Good afternoon, ladies and gentlemen. Welcome to the Ceres Power Holdings investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time just using the Q&A tab on the right-hand corner of your screen. Just simply type in your questions at any time and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll, and if you'll give you that your kind attention, I'm sure the company will be most grateful. Finally, we have placed the ESG report in the handout section on the right-hand side of your screen. I'd now like to hand over to Elizabeth Skerritt, Director, Investor Relations. Good afternoon.
Thanks, Mark, and welcome everybody and thanks for joining us despite the World Cup kicking off as we speak. For those of you who don't know me, I'm Elizabeth Skerritt, and I look after all aspects of investor and corporate communications at Ceres. We wanted to take a little bit of time this afternoon to talk through our inaugural sustainability report, which we published at the end of October. I'm delighted to be joined today by members of our management team who led on all aspects of environmental, social, and governance at Ceres, and who'll be touching on the important report and importantly, how we continue to improve and report on our progress in this important area for Ceres.
Firstly, I'm joined by Phil Caldwell, who many of you will know already is our Chief Executive, and he also chairs our ESG committee. Phil is joined by members of his executive team, Mark Garrett, who's our Chief Operating Officer, Michelle Trainor, our People Director, and Deborah Grimason, who joined Ceres earlier this year as General Counsel and Company Secretary. We'd be happy to take questions at the end of the presentation. Without further ado, I'll hand over to Phil to kick us off. Thanks, Phil.
Great. Thanks, Elizabeth. Thank you everybody for joining today. There's been a lot of work done in producing this first sustainability report, led by Elizabeth's efforts and also the ESG committee, which I chair. Obviously you have the principal directors who will each talk to the various aspects of what's in this first sustainability report. I just wanted to give you an overview of the importance of the ESG agenda to Ceres. I mean, you know, we've been working on clean energy technology for a number of years. In fact, we had our 21st birthday party a week ago. That just shows you how long Ceres has been involved in the whole area of clean energy.
Sometimes I think we take it for granted that we think of ourselves as a sustainable company that's trying to, you know, make a big difference in the world. We have this big purpose, which is, you know, clean energy for a clean world at Ceres. A lot of that is about how we also behave as a company, and hence the ESG agenda for Ceres is not just about the carbon that we help other companies avoid, but it's also about how we behave as a business and also our social and governance aspects in terms of how we treat our employees and our stakeholders across the business. That's what we hope to give you a flavor on today.
We wanna ensure that our sustainability strategy keeps pace with our purpose, and we wanna be, you know, carrying our best practice across our industry for Ceres. just, you know, probably you know Ceres, but our whole business is around clean energy technologies, and we have a world-class solid oxide technology, which for a number of years now we've been scaling with partners on the power system side. as you can see, we have partnerships with Miura in Japan, Bosch in Germany, Doosan in South Korea, and Weichai in China, and that's all on stationary power. that technology is fuel flexible. today it can run on natural gas, it can run on hydrogen, and we're working on future fuels such as bioethanol and others that we might need in the future.
Really because this technology is so efficient and fuel flexible, we have a pathway to helping our partners, first of all, avoid carbon and reduce carbon all the way through to zero, depending on which fuel you are running the fuel cells on. Just over, well, about two years ago now, we took the strategic decision to move into green hydrogen as well. Obviously now with this technology has SOEC run in reverse, we can actually generate a low-cost green hydrogen, which helps in the decarbonization of industry. Again, another big impact that we at Ceres can make on society. We have, you know, without a doubt, a big impact that we make as a business. We're not always able to report on those. They're kind of like Scope 4 emissions, but that's what our purpose is about, is helping others to get to a net zero future. Internally, we obviously look at ourselves in terms of how we operate as a business. With that, I'll hand over to Mark Garrett, our COO, who can start to talk about the environmental and operational aspects of our approach at Ceres.
Thank you, Phil. Good afternoon, ladies and gentlemen. It's great to be with you this afternoon. I'd like to take a few minutes to expand a little bit on the key aspect of our environmental practices. Just expanding on our carbon reporting. Historically, we've reported primarily on Scope 1 and 2, so gas and electricity and fuel used in personal company vehicles. This report allows us to expand into a full analysis of our Scope 3 emissions, which are significantly higher than our Scope 1 and 2. It's a very important part of our business that we're now reporting on. Within the report, we've looked back to the 2021 position and shown where are the categories within Scope 3 that our primary emissions are being produced. At 1 point to note is that from October 2020, we sourced all of our electricity from zero carbon renewable sources. Our Scope 2 CO2 emissions are indeed nil.
