Ceres Power Holdings (LSE:CWR) — Full Year Results

0:02 Good morning, ladies and gentlemen, and welcome to the CERES POWER HOLDINGS PLC full year results investor presentation. Throughout this recorded presentation, investors online will be in listen only mode. Questions are encouraged. They can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Please just simply type in your questions at any time and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your investor meet company dashboard. Before we begin, we would like to submit the following poll and if you would give that your kind attention, I'm sure the company would be most grateful And I'd now like to hand over to CEO, Phil Caldwell. Good morning. Good morning, everybody. And it's great actually to see real people in the flesh here and also welcome to people joining us online.

0:52 I'm very pleased to talk you through the results for CERES for the period ending December 2021, and also delighted to have Eric Lakin alongside me as our new CFO. Just for those of you that know, CERES, and some of you that maybe don't, I just want to remind you of our purpose, mission. At CERES, we've built one of the leading technology businesses in clean energy globally. We have a leading solid oxide technology protected by over 100 patent families that's quite unique to CERES. And because of that, we operate a high margin licensing business model, which is unique in this sector. And really, we are successful in this because we collaborate with some of the world's leading companies.

1:42 And it's all about delivering technology at scale and pace to meet the urgency of the climate change agenda. And I think over the past few years, you can see very strong evidence that we are succeeding on our purpose and our mission. The evidence I would say for this, and I think how you should judge success for CERES, is for CERES, it's all about getting our technology into global applications at scale. And you can see from the top line here, what we have is we have a platform technology, which is the CERES steel cell, which we build into stacks. And we've successfully now built into products with partners that are going through to market. So we have Miora in Japan, we have Bosch in Germany, we have Doosan in South Korea, and we have Weichai in China, all on the power system side for a number of applications, including homes, businesses, data centers, and even taking us into things like transportation and into maritime as well. So the number of applications for the power system side of the business is growing substantially.

2:52 Last year, we took the decision to broaden the scope of the business and essentially double the size of the business by moving into green hydrogen. And again, one of the beauties of this technology is it's truly reversible. So again, taking all of the technology on the cell and stack side and all the infrastructure that we're building out with supply chain and manufacturing, taking that into green hydrogen to electrolysis. And we are now engaging with commercial partners and looking to put a first of a kind demonstrator later this year on so EC. So the business is grown on the application side. And what that does is that really stimulates the demand for manufacturing globally.

3:39 And I'm very pleased to report upon progress we've made there. So obviously, CERES is a UK business, we're very proud to be a technology business based here. We have approximately 500 people across two sites. And we're broadening that with the recent announcement of a new test center with Mara also in The UK. But really from this technology hub, we're exporting this technology globally, and we're enabling manufacturers to scale. Our lead manufacturing partner is Bosch in Germany, and they've committed about €400,000,000 investment into commercialization of this technology, and also are in the process of replicating production in Germany and have plans for 200 megawatts by 2024.

4:25 Closely followed on that is Doosan in South Korea, one of the leading players in stationary power technology. Their initial capacity is targeted around 50 megawatts, but we expect it to grow beyond that. And they've recently announced 90,000,000 investments in that plant as well. And then earlier this year, we announced a very exciting three way collaboration between Bosch and Weichai for a first manufacturing facility in China. China is probably the biggest market for clean energy technology globally. And with this combination of Bosch and Weichai, we've got a pretty formidable partnership with two of the biggest players in the industry. We have the collaboration also with ABL on business development and engineering. So really, our global footprint is growing.

5:14 And why that's important is the success of this business is all around future royalties. So we're very healthy on high margins today. But what we're really targeting on is getting the technology into more and more applications, which therefore drives demand in aggregate for gigafactories globally. That's what we're trying to target here. And that's what really drives the scale of this business in the future. It's been a pretty transformational year for the business. I mean, the last two years have been interesting for the company since the whole pandemic. Because since that time, we've more than doubled the company. We've more than doubled the ambition. We continue to deliver on top line revenue. So 44% increase this year to just under 32,000,000.

6:07 We've got a very healthy balance sheet. So we're in very strong financial shape. So not only do we operate capital light business model, but we are investing for growth, particularly on the electrolysis side, and Eric will give you some more color on that. And we're building capacity globally. So we're seeing more and more partners now moving towards commercial scale and the manufacturing, as I mentioned earlier. On top of that, we're investing in new markets as well. So we intend to enter new markets like marine. We're doing a lot of work on future fuel capability as well. So we're really in a growth phase, because the more we grow now, the more we capture these huge markets, the more value we create from this licensing business. And that's quite different, I think, from anybody else in the sector.

