This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk07: Hello, everyone, and welcome to the FRERA Second Quarter Earnings Conference Call. My name is Harry, and I'll be your operator today. If you'd like to ask a question after the presentation, you may do so by pressing star one on your telephone keypad. I would now like to hand over to the host, Jeff Spittel, Vice President of Investor Relations.
spk06: To begin, Jeff, please go ahead. Good morning, good afternoon, and good evening. Welcome to FRERA Battery's Second Quarter 2023 Earnings Conference Call. With me today on the call from Oslo are Tom Einer-Jensen, our Chief Executive Officer, and incoming executive chair, Jan Arve Haugen, our chief operating officer, Oscar Brown, our chief financial officer, Jeremy Bezdek, president of Frere Battery US and EVP of Global Corporate Development, and Berger Sten, our incoming CEO and board member. During today's call, management may make forward-looking statements about our business. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expectations. Most of these factors are outside Frayer's control and are difficult to predict. Additional information about risk factors that could materially affect our business are available in Frayer's S-1, an annual report on Form 10-K-5 with the Securities and Exchange Commission, which are available on the investor relations section of our website. With that, I'll turn the call over to Tom.
spk04: Thank you, Jeff. And good morning, good afternoon, and good evening to everyone joining today's call for our second quarter results presentation 2023 and our ninth overall quarterly presentation since we were in public on the New York Stock Exchange in July 2021. It is a privilege for us to provide an update on results for the second quarter, along with our outlook for the business. Following our recent capital market day in late June, our teams have continued to work tirelessly to advance several important initiatives. But before we get down to the business at hand, I am extremely delighted to announce that we have strengthened our organization materially with the addition of our new Chief Executive Officer, Mr. Berger Steen, who is with us today here in Oslo on the call. Berger brings more than 30 years of leadership experience at some of the world's most admired companies, including Microsoft and McKinsey & Company. He also has deep expertise in the technology sector, and we'll elaborate on how that dovetails so well with Friar's strategy in a moment. In conjunction with Berger's appointment, I will be assuming a new role as executive chair of Freyer's board of directors. With the day-to-day management of the business in such capable hands, these changes free up much of my time to focus on key initiatives that are critical to our long-term success and the creation of shareholder value. Going forward, I will be concentrating on three key areas. Global corporate development with our customers and strategic partners, large scale capital formation and engagement with the investment community and our other capital providers. Our ability to attract the talented and highly respected executive, such as Birgit, to strengthen our team is a testament to the progress Freyr has made as an organization. And I'm very much looking forward to collaborating with him, the rest of our management team, and my colleagues on the board of directors as we continue to execute on Freyr's growth plans. On that note, let's now turn to business. I'm pleased to report that the operations at the CQP are proceeding according to plan and that we're on track to achieve key milestones during the second half of the year and beyond. As Enarive will document shortly, the operations and project teams have continued to make remarkable progress. We have now commenced on a testing program for Nidec at the CQP, and we will start up fully automated dry runs of the entire production system later this month. The continued progress we're making in commissioning the CQP leaves us on track to begin producing fully automated active battery cell production in the fourth quarter. Ramping the CQP is a highly complex and challenging endeavor. And as we have indicated previously, you should expect us to encounter some adversity along the way. But we have incredibly talented people working day and night that have solved and will continue to solve problems as they arise. And thanks to their continued devotion, professionalism, and creativity, our progress at the CQP is positioning us to drive capital formation on multiple fronts, which I will dedicate more of my time on moving forward. As Oscar and Jeremy will talk about later, we are on track to execute up to a $1 billion project-level equity raise for Giga America, which will facilitate FID on Phase 1A of our Giga America project by year-end. We have also launched an application process with the U.S. Department