H-Power (LSE:HPOW) — Q&A session

0:00 Good afternoon, ladies and gentlemen, and welcome to the AFC Energy Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your question at any time and press send. Given the significant attendance on today's call, the company may not be in a position to answer every question received during the meeting itself. However, the company can review your questions submitted today, and we publish those responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. And if you give that your kind attention, I'm sure

0:31 the company will be most grateful. And I'd now like to hand over to Adam Bond, CEO. Good afternoon. Good afternoon, Mark, and and good afternoon, audience. It's it's great to be with you again this afternoon, our second investor meets company presentation. It's great opportunity for us to speak to as many of our shareholders as we can in one location. I understand there's a great turnout today of about three fifty shareholders, which is fantastic. And as always, we very much appreciate your support. The structure of today's presentation is really a brief overview based on the results that we announced yesterday for the year ended October 2023 and to give an opportunity for shareholders to ask questions. And as Mark said, I believe a number of questions have been submitted. We may not get through them all, but we'll we'll do our best to get through as many as as possible.

1:20 But to start with, the presentation today, as I said, is is really around our our results, which were announced yesterday. And for those who haven't seen them, we've announced a couple of new initiatives and ways of reporting information that we haven't used in the past. And I guess one of the first things that we've talked about in our results is the concept of an order book, which, at the moment stands at about £27,000,000. The £27,000,000 order book reflects, contractual, unbounce, revenues, if you like, that, our current customers and partners have committed to in contract. Although admittedly, of those may be, deferred in terms of timing into subsequent years. They won't all be recognized this year. And an example of that would be your Speedy Hire contract where we have a an amount of committed, investments or or committed, sales, if you like, into our joint venture with Speedy Hire, which we've publicly stated at 4,700,000, and certain revenues will happen after that, which is defined as uncommitted revenue. So we tried to be, very clear in how we've committed to or or or stated committed versus uncommitted revenue, but an order book, which is in the form of a signed contract of about £27,000,000.

2:36 Cash at bank for the year of 27,400,000, which, is compared to 40,000,000 last year, which, I think shows the the way in which we are managing our costs, and and and Peter is gonna talk a lot more about that in in the coming slides. Loss after tax of 17,500,000, which is fractionally above where we were last year. And importantly, and you may have seen this in some of the announcements that we've been making of late, we're starting to recognize two individual divisions within our business. We don't account for them separately at the moment, but divisionally, we now see a fuel cell business and a fuel conversion business, which, is is also referred to as as our ammonia cracking technology. And so we'll be talking a bit more about that in the slides ahead. In terms of the fuel cell highlights over the last twelve months, I guess it's a progression.

3:26 Most of our shareholders will be familiar with the concept of the HPOWER towers that we deployed, over the last twelve months into a number of customers' hands. Those systems were designed to unlock a market. They were all, I think 100% of them were deployed on a paid for rental basis, so they were commercial in nature. And as part of that process of deployment, we received invaluable feedback to our engineering and technology teams on how the technology can be evolved into a larger scale product, which the market is demanding. The the one of the basis of the HPOWER Tower deployment model was, as I said, there to unlock a market.

4:11 Through the types of customers that we we received inquiries from, many of you will have heard when we talk about a a list of of qualified inquiries. A lot of those, you'll see, were the the companies that we deployed systems into the hands of over the course of the last twelve months, who are also customers of Speedy Hire. And it was through the success of that, that that deployment year, if I can call it that, where we we garnered enough interest from the industry to, to drive Speedy Hire into a, a joint venture with us, to basically capitalize on on not only our technology platform, but also the great positioning that Speedy Hire have in The UK plant hire market as it relates to, for example, generators. So during the year, we, assigned our heads of first heads of agreement, heads of terms with Speedy Hire.

5:02 That was announced middle of the year. And and then just after the year end, that culminated in the signing of our first joint venture with them, which was hydrogen Speedy Hydrogen Solutions. And for those who who who follow the social media side of things, you will have seen that, we deployed our first generator into the hands of Speedy Hire, last week in Liverpool as part of their, their expo in in in Liverpool to their to their customers, which is exceptionally well received. And that's a you see a photo of that in the in the final final slide there on the on the right. During the year, we also have been working quite studiously on the ABB system, 200 kilowatt s plus series. We often refer to it as ABB system. They've supported us and funded the development of it, but clearly that technology is not something that is exclusively available for ABB. It's also being marketed by a number of our other partners and, for example, TAMGO in The Middle East. But the work that we've been doing on the, on the s plus series, the 200 kilowatts, you can see a photo of it there.

6:08 It does exist. It's, it's it's nearing its operational milestone, and, we we're just, as I said, completing the build phase at the moment. But, vastly, we're we're through most of that. For those who have built new technologies before, you know, sometimes you can build these things and and it takes a little bit longer to iron out all of the bugs, particularly around software and being able to operate on in an automated, way. And so a lot of the work we've been doing on the 200 kilowatt plus s plus series, generator has been to try and iron out a lot of those bugs, whilst still in the manufacturing or build phase of the project. And so that's pushed us a few months into this year, but we are expecting to see, generating the system generating power in the in the short short term. One of the big announcements during the year was, the entering into a second distribution agreement with Tamgo, which is a Middle Eastern partner based in Jeddah, Saudi Arabia.

7:02 Tamgo are part of the Zahid Group, which is has been recognized by Forbes recently as one of the most influential families in in The Middle East, and, and they're certainly very well positioned with companies like Caterpillar and, FG Wilson, Doosan, Kubota, others. And, they've selected us to be their partner into The Middle East. We are working with Tamgo on a number of deployment, opportunities at the moment with some of the mega projects in Saudi Arabia in particular, and, we are expecting to see our first orders coming from that relationship, during the course of of this year. Clearly, is a little bit out of our control. We are supporting the TAMGO team with, proposals. There are a number of proposals out there at the moment. So as soon as they're as soon as they're in, we we will be making further announcements on that, shortly.