6:56 I think the other thing to mention is, you know, we've more than doubled during this period. We've attracted something like 160 people just in the last year, but more than that over the last two years. These are very highly skilled scientists and engineers. And again, there's probably not, we're probably the leading tech company in The UK in this space, with probably the highest calibre team anywhere, I would say. So we're in a very strong position to be one of the world leaders in in this whole clean energy technology space. So with that, I'm going to hand over to Eric, and he'll talk you through the financial highlights. Thank you, Phil. Just from the top, I'd like to say it's a real pleasure to be here today presenting my first set of results for CERES. It's a genuine delight to have joined such an exciting company and to do this event in in person.

7:51 I mean, CERES is a business with highly talented people, truly innovative products and a genuinely compelling purpose. I've been here two months now. It's been an intensive learning process. And I'd like to give a special thanks to Richard Preston for his support and advice during the handover period. With that, I will turn over to the numbers for the year. As you can see, the headline sales grew very strongly, 44% up in the year to £31,700,000 much of that driven by Doosan license fees and engineering services amongst other customers. We've maintained gross margin at high levels at 66%. Gross profit increased to £20,300,000 that's about a 40% rise, driven by the growth in sales.

8:43 EBITDA losses increased in the year to £16,700,000 as expected as we begin to ramp up our investments in fuel sales and the electrolyzer business. At the end of the year, we finished with a very strong cash position of close to £250,000,000 of cash and investments, thanks to the fundraise of £179,000,000 in the year. That puts us in a really strong position to fund the existing business plan as we see it. We increased headcount by over 160 people to four eighty nine to support the growth across the business. Order book and pipeline collectively finished the year at £80,000,000 That compares to 98,000,000 the year before, and that reflects a level of revenue recognition in the year. So the order book and pipeline will vary subject to the order intake during a given period and amount of revenue recognized in that period. But it's still a high amount, and think about that 80,000,000, that's effectively covering our current sales run rate by over two times.

9:51 In terms of the revenue growth, you can see we've had continuous trends of revenue and gross profit growth over the time, maintaining high margins. Overall gross margins of in the range 65 to 70%, we expect to continue in that range this year. In terms of mix, as a reminder, and many of you will know this, we've got three main income streams as it stands, depending on the progress within a given development arrangement with our partners, license fees, which are upfront or over time, which are very high margin, 100% in effect. We've got engineering services of the order 40 to 60% margin, and that's providing work in collaboration, working with the partners on developing new systems and improvements to the stack design.

10:48 And we also have what we call supply or supply of prototype hardware and technologies. These are samples and prototypes used ahead of our partners ramping up their own large scale production to support development of new products and systems as well. The margin around hardware prototypes can vary from period to period, typically in the range 20 to 30%. The reason for gross margin not being as high as one might expect in the year, given the high proportion of license fees, is really down to the hardware margin. And last year was a key year for CERES as we got CP2 Red Hill facility on stream, making more investments in capability, in capacity before the volumes have really increased there, which expect much higher volumes this year. So as a counter of that, you've got less overhead absorption in effect. And also, we had a warranty increase in the years, we're getting better data and getting more products into the field with our partners, so we can quantify what that should look like over time.

11:55 So we expect margin trends to continue to improve this year. But they're the main building blocks as it stands. And as Phil mentioned, over time and from '24 onwards, we'd also then look to see royalty income coming through as well, which is in effect another very high margin stream, in effect 100%. And just finally, other operating income, that's effectively grant income, it increased in the year to 900,000. We expect that to be less significant going forward, unless perhaps we get additional grants from some of our new products possibly within electrolysis area. So we'll be monitoring that as we go forward. As Phil mentioned, it's important to note, 'twenty one was a significant investment year, and you can see we've got this measure we call investment in future growth, and that's simply defined as R and D spend plus CapEx plus capitalized development.

12:57 It's important to look at all of that in the rounds. That measure increased to close to £35,000,000 in the year, up from 26,000,000 in the prior year. And the CapEx increase was down to increasing our capability around fuel cells, but also ramping up electrolysis investments as well. And it's worth noting that investment is expected to increase substantially this year as we're looking to improve our capacity and capability, especially a lot of that growth is in the electrolysis business, which really started to grow last year, and much of that increase will continue this year as we build the demonstrator and other products and ramp up that business. You can see more of that when we talk about the segmentation analysis as well.

