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spk02: Research shows nostalgia can help you remember ads. So customize and save with Liberty Mutual. Hello, everyone, and welcome to Fusion Fuel Green's fourth quarter investor update. My name is Ben Schwartz, and I'm head of investor relations at Fusion Fuel. I would like to first remind everyone this call may contain forward looking statements, including but not limited to the company's expectation or predictions of financial and business performance, which are based on numerous assumptions around 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 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 briefly run through our agenda for the next hour so we will begin the proceedings with some remarks from fusion chairman jeffrey schwartz then the management team will share some fourth quarter highlights financial results and provide a business update we will then open up the floor for a half hour of facilitated 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 mailbox at ir.fusion-fuel.eu. So with that, I will pass it over to our chairman for some opening remarks.
spk03: Thanks, Ben. Good afternoon or good morning, as the case might be. I'm Jeffrey Schwarz, chairman of Fusion Fuel Green. We're about to begin an investor presentation where we will walk you through a summary of our financial results for the company's first full year of operation, and then update you on business developments as we pursue our plan to build fusion fuel into a global player in the developing green hydrogen business. In that regard, this may seem like business as usual. Make no mistake, it is anything but. Our thoughts are with the Ukrainian people. Russia's unprovoked invasion of Ukraine is an appalling violation of international law, resulting in a tragic loss of life, and even if there were to be a best-case outcome, will trigger a humanitarian crisis. As a medieval Iberian poet and philosopher wrote, I am at the edge of the West, but my heart is in the East. Before I turn it over to Frederico Figuera de Chavez, Fusion CFO, I'd like to offer a couple of observations on the company's first full year of operations. As I've said in past calls, my experience, based on more than 40 years as an investor in public and private companies, is that if you are serving the right market with the right people and the right product or technology, you have a recipe for great success. Well, 2021 confirmed for me that fusion possesses those three attributes. While green hydrogen is still a nascent market, interest in it accelerated throughout the year as evidenced by the pace of incoming inquiries from potential purchasers of technology to produce green hydrogen or alternatively to purchase the green hydrogen itself. We were and continue to be successful at building out our team of talented and experienced individuals, and so doing strengthening our R&D, production, and business development functions, while also establishing a presence in Australia and North America, both being among the most attractive potential markets for our HEVO solar technology. Test results at our first hydrogen farm in Evora, Portugal confirmed levels of production modestly in excess of what we had expected. Our R&D team continues to innovate with a goal to constantly be bringing down costs and increasing performance of the HIVO. And the volatility in energy markets, which resulted in spikes in both natural gas and electricity prices in Europe, demonstrated the unique value proposition of our off-grid solution for producing green hydrogen. Well, one could be forgiven for wondering, given all that, why the disappointing share price performance? I'll simply quote Ben Graham, the father of value investing. In the short run, the market is a voting machine, but in the long run, it is a weighing machine. Our goal with Fusion Fuel is to capitalize on our early mover advantage to build a heavyweight in the green hydrogen business. With that, take it away, Frederico.
spk01: great thank you very much jeffrey and thank you all for joining us today i look forward to updating you on our progress as always before we get into the meat of the presentation um i want to recap for any new joiners on what fusion fuel is all about um in the next in a nutshell we aim to deliver cost-effective clean hydrogen solutions We do this through our proprietary miniaturized electrolyzer combined with our concentrated photovoltaic panel. This allows us to offer a fully integrated off-grid hydrogen solution that delivers a market leading cost of green hydrogen production. Before going into the details of the company update, I'd like to touch upon the hydrogen market overall. As Jeffrey mentioned, the tragic events in the Ukraine have a direct impact on both the energy and hydrogen markets. The continued increase in the cost of natural gas has a direct impact on the cost of grey hydrogen, now reaching values of around €4 per kilo without including the carbon charges. Due to the ongoing uncertainty in the market, This is a commodity that may continue to experience significant volatility in high prices. This is generating interest in green hydrogen from players industries that were previously reluctant on making the shift from greater green. However, with energy prices also hovering at very high rates, any solution that requires energy from the electrical grid are not commercially viable. FusionFuel's off-grid integrated solution is perfectly suited for the current market conditions, and we have been seeing continued increased interest in our HEVO solar. On the hydrogen market overall, we've also been seeing increased interest in the mobility sector in hydrogen, which is very exciting that this market seems to be taking shape even faster than we initially expected. Jean and I will update you on some of the company financials, the main events that happened in Q4, as well as some more of our recent developments that we've also been announcing. As we will dive into some of these items here later in the presentation, I'll briefly focus on the items that