Fusion Fuel Green PLC

Hello, everyone, and welcome to Fusion Fuel Green's third quarter investor update. My name is Ben Schwarz, and I'm head of investor relations at Fusion Fuel. I would first like to remind everyone that this call may contain forward-looking statements, including but not limited to the company's expectations or predictions of financial and business performance, which are based on numerous assumptions about sales margins, competitive factors, industry performance, and other factors which cannot be predicted. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions, and they are not guarantees of performance. I encourage you to read the disclaimer slide in the investor presentation for a discussion of the risks that may affect our business or may cause our assumptions to prove incorrect. The company is under no obligation and expressly disclaims any obligation to update, alter, or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. So thank you all for joining us today. I'll just briefly run through our agenda for the next hour. We'll kick off the call with some remarks from Fusion's chairman, Jeffrey Schwarz. Then our management team will share third quarter highlights and financial results, along with a business update. And finally, a recap of our progress against key 2021 milestones. We'll then open the floor up for 20 to 25 minutes of Q&A. As in our previous quarterly calls, all questions must be submitted in the chat box in the webcast platform. For those of you who have dialed in and have questions for management, please direct your questions to the investor relations inbox at ir.fusion-fuel.eu. So with that, I'll pass it over to our chairman for some opening remarks.

Hello, I'm Jeffrey Schwartz, chairman of Fusion Fuel Green, and it's my pleasure to welcome you to this Q3 investor update. Before I turn it over to the management team, I'd like to offer some high level thoughts. Most importantly, I would say I could not be more excited about the opportunity that Fusion provides to help change the world and in so doing to also generate extraordinary returns for its shareholders. I hope at the end of today's call, you'll feel the same way. Now, unfortunately for our share price, Fusion does not make electric flying taxis. The good news is that Fusion does have proprietary and proven technology for producing green hydrogen. And that's a market with a strong wind at our back. The private sector has finally realized the importance of decarbonizing economic activity. And so the level of inquiry and interest that Fusion is experiencing across geographies from potential customers for either our technology wherefore our green hydrogen has never been greater. Simultaneously, the public sector has arrived at the same realization about the importance of combating climate change. And so governments around the world are making billions of dollars, euros and pounds available in grants and subsidies to jumpstart a global hydrogen economy. In other words, fusion is well positioned in a market that should experience a steep growth trajectory for many years to come. Now, unfortunately for our share price, Fusion is not looking to make electric pickups and SUVs like $150 billion market cap company we all know of. On the other hand, Fusion does not face a handful of behemoth competitors who will be fighting tooth and nail to retain market share and who benefit from significant legacy infrastructure. While a number of fusion's competitors are somewhat larger, the market for electrolyzers is nascent, and from my perspective, entirely up for grabs. Fusion and our combined CPV microelectrolyzer technology gives us a differentiable edge versus our competitors. How, you might ask? Well, unlike blue hydrogen, our integrated solution is not dependent upon natural gas as an input. Unlike traditional centralized electrolyzers, our integrated solution is not dependent upon electricity from the grid as an input. Even if electricity comes from renewable sources, its price may be influenced by the market setting price of gas-fired generation. And the price of carbon, under present and future emissions trading regimes, as another layer of uncertainty for the cost of hydrogen that is exposed to natural gas at any point in the value chain. Given the volatility of the price of natural gas and of the price of electricity from the grid and of the price of carbon offsets, the fusion solution can provide a consumer of hydrogen with certainty of cost, a feature many of the potential customers we are speaking with find compelling. With a differentiable solution that addresses what will soon grow to be a huge market, and with an enterprise value net of cash of little more than $100 million, I'll just leave it up to each of you to draw your own conclusion as to whether you find Fusion shares to be an exciting risk-reward opportunity. With that, I'd like to turn it over to Frederico Figueroa de Chavez, Fusion's Chief Financial Officer, to walk you through our third quarter update. Frederico.

