Nel Asa

The NEL team consisting of CFO Kjell-Christian Bjørnsen, Head of Investor Relations and Communication, Wilhelm Flinder, and me, Håkon Waldahl, CEO, are ready to present our first quarter 2025 results.

We have the following agenda.

shortly about Nel. Then we move on to the Q1 highlights. We have a commercial update with the recent contract wins and also more general comments about the current state of the hydrogen market. We will touch on technology and some updates on our development efforts and we'll round it off with the partnership update and the usual Q&A. Now, Nell is a fully dedicated electrolyzer technology company founded in 1927 and listed on the Oslo Stock Exchange in 2014. We have sold more than 7,000 electrolyzer stacks to more than 80 countries. We have 1.5 gigawatt of production capacity, 1 gigawatt for alkaline electrolyzers in Norway and half a gigawatt for PEM electrolyzers in the US. We're now close to 400 employees. We continue to invest heavily in R&D to develop next-generation alkaline and PEM technologies. We have a global sales and office network. We have become the preferred partner for industry leaders, as we will talk more about later today. And we have more than 2 billion knock-in cash reserves.

If we move on to the Q1 highlights,

In the first quarter, we had revenue from contracts with customers of 155 million NOC. We had an EBITDA of minus 115 million NOC. Order intake of 311 million NOC. Our order backlog at the end of the quarter was 1.46 billion NOC. And we had a cash balance of 2 billion and 59 million NOC. Key highlights in the quarter received numerous contracts for PEM equipment and also the signing of a collaboration agreement with Samsung E&A and also a private placement of 353 million NOC, making Samsung E&A Nell's largest shareholder. Group financials compared to first quarter last year, revenues declined by 69%, quarter on quarter declined by 69%, PEM revenues increased by 64%. The alkaline segment had few project milestones in the quarter. That's part of the reason why alkaline revenues were significantly down, while PEM had increased revenue from containerized electrolyzers compared to the first quarter of 2024. Cost reductions and capacity adjustment measures were announced in our previous earnings call. and have been implemented in the first quarter, including a temporary halt of the Herøya facility for the production of alkaline electrolysers. This will reduce the cost base gradually over the first half of 2025, with full impact in the second half of the year.

Alkaline financials.

On the revenue side, down in the first quarter, 69%. compared to first quarter last year, as I said, largely impacted by a lower activity level. EBITDA consequently decreased compared to the first quarter last year, which was a very healthy and strong quarter for the alkaline division. Q1 included 23 million NOC in net research and development expenses compared to 21 million NOC in the first quarter of 24. So we keep up the investment on the alkaline side, but obviously money shifting from existing products to next generation products, including the pressurized technology. On the PEM side, first quarter compared to first quarter last year, 64% up, primarily driven by project revenues from deliveries of containerized solutions. EBITDA improved from minus 43 million NOC to 31 million NOC due to higher revenues. In this quarter, we had 22 million NOC in net R&D expenses compared to 30 million NOC in the first quarter of 24. Product and project margins are in general higher compared to previous quarters due to more favorable terms and conditions and better execution.

So we see margin expansion for our PEM divisions. Order intake and backlog.

We bounced back from the third quarter and fourth quarter, logged 311 million NOC in order intake, predominantly from sale of PEM solutions. And our backlog is now at 1.46 billion NOC. The reason it has come down compared to the fourth quarter last year, when actually the book to bill was close to two, and it should have gone up is that we have deleted some of the contracts that were exposed and that we have talked about in the previous quarter from our backlog. So 1.46 billion NOC is the updated backlog. Cash burn is important to get that under control. We've had large expenses in 2023 and 2024 pertaining to the construction of Line 2 at Haerøya, the manufacturing expansion in Wallingford and also technology programs. As you can see, the cash burn is on its way down. In the third and fourth quarter of last year, and also first quarter this year, cash burn has gone down compared to previous levels. And the burn rate has been reduced through downsizing and also harvesting of past investments. On the left-hand side, you see our CapEx, growth CapEx, you could argue. The first bar or column represents actual investments made in 2024. A big chunk of that money went into building Line 2 at Hadea, taking the total capacity to one gigawatt. We also invested in automating and expanding our facility in Wallingford, Connecticut. That was a big investment. We invested in the next generation technology development, and we had some other expenses as well. The total capex was close to 650 million NOC. Now in 2025, there's no reason to continue investments at Haidoja. There are some remaining improvements we are doing in Wallingford, but in terms of money spent, it's significantly down compared to last year. And then we keep up and actually increase our investments into next generation technology development. Still, even if we Increased investments into our product program, CapEx, is reduced by almost 50% from 25% to 24% without sacrificing anything. We can harvest the production capacity we have in place. We will benefit from that in the years to come. And that's also why we previously have announced that the CapEx will come down and contribute to reduced burn rate. Another important factor is that by the end of the quarter, we had 394 employees. However, the cost reduction program we announced in the previous quarter has been executed, and the run rate from June this year will be more around 350 employees, taking us back to the level we had by the end of 2022. And obviously then a more sustainable cash burn rate going forward. And a more healthy P&L development of the cost side. Moving on to the commercial update.