13:53 Just to give more color around the type of investments we're making, as you've seen announced, there's the outsourcing of as a service with REBA MIRA. That's really important in terms of growth. Test capability is really important to support the capacity that we need for our own lower scale production and supporting the partners. And what Harib and Mara bring is effectively this outsourcing flexibility so they can increase capacity over time and potentially even different locations and scale up with us without us having to make the investment in our existing facilities. As I mentioned, we're also making significant investments in the Red Hill facility for prototypes and automation, investing in some very sophisticated equipment such as laser drilling and test stands to support the existing product, but also the upgrade. This year, for example, we're upgrading from Gen one, Gen 1B to Gen two for fuel cells. But another significant investment this year, as previously announced, is the one megawatt class demonstrator for electrolysis, which is really crucial for proving to our potential partners how that works.

15:08 And so that's obviously what the fundraise was designed to do. And we importantly put that money to work. There's a significant opportunity here. And it's important to maintain our competitive position and capture that addressable market by investing in people as well as equipment and the people, its scientists, its systems engineers, and so on, and maintain that world class technology company that Phil mentioned before. So, as you know, we've split the business and showing sales and EBITDA for both electrolysis and fuel sales. This provides better visibility because we've got two business lines with different levels of maturity in their growth. As you can see, as a trend, there's reduced losses in the fuel cell business.

15:58 That will be influenced by the level of sales, of course, in a given period of time. And we expect for this year, subject to the amount of sales for fuel cells, to expect reducing losses again for the fuel cell business. On the other hand, electrolysis, as I mentioned, is in investment mode and expect those losses to increase this year as we invest significantly, particularly into the demonstrator and other technologies around that, before we see material revenues coming through from that side of the business. And finally, this is a reminder of the profile of our sales build up over time, and we're currently in that near term growth phase. We're picking up new partners or extensions of business with our existing partners. So, the build up is primarily license fees, engineering services, and supply of prototype hardware and technology.

17:03 And over time, we'll build up the similar revenue streams on the electrolysis side of the business. And then once they're monetised and our partners start producing and selling the fuel cells and electrolyzers, we'll get royalties from those. And as you know, from 2024, our existing partners, Bosch and Doosan, are planning production, and we'll start to see royalty income from that. So, over time, these different revenue streams will layer on top of each other, supporting strong high margin long term growth. With that, I'll hand back to Phil. Great. Thanks, Eric. So I just have a couple of slides here to remind you and report on progress against the business strategy.

17:51 So if you go back to our purpose, we're a technology business that enables people globally to address climate change. And the business has grown substantially. The core business that we started with was really focused on stationary power. And I think you can see the evidence of that coming through with the partnerships that we have, the products going to market now, etc. But if you think about global decarbonisation, our buildings that we work in, that we live in, is only about 30% of the issue. So we have to start to decarbonize the really difficult, hard to abate areas of society. So that includes transportation and industry. On the transportation side, we obviously have our relationship with Weichai, looking at commercial vehicle applications, and also more recently getting into things such as marine decarbonization through our partners such as Doosan and various other interests that we have coming in there.

18:51 So we're starting to get into the transportation sector. The move into electrolysis really takes us into industrial decarbonization. And again, industrial decarbonization is one of the hardest areas where we probably can't decarbonize through direct electrification. You need green electrons going to green molecules to help to decarbonize industry. And really, that's why we're making the investment that we have in electrolysis because that for us completes the whole map of addressing global decarbonization. I touched upon this earlier, but you know, there's some notable milestones now in terms of the stationary power side in particular, with Doosan having completed their 10 kilowatt system.

19:39 So this was a joint development we kicked off with with Doosan a couple of years ago, and they're now getting into a soft commercial launch of that product this year. That's on top of what we're doing more recently, which is scaling power systems to higher power with Doosan towards utility scale and some of these other applications as well. So Doosan is obviously a very key partner for us today, I believe the world leader in stationary power. Bosch, as we mentioned, is already investing something like €400,000,000 into SOFC, and is in progress of deploying about 100 of these type of systems into different applications. Think we might I mean, just to make that real for you in terms of what does it look like? Where are these things going?

20:29 Here's an example of a system powering a bakery in Downtown Bamberg in Germany. So you can see here, very neat distributed power system, providing low carbon power in that working environment. That's just one of the applications that they're looking at. It's also looking at things like data centers, EV charging, grid reinforcement, etc. And that's probably becoming more and more relevant. If you think about some of the energy security issues that we're facing right now, this move towards decentralized power and moving towards more and more natural gas towards hydrogen, this technology provides you with that that fuel flexible route. Just to update on progress with Weichai, we're obviously making good progress on the commercial vehicle side. But we also have this new 30 kilowatt stationary power module as well, which takes us into station power into the Chinese market as well. And again, China has a big mandate on things like green data centers, distributed power, etc. So again, that's a pretty exciting development for us is broadening the scope of the relationship with Weichai in China.

