Minesto AB (publ)

Hello and welcome to today's broadcast with Minesto, where CEO Martin Edlund will present a report for the first quarter of 2025. After the presentation, there will be a Q&A, so if you have any questions, you can send them in via the form to the right. And with that said, I hand over the word to you, Martin.

Thank you very much. And hi, everyone. It's quite impressive to see the interest in an update from Inesto like this. So I think this is a good format that we will keep going with. Unfortunately, today, my colleague and brothers in arms, Gustav Kvibling, our CFO, is not available this morning. So I will attend to and focus a lot on strategy, content, progress, technology, all the areas that I'm driving in Minesto. And we will also... have room for quite some questions. I just heard from the organizer here that a lot of questions has come in just lately. So I try not to be too lengthy with my run through to be able to cover as many of those questions as possible. And we'll try to stay within the hour that we have set aside for this. So first, on technology and the status of our operations in Westmanna over the winter and first quarter here, we published in January the results or shared results in general on the large third party valuation of our production during 2024 with a big commercial scale D12. And I think the main takeaway from that is that the next natural step, as DNV puts it, the next natural step for Minesto is a scale-up in number of units into a dragon farm aiming for Hestfjord. And with our internal work over the first quarter, I think we can just underline that the technology is in really good shape and ready for that scale-up. And if we look at the operations and the work we're doing in Westmanna, there are basically three areas here, three purposes of this, with the evolution of the technology and being ready. The first one is related to operations. You see this, it looks a bit messy from this drone footage here that you see. And in this context, there are a lot of unique steps of handling, of lifting, of moving, of inspecting and testing that needs to be in place and to be scalable for the next phase. And I think that we've had all the progress we need up until now in being ready to do this with multiple units for Hestfjord. So that, let's say, operational aspect, including the marine operations, is really, really in a good shape. And you can say, is that anything to talk about? And is that a concern and so forth? But we should be aware that no one else is towing megawatt power plants of this type in the world. And no one is doing marine operations with power plants within hours from Quayside to launch. And this is really at the core of the competitiveness for Minestos. We better make sure that those procedures and the supporting technologies are robust and at the performance levels we need them. And they are in place. Definitely so. Then on the hardware, the tech, to build six units and do some tweaks to the D12X, which is the next unit, we also believe that we're ready. We've had some small upgrades. We've had inspections. We have had repairs and service needs and a lot of experience now in handling, touching, working with the units. And all that is also now migrated into the build of D12X. of the six units for Hestfjord. The third area on demonstration, the obvious goal for us is to do more, and not only with the D12, also with the smaller units, where we are in discussions on microgrid installations for that unit. So that is what we're looking forward to. We will start with a D12 and then we will move also to get smaller units into production, in demonstration production. And this is obviously also supportive or more, let's say, more needed from a commercial perspective than from a technology perspective today, let's say. I think I'll hold it there on the test site and testing and then move on to... to the Horsfjord or Hestfjord, which is what we're really eager to get going with, to really now go into a commercial demonstration array to take Minesto forward. And we're not just sitting around waiting for project investments and project development to happen. We're working. This is our priority activity in many ways when it comes to hands-on infrastructure design, site development work, site measurements, and also the financial setup around it. So just to comment on a few of those activities that we're involved in. I mean, we've set, and I think we've mentioned that externally also on a few occasions, that we've set a market development company that we call Vretjin, which means the dragon in Faroese. And it's not a conventional special purpose vehicle or special project vehicle. It's a market development company where the rights... to develop the tidal market with our technology in the Faroes resides. And what we're trying to do here is also to, let's say, compensate for the fact that this is not just a normal infrastructure investment. I think this is something the sector needs to do better, and I think we are at the forefront of that, to acknowledge that the risk profile and the setup of a world-first array like this one is not a setup where you can do it in the same way as you do with wind farm number 55,000 in the world. And this market setup, those rights and the way we structure it is one part of helping that. We also really want local investors on board with this. This is a natural resource that should be long-term owned and operated by the Faroese and from a Faroese perspective, given its huge value for the Faroe Islands. We have also, in this context, decided on and in dialogue with government and our partner SEV to set it up in a way where we will be able to benefit from the same strong power purchase agreement price level that we have for the test site in Västmanna. And that means that the first 10 megawatt build-out has a price level that is significantly above market prices in Europe or elsewhere, but at a commercial level from the Faroese perspective. And that is a huge strength. I think that will position the Hesfjord case as the only investment opportunity in the world for a tidal array where there are