Fusion Fuel Green PLC

Hello everyone and welcome to Fusion Fuel Green's first quarter 2022 investor update. My name is Ben Schwartz and I'm head of investor relations at Fusion Fuel. I would first like to remind everyone 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 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. We'll begin with an overview of our value proposition, as well as some commentary around what we're seeing in the market from a macro perspective. Then the management team will share some first quarter highlights, financial results, and a business update focusing on commercial progress and the latest on tech and production. We'll then close with some remarks from Fusion Fuels Chairman and Open up the floor then for a half hour or so of facilitated Q&A. As in our previous quarterly calls, questions can be submitted in the chat box in the webcast platform at any point during the next hour. Alternatively, you can also submit your questions to the investor relations mailbox at ir.fusion-fuel.eu. So let's begin with an overview of Fusion Fuel's business case. For those who are new to the name or in need of a refresher, Fusion Fuel is in the business of developing and delivering cost-effective clean hydrogen solutions to accelerate the global energy transition. Our aspirations take a meaningful share of the global hydrogen opportunity, which between legacy demand and emergent applications is already a significant market today and one that's poised to experience tremendous growth over the coming decades. At its core, Fusion Fuels is a technology company. We've developed and commercialized a proprietary integrated solar to hydrogen generator that unlocks grid-independent hydrogen production at a market-leading levelized cost. We are only one of a handful of companies that are producing green hydrogen today at our demonstration plant in Portugal and are moving quickly to capitalize on that early mover advantage and execute on the substantial commercial pipeline that has been built over the last year and a half. We believe we have the right technology and the right team at the right time to make Fusion Fuel a major player in the green hydrogen business. So before we dive into the business update, and as we have in recent meetings, we want to take a step back and touch on the hydrogen market more broadly. So as has been the case for much of the last year, the economics of conventional hydrogen production remains under pressure. most acutely in Europe amidst a sustained increase in the price of natural gas. And similarly, the levelized cost of green hydrogen, extremely sensitive to electricity prices and the pervasive volatility in both the price and availability of renewables is challenging the economics and the viability of large scale electrolyzers, particularly when you include between one and two dollars per kilogram in last mile logistics from centralized production. In this market environment, our integrated grid-independent solution is significantly advantaged. Not only can we offer known long-term certainty of cost, but we can do so at market-leading levels at small or large scale without grants. With clear line-of-sight to de-risk cost reductions from the ramp-up of automated productions at our Benevente facility, along with the introduction of successive generations of Archivo technology, which will help sustain our advantage even as the competition continues to drive down the cost curve. So having set that context, I'll now pass it over to Frederico, who will provide an update on the quarter.

Great. Thank you so much, Ben. So good afternoon. Thank you, everyone, for joining us today. So today is an exciting day for both me and Zach. It's the first time that we present to you as co-heads of Fusion Fuel. and we're very excited to present the latest developments of the company. And before we go into the details and show you all the great things that are going on here, we'll briefly go through some of the financials and quarter highlights. So first to note, as part of our drive to strengthen the senior levels of the company, we continue to hire key personnel, including most recently Zach, but also Jason Barron, who will, together with Zach, jointly oversee Fusion Fuel USA. Later in the presentation, I'll provide more details on our personnel development overall, but you'll see there's been huge advances in that department and we still expect to increase significantly the talent in the firm. In this update, we want to highlight a very important development for us. As of today, we have secured confirmed binding income for 2022 of 8.4 million euros, composed of both technology sales and grant income related to our projects and to Benevente. In addition, we have another six projects in late stage development that could generate up to 20 million euros of revenue potential in 2022. So that is 8 million euros confirmed, an additional 20 million euros income in late-stage negotiations for a total of potential income in 2022 of 28 million euros. In the first quarter, we also entered into agreements with AESA regarding projects aimed at decarbonizing the industrial sector and hydrogen mobility projects in Spain, as well as with Hive to develop an already established portfolio of projects with fusion fuels technology. I will touch upon some of the points here regarding