7:49 And then finally there, we have, our relationship with Axione expanding from an initial field trial, last year into a first order of a of a 30 kilowatt generator, which will be coupled with a 45 kilowatt hour battery to form a 50 kVA generated package for deployment into Spain this year. The generator is is is under build at the moment, be starting its factory acceptance testing shortly, so you'll be, seeing a little bit more information on that very soon. So a lot of progress this year, and and you'll notice that most of that is on productization, not necessarily on technology in in a pure sense. A lot of the work that we've done has been developing products based on customer feedback, and we're now starting to see the benefit of that work through the the culmination of a £27,000,000 order book, which which, as I said, we we announced yesterday.

8:41 The highlights of the year, I think, you know, we can certainly talk about validation of construction market as our focus. We we took that as a view about two years ago that we should start focusing on construction. And I think that's very much been validated with the uptake we've we've received on from the construction industry. And, you know, the the types of organizations, the tier one contractors coming to site at the moment with Speedy Hire has been tremendous. We've, we've we've certainly seen a vast amount of interest that probably exceeded both Speedy Hire and our expectations when we first signed the, the joint venture agreement. The business model has always been something we've been challenged on in terms of have you got the right business model? Is it is it is it a means of accessing customers at scale? You know, we often refer to the diesel generator market being a $20,000,000,000 a year market.

9:30 And I think during the last twelve months and certainly the discussions with Tamgo and Speedy Hire, we have really validated that business model as a vehicle to scale deployment through the rental businesses and and our dealers locally. The validation of the s series air cool technology, you know, as as as much as we talk about, a 27,000,000 pound pipeline or order book, it's important to say that that doesn't include any values associated with the s plus series, which is the, system going to Axiona oh, sorry, to to ABB, nor does it include any revenue associated with the ammonia cracker. So that pipeline is is exclusively the s series air cool technology and any ancillary infrastructure around that. We believe that is a quicker route to market, and we've had that validated with the interest that we've received today.

10:19 The component supply chain, we've spent a lot of time working on our supply chain. We get asked a lot, how are you going to scale? Who is going to help you scale? And, the last twelve months, we've we've validated a component supply chain that has been set at a level that, we believe is is it gives us the the ability to scale as as and when the demand is is is there. The impact of that scale on the pricing, we are now starting to see, as the last point there also alludes to, validations of over 50% cost reduction in components versus what we were delivering twelve months ago. And that 50% is is just a starter, where there's certainly a lot of scope to further reduce costs, bringing the cost of our the capital cost of our generators down to, to to levels which is more commensurate with the with with generators in the market today.

11:09 So why the construction industry focus? You know, we talk a lot about, the demand in the industry, but why? I guess there's a number of drivers and and and all of these are external to AFC. We do not have to create these drivers. They are drivers that are pulling the technology towards the industry rather than us us pushing it. And that pain point, if I can call it that, is basically a a result of renewables and batteries alone not being able to meet the requirements of off grid power in The UK construction market, or indeed any construction market. The tender requirements for decarbonized solutions are now vast. We're now seeing examples where up to 30% of tenders are requiring decarbonized solutions as part of their evaluation criteria. That's something that particularly is being seen in government contracts. Emission regulations and driving technology choice, Obviously, you you have to meet certain emission standards. We see that as we drive cars through London through the ULEZ.

12:06 That same pressure is being applied into the construction and off grid power market. You're now only able to purchase new stage five generators, which are significantly more expensive than previous generators because they add in catalytic converters, they add in platinum, they add in certain aspects which drive costs higher at a at a point where our costs are coming down. So we are becoming more cost comparable against new latest technologies in diesel. And I guess above all, tier one construction companies are being encouraged and and indeed, you know, strongly encouraged to drive environmental, social, and governance requirements by their shareholder community, as we all are as listed companies. So there's a lot of drivers moving the construction industry at at at pace towards a decarbonized future.

12:53 And so that that that pain point is not only UK based, but it's also global, which means we have a very good global market in which we can position ourselves to, to exploit. Some examples of that, if those of you who who are familiar with the HS two project, you will, see there a diesel free plan building a net zero future, which was published just over a year ago, which talks about, no use of diesel on HS two sites by 2029. You know, these are targets that are no longer being set by reference to 2040, 2050. They're this year this decade, and they're five years away. If you think about how many diesel generators on are on construction sites for HS two, you'll know that that alone is is quite a decent market. The Lower Thames Crossing, which is a tunnel being built under the Thames or drilled under the Thames, is is a multiyear project, multibillion dollar project multibillion pound project, sorry, which is looking to replace around 20,000,000 liters of diesel, and and most of that is going to be met through the adoption of hydrogen. So, again, a a massive opportunity for us just in two projects. And you can see how government, particularly these large infrastructure projects, are driving towards the immediacy displacement of diesel.

14:09 Our scaling up of technology, our focus has very much been on third party contract manufacturing. We've we've said stated that publicly before. There are three key subassemblies to our HPOWER generators. You've got the fuel cell stacks, and we're currently working with contract manufacturers at the moment. Some of are actually in the office today, and we're talking about how we are going to scale up the production of stacks and the components of those stacks into the thousands of generators worth over over a period of years. And, I don't wanna give you impression that's gonna be this year or or next, but it but it's certainly something that we're aspiring to looking forward. The fuel cell modules, we're we're in advanced discussions with world class manufacturing groups on on on that particular module. That is basically the stack and the balance of plant around that stack.

14:54 And then the generator canopies, which is the the the canopy that looks like a diesel generator, I guess. We're in discussions with a number of suppliers around that. That tends to be a little bit more metal bashing, less technology driven, and so that is likely to be you know, likely to look at a number of different suppliers across different regions depending on where the the the demand ends up being. So you can see there, we're covering The Middle East and UK and Europe in in particular at first instance. So we'll we'll progress with those. But in terms of the components that make up those subassemblies, we're talking to suppliers now that are able to deliver a thousand generators plus worth of components. If you can't meet that sort of standard, then they don't tend to form part of our immediate supply chain or at least our strategic suppliers. So thus far this year, the scale up that we've delivered with our partners is seeing costs reduced by over 50% on those key components of the fuel cell.