are not outlined later on. Firstly, we continue to add significant talent to our team. And most notably, at a very senior level, we added Teri Jester to our board, bringing with her a wealth of experience in product development, production management, and renewable energy. We also brought on three new executive committee members with David in Australia and Zach and Jason in the US, all three bringing substantial knowledge and experience to our executive team. and they highlight our ambition for significant growth in those markets. Both the US and Australian regions present an enormous opportunity for our technology. Dave, Zach and Jason have the experience to not only open up these markets for us, but also to help us across several strategic projects we have in the company more broadly. We're very happy to have them on board and they're already having an impact in the company. On the financials, we will provide more granular detail when we submit our audited financials as part of the 20F in April. So we continue to now for the course, we just do the sort of financial flash. In the fourth quarter, we recorded negative operating costs, i.e. a positive P&L impact of €11.1 million. This was significantly driven by a release of previously recorded share-based payments. This is a non-cash expense, or in this case, a non-cash release. The release is due to the forfeiture of the contingent capital consideration by three of the four parties involved in the 2020 Business Combination Agreement. This was driven by a desire to remove a conflict of interest that the structure created between executives and shareholders. So this is overall beneficial for the company. This resulted in a reversal of 19.6 million euros, which when netted with a Q4 share based payment charges, leaves us with a net negative share based payment charge of 14.7 million euros as outlined on the slide. In terms of actual cash expenses in the fourth quarter, we saw an increase of 1.7 million euros quarter on quarter. This increase was driven by large expenses during the year that were booked in Q4. These include around half a million related to various auditing, accounting, and grant advisory services, higher recruiting costs related to several senior and specialist function hires, and the booking of several large yearly administration costs, such as transportation, rent, travel, and business expenses, which fell in the fourth quarter. Going forward, we will be amortizing that throughout the year, and so that one-off impact will not be seen in 2022. In addition, in Q4, we also welcomed 15 new hires in the quarter, including some senior managers, which also increased our personnel costs. For guidance for future courses, we expect our operating cost quarterly run rate to vary and to devolve from around 2.3 million to 3 million per course as the year progresses and as we continue to grow the team. In Q4, we recorded a pre-tax profit of 24 million euros. And as much as I'd like to take credit for that, this was also driven by another very large positive non-cash impact. And it's mainly driven by accounting practices and standards. As mentioned in previous courses, we need to recognize fair value movements on outstanding warrants. With the negative market developments at year end, we needed to book a release of 13 million euros in the fair market value of these instruments. In terms of cash, we've closed the fourth quarter with around 35 million euros in cash or other liquidity instruments. And the main drivers of the 7 million cash drawdown in Q4 is comprised of the 3.65 million operating costs I mentioned earlier and another roughly 3.5 million euros in raw materials and capex investments. Now for our outstanding shares and warrants remain unchanged from the third quarter. As outlined in the third quarter, we introduced an employee incentive plan to both incentivize and retain personnel and ensure their alignment with shareholders, but also as a form to attract talent. So this is reflected in the very last line here on this table. This is the restricted stock units. We believe these are critical instruments to help us deliver the growth potential to us. And these restricted stock instruments are well-vest over several years. So they form a form of a, how do I say, lock up for some of our key employees as well. Now going into the business update, now that I've done the more dry and sort of technical part of the presentation, we're excited to show you what we're working on and where Fusion Fuel is today and where we're already being a pioneer in the green hydrogen market. I'll start by sharing our five key milestones for 2022. As you'll remember from last year, we had this slide each quarter outlining what the priorities for the year was. Our intention is to do the same in 2022. So our five key priorities start with production. This is the go-live of our Beneventa facility. So the benefit facility is critical for our growth. It's critical to deliver not only the increased production capacity, but also the reduction in unit costs of the HIPAA solar and also on the securing the grants and financing for this facility. Then secondly is to continue to close both hydrogen purchase agreements and tech sales contracts to fill our 2022 and 2023 targets. And importantly for that is also to secure grants for projects and development. So there's enormous amounts of grants and programs available for clean hydrogen and green hydrogen solutions. And we want to make sure that we are heavily participating in these. On third tech, this is critical. We continue to evolve our HEVO and HEVO solar technology. At the heart of our company is a large technology component. We intend to keep innovating, keep staying at the forefront of the technology piece of the business. Throughout the year, we will be launching different generations of the Hibosolar. These will either improve on the performance or will improve in the cost of the product. So this will be a continuously ongoing process, not only in 2022, but also in 2023. We also want to introduce green oxygen capturing capabilities