actually, let's say, commercial terms and not everything based on huge subsidies that we see in the UK. which actually are competing technologies need to even be able to make a case. Having said that, of course, we are not going to sort of put the opportunity to secure support funding to this aside. The EU is creating a lot of opportunities in this area and we are definitely there and involved in it. It's a good way of driving business development also because it drives partnerships, it drives, it's challenged you to really build partnerships business, build the business plan for a case like this. And there's a handful of opportunities for us now in this area, where being a Swedish company is an advantage because the Faroe Islands is not always included in those EU based funding setups. We do more in the Ferros. We're also involved together with SEV, the utility company, to look into grid mix simulations. We've known and we've seen data historically from research and from SEV's own analysis that the tidal case has real serious advantages to really create cost-effective simulations. net zero energy for the pharaohs and we believe that we have strengthened this case even further and that we will have a story to tell that will be further emphasized in this as we move on and i think this is this is at the core of of the energy transition debate also globally to really be able to hands-on, step-by-step show that it is possible to reach net zero and build 100% renewable networks that are affordable. I think we can compare with Sweden and other areas. I mean, we have a debate now on how much wind and how much storage. And I think we can conclude from a more controllable context as the Faroe Islands that... that there is the belief in the really high quality wind resource in the Faroes to be able to fix that on its own together with a small hydro. It's simply too costly. The overcapacity and the long-term storage needs makes it very, very difficult to afford it. So even with tech risks being a novel technology, we believe now that it's fair to say that to reach net zero, the Faroe Islands need the Minesto technology up to 40, 50% of the energy production. And this is something that we are showing in numbers and are working on together with SEP now as a part of funding the Hestfjord and really show the economic value of what we're doing. Also on the same topic, we have seen now from our analysis of hands-on ADCP measurements in Hestjord, which is equivalent to measuring wind speeds in the wind sector, where you can analyze the energy content in the straight that you see here, the nice illustration we have in front of us. And of course, the more energy that passes through the straight here, the better the business case. And there is a significant increase from our real measurements to what we historically have relied on from simulations. So this is also really good news for the business case and making it investable. I think some of you, if not all, have also seen that as a part of our Faroe Island commitment, we've also, together with SKF, had quite a successful and, as we believe, rather cool commercial exposure with the Faroe Island space program. I will come back to that, and I even will take some of your time to show you one and a half minutes film from that. But that focus on the Fair Island context, and it's also the reason why we're involved in that and do that, apart from general exposure, is of course to support the Hestfjord investment case. And A final comment on Hestjord is related to manufacturing, where I believe I'll try to move into my next topic. We obviously get from local investors and others get questions around how will you supply six units in the first phase and then another 150 to 200 units into the Faroe Island context. So we have together with suppliers including SKF been working on an analysis and a conceptual design of how to manufacture our dragons. And I think it's fair to say that Minestos technology has unique competitive advantage in many ways related to handling and operations and its energy conversion performance in the sector. But we're also unique in the way that that small size, relatively small size, and that it's built on components that can be manufactured at supplier sites at volume. This puts us in a situation where we can do where we can streamline batch-oriented and flow-oriented manufacturing processes. So building kites is not a shipyard one-off operation. And this is a huge advantage because it means we can build volume faster. We don't need bespoke key sites or unique environments for this. We just need to duplicate and migrate a stable best practice system integration and assembly process. And we're looking into doing this in a specific area in Sweden on the West Coast. And we have the partners on board to do the first phase of development of this, to really be ready to push the button when needed. We already have... capabilities to build prototypes with the same suppliers and basically with the same testing and quality assurance. But by doing this in a streamlined way and building a small bespoke operation for it, we will be really ready for scale up. And this will also lower the risks from the project investor perspective, where we can show hands-on how the six first units will be built, tested and quality assured and even transported for direct installation at site in a very efficient way. We hope to be able to talk more about this as we move on. And also to underline here that this is not something where Minesto is going to burden our balance sheet with manufacturing or plant investments. This is build as you grow setups, where it's a lot of focus on on, let's say, testing the process and not building expensive assets for production. And we're not doing it as a small standalone tech startup in this. We're doing it together with really strong global partners that have experience in this type of manufacturing, of course. But growing importance, and I think we're in a good place. So, okay, that's the manufacturing. And then perhaps if you bear with me, for those who haven't seen it, this is a minute or so on communication.