21:42 And that really brings me on to a brief update on the collaboration for China. As we announced about a month ago, we've now actually broadened the scope of that. So the collaboration is now a three way collaboration, including Bosch into the mix. So what that means is our intention, and the teams are now working towards final contracts, is to have two joint ventures in Shandong province. A three way system joint venture, which will combine our system expertise, including the transportation and the stationary side, together with Bosch's expertise, so the products that you saw there, developing products for the Chinese market.

22:28 And in addition to that, and probably, you know, very exciting for CERES is the intention to have a third manufacturing facility to produce our stacks in China, which will be a majority operated and controlled by Bosch with participation by Weichai. That deal near term is worth about 30,000,000 to CERES in license fees. So it's going to have a significant impact on our revenue lines in the coming periods. But more importantly, we expect that manufacturing capability to provide high margin royalty stream. And we expect that will grow with time as well as we expect the market opportunity in China to be very significant in the future.

23:23 So I've given you a little bit of color, I think, on progress. All of that is on the power system side. So power to businesses, to transport, power to homes, and we're continuing to grow the applications there and also expand in terms of the fuel capability and the power levels on the power systems. But then we have this whole new opportunity, which is in the green hydrogen space. So if you reverse the technology, you can actually produce hydrogen for industrial decarbonization, for fuel stocks, for e chemicals, etc. So that's where we're going next as a business. We're making good progress on the first of a kind demonstrator. And really just to remind people what we're targeting here is high efficiency electrolysis.

24:14 So up to 20 percentage points higher than established technologies that operate at lower temperature. And really because of that, we believe we can actually enable partners to achieve hydrogen production at about 1.50 a kilo, which is where green hydrogen starts to really become competitive. So all of that is consistent with our strategy. If you think about where we've come from stationary power into transportation, now into green hydrogen. Which On the left hand side, we're broadening the applications for the technology. So we'll have more and more partners using our technology at the systems level. And what that does is it drives the demand for more and more manufacturing capacity globally.

25:04 So again, the aim of this business is all about enabling Gigafactories of production globally to happen. That will be in aggregate in the high growth areas where we need this technology. And I think, you know, we're successfully delivering on that plan. And that's really what drives the long term high margin, high value business that CERES is and intends to continue to be. So just in terms of an outlook and some targets for the year ahead, to look out for continued top line growth. Every year I've been here as CEO, we've delivered top line growth, and I think we'll do so again in 2022. We are investing in SOEC and marine to drive future value. So we're investing for the future because we want to expand the demand for this technology, which in turn drives the demand for the manufacturing side.

26:02 We're obviously highly focused on supporting our existing partners to get scale. So that's a big part of what we're doing is supporting activities in Germany and South Korea and China. A big focus this year is conclusion of the JV in China and bringing that to the positive conclusion for a third manufacturing plant. SOEC progression is underway, and we are making progress also with commercial partnerships for green hydrogen, and we hope to have more to say on that this year. So I think we're very pleased with the level of interest and the progress we're making on that. I've already mentioned we're expanding into some of these newer markets, higher power, future fuels, maritime.

26:56 And we will move to the main market this year when we have the right timing to do so. But I think overall, we're looking forward to another exciting year ahead. It's going to be a high growth year, but what we've done in the past two years has really laid the foundation for the business to continue to kick on and grow again, and I think that's what you're going to see in 2022. I think with that we'll take any questions. That's great, Phil. Eric, thank you very much indeed for updating investors this morning. Ladies and gentlemen, please could I ask you to continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. Just while the company take a few moments to review those questions submitted already, I'd like to remind you that recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor meet company dashboard.

27:44 Elizabeth, if I may hand back to you, obviously you've had a number of questions submitted from the participants online. And obviously I know you have a number of attendees in the room. So if I may just hand back to you to run through the Q and A and I'll pick up from you at the end. Great, thanks Mark and thanks guys for the update. Yeah, I've had a couple of pre submitted questions. If I could go to those first, from Adam Collins at Liberum, who asks: When will the £20,000,000 of investment in China JV impact the cash flow? I come to you, Eric. Yeah, sure. Hi Adam. We've announced we expect circa £20,000,000 investment for our 10% share in the new JV, in the system JV. The phasing of that is yet to be determined, and it will be enshrined ultimately in contracts, which we're working on as we speak. My expectation is that investment will be phased over the investment period of that JV.