15:46 So we're now starting to see the benefits of scale, and that benefit will become more prominent as our our scale up continues. And I guess the the qualification of those suppliers, if you think about every key component that goes into a fuel cell, you don't just take the first one you buy off the shelf, you buy them, you test them, you test the quality assurance, you you run them within the component or within the module themselves, make sure they work to to the specification. That's quite a timely and and, both a large investment of time and resources. And 2023, we saw the company, AFC, invest a lot of time and resources in the qualifications of our supply chains in, in in to position us for scale. So there's been a lot of work done this year, not only on the product, but on the mass scaling up and and preparedness for scale up and manufacturing and engagement with the industry as to why we believe we've we've got the right business model in the right industry at the right time.

16:44 On the ammonia cracker front, which is an area which is probably a little bit less known and understood, we have spent a bit of time working with, with industry and and certainly shareholders have probably heard this before, but, you know, hydrogen is a great fuel and and that is is the core of our business, but it can be difficult to move around in significant volumes often using things, vehicles like that, the trailer you see in the image there. But ammonia is one of the most widely traded commodity chemicals on the planet. I believe it's the second most produced at the moment, used predominantly in agriculture. It's transported widely, and it is a hydrogen carrier fuel. So hydrogen is part of the ammonia mix with along with nitrogen. And just in those two images there, you can see a 40 foot tube trailer versus a 20 foot, ammonia, tank.

17:34 That ammonia tank probably carries enough hydrogen to fill eight to nine of those hydrogen tube trailers. So when you're talking about logistics, you you know, the cost of logistics is is one of the key determinants of of the economics of of hydrogen and our fuel cells. And so we believe moving towards a generator that's able to use both hydrogen where it's available at reasonable cost, but also ammonia and cracking it on-site provides us with diversification of hydrogen supply to meet the demands of our clients.

18:07 A lot of people we speak to don't actually know what a cracker looks like, and crackers are not new as a technology. You can see there on the left ethylene and naphtha crackers, which are currently in place around the world today. You get a sense of the scale of these crackers. The the the the types of technology within an ethylene and naphtha cracker are different to an ammonia cracker, but you can see that one of those, larger scale crackers is is unlikely going to be seen as an alternative to a refueling station for a truck at a a at a local shell service station, for example. It's unlikely to be seen as something you could put in a on a temporary basis, a construction site to generate hydrogen from ammonia. And so what we're trying to do and what we are doing is distinguishing what is currently the market's view on what a cracker is and its footprint with something that is but as you can see there in the in the in the in the in the render there, a 40 foot shipping container, which basically produces four to 500 kilograms of hydrogen per day. Now those four to 500 kilograms of hydrogen, just to put that into context, a traditional hydrogen, if I can call them traditional, a hydrogen truck HGV has a storage tank of about 15 kilograms of hydrogen. If we're able to produce four to 500 kilograms of hydrogen from a 40 foot container, you can see how, you know, how that becomes an enabler for things like transportation, using using hydrogen as a as a, you know, hydrogen trucks and buses and and and the like.

19:32 So during the year, we've our our cracker team had, invested a lot of time and money in in the modularization of this technology, and you can see on the left hand side there a photograph of the cracker, its purification, and and what what you can't see is a is a compressor, which is currently being installed. The the system that we have in operation today is modular in design. It's scalable in design, so we can go as big as you as you needed to. It can fuel construction sites and, and and and become a hydrogen refueler, for example. But it unlocks also the global trade of hydrogen, which we're now starting to see hydrogen being moved around the world in the form of ammonia, where it has to be uncracked or cracked at the at the at the point of, of arrival into Europe or Asia.

20:20 What makes our technology different? We have a number of patents filed and, and and certain patents are under development as we speak. So we believe we have got a number of areas of novelty in those patents. The it's it's a novel modular scalable design, that, you know, there aren't too many people doing what we're doing. So we believe we've got a first mover advantage in in that novelty. The fast startup and response time, if you think of those crackers that you saw in the previous image, the time from, you know, from cold to to hot running is measured in hours generally, in in some cases over twelve hours. Our our ammonia cracker has a response time that is measured in minutes, not hours. So the applications lend themselves more to the technology that we're developing. Low power requirements, we talk about a 5% of an electrolyzer producing the same amount of of hydrogen.

21:10 So where you have low cost hydrogen, I'm sorry, low cost power, you obviously make the hydrogen there using electrolysis. But where you need to use it, in in other locations, you're often best to use an ammonia cracker to crack the hydrogen from ammonia at a much lower power cost. Our systems are very much designed for mass manufacture. Mike Rendell and and his team are very focused on how you scale this up from a production perspective. This is not an area that has been mass produced in in in sort of the volumes we're talking about before. So it's important that we work with the industry to to make sure that we are capable of mass production of these these crackers. And, of course, above all, the systems are portable and easy to install. You know, we're not building a big petrochemical site. We are basically loading a 40 foot shipping container, on a site with limited civils, being able to utilize that to make hydrogen as and when. And then if you ever decide to relocate that, it's it's easily removable.

22:05 So again, much more nimble technology platform. The cracker itself, it it sort of resembles and and what you can see there on the left, that's a little bit larger than a Coke bottle as as those who have heard me talk about it before. I often refer to it functionally very different, dimensions are are not too far off. That ammonia cracker technology is able to be put into a purified system to create hydrogen for transport and power such as a fuel cell. We are doing that as we speak. We are also working with some partners around using the cracker to create a pilot fuel on ammonia combustion, which tends to be greater than one megawatt class combustion engines such as those used in maritime where ammonia combustion is likely to be a a future decarbonized solution for the industry.

22:57 And we're also increasingly working with our partners around producing a hydrogen rich combustible fuel for industrial applications. And we have probably half a dozen customers at the moment where we're working to define what that technology application might look like in a real world environment. So they're the three applications, but both of those all of those, I should say, are are predicated on on the core technology, which is the ammonia cracker on the left. So to the financials, I'll, I'll hand over to Peter. Great. Thanks, Alan. So if we could go to the first slide. So good afternoon, everybody. I'm the CFO. This is I've been here just over a year. So this is my second set of results.