of Energy Loan Program Office for Phase 1B of Giga America. Furthermore, we have initiated a process with Norwegian government financing institutions to formalize the government's incentive packages, which will augment the 100 million euro grant we recently announced from the EU Innovation Fund. But our ongoing progress is hardly limited to the CQP. Freyr's board of directors has approved a process to redomicile the company from Luxembourg to the US by the end of 2023. This decision is particularly relevant for our investors as it will dramatically expand our eligibility for inclusion in equity indices, along with the associated passive and active investment in our equity. Although the redomiciling won't change Freyr's Norwegian DNA, The move strongly aligns the company with our accelerated growth agenda in the US, which is underpinned by the Inflation Reduction Act and the US Department of Energy programs. Our progress with strategic partners continue to progress and the underlying interest in our products keep increasing from existing partners and new customers. Our continued progress is underpinned by a very healthy demand supply environment for Freyr's fit-for-purpose energy storage system solutions based on LFP chemistries. Contrary to what you may have read recently, we are not seeing evidence of Chinese capacity from the EV market spilling over into the ESS space, nor do we expect the favorable supply-demand dynamics to deteriorate over the next several years. And as we'll touch upon later, a report we recently commissioned from Rijstad Energy supports our view that the deep market short of clean fit for purpose LFP storage solutions will persist for the foreseeable future. We are daily witnessing the catastrophic climate catastrophes around the world from heat waves, ocean temperatures at record levels, droughts and flooding, which is increasingly driving governments to push through larger and faster incentives for accelerated deployment of renewable energy technology. This urgently required acceleration is further augmented by the need for regional security of supply of critical renewable energy infrastructure, of which batteries form an absolute necessary backbone for a decentralized, decarbonized and therefore democratized energy system. Against this backdrop, Freyr is increasingly recognized as an industrialization partner of choice, based on our ambition to deliver the most environmentally friendly, and cost-effective batteries, catalyzing and accelerating renewable ESS projects at the multiple hundreds of gigawatt hours over the coming years. In short, demand is there and increasing. Support for the energy transition is accelerating from targeted government incentives around the world, while our CQP is starting up automated production, which enables non-dilutive funding at our Gigafactory projects to deliver Freyr as a clean battery solutions champion that we have aspired to become since our start in 2018. I am very excited about the latest addition to our leadership team, our soon-to-be Chief Executive Officer, Mr. Bergerstein. Before I introduce Berger, it's my privilege to share a bit about his background. Berger comes to Freyr as a seasoned and accomplished executive and board member with deep expertise in the technology sector. He is currently board chair of Nordic Semiconductor ASA and Pagero Group and a thematic partner at Sama Equity, and his experience include leadership roles at Microsoft, Parallels, Shipstead, and McKinsey. Berger brings a unique set of capabilities that aligns seamlessly with Freire's aspirations to become an industry leader in the application of next generation technologies to the battery space. And with that, I'll turn the call over to Berger to say a few words. Berger?
spk05: Tom, first of all, thank you for the opportunity to join this fantastic mission that you and the Freire team started in 2018. Freire is participating in building a new global industry based on knowledge and resources, which have been developed in Norway for more than a century. And you're advancing the state of the art in battery production to help make efficient and affordable electricity storage ubiquitous and ultimately enabling us to eliminate unsustainable legacy energy systems. Moreover, something I find really inspiring is that we're building this in Europe and the Americas to ensure access to both key technologies and end products in required volumes in all geographies for the foreseeable future. So I'm super excited to get going at the end of August to meet the 400 plus Frayer team members, our customers, our partners, and investors. And so hoping to meet many of those of you on this call in a more interactive setting in the next few weeks. And with that, I'm super excited about this opportunity, Tom, and I look forward to partnering with you to develop Frayer going forward. Thank you very much, Berger.