to our solution. So our solution does produce oxygen with no emissions. So we want to have the ability to capture it. And we want to continue to innovate and develop further products. So over time, we want to not only have the HIVO Solar, we'd like to continue to work on new product development. Fourth, very important, is the project development. So this is our ability to deliver and execute some projects in flight. We'll touch upon a few of those in a moment. Also kick off and start the construction of some of the subsequent projects that we've already announced that we've already approved. And importantly, to secure the licenses for Fusion Fuel's multi-year project portfolio. But this is a challenging one because the licensing environment changes country by country and it's a very new world. But this is a core priority for us to make sure that we're able to deploy our units into the ground. Lastly, and most critically, we want to ensure that we have a robust safety culture across all areas of the company. We have hydrogen producing facilities. We also have a production plant. Safety is going to be a principal pillar of the culture and DNA of this company. I want to start with Benevente. Very pleased to inform you that we have secured just under 10 million euros in financing support for the development of the Benevente production plant. It represents around 25% of the total investment expected in that plant over the coming two to three years, where we then plan to have a production capacity of around 500 megawatts per year. The installation, as I mentioned, is at the heart of our growth plans. And the financial support that we obtained from Portugal's trade and investment agency highlights Portugal's commitment to its announced hydrogen ambitions. We'll continue to provide updates on the Benevento facility and development of it in the coming pauses. Now, a quick update on Evro. So Evro-1, as Jeffrey mentioned, continues to produce hydrogen and receive visitors to site. This was the critical and most important function of this demonstrator site. It also, as Jeffrey referred to, continues to perform between 5% to 10% better than was expected, depending on solar radiation, which is absolutely fantastic. We continue to work through the licensing steps required for full commissioning with significant progress already made. We hope to fully go live in the coming months. Evra is a true trailblazing project. It's the first solar to hydrogen project in Iberia. It's the first project that uses hydrogen as energy storage to feed into the electrical grid. And so while everyone is talking about green hydrogen, we are the only ones currently delivering clean hydrogen from renewable energy source through to the electrolyzer, through to the end storage. The challenge is that we are also forcing the development of new standards and licensing frameworks as part of being at the forefront of this market. Over time, we expect that framework to become more straightforward with subsequent projects. I'll now pass on to João to update on some of the upcoming projects we have.
spk00: Thank you, Frederico. We are very happy to announce that our EVOSOL project with an equivalent electrolysis capacity of 3.5 megawatt has contracted non-recourse grant from POSIUR funding program. The project is located in the south of Portugal, more precisely in the Sines area, and consists of installation of 178 EVOSOL units, which after commissioning will produce around 400 and 18 tons of green hydrogen per year considering day and night production, a portion of which will be used to produce green ammonia and the remaining will be mixed into the natural gas grease and or bottled for industrial uses as well as mobility. The global capital investment will be around 8 million euros and the project will receive 4.3 million euros from the posse funding during the construction period. Currently the project is under licensing process with the local authorities and national environmental agency and we are waiting for the final licenses to start construction. This project will have a strong worldwide visibility and will have an important role in demonstrating the economic use of our green hydrogen in several different options such as green ammonia production, blending in natural gas with monetization of the certificates of origin and supply hydrogen refueling stations. We entered also into an agreement with Keme Energy to install their green hydrogen plant in the same region of Sines, designed as Sines Green H2 Solar One, which also contracted non-recourse grant from Possegur funding program. The project consists of the installation of 62 EVO solar units totaling a global capacity of 1.2 megawatts, which will produce 77 tons of green hydrogen per year, also considering day and night production. That will be bottled for industrial uses in the Sinis community and also for mobility. The global requirement investment will be around 2.54 million euros. The project is under licensee process with local authorities and national environmental agency and CAME is waiting for the final licenses to start construction. This project is expected to be a net contributor for the aggressive decarburization targets laid by the Portuguese government for the industrial and heavy transportation sectors.
spk01: Sure. And as we did in Q3, we want to provide an update on our activities regarding funding programs for projects in Portugal. So as mentioned several times just now, we are involved in three possible projects that were approved. But also during Q4, we're also involved in three submissions to the Component 5 program of Portugal's PRR, where we expect to hear the results in September of this year. More recently, we were involved in the submission of two projects to the C14 component of the PRR program with a total of 10 megawatts molecular capacity for those projects. And we will continue to develop and submit projects to these programs as they open up. We are incredibly active in this space. And so far, we've been quite successful in securing the grants for our projects.