Benevente and our partnership with Toshiba later on in the presentation. Regarding financials, in the first quarter, we recorded an operating loss of 3.8 million euros, of which 3 million euros are related to operating expenses. Around 1.6 million euros of those are related to personnel costs, the single biggest item. But overall, the costs are in line with the guidance we provided at the last update of between 2.3 million to 3 million of operating costs per quarter expected in 2022. Even as you'll see with a ramp up later on in one of the slides of the personnel, our guidance still continues to be between that 2.3 to 3 million of operating costs per quarter expectations in 2022. We've booked 800,000 euros of share-based payment expenses. These are non-cash expenses and are related to restricted stock units and options awarded to fusion fuel personnel. This is a charge that will be recurring as it's amortized over the vesting period. We do intend to keep using securities with vesting clauses as a means to attract talent, reward staff, and ensure alignment with shareholders. Therefore, a non-cash expense line related to these should be expected to continue over the coming years. As mentioned in previous clauses, we need to recognize the fair value movement on outstanding warrants. With the increase in stock price in the first quarter, we need to account for the fair value movement of around 4.7 million euros in the warrants. This is simply an accounting recognition. This is, as mentioned before, this is a non-cash item. With FX movements as well as movements in the value of short-term investments we hold, we booked a charge of around half a million euros. The 115,000 euros charged there of equity-accounted investees is related to our FusionFuel joint venture and our share of their results. So this is an entity that has recently started or started last year its activities, continues its ramp-up, and as we expected to... to still continue to operate pre-revenues for a while, we do expect this line to continue to show a loss for the foreseeable future as we invest in that entity. One point I'd like to mention here, and it's also related if you will find more information of that in our 20F for the full year financials for 2021, but it's our total assets. So as you can see, we have here around 23 million of cash and short-term investment instruments, liquidity instruments. But in addition to these 23 million euros, we have around 23.5 million euros in PPE assets related to our two Avro projects, our HevoSul project in Sines and our Benente production facility. We have around 11 million euros of inventory and materials that we have prepaid to secure their delivery. and we have around 5 million euros of VAT that we will be recovering through the regular process. This actually brings our total assets to around 68 million euros, of which 23 is our cash and short-term instruments. It's important that everyone's aware that we have been significantly investing the company and the assets of the company over the last year, and that is reflected in that total assets value. On outstanding shares and warrants, they remain unchanged from the previous courses. The 92,000 restricted stock units are related to our employee initiative plan that we briefed upon in the last couple of courses. The increase is regarding new hires that have been made as we award them restricted stock units with a several-year vesting period. The options granted are related to options granted to members of senior management and board of directors that vest over three to five years. Now I'll pass on to Zach, who will take us through some of our projects and the more exciting stuff for the presentation. Thanks, Frederico.

It's nice to meet everyone. Fusion has established ourselves as a leading player in the Iberian green hydrogen market and built a foundation for significant growth over the last year by building out a well-rounded and experienced management team and building off of our initial projects across multiple applications, which are mobility, industrial applications, and green ammonia. Fusion's decentralized electrolyzer provides multiple solutions to our customers, which is to sell turnkey technology solutions as sales, as well as to sell hydrogen through our own projects that we develop. Our unique offering provides several key advantages. First, our modular technology is viable at competitive costs on even small volumes. Usually centralized electrolyzers are not economical below five megawatts of capacity. However, fusion can be competitive on projects as small as 25 to 50 kilowatt hours of capacity. Second, Fusion Stevo solar technology is grid independent, and we do not have energy cost fluctuations unlike our competitors, which is an important feature when energy prices continue to rise, as the majority of our cost is actually CapEx related. Third, through our integrated solar solution, we can take advantage of existing solar investment tax credits in the US, as well as cash grants in Europe, which further reduces our capex. As Ben noted earlier, we already have quite an advantage from a levelized cost of hydrogen standpoint without grants, but with the grants or tax credits, it could be an additional 10 to 30% cost reduction, which would make us world-class pricing in the hydrogen markets. Lastly, we have a