Increased demand for energy has led to a new space race. Global superpowers are competing to control lunar resources. One of the world's smallest nations will now join them. With one difference. This space program will never leave Earth. We already have endless lunar power. It's called tidal energy. Our spacecraft won't go up. They'll go down. And they'll fly underwater. As tidal streams pass through their turbines, they generate renewable moon energy every day, right here on Earth. The space program is a part of the Faroe Islands mission to reach 100% renewable energy by 2030. Join us in making the most of the resources we already have.

So, OK, sorry about that, but we're really proud of what we've achieved here together with SKF. And it's not for fun. It's for real and for taking Minesto forward. When you have a novel technology in a novel non-existing industry as ours to reach the broader market, public to reach into markets where there is a lot of title, but limited knowledge and understanding of Minesto and what we do, this is extremely helpful. And the response we get is on a level where Even if we have expanded on the market side, we have never seen an inflow of requests and interest for what we're doing on this level, never. We're talking millions and still growing in the number of contacts in different ways. It's also spreading to invitations into different important contexts that are more industry specific. We're a part of the Swedish delegation for the World Expo. And instead of being in the corner of such an expo, we are centered innovation showcased in the Nordics. And we get invitations to IRENA and the important energy forums to keep talking about innovation. how valuable this technology is for the global success of energy transition. And this is important, not just because we're novel and where we are. I think we need to be aware that the first generation systems from Tidal and also Wave, they have not delivered. And that is something that we are overcoming that. And this helps a lot in that context as well. and to reach the sales breakthroughs. We're also working on several markets with step-in sales. We talked about that for you who were involved in the year-end webinar that we had. to talking about an engagement ladder and how we move forward. All the cases we talk about there are alive and kicking and moving forward. I can say that it's fair to say that we expect those processes to be successful, but it's painfully long processes and a lot of work on the customer side to take the first step of engaging with Minesto. So since the beginning of the first quarter, I believe that it's fair to say that there are thousands of hours invested in large companies investigating the opportunities of using the Nestle systems locally and in their turfs. And we're supporting that and we will turn that into business. And with that said, I think I will... move over to questions please.

Thank you so much for the presentation Martin and the first question here that we got is what are the biggest operational risks Minesto sees in 2025 especially related to technology finance and partnership and how are you working proactively to minimize these risks?

Maybe you'll have to help me with some parts of the question as we move on. But starting with tech, I think the most important aspect for tech for Minesto now is to take an order for Hestfjord so we really can build new units, and to be fair, with secured funding yesterday, we would have been already in that process today. So that's holding us back in that sense, because we are ready. Then of course, to do demonstration testing and to move on, I think that some risks associated with that is only on really low tech levels. I mean, you need to repair cables, You will have to have clean foundations where you hook things up. And as time passes by, you need to invest in that service infrastructure and so forth. So it's really on levels that has nothing to do with the competitiveness of the core value of Minestos technology. So we just want to move on, build new systems, deploy them and sort of evolve as we grow. When it comes to finance, I think that we would need to keep all options open on how we take Minesto forward financially. The project finance side, the sales of these abilities, the sales of units into the first Hestior case has to be complemented with preparedness for other types of capital injections. And I think it's easy to say that the capital market is in turmoil or there are difficulties around it. But I believe that with the way we position Minesto as a true, genuine invention that enables energy transition globally, this is not about building a manufacturing plant in the appealing to, let's say, ask people to invest in something sustainable just because it's sustainable. This is hardcore competitive value for energy transition with local energy, security of supply, and cost-effective energy transition to really deliver value. So we are determined to focus on what we can influence, the triggers on sales, on continued development, populating the Hest fjord. And by doing that, we believe that we mitigate the risks of not accessing adequate funding. So I think that's tech, that's finance. There was something else also in... Yeah, partnership as well. Yeah, partnerships. Again, I mean, everyone is waiting to get going with Hestior basically on our partner side, to want to build a new unit, use the new setup of manufacturing and testing. So I think that the partnership side is the one where the least concerns. And that's been a huge shift over the years for us. We really select partners and working with the best in all aspects of technology today, which is so important for a small company.

Thank you so much. Given the recurring delays in previous projects, what concrete measurements have Minesto now implemented to ensure that timelines are met and when can shareholders expect verified revenue streams?

Expect verified revenue. The sales and the breakthrough of sales is sort of the enabler of the rollout. If you would have asked me a year ago, I would say that I would expect within a year. What I say now is I expect it within a quarter to have sales in place on some level. And That's the enabler. As soon as we get going, there will be more to come. And the Hestiod case is the most difficult one because it's the first one. So the answer is a little bit, you know, as you ask a politician to promise something in this. But I also think that everyone that has been involved in this kind of pioneering activities, you know that it's extremely difficult to forecast when the breakthrough will happen. But we've never had a more stable technology. We've never had as many sales process ongoing and that strong support in getting that job done. So I expect it to happen now, basically.

Thank you. When will the 1.75 megawatt Dragon go into production?

Yeah, it's not something we're going to finance on Minesto's balance sheet without having a clear customer context in Hestfjord to start with. So we are ready and we're more than ready. We've taken the time we need to prepare, do conceptual design and are waiting for Hestfjord to be ready to take them on.

Thank you. Is the 1.2 megahertz dragon in the water producing electricity? How is it doing? If not, why is it still on land?