If we look at the Scope 3 emissions, you can see there from the pie chart, about half of those are through our purchased goods and services. We rely significantly on our supply base for a lot of the material that we process through our pilot factory. That's demonstrated there. A lot of that, 48% is through the steel that we procure, which go into the steel substrate and elements of our fuel cell stack. Just over a quarter of our Scope 3 emissions are produced by the manufacturing of capital goods. As a technology R&D company, not only are we implementing new manufacturing capital equipment as we expand our capability, we're also investing in new test facilities to accelerate the development of our technology.
All of those accrue a carbon footprint, which we include here. The processing of sold products is driven by the fact that we don't just manufacture complete stacks. We're also providing to our licensees some part finished stacks and stack components for them to finish the assembly and manufacture of stacks at their own facilities during this pilot phase. That accounts for downstream processing of some of those components. The two final sections there are employee commuting and then all the other remaining 11 categories within Scope 3. We're pleased that we've done this analysis, and this now forms the basis that we can look at in developing the next stage of our journey around reducing our carbon footprint.
It's very important for us that we look at our carbon emissions, and we implement plans to bring ourselves in line with the Science Based Targets initiative for net zero to support the 1.5 degrees Celsius climate temperature increase. What we've tried to show in this graph here is that, if we did nothing at all as a growth company, we would expect our overall carbon emissions to increase over time. We are genuinely committed to achieving that 1.5 degrees Celsius alignment. We are a growth organization. Therefore, in the short term, it's reasonable to expect that as we try to accelerate the implementation of our technologies and support our partners, our short-term carbon emissions will increase.
What we are going to be implementing during the next year is a full analysis of mitigation strategies against the full Scope 1, 2, and 3 emissions I showed you on the last slide. Looking how can we accelerate reduction of those emissions while remaining true to our growth strategy, and try and follow something like the green line we showed here, which means that we start with some level of growth, then we accelerate a reduction down to achieve 2050 or better in terms of aligning with the global targets. There's a lot of work for us to do there.
It's very clear to us that we want to maintain our investment, both in our technology development and in our pilot manufacturing, to get our partners at scale and speed to high levels of volume. We have very good levels of confidence we can find ways of mitigating our CO2 emissions in those areas. We've also conducted a cradle-to-gate life cycle analysis of our current stack technologies. Those of you that know us will know that we currently manufacture a 1 kilowatt and a 5 kilowatt version of our technologies. We deliberately chose to do a cradle-to-gate rather than cradle-to-grave on the basis that our stacks go into different types of applications, so motive application, stationary power, potentially into marine applications.
We wanted to understand the manufacturing CO2 footprint at a stack level rather than through life, but it's reasonably easy to add on the through life CO2 emissions. The last element is the end of life aspects. Whilst we're going through some initial pilot investigations on recyclability of our stack, we wanted to exclude that from the analysis at this stage. What's useful to see here is that as we go to higher output individual stacks, we're seeing an efficiency in terms of carbon footprint. We're reducing from 570 grams of CO2 equivalent for a 1 kilowatt stack down to 425 at 5 kilowatts.
So if we went, for example, to a 10 kilowatts device, we'd expect those efficiencies to play through further. A quick thumbnail calculation which shows that on a G20 grid carbon intensity, the payback in terms of CO2 saving against footprint for manufacturer is achieved in only 3 months, such is the efficiency of our fuel cell stack. That's useful for us to understand the benefit of our technology and the impact of the carbon in manufacturing. We now have a tool in place which allows us to assess our future technologies for their carbon impact. As we're looking at new chemistries or new architectures of our stacks, we can look at how sensitive the CO2 footprint of our manufacturing is to those new technologies, as well as through life emissions.
