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spk02: Hello everyone and welcome to Fusion Fuel Green's third quarter 2023 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 have not guaranteed 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 greetings. Thank you all for joining us today. In terms of our agenda for the next hour, I'll kick things off with an overview of Fusion Fuel, along with some perspectives on what we're seeing in the market currently. Gavin and Federico, Fusion CFO and CEO, respectively, will then share their quarter highlights, financial results and commercial updates before wrapping up with a recap of our 2023 priorities and our progress against them. We'll then open up the floor for a facilitated Q&A. As in our previous quarterly calls, questions can be entered 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 team at the IR mailbox, ir.fusion-fuel.eu. So as always, let's begin with a brief refresher on Fusion Fuel, our value prop positioning in the green hydrogen sector. So our mission is to make the energy transition more accessible to the development and delivery of cost-effective clean hydrogen solutions. Our patented miniaturized PEM electrolyzer, the HEVO, is at the heart of everything we do. Its simplified and modular architecture is a unique differentiator in a crowded electrolyzer market, one that unlocks multiple sources of advantage for us, including high throughput industrialized production and a scalable building block approach that positions us to create customized, fit-for-purpose hydrogen solutions. We built a robust pipeline of actionable near-term green hydrogen projects in our core market of Southern Europe, enabling us to create our own demand for our technology. Many of these foundational projects have significant grant funding tied to them, strengthening and de-risking the business case for third party investors. We have a differentiated and synergistic business model that positions us across the value chain. In addition to selling our proprietary technology to third party customers, we also originate and develop green hydrogen projects from start to finish with diverse avenues for monetizing value creation along the development cycle. And finally, we're positioned for a significant growth ramp as the market continues to mature, with an extensive long-term project pipeline and a world-class production facility located in Portugal, where we're targeting 500 megawatts of electrolysis production per annum by the end of 2025. Despite the promising, the next slide please, long-term tailwinds behind the Green 100 opportunity, the industry is grappling with a number of fundamental challenges that threaten its trajectory. Rampant project delays, electrolyzer underperformance, a scarcity of firm projects and offtake agreements are but a handful of roadblocks the industry has had to navigate as early movers work to deliver on the lofty expectations they've set. Nevertheless, with the velocity of our project pipeline And our unique technology, amongst other things, we believe we are uniquely positioned to overcome these obstacles. And in many cases, we have a meaningful head start in doing so compared to our peers. So with that, I'll now introduce Gavin Jones, CFO of Fusion Fuel, to share some highlights from the third quarter of 2023.
spk01: Thank you, Ben. Good afternoon or morning to all of you who have joined our third quarter ambassador update call. I'm joining today from our offices in Ireland. During the third quarter, we were awarded a technology sale contract to supply a 300 kilowatt electrolyzer and balance of plant system from a leading global building solutions supplier. We also entered into a partnership with Elemental Clean Fuels, a company focused on originating and developing clean fuel projects in North America. This partnership will provide Fusion Fuel with exposure to the emerging North American green hydrogen market and adds to our existing partnership with Duferco in Italy, whilst enabling the company to focus its near-term commercial efforts on the Iberian Peninsula and Northern Europe. After the end of the third quarter, we received two separate purchase orders for a combined €4.2 million of revenue. These projects will serve as customers in Portugal, and will include the supply of our HEVO chain product, along with balance of plant equipment and EPC services, and will each represent a 1.25 megawatt system. When I spoke with you back in early September, I commented that we were in discussions with both existing and prospective capital providers about financing solutions. We are pleased to share that we have entered into an agreement with Macquarie on a financing facility of up to 20 million US dollars, which we announced last week. This agreement represents the culmination of a due diligence process that spans multiple months. We are very pleased with the terms of this facility and perhaps equally as importantly, the stature and quality of the counterpart in Macquarie. This is a convertible debt facility with a two-year term. The drawdowns will be done on a phase basis with the size of each tranche to be mutually agreed by both parties, depending on our cash flow needs at the time. Macquarie will receive warrants equal to 30% of the aggregate amount funded. The warrants will have an exercise price equal to 130% of the volume weighted average price for the five trading days immediately preceding any tranche issuance. There are certain conditions that must be met before we operationalize this facility, such as completing the required SEC filings. We are working on these and expect to close them during the first quarter of 2024. This facility will provide us with the capital needed to execute our 2024 objectives. We will now move on to the financial results for the third quarter. Please note that all values discussed are in euros unless stated otherwise. We recognized 2.5 million in revenue during the third quarter. This