Fusion Fuel Green PLC

Welcome to Fusion Fuel Green's third quarter 2022 investor update. My name is Benjamin Schwarz. 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 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 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 again for joining us today. I'll just quickly run through our agenda for the next hour. So we'll kick things off with an overview of fusion fuels value proposition, um then the management team will share uh uh you know actually well yes we'll share uh third quarter highlights financial results the latest on our commercial strategy uh pipeline market expansion plans and finally a very exciting technology update we'll then revisit our 2022 milestones before ending the presentation portion of the webcast with some brief closing remarks from Fusion Fuels Chairman. We'll then open up the floor for facilitated Q&A. I'd like to remind everyone, as in our previous quarterly calls, questions can be entered in the chat box in the webcast platform at any point in the next 57 minutes. Alternatively, you can also submit your questions to the investor relations mailbox which is ir at fusion-fuel.eu. So let's begin with an overview of Fusion Fuel, what makes us unique, how we are creating value. Fusion Fuel is in the business of developing and delivering cost-effective clean hydrogen solutions to accelerate the global energy transition. At its core, Fusion Fuel is an industrial technology company. We have developed and commercialized a proprietary, miniaturized PEM electrolyzer that unlocks cost-competitive green hydrogen through unprecedented functionality, flexibility, and scalability. The modularity of our electrolyzer technology lends itself to a decentralized approach, and we've leaned into that as a source of unique differentiation. where much of the market has gone down the path of ever larger scale electrolyzers to drive down their levelized cost, we've gone in the other direction, small scale mass produced. In doing so, we've been able to eliminate some of the cost and complexity of hydrogen production and distribution and deliver bespoke co-located solutions that few others can. So while others are talking about developing green hydrogen projects, we are doing it. Our unique approach and differentiated tech have enabled us to build a robust commercial pipeline of tech sale and development projects. We are producing green hydrogen today at our demonstration facility in Portugal with many more highly actionable projects in various stages of the development cycle, including what will be Spain's first solar to green hydrogen refueling station, which we're developing for Exolume in Madrid. So with that primer, I'll now pass it over to Frederico Figueroa de Chavez, Fusion Fuels CFO and Co-Head, for an update on the third quarter and subsequent events.

Thanks, Ben. Appreciate that. And thank you, everyone, for joining once again. As mentioned last time, we have received approval of a 10 million Euro grant from Component 14 of Portugal's Resilience and Recovery Plan for a project in Sines, and also commenced work on our Exalume textile project in Madrid during the third quarter. More recently, we have announced two textile contracts totaling 7 million Euros in Portugal and in Spain, in addition to opening the Italian market with a Deferco Energy Agreement. We continue to make progress on securing grants for the projects we're involved in. Now we'll dive into this a little further later on. Two significant notes from earlier today and last week that are important for us. We've now disclosed our first project in the US. This is a project that has been in the works for several months now. And with the passage of the Inflation Reduction Act, it's become a key strategic pillar for the company. Zach will dive deeper into this major milestone in a little while. Last week, we also introduced the Hevo chain. This is the first centralized electrolyzer for the company and is the first that we know in the market that is based on a series of miniaturized units working together in a string. We're extremely excited by this product. It not only opens new markets to us, but we believe it will also be a true disruptor for the pemmolecularism market in the coming years. During the third quarter, we booked an operating loss of 5.5 million euros, driven by 4.6 million euros of operating expenses. The increase in expenses from the second to the third quarter, was largely driven by an increase in headcount coinciding with the go-live of Beneventi, and then the related tax provisions required in Portugal for the holiday subsidies paid to employees. In addition, we incurred €600,000 of one-off bookings related to Evra and Exolume expenses, and various larger activities related to marketing costs, as well as various consulting and specialist engineering validation works, the results of which we've disclosed in previous courses. Going forward, we're adjusting our administration expenses guidance to around 4 to 4.5 million euros per course for the fourth course and also for most of 2023. Our pre-tax profit loss for the quarter was again significantly impacted by the non-cash item of the fair value movement of the outstanding warrants. This had a 3.8 million euro positive impact, bringing our pre-tax loss for the quarter at 1.6 million euros. One item I would like to highlight is that we expect to book revenues and also part of the P&L impact of the Exolume project during the fourth quarter of this year. So that's something to look for in the next quarterly update. We've added this slide. So for additional transparency for our shareholders and analysts, we've added a slide covering some elements of our balance sheet into this, to the financial section of our results. And we'll continue to provide this information going forward. As you can see, we have a total of 61 million euros of total assets and around 15.6 million euros of liabilities. Our property