spk00: As mentioned before, we signed a contract with Exolume, a leader European fuel logistics and storage provider, to develop a solar-to-hydrogen plant to supply green hydrogen near Madrid. It was the first third-party sale of EVO Solar technology, which will produce and supply green hydrogen to one of Spain's first 100% green hydrogen refueling stations. The EXALUM project in Madrid consists of the installation of 21 EVO solar units to produce more than 40 tons of green hydrogen per year, being 20 tons produced in daytime by their direct conversion of solar radiation into green hydrogen, and the additional 20 tons during nighttime using electricity outsourced. The project is under licensing process but already received authorization to start site preparation and clearing. We are already manufacturing the solar units and if everything goes according to the planning, we will start construction in May with the aim to fully commission the plant until the end of quarter three this year. This project is very important to demonstrate the enormous advantage of our EVO solar technology and consolidate our strategy in Spain, which includes the development of more than one gigawatt of electrolysis capacity in the next five years. We entered into a very important collaboration agreement with IESA, a leading Spanish industrial engineering service company and a pioneer in the decarbonization of industrial energy that will focus on the substitution of more than 500,000 tons of grey hydrogen consumed annually by industry today in Spain and promote the transition to hydrogen-fueled vehicles for logistics and haulage fleets, as well as a decarbonization of power generation and industrial heating. Fusion Fuel and AESA are actively developing decarbonization projects with major industrial clients who are well positioned to benefit from the recently announced CAPEX subsidy programs aimed at incentivizing the innovative use of green hydrogen technology across the industry value chain. By jointly going to market, Fusion Fuel and IESA together form the leading edge provider of turnkey low-cost green hydrogen solutions for decarbonizing industrial processes, thermal energy, as well as heavy commercial vehicles. We also entered into a strategic framework with Hive Energy, a British renewable energy developer who has throughout Spain a portfolio of around three gigawatts projects for green hydrogen and green ammonia production currently under development to supply the growing demand market. Under this agreement, we will supply our EVO solar technology to Hive Energy, who will develop and build a green hydrogen production plant in an exclusive technology supply deal. The project has a target annual production capacity of some 7,500 tons of green hydrogen per year and is currently in its administrative processing phase. We trust this project will be the first step on the road to a very significant portfolio of joint green hydrogen generation plants with Hive Energy in Spain.
spk01: So as for Portugal, we are already very active in engaging with the various grants programs in Spain, and the Fusion Fuels Spain team has been unstoppable going after these. In the MOVES programs, five projects totaling more than 15 megawatts have been submitted using Fusion Fuels technology, and other projects are already being worked on for when the next programs open up. Now, coming to some of the new markets for fusion fuel, as we've mentioned before, we have our partnership with Ampol, Australia's transport fuel leader. We will create a pilot plant in Brisbane to supply a hydrogen refueling station. The project and site development and licensing has kicked off. We've had our ample counterparts come and visit us in Portugal recently, and we're all extremely excited between the partnership between these two companies. In the US, even though the team has only just started, they hit the road running. The US is obviously another key future market for us, and it's one that's starting to take shape quickly. We started to take our first steps into this market with a project at the University of California, Irvine, for a solar to hydrogen facility. We submitted an LOI to one of the DOE's programs for this project, and we're already actively looking into potential submissions for larger DOE programs that are part of the Infrastructure Investments and Jobs Act. So this is exciting early days for fusion fuel in the U.S., It's been a while since we shared an overview of our pipeline. We hope this provides a good idea of where we stand now. We haven't included all markets we're in discussions with. So if you will recall from a year ago, we had things like in Chile and so on. Discussions there and other markets continue to be ongoing, but we've only included the projects that have a bit more shape to them at this stage. So we currently have over 3,000 hectares reserved for our projects and the pipeline for prospective hydrogen purchase agreements or tech sales projects number 36 different projects, 10 of which are already in the licensing phase. We've included on the right, the respective megawatts electrolyzer capacity to be more easily compared to other players in the industry. We always think about it in tons of hydrogen, but obviously every announcement in the industry comes with megawatts. So we've decided to clarify what the pipeline actually includes. And you will have noticed maybe that in the different project slides, we've been as much as possible, including the megawatts electrolyzer capacity for clarity as well. Although these 2.4 gigawatts of potential projects include non-committed projects, we're extremely excited at the level of interesting engagement in our solution. As the Australian and US operations take shape, we expect this to grow further. Now, before we go into Q&A, I'd like to recap on the core milestones as this is a little bit stubborn of us. We show this slide twice every time. So as a reminder, production facility, one of our key priorities, moving the existing pipeline to closed contracts, continued tech evolution and new product development, project construction and licensing, and the overall safety culture across the firm. We truly are pioneering the green hydrogen market in Liberia, and we'll keep being at the forefront of this emerging megatrend industry. Geoffrey opened today's update with a quote from Benjamin Graham and highlighted how we aim to build a heavyweight in the green hydrogen business. In my closing, I'd like to reference a quote from a heavyweight champion that captures how we will make this happen. And it's Muhammad Ali. He's flying like a butterfly and sting like a bee. We're small, we're nimble, we're agile. We're innovative and we're creative. We develop our own projects and we control their destiny. And we intend to fully disrupt this industry. So with that, I thank you and we'll open up with Q&A.