23:40 And I think straight off the bat, what I'd like to say is we are reporting a month earlier than we did last year. Feels very good to be doing that. You know, we've built a really strong team here, and the proof is in the pudding. As Alan said, for 2024 to be about scaling up, 2023 needs to be about investing. And so I thought the best way to walk us through the results was to look at the cash flow, because most of the story of 2023 is is in the cash flow, and that's the easiest way to explain explain what happened. So as I say, investing in both the product and the facilities, laying the groundwork for scaling up. We've focused on all the areas or we covered all the areas Adam has talked about, but the particular focus, certainly in terms of cash has been on moving from the 10 kilowatt generator to the 30 kilowatt generator, reflecting the customer feedback and the field trials we've had. We've identified this sweet spot in construction sector, and that's around about 30 kilowatt mark.

24:44 So I think the two main points to bring out are cash flow from operations. The outflows have increased by a couple of million from 15,000,000 to 17,000,000, and that's essentially an increase in staff costs, two 1 2,100,000, and I'll cover that a bit more later. Overall, however, cash outflows have reduced by 2,400,000. And that's primarily driven by two areas. We've managed to accelerate our tax credit recoveries, and we got a a 2,000,000 from ABB, which again I'll cover I'll cover later. But I think on this acceleration point, a lot of the work we've been doing is behind the scenes around systems and processes. And the best way to manage your cash and get maximum value is more efficient processes and systems. And as I say, had we not done that, we would not be sitting here a month earlier than last year.

25:37 Thank you. Okay. So in terms of operational readiness, the reason this is so important is we can outsource and outsourcing is is a key pillar of scale. But we do also need the abilities in house not to work at scale, but to set a baseline and to guide our outsourced partners, you know, knowing what we're doing is the best way to get the best out of out of our outsourced partners. So really, the main thing here, as I say, staff costs have increased by 2,100,000 from 7.5 to 9.6. And that's been largely driven by an increase in average employee headcount, 77 to a 113. But if you look, the average cost per employee has actually dropped from 77 to 68.

26:23 We've got more people on the on the shop floor, if you like. We've we've beefed up our engineering, our manufacturing, and our purchasing, all three critical to a successful scale up. And essentially, about third of those costs can be recouped in the R and D tax credits. Okay. As I say, there was a sort of a double bubble in 2023, 4,100,000 of cash received versus 500,000. And so I've just broken that down so you can see how that picture has evolved over the years.

27:03 And then back to the investments. So leasehold improvements, 2,700,000 last year and some related equipment, but essentially leasehold improvements GBP 1,600,000 this year. So essentially, the work is done. We've got the facilities. We've got the floor space. We're doing a lot of work now on setting up the floor space, so we'll have workstations and we can move the units through the facility at the at the sort of rate we need to do to hit our revenue targets. The other thing that sits within the investing and financing activities line is the ABB relationship. And again, last year, we received £2,000,000 from ABB, pounds 600,000 in respect of warrants accounted for in equity.

27:49 But more interestingly for in terms of looking ahead, the balance of that, the 1,400,000 is sitting in deferred revenue. And that will be earned earned out over the course of up to 10 units from ABB. There'll be a discount for each of the 10 units. And, obviously, that's a that's an incentive for ABB to keep, you know, keep coming back for more. And then finally, the question I always get, so I always like to deal with this one head on, is cash is cash burn. There's a number of things going on here. One of the things is, obviously, as we've we've moved through 2023 and into 2024, there's less cash going out the door in respect of r and d, and there's more cash going out the door in respect to the inventory buildup. That inventory buildup is then turned into product, which is turned into sales and receipts.

28:45 And so in the first four months of 2024, we've already invested $2,600,000 in inventory buildup. So in the reports,

28:55 we've given the February cash position of 18,000,000, which is a movement of about 9,000,000. About half of that 9,000,000 is CapEx or inventory buildup, it's balance sheet. The balance is sort of the operational cash burn. And so I put these two lines in here. So the average monthly operational cash burn, 2022, 1.3, '23, one and a half, first four months of '24, back down to 1.3. So actually pretty steady, you know, as Adam says, we're we're we're staying on top of the expenses and and and the cash. Interestingly, if you adjust that line for the tax credit receipt that we'll get during 2024 that isn't in that 1.3, the cash burn drops to 1.1.

29:44 So we're in good shape. You know, cash is under control. And I've seen a lot of questions in the the pack about sort of fundraising the future and what does that look like. And, you know, we'll we'll come to that in a minute. But, essentially, I think the sort of points to the points to note, as I say, cash is under control. We're we're delivering on what we expect, and those are the numbers we were expecting to see when we set the budgets last year. The market is is difficult at the moment, but the market is very definitely open, and we're getting a lot of lot of interest.

30:20 And this shows that we've still got time, we still have options. So we're in a good position, and I think that's probably the best way to end the results. Thank you. Thanks, Peter. So last couple of slides before we move to questions and answers. The outlook. On the on the revenue front, as I mentioned earlier, we have an order book of 27,000,000 as of March 2024. The majority of our revenue targets in analyst consensus, for what it's worth, can be met with our existing customers and dealers. We are on target to meet our consensus analyst consensus revenue forecasts, and we are you know, we continue to be encouraged by the demand that we're seeing from the likes of Speedy Hire, Axione, and others.

31:06 The revenue forecasts are heavily weighted, as I mentioned earlier, on air cooled fuel cell technology. So in in our revenue forecast this year, we're not assuming any revenue from the 200 kilowatt generator from with ABB, nor are we expecting any revenue from the cracker. Obviously, can change. We can accelerate some of those items. But at the moment, we we we feel prudent to exclude them from the from the forecasts. In three years time, we're targeting over 200 generators annually of of of of of of product. That's not necessarily all 30 kilowatts, so please do not just divide 30,000,000 by 200 to get a a cost of good.