28:40 So if you want a best guess for modelling right now, would suggest £5,000,000 a year for each of the next four years. Great. Thank you. There's a follow-up question from Adam and also another person online just asking what was the level of production in CP2 during the year and where will that head in 2022? I don't have an exact figure for that. I'm not sure we've disclosed that, but the capacity of CP2 is around two megawatts and there was obviously a ramp up last year. We're also looking to continually expand and debottleneck CP2. So I think the capacity intention will grow to around three megawatts, and I think probably we could squeeze about five megawatts out of that facility.

29:29 So that's kind of the plan. Don't forget, though, CP two is a manufacturing technology center as well. It's where we, you know, introduce new products first so that customers can get them, and then also bring that into their factories. So at some stage, there will be some disruption in CP2 because we'll move from, as Eric said, a Gen one to a Gen 1b to a Gen two, and we'll continue to bring new technology through into CP2. So this is one thing I do want analysts to get in their heads is this is not a manufacturing business. CP2 is really an enabler for more and more licensees. And the margins that we get in CP2 are going to be typical manufacturing margins, but really the margins you get from this business are all around the licenses.

30:21 Occasionally, we're going to change CP2 configuration to produce the latest version of the technology, because that's what we will continue to do. It's as much an innovation center as a manufacturing center. And it's only ever going to be low megawatt scale, because the capacity is really done by our partners. You know, several orders of magnitude greater than what we'll have at CERES. Yeah, great. Thanks for reaching out. Can I come to the room if there's anybody who would like to ask questions? If you could just shout out where you're from, your name, that would be really helpful for everyone online. Yeah. Sure. Hi, Phil. It's Ed from Citigroup. So so my question is just around the China JV.

31:06 What sort of dimension can we sort of start thinking about in terms of megawatts per annum? Just bear in mind the respective sizes between Germany and China and the Boschwood in Germany. Look, it's a good question. I can't answer precisely because ultimately that's for Bosch and Weichai to disclose when they have concluded on that manufacturing JV. But what I could say is, if you look at the building blocks of capacity, there's several 100 megawatts is really the sweet spot where you get to very low cost type, high volume modules, if you like. So I think it's clear that the priority, the first plant that you will see will be Germany, but then I think you could imagine similar kind of levels of capacity coming on stream in China.

32:03 And then from that, then it's really growth and responding to the market demand. And then if I could just tag on to that. It looks like Japan is sort of covered, South Korea, and Germany, and then China, what about The United States? Are you sort of focusing on that market? Yeah, we're going to focus more on The US. Think, you know, there's been a bit more of favorable change under Biden with, particularly around green hydrogen subsidies for that. Don't forget though that, you know, a good illustration is our partnership with Bosch and Doosan. Doosan has operations in The US. Bosch has operations in The US as well. So some of our existing partners can also access those markets.

32:48 But look, this business operates on bringing on new licensees as well. So you should expect that we're going to target other regional production in the right parts of the world. So not just The US. It's Anthony from Berenberg. Obviously, good strategic progress across the year. Don't think there's any mention of ABL in the statement. I think sort of at the half year you talked about three kind of early stage conversations. So I guess how is that sort of progressing? Yeah, the pipeline with ABL is growing. We haven't had much of an update, I suppose, on specifics, but it's it's going very well. But I think those contracts are still at an earlier stage, and when we when we can say more, we will. But they are bringing us into some of these newer opportunities, and they bring capability in some areas that that will be new to us. So there'll be more to come on that, I think, in the future.

33:54 And then just on Hareba sort of testing partnership, how how do maybe a silly question. How do the economics of that actually works? You're putting in money. Do you then open the answer? I guess, is this all around sort CERES strategy of staying asset light? What's the sort rationale behind that? So there's two aspects to it. There's a kind of a test as a service, aspect where if you've some of you may have been to Horsham recently. If you have, we couldn't shoehorn much more capacity in there than, you know, we've got something like 70 yard test stands, and we build our own test capability. So we're building our own SOEC test stands, we're building test stands to run on future fuels like ammonia etc.

34:41 And then we have long duration durability test stands as well. The philosophy behind it is some of the more regular testing we can put in the hands of a trusted partner like Myra to run for us, And that means some of the higher end sophisticated test work that we need to do as part of the the the science and engineering programs will still do in house. But the other interesting thing is when we scale with partners, they need test capability as well. And we need them to be running the same test platforms that CERES runs. And we can't necessarily continue to build all our own test platforms and supply them to other partners as well. So the the good thing about Hariba, the parent group is they're one of the biggest providers of test stands globally. That's the Japanese parents. So they're going to produce CERES test stands that we can then provide to our partners as well. I'm not suggesting that's gonna become a a whole new business stream for CERES, but it's all about enabling our partners to get to scale.