low carbon intensity, which is an attractive feature for industrial applications in particular. Typical grid-connected power has an estimated 26 kilograms of CO2 per kilogram of hydrogen, where our Hevo Solar provides a solution with almost zero emissions. This means we're not just greener, but we can also provide better netbacks on offsetting carbon taxes and tariffs for our customers, again, to further reduce their costs. Next page. Our solution, as you can tell on this page, is gaining traction globally. The pipeline has expanded substantially and now includes projects in five countries with a combined pipeline of over 170,000 metric tons per annum of green hydrogen. This pipeline represents over four times our expected capacity through the end of 2025. We have built a significant presence, as most people are probably aware, in Southern Europe, which is made up mainly of mobility and industrial application projects. In MENA, we're developing a project in Morocco, which will be a low-cost green ammonia export project. And lastly, with Jason, Barron, and I joined the company, we have recently started our business development efforts in North America. We're excited that in a short period of time that we've already built early stage opportunities totaling over 2,500 tons of green hydrogen potential. We believe the United States is about to take off as several subsidies are already in place that will help drive hydrogen development. These subsidies are the green hydrogen hubs, which is over $8 billion of investment, the Department of Energy loan guarantee programs, and low carbon fuel standard credits in the states such as California. These programs, along with Fusion's unique ability to utilize the solar investment tax credit, makes the U.S. market very attractive as a platform for the company. These projects we're highlighting on this page are in advanced stage receiving grants and or near-term opportunities for technology sales, which represent a total of 43,000 tons of our 170,000 ton pipeline. We've submitted for over 60 million euros in grants for these projects and have been awarded thus far 8 million. As noted earlier, we're already providing industry leading costs of hydrogen without grants, but these grants just further help support us closing projects and building our pipeline. Over the coming months, we hope to announce that we've been awarded additional grants which will further bolster our project pipeline. As I noted earlier, our company is focused on several key applications, which are mobility, industrial applications, and green ammonia. These applications have a total adjustable market potential of over 150 million tons per annum of hydrogen by 2030. Our first application I'll discuss right now is mobility. Fusion Fuel provides a low-cost, modular, scalable solution to our customers in the mobility sector. The mobility sector will grow to an estimated 12 million tons per annum by 2030. We're currently constructing our first refueling station in Madrid, which is with Exolume. This is a pioneering project and a first-of-its-kind application in Liberia. As we continue to pioneer this market in Iberia, we've built a pipeline that represents over 20 projects, totaling $140 million in capital costs, $65 million in grants that have been submitted for, the net capital exposure of $75 million. These projects are a combination of tech sales and Fusion-owned projects. Fusion's technology provides decentralized and low-cost hydrogen, which are attractive features in industrial applications. Also, our low carbon intensity, as I noted before, provides not only emissions reductions, which is important, but also just as important, it provides customers with the ability to reduce their carbon taxes and tariffs. Industrial applications is made up of power generation, midstream assets with natural gas blending, refining, heavy industrial applications such as steel and cement manufacturing, and the oil and gas markets. The total addressable market by 2030 is an estimated 110 million tons per annum of hydrogen potential worldwide. Building off our early successes with Everin Green Gas, which most of you all are aware of, we've advanced our pipeline to seven projects with a total of 43 million capital costs, with 14 million grants submitted for or have been awarded, for a net capital exposure of 29 million. As we continue to build out our presence in both North America and Australia, we believe our advantages for industrial applications will continue to gain traction for further build out of our pipeline. And lastly is green ammonia. Green ammonia is the most efficient way to transport hydrogen today. Green ammonia market is estimated to be approximately 40 million tons of hydrogen by 2030. Our technology is perfectly suited to provide low-cost hydrogen in markets with strong solar radiance and with a suitable amount of land. Morocco is an ideal first location for fusion to develop a green ammonia export project. Fusion's role in these projects is to provide the green hydrogen in partnership with other technologies and companies to build the ammonia facility and related export infrastructure. The project is approximately 32,000 metric tons per annum of hydrogen and totals over 180,000 tons per annum of ammonia. And I will now pass it off to Frederico to talk about production technology.