spk04: It's a pleasure to have you here. We are delighted to welcome you to Friar's team, and I'm already looking forward to working together and already seeing benefits of this relationship. With Berger's appointment, I will furthermore be stepping up to a new role as chair of Friar's board. As many of you know, I am passionate about building Friar's business, and I'm very excited to be able to devote more of my time to capital formation strategic corporate development efforts while engaging frequently with our investors and the broader investment community. So although I'll be taking on a new role, I look forward to continuing to interact with you all. The ramp up at the CQP continues to progress according to plan. Having announced that we have assembled and successfully charged our first battery cells before the capital markets day in late June, our progress in the ensuing weeks has included the completion of additional production line equipment, commissioning packages, testing of our automated mechanical processes using sold ancillary, and the commencement of testing program for NEDEC. As we look ahead to the second half of 2023 and beyond, we remain on track to achieve key milestones that include the startup of fully automated production, and we expect to gradually improve yields, uptime, and sell performance characteristics along the way. In a moment, Jan Heideberg will detail all the good work his teams at the CQP have been doing. We continue to be encouraged by building governmental support for GigaArctic. On July 17th, we announced the 100 million Euro grant for GigaArctic from the EU's Innovation Fund. The grant will be funded over time in concert with our capital expenditures on the project. We are greatly appreciative and encouraged that the EU Innovation Fund has identified the strategic importance of establishing decarbonized, localized battery production in the European economic area. The central role that batteries will play in the energy transition is not only vital to combat climate change, but it's also a critical element of safeguarding the region's energy security. This belief is shared by our friends and colleagues in the Norwegian government as well, with whom we continue to maintain a deeply constructive dialogue. Following the Minister of Trade and Industry Vestre's recent appearance at FinanX Capital Markets Day, discussions regarding the formalization of an incentive package for Giga-Arctic have now started. Norway's ambitions to become a material player in the battery space remains firm and as articulated in the National Battery Strategy, and we anticipate a significant incentive package for Giga-Arctic in conjunction with Norway's state budget announcement in October 2023. Given the highly constructive market environment and GigaArctic's locational advantages with already secured ultra-low cost renewable power supply, we understand that we cannot move quickly enough to the start of production in the eyes of our investors, but rest assured that the project presents us with real optional value. The magnitude of the incentive package we have proposed for GigaArctic is without precedent in Norway, so we continue to believe that our measured approach to developing the project within our financial means while we await Norway's forward response, is the best course of action. And as I turn the call over to Jan-Arve, he will highlight our continued progress with construction at GigaArctic, which is becoming a landmark project, not only in northern Norway, but an emerging example for others in Norway and elsewhere to follow and be inspired by.
spk00: Jan-Arve, over to you. Yeah, thanks a lot, Tom. And hello again to all of you listening on this earnings call. I'm now going to share with you some of the latest update from our operations. As a regular and reoccurring topic, safety first. I'm glad that I can say that we have had a quarter without any reported serious safety incidents. The high potential incidents that we had in previous quarter have been analyzed and corrective measures have been implemented. During the summer period, we have gotten an improved reporting of unwanted incidents, and we use these data in order to implement precautions and focus on high risk operations, both in the CQP and in the GigaArctic site. We are currently close to 140 people working at our two sites in Moirana during the last quarter, approximately 60 at the customer qualification plant and an average of 80 at the construction site at GigaArctic over the summer. As the outfitting on giga-arctic buildings are now ramping up, we are expecting the construction manning to increase to approximately 100 persons. The workforce at the CQP is going to be the same, while increasingly being spread into two-shift pattern and even night shift on critical activities. Freyr's operational group comprises today nearly 50 individuals in Mojrana, representing 16 nationalities. I want to follow up on previous earnings call and be open and transparent on what issues we are working on and repeat that we are not immune to problems when we connect the bits and pieces of the machines that are delivered by the suppliers. But let me remind you that we have had deliveries of 16 different global suppliers. During the quarter, we have performed site acceptance tests for most of the deliveries and we now fine tune and calibrate process control between these 35 production line machines. The 31 systems related to the building and infrastructure tailor-made for the battery factory is completed and in full operation. The complete customer qualification plan is divided into a total of 388 discrete commissioning and test packages. These packages individually have been verified against technical specifications and internal Ownership is now taken over by operations. As per now, 321 of the 388 is operated by the CQP operations team. Our own test center, a comprehensive modularized test facility with 480 battery test channels and laboratory facilities are an integrated part of the CQP. We are now continuing to produce semi-manual batteries And we also use test facilities for our internal verification against preset acceptance criteria agreed with our customers and as per the license agreement with 24M. The powder handling and slurry mixing systems has been used during the last quarter to provide active materials for the semi-manual unit cell production. We continuously update and revise our standard operating procedure based on the result of replicated product quality versus the specifications. As per the end of the quarter, a