plans and equipment is mainly composed of our Evera plants, our Hivosul CNIS project, and our Benevente facility. Regarding Benevente, several months ago, we initiated a process to do a sale-leaseback of the property. We can now inform you that this is a transaction that we expect to close in December, which will also generate substantial cash proceeds for the company. Important to note, we currently hold 12 million euros of inventory and around 3 million euros of advance payment to suppliers. This is a result of measures taken late last year and at the beginning of 2022 to secure our supply chain. We've recently seen several cases where competitors were unable to deliver due to supply issues and we have had the opportunity to step into projects in their place. Over the coming months, we will be working to transition this inventory into revenues and have a positive impact on our cash balance. Our receivables also include 3.7 million euros of grant requests that we are awaiting payment on. In the third quarter, we continue to hold substantial VAT receivable balance of 6.5 million euros. However, I'll highlight that we have submitted reimbursement requests for part of this balance. These requests have been approved and those infos will be reflected in the fourth quarter. During Q3, we continue to pay for some materials ordered, not only for inventory and for our EBR and XLUM projects, as well as investments into our intellectual property and our 4.6 million euros of operational expenses. Our liquidity position is something that we as a team have been actively managing with the various tools that are available to us, including, as mentioned, the reimbursement of our VAT and the grants receivables, the sale-leaseback of Benevente, and as our projects progress, traditional revenues. We are a company in an aggressive growth trajectory, and the recent announcements and projects may require certain capital in the future. As we've noted before, we'll continue to consider all possible options for the company to ensure that we continue to execute along our growth plan. Our outstanding shares and warrants balance is relatively unchanged at 13.4 million shares. As announced at our last earnings release, during Q3, we did tap into the ATM facility and sold around 300,000 shares at an average price of $7.35. During the fourth quarter, we also used the ATM facility and sold nearly 400,000 shares at an average price of $4. Year-to-date, we have raised around 3.7 million euros through the ATM facility at an average price of $6.3 per share. With the sale east back of Beneventi, the receivables mentioned in the previous slide, and the other capital options being explored by the firm, in addition to normalizing of our project activity and revenues over time, we expect to have less use of the ATM facility going forward. As highlighted previously, we have a strong track record of securing grants for our project portfolio. We have applied for nearly 80 million euros of grants, excluding our IPSA submission. As of our last update, we had, during our last update, we had 19 million euros of grants approved and 3.5 million euros of grants reimbursements already requested. As of today, we can share that we have secured another 30 million euros of grants, for another one of our projects. We expect to be able to disclose information regarding this award in the coming days. So for now, I'll not go into the details of the project that it relates to, but please be on the lookout for the press release relating to that, hopefully still this week. As announced last week, we are technology providers for four projects in Spain that were pre-selected for grants. We expect to get the final results of those submissions early in 2023. This grant portfolio and the related projects are a very significant asset for the company and establish a very strong basis for our order book for the coming years. Now to dive a little deeper into those, I will pass to Zach to share more information with you regarding our commercial activities.

Thank you, Frederico. Nice to see everyone and everyone that is in the U.S. I hope you had a great Thanksgiving weekend. Frederico, can you go to the next page, please? A key focus going into next year for Fusion Fuel is to turn the dreams of the hydrogen market into a reality. The market is being created, which requires projects to be permitted and attracting customers with providing attractive economics and confidence in our offering. We're targeting over $40 million in gross revenue next year. We plan to achieve this target through technology sales to third-party customers and sell most of our existing Fusion Fuel-owned projects to financial investors. We've been focusing de-risking our pipeline in 2023 and beyond by concentrating on a few key characteristics. First, does a project have the land secured? Secondly, does it have grants? Third, completing permitting? And finally, does it have a customer? These four characteristics, as simple as it may seem, allow us to rank opportunities that will have a high likelihood of reaching final investment decision and lets us prioritize our resources appropriately. Virtually our entire pipeline has grants and land secured for 2023. This allows for our pipeline to commence permitting and have a higher probability of reaching FIV due to the fact that we can subsidize our projects via grants to make them more attractive to third-party customers. We received or started permitting on over 50% of our 2023 pipeline, and the balance is planning to start. Permitting takes approximately six to nine months to receive the necessary permits to reach FID. Our team is focused on initiating permitting on the balance of our 2023 pipeline by the end of Q1 2023. NextGear's pipeline is broken down by approximately one-third being already established third-party customer sales, and the balance of them are our Fusion Fuel-owned projects, which are all located in the Iberian Peninsula