Clean Power Hydrogen (LSE:CPH2) — Investor Presentation

0:01 Good afternoon, ladies and gentlemen, and welcome to the CLEAN POWER HYDROGEN PLC Investor Presentation. Questions are encouraged. They can be submitted at any time via the Q and A tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and will publish our responses where it's appropriate to do so. Before we begin, we would just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand you over to CEO, Richard Scott. Richard,

0:33 good afternoon, sir. Good afternoon, and, good afternoon, everyone else, and thank you very much, for your time today. It's, it's really appreciated. I'd like to, take some of that time to talk to you about CLEAN POWER HYDROGEN, and how we are licensing low cost hydrogen technology for, the growing alternative energy market. And contrary to to popular opinion, that market continues to grow, and we have the technology that's able to exploit it. The traditional hydrogen technology has struggled to scale. The constraint is not the the the market itself. It's not demand. It's the lack of a better electrolyzer to produce it. It's the better the lack of a better way of delivering it.

1:19 Where you have the ability to access variable and intermittent power, say, wind or solar, where you have a lower all in system cost, I e, lower capital cost of the equipment, and where you can where you can sell a higher purity hydrogen and oxygen, saleable co products, But you can do all of that together, then you have a very economic proposition. CPH2 is liberating hydrogen with our successfully saturated tested technology that solves all three of those problems. We've been granted 16 patents across 12 jurisdictions, including The United States, Japan, India, and across The Middle East. And there are a further 17 patents that are pending that we're confident we can secure.

2:06 Traditional electrolyzers are yet to solve all of the industry's problems. They've they've been around for a hundred and twenty years, certainly in the in the case of alkaline technologies. So this is this is well understood scientific principle, but the technology to do so economically and robustly in different applications around the world is yet to be perfected. Whether it's pen technology, alkaline, solid oxide, or even anion exchange membranes, only clean power hydrogen technology is able to tick all of the different boxes. We're able to lower the CapEx requirement per unit. We're able to follow dynamic loads, which is again that wind and the solar without loss of efficiency, which others do. We can produce premium co products, no, high purity hydrogen, which can sell at a higher price. Medical grade oxygen, which can sell at a higher price.

3:00 We can scale the supply chain because we're using non rare earth materials, readily available materials, and therefore, overall, producing a lower lifetime cost of ownership for electrolysis capability. Now for those of you that have spoken with us before or been around this industry before, you you'll be very well used to the to the to the principles. But for for anyone new, it's worth going through how this normally works, but how we do it differently. Electrolysis uses electricity to split water into hydrogen and oxygen. You take the h two o and you make it h two, and o. What normally happens is that that water comes into a stack, you add the electricity and it splits them apart, and then it uses a very expensive, very fragile membrane at its heart to keep them apart.

3:53 It's usually made of platinum or iridium or both. And it can often be as much as half the cost of the the whole unit. I've worked in this industry for well, directly in this industry for eight years, and I know that they break. And I know that they can be a a real challenge to hydrogen projects and ammonia projects around the world. Our stack doesn't have a membrane. At the point of which we've broken the bonds, we we leave the gas mixed. That has to be handled very carefully, and we're gonna spend some more time talking about that later. But that mixed gas in our system immediately goes into a super drying process and then rapidly into a cryogenic tank. At minus 200 degrees, the oxygen becomes gaseous and falls to the bottom of the tank. The hydrogen remains gaseous becomes liquid, I should say, and falls to the bottom of the tank.

4:48 The hydrogen remains gaseous and goes to the top of the tank. We have then more IP protected technology that then separates or captures them separately, capturing very high purity hydrogen and above medical grade oxygen into separate tanks. If that was the end of the story, this would be a very inefficient way of producing hydrogen and oxygen because the electricity required to keep the tank at minus 200 degrees would be prohibitive. We have perfected more technology that allows the cooling energy that's within that cryotank to precool the incoming mixed gases so that they're they're cooled as immediately that they leave the dryer.

5:34 That means that by the time they reach the tank and the oxygen is being liquefied and falling to the floor, we've already taken out 90 of the energy requirement that would have otherwise been used.

5:51 So CPH2 is now in a position where we're generating enhanced value as a global technology development and licensing company. We're pivoting away from the capital intensive manufacturing to focus on on these core capabilities. We're in advanced discussions with some very experienced manufacturing partners, and I'm going to introduce you to some of them down the line here, who are in a better place to be able to manufacture our technology in different places around the world. We're creating value for our industrial customers through technology solutions. It's for better, lower cost, more reliable electrolysis, and that all important handling of mixed mixed gases. So we can leverage our existing and our extensive IP to support more clients in more places, and we can license our technology and the know how. Sometimes it's hands on know how that we can that we can sell into the market as well when people are trying to develop these projects.