total of close to 500 SOPs are defined to run the production line with 15 operators on day shift and nine operators on the second shift. The integrated control room monitoring a total of 5,100 digital sensors in the plant is now being operational. Siemens, our provider of the control system, are working with our operators team to tune in the manufacturing execution system and the supervision control data acquisition system with real data from these sensors tuning in and calibrating that according to the defined cause and effect structure. The main focus during the summer has been the costing and unit cell assembly delivered by MPAC Lampert in the UK. And as I said in previous earnings call during the and presentation at the capital market day on June 27. This is the delivery on the critical path towards fully integrated and automatic automatic production system. So today we continue the sequential tuning in both mechanical alignment and sensors are adjusted while we also update and adjust the local logics in the control system. Again, a complex activity managed by our own engineers integrated with the experts from the supplier. We realized that these activities have been taking some more time, a little bit more than we expected. However, we are confirming that all measures are taken to avoid incidents that can result in damages to the precious mechanical equipment. As Tom said earlier, we are now planning for dry runs of the fully automated production line already later this month through the casting of cell using inactive slurry. But technically with the same specifications as active slurry with electrolyte in order to test the operational capabilities without needing to wear full protective clothing and under complete dry room criteria. Then for the construction site on Giga-Arctic. Since our last market update, the final erection of the production halls at Mo have been completed. The photo at the left shows the November picture, and then you see the latest update drone photo. The building and infrastructure contractors are now mobilized for installation of utilities in all upstream buildings. Project engineering has been coordinated with the front-end engineering design of Giga America for all production line equipment. As we speak, we plan to run comprehensive sprint workshop with all six frame agreement suppliers in order to instigate further value engineering actions based on the input from our latest benchmark executed together with McKinsey during June. The ambition is to reduce capex and the critical bath activities in order to support the startup of the plant in the summer of 2025 for the initial production lines. Finally, before I give the word to Jeremy, please let me say that also the supply chain team is now converting raw material supply contracts into global supply agreements, and by this securing volumes and price levels for the estimated bill of materials for the first phase of GigaArctic and for GigaAmerica production lines. This was the operational update of today and now I give the word to Jeremy for an update on Giga America.
spk02: Thanks, Jan Arvo. We're excited about the accelerated development of the project and our team's continued efforts toward making the business plan a reality. We are actively involved in project design, front-end engineering, site preparation, plot planning, permitting, and utility contracts, as well as other additional project-related activities. We're also working with our production line equipment vendor on planning and timing for the two line fast track equipment, which remains the long lead item to the start of production. Each of these work streams, of course, will benefit from the closing of the current fundraising process in which we are engaged. As we have previously discussed, we kicked off the process with strategic partners in the spring and then with financial sponsors over the summer. Over the last several weeks, we have been conducting investor presentations, engaging in due diligence calls and Q&A with a significant number of counterparts. We have strong support from our strategic partners as not only part of the potential investor group, but also via commercial agreements for the Giga America business. Both of those areas of participation by our strategic partners are not only valuable to Frere, but accretive to the desires of the financial sponsors as well. The feedback we have received from potential investors has been constructive, and lead us to believe that the closing of a transaction in the early part of the fourth quarter is realistic. That timing will allow us to provide key demonstration metrics from the customer qualification plan, appropriate time for investors to complete due diligence, negotiate definitive agreements, and finalize the commercial agreements related to the business. We remain confident that the project-level equity funding can occur for the U.S. Fast Track project. and we will continue to provide updates on the fundraising processes as we move forward and we build the book. It is exciting to know that we're building the pure play energy storage focused battery cell production facility in the United States based on US technology and that the project will provide significant returns for our investors. Over to you, Oscar.
spk09: Thank you, Jeremy. Building on Jeremy's Giga America update, I would like to remind everyone of FIRE's meaningful exposure to the U.S. Inflation Reduction Act, which is detailed on slide 11. The most impactful section of this act for FIRE is 45X. It is quite simple and straightforward. Raw material can come from anywhere. Batteries and modules must be produced in the U.S. Products can be sold anywhere, and you earn the production tax credits. Based on Giga America's planned nameplate capacity and operating plan after full ramp-up, prior would generate more than $1.4 billion per year of incremental cash flow than it would without these tax credits. This is an important feature of Giga America that is attracting capital to the project, as well as over 400 million of state and local support for the project in the form of tax abatements and grants in Georgia. We've received already 20 million of these grants in the first half of 2023. We provide more details around our announcement to re-domicile from Luxembourg to the United States. This move dramatically expands our opportunity for equity index inclusion. Today, only an estimated 3% of our shares are held by index funds, compared with a peer group average of well over 20%. Redome Assign has the potential to drive incremental