This is now a tool that we are starting to deploy in our R&D programs to prioritize the new technologies for next generation fuel cells and stacks. As soon as we have a recyclability analysis, we'll build that into a next generation tool set for our LCA analysis. Finally, just looking briefly at the impact of our technology. Our partners are deploying at scale, by 2024 we should have something like 250 MW per annum of manufacturing capacity in place in Germany and South Korea. To put that in perspective, that should be saving of the order of 400,000 tons of CO2 per annum for that manufacturing capacity. We're very pleased that the basic architecture of our fuel cell technology is around a steel substrate.
As we know, steel is extremely widely recycled. Since our fuel cell is about 95% steel by weight, we have very high confidence that we'll be able to recycle the vast majority of that. Our electrolyte is based around ceria, which again is highly available on a global basis. The basic core technology is based around some very helpful materials for high levels of recyclability and availability. As I've touched on already, this cradle-to-grave analysis will be something that we are developing over time. I'm very hopeful that we'll be able to give full end-to-end analysis of our technology in the near future. That's just a quick snapshot from the report. At that, I will then hand over to Michelle to talk a little bit about the social aspects of our report.
Thank you, Mark. Hello, everyone. I'm delighted to be able to talk to the people and social aspects of our sustainability report and activities. The story over the last 3 years has undoubtedly been one of growth, not just in terms of headcount, but also in terms of people initiatives and reach, generally speaking. We now have well over 500 employees, primarily based across 2 sites in the UK, although increasingly on a global basis, many of which work remotely. As a business, we have sought to support that where possible. In growing the business, we've had to balance, continuing to bring in strong experience and expertise alongside growing and developing our own people and looking to future talent and building our future talent pipeline.
In that respect, we have a number of partnerships and initiatives with schools, colleges, and universities to help promote young people in science, technology, engineering, and math disciplines and offer them opportunities to work with us, and we're very proud about that. In terms of what we offer our people, we offer a very comprehensive benefits package, but we have a particular focus on development and engagement. Our people generally join Ceres because they fundamentally, truly believe in our purpose, and they're hugely excited about the technology and having the opportunity to work with the technology. Therefore, an awful lot of their growth and development comes on the job through the exciting projects they get to work on. In addition to that, we have invested in creating Ceres Academy, which, amongst other things, offers three bespoke programs for our people.
We have a Leading Self program, which is targeted at our young, ambitious employees who are keen to build their confidence and impact within the business. We have a Leading Others program designed for people that may be relatively new to leading and managing others. We have a Senior Leadership program designed to help our senior leaders hone and mature their leadership skills. From a broader engagement perspective, we want to engage everyone in the business, and we want to give everyone a voice. This year, we introduced the Gallup Q12 survey and had a good response to that with high levels of engagement. That gives us something to build on as we go forward.
From an engagement perspective, we also encourage people to take a real stake and ownership in the business, and we do actively encourage people to join our Sharesave scheme so they can become stakeholders and shareholders. We have strong levels of participation in that. When it comes to diversity, equity, belonging, and inclusion, we believe that talent and ingenuity come from a variety of experiences and perspectives. At Ceres, we have a very open and supportive culture for our people. We want everyone to feel that they can be themselves and bring their best every day. We're very rich when it comes to cultural diversity. We have over 42 different nationalities represented within our workforce. The area that we struggle with more so is on the gender diversity. We are predominantly male-based in terms of our workforce.
That has been a clear area of focus for us over the past year or so. I'm pleased to say that that is increasing. We have some fantastic female talent that we are now bringing into the business, working for us. In terms of employee workforce and representation, we have an employee forum called our Connect Group. They very much are an active group of employees that want to make a difference, both internally in terms of the working environment for our people, but also externally in terms of how we engage with the local communities and communities on a broader basis. The Connect Group support and indeed lead on many of our activities in relation to diversity.
They also lead on many of our charitable giving and volunteering aspects, and they support our ESG endeavors as well. The chair sits on the ESG committee. You may have seen that we have recently added Trine Borum Bojsen to our board of directors. She brings with her 25 years of experience across the renewable space. She's also actually just been nominated as our Non-Executive Director for workforce engagement. We're very much enjoying benefiting from her experience and involvement alongside all of our other board members. I'll let Deborah talk to that in a moment. Just before I hand over to Deborah, we do take our business and our roles very seriously at Ceres, and we believe in conducting our business in a socially responsible manner.
