ITM Power Plc

ITM Power PLC interim results for the six-month ended 31st October 2024. Throughout this recorded meeting, investors will be in listen-only mode. Questions are encouraged and can be submitted anytime by the Q&A tab situated on the right-hand side. Just simply type your question and press send. The company may not be in a position to answer every question it received during the meeting itself. However, the company can 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 the ITM Power team. Good morning.

Good morning and welcome to our interim results presentation for the first half of the financial year 25. We have put together for you a comprehensive update. Among other topics, we will check in on our strategic priorities, talk about our project landscape, our contract backlog and our sales pipeline. But before diving into details, let me give you an overview of where we stand. I've clustered the overview into the market, our operational situation, the competitive landscape and our financial position. Achieving net zero requires the transformation of our energy system. To support this cause, governments worldwide are implementing policies, regulatory frameworks and financial support mechanisms. As the only net-zero gas, green hydrogen is becoming a significant pillar of the global energy mix, whether as a feedstock in sectors such as chemicals and refining, as a fuel or as a source of flexible power generation. The potential of green hydrogen and the electrolyser industry remains phenomenal and provides optimism for the future. When it comes to regions, the European Union has an ambitious strategy for hydrogen. Its target is to produce up to 10 million tons of renewable hydrogen by 2030, requiring around 100 gigawatt of electrolyzer capacity. According to the EU, this equates to more than 500 times the installed capacity at the end of 2023. The European Commission awarded 4.8 billion euro in grants to 85 net-zero projects across 18 countries. From within the European Union, it was Germany who has led the world in policy and funding support for green hydrogen. As an important enabler of growth, the German government recently approved a 9,000 km hydrogen pipeline network, set to be operational by 2032. The first approximately 500 km of pipeline are announced to come online already this year. In the United Kingdom, the new government reaffirmed support for 11 green hydrogen projects selected in the HA1 auction last December. They further signaled an ongoing commitment to green hydrogen. In the United States, the energy policy and related net-zero targets remain uncertain after the election. The Inflation Reduction Act has always had bipartisan support, and much of the investment in manufacturing has been concentrated in Republican states. The hydrogen production tax credit, Section 45V, was introduced with the IRA and proposes to award up to 3 US dollars per kilogram of hydrogen produced. The long-awaited final rules were released just this month. However, President Trump has since signed an executive order immediately pausing the disbursement of funding. All agencies must now review their processes, policies and programs for issuing grants, loans, contracts and any other financial disbursements of these appropriated funds for consistency with a new set of criteria. Until the outcome is clearer, industry participants will likely hold off making material investment decisions in the U.S. Beyond politics, from an industrial perspective, the previous hype around green hydrogen has now given way to real industrial scale-up of projects and production capacities. We are seeing an increasing number of custom FIDs and expect this momentum to continue. Especially in the European Union, which remains the most mature market for electrolyser projects. With regards to our operational performance, we have continued to make massive strides. Today, we are clearly in the best shape the company has ever been in. We now have a comprehensive and competitive product portfolio, tailored to the needs of our customers. The very visible success of Neptune 5 proves the product to be a game changer. In the first half of the year, we have commissioned important reference plants for our customers, such as the 24 megawatt green hydrogen to green ammonia plant for Yara in Norway, and the 4 MW pilot plant in Lingen. Our growing number of deployed reference plants and field operating data are conducive to customer confidence. One tangible evidence for our operational progress is our FAT, or Factory Acceptance Test, first time pass rate for electrolyzer stacks. Every stack we produce must pass a comprehensive set of tests before being declared ready for shipment to our customers. Two years ago, we were faced with a path rate of below 50%. This was not sustainable. Today, we stand at an impressive 98% path rate. This unlocked obvious and significant cost savings. The last point on my list is our very healthy sales pipeline, which I will talk about in more detail later in the presentation. Despite obviously growing momentum, custom FIDs overall are still slower than industry participants would like. As a result, competitive pressure has increased and first peers have reported that they are struggling. Market consolidation has undoubtedly started. In turn, we at IDM forecasted and expected this development and have therefore meticulously prepared for this very moment over the last two years. I just talked about our many operational improvements. Likewise, we have continued to advance our technology. The cost base we have achieved is highly competitive, and