spk02: Great. Thanks, Frederico. So we'll start with some questions we've received over email. This is a question for Zhao regarding the Keme project. Is there any expectation that the hydrogen produced from the 1.2 megawatt Keme project would be exported?
spk00: No, today the equipment to transport, to export the hydrogen is very complex. So green hydrogen will be used in the community of Sinesh and at the same time part of it will be used for hydrogen refueling stations. But the concept is always for the community of the Sinesh city.
spk02: Thank you. And as... We continue to look ahead towards a more robust hydrogen export market. Do you have a perspective on what forms of hydrogen look most economically promising, whether that's liquefied or green ammonia or something else entirely?
spk00: Yes, in fact, today the numbers, studies that have been published, they clearly notice that the cheapest way to transport hydrogen exported is by converting the hydrogen to ammonia and then cracking this ammonia. to get again green hydrogen to be used. The cost of liquid hydrogen is today very expensive. There's only today one boat from a Japanese company, Kawasaki, transportation of liquefied hydrogen, and the costs today are still very expensive. There's also one additional possibility. It's in early stage, let's say, which is a liquid organic carrier, but today it's still doing its first steps, so we cannot assume it as a reality.
spk02: Thanks. This is a question for anybody. So we received a question about the maturity of the HEVO solar product and whether there are any future improvements to the product that are expected. We can talk about that.
spk01: So I'll take that one. As I mentioned in our priorities, there is certainly an evolution of the EVO Solar generations. So we consider the product mature in terms of what we can put into the ground. This is why we are going to be delivering it to Exolume in a few months. But that said, we do have a significant pipeline of generations to come of the product. We will look to increase the performance of the product. We'll look to decrease the costs of the unit. That doesn't mean that the units we have today are not mature. So this is just different generations that we will be deploying.
spk02: Thanks. We'll pass it back to Zhao. The next question is about the process of commissioning a plant. How long that process typically takes and what are the possible roadblocks?
spk00: For the commissioning of a plant, we have to separate the commissioning, I think the permitting processes, and really the technical commissioning of the plant. So commissioning, so starting producing green hydrogen, it's a process that, of course, depending on the dimension of the plant, can take various weeks. to one month to commission and start producing. I think the question is related to permitting and permitting of a licensing process of a plant sometimes depending on the land that we are using, if it's agricultural land or if it's industrial, it can take from very fast and again depending on the dimension of the project, it can be done in six to nine months but it can also in for bigger plants it can take one year to one year and a half we knowing that this process takes long time we started permitting some of our projects one year ago so today we can say that we have some projects already in advanced stage of permitting but they will most probably can take six to nine months to to become able to install the technology
spk02: Thanks. And finally, for the large projects that Fusion Fuel is looking to develop, how does that rollout work? Is the addition of new HEVO solar to an existing installation expected to run smoothly?
spk00: For a bigger plant, we will install additional quantity of EvoSolars. So a small plant or a big plant, it has to do with the quantity of the number of EvoSolars that we will install. Of course, this plant will need different equipments, depending, of course, on the output of the green hydrogen produced. It will need different equipments for compression, for purification, hydrogen produced.
spk02: Thanks. We'll pass it to Frederico now. So in the context of the 2.4 gigawatts of project backlog or pipeline, can you attempt to quantify what those figures mean in terms of potential revenue or EBITDA margin?