31:44 There there are different sizes in those, but that's where we're targeting about 200 generators to achieve over 30,000,000 of sales. And one of the questions we get asked a lot is, think it was a phrase that we used last year around hockey sticks and and hockey stick curves. You know, we were we're we're we're sitting at, you know, as you as you saw in the results, you know, a few 100,000 revenue this year, moving to approximately 6,000,000 next year or the year that we're currently in, moving then to another number, which is sort of, double that and then and then over double it again. So you're starting to get an a a growth of revenue, which resembles a hockey stick, hence the reference. You know, we don't control the share price, unfortunately, but, in terms of revenue and generating sales, we are, you know, we're mirroring what we would call a hockey stick curve, for the for the years that, that follow.

32:31 And as I mentioned earlier, no no sales are expected from, ammonia crackers this year.

32:37 The outlook is very much focused on delivery. As Peter said, we've spent money this year, we've invested money preparing for delivery. We've, accumulated now an inventory position, which now has been converted into product, which will be converted into revenue. Some of that inventory is being spent, others, you know, obviously, we still will continue to buy for for emerging demand. The actual delivery of the first 30 kilowatt generators to speedy hydrant solutions, we've seen, you know, the first system reach factory acceptance test. We've now received the attestation of conformity for the CE mark from Tufsud. So we're confident now that, you know, there'll there'll be systems in the in the market pretty soon. We're working with Speedy Hire on on selecting those first customers based upon the demand that we've seen to date, and that pipeline of demand is is only continuing to grow.

33:28 Delivery of our first system to Axiona, I mentioned that's now within the next few months. First time go commercial orders into the Middle Eastern market, which is an important stage of,

33:38 of our diversification of supply away from just, The UK market into The Middle East. You know, the target is to start looking at not only receiving those commercial orders, but then obviously delivering those orders into The Middle East during the course of this, this calendar year. The delivery of the first 200 kilowatt system, you know, delivery is is not necessarily CE marked, which I know is is we said is a prerequisite to go to ABB, but that CE marking process, which took us about six months on the, on the air cooled generator. We expect to basically start that process in in full knowledge of now what's required. Having gone through it once with the s series, we're well positioned to maybe speed that up a little bit for the s plus series. So that that that will be, commencing this year. We will be announcing more supply chain partners and manufacturing partners, which will give you the evidence and confidence to to see the growth trajectory of our of our of our of our scale up, strategy.

34:34 The ammonia cracker that we have on operation at the moment, we're continuing to to validate that and and and see that operating successfully, which is actually now becoming a bit of a a point of interest for our partners to come and visit, see it operating, see how it works, understand how it might work in their application or in their jurisdiction. And so we, we're regularly receiving partners, coming through the door on on the ammonia cracker at the front. And so as a result of that investment over the last twelve months in our, you know, the what we've described as the world's largest modular ammonia cracker, we're now expecting to see announcement of of development and deployment partners during the course of this year with revenues, obviously, to follow in subsequent years. So it's a it's a hopefully, that's a fairly coherent progression of, you know, first systems in the field, fuel cells in particular, then moving in towards market deployment with our our customers and and and our distributors into now growing and actually delivering on on that, investment over the last few years into a business where revenues are projected to grow over the coming years. And I

35:36 think that's the conclusion of the of the slide deck. So on that note, thank you for listening and, look forward to your questions. That's great. Adam, Peter, thank you very much indeed for updating investors. And as you say, you've received a number of questions throughout today's presentation. Thank you to John, Kurt, Steve, Rob, Chrissy, and a bunch of other investors for submitting their questions live and also to everybody for their engagement and for those of you that submitted your questions ahead of the event. So let's dive straight into it, if I may, Adam. I to combine a couple of questions here. Is there any interest in producing in The USA, taking into account the tax incentives when selling and renting internationally? And perhaps an add on, are you planning to expand into Ireland?

36:18 Okay. So starting with The US, I mean, The US in terms of temporary plant hire is probably the largest market in the world. We are and and do have discussions with some of the big plant hire businesses in The United States. The, tax incentives that have been announced through the inflation reduction act, recently tend to focus more on the availability of green and blue hydrogen, not so so the production of hydrogen, not necessarily the consumption of it, which is what we're focusing on. So, it will mean the fuel gets cheaper in The United States. I think the The US is projected to have the lowest cost, hydrogen in the in the world based on the subsidies that are received, which then makes it a more viable technology to be deployed into that market. So short answer in The US is it is a market we will look at.

37:08 It's a market we have got inquiries from.

37:11 I I would say at the moment, we've got a great partner in speed hire, and we've got a very big market, which we have first mover advantage in The Middle East. They are our immediate focuses, and I I you know, I'm reluctant to go too far, too wide, too quickly because what that will see is our cash burn accelerate, and I'm I'm really all about delivering our commitments this year and seeing revenue hit hit the hit the books this year rather than create a bigger pipeline without the delivery behind it. In terms of Ireland, yes, the the relationship with Speedy Hire includes Ireland. They have exclusivity over Ireland. I know there have been some inquiries into from Ireland, both on the fuel cell and the cracker front. So we are working with Irish well, potential Irish customers.

37:57 Do we have a a strategy that's dedicated to Ireland? No. But we're we're certainly, you know, not excluding it from our from our pipeline. That's great. Thank you. What are the contrasting benefits of the air cooled and liquid cooled versions? And why do you need both?

38:16 So there's an hour long answer to that question, which I'll try and condense into thirty seconds. Look, at at the end of the day, the two are positioned for different, scales. So our our air cooled is designed for a 10 to 50 kilowatt range coupled with a battery, which gets you to around the up to 75, 80 kVA mark. And then our liquid cooled is designed more for the 100 kilowatt and above. So the the the two don't necessarily overlap then. They're complementary to each other, hence the need for both. When we talk to the construction businesses, they talk about their sweet spot being in that sort of 30 to 50 kVA range, which is why we started at that level. And, you know, if you speak to Speedy Hire and I I don't have the exact numbers, so these this this won't be true.