holdings of up to 45% of our current market capitalization if we were held by all the index funds we would then qualify for, as well as associated actively managed funds who benchmark against those indices. Moving our domicile to the U.S. is also the added benefit of aligning fire with the country that has offered the highest incentives for battery manufacturing in the world, as well as the world's largest market for our products. The U.S. has well understood corporate governance and disclosure requirements, and we will still be able to maintain our European strategies alongside our U.S. efforts. The transaction to move from Luxembourg to the U.S. will require an extraordinary shareholder meeting and a vote later this year. Since the majority of our assets are in Norway and the United States, with the U.S. expected to grow substantially, the tax position of FIRE should not be materially impacted. More information about the transaction will be provided with the documentation associated with the EGM at a later date. We expect to close the transaction by year end. Moving now to slide 13, the financial update slide of our earnings deck. I will review our recent financial results as well as provide an update on our financing initiatives. For the quarter ended June 30, 2023, Friar recorded a net loss of $25 million, or 18 cents per share, compared with net income of $5 million for the same period last year. The net income from last year's period was due to a $33 million non-cash gain on our warrant liability fair value adjustment due to changes in our stock price. This line item reflects the gain when our stock price declines during any reporting period and a loss when our stock price increases. For the six months into June 30, 2023, the company reported a net loss of $38 million, or $0.27 a share, compared with a net loss of $30 million, or $0.26 per share, for the same period last year. More importantly, the company reported higher general and administrative expenses, as well as higher research and development costs for the second quarter and six months into June 30, compared with the same periods last year. Logically, this is a function of our larger organization, which is managing more projects around the world. Regarding our cash investment rate and liquidity, we spent net cash of $175 million during the first six months of 2023, which includes $128 million of capital expenditures. During the second quarter, FIRE spent $64 million on capital expenditures, of which $54 million was spent on Giga-Arctic, and $10 million was spent on the Customer Qualification Plant and Test Center. We ended the first quarter of 2023 with $384 million of cash, cash equivalents and restricted cash, and no debt. For the rest of the year, our capital expenditures will decline pending the Norwegian response to the IRA, but development spending on Giga-Arctic will increase as the U.S. team is being built. Major additional capital expenditures will be dependent on project level financing as we preserve ample burn rate runway for the company. Our near-term priorities remain ramping up the CQP, continued progress at a measured pace of Giga-Arctic and an acceleration of Giga-America. We will provide additional guidance on capital expenditure upon the success of Giga-America's initial capital raise and upon receiving more information regarding Norway's response to the US IRA. With that, I will now move on to slide 14 for an update on our integrated financing strategy. I showed this slide at our Capital Markets Day in late June, so I won't spend too much time on it other than to highlight that while we have checked the box and nearly all of the activities shown, the CQP is integral to demonstrating commercial, industrial, and technological readiness for our factories, which drives capital formation. With the progress to date and the expected near-term milestone achievements, our financing processes have intensified. On my final slide, I note updates to our key financing activities. In terms of corporate financing, we have raised a billion dollars of equity over the last two years as our position of one of the only pure-play investment opportunities listed in the United States for gigascale battery manufacturing, which is at the very heart of one of the largest secular shifts in human history, the energy transition and electrification of the world, and this has resonated with investors. We have now transformed the company from a PowerPoint company to an operating company with the opening of the CQP and the assembly of our first batteries. We continue to make progress on the project financing for GigaArctic by moving due diligence and documentation forward. As we announced recently, we were awarded a hundred million dollar, or sorry, a hundred million Euro grant for GigaArctic by the European Union Innovation Fund, which is an outstanding validation of our project. The review by the EUIF was very intensive, covering hundreds of pages of documentation over the course of a year. We will be working with the EU to finalize the terms of the grant over the coming months, which will be tied to giga-arctic construction progress and greenhouse gas emissions abatement over time. Once clarity is received from the Norwegian government regarding additional incentives for the project, we will update details of the overall capital plan. Certainly, the CQP milestones this fall are addressing many of the conditions precedent expected from the project base. As Jeremy described, we continue our efforts around the project level equity funding at Big America Phase 1A, which is the two initial production lines. For the next phase, including the remaining production lines, we've already begun the process with the United States Department of Energy Loan Programs Office for the debt component of that process. We've provided our draft Part 1 application to the DOE earlier this week under the Title 17 program, which is appropriate for energy storage system providers. After Part 1, the process is very similar to a project financing process, which we will anyway run in parallel to ensure timely access to funds. The DOE could in theory provide for all of our debt ambitions, but more likely will be part of an intricate capital stack. We will keep investors informed over the next several quarters as we make progress on these efforts. Section 45X of the IRA with its annual production tax credits provides key underlying support to the financing of Giga America, unlike anywhere else in the world. With that, I turn it back over to Tom for additional comments.