Health and safety is crucially important to us, and we have a very strong track record in this, which we're very proud of. I'm pleased to report that we've had no major incidents or injuries over the past year. Equally, when it comes to our supply chain, we have a clear code of conduct, and we have a risk management system that we've put in place that allows us to conduct due diligence on our suppliers. As we speak, we are just in the process of completing the audit for the ISO 14001 accreditation. That should be completed by the end of this month. As I've already said, you know, community impact and involvement and academic partnerships are really important to us. That's something that we take pride in, that we enjoy participating in, and that we will continue to do more of as we go forward. Thank you.
Thank you, Michelle. Good afternoon, everyone. I just want to set in context for you the governance element of our ESG strategy and as delineated in our report. As Elizabeth said earlier, I joined Ceres at the beginning of this year and have a really strong focus on governance within with supporting the board and also within the executive team and the company more broadly. As you can see here, the ESG committee currently is an operational committee within the company. It's chaired by Phil, and it has currently got Dame Julia King and Trine Borum Bojsen as non-executive director advisors to that committee. We have drawn on their experience and expertise quite highly during the preparation of this, our first report.
This is part of the journey in terms of embedding ESG firmly within our governance structure and within our board and committee structure. The aim is to see that purple bubble on the right-hand side become white in the next year as the ESG committee moves from being an operational committee to a committee of the PLC board. We will also retain within that an operational committee chaired by Phil as he currently does. The chair of that committee, the ESG board committee in the future, will be Dame Julia King, again, drawing on that continuity of support and expertise that Julia brings.
That's the context of a governance and oversight by the board, by the PLC Board, in relation to ESG. Sitting within the context of governance of ESG, we also have incorporated our climate related risks into the corporate risk reporting process. As you'll be aware and seen from the report, of course, the board is ultimately responsible for risk and for reviewing the risk register with the material risks within the business, and also overseeing our strategic risk management and the mitigation of that risks and the plans associated with mitigation of that risk. The Audit Committee, obviously, with its oversight of risk management, reviews our risk register and our material risks during the year, twice during the year, and those obviously ultimately feed into our annual report as well as principal risks.
In terms of our risk management, the board oversees that. The audit committee reviews it and facilitates the framework for managing that risk. In line with our highest risk categories in our materiality process, we have previously undertaken a review of the materiality matrix, and you will see here in the graphical representation, the top 13 business issues relating to environmental risk management and governance. As Michelle said, stakeholder engagement and Elizabeth before is really key for us, and this is part of our stakeholder engagement today. We undertake a series of active communications with all of our stakeholders, whether they be our suppliers and partners, our shareholders at Ceres, our employees, as Michelle has outlined, and wider society to generate social environmental impact, which is part of the company's core purpose. We want to ensure that our key stakeholders understand the company's circumstances in the context of ESG, our plans going forward and our targets on improvement, and also the constraints around us going forward. With that, I will hand back to Phil. I think you're on mute, Phil. Sorry. Jump in.
Thank you. I hope what you can see from this first sustainability report is we've made quite substantial progress on our ESG journey. In the past year, we've obviously completed the employee surveys, the diversity and inclusion policies. We're now up to speed with gender pay gap reporting. We've got pretty good visibility into our supply chain with some of the management tools that we're using there. We're on track with the SASB framework, and we're very close to securing the ISO 14001 accreditation. As chair of the ESG committee, I'm pleased with where we've got to in the past 12 months. As I look ahead, we've got some very specific targets for 2023, including SBTi accredited Scope 1, 2 and 3 emissions.
We're gonna start to report with TCFD by the end of 2023. We intend to achieve the Carbon Disclosure Project rating, I think by towards the middle of 2023. We will formalize our strategy towards the SBTi pathway to net zero. There's a lot of good work being done by this committee. You know, we'll continue to update you. I think we've provided a very good base on which we can build and start to measure progress as we go forwards. I think that's the end of the formal presentation, but I think with that we can go to Q&A, Elizabeth- If people have questions.
Yeah, absolutely. Thank you so much. There has been a couple of questions come through and perhaps, Phil Caldwell, you could pick up on that last point you made in terms of moving towards a net zero sort of accredited pathway. Tom C has asked, "Has Ceres signed up to The Climate Pledge? And if not, why not?