39:05 But, you know, they don't own many one megawatt generators, but they own a lot of 30 kilowatt generators. So, you know, if we wanna get volumes up, if we wanna get revenues up, if we wanna get the supply chain working in a way that brings cost down based on volume, you start at the point where the highest volume is. And that's why our focus is very much on air cooled generators for the construction market to drive volume. In the same time, we're working on on on some of the, scale up opportunities around the s plus series, which are going to be more valid when you're looking at backing up up megawatt data centers, when you're looking at maritime applications where the air cooled just won't be big enough. So different markets, different applications focus today is on the s series, air cooled. That's great. And sticking just with the,

39:50 s plus series, how long do you think certification will take? As long as the certification agency take to, opine is is is the is the cute answer, I guess. But, I mean, at at the, at the time when we started the s series, approach with about six months before we got the letter, confirming that we've, complied with all of the CE standards and requirements. So if I said six months, I I'm probably not going to be a million miles away, but, you know, you you don't control that timeline. That's that's a timeline that someone else is controlling

40:25 for you. You can only present the information in a way that they want to see it, present it in a way which is robust. And I think the information gathering that we and the experiences and learnings we got from the, air cool system, will only help accelerate or at least achieve the same type of time frame as as as as we've just just experienced. That's great. Thank you, Adam. Let's just turn to, I guess, manufacturing. A few questions that we received around this. I mean, do have any plans to manufacture fuel cells for use in aviation? No. Short answer. Very different market, and our market is about displacing diesel generators. We don't wanna be everything to everyone. That will be very different and probably a very difficult conversation to have with our shareholders next year when we're promising a much longer term. Aviation is going to take years to develop and to implement. And whilst it will be a big market and we know the company is playing in that space, it's not a market we're focusing on.

41:24 Thank you. Who is manufacturing our fuel cell stacks, and is it the same company being considered for manufacturing the the complete systems? We have multiple companies that we're talking to about manufacturing our stacks. One who actually does manufacture them is in room next door to us at the moment. So, I I I at the moment, we're not disclosing names. The company that we're working with, is a highly reputable organization who, has already manufactured our s plus series generators for the ABB generator, and they're now moving towards manufacturing the s series, stacks for our, for for for our, you know, our latest 30 kilowatt generator. We have other options. You you know, it's it's always risky to put all of your eggs in one basket. So, we have other partners that we're talking to about, scaling up some of their production around stacks in particular.

42:19 But they, you know, we we we yeah. We're not in a position at the moment to announce who they who they are, but but we will be talking about them very soon. That's great. Sticking along the kind of same theme, will the company need to invest any funds into the outsourced system mass manufacturing lines? It's early stages, but sometimes you do, sometimes you don't. What we're not expecting, if we do invest, it will be small things. It certainly won't be sort of material cash outflow, that's not part of what we're looking at. That's great. And then perhaps just finally, what scale does the company envisage for contract mass manufacturing in 2025? What scale?

43:06 Like I said, in terms of numbers of models or total number of kilowatts, megawatts, or gigawatts? Yeah. Look. I mean, we we we well, we've given you a a sort of a hint of 200 generators by in three years' time. So you can assume it will be less than that in in two years' time and less than that in one year's time. So you can assume there'll be a cascade upwards of, of of generators out the door. I would say and it's it it is an important point. I think for companies like AFC who are now starting to work with third party contract manufacturers in scaling up their business, one thing that we as a company have taken a view on is you never lose the ability to manufacture in house. At the moment, we're manufacturing all of our generators in house. We we as I said, we're using some third party contract manufacturers for some elements, which is almost a sort of a we're we're starting that journey of third party contract manufacturing, but we do not intend on losing that capability in its entirety. So what we externalize will not be reflective of the full fleet of generators that we produce. There will still be a cup of in internal production and and and external production.

44:15 Thanks ever so much, Adam. Let's turn to partnerships with a few questions around partnerships here. Once the Speedy starts delivering generators to their customers, how do you see the supply of hydrogen to sites taking place? So the one of the reasons we like the 30 kilowatt generator size is it doesn't require, you know, tube trailers of hydrogen to be delivered to site daily to replace fuel that, you know, has been consumed the day before. With the size of the 30 kilowatt generator and and and and the sort of the number of generators we're looking to produce over the next year or two, there's certainly enough hydrogen in The UK to cover the demand. We are working with the likes of Air Products, BOC, others who generate hydrogen today, both green and gray hydrogen.

45:09 So we have the ability to source hydrogen for for those projects. We will procure that on behalf of the Speedy Hire joint venture on the basis that we, a, know the know the the the the producers. We are able to order potentially larger volumes and get better pricing on on those hydrogen supplies. But also, we have invested in a couple of hydrogen trailers to store hydrogen to load you know, move hydrogen around, which I think we announced a couple of months ago just before Christmas, which we purchased from Octopus Hydrogen. And that gives us the ability to start to influence and control the distribution pricing of hydrogen, which, you know, a lot of people talk about hydrogen being expensive. The actual hydrogen gas itself is not massively expensive. It's the actual cost of logistically moving it from a to b, which is the big price. So whilst our ammonia cracker is being developed and and perfected, as part of our development program of the cracker, we are able to capitalize on on hydrogen availability from our partners and also, distribute it logistically into into customer sites.

46:14 Thank you. Couple of questions, I guess, around partnership extensions aside from SpeedyHire. Do you have any plans for sales collaborations with other companies? Always. Yeah. You know, we're we're never we're we're not gonna be static in terms of, you know, we've we've got one customer. Let's let's try and, you know, deliver as many fuel cell systems as we can into that one customer. It's all about growth and diversity of of of supply and demand, and, you know, we have got I mean, we talked about The US moments ago. We have inquiries from Australia. We have inquiries from India. We have inquiries from Germany. We have inquiries from, you know, any any part of the world. I think partly the challenge is how do you not not other opportunities to grow. It's it's it's how do you do it in a way that, you know, mitigates your exposure on on cash on cash burn.