spk01: So I'll try to be very cautious here in my answer. But effectively, I want to note that that pipeline includes hydrogen purchase agreements and tech sales. We will look to do... the projects that achieve the sort of maximum return to shareholders. So, this could be projects with high net present value for the ones we own or high gross margins. So, it's hard to quantify exactly, but as a rule of thumb, if they were to be sort of all sale, the 100,000 HivoSolars and you sell them at 30,000 euros, that's a 3 billion pipeline on the very back of the envelope calculation. The EBITDA margin does change significantly, especially in the short term, if you're doing HBAs or if you're doing tech sales or the proportion of those. So I'm going to elegantly sidestep that question, but that puts into perspective the pipeline. That does not necessarily mean that we can do a pipeline this size and actually execute on it, but this is just the size of the pipeline with all the caveats. Thank you. essentially have on that one.
spk02: Thanks. On the subject of the pipeline, obviously, the GoLab at the Benevente facility is critical to achieving it. How confident are you on the mid-2022 date for the factory to be up and running?
spk01: So to note, we initially said that we would have the, last year we gave guidance that the factory would be up and running during Q3. We actually expect the first activities to already take place in the next quarter, in Q2, with further rollouts of different lines in Q3, and then for some of the longer lead lines, potentially during Q4. So we do expect to have activity in Benevente in the coming months.
spk02: Great. And how are you thinking about production capacity at Benevente this year?
spk01: Sure. So the production capacity and the guidance we gave last year was to target around two and two and a half thousand hypersolars. So that continues to be a potential target for us of production capacity. That said, I want to note one point here, which is we will produce what we need for the projects that we can deploy to. producing for just the purpose of keeping in stock has two issues. The first is that it does eat significant amounts of capital. And the second is that as we have evolutions of the HuboSolar technology, we don't want to be keeping stock of a previous generation of HuboSolar. So that is the production capacity, the two to two and a half thousand. That's what we hope to be able to deliver on this year. The production volume will depend on the licensing of projects and what we can deploy into the field.
spk02: Great. So we received a question about the oxygen capture system. While it's still early, is there any additional detail you can provide on key milestones or projections?
spk01: Not yet. I'd love to share those with you. That is a key target for this year. It would be too early to put out the figures on that piece. I just want to note that, of course, whatever we produce in hydrogen, the rough calculation of what we produce in oxygen is eight times. So that gives an indicator of the potential volume of oxygen that we're talking about. If a Hibiscus is producing one ton of hydrogen, we're talking about around eight tons of oxygen, eight tons of oxygen potentially being created as well. So that's probably, I will stop there on the guidance.
spk02: Thanks. Got some questions on the Hibo Solar. If possible, can you provide some additional information on performance
spk01: So as I mentioned before, we had in August, we showed the initial performance of the Hevo Solar was around a little bit north of 10% better than we had initially expected. So if you think that it was a one ton Hevo Solar, We're talking about 1.1 or 1.12 tons per hectare solar. Of course, we saw the strong performance of the summer months with high solar radiation. Now that we've seen different months, we're actually closing in on somewhere between 5% to 10% increase in performance. So I'd say from 1 ton to 1.08, 1.07 or so on improvement in – sorry – in production.
spk02: Great. In light of some of the increases in raw materials costs over the course of 2021, we received a question on expected manufacturing costs per Hevo Solar this year.
spk01: So the manufacturing costs for this year will depend on which generation, as we have several generations coming through. Given that some of these are tech sales, some of these are on project developments, we're not disclosing at this stage the exact cost of production, also given that we are in contract negotiations. I do want to note that the what we communicated about the target production cost of hydrogen in 2023, we still hope to be delivering at those cost levels, probably in the later half of 2023. Part of the increased production costs and raw material costs have been offset by grants that we've been able to secure and that we've mentioned before in this presentation, allowing us to still keep that target.
spk02: Thanks. You alluded to the cost of hydrogen production. Are you able to share what the cost of production we are at currently on a dollar per ton or dollar per kilogram basis or euro per kilogram?
spk01: Currently, at Evera, we'd probably be north of Arapahoe at around 4 euros per kilogram. As we say, As I mentioned before, our commitment, which we mentioned before, was the stabilized cost of hydrogen production costs, especially in the second half or later in 2023, to be two euros. That's at the cost of production. The final cost of the hydrogen will depend on the use case, depending on if it's for mixing natural gas, if it's for cars, buses or trucks. or so forth, that will change depending on the compression, purification charges. But from a pure cost of production, given the grants that can offset some of the price increases, we continue to still be having that target.
spk02: Thanks. We'll pass it back to Joe for a moment. Are there any issues with the Evera plant? And if not, why is it taking so long to receive full commissioning?