Let's start with a market outlook.

The hydrogen council supported by McKinsey came out with a report. called Closing the Cost Gap in 2025, that we in Nell actually think is one of the better reports on the market. We like the approach they have taken. They looked at hydrogen demand in the European Union, in the US, in Japan and Korea, based on existing policy frameworks. So no new policies being introduced, but just looking at the implications of the EU renewable energy directive, the contracts for difference in Japan, South Korea's clean hydrogen portfolio standard and the US Inflation Reduction Act. If you look at these policy programs and existing projects, these four markets or regions are expected to represent 30% of global hydrogen demand by 2030. Applications that will be important include refining, ammonia and methanol, which will make up 75% of total demand, whereas the emerging applications such as power generation, heavy transport, aviation, maritime applications could contribute to 25% of demand by 2030, but progress will depend on further regulatory support. All in all, 8 million tonnes per annum will be in demand based on existing schemes. That is done by looking at this analysis. What they did was that they looked at what is the value of hydrogen in different parts of the world for different segments, different applications. If you look at refining in the EU, and the requirement under the energy directive to decarbonize parts of your refinery operations that has a high value in use. Then you subtract the cost of supplying hydrogen to that particular part of the world for that application, because the cost of hydrogen is not equally distributed globally. It varies quite a bit. When you take the value in use less the cost of supplying the hydrogen, you get to the differential is the actual commercial value of hydrogen. Now, if you sort all these projects and applications, You see that 8 million tonnes, as we commented on, actually makes sense from a financial perspective. A further 13 million tonnes per year can be unlocked if the value in use or the cost can be addressed. And we're talking about the gap of less than half a dollar per kilogram. A further 13 million tonnes can be unlocked, but then the gap to conventional production hydrogen sources such as natural gas is higher. It's between half a dollar and $5 per kilogram. Obviously, then you need breakthroughs in technology, further policy programs or other initiatives to reduce the gap. But if you focus on the first part and the second part, there's more than 20 million tons of hydrogen that can be in demand. At the moment, though, market demand is higher for small and medium-sized projects, and that favors our containerized PEM solutions where we deliver the total scope compared to an alkaline solution, which is usually bigger and more complex. You see the PEM solution on the right-hand side. This is a complete solution delivered by Nell, and project sizes can range from 1 megawatt to 20-30 megawatt. Usually, it's around 2.55 megawatt. For large-scale systems, more clarity around EU and US regulations in combination with national hydrogen auctions will help demand. We see that several countries in Europe have had their own auctions where they try to close again the gap between hydrogen made with natural gas and hydrogen produced with electrolysers. Several of Nel's target projects are expected to take FID, final investment decision, in the next quarters. And projects for Nel these days are generally in the 20 to 200 megawatt range. It doesn't mean that the larger projects have been completely abandoned. It means that what might have started as a plan to build out initially 200, 300, 400 megawatt, will be more of a staged approach and project, where they start with phase one as a smaller investment, and then expand that in subsequent stages to reach the total production goal that they had. We reiterate that order intake this year is expected to be higher than in 2024. The quality of the projects is also Generally speaking, higher given more rigid and demanding qualification processes and FID requirements. In the quarter, we had actually a record high PEM order intake. Nell has never booked this much order intake on the PEM side. We have strong momentum for our containerized PEM solutions, what we call the MC series, and expect additional near-term contract wins from that part of our portfolio. The MC unit... now offers an unrivaled track record for target segments with proven field experience and market-leading reliability. We have close to 15 to 20 of these units in operation in different parts of the world, something which is hard for competition to match. Modular system, easy transportation installation makes it easy for the client. It's a solution that backs Nel's customer promise to make green hydrogen Simple and easy. Some examples. We received a third purchase order from a major US steel producer in the quarter. Fortunately, we cannot disclose the name of the customer, but we're super happy that we get repeat purchase orders. I think that speaks to the quality that we deliver and the reliability and performance of Nels solutions. So this is one of the largest US steel producers. They already use Nels PEM electrolyzers to generate hydrogen at two other sites in the US. And we continue to see an increasing demand for these installations at sites that potentially over time will need larger installations. But it's a turnkey concept that offers easy outdoor installation and operations. We also delivered a 2.5 megawatt PEM unit to the Aberdeen Hydrogen Hub project in Scotland. It's delivered through a joint venture between British Petroleum and Aberdeen. And we deliver our standardized PEM unit, the MC500. Then we had an interesting contract signed in the quarter with Collins Aerospace. Nell has for more than... 15 years, made stacks for the US Navy. On board these submarine vessels, the electrolysers are not used to actually generate They do generate hydrogen, but the stacks are interesting because of the oxygen output. Oxygen is needed for life support on board submarine vessels. This is the most recent in a series of deliveries to Collins Aerospace, where Nel has a long track record of developing and delivering equipment for this application. The stacks will be delivered over several years with the first deliveries in late 2025.