6:52 Finally, and perhaps most importantly, these days, we're delivering AI enabled process control, visualization, and safety management, and that's something we can invest more in now that we are in in a different type of environment. So where we get to is we sell what I call technology transfer agreements. It's it's packaged up sales of licenses of the IP, of the insight, and the capability, the hands on capability, in much the same way that many organizations do around the world. We invent the we the the the solutions, others build them for us, and then together we sell them in different countries. We'll be licensing upgraded designs for the successfully fat three tested m f e one ten unit. That's the smaller unit.

7:40 By the end of twenty twenty six, we'll have a new design basis developed, including process flow diagrams and control philosophies for the successfully fat tested MFE two twenty unit, that's the larger unit. And we'll spend some more time talking about the two twenty in in a little while. Licenses are available by region with the right to use, manufacture, and or sell. And, of course, different customers, different licensees have different requirements or expectations according to their local markets. But the the opportunity of that local market knowledge is something that we're we're very excited about being able to exploit and be able to work with. It allows us to gain a a broader reach into customer expectations and projects, as well as being able to provide sales and marketing support, supply chain services because there's a lot of components into into one of these machines.

8:45 The commissioning is a core skill as well as operation and maintenance and other advisory services. So many of you will know that there was a a test site incident with our MFE two twenty. That's the two twenty in the picture, and it's on the test site in question. An incident occurred at that dedicated facility during its third and final stage of its factory acceptance test, so FAT three. Structural damage was sustained by the by the electrolyzer. No personnel were injured. An initial assessment is that a hydrogen oxygen mixture ignited during what is a routine depressurization of the system, a normal depressurization of venting of the system.

9:35 And that ignition caused a loss of containment. There was a big bang. There's a reason we do these things on on test sites. There's a reason that we we test all of our equipment extensively over several months in in fact. Potential causes of that that ignition are are being addressed, but they really come down to in the interim report, and there will be subsequent reports. But in the interim report, cleanliness. Particles, microscopic particles present downstream are probably introduced during the installation on what became a very exposed and external site for sensible reasons, combined with a venting velocity problem during that depressurization.

10:25 Velocity of those mixed gases exceeded the specification in valve seven zero five. Combine those two things together with the point at which we were testing the the the venting procedure and there was, like, an ignition and a bang. We are much more able to understand what occurred at the root cause analysis over the coming months, but we have been able to establish that the proprietary membrane free stack that we talked about earlier and the associated separators that we mentioned were not the cause of the incident. Our IP protected technology that we developed was not the cause of the incident.

11:14 But it remains under investigation at the, you know, molecular level as it should be. Internally and with external consultants, we've we've commissioned WSP who are underway to complete their their report as well as the health and safety executive, quite rightly, who are well underway as well and have been on-site. This will complete in on the August 31 and provide a basis for all remedial changes, which will then be retested right down to the component level to ensure that they meet all the required operational and safety standards as we move forward. We did successfully test the the smaller unit, the m f E 110 in Northern Ireland Water. It completed its its factory and its sat three at that site in Belfast. That's that's a picture of it there. You can see it's a it's a smaller unit.

12:10 It's the same technology, and therefore, it's the same IP with with much the same components, the exact same stacks that are involved in the process. Of course, we'll apply any of the learning from the larger unit to the smaller unit when we recommission. But Northern Ireland Water, Lag and Micah, the the Department for the Economy, ARUP, Baker Risk, and WSP were all involved in that project, and we're, you know, it's important that I I I cite their their huge efforts and their support in making that a success. So one of the things that we're doing is we're pivoting to a more capital light business model, becoming a technology development and global licensing business.

12:59 Perhaps the easiest way of demonstrating how that's changed is to show a a slide from a previous occasion, where we were showing there were two columns, manufacturing and direct sales as one revenue stream, and then technology development and licensing as a different revenue stream. We are ending that first column. We will not be manufacturing and selling directly. That opens up new opportunities. Our revenue will come from those technology transfer agreements from component sales. We still have stack capabilities. Services and advisory, It becomes much more highly predictable on long term revenues as we develop these technologies, work with our licensees and our manufacturing partners, then sell them into into markets around the world, especially where they have that knowledge of local customers, local projects.