that we plan to sell to third parties. Having our 2023 pipeline being focused on Portugal and Spain allows for a higher chance of success due to our company has most of our employees located on the Iberian Peninsula. As we're focused on 2023, we're also looking ahead into expanding our reach into other core markets. We're excited to announce that we are expanding into North America and the Italian markets. Both markets have strong incentives, especially the Inflation Reduction Act in the United States. We've secured early stage opportunities in California and Southern Italy, a total over 75 megawatts of capacity for 2024 and 2025 production. These projects combined with the balance of our portfolio in Portugal is over 138 megawatts of HEVO solar and HEVO chain units for 2024 and 2025. HevoChain is a product that Frederic will go into next, but it's a new product that we have developed and will be in production in 2024. HevoChain is our own centralized PIM electrolyzer that Fred will discuss shortly. To take advantage of the Inflation Reduction Act in the US, our team is actively evaluating if we can supply units for our USA projects from Benevente, or do we need to build an additional production capacity in the USA? This could be a step change in our production capacity due to the early successes that we've had so far and the massive increase in the total addressable market size via entering the United States and Canadian markets. We believe our product offering, along with our approach, will be attractive to third party customers and financial investors to expand into these exciting markets. In summary, we have a strong plan to utilize our 2023 production capacity, focusing on a region that we know very well, the Iberian Peninsula. And already we've established anchor projects in two core, exciting and strategic markets to ensure the growth in the future for the company. 2023's technology sales, as I just noted, are focused on the Iberian Peninsula. We have over 18 megawatts of capacity of projects that total 743 units with an estimated potential revenue of over $45 million to fusion fuel that have $15 million grants attached to those projects. We are concluding the construction, as Frederico just noted, of our first technology sale in Madrid with Exelon. I've built a team to be able to execute our projects in this region, working closely with our third-party external partners. These capabilities allow us to either do a tech sale or a turnkey project that includes engineering, procurement of the balance of plant equipment, construction of the facility, as well as the operations. This allows us to not only make returns on the tech sale, but also on the overall project and potentially recurring revenue from operations if we operate the facility. Our tech sales in Portugal are with the same company, Kime. Both projects have secured grants have the land and the first QMA project is already under environmental permitting. Anticipate QMA one reaching FID in the first half of 2023. And as for Rico noted, we already have inventory available to execute this project. The Spanish portfolio has been pre-selected for the per day program and finalizing their respective grants. These projects are going through a final evaluation to receive formal award of the grants, which is noted as a waiting grant in the table. We're focused on supporting these respective projects and receiving their grants so they can initiate permitting in the first quarter of next year. Some of the projects do not require offtake because the company is the induced customer or already has security customer. I cannot emphasize enough that that helps de-risk these projects, knowing that they already have a customer in hand. Alcala is the most advanced Spanish project and is finalizing permitting with anticipation of reaching FID in the first half of 2023. And again, we have inventory available for this project already to execute it. Also, we have a backlog of projects for 2024, which include additional technology sales in Spain that have applied for other grant programs and the Deferco project in Italy and other projects we're currently in negotiations on throughout North America and Europe. Our development projects continue to progress. We have two key themes as we touched on the last investor call. First is that we are building a mobility backbone, not only in Portugal, but now in the Iberian Peninsula. Second is decarbonizing industrial applications to sell to customers throughout Iberia with our initial focus on the Senas region of Portugal. We've secured grants and land for all the projects we plan to reach FIB in 2023, which includes two mobility projects and three industrial focus projects. Our focus is to build out our footprint in the Cines region through three phases to reach a total capacity of 85 megawatts. Our first phase has already received its environmental permits and is finalizing feasibility phase to reach FID in the first half of 2023. And again, we have the inventory available to do these projects. Our second phase has initiated environmental permitting and is planned to reach FID in the second half of 2023. We continue to do pre-feasibility work on the balance of our portfolio to be in position to commence permitting in the coming months and reach FIDs in the second half of 2023. As noted on our last call, Portugal is the blueprint for the rest of the markets that we're currently focused on. This blueprint is already being utilized to build a pipeline of over 175 megawatts of development projects in California, Portugal, and Spain for 2024 and 2025. I cannot emphasize enough how the expansion into North America is truly a game changer for fusion fuel. North America has significant momentum due to the IRA and infrastructure bill that create hundreds of billions of dollars in subsidies for hydrogen and other renewables and clean tech manufacturing. Most of you probably already know this, but I will emphasize