represents the revenue related with our green hydrogen project in Madrid. Provisional acceptance of this project was achieved in September of this year. Of the 2.5 million recognized, 0.7 million is accrued, and this cash is expected to be received within the next 60 days. Back in the first quarter of 2023, we recognized revenue relating to a technology sale contract. Our customer's intention was to complete this project as part of Portugal's POSO Euro program. During the third quarter, it became apparent that this project would not proceed as it wouldn't be completed within the timeframe set out in their grant agreement with the Portuguese government. We reversed the revenue and associated cost of goods sold for this contract during the third quarter, and this reversal is shown as part of the second quarter column for comparative purposes. The revenue reverse amounted to 0.5 million. Please note that we still expect to complete the sale with this client for further project they have planned. As you may remember from our second quarter investor presentation, we booked a provision for impairment of 7.2 million against our legacy Hubo Solar inventory. During the third quarter and into the fourth quarter, we've continued to sell or scrap this legacy equipment. We expect this process to continue for the foreseeable future. The inflows received as part of this process have been offset by an increase to the provision of 0.5 million during the third quarter. Our operating cost base decreased for the third consecutive quarter. we saw a reduction to our personnel-related costs of 0.26 million when compared to the second quarter. This was due to the continued reduction in our headcount, coupled with the fact that the second and fourth quarter typically have higher costs due to vacation subsidies being paid to our Portuguese-based employees. This was coupled with further reductions to travel, administrative, legal and consulting fees, but was somewhat offset by an increase in R&D expenses. Our quarterly charge relating to our equity incentive plan increased by 0.28 million during the third quarter. The second quarter amount was lowered due to a one-off reduction for the forfeiture of a significant number of instruments. There were no new awards during the third quarter and none expected for the fourth quarter. We expect a non-cash quarterly expense of 0.6 million for legacy share-based compensation until the end of 2024. The pre-tax loss for the quarter amounted to 4 million. In terms of the balance sheet, the increase of properly planted equipment is driven by the booking of new equipment that was invoiced during the quarter for our Beneventi production facility. This increased the value of this asset by 2.8 million. The inventory balance shown is net of the impairment charge, which was discussed earlier. The significant decrease since the second quarter is down to the revenue recognized. Until we recognized this revenue, the equipment used related to this revenue was recognized as part of inventory. Our bank balance was just over 1 million on September 30th. Since then, we've received 2.1 million in grant funding with a further amount of 0.4 million due in addition to client inflows before the year is out. We have significant grant demands expected for 2024, which will mostly be to reimburse us for spend relating to R&D and our Benevente production facility. Given that we are now receiving customer inflows monthly, we are satisfied that the operational inflows coupled with the drawdowns from the Macquarie facility will enable us to have a strong 2024. The other notable movements include a reduction of 2 million in the fair value of warrants, an increase to trade payables as we book the equipment for Benevente as mentioned above, and grant income of 2.3 million received during the third quarter. Over 16 trading days in the third quarter, we raised 0.6 million cumulatively by selling 376,000 ordinary shares through our ATM facility. No sales have been made since September 20th. Next slide, please. We revised our 2023 guidance in the second quarter and we expect this guidance to hold true. We have significant equipment to deliver during December for two active technology sale contracts. For 2024, we expect to recognize revenues of 34 million. As this slide shows, this total can be attributed to two different categories, technology and balance of plant equipment sales and the sale of projects from our own portfolio. The technology and balance of plant demands are already backed by committed orders. We have not included any estimate of further equipment sales from our pipeline, as if we were awarded contracts, the timing of revenue recognition is too uncertain right now. For those familiar with our development project pipeline, we have two projects in CNES Portugal that have been awarded a combined 32.5 million in grant funding from the Portuguese government. The revenue guidance for 2024 assumes that we will sell our seen as one project to an infrastructure fund and convert the project into a technology sale that will include balance of plant and EPC services. Frederico will touch upon the status of our technology and development project pipelines a little later. From a cost perspective, we continue to work through our budget for 2024. It's imperative that we keep our costs as slim as possible, given the general uncertainties in the global hydrogen economy. Right now, we have a lower cost base when compared to our competitors, and we are working to reduce this further without diluting the quality of our product and ancillary services. As noted earlier, our cost base has reduced for three consecutive quarters, and we will look to continue this trend into 2024. Our goal continues to be reaching cash flow self-sufficiency as quickly as possible, and keeping costs low is critical to achieving this. I will now pass you over to our CEO, Frederico, who will guide you through the rest of the presentation.
