ITM Power Plc

Good afternoon and welcome to the ITN Power PLC interim results investor presentation. Today's session will run for about 30 minutes and throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged. You can be submitted at any time via the Q&A tab situated in the right-hand corner of your screen. Just click Q&A, scroll to the bottom, type your question and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Dr. Graham Cooley, CEO and Andy Allen, CFO. Good afternoon.

Good afternoon. Hello, everyone, and thanks very much for joining this call. So first thing to say is that this will be a relatively short and concise presentation because we gave our trading update only six weeks ago. So this is a presentation for the results for the six-month period ending the end of October 2021. I'm going to start with a presentation and then hand over to Andy Allen, our Chief Financial Officer. So we were delighted actually to make the announcement of our interims this morning, particularly to bring to attention the market to the market of a 24 megawatt industrial electrolyzer and our first industrial electrolyzer in the ammonia market. So just a quick introduction to ITM Power. As you know, ITM is an electrolyzer manufacturer. This year we moved into, sorry, last year we moved into the world's largest electrolyzer factory. We are scaling the production of PEM electrolysis and our partner, Linder Engineering, is scaling the deployment. We have a very well articulated roadmap to increase capacity to five gigawatts per annum by the end of 2024. And we raised the resources in October of last year to achieve this. So the period that we've been in now is a period of delivery. It's all about execution, sticking to our mission and our roadmap, and converting from pipeline through to sales and recognised revenue. So just a quick year on year comparators. So work in progress, that is sales. That is megawatts that are under contract and being manufactured in the factory stands at 86 megawatts. It's up 300% year on year. a contract backlog. This is those contracts, a combination of work in progress, in the final stages of negotiation and also preferred supply status, that's up 200%, stands at 499 megawatts. And the tender pipeline, that is the number of quotations we've made against commercial tenders over the last 12 months, is 880 megawatts, up 166%. So I think strong and solid progress at all levels. In terms of the backlog, and the tender pipeline over the six-week period almost unchanged. And actually, the six-week period that we have been in since the trading update included Christmas and the New Year, and we've clearly had a reduced amount of activity over that period. The significant change, and you can see it in the graph, and the orange lines is the change in the work in progress. And we're seeing very solid growth in converting contracts that are in the final stages of negotiation to full sales and announcing those. And the change you can see there is the 24 megawatt deal, which for ITM is an important project. It's an important project because it's the first large-scale industrial ammonia electrolyser. Ammonia is one of the largest sectors in industrial hydrogen. Today, between 70 and 75 million tonnes of hydrogen is sold into the industrial sector. Broadly speaking, half of it is ammonia and half of it is refining. And with today's announcement, we have a key reference plant now in the ammonia industry, and we also have a key reference plant with Shell in the refining industry as well. So an important project, an important reference plant, and also you'll be finding out soon who the industrial partner is, and it's a very important industrial partner. in the area of ammonia production. In terms of driving forward cost reduction standardization, it's also important. 24 megawatt electrolyzer is actually a replica of the LOINA project, which we're doing with Linde Engineering. It means that we don't have to go through a process of non-recurring engineering costs and any design specifics on site. It means that we are driving standardization in the balance of plant and also achieving cost reduction. And because of the standardization of this 24 megawatt deployment, it means that we can bid more rapidly and we understand the terms and conditions as well. So useful in terms of reducing engineering costs, standardization and also bidding. So I've shown you this slide before, but just so you understand the effect of standardization. If you want to drive down the cost of green hydrogen, get to the lowest levelized cost of hydrogen for the customer. You work on three levels and we derive competitive advantage at all three levels. So the first one of those is production costs, and it's by far the most important. So that's the cost of the renewable power and the effectiveness by which you convert it to renewable molecules. So that's all about technology and performance. Lowest full system price is the next and actually the standardisation now means that we can bid 24 megawatt machines going forwards into industrial applications and also 100 megawatt machines with the standardization achieved in the feed study from the refined project and then operational excellence and actually understanding how you operate electrolysis equipment and in the industrial environment and how you make the most of things like grid balance so But at lowest levelized cost of hydrogen is the requirement of every customer in any industry. And actually what we've seen is a very strong dynamic in the energy industry, certainly over the last year, but more importantly, literally over the last couple of months. First thing to say is that green hydrogen comes down in cost as renewable power comes down in cost. And actually its parity with the cost of grey hydrogen and blue hydrogen has been achieved in many parts of the world with the increase in the cost of natural gas. Of course the feedstock for green hydrogen is renewable power and the feedstock for grey and blue hydrogen is natural gas. and renewable powers come down rapidly in price, and natural gas has gone up in price. So you've seen that parity crossover. Also, the volatility of green hydrogen and its price is very low. If you connect an electrolyser via a power purchase agreement directly to a renewable source, then you get extremely low price volatility. And this is increasingly important as we look at the volatility of the price of natural gas. You also get fuel security and you also get improved balance of payments because you're making the green hydrogen in country. And that means you're not importing fuels. And of course, we've seen an intensification in the geopolitics of using natural gas. And we've also seen the increase in carbon pricing moving to a level not seen before, between 80 and 100 euros per metric tonne of CO2. So we have some important drivers. All of the arrows are now in the right direction for green hydrogen. Price parity, low price volatility, energy security, balance of payments advantages, and it's the only zero carbon energy gas. And all of these dynamics are playing out now with policy makers, particularly in Europe. So I'm going to hand over now to Andy who's going to talk us through the results.

Thanks, William. Good afternoon, everybody. So I've got three slides. One is the interim results, one on guidance for the full year, and finally a little bit about the next UK factory that we have. So in terms of the interim results, total revenue for the period was £4.2 million, up from £0.2 million the year before. We had an adjusted EBITDA loss of about £13 million, which was an increased loss compared to £10.4 million in the same period a year ago. And some of that is about being in Bessemer Park, but it's also about getting capability in place so that we can address demand as it comes through. In terms of the balance sheet at the period end, we had cash of £167 million. That doesn't include the money raised in autumn last year, which actually hit the bank in November. So the cash balance as at today's date is just about £390 million. So we are well placed to execute on this manufacturing expansion we've got coming up. In the first six months of this financial year, we had a cash burn of £12 million, which is down from £14 million the period before. In terms of guidance for the full year, we had a plan for completed product production of between 33 and 50 megawatts. And in fact, we're steering towards the middle of that range in terms of products that will be completed. And in terms of core stacks, which can go into any of our products, we'll be producing in excess of 55 megawatts. And that's reiterated from previous announcements. The revenue, we've always said, will be heavily weighted to the second half of this financial year. And we're now saying, actually, it's going to be in Q4 2022. So revenue recognition for IT Empower is about fulfilling every obligation in the contract and recognizing all of the revenue at that single point in time. So we have to have built, fully factory tested, and packaged product ready for dispatch. And then we recognize the revenue. Now, the one specific here is the Loina product, standard modules, 24 megawatts, which are due to complete in late April. In terms of overheads and cash burn, the fundraise at the end of last year set us up for a technology roadmap and a design and product development roadmap which accelerates. So you would expect to see overheads and cash burn running at a slightly higher rate than it did in the first six months of the year. And then there are two other features which would affect cash. One is that we will be building to inventory, including those 55 megawatts of stacks. And secondly, we might be buying the land for the second UK Gigafactory within the financial year. And that land is Aviation Park. And it's about a mile and a half from Bessemer Park. And you can see the design here. It's twice the size of Bessemer Park at 265,000 feet. And we'll update as we go through the process. But we've got engaged with principal contractors for early studies and early work to make sure that we get spades in the ground in the second half of 2022. I'll hand back to Graham for a summary.