47:07 And, you know, some of these, if you look at the, the relationships in The Middle East, we signed that MOU, three years before we signed the distribution agreement. That was, quite a lot of investment of time and effort to go into that distribution agreement. Now that we're there, we're we're able to move forward and and hopefully start delivering on orders received this year. But, you know, I I think at the moment, we if The Middle East, in particular, becomes as big as we think it can be, then, we're gonna be busy for a few years to come without extending too far beyond where we are at the moment. Thank you. Let me read the next question. Much has been made of the TAMGO partnership. We've heard about the dealership agreement, but the market has little to go off to value this partnership. When we hear will we hear more about what this is actually worth to AFC?

47:54 I mean, it's it's a it's a good question, and and it's it's a hard one to give an answer to that doesn't breach NDAs and things. I I think the the interesting thing for The Middle East and and, know, you've got Saudi in particular, if I can draw that as a as a particular country out of the of the of the region. You've got some of the largest projects in the world being delivered in that in Saudi Arabia at the moment, and you're no doubt funded by some of the revenues that they they're receiving from from the sale of oil. But in in contrast, they are looking to try and make those cities as sustainable and green as possible. And we we we know things that aren't necessarily public, which state that, you know, some of these projects are looking to go off of diesel by 2030 as part of the the country's plans for vision 2030.

48:50 And if you're removing diesel from any one of those projects, you know, the the size of that market is is enormous. We know because we're working with Telengo directly on some of the proposals that they are receiving interest from, We know through a very transparent and and open relationship we have with Tango where the opportunities are are emerging. And so for us, it's about working with Tango to educate them and to educate their customers on what does it mean to diversify away from diesel into hydrogen. How you know, the question is like, how do you get hydrogen to site in the middle of the Arabian Desert? How do you change hydrogen cylinders over? As simple as that. You know, it's it's a it's an education process that you need to go through, and we are going through that as as we speak. However, if I was to look at the market opportunity, that is by far the biggest market we're looking at today.

49:46 That's great. Thank you. Just turning to ABB, what date can we expect delivery of the first 200 kilowatt system? So I alluded to it earlier in the presentation. I mean, we're there's a delivery be careful how I describe delivery. We are looking to do two things. We're looking to have operational our first 200 kilowatt generator, which will be in the next few weeks and months, and probably few months as opposed to few weeks. I would then say we go through a process, which is the certification, which we talked about earlier as being six months. And then after that certification, we're in a position to hand the system over to ABB. That will still be a prototype system. It will be the first one, but it will be a system that not only has passed the factory acceptance test, but has also gone through the certification process.

50:32 So delivery of the generator in an in an operational sense, we're talking in the next few months, but delivery to a a site of ABB's choosing is is probably sort of another at least another six months from from there. Okey dokey. Let's turn to cracker. In the results regarding the ammonia cracker, you say that we're reviewing options to capitalize on this unrealized value. Do the options include a sale of the part of the business, or what other options are there? There are lots of options, and this is probably not the right forum to talk about those options in public. What we are very much aware of is when we speak to investors, whether it's private investor or whether it's institutional investor or whether it's a strategic investor, everyone understands the concept of displacing a diesel generator with something that is green and and and and provides functionally the same same outcome.

51:28 So that's an easy easy sell, if you like, or an easy proposition to understand. Once we start talking about ammonia crackers and the role that it plays, those who are producing large amounts of ammonia, those who are looking to consume large amounts of hydrogen, those who are o fay with the global trade of hydrogen will tend to understand the opportunities around the ammonia cracker technology. And, you know, where we are a private company, we would see a very different valuation being attached to the technology than if we are part of a bigger private a public company. So there are opportunities that we can look at to try and drive value into a cracker business, which is clearly a little bit more, early stage in terms of its not only development as a technology, but also its deployment.

52:16 And how you value that, you know, we we are obviously privy to some of those opportunities and the scale of those opportunities, but most of that we can't talk about without giving away some form of, confidentiality or or or maybe even intellectual property around the application and use cases of the fuel of of the of the ammonia cracker. So it's it's difficult to quantify a market value in the in the company. However, we do know from discussions with industry that the value of that cracker is well in excess of the current market cap of AFC Energy. So when we look at it in that light, you you you've got to say, well, there's there's got to be something we can do to create value in that technology, which is not currently seen in the share price. And these these are the options that we're looking at and evaluating as a board, as a management team, and, you know, at at the right time, we'll, we'll sort of advise on what what we've concluded.

53:12 Thank you. Just turning to, financials, I guess. When does, AFC aim to breakeven? A question that, you know, I I probably wouldn't answer. I I would happily defer this to to Peter. But, I mean, I think the the challenge is a lot of the revenues that we are generating today are are covering, you know, materials costs. We've got a lot of overheads we need to cover. We are going to grow still in in some areas. And, you know, your reinvestment back into manufacturing, into into your people, into your facilities, you know, doesn't stop when you first sell your first generator. So so, you know, for us, we have different scenarios when we may achieve breakeven, but, you know, we're not we're not looking at it being in the next year or two. That's for sure.

54:03 That's good. I don't if you have anything to add to that, Peter. Yeah. I mean, it's it's also very important as Adam was saying in the last question. You know, there's a question here of value. And the classic way of valuing your company is your discounted cash flow, but, obviously, that's a very sort of standard model. What the numbers don't really communicate very clearly is the derisking process that's going on. Each time our prod as as time goes on, our products become, you know, the the the commercial side of the product gets derisked risk because we've proven the market, the technology gets derisked because we've got field trials, we've got sales, we've got data, the operational side gets derisked. And there's a huge value accretion in the derisking. It's hard to see it in the numbers, but, you know, the the fuel the fuel conversion business is a great example of that.