improvements like the recently announced further 40% Iridium reduction, among many others yet to come, are keeping us in the pole position. This is also a result of distinguishing ourselves from our competitors by retaining all core science and manufacturing processes in-house, which maximizes value-add, provides security of supply, and enables rapid improvement and validation cycles. As customers and finance providers, including banks, increase their focus on de-risking their investments, reference plans, operational product performance data and long-term service agreements are gaining importance. IDM has successfully reduced its dependence on Linde as our primary go-to-market channel. The bigger share of our sales pipeline today are projects without Linde involvement, especially when Neptune 5 comes into play. This does not mean, though, that our relationship has deteriorated. Quite the opposite, actually. We are actively bidding together and Linde remains an important partner and door opener for large-scale projects in particular. Recently, we have increased regional focus, which is starting to bear fruit. I will share more about this topic later in my presentation. I don't want to go into too much detail on our financial situation, because Andy and Amy will do so later, but let me confirm that our position is very strong. Our efforts around spend control and strict cost discipline are showing the desired effect. Underlying cash burn without exceptional one-offs has been halved again compared to last year. As you have probably seen already, we have yet again raised our cash guidance substantially for the remainder of the year. In a very volatile market over the last two years, we have attained stability and continue to deliver on each and every of our promises. 2025 will be an exciting year for the industry and for IDM. Following the completion of our 12-month plan and based on the market development we expected, we formulated our three strategic priorities. These were aimed to ensure readiness for an acceleration of customer FIDs, flexibility in scaling operations and delivering products into different world regions, and managing our capital commitments carefully to preserve cash. This required from us to first remain at the forefront of technology, product and delivery credibility. I spoke about our operational and product portfolio progress already. What's worth mentioning in addition is that the development of our next generation stack platform Kronos is well underway. Kronos is poised to become a game changer just like Neptune 5. We know what our customers need next and we will stay in the pole position. Second, we worked hard to scale our operations without losing region flexibility and without committing cash too early. Our decision to wait to see the market develop more tangibly before investing into a factory in the US has proven right. The very conscious and stepwise introduction of manufacturing improvements and automation has had the desired effect as well. I already mentioned our significantly improved FAT pass rates. Third, growing our global footprint without sacrificing adaptability. We have enhanced regional focus and dedicated resources to support business development activities in different regions. This allows us to stay close to our customers and to get early sight of new trends and developments. Our electrolyser stack, the heart of all our products, has achieved compliance in all relevant markets now. Just this week, we announced compliance with Australian standards, which was the last missing piece of the puzzle. We are now in a position to deliver the same stack unchanged into every world region. This gives us obvious manufacturing supply chain cost and flexibility advantages. Our success proves us right. They were the right priorities at the right time and they remain valid also in 2025. Now let's take a look at our contract backlog, which is an important measure for the health of a company. Contract backlog refers to firm contractual orders not yet recognized as revenue. A growing backlog indicates future revenue growth and a sustainable business. Over the last two years, our contract backlog has grown substantially to 135 million to date. Our financial year 25 order intake comprises the ShareRefined 2 100 MW project, the 500 MW capacity reservation, 4 Neptune 5 units just sold at the end of last year, 60 MW of new feed contracts and after-sales services. What's particularly important to mention is that all new project contracts which we signed in FY24 and FY25 are profitable. This is an important data point on our journey to grow into a profitable business. Andy and Amy will talk more about our revenues later. We at EM distinguish ourselves by keeping things real. Real-world products for real customers, not just paper announcements and hot air. Therefore, it's important to me to share some real-world impressions of recent commissioning activities. In the picture on the top left of the slide, you see two Neptune 2 units recently deployed to Germany to produce green hydrogen for waste collection in a circular economy model. The picture on the top right shows our 24 MW green hydrogen for green ammonia plant for Jara in Norway, which was inaugurated by the Norwegian Prime Minister. In the bottom left, you see a Neptune 2 unit deployed for the semiconductor industry in Austria. And on the bottom right, you see our 4 MW Lingen pilot plant built together with Linde Engineering for RWE. This plant will give our customer RWE the opportunity to gather operational experience with our technology prior to the commissioning