spk04: Thank you, Oscar. I'm sure that many of you have read the recent prognosis by certain institutions about a potential oversupply of Chinese LFP capacity spilling over from the EV markets into the ESS space in Europe. A cell is not as fungible as you might have been led to believe. EV capacity, which is still dominated by NMC chemistries, is evolving into fit for purpose products and form factors, most of which are cost prohibitive for storage customers and unsuitable for their longer duration use cases in the ESS markets. ESS markets have shown the LFP as the preferred solution, and many customers are increasingly interested in packaged product solution with which EV offerings are not competitive. To fully grasp the dynamics in the ESS space, it is important to begin with the understanding that the battery market is becoming increasingly specialized and populated with product offerings that are tailor-made for specific applications. Our sales organization, led by our EVP, Jerry Bonduelle, who many of you met at our Capital Markets Day in New York in June, includes a dedicated ESS team that we have hired away from Tesla, and they are the best at what they do, and they have their fingers on the pulse of the market. And they are simply not seeing evidence of a building over supply coming to the markets in which we focus. On the contrary, the evidence that we are seeing in the real world is that the deep market short in the ESS space is likely to persist and maybe even widen. Our view of the market is informed by our ongoing dialogues with our customers, intensive market research from our in-house team and our external research partners at Reistat Energy. So in short, we are firm believers in a deep market short on the horizon. Remember as well that to build a battery company in a profitable way is a notoriously complicated and integrated challenge, and therefore only a handful of Western Hemisphere players will succeed. But not by replicating the Asian business model in general, but to drive next generation solutions with technology advantages to increase uptime, yield and speed and drive down investments and cost of production. Moving to the next slide, please. And the final one at that. I'll emphasize that Freyr has a catalyst-rich set of opportunities in the second half of 2023. At the CQP, our ramp is on track with what we communicated at the Capital Markets Day in June, and we are very excited to have begun our testing program with Nidec, our first long-term sales agreement customer, and our joint venture partner for Integrated Motive Solutions in Europe. Our next milestones are the ramp of semi-automated production and the provision of sample cells as we approach the start of fully automated production. As mentioned, we're starting dry runs of the fully automated production system later this month, and we will be starting up fully automated production with active materials towards the end of this quarter and the beginning of Q4. At Giga America, we are focused on completing the project level equity raise And as Jeremy shared earlier, we are highly encouraged by Neadeck's initial commitment to the farm down, as alluded to during our capital markets day, as well as feedback from both prospective strategic and financial investors with whom we are increasingly engaged. With the IRA in place, governmental support for gigafactories is no longer a nice-to-have tailwind. It is a fundamental proposition to the economic competitiveness of a project, and we remain focused on maximizing the economic and competitive benefits of incentives on both sides of the Atlantic. During our capital markets day, we indicated that the new participants in Freyja's energy transition acceleration coalition would be forthcoming. And although we have yet to formalize those relationships and share them publicly, we fully expect to expand and announce significant new partnerships across the value chain in the coming weeks and months. And before we take your questions, I'll conclude on a personal note. As we indicated in this morning's press releases, I am assuming the role of executive chair from my co-founder, mentor, and friend, Mr. Torstein Dahler-Schödtveit, who is retiring after 40 years of successful industry leadership across multiple industries with the New York Stock Exchange listed clean battery solutions champion as his most recent accomplishment. Torstein called me back in 2017 and explained his vision to build the world's cleanest batteries in Norway and to disrupt the established oligopoly at the Senate of the global battery landscape. He has been the driving force behind our mesmerizing development over the last six plus years, and he has been a valued friend, mentor, and leader to our entire organization. On behalf of our board of directors, Freyr's leadership team, and employees around the world, I wish to extend our sincere thanks to Torstein for his invaluable contributions to Freyr. We wish Torstein a happy, healthy, and long retirement. And with that, we turn it over to Q&A. Jeff, thanks, Tom.
spk06: Operator, we're ready to take questions.
spk07: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. And when preparing to ask your question, please ensure your phone is unmuted locally. We'll just leave a moment here for any questions to arrive in the queue. And our first question today is from the line of Adam Jonas of Morgan Stanley. Adam, your line is now open.