54:55 But there's there's derisking going on behind the scenes here as well. So we haven't guided on a breakeven point, but that's not the single sort of value creation point. There's a lot of value being created in the background as well. That's great. Thank you. Has HPOW considered moving to a full UK listing or perhaps a listing on NASDAQ to attract more institutional demand? Well, I mean, first off, we should you don't have to be on either of those two markets to attract institutions. We're we're on AIM, and we get a lot of institutions coming down to site, and they all love what they see. So you don't have to move to attract the institutions. NASDAQ, for the most part, if you're on NASDAQ, you know, the assumption is you'll have a market cap minimum 500,000,000 US, usually close to 1,000,000,000 US.

55:47 So, you you know, I I know this is very topical at the moment in terms of, you know, do does one get better valuations moving to The States? And I you know, we've all seen what's happened at ARM and and and so on and so on. But I think where we are right now, we go back to Adam's point. If we deliver on the pipeline we've got sorry. On the backlog, we've got the order book. If we delivering on the order book that we've currently got and building that order book has to be our priority at the moment. And frankly, I think moving around and paying a lot of money to advisers and and etcetera, etcetera, is not how we're gonna drive the value. We're gonna drive the value by delivering on that order book and growing the business that way. I would I would add to that that, you know, we have more institutional investors in ASC today than we've ever had before.

56:36 And obviously, we're not main board listed. We don't need to be main board listed. It doesn't guarantee you an uplift in your in your share price and your market cap. So I'm I'm I'm actually, at the moment, really quite happy with the level of interest we're getting from institutional investors. As Peter said, we've we've got quite a number of them coming to site at the moment to learn a bit more around what we've actually achieved and what we're doing to to drive value in in AC Energy. Thank you. You just touched on the order book there, and there were a number of questions both submitted during the live event and presubmitted. And guess wonder whether you can give any commentary around the order book just briefly around the stated book of 27,000,000. Is that committed? Or how much is still be to be committed? And what's the true value really? I mean, the true value is a £27,000,000 order book in contracted form. So these are not this is not us stating we've we've bid for, you know, 27,000,000 of grants. We've not bid for I mean, the grant that we've received, 4,000,000, isn't included in the order book.

57:37 It's it's in addition to that. So it's it it is it is purely sort of revenue, which is articulated in a contract, but is both committed and uncommitted. And there's no there's no science and magic around the the words committed and uncommitted. It's basically, we're committing this amount this year. We're committing this amount next year. We're committing the the another amount the year after. And so what we're trying to do is not give an articulation of an order book which is contractually committed and binding. We haven't distinguished between what is committed and uncommitted in in bulk value terms, and and we we won't be doing that today. But, you know, I think if you if you were to do an analysis of, you know, our our revenues are going to start, as I said, follow that hockey stick, you can start to see that this year is gonna be less than next year, and the year after is gonna be bigger again. So you can assume that, I think, our consensus revenue for the year is somewhere between 5 to £6,000,000 of of revenue this year.

58:31 So, you know, that gives you a sense of what, you know, may be committed versus what's not. And it's it's probably worth answering one of the other questions, which is just to confirm that the 4,700,000 that we've discussed in previous press releases relating to Speedy year on orders is is in that order book. Yes. Thank you. Well, look, we're coming up to the hour, and I know you've got so many questions for every one question I seem to read out. There's others coming. So I'll try and just go into these couple of categories, which is around fundraising. Does AFC Energy need financing in the next three years? And if so, will retail be able to participate? We want to scale up. So it's all about the rates you scale up. We think there's a massive well, we don't think. We know. We've demonstrated. There is a massive opportunity out there, and we want to meet that opportunity.

59:21 And to scale up at the rate we feel we need to, to meet that opportunity will, at the right point, require additional funding. Yes. Thank you very much indeed. And I guess, look, just before I ask you the final question, just thank you once again to everybody for such wonderful engagement this afternoon. And I hope we've covered a number of the topics that you've looked to address, and we will make the questions available post today's meeting to you. But I guess the final question maybe that that people would like to hear about is, I guess, what are your views on the current share price? It was one of the questions that we had ahead of the event, but maybe we could finish on that. Well, you'd be upset if I didn't answer in the way that I'm going to answer it, and that is it's it's clearly well below what we believe the price should be at this point in time.

1:00:06 You know, we have achieved our last fundraiser was done at around sixty four p, and we're a mile ahead of as a business on where we were at that point in time. Does that mean the sixty four p was correct? No. Never is. It it it was a point in time. But if you look at the scope for growth, if you look at what the analysts, both house analysts and our and external analysts who, you know, we don't we don't pay a fee to, are saying, you know, what the value of the business is. It's substantially higher than what it is today. So I think we are still caught in a slight macro circumstance where, you know, we hear from institutions who invest in us. You know, we have some institutions bringing us up going, you know, I've got I've got more redemptions. I need to sell a few more shares because I'm being told to. And, you know, I think for those who don't know, there's been thirty three consecutive months where capital has left The UK capital markets.

1:00:57 It is it is a dire position to be in as a as a as a UK capital market at this point in time. We are listed on that market, so we are, you know, we're we're not immune to the effects at a macro level that thirty three months of consecutive redemptions from fund managers has has had on the market. I would say that if you look at us at an at an enterprise value, I. You take our market cap and you reduce our cash position, we are actually one of the highest valued fuel cell hydrogen businesses in the world today. And and I don't think that is fully appreciated by by the market. But, you know, I'm I'm I'm I'm but one person who has a view the market is much bigger than just me. So I I would say, we are undervalued, but, you know, I I think that will correct itself in time. And, you know, I look I look forward to to speaking to shareholders at that point.

1:01:48 Well, that that's very, very kind, and thank you very much indeed for your time, Peter, and for your time and for being so generous with the questions that we've hopefully been able to address today. On that basis, all that's left to me to say thank you. And if I could ask investors please not to close this session as we'll automatically redirect you for the opportunity to provide your feedback in order that the company can better understand your views and expectations. This may take a few moments to complete, but I'm sure it'll be greatly appreciated both by Adam and Peter. So on behalf of AFC Energy PLC, we'd like to thank you for attending today's presentation, and I wish you all a very good afternoon. Thank you. Thank you.