anyways. These subsidies include a $3 per kilogram production tax credit. It can last up to 10 years. a 30 to possibly 40% investment tax credit on the capital cost of the solar components of the project, billions in subsidies for clean tech manufacturing, and development of hydrogen hubs to further advance the growth of key areas of hydrogen production and demand in the United States. We also have significant state level subsidies, such as a low carbon fuel standard credit in California focused on the mobility industry. Lastly, Canada has also recently announced a 40% investment tax credit for the upfront capital cost of hydrogen production, which makes Canada a very attractive market for fusion fuels hevo chain product they plan to roll out in 2024. This legislation, combined with our expanded technology offering, create a strategic shift in our focus to accelerate our plans to grow in North America for 2023. Securing our first project in North America in Southern California was strategic due to our technology offering and maximizing incentives to have the highest likelihood of reaching a successful FID. Our first project is in partnership with Electus Energy, a developer of hydrogen projects with operations in California. We're excited to work with Electus, which brings commercial relationships and boots on the ground in California. Our first project is planned to be 75 megawatts of capacity of green hydrogen production, located on 320 acres in Bakersfield, California, off of Interstate 5. Bakersfield is a strategic first location due to its existing heavy industry and located to nearby distribution facilities that connect to areas such as Los Angeles. We've commenced pre-feasibility work with Black & Veatch as a lead contractor and we'll update as we make progress on this exciting development project. Our target is to have an FID on this project in 2024 and have commercial operations in 2025. We're actively building out our team in North America to be able to execute this opportunity, as well as identifying secure additional opportunities in 2023. We believe the announcement of HevoChain expands the market opportunity significantly for us in the US and Canada, specifically in markets such as Northeast and Pacific Northwest of the United States and British Columbia and Ontario provinces in Canada. These markets have existing or planned hydrogen incentives that make them attractive markets to apply to HevoChain technology. The size of Bakerfield project alone justifies building a new manufacturing facility, in particular for the Hebo component. As this project matures to reach a final investment decision, along with other projects in our pipeline, we'll need manufacturing capacity in the U.S. to be able to obtain the benefits from the IRA as a majority of the equipment that you produce has to be made in the USA. We're in the early stages of identifying our needs and starting to look for possible locations of putting a manufacturing facility or two in North America. This growth would be an increase of our existing business plan for Benevente. We're excited about the challenge to grow in such an important market as the United States and Canada. We are also excited to have expanded to the Italian markets. We think that the Italian market is a natural expansion of our core and strategic markets in Europe due to its excellent solar radiance, existing natural gas infrastructure, and ambition to add hydrogen production in the coming years. Italy also has an existing natural gas grid from northern Africa to southern Italy and is seeking to, by 2030, have a significant increase in its hydrogen use for heavy industries and long-distance truck transport. This is ideal for fusion's mobility and industrial decarbonization strategies we are already employing in the Iberian Peninsula. Our partnership with Deferco Energia is exciting because Deferco's core business is energy trading, steel manufacturing, and shipping businesses. The joint agreement has been established between Deferco and Fusion Fuel with the following goals to develop a footprint in Italy and the MENA region for technology sales and project development. Fusion Fuel will utilize Deferco's existing operations and will be the boots on the ground for expansion to Italy and possibly Algeria and Tunisia. The interesting aspect of Algeria and Tunisia is that there's an existing pipeline that connects northern Africa to the Italian markets. And the other interesting part is that Deferco has significant operations in both those regions. The perfect way to start any partnership is to focus on a project and execute it. We're doing this through the development of a pilot plant in DiFerco's Giammoro site in Sicily. We plan to install 50 HEVO solar units where the green hydrogen will be used to feed a molten carbonate fuel cell system that's a technology that DiFerco wants to test. The project is planned to be installed during 2024 and will allow us to showcase the HEVO solar potential in this strategic country and in a very hard-to-abate market sector to potentially replicate in other markets. Following our successful strategy in Iberia, Fusion Fuel will now use the same blueprint as I noted earlier in mobility and the industrial segments. Our target is to have up to four mobility hydrogen refueling stations in Southern Italy by the end of 2024. Separately, we've seen Northern Italy in areas such as Bologna, Brescia, Verona, and Rodina as key areas similar to Cines to focus on decarbonizing the steel, glass, ceramic, and refinery industries as examples. These are ideal locations for our new HevoChain technology that can scale with our customers, decentralized or co-located, and is more efficient than our peers. We'll work with Deferco to use this technology at the Brescia Steel Mill as one of the initial targets in this region. I'll now pass it back to Frederico to go through our exciting new technology developments of the HevoChain. Thank you.