13:57 It significantly lowers the amount of capital required. And on an ongoing basis, our working capital requirement is extremely limited in comparison to a manufacturing environment previously so that we don't have to keep coming back to the market to invest in the in the future of of this solution.

14:16 The margins are better. Our customer range is broader. We can even approach previous competitors to to sell them some of our technology and some of our IP. So we we have a much broader target to aim at. Really delighted that our existing licensees have stuck with us, Fabram, HYDROGEN, BENTEC, and still in negotiation, Coke Modular, part of the huge Coke industry's operation in The United States. So one of those manufacturing partners, I had the pleasure of of meeting with them on-site just outside Dublin last week, is HYDROGEN, working with Jones Engineering. HYDROGEN is a renewable energy company developing projects.

15:05 They've secured a relationship with a large famous insurance company for investment. Jones Engineering are an existing well established manufacturing organization, well over $1,000,000,000 in annual turnover, four and a half thousand employees. They are working together to be our manufacturing partner. We're in negotiations with them for The United States, Canada, Mexico, The United Kingdom, and Ireland. And they will have manufacturing facilities in both Ireland and in The United States. Now if you look at the pictures there, those units look remarkably similar to some of our electrolyzers.

15:54 These are actually power control systems units for data centers in Ireland and The United States. But the size, shape, scale, the assembly requirements, the engineering tolerances required, and and perhaps most importantly of all, the safety requirements of those units are very similar to ours. It's just that the components are different. So it's a real opportunity and a perfect marriage in many respects. We're excited to be able to make use of Jones' design for manufacturing and assembly protocols, which allow them to build much more quickly, much more cost effectively, and to ship much more readily.

16:41 It leapfrogs. It accelerates our ability to reach the market. That market is growing. Again, contrary to popular opinion, there is no lack of a market for electrolyzer technology or for the ability for projects that need oxygen and or hydrogen. What is lacking is is the supply chain to do so effectively, cost effectively. Whether it's the safe handling of mixed gases and the avoidance of ignition, which we have very direct experience with, whether it's advanced processes and methodologies in hydrogen recirculation, it's about cost and efficiency of those electrolysis stacks.

17:26 It's the technology for ultra high purity hydrogen, which is used in things like semiconductor manufacturing. It's used in things like pharmaceutical manufacturing. And even above medical grade oxygen, which can be used in wastewater treatment, which is needed around the world, or it can be used in in hospitals for therapeutic uses. All of these all of these are things that that can be delivered with our technology. We're doing so while removing those rare, expensive, and hard to source materials, that platinum and that iridium that are used in the membranes and other electrolyzers. And we have expertise in cryogenics that is really making a difference. So we have this global market for our technology, and we can license it by region.

18:16 Our licensees currently cover 12 different countries. USA, Canada, and Mexico, we think are about to be added, and we have two different organizations we're in conversation with who are both keen to seize that particular market, and there's a lot more countries to go at. And we have now a much more a much smaller team that will be focused on delivering this new model. The previous chief executive and chair have chosen to step down. Other directors have also left. There's four in total that are no longer on the payroll. And I think that's the right thing to do in terms of our new model.

19:01 It's the right thing to do in terms of our cash burn and our cost base as we move forward. Maybe if I spare my blushes, I'll I'll spend just a second talking about me. The board asked me to step up to the role of chief executive officer. I've been in the hydrogen industry in very senior roles, well, progressively for thirty years. For the last eight years in hydrogen, coming up on nine. For six or seven years, I was in The United States with a Fortune one hundred, Amongst other things, developing a hydrogen project in in Texas, we acquired a hydrogen business in The UK whilst I was there. Lastly, I moved to to Dubai working for an Indian company based in Dubai who were developing hydrogen projects in Adisha on the East Coast Of India, in the Port Of Duckham in Oman, and again in in in Texas.

20:01 I understand this market. I understand these customers. I understand that membranes break. They foul up. They're inefficient. They're very expensive, and sometimes they break. When I heard there was a technology company in The UK who were developing a solution for that, I was very excited to join, and I did, and I invested too. So I'm also a shareholder as are all of these these people here. So last slide. We're repositioning clean power hydrogen for the growing hydrogen market, and it is growing. CPH2 today, maybe that should just say yesterday, we're a manufacturer of IP protected membrane free electrolyzers.

