NEL ASA

Good morning from Oslo. We are ready to announce NEL's third quarter 2025 results presentation. My name is Håkon Voldahl. Sorry, the microphone is on, Vilhelm. My name is Håkon Woldahl. I am the CEO of Nell. With me today, I have our CFO, Kjell Christian Bjørnsen, and also Vilhelm Flinders, our Head of IR, Communication and Marketing. We have the following agenda. Nell in brief, highlights from the third quarter. a short commercial update, a short political update, and a short technology update. And we will, as always, end the session with questions and hopefully answers. Nell is a fully dedicated electrolyzer technology company. We have been listed on the Oslo Stock Exchange since 2014. We have sold more than 7,000 electrolyzer stacks across the world. I think if we do the count, it's now more to more than 80 countries. And we have been in business since 1927. We have 1.5 gigawatts of manufacturing capacity. one gigawatt here in Norway and half a gigawatt in the US for PEMP. We are about 350 employees. At the moment, we are investing heavily in R&D to develop next generation platforms. We have a global sales and office network. We have become a preferred partner with industry leaders such as Samsung, Reliance and General Motors. And we have 1.8 billion in cash reserves. Our value proposition is based on a long track record, what we call an arrival track record. As I just mentioned, we can trace our history back to 1927. That gives us decades of experience more than any other electrolyzer OEM today. We also have a large installed base that we can learn from in terms of performance and energy consumption and degradation and all the important things that customers want to know. we claim technology leadership we have multiple technology platforms both what we call the alkaline platform and the pen platform we have guaranteed and proven performance and we have game changing next generation solutions that brings me to the third leg of our value proposition cost and scale leadership we have been front runners in cost reductions starting with automated manufacturing and also full-scale plants together with the partners to bring down the total cost of ownership. And we have market-leading production capabilities, including one of the most advanced and fully automated assembly plants for electrolyzers here in Norway and now also in the US. The finance department has aggregated the numbers and here, are the results on top line revenue from contracts with customers 303 million knock EBITDA minus 37 million order intake in the quarter 57 million knock order backlog 984 million and we ended the quarter with a cash balance of 1 billion 757 million And not a lot of press releases or news in the courtroom among the highlights and subsequent events. We can mention a follow-on equipment order from a customer in Switzerland called H2 Energy for a containerized 2.5 megawatt electrolyzer. We signed a feed study for a 100 plus megawatt project in Northern Europe, and we also signed a pre-feed contract for a 100 megawatt plus project in southern europe let's study the group financials a bit more carefully revenue from contracts with customers 303 million knock that's a decrease of 17 percent um compared to to last year while it's up 74 quarter on quarters compared to the second quarter a strong rebound Total revenue and income 349 versus 391 last year. That brings the year to date to 633 versus 974 in 24. So obviously a bit tougher markets in 25 than in 24. We've done what we can to improve performance by managing our cost base and also improving execution capabilities and margin on deliveries. You can see some of the results here. EBITDA in the quarter minus 37 million compared to minus 90 last year. Also improvement when it comes to EBIT, pre-tax income and net income. Just one remark regarding the cash flow from operating activities, which is weaker than in the third quarter of 2024, despite the higher EBITDA. And that has to do with the payment milestones. We had recognized or we had not recognized, we had collected cash from customers on some of the work that we recognize as revenues in the third quarter prior to doing the work. So cash, we try to stay cash positive on projects. And that meant that in the third quarter of 25, although the results are good, we have been repaid for the work that we did, hence cash flow from operating activities a bit weaker than the EBITDA should signal. Still a healthy cash balance at the end of the quarter. Turning our attention to the alkaline financials, we can see that the third quarter represented a strong rebound from a slow first quarter and second quarter. And you can also see that in quarters where we have solid revenue, the alkaline business is EBITDA positive. We have proven that on multiple occasions, but we need the revenue to be around 200 million plus in order to balance the books. With high utilization of our factories and with high revenues, we also have a profitable business, i.e. the business model for the alkaline segment works. The challenge is to fill the factory. For PEM, it's slightly different. We still lack the top line to turn a profitable or to have a positive EBITDA. We reported a 15% decrease in revenue compared to last year. And a lot of the revenue in the quarter was driven by containerized electrolyzers, delivery of containerized electrolyzers. EBITDA fairly flat in the first quarter, second quarter and third quarter. In general, we would say that product and project margins are up due to better project execution. But we also have some heavy investments going into the next development or next generation development of stacks. Order intake in the quarter, 57 million NOK, and that meant that a lot of the revenues we recognized in the quarter came from our order backlog, which now stands at 984 million NOK. The breakdown of the 984, roughly 600 million NOK on the alkaline side and 400 million NOK for PEMP. And again, the order backlog is subject to risks such as delays and or cancellations. And we have given further information on that in the notes to the quarterly report. Cash burn rate is important. What this slide tells you is that we have a cash burn rate which is coming down. We spend less money on operations and on investments than we did in the past. We're still talking negative numbers, but compared to 22, 23 and 24, the cash burn is significantly down. And that's important in a market which has been slightly slower than we anticipated and expected to control the expenses. We are down from a peak staffing of 430 one year ago to down to 354 at the end of the third quarter this year. And it will continue to go gradually down. Personnel expenses down year to date almost 60 million NOK. The slight uptick in the third quarter is due to periodization and payment of vacation money in Norway. So the trend is that the number of of employees is coming down and we do that in order to, of course, reduce the burn rate and extend our runway. We're still set up to conduct significant R&D work. We are working on very exciting developments, both in Alkaline and PEM. I'll get back to some of that later. This is predominantly adjusting our manufacturing capacity and also project execution capacity in the wake of a slower market. On the commercial side, the pipeline is indeed large and increasing. We try to keep our pipeline up to date by cancelling or removing all the projects that will not move forward. But actually, the pipeline is growing. However, final investment decisions continue to be pushed out in time. several target projects in the 20 to 150 megawatt range are expected to take final investment decision in during the next quarters and we are currently involved in more than 500 megawatt of paid feed studies for large-scale systems and our epc partners are involved in additional studies um two examples in in the quarter we signed a feed study with a reputable European company for a 100 plus megawatt Northern European project. We also signed a pre-feed contract for a 100 plus megawatt project in Southern Europe with a reputable company. So the quality of the feed studies or our feed study partners is very high. I would be surprised if none of these projects would materialize. And for a lot of the feed studies, Nell is conducting exclusive work. That means if the project takes FID, Nell will be the partner that will receive the purchase order. One highlight after the close of the third quarter was an additional purchase order for a containerized PEM system, what we call an MC500. And this actually represents the third purchase from H2 Energy in Switzerland. What you see on the picture is the second installation we delivered to them. It's under a beautiful bridge and the electrolyzer is in the middle of the picture. It's hard to see it and that's good because it proves that the footprint isn't that big to produce hydrogen. It's a rather neat, compact installation The third unit that HG Energy will buy will be installed in Switzerland and supply hydrogen for mobility and industrial applications. And we're proud of this order because it's a repeat order. And it proves that Nel's customer satisfaction is high. And it also, I think, documents our track record when it comes to delivering working electrolyzers around the world.

