, for me, splits into two parts. There's the operating activities, which is Bessemer Park. We spent 17.2 million on operating activities and 10.4 on CapEx. And there was a working capital impact of 3 million pounds. 2 million of that is building inventory and really starting to reduce lead times for customers. And in terms of partnerships, we've invested in ILE, we've received money from the fundraise and the stand partnership, and we've started to spend money on Gigastack as well, which we recognised on the balance sheet. So in total, we spent about £4 million on Gigastack in the year. And finally, to the current year guidance. So we've added an extra metric here, which is the core stack module production. This is the bit of electrolysis in the middle of the products that we make and that will be in excess of 55 megawatts this year with an ability to ramp so that is the core system goes into everything beyond that we have different subsystems that then are attached to it to make up a completed product we're expecting that production volume to between to be between 33 and 50 megawatts this year The revenue recognition will depend on a few things that we've already touched on. Site access in particular, travel restrictions, but also some disruption to the supply chain affecting plug and play products. And as we said before, revenue will be heavily related to the second half of the year and we look forward to updating more at a later date. I'll hand back to Greg for a final slide.