spk11: Hey, thanks, everybody. I've got a question for Oscar and then one for Jeremy. Oscar, the cash usage, it's tricky because there seems to be some corridors of your cash consumption based on the Norway's response to the IRA crisis. and other milestones. It makes it very, very tricky for analysts and investors to kind of think about the consumption of cash. So I understand it's hard to be precise, but if I could begin with 2Q as just a base of the 90 million or so or high 80s million cash run rate, can I just ask you to just give us even some corridors of how to think about the next three months or second half of the year? I realize the outcomes are variable, but I'm just going to give you another shot to just help give us some guideposts, and then I've got to follow up. Thanks.
spk08: Thanks, Adam. Good morning. So here's how I guide you. So our spending, our total cash spending for the company should be similar in the second half as the first half. Okay, let's start there. And so that will leave us with cash balances, you know, to cover our overhead for the next couple of years. So we'll have a long runway in that case. Any significant new CapEx, for example, on accelerating big Arctic, big America, and so forth, will be funding dependent. So we have processes ongoing there, as you know, for that, okay? And then when you think about second half cash spending, the mix will be a little bit different. So capital expenditures on big Arctic will be a little bit lower than the first half. I'm spending a big America will be higher not all that will be capitalized yet we may start capitalizing some of that. Late in the second late late in the 3rd quarter so. And then we have a little more spending to do on the CQP and some working capital related to the operations of the CQP so it could be a little bit of something that would be similar. But the point being from what's authorized already sort of in that sort of second half spending anything incremental will be tired. to the Giga America project level equity raise or some additional clarity on the capital plan related to Norway and the Norwegian response. Does that help?
spk11: It does help, Oscar. And it sets me up for a question for Jeremy. What are those most important demonstration milestones for CQP that will trigger Giga Arctic project finance consideration and funding and also for Americas. I think that's both irrelevant, but just to remind us among the many milestones, which are the ones that are most deterministic and consequential? Thanks. You bet, Adam.
spk03: Thanks and good morning. Oscar, why don't you address GigaRP first and then I'll address GigaAmerica. How about that?
spk08: Sure. So our, I guess I would say our most challenging and thorough sort of efforts and milestones, project financing, as you know. And what we've begun to work with the DOE on, as well as banks, is going to be very similar. So the milestones are going to be very similar for sort of the debt side related. And those are producing, first of all, production of batteries, which we are doing now. Then it's the production of testable batteries, which we're working through now and it's happening. And then it's a successful test and acceptance of those values by customers is really, really important. And then over time, it's the operational performance, the technical performance of the CTP to sort of validate the design plan and the operations that we'll have in this case in Vida Arctic. So it's very similar for Vida America, but what we're seeing is really those milestones should be achieved through the end of the year.
spk03: Yeah, and I would add on that, Adam, that You know, we've been, Oscar and I've been tag team in investor presentations now the last several weeks related to the GigAmerica process. And specific feedback from investors has been very similar to what Oscar just said, which was make batteries, get them tested, get them validated, prove the 24M technology can work at scale. and you've de-risked the investment opportunity for Gig America. And so, you know, investors are sharp. They understand that, and they are wanting to see that demonstration to really unlock the investment opportunity for the Georgia site.
spk11: Appreciate that, Jeremy. And just to slip one last one in on that second, how many cells have been delivered to NYDEC, if you're willing to share that to date?
spk01: So, Adam, good morning. This is Tom. So, when we entered into the long-term sales agreement with NEDEC last year, this was based on a low double-digit number of cells that were tested at an external facility. We are now in the process of first producing a similar number of cells or unit cells, I should say, at the CQP, which will be tested at the CQP. And then we will produce more cells than that and send to the same external testing lab that was used when they tested the 24M-produced cells in Cambridge. So we're talking about multiple double-digit cells that will be tested, which is well within the production plan that we have in front of us in the coming weeks and months.
spk11: Thanks, Tom, and congrats.
spk10: Thanks, AJ.
spk07: Thank you. As a reminder, if you'd like to ask a question, please press star, follow the one on your cell phone keypad now. That's star one for any further questions. Okay, it appears we have no further questions in the queue for today, so it'd be my pleasure to hand back to Jeff Spatel for any closing remarks.
spk10: Thanks, Harry. Well, I appreciate everybody devoting some time. I know it's a very busy morning with a number of our peers out with Prince as well as us this morning, so thanks for your participation, and please don't hesitate to follow up with calls today and tomorrow. And we look forward to seeing you all on the road. We've got a very busy marketing calendar as we get through August and into September. Thanks again. That'll conclude the call.
Disclaimer