Moving on to a technology update.

This is our current program. We have the alkaline electrolyzer stack, a 2.5 megawatt stack delivering gas output at one bar pressure. We take that stack and we can package it into smaller or medium-sized hydrogen plants from 10 to 80 megawatts, where NEL provides the stack, the balance of stack, potentially some of the low-pressure components, and where we partner with EPC companies to provide the full balance of plants. When we move on to the really large plants, we provide just what you see on the left-hand side, and the EPC partner will provide the complete balance of plant, including system performance guarantees. There's a plan in place for for the alkaline program. And we continue to improve it, not so much on the core technology itself, but the packaging and the system design to get the footprint down, to get the cost down, to get high quality partners in to deliver the components that Nell does not deliver. There's a lot of improvement activities happening around the alkaline electrolyzer, even though the technology itself is rather mature. On the bottom part of this page, you see the PEM stack to the left. It's a 1.25 megawatt module stack delivering hydrogen gas at 30 bar pressure. We package that into containers. You can get the 20-foot containers, you can get the 40-foot containers, and we can deliver multiples of these containers to cover projects needing anything from 1 to 30 megawatt of capacity. you get the complete solution from Nell. For larger plants with PEM technology, we package our stacks into containers, what we call the stack skids, and then our partners, EPC partners, provide the balance of plant and system performance guarantees. And as I said, it's a dynamic development. We're not standing still on the PEM side. We have recently invested into automated manufacturing of of these stacks, we continue to improve how we produce the different components going into the stacks to get the cost down and the efficiency up. And we continue to explore new applications. I mentioned the submarine segment, which is an interesting segment. Here's another development. We've signed an agreement with Hyde Point out of Norway for offshore and nearshore projects. So this project aims to enable scalable green hydrogen production in offshore, nearshore and other harsh environments. The collaboration with HydePoint will focus on the integration of NELS PEM electrolysis stacks into HydePoint's modular hydrogen production systems with different capacities. You can see one such module on the right-hand side. By focusing on system efficiency, modularity and operational resilience in offshore and nearshore environments, the collaboration will look at solutions to significantly improve the levelized cost of hydrogen. One of the companies behind Hyde Point or one of the supporters of Hyde Point is Kongsberg Gruppen.

Then moving on to our next generation platforms.