Great. Thank you very much, Jeffrey. Good afternoon, everyone. And thank you for joining us today. I will take us through the financials and I'll try to keep it short. We're very excited to get to the latest news from our business development team that we have for you today. As previous causes, I will briefly recap on what Fusion Fuel is all about, just in case there's anyone new on the line, so bear with me. At Fusion Fuel, we've created an integrated solar to hydrogen solution. It's based on a proprietary miniaturized PEM-based electrolyzer. combined with a concentrated photovoltaic solar panel that you see on the bottom left. So we attach our miniaturized electrolyzers directly to the panel, leading to a modular and scalable system that can deliver highly competitive green hydrogen. Our system is off-grid and thereby immune to the energy market volatility that we've been seeing recently. I'll touch a bit on that volatility at the moment, because this year we've seen significant disruptions. in the global hydrogen industry overall. Until recently, companies needed to consider paying a significant premium to decarbonize their hydrogen production. With the huge increases in the price of natural gas, particularly in Europe, both gray and blue hydrogen production costs have more than doubled. And this is even before including carbon charges, which are only expected to increase in particular in Europe. In this market of today, green hydrogen is no longer a premium product. The elements of the green hydrogen market have also been affected with the recent developments in the energy price. For example, a PEM-based system using energy from the grid has seen the energy costs of producing hydrogen rising to around 7 euros per kilo at power prices of 140 euros per megawatt hour, as was the case towards the start of this month. But just to note, only yesterday, power prices in Iberia increased were at around 200 euros per megawatt hour and above. This would lead to costs of over 10 euros per kilo in energy costs alone for an electrolyzer plant that is connected to the grid. The way forward in this industry is crystal clear. Green hydrogen must be produced with off-grid solutions, like our own HIVO solar unit. This is the only way that green hydrogen can be stable and competitive. I'll provide a brief overview of the third quarter financial highlights and latest developments, but I will be brief. I'll focus mainly on those that won't be covered later in the presentation by Joelle. Q3 saw a significant development in our relationship with clients. In particular, we signed a contract to do our first tech sale, so the first Hevo solar plant and hydrogen refueling station with Exolume in Madrid, in Spain. We also received three approvals of grants on three different projects for involving fusion fuel technology. And we've started the licensing process for eight different green hydrogen projects in Portugal and Spain. As far as we can tell, this is the most of anyone so far. No one that we've heard of has eight green hydrogen projects in the licensing phase at the moment. From a technology perspective, we've been producing green hydrogen in Evra for several weeks now. We currently must release it into the air until the plant has been commissioned, but the system is live. We've also independently verified the hydrogen production with fantastic results, and we've seen results above our planned system efficiency levels. To focus a little bit on the team build-out, throughout the year, we continue to build the strength of our bench at Fusion Fuel. with recent senior hires being Andre, our chief production officer, Mario Garmer, our head of EMEA, and David Lovell, our head of Australasia, among others. This is a trend we expect to continue well into 2022. We want to focus on building our team, and we'll do so to position us for the growth we expect to capture. For our costly financial results, as expected, our top line remains devoid of client activity as all the projects we are currently installing are fully owned by Fusion Fuel. So we will only recognize the revenues from these investments when the projects go live and we start selling hydrogen. Going forward, we will not book revenues or cost of sale entries on raw materials that are consignment stock between Fusion Fuel and our production partner, as we had done in Q1 and Q2. So we've removed that from the revenues and cost of sales to make sure that we avoid any confusion between what is relationship with clients versus consignment stock. Our operating costs are significantly impacted by non-cash expenses. Once again, these are related mainly to the share-based payments from the earn-out considerations from the merger last year. These will continue until the end of June 2022. And as I mentioned before, these are non-cash expenses on that first line under the total operating expenses. Cash-based operating expenses saw an increase driven by the growth in the teams, as I mentioned before, by also increased professional service costs, this ranging from legal, insurance, all the way to laboratory and engineering work done across the laboratory costs. I'll stop there. Our pre-sized profit was driven by an adjustment of the fair value of the warrants with a positive impact of 7.5 million. This is a non-cash item to our P&L. Our cash balance at quarter end was just over 42 million euros. The main uses of cash in the quarter was investments into raw materials and securing our supply chain, investments in development of our Evro plants, renovation work performed on our Beneventa facility, and then payroll and staff costs. From an outstanding shares position, it remains unchanged. Although in the third quarter, we did issue restricted stock units to 26 employees as part of a new equity incentive plan to align those individuals and teams with shareholders, as well as to serve as an incentive and retention tool for the firm. We do expect to use these RSUs going forward, both as a rewards tool, but as well as a way to attract talent. At the start of the year, we highlighted the following three key milestones for 2021. The Evera Plants Go Live, this is our industrial scale demonstrator. So this was key for us and we've now been producing hydrogen there as mentioned for for a few weeks, if not months now. The signing of MOUs, HPA contracts, or hydrogen purchase agreement contracts, as well as tech sales. I mentioned some of those before, and Joan will build on that in a little bit. And then the establishing our own highly automated production facility. Last quarter, we focused on production and we provided updates on timings and volumes. This quarter will focus on business development as the production facility build-out continues. So, as mentioned before, with Evora, we're pleased to report that we've completed the construction of Evora and the development of that phase one. We've now requested the commissioning of the plant so that it can go live, hence that status all is nearly fully green. Phase two civil construction is complete and the trackers are fully installed. We will roll out HEVOs, or miniaturized electrolyzers, as the supply membranes allow over the coming weeks. With this, I will now pass over to Joel, who will update you on some of the projects, fundings and licensings that we have going on.