spk03: Thank you, Gavin. And good afternoon, good morning to you all. I'm pleased to share with you today the latest news from the numerous activities we have going on. I want to note that many people speak about green hydrogen and announce large future plants. In reality, very few companies have plants that are live and producing green hydrogen today, and few have the expertise to install a green hydrogen plant safely. Through the process of having the Madrid plant live, we have seen firsthand the benefits of our modular solution, with the occasional teething problems of the plant only causing the loss of a few days of production, rather than full plant shutdowns as others have suffered. We have the pleasure of having hydrogen plants in Portugal and Spain, as well as a laboratory that is not only testing the next generations of materials for future Heber releases, but is also ensuring we run thousands of hours on our existing versions to ensure degradation rates and material behavior. During 2024, we expect to put at least another six green hydrogen plants into operation. And the experience from these first projects from our lab and our own production facility has been critical to close these contracts. I would like to highlight today our engineering capabilities, as they are not only a differentiating factor, but have also been a crucial one in closing the various equipment sales we have signed. Few clients have the experience and knowledge required to design, implement and go live with a fully fledged green hydrogen plant. In addition to submitting electrolyzer proposals for over 40 projects, our engineering team has fully designed more than 10 green hydrogen plants in Portugal and Spain to date. This includes ATEX and HAZOP studies, licensing processes, and fully defining the specifications for all equipment in the plant. Given the challenges that some hydrogen projects have experienced recently, using an experienced and proven player is of increasing value to clients. This allows us to create a partnership with clients that goes beyond simply delivering equipment. We have already received requests for engineering auditing services where a client wants us to review their plant design, in addition to requests to fully develop the engineering solutions for even alkaline electrolyzer systems. This confidence and trust in our engineering capabilities will not only be a major selling point for Fusion Fuel, but we expect to generate independent revenues from these services as early as next year. More and more, the proposals requests we are receiving are for full plant designs, and these tailored to the specific client requirements. We have designed plants with hydrogen usage at a pressure of two bars, as well as one reaching even a thousand bars, and also of various sizes from 300 kilowatt plants all the way up to 10 megawatts so far. The use cases include plans for hydrogen mobility, gas blending, tube trailer filling, and for use in industrial furnaces. What you see here are renders from three of the 10 projects that the team has designed and provided full specifications for. In an initial step, we provide preliminary engineering for the equipment in offer. and then we charge for engineering services for detailing and designs beyond stage one. There are companies that can deliver this type of expertise. For markets, there are few companies that can deliver this type of expertise. For markets where we do not have full engineering capabilities, we look to establish partnerships with players that have the know-how for their specific market. The partnership we entered into in Italy and also in the Middle East with TCC is a good example of such cases. As we announced at the end of September, we will be delivering a 300 kilowatt green hydrogen plant for a global leader in the cement sector. This includes the HevoChain electrolyzer, along with full plant design and implementation, along with a local partner. This plant uses our already announced HevoChain technology, in particular the Cube solution, which is modular at 20 kilowatts per unit. In the image, you can see the first HevoChain demonstrator that has already been installed in our Evro plant, which uses multiple HevoChain cubes in synchronized production. In addition, it is the first plant where we will be using our new oxygen capture system, as the client has used for the green oxygen as well. So we'll be using our new oxygen capture system, sorry, as a client has used for the green oxygen as well.
spk00: This project is currently in development and is expected to be fully installed and operational in the first half of 2024.
spk03: More recently, we announced the order of two 1.25 megawatt green hydrogen plants that will also use the Hugo chain system for installation in 2024 in Portugal. As you can see, we will not only provide the electrolyzer unit, but also do the full plant design, POP equipment selection and purchasing, and oversee the installation. We expect to book approximately €4 million in combined revenues from these two projects in 2024. These projects consist of multiple hebo-chain cabinets, as shown in the render, where each contains around 50 kilowatts of electrolyzer capacity, still providing significant modularity for the client and reducing costs by reducing the number of connections, valves, and pipings used in the solution. As we've shared before, we made as
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