35:46 And it does speak to the asset light nature of our business as well. Hi. It's Maggie from Stifel. And I have two questions. The first being, you've often said on SOBC, you were not in a rush to do a licensing deal to get the maximum value. But the statement at the half year and also today talks about high level of inquiries on SOEC. Can you just give us some better understanding of the balance between waiting to get the maximum value on licensing and what we should expect given people are obviously attracted to the high efficiency of your systems compared to? Yes. What you should expect is if we we can build a a demonstrator, and initially, we thought about we'll build a demonstrator, and then we can convince people.

36:42 I think actually, there's a high appetite to get involved earlier to understand the system side of it. And also, there's a lot of capability out there that we can tap into. So we're we're new into this field of electrolysis. So really, in the initial partnerships, they're not necessarily pure play license deals, but they're partnerships on the system side that that would then take us into the end market. So the first partnerships that we're looking to put in place will be more around the collaboration, joint development stage, just as we've been through with the fuel cell side. And then licensing the core technology, I think we'll follow on from that. But it's also of interest because strategically, if you're making fuel cells based on our technology, by default you're making electrolysis cells.

37:39 At some stage there'll be some interesting opportunities for our existing licensees as well. Question I had, three way JV addresses some concerns about IP protection in China. Could you just remind us why that was the best way to go forward and why you feel confident that that gives you an enhanced level of IP protection in China by using Walsh as opposed to solely interacting with each other? Yeah, a couple of aspects to that. Just to make it clear, we trust Weichai, they're a very high integrity business, but for us as a two way joint venture, we were talking about establishing manufacturing potentially in China from a standing start, we're a UK technology business so that the advantage that Bosch has is it has a pedigree of over one hundred years of operation in China.

38:34 It's got 55,000 people in China. And it's very used to dealing with high-tech and protecting IP in China. So their capability compared to ours is significantly stronger. I think also, the level of investment, you know, I just talked about a small investment in this joint venture. But if you think about, as we scale up manufacturing capacity, Bosch and Weichai really have the balance sheets to do that. So what it means is, Bosch can take the lead in the manufacturing in China and actually take a controlling position that CERES probably wouldn't have been able to do. So that will be under you know, the majority shareholding of Bosch. And that that makes a big difference, I think, in terms of IP protection, because the license that we have will be with Bosch.

39:34 So we've extended that license through a partner that already has the license. So if if there was ever an issue around IP, we know how to progress, shall we say with Bosch. The multi million investment for Europe. Can you give us some understanding of what multi million pounds is and how that's gonna be based? So I I won't give you the exact number as you might imagine, but but just to give you to help think about the level of investment this year, as I mentioned, we're going to be increasing again the investment this year as a double down on the opportunity. So CapEx figure of the order '20 to '25 in total is what you might expect. Obviously, depends on the phasing and sometimes you make capital commitments and the actual spend goes into next year. So actually last year was a bit lighter than I think we or others might expect partly because of that. So 7,000,000 or so. So some of that's coming into this year. So this will be a significant increase.

40:38 And of that, there's a, you know, a a meaningful proportion, but obviously a minority portion is is a REBA. Yeah. And I think to to that point, we've we've we've raised significant funding last year. We're starting to deploy it, but this year will be really where we we accelerate that investment because this demand is not going away. You know, we wanna get into the businesses, the areas like marine, into electrolysis as fast as we can really, because that opportunity is there as well as support our partners as they scale. We're doing both growth and the investment to support partners. And just checking on this. So from £34,000,000 last year, this year we can anticipate what sort of uplift on that? Yes, so referring to the investment in the future metric, I'd say you know, not quite double, but that sort of order. You might think 60 to 70 territory, clearly, R and D, the CapEx guidance I've given, plus capitalized R and D.

41:46 Great. I have a couple of further questions online. If I can come back to you guys. Chris Leonard from Credit Suisse asks three questions. In 2022, do you expect the mix between license engineering services and hardware buckets to be more evenly split? Go straight. So, yeah, hi Chris. I think the mix this year will partly depend on the JV signing the associated revenue recognition with that. So it presents some quite variability. The way we're expecting it to come through means it will have a very meaningful contribution from license fees again. So that would mean a similar mix this year to last year.