20:48 But it remains PFA free, membrane free, designed for reliable long life operation, higher purity oxygen capability, higher purity hydrogen capability too. The smaller unit completed all of its testing. The larger unit got to to FAT two, and we will get to FAT three eventually. But we're investing now to reposition this business. We're focused on that core capability. We're moving the capital intensive requirements of manufacturing, significantly lowering our cash burn in terms of people, board, but also, of course, manufacturing and WIP costs. All 16 patents in 12 jurisdictions, including USA, Japan, India, and across The Middle East. And a further 17 patents are all still retained within the business and they belong to you, the shareholders.

21:45 We're exploiting AI capabilities in process design to accelerate, you know, more effective and efficient processes, visualization, safety management. And we have these global manufacturing partnerships, which is a a a way for us to leapfrog into the market, access those local markets with local knowledge as we license and then sell around the world directly. So we're we're we're pivoting this business very quickly to a technology development and licensing operations. We've kept there our existing licensees in 12 different countries. There's more to go. And this investment that we've just secured recently allows us to expand and activate that more readily. We can continue to develop new technologies too for what is an an evolving electrolysis industry.

22:35 And I think that in combination, this accelerates shareholder returns. We're able to project better returns because we're exploiting that sunk IP cost into what are addressable growth markets. And I think that's the end of the presentation. I don't know if, Jake, you want to jump back in there. Absolutely. Richard, if I may just jump back in, and thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's situated on the right hand corner of your screen. Just while Richard takes a few moments just to review those questions that have been submitted already, I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q and A, can all be accessed via your investor dashboard.

23:24 Richard, as you can see there, we have received a number of questions. So if I may just hand back to you to read out those questions and give your responses where it's appropriate to do so. And if I pick up from you at the end, that would be great. Thank you. Thanks, Jake. Okay. So we got some questions. Presubmitted. I mentioned I'm I'm reading the question. I mentioned to the previous management about obtaining grant funding, which they ignored. Okay. But your competitors seem to be successful at achieving this. I think that's a very good point. I don't think we have been good enough at securing the different grant funding. We have had some, but perhaps not as many as others. Sometimes the PLC status bars us from proceeding, but not in all. Sometimes size bars you from from being involved, but I think there are lots of opportunities.

24:12 Yes. I agree. And I think in this new arrangement, we should be better looking for the the different pots of funding that are are around, especially in the EU at the moment that we can we can make use of. I'm gonna there are some tough questions here. I'm just I'm just saying, but I'm I'm not gonna hide away from from any of them. I'm not sure Natalie should be the chairperson. She's tainted with the the previous management of all of them were useless, and the Ned's didn't do their jobs. Well, most of them are no longer with us and no longer on the payroll. Natalie has been elected by the shareholders in in an entirely proper process, and and I think that's I'm delighted that she's the chairperson.

24:59 And she actually brings a a different set of skills to this team, to this board that I that I think we need. There are others that are no longer here. Please, can you let us know if previous management's directors have given up any options and warranties they were given? They have all left consistent with their contractual arrangements. I I don't think any of them fully benefited from their contractual arrangements. It wouldn't be wise for me to go into personal details, but I understand the I understand the nature of the question. We the important thing is that we have part of the company.

25:46 We have repositioned the business. The cash burn is significantly lower than it was before, and we're in a much better place moving forward to exploit the IP with a team that's focused exclusively on doing so. Why did the directors only invest £10,000 in total between them? Actually, that was largely me. Well, because a lot of them were leaving and because a lot of them have invested previously, doesn't show confidence. Well, not all of them are independently wealthy individuals, and, actually, we've got more doers than we have investors than the and therefore, I think given that the the status of their previous investment shows some commitment as well as does their commitment to the business more broadly.

26:36 I missed a question. Can you see any investment in fuel forecourts to drive hydrogen fuel vehicles? Yes. I don't think it's our primary target. I think industrial use cases are more readily available and there there are more projects. The primary uses of of hydrogen at the the very bulk scale fertilizers, hydro desulfurization in particular are are core. But marine fuels are growing rapidly. Sustainable aviation fuel could be a huge market opportunity. I've been involved in a a road going fuel directly myself on the I 5 on the West Coast Of The United States when I was working out there.

27:26 Those projects are usually best secured when they are done in conjunction with someone that is is guaranteed to be using that fork or that refueling station initially, whether it's a local trucking company, for example. How does the change to licensing from manufacture affect the bottom line profit and so value of the company allowing for the cost benefits you have described? Well, the cost benefits are are the big win. The capital requirement moving forward is a huge advantage. Ultimately, profitability in terms of margin size, percentage margin size is significantly higher. But, obviously, we're not directly selling the units themselves.