of the 200 MW plant currently in build. In our last update six months ago, I showed you a render of how the world's most advanced biggest PEM electrolyzer plant will look like. In the meantime, this lighthouse project between RWE, Linde and IDM has progressed well. And this is how it looked like just a few weeks ago. The first 100 MW of Linde high PEM modules are now installed and in them 100 MW of our Trident skids already. Over the next few months, the first 100 MW of stacks will be delivered and installed in batches as well. It's very difficult to grasp just how huge this plant is. To truly appreciate its dimension, one has to stand in it. This is a massive gas plant, even for people from the oil and gas industry. Equally massive and not least important are the real-world learnings all three parties gathered during the execution of the project. They are invaluable experiences which make us even more credible for future XXL deployments. It is these kind of shared experiences which form a special and strong bond between our three companies. Speaking of real-world deployments, we thought it would be worthwhile sharing in which locations IDM has deployed electrolysers so far. Every dot on this world map represents a real product. Studies and feeds are not shown here. Some plants older, some newer, some smaller, some bigger, but today already quite widespread across the globe, from the Americas through Europe to the Middle East and East Asia all the way to Australia. As already mentioned, Europe is in the most active and mature market today and likely in the next years. We expect other regions to pick up incrementally. Last time we spoke about our sales pipeline, which had grown by a staggering 25 times. Since then, over the last six months, it has continued to grow unabatedly. This relates to both the number and the quality of projects, with an increasing share of industrial and energy companies in the mix. By year of manufacturing, on the top left, our full pipeline until 2031 by product. On the top right, a snapshot for 2026. Whilst Trident Snacks and large EPC modules constitute the majority of the pipeline, of course also due to such projects being bigger in megawatt capacity, in the near term, Neptune containerized plants are the most demanded product. Customers tend to prefer the clean solution of a containerized green hydrogen plant with all its benefits for projects of typically up to 60 MW today. Bigger projects then tend to go for modular EPC solutions based on Trident or Poseidon. I spoke about our market and the different regions already. While the overall picture looks fairly balanced until 2031, and this shouldn't come as a surprise, in the nearer term the European Union is likely to remain our core market. In 2025, we also expect the United Kingdom to gain momentum, finally. I will now hand over to Andy to present the financial results of the half year which ended on 31st of October 24. For the forward-looking guidance, Andy will then hand over to his successor Amy Gray, who has joined as our new CFO just this month.

Thank you, Dennis, and good morning, everyone. This slide shows a summary of the results for the six months to the 31st of October 2024. In the period, we delivered our highest number of Neptune 2 units in any given six-month period, which is reflected in the revenue line of 15.5 million, up from the 8.9 million in the prior year. Our gross loss at 10.2 million is broadly consistent with that in the prior year loss, despite higher production. This is a reflection of the improved controls, particularly around projects that have been instilled in the last year. The gross loss features a level of under-absorption within production, in that we have unlocked greater capacity within our factory, which will support the growing sales pipeline going forward. Our adjusted EBITDA loss improved year on year at 16.8 million compared to 18.1 in the prior period. This loss was achieved despite building the capability of the company through personnel and investment in processes. Our cash position was 203.1 million at year end compared to 253.7 million in the prior period. In terms of cash, our opening balance was 230 million, with 16.8 million of EBITDA losses. Inventory increased by 2.6 million. When we consider inventory, the two graphs on the top line show that we are starting to see a consistency in the raw materials held at circa 11-12%, with the balance being products that are being worked on or held as finished goods. In the period, we paid an exceptional item to Linda of 13 million. This has been disclosed as a contingent liability at the prelims in August, and we are pleased to confirm that all historic claim risk is now settled. Our relationship with Lynda continues to be very strong and successful, both regarding projects in flight and also bidding activity on new sales opportunities. There were positive working capital movements before 5.4 million of investments in the period. In terms of investment, the bottom two graphs show the split between investment in manufacturing capability and in new product lines. You can see for the period to 31st October, a higher proportion of investment was made into product development compared to the prior year where we were focused on de-bottlenecking the factory. Therefore, our total cash outflow was 27.2 million against 28.8 million in the prior period. However, were we to exclude the impact of the one-off exceptional item, our like-for-like cash outflow halved in the period. I am now delighted to hand over to Amy to introduce herself and to give you an update on the guidance.