42:34 Worth noting, we put a comment on this in the release, because that would represent a significant upfront license fee, so a part of the total 30,000,000, The timing of the growth this year will depend in part on when we actually sign contracts for a JV. So whether it's H1 or H2, that's worth keeping in mind when looking at the phasing in the year. Great. So I could come to you just with the benefits of history. Have you seen your partners, particularly with Doosan, put higher levels of investment in than you were originally thinking? Yes, probably. I think with Doosan, what we're seeing is high levels of ambition, particularly into new markets.

43:29 Doosan fuel cell is a publicly listed company so that they have their own communications. You can see their ambitions for SOFC there, but also they're obviously forging partnerships with the likes of Hyundai Heavy and Shell on maritime. They've stated intentions to get into electrolysis as well. Doosan want to maintain that leading position in hydrogen fuel cells in South Korea, and I think that to do that they are putting more investment in. Then just lastly from Chris, he asks what's the expectation for new SOSC system partners? Well that comes back to, some of the things we talked about in terms of the ABL relationship and also some of the incoming that we've got now. I think, you know, if you think about the partners we have, there's a lot more out there on the power system side as we go forward.

44:29 That's going to be a, you know, it's a key growth area for the businesses, driving more demand for the existing power system side of the business and also pioneering these new areas that we've discussed. Great. There's another question there for Chris, just saying is there an update on the release of the next generation of the SOC technology? We touched on that, Gen two. There's no particular update. It's something that we're working on now and at the appropriate time we'll take it through into CP2 first and then into partners after that. It's quite a big step change for us because it's a lower cost cell. It's something that we've worked on with Bosch and therefore it's designed for mass manufacture a lot fewer components and therefore that's ultimately what we'll move to in the future as we scale.

45:31 And Nick Walker from Peel Hunt is on the line. He asks, when do you expect manufacturing of both stacks and systems to begin in China? I think the at the system level, you know, there's there's already prototype systems being built in China now with what we've been doing on programs, etcetera. So Weichai already have that capability, and they're building that up. Obviously, this expansion with Bosch and CERES will be a much bigger initiative, but in China, it will be systems first, and then stack manufacturing will follow. So I think that's that's the way to think about it. So I think once we conclude the JV, you know, system development can happen quite quickly.

46:21 I think manufacturing of stack development will follow, you know, up first in Germany and then secondarily in China. Yeah, great. And Nick also asked the question, just could you talk a little bit about CERES radar and long duration energy storage? And actually we've had two or three questions on sort of long duration energy storage and the importance, you know, its importance within the energy transition. So just some views on that. Yeah, sure. Look, the CERES radar is really beyond what we're doing on solid oxide. So if you think about our capabilities in electrochemical technology and as a clean energy business, we see, look, there's a lot of interest out there in new technologies and you see it all the time. You see it with Bill Gates breakthrough energy.

47:11 People are looking at how do we accelerate technology to decarbonize society. One of the key areas I think that will be important next will be long duration energy storage. Because as we look to electrify more and more parts of society, one of the issues that we have is intermittency of renewable energy. So anything that provides a solution to that is going to be valuable. Hydrogen is a solution to that potentially, you know, you can use hydrogen to store energy, but equally some of these new technologies. Now, this is for us a new initiative, which is really how do we identify technologies and how do we almost accelerate them, incubate them or accelerate them with our capability because we have test capability, we have system engineers, we have some of the boring stuff like HR and supply chain etc, that companies just don't have. That's very different from a financial investor. So you see lots of these funds being formed now out there around hydrogen.

48:16 But what we can do with companies is really take a technology, evaluate it and accelerate it if it's any good. And I think the first step in the RPC type kind of technology is for us to assess it, work with them for a year accelerator, and then we'll make a judgment whether we think it's it's going to be commercially viable or not. But we'll do that with, you know, several areas of technology and that's part of Mark Selby's role in innovation is that landscaping piece of what else is out there. When we think any of those technologies becomes mature, then we'll bring it into the mainstream of the CERES business as a potential new line of business. That's the philosophy. Eric, if I could come back to you, just a couple of questions. Obviously we're increasing investment and there's a question around how long will your existing cash last?

49:10 So, as as Sarah said, during the fundraise, the £179,000,000 raised last year fully funds the known business plan. So that's probably the answer on that. That's still the case today. Yeah great, thank you. So the investments we talked about, the increased investment is in line with that plan. Yeah and I'll just remind people as well, our top line revenue is growing. We make a pretty healthy gross profit. If you compare our company with any other company in the sector, we're miles ahead in terms of margins that we make. That margin helps us to fund a big part of our development costs. You know, analysts often compare top line revenue, and they don't always look at the margins that this business operates on. CERES is a very different business.