28:15 So we're now into into a position where we are licensing our technology. That comes with license fees, comes with royalties, and then it comes with advisory costs and o and m costs and commissioning costs, which we we can charge directly. The percentage margins are much higher. It will take time for us to to build up that layering of licensing and royalties over time, but we don't have to outlay huge amounts of capital in order to get there. Given increasing competition within green hydrogen, better CPH2 have the strongest competitive position geographically. I'm gonna answer that question in a slightly different way. I think we have the opportunity to compete everywhere simultaneously unlike most, if not all, other electrolyzer manufacturers.

29:08 No one else has IP. Other electrolyzers are twentieth and even nineteenth century technology. They can't protect it. And therefore, we are uniquely in a position of being able to secure the rights to our equipment or the design and building of our equipment. And therefore, we can work work in those local markets and we can compete everywhere. A a more broad point, I think the the the market for hydrogen and or ammonia is is actually growing faster outside of Europe, and therefore, our ability to to be present in in Southeast Asia, in The Middle East, and in The United States, all of whom have very different dynamics to this market even though the end product is the same.

29:58 But our ability to access them is is a real win. Patents are no good if the technology doesn't work. I agree. It does work. We we fat three and sat three test tested the smaller unit with the same IP. The IP that we applied the the technology that was applied to the larger unit, which which failed during testing, wasn't the cause of the failure, so we have to go again. It's extremely frustrating. It's extremely frustrating for for shareholders, but also for the many guys that worked on it from for for a year or more in in building that unit and testing it extensively. Believe it or not, we were about ninety minutes away from completing that test.

30:48 It is a small comfort that it wasn't the core technology that appears to have failed. We have to go again. The innovation journey is always hard, but the IP has huge value, especially as we we begin to apply it to different projects around the world. Could you please provide an update on when the company expects to begin generating meaningful revenues? I think well, '20 well, 2028 is in the business plan, and that's been submitted in the normal manners in the normal manner. The full business case will be submitted at that time. We are just completing the transition process.

31:37 The investment that we've secured at this time is for funds, as we as we stated, funds the transition to a low cost model, which has some one off costs associated with it in terms of people, unfortunately, but also in terms of buildings and equipment. It funds the investigation into the testing failure and its correction and rebuild with others with other manufacturing partners, and then it funds working capital for the next two years. I think at that point, we're in a position where we can start to generate meaningful revenues for our shareholders. Are CLEANERA and KC Doitag still holding licenses and committed to selling the technology across Europe and The Middle East? That's an easy one.

32:26 Yes. Except they've changed their name. It's they're now called Bentech. So the the pictures used the the slides you saw earlier where it said Bentech across The Middle East is the the new name for Kaneera and KC Duytag. And they've moved their headquarters to Texas, which is interesting because a Jones Engineering will also be, they hope, building in in Texas too. Are Jones going to be rebuilding the new m f e two twenty to test? Who would pay for that? In the first instance, the one ten unit is is gonna be there on-site at Jones Engineering, and we'll apply the learning to that unit in the first instance.

33:17 That will be well, all of that insights and testing will be paid for by us, but the rebuild and the and the cost of hosting that will be paid for by by HYDROGEN. I'm not sure if I missed any of the other questions. I think that was all of them. Unless there are any more, I'm happy to I'm happy to try and answer any more questions if we have some. Richard, I if may just jump back in there. It looks like you've addressed absolutely everything. So thank you very much indeed for being so generous of your time and addressing all of those questions that came in from investors this afternoon. And, of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended.

34:03 But Richard, perhaps before really now, just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with, that would be great. Yeah. Well, we we we went through a lot. The innovation journey is a is a challenging one. The technology is is unique. It's market leading. We have quotes from customers and licensees around the world telling us that they believe it's breakthrough technology. The reason I'm here at all and that I came back from my my my other roles in the world is because demonstrating membrane free electrolysis and the handling, the safe handling of mixed gases is a real prize.

34:54 It was never going to be easier, and so it was proven. What where we are now is is that we are in a position where we can actually better exploit the intellectual property that our our our long standing shareholders have funded and our new shareholders have committed to to actually make that a reality with partners around the world and focus on, you know, the real core capabilities. KING POWER HYDROGEN has the technology to liberate the hydrogen industry and to provide a more cost effective and reliable solution for the production of hydrogen and oxygen. And I'm I'm delighted that the board asked me to step up into the chief executive role so that I can be part of that future, And I hope to be speaking with many more of you in the future also.

35:46 Perfect, Richard. That's great. And thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback in order the management team can really best understand your views and expectations. This won't take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of CLEAN POWER HYDROGEN PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all. Thank