On the top, you see the existing Alkaline stack, a 2.5 megawatt stack. It is, in principle, a very low capex solution. It has and energy consumption, which is above what you can theoretically achieve and what we hope to achieve with newer platforms, giving us a medium OPEX solution. OPEX then being a link to electricity consumption. We look at different ways of packaging that. We're looking at potentially adding a little bit of pressure to the stack and that will simplify the footprint or it will reduce the footprint and simplify the system design. And that will enable us to put together very low capex solutions from 10 to several hundred megawatts using the existing production lines at Haerea. Another development that we have invested into for close to eight years now, is the pressurized alkaline solution. It's a 6.25 megawatt building block. It initially will have a medium capex and very low opex. It has a high energy efficiency. We put these building blocks together and arrive at a module of 25 megawatts. That module can then be multiplied into projects consisting of hundreds of megawatts. We provide the stack and the gas separation skid, and then our OEM or EPC partners will provide the power electronics and balance of plant. And then we have a very interesting development with General Motors. on the future PEM stack, which might be the low capex, low opex solution. It's a three megawatt PEM stack that we will package again into containers covering needs from 3 to 24 megawatts. And then for larger systems, we can have a similar design as we have for the pressurized alkaline and the next generation or iteration stacks at Herøya and provide solutions from 20 to several hundred megawatts. There are a lot of development activities going on at the moment. The most imminent development is the pressurized alkaline. In the bottom right picture, you see some of the construction work happening at Haurea, where we will install a 6.25 megawatt prototype. You see the stack itself. You see the gas separation skid. So all of these different components are coming together. The development of the prototype is according to plan with promising results. We have broken ground at Haurea. We have the gaskets in final construction phase. Stacks are being assembled. And we have started to prepare for industrial manufacturing at Harøya. Production concept has been verified with a significantly lower capex and footprint per megawatt compared to the atmospheric alkaline production lines that we already have. A final investment decision for equipment related to key process steps has also been taken. And of course, we can do that because we have 135 million euros in grants that now are formalized in a contract with the EU Innovation Fund to help Nel cover expenses related to establishing capacity and verifying the final product stages.

One more thing to add on the pressurized alkaline side.

Yes, we're taking the investments into, or we're verifying and testing the product itself. We're preparing for large-scale deliveries of the product, and we've started to reach out to potential customers. And one potential customer, very interesting customer, is Norwegian Hydrogen. End of March, they announced that they had taken final investment decision for their project in Rukan, Norway. Actually, the place where Nell built its 167 megawatt electrolyzer plant back in, you know, 100 years ago almost. And Nell has been selected to deliver a 25 megawatt pressurized alkaline pilot. So from Rukan, Norwegian Hydrogen will supply green hydrogen to both existing and new customers in Southern Norway and parts of Sweden, offering predictable and competitive turns using Nell's latest technology. The facility is projected to be completed at the end of 27, with testing obviously happening a lot sooner than that. And the company is also considering starting production ahead of full completion.

That's for the technology.

A lot of exciting stuff happening. And again, the reason we are investing into new technologies is to unlock more projects that have a small cost differential compared to the cost of using grey hydrogen or natural gas instead of green hydrogen. We are not doing... everything on our own. We recognize that to be successful in this industry, we need strong partners. We need partnerships with leading players. And I'm happy to report that in the first quarter, we signed a collaboration agreement and conducted a private placement with Samsung ENA out of South Korea. Samsung ENA will offer a complete hydrogen plants using Nels electrolyzers. They have built a wrap around our core technology to offer a complete turnkey solution for end customers. With this agreement, we continue to widen our global delivery capabilities and strengthen our overall competitiveness. It gives us a broader market reach. It gives us a strong partner that can invest into making our solutions more competitive. And it gives us also, over time, the opportunity to explore different ways of delivering our modules to clients. In a separate transaction, Nell raised 353 million NOC in the private placement. And through that, Samsung ENA became Nell's largest shareholder with a post-transaction ownership of 9.1%. So now we have an anchor investor, which is important. It's not just Samsung. I think it's fair to say that Nell has become a preferred partner for global industry leaders. Yes, we have Samsung E&A and truly happy to welcome that partnership. We also have a partnership with Sipem, which is a large EPC company. And we... We look forward to continue working with them on complete market wraps. They also build a complete wrap around our core technology. But if you look back, we also had a partnership with General Motors. They selected Nell as their partner to enable development of new PEM electrolyzers, because it doesn't matter if you have the most competitive trucks, unless the cost of hydrogen comes down. So they have shared their insights and knowledge with Nel to help us develop an electrolyzer that can reduce the cost of hydrogen significantly. And we have the partnership with Reliance, where they chose Nel and our technology, and they're building a factory in India. where they will produce more or less the technology that we produce at Haidoja. So I think to us, it represents a strong signal that all these industry leaders have chosen to partner with Nel. Out of all the electrolyser OEMs out there, they chose Nel. And I think they do that for a reason. They like our long track record. They like our poor technology. the reliability and the performance and they like the ambitions that we have when it comes to further improving and optimizing next generation technologies. It's not only the big guys we have. a full ecosystem of world-class partners ranging from universities, research institutes, component suppliers, module suppliers, other EPC partners, the whole range of different companies that we work together with in order to secure that Nel remains one of the leading players in the hydrogen industry. So with that, I conclude my presentation and then we open up for Q&A. Wilhelm, you have your usual script that you will go through to explain how it works. And then I welcome Kjell-Christian, our CFO, to share the stage with me and answer the questions.