spk00: In fact, what happens with the EBR project, with the permitting process, is that the project All the legislation is prepared for the production of brown hydrogen, so steam methan reforming. The moment we started developing and we were the first in Portugal to develop green hydrogen projects, we came, suddenly we were caught in a legislation that didn't exist. So our projects were considered, our production of green hydrogen was considered as the production of the grey hydrogen from a schematon reforming. In fact, what happens is if we go according to the actual legislation and regulations and certifications, we have to go through a process much complex, which, for instance, includes the studies of emission of pollution emissions, which all of us, we know that there is no pollution at all from the electrolysis of the water to produce green hydrogen. This is the reason why the EBR project permitting process is taking more time than expected. All the local authorities and the environmental agencies are working together to try to to make it more simple, as they all assume that the complexity of green hydrogen is completely different from the complexity of grey hydrogen. And so we truly believe that in the next coming months it will be solved. And so we'll get the licenses and finish the permitting of the ERA projects and we'll open a new and faster way for the permitting of the future projects. This happens in Portugal, but it's the same thing exactly in Spain, in Australia. So this is a process that takes time, but it's a learning process. We truly believe that the coming projects will be much, much faster.
spk01: So I would like to add just two points there. As I mentioned before, this is part of the cost of being pioneers in the green hydrogen market. We are really opening up the green hydrogen market, and this is why we're also facing that. The second one, and just to answer a specific point there, none of the delays on commissioning are due to issues with our system. So issues with our system are not causing these delays. This is a permitting issue.
spk02: Great, thanks. Given the size of a fusion's own production capacity versus pipeline, how are you thinking about production going forward? Are you considering developing additional production capacity or potentially pursuing an outsourcing strategy?
spk01: Simple answer is yes. And in addition to that, it's also looking at potential strategic partnerships where they may make sense. So, of course, one of the things that Andre has seen looking into is the ease of production of the product, the ease of outsourcing production and essentially moving to assembly, all the way to the full outsource option. So these are all things in our sort of strategic discussions and also activities that we count on. And this is why I mentioned at the beginning, very happy to have Terry, Zach, Jason on board, bringing that additional expertise to help us with that strategic, help us and Andre in that strategic assessments of our way forward. Okay, we'll stick with you. Yes, go ahead.
spk03: One moment. Frederico, you mentioned the productive capacity for 2022, but as the various production lines will only be coming on October into operation during the course of 22, perhaps you could also offer what productive capacity of the Benevente facility would be in 23 without any additional capacity expansion
spk01: Sure. Absolutely. So the 2023 production capacity, we're saying between 120 to 200 megawatts, that's between 5,000 to 8,000 PIVO solar units. We will have to, in a few months' time, make a decision on exactly what number we close for that capacity. for that additional capacity, but that is the current target for the Benevente. That would add to the production capacity of the MAGP. And in 2024, that would be increased further between the 200 to 400 megawatt production capacity and going into 2025, reaching the 500. Again, the 2023 and 2024, it's not a question of design. It'll be a question on decision of how much we want to install. And this will be driven by what we believe will be the projects that we'll be able to install in 2023 and 2024.
spk02: Thanks. Stick with you, Federico. What is the current cash burn and how is the company thinking about its cash position and potential sources of additional capital?
spk01: Sure. So on the cash plan, as I mentioned before, the guidance being given there on the operating costs between 2.3 million per quarter all the way to sort of 3 million per quarter as a sort of development throughout the year as a guidance with all the caveats that comes with giving guidance as things can change throughout the year. In addition to To that sort of normal operating costs, we do have significant investments that we expect to make in benefit and in some of the hydrogen plants. Now, this will the cash plan that will also depend on the, our ability to secure some of the financing and debt. solutions for for both those capex investments uh we're in advanced discussions uh on that front um so we will provide a hopefully more detailed analysis on that cash cash firm specifically on the capex side uh likely in the next uh quarter so uh i i now on how we think on the on the capital piece sorry the second piece of the question then apologies um the first part there is that one of the ways to preserve capital is to produce really what is required into the projects that can go live rather than just producing for storage. So that allows us to, at the point that we produce, we're able to put them into the field. We're also able to secure the cash from the grants that are available. So this is why it's important to also time that correctly. In terms of... potential capital raising in the future. This is something that we discuss on the board on what the possibilities are. Do we do Will we do a strategic capital raise? Do we do an opportunistic capital raise? Do we do one at all? Do we go with debt? These are still all conversations on the board. Of course, as we mentioned before, what we want to make sure is that we can deliver upon the growth potential that we see in the industry now. So that could take many shapes and forms, including strategic partnerships as well. Jeffrey, I will stop on that one there unless you want to add anything.