Short political update.

We have sent a letter together with other leading European OEMs to the European Commission, and we ask or urge the European Commission to adjust the hydrogen regulations. Less than one gigawatt of capacity has been deployed in Europe compared to the six gigawatt targets that was initially set for 2025. The industry promised to establish annual manufacturing capacity close to 10 gigawatts. We have done that, but demand is still not strong enough. And we believe part of the reason is that the current rules and regulations are delaying project realizations and also undermining demand. We need a more pragmatic way of regulating the market. We need to extend exemptions for the frontrunners and also more flexibility in how hydrogen plants are regulated. We believe it's possible to do this within the context of the legal framework that has been established. And we remain hopeful that by changing some of the rules and regulations in the current framework, it's possible to speed up hydrogen adoption across Europe. It's a broad push for this. And I think the EU has also in the past shown that through the omnibus process, they can indeed work with existing frameworks and speed up and simplify, remove some of the red tape in those quite fast. Moving on to the technology update, one of the more important things we are working on is the next generation pressurized alkaline system. I have presented this many times in the past, but just to highlight sort of the key selling points of this, why are we spending a lot of time perfecting this and why are we bringing this to market shortly? It is because we reduced the footprint by up to 80% compared to our existing system. And that's important because in Europe, which is indeed a very important market for clean hydrogen these days, you don't always have the space to do whatever you want. You're constrained by existing land plots, properties. You have brownfield sites where you don't have the opportunity to just expand your hydrogen plants in all sorts of directions. You need to limit the footprint. footprint of the system. This is a very compact footprint. It's less than 230 square meters for 25 megawatt of capacity. Along with that comes a significant reduction in investment cost, and not just for the NEL part, but for the entire system. We're talking about a total system capex reduction up to 60%. It will be more energy efficient than anything available in the market today, we believe. The system energy consumption will be less than 50 kilowatt hours per kilogram of hydrogen, which is a significant improvement versus what is available today. That's why this is important. What you see on the right hand side is a real picture. It's not a PowerPoint. It's a picture from Herøya where we are building half of what you saw on the previous page. It's pilot or prototype. The mechanical installation is done. The cold commissioning is done. We're entering hot commissioning, meaning we will produce molecules very shortly. We hope to do that in November. We hope to take FID on a new production line before year end 2025. hope to validate this um as a running installation producing gas hour after hour day after day in 2026 and we hope to also commercially launch it in 2026 and deliver at scale meaning hundreds of megawatts in 2027. so this is not a powerpoint concept anymore it's real and um we um remain very positive that this will be a way for our customers to actually move their respective projects along at a faster pace and with much more attractive financials behind them. Unless we can enable our customers to have positive business cases, we cannot sell our equipment. And I think with this, we have looked at all the different aspects of building a hydrogen plant and how you can do that in the most post-competitive way, taking the customer's point of view and not only focusing on the hardware cost, but focusing on the total project cost where things are modularized, standardized, brought to site. It's quick to assemble it and it involves limited engineering and limited construction time. So more on that in the coming quarter, we will also in the coming quarter give a more detailed update on our next generation PEM stack. But that's what we had for today. And I will be joined now by Kjell-Christian Bjørnson, our CFO, to answer any questions you might have. So, Willem, you have the usual text you need to read before we start.