Thank you, Okon. I see we have one question coming in already. And as a reminder from also the last quarterly results presentation, if you want to ask questions, please use the raise hand function and we will call up the name and activate the microphone on the one next in line. Please make sure to activate the microphone on your end as well. If we have time, we will also take written questions submitted through the Q&A function. If there are questions we don't have time for, please reach out to us on ir at nailhydrogen.com. And as a reminder from previous quarterly presentations, we will not comment on outlaw-specific targets, detailed terms and conditions on contracts, as well as questions on specific markets. Modeling questions we would also appreciate is taken offline. The first question comes from the line of Ervin Kuroda.

Please activate the microphone and go ahead.

Thank you for that question.

I've just got one, please. On the alkaline loss posted for the first quarter, obviously there's an element of research expenses in there. How much of this is I would say how much of that loss was, I would say, not necessarily expected. And how can we think about the runway going forward for the rest of the year? Thank you.

So the question was on the loss on alkaline first year. So we've highlighted the R&D expenses. And in addition to that, the remainder of the loss is mainly driven by the fact that we have scaled up for growth and the production is currently not running. That is the main driver behind it. There's no major one-time effects going one way or the other. As Håkon previously commented on, we have initiated cost-out initiatives, and they take some time to filter through due to notice periods and other things. So the cost base should be expected to come down somewhat over the next few quarters.

Okay, thank you. Very good.

Thank you, Erwin. Next question comes from Arthur Sitbon. Please go ahead.

Yes, thank you for taking my question. I was wondering if you could comment on the reliance agreement. I was just wondering if you still have revenues left to book from the upfront fee there. And the second question is just on the US market environment regarding potential changes to the to the IRA and associated subsidies for green hydrogen. I was wondering how you think about the evolution of the situation there and if that can impact your future orders and the pace at which they go in the backlog in the coming months. Thank you very much.

So I'll start with the reliance part. And then on the reliance part, the upfront fee is to a large extent driven by specific milestones. Those milestones are linked to how fast Reliance establishes their own production and validates that they can produce with the same quality. So the speed of revenue recognition there will depend on their progress and that is outside of our control.

But there's still a portion left.

There's still more left to book than what we have already booked.

Yeah. So less than 50% has been recognized. When it comes to the US market, it's a bit unpredictable at the moment. The smaller PEM initiatives, I think, are not really related to Aira support. They are linked to core operations and they see... on-site generation of hydrogen using our equipment instead of buying delivered hydrogen from a gas company as a better way of running their plants. So I think for what we are currently doing on the PEM side, which is the product that tends to be in favor in North America, we're not that impacted by IRA and what's happening on the policy side. However, when it comes to the larger projects involving potential alkaline equipment and large PEM projects, we need more visibility. And that's why currently I would say there are more market opportunities, near-term market opportunities in Europe than in North America for the large scale opportunities.

good next question comes from the line of uh skyland please go ahead hi thanks guys um my questions around um around the the pen market and the single container solutions um what's the kind of cadence of how quickly new orders in this division can kind of flow into the revenue and and the the 300 300 million of orders that we saw in one queue. When do you expect that to flow into the revenue line?

Thank you. The question was about revenue recognition on the containerized systems. And these are closer to products rather than projects. And therefore we typically do revenue recognition when we have the whole piece of equipment ready. And then there's also separate revenue recognition on engineering hours and installation hours that go a bit over time. But the bulk is linked to physical handover of the risk on the product. I would say typically nine to 15 months for something like that, not necessarily driven by our time to produce, but by the time the customer needs to have the site ready.

Meaning a lot of the contracts we announced in the first quarter should impact the revenue line in 25, but probably not all of it.

That's great. Thank you.

Thank you. Next question comes from Johan Cherenton. Please go ahead.

Please unmute on Orion as well.

Good morning, everyone. I would like to ask about investments and whether you could help us understand the factors that do not allow you to maintain investments at the current quarterly implied run rate for the remaining of the year. How much flexibility do you have? Again, the CAPEX guidance for 2025 that is shown on the slide 13, please.