49:59 So as we grow, we are throwing off, gross profit that we are reinvesting in the business, and that helps us to be pretty confident on our cash balances. We don't operate on the same kind of cash burn that other companies do. Absolutely. Okay. Just coming back maybe if I can to electrolysis, Phil. Just sort of a couple of questions. One is the sort of scope for production scale for CERES SOEC by 2025 or 2030, however we view that in terms of how it's going to scale up. Do we have a feel for what a standard module might be for electrolysis products in the future? I mean, we've already been talking about that megawatt demonstrator, but could it be in megawatt, two, five?

50:44 What does that look like to you in your view? Look, think that's where, you know, the business scales in modularity. So, you know, a five kilowatt stack is a 10 kilowatt electrolysis stack. In time, you expect power density to go up, those modules will get bigger, But ultimately, you're you're adding stacks. And, yeah, it's in that low megawatts to 10 megawatts kind of range, I think, is is gonna be, you know, the typical mod module starts. But again, we're the technology provider. So this is where collaboration with systems people and and some of the people in the business will determine what that ultimately looks like. Yeah. And Tarek from HSBC is also on the line, and he just says, am I correct in thinking that most CERES units are currently geared toward natural gas? I think we've touched on this, but how much of the planned expansion is towards natural gas versus green hydrogen? Or I guess we could touch on other fuels.

51:41 Yeah, look, we have systems operating in Horsham on pure hydrogen. The technology is hydrogen ready. The Bosch systems have a degree of hydrogen flexibility, so if we would start to introduce hydrogen into gas streams, they're compatible today. The systems actually get simpler if we suddenly woke up in a hydrogen economy. The systems are ready to go, they actually get cheaper. But in terms of answering the question, we're continuing to do development on pure hydrogen, because for reasons I said, can adapt a simpler system. We're also getting into some of these future fuels as well, like e fuels, ethanol, ammonia, etc. Because again, different parts of the world, different applications will need different fuel solutions.

52:34 So that's a big part of our R and D is around future fuel compatibility. And maybe one for you, Eric. Do you think growth will be driven organically or through M and A? And if M and A at all, where might we look to accelerate? Great question. So the business plan is for organic growth and everything we described today fuels that including the investments, both the fuel cell business and the nation electrolysis business as well. And that provides strong medium term, long term growth. M and A is an interesting one. I think it's secondary to our organic plan and part of the scope of the CERES radar that Phil mentioned is looking at doing that horizon scanning for future opportunities and looking where if there's a complementary business where we can add value, particularly through our electrochemical capabilities, then that's one of the filters we look at.

53:35 So we'll follow-up if opportunities like that arise, like RFC last year. Any more questions in the room? Then maybe I could fill you with this last one which is when do you expect the first Gigafactory to be live? Look, I think that's an for me, it's an aggregate. So I can already see a pathway to around half a Gigafactory already in in some of the planning discussions, etcetera, that's out there. And I see that, you know, if we're successful in that initial stage, then then growth beyond that can happen quite rapidly. I think for us, our focus is getting to that first scale up because I think beyond that then, we've proven everything in terms of commerciality, and then it's just it's just business demand.

54:30 But I you know, our our our internal plans are for, you know, for for multi gigawatts by the end of this decade. So it goes far beyond the first gigafactory for me. Absolutely. Maybe I can hand back to Mark. Thanks. That's great. Elizabeth, Phil, Eric, thank you very much indeed. Thank you to all the investors that have taken time to submit questions online. If any further questions come through, we'll obviously make those available to the company after today's meeting. Phil, I will shortly redirect investors to provide you with their thoughts and expectations via feedback, which I know is particularly important to you and the company. But before doing so, I wondered if I may just hand back to you just for a few closing comments. Yes. Thank you. Look, thank you everybody for joining today. It's really nice to see you all and and also have the high level of participation online.

55:19 I think, you know, we've put CERES in in really good shape, as well as Eric who's up with me. I've also added considerable strength in a new CTO, Caroline Hargrove, and new GC, Evan Grimerson. So we're adding capability into this team. We're adding world class scientists and engineers all the time. So we're growing what is a fantastic business here in The UK, and we've got fantastic opportunities. I think, like I mentioned, '22, there should be a lot of things to look out for in terms of progress with CERES. So thank you for joining today. That's great, Phil, Eric, Elizabeth, thank you once again for your time and for updating investors. Can I please ask investors not to close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order that the management team can better understand your views and expectations?

56:12 Will This only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of CERES POWER HOLDINGS PLC, we'd like to thank you for attending today's presentation. That now concludes today's session. So good morning, should I say to you all.