It's not producing at the moment. We are working to get it back into the water as soon as possible. We have over winter swapped out the tether to extend it. And there have been delays that are annoying. That's nothing to do with the core technology. Then there are other small aspects to it. Just to mention one thing. We are operating at a small scale and using marine operations rarely, especially with the D12, since we had such a long production during 2024. So our local partner, which is sort of the best partner in the world to launch kites, obviously have to take other deals as well. So sometimes when we need marine operational assets at this scale, it's not available locally. So it's partly a cost prioritization as well. This will go away when you expand your operations to larger scale. And it's not so that there is anything unique with that vessel or the technology. It's just that they have their home port or home harbor exactly where we are, which makes it so much more cost effective. So we need to get back into the water as soon as possible to produce to the grid.

Thank you. Two years ago you mentioned on a slide at your AGM that the CFD program in the UK was one of your priorities. We haven't heard so much since then. How has it worked out? Did you or your partners apply or where's the status there?

We still have access to our site in Holyhead in North Wales. But the onshore grid infrastructure build-out that was promised by local authorities has been significantly delayed. So we have made an assessment that we will be able to move much quicker in the Faroe Islands than... sort of rely on progress there. It's a highly viable case, very interesting commercially, but we are not going to invest in onshore grid infrastructure that has to be put in place in the same way as in the Faroes. In the Faroes, we get this customized for free all the way to site transformer stations. And in the UK, they are still sort of debating on how to sort those things out. That's why that's on hold.

Thank you. What's the timeframe on the initial plan of the 10 megawatt in Hessjord?

As soon as we have initial funding sorted out, we will be able to deploy within, let's say, two, two and a half years from that point in time. With sales significantly earlier, of course. The order placed in association with financial closure as convention in the energy industry.

Thank you. Is DE12 in work? And if not, why?

Yeah, we had that question, so I'll pass on that one.

Yes. Are Minesta going to analyze Indonesia's resources without USAID?

The consultancy company in Indonesia that has been doing the work with USAID funding is still in operation. The challenge is then, of course, to find new financial resources to do that. The good news is that we can access that information much more easily, the work they've done. But it would have been much better with USAID still in place, working on it. But it's a priority for us, and we will not finance it on our own. That's not within our scope. But we are working really hard with commercial partners and with even the Swedish government to get that job going quicker.

Thank you. Who are the potential owners of Hessfjord Phase 1?

Potential owners will be Minesto, SEV, local industry, including fish farming and the existing energy actors locally. And on top of that, we would really like to see some of our strong technology partners and If we really can put the wish list, it would also be good to have one of the global project developers in to use this as a springboard for build-out in other parts of the world. But the core ownership, we see that it's going to be Faroe Island actors and, of course, initially Minesto.

Thank you. DNV has inspected the power plant. What is the next step? Must DNV do a certification before SEV can fully integrate the power plants in their system?

No. The current system that operates in Västmanna is fully integrated into the grid of the Faroe Islands with grid code compliant electricity integrated all the way into the grid management system in Torshavn. So when we operate, I think there are five sources of energy in the energy mix in the ferros, from hydro, oil, wind, solar, some small biogas, and then also tidal. So it's already where it should be. But there will be a need to go through different types of technology, verifications, and in the longer run, in certifications, of course, to get insurance levels right and to get everything productified, so to speak. But not a necessity to build the first phase of Hestfjord. Thank you.

How long will your cash last? Will a new share issue be needed?

We keep all doors open. So I will not comment on that question for obvious reasons. I don't think that I'm even allowed to do it actually.

Thank you. What time in continue running mode will convince the customers that the project can be trusted?

I'd say that for the smaller D4s, we need three to four months continuous operation. And for the D12, we've already had enough continuous production. It's not just a matter of, let's say, to keep going with it to create confidence. The four months of continuous installation is enough there, I'd say. But the continuous electricity to grid with systems in the water is extremely helpful for all the commercial processes. I mean, it's no way around that.

Thank you. What solution do you see if the anchoring gets stuck and can't be loosened?

Interesting. Well, it theoretically, it's really, really difficult to see how it can get stuck because it's a pretension system. So if you lose that pretension, you will loosen the mechanical connectors in a way where, I mean, the risk would be the other way. And if everything then falls apart, it might come loose in some strange theoretical reasoning. There are scenarios where, I mean, in an emergency context where it can be completely stuck for some reason I can't figure out, and then you have to cut the cable. But I think this is a discussion beyond the scope of this seminar, I believe, in that sense.

Yes. Moving on to the last question we received there, and I know you answered a lot about the dragons here, but are the other two smaller dragon producing electricity?

Not at the moment. They have also been upgraded and we have not prioritized them over winter. but they are highly relevant for the discussions that we have on microgrid build-outs, not only in the ferros, but to start with in the ferros, but then in some other contexts as well. So the goal is to keep using them and keep testing with them as well.

Thank you so much, Martin, for the presentation here and answering all our questions. And I wish you a pleasant Volvo here when it starts. Same to you at home, watching.

Thank you. And thank you, everyone, for listening and your patience. Have a nice weekend.