So we have, of course, a lot of flexibility and ramping up, but currently no more capacity investments are needed. And as you can see from the slide, the driver now is really on technology spend. We believe it's correct to continue to invest in full blast on technology because a lot of costs still need to come out of the solutions. The solution needs to continue to get better. What is sellable now will not be sellable in three to five years. And that's why we need to keep that investment pace up. But of course, if there was an even more prolonged market shutdown, then we could adjust that further.

Thank you.

Thank you. Next question comes from Sun Yialu. Please go ahead.

Hello. So I was wondering, like, how are the U.S. tariffs going to impact the price? And do you see yourself, like, producing products, mainly like the PAM electrolyzer outside the United States to go around it?

I think one should be careful to make long plans in today's environment. But we are, of course, looking into how the current tariffs could impact the cost structure of our products. We produce the stacks in the United States, all product deliveries to U.S. customers. will then only be impacted by tariffs on imported modules and components that we use. So the price could marginally go up on our solutions sold in the US. There are currently no tariffs selling the product back into Europe. We hope it stays that way. What is actually helping us when it comes to selling our PEM solutions to European clients is the depreciation of the US dollar versus the euro. We have a more favorable currency exchange ratio, euro to dollar, making PEM equipment produced in the US cheaper for our European customers. So we're actually in a more favorable competitive situation. situation now for our PEM products. And for alkaline, I would say demand is first and foremost in Europe. And we do not rely on a lot of components and modules from the US. The US content in our alkaline solutions is very, very limited. So I would say the risk exposure for Nel is limited as we speak. But of course, this is a very dynamic and changing environment. So I would say up until now, it's manageable and to some extent helping Nel versus other competitors. But let's see what happens.

I think it's also fair to add and remind, as we have done earlier, that for all the large projects in particular, the cost of the hydrogen stack or the electrolysis stack we produce in-house is a small part of the total installed system cost. And the rest of that cost can easily be localized. With the containerized systems, it's a bit harder, but for the larger systems, it's fairly easy to do local production on the balancer plant and balancer stack equipment.

We have one more question in the line, so remember for the ones that wants to ask a question, please use the raise hand function. Next up is Sean McLaughlin. Please go ahead.

Can you hear me?

Yep. Oh, super. Thank you. I just wanted to understand a little bit more about the projects with significant risk of delay or cancellation in the backlog. It's come down from 650 million at the end of the year to 300 million Where are we? I mean, what are the next steps with the 300 million? Should we think about these being cancelled through the next quarter? I mean, what does this process depend on? Are you currently re-evaluating these with your customers? Just to help us understand what you expect on the trajectory of these 300 million over the next quarter. Thank you.

So the reason for projects ending up in that bucket in the first place is if the project fundamentals look extremely challenging and all clients fail to reach financing on the project. The reason why it's come down is because of one individual customer and that's also public information who that is that has gone to the final stages of a bankruptcy proceeding. The remaining ones are solid counterparties where there are cancellation clauses in the contract and They are struggling a bit with finding the final business case. It's been delayed compared to original plans. we continue to be helpful where we can in helping to optimize the total spend. But we do highlight these because there is a risk of those. So we would love for them to go forward. Being in that bucket is not a guarantee that it will go up, but it's one where there's a higher risk and that it either may be significantly delayed and or canceled altogether.

Thank you. Understood. The remainder of the alkaline projects in the backlog and also the PEM projects in the backlog do not have those characteristics in terms of end customer, let's say financial stability issues with reaching FID risk.

So, yeah, that is correct. These ones are the ones that we have highlighted because we see those characteristics. Thank you.

Thank you, Sean. Next question comes from Ervin Kurodan again.

Please go ahead. Please unmute or activate your microphone, Ervin.

Sorry, I forgot to unmute. Yeah, thanks Wilhelm. Thanks for clarifying the effect of tariffs. Now, you made a point about not being alone and the importance of partnerships. So obviously, the effect of tariffs on a company like Nell is very different versus a company like Samsung ENA. Has the current macro environment, I would say, impaired or impacted in any way the prospects of purchase orders coming from Samsung?

That's my question.