spk03: Yeah, I just wanted to offer kind of at a high level, We have lots of different levers to pull and people should understand that among those levers would be a shift in the percentage of business that we do between tech sales and our own hydrogen farms. So hydrogen farms require a capital investment over where the payback is over an extended period of time. We will do those to the extent that they provide attractive returns on capital. And the returns on capital there will be dependent on things like what amount of debt financing we can get, what amount of grants we can receive. We have been approached by too many to count numbers of potential investors, folks who have said, we want to partner with you on projects. firms that potentially have a lower cost of capital than we do. And there are lots of different ways to slice and dice how to structure the capital investment required for a hydrogen farm where the return would come over time with an HPA. There is project finance potentially available. There are ways of structuring mezzanine type of returns for targeted towards infrastructure funds that are looking for safe and secure returns over time. Or we could bring in people to be our partners in those projects at the equity level. So between the different ways that we might be able to finance hydrogen farms, and the ability to shift between tech sales and hydrogen purchase agreements. We have lots of ability to manage our capital needs, understanding that at the bottom, what we are interested in is generating the best returns for our shareholders. So we are not going to look to dilute our shareholders with raising equity unless we believe that that equity can be put to work at very attractive rates of return.
spk02: Great, thanks. Just a few more questions here as we get to the top of the hour. A couple of questions on commodity inflation. How are increases in prices for raw materials and key components impacting product profitability? Are you able to pass through some of those increases to potential customers?
spk01: So I'll take that question. At the moment, as I mentioned, we're able to at least pass through some of those cost increases with the grants programs available. That's actually been probably the larger source of support for that cost increase. Of course, it has helped that As mentioned before, both the market for grey hydrogen, but also the market for green and blue hydrogen has suddenly become more expensive, allows for a different commercial discussion when adjusting for just in some of our prices. I will note, though, on the price of raw materials, there are some prices of raw materials that we do suffer, as everyone else, aluminium being one of them. But we have also seen huge decreases in some of the components as the markets also mature. I will use an example of the membranes were secured a price of a quarter of what we were paying a year ago. So even though we do feel some raw material upward pressure in some components, just the ongoing development of the hydrogen world in general is also providing some relief in other components.
spk03: Ben, once again, I just want to jump in here for a moment to make two points. The first is that the green hydrogen market is very young. It's still developing and the sources of demand are developing. So some amount of demand comes from traditional consumers of hydrogen who have been consuming gray hydrogen who are looking for ways to reduce their carbon footprint. They have to think about how much more they're willing to pay for green hydrogen over gray hydrogen. As Federico said, the cost of gray hydrogen is a moving target. And then they need to decide how much of a premium they're willing to pay. Some portion of that may be attributable to commitments that they have made to shareholders or more broadly to their customers about decarbonization commitments. But at the same time, new, there are markets that are developing for green hydrogen that I think we have mentioned in the presentation, the mobility market is one that is developing more quickly than we had expected. The mobility market is a market that pays a premium for green hydrogen. So in terms of the company profitability, we need to look at a lot of different things. There is our cost of production, and then there is the price at which we can be selling either green hydrogen or the technology to produce green hydrogen. Can that be sold to companies? to subsectors of the market who are willing to pay a bigger premium for green hydrogen, as is the case with mobility. And lastly, as also has been mentioned, in thinking about cost of production and therefore what our gross margins would be, at this early stage of the development of the green hydrogen industry, the subsidies that are available from government by way of grants are represent a very significant portion of what the all-in cost might be. So while we and our fellow competitors have experienced price increases for raw materials and some components previously, That's only one portion of the story. And I really would encourage folks to be keeping their eye on our ability to generate sales, either tech sales or HPAs in higher margin portions of this market and keeping an eye on that as the year progresses to see where we are able to be signing up revenue generation. We're confident that given what is at the, in 2022 and 2023, only developed, what we believe will be capacity constraints for fusion fuel, we will certainly look to take advantage of those high margin opportunities to maximize the potential either gross margin on tech sales or realized over time via HBAs.
spk02: Great, thanks. So we've reached the top of the hour. This concludes our fourth quarter webcast. If you have additional questions, please feel free to contact us directly at ir.fusion-fuel.eu or visit us at our website at www.fusion-fuel.eu. Thank you all for your participation and engagement. As always, we look forward to our next quarterly update. Thanks.
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