I think Samsung, E&A, along with our other EPC partners are hunting for projects around the world. They explore opportunities on all continents, but they are typically in it for the large scale projects. They're not in it for 20, 40, 50 megawatt projects. We're talking hundreds, multiples of 100 megawatt projects. building blocks. That's where they can really take advantage of their fabrication skills and engineering skills and to some extent also manufacturing of complete modules and local construction work. And these projects take time. That we signed the partnership in March doesn't mean that they right out of the gate have three, four large projects where they will need to purchase equipment from Nell. It means that they now have a concept, a solution that they can talk to customers about. But these large projects take longer time to mature. So I think we need to give them a bit more time to develop projects together with their clients before we see purchase orders for equipment. What I do like about that partnership is that Samsung had the opportunity to go with anyone. in the industry. They could have chosen a completely different OEM, but they chose Nell and they chose our stable atmospheric alkaline product as the core product. Now they can also choose other products in Nel's portfolio, like PEM and pressurized alkaline over time. So I think, to me, it's a testament that even though production has been halted at Herøya, we have an inventory we need to get rid of, there are still companies, smart companies out there, important companies out there that believe in our technology and the market need for those solutions. But let's give them a bit more time to come up with the first purchase orders.

Understood. That's very good. Thank you so much.

Thank you, Erwin. We have a question from Alec Sherman.

Please go ahead.

Yeah, so I had a question about, hold on, I wrote it down. All right, so given Given the tariffs back and forth between China and the United States, how do you envision the impact of electrolysis specifically in China?

In China, I wouldn't know, but I think that's not the market that Nell targets anyway. It's very difficult for a Western electrolyzer OEM to sell anything into China. They have a lot of domestic companies with a lot of production capacity, a lot of oversupply and cutthroat price competition. So that's not a market that we really prioritize. We currently explore opportunities in Europe and North America as NEL, And then we have partners in Asia Pacific and the Middle East and Latin America to help us with sales there. But I'm not aware of any project that Nell is currently pursuing in China. Hence, what happens to tariffs between the US and China doesn't really impact us other than any components that we would buy for our stacks, which are, I think, very limited and not high in value.

So, thank you for answering that, by the way. But I was going to say specifically, I'm the customer in China, and I ordered a machine, and it's due for June delivery. But when I went to the Connecticut factory, they, yeah, it's just... it seems as if, yeah, just with China in general, yeah, it's like, that's what I was looking at.

Yeah, I think to add on Håkon's earlier comments, we have over time sold a few smaller systems, industrial size systems to China. And I would say it's fair to note that in the current environment, the final tariff specifically on exports from the US to China, is a bit unclear. So, I understand that you haven't been given clear answers, but if there are operational issues such as those, I propose that you address them with the operational counterparty, and I'm sure we'll make sure that you get a good feedback on that answer.

Thank you so much. Yeah, they were really helpful there in Connecticut, so thank you.

Thank you, Alec.

Seems like there's no further questions, so that ends the Q&A session, and I will give the word back to management for any final remarks.

Thank you, Wilhelm. Thanks for attending. We will work hard to mature our pipeline of projects and hope that we can bring some large contract wins to the table. It is a challenging market, but I think it's important to realize that there is demand out there. It's not like nothing is happening. There are positive developments with projects being moved forward, both involving Yale equipment and equipment from other OEMs. So an increasing number of hydrogen plants will be put into operation in 2025. There are also a number of projects out there, and NEL has a healthy pipeline of opportunities that they continue to mature. It is more challenging now than it was, but I think also... On the positive side, we will probably avoid some of the cancellations and bankruptcies that we have seen recently. The business cases that we develop now or that our customers develop now are, I would say, robust and solid in a different league compared to where we were in 22, early 23. So it's not all dark. Please also remember that the reason we raised capital was to live through a storm like this. It's not completely dark. If you look at the PEM side, record order intake for PEM, we wait for Alkaline, but Alkaline is a bit more up and down and unpredictable. So I think what we can do now is to try to impact positively the things we can control. We can control our costs. We brought the CapEx down without sacrificing on technology progress. We have reduced the size of our organization. We'll continue to optimize that as we move along. So in terms of cash burn, we have taken actions. We continue to invest into our technology programs that hopefully will unlock new project opportunities. And we have put in place a full-size sales team and we continue to add attractive partners to help us develop and capture market opportunities out there. Even though you might read a lot of negative things about the hydrogen industry, I think it's also important to share that a lot of positive things are taking place and that remain optimistic about hydrogen's future potential and that we can actually win large contracts this year. Thanks for listening in and then we'll see you back in July.