Yeah, it's a good question. We've looked at it, and a lot of companies have signed up to these pledges, and then they're gonna figure out how they're gonna get there along the way. We wanted to make sure that as scientists and engineers, we had a very, I suppose, a very logical approach to how we're gonna get to that net zero, and indeed how fast we can get there and, you know, if possible, even accelerate that. Hence we are doing quite a lot of work on our pathway, and then we'll choose the... we'll publish our own targets when we're ready to do so. I think there's a number of these targets and schemes that you can sign up to. For us, it's more important that we actually commit to what we believe we can deliver on and explain how we intend to get there, rather than just put a target out there and not give any color on how we're gonna get there. That's the approach we've taken at Ceres.
That's great. Thanks, Phil. Mark, maybe I could come to you. Someone has asked, as we're using higher temperature, solid oxide technology, what do we do about the carbon dioxide which is released if you're using it on nat gas? I'm assuming is the question.
Yeah, sure. It's a good question. I think the first thing to point out here is that the level of CO2 emitted is substantially below alternative methods of producing power. On a G20 carbon intensity grid equivalent in combined heat and power mode, we're nearly 50% lower CO2 emissions than alternative power sources. We're already looking at substantially lower CO2 emissions with our technology. Secondly, we are a hydrogen-ready technology. We are able to accommodate multiple fuels, and natural gas is one of those things. The technology is readily available for zero carbon emissions when the right fuels become readily available.
I think in terms of answering that particular question, we are starting to look at linked technologies such as carbon capture, and the level of CO2, or the type of CO2 emissions that we're getting out of our stack technologies is well-suited, I think, to linking it to carbon capture technologies as an interim solution until hydrogen's available. I would wanna make the point that our technology is already highly efficient.
Great. Thanks, Mark. There's a question here, perhaps, Phil, you can take this. Someone's asking about whether we could use ammonia, but perhaps you could talk about future fuels, as a source.
Yeah
Of a kind of electricity generation and our plans around that. Thanks.
If you look at some of the applications we're getting into now, we focus very much on the hard to decarbonize, the hard to abate sectors, and that takes us into some of the more difficult technical challenges, such as how do we decarbonize things like shipping. If you believe in hydrogen as a worldwide energy vector, how do we move it around? Ammonia is definitely one of the fuels that we're looking at on our future fuels roadmap in two ways. One is, we believe with the electrolysis path we're on, we're a very good fit because of our temperature range into industrial processes like Haber-Bosch to actually produce ammonia using green hydrogen. We definitely see a future where ammonia plays.
Because of that also, we're also looking at can we use ammonia as a fuel in the fuel cell systems. We're doing some work on that right now. I think ammonia is one of the more challenging fuels, as in we probably can't take it directly into the cells as we have them today. With some preconditioning, we're looking at how we actually can build it into the power systems that we're developing. We're also looking at future fuels like bioethanol, methanol, et cetera, which is also a fuel that's being considered for some of the shipping and heavy-duty transportation applications. As we've already said, we're already hydrogen-ready. We can use nat gas, we can use biogas, and we can use blends as well. From our point of view, because of the high efficiency and the fuel flexibility, we want to be able to utilize as many of these future fuels as possible, and also enable their production through the green hydrogen pathway into synthetic fuels and indeed ammonia in the future. It's very much at the core of what we're developing on the technology side.
Brilliant. Thank you. There's a question here from Robin C, who asks, "Are there comparable manufacturers or comparable processes to understand whether Ceres's carbon consumption and sourcing of steel and materials is efficient or better or worse than others?" I mean, I don't know whether we could speak to our particular industry, but...
I think it depends where you draw the boundary on the industry. If you look at other alternative solid oxide producers, there are. They tend to use more of the rare earth ceramic materials, and very often they're hard to source. On the ceramic side, we use the most common of the ceramic materials, which is ceria, and we're also very careful in terms of how we source that as well. We believe that by using less of the hard to source rare earths and use highly recyclable steel, and with the rare earths that we use the most abundant, we do believe we have an advantage, if you like.
When you look at wider technologies, such as membrane or PEM-based technologies or even alkali-based, we avoid altogether some of the harder to source materials. We don't use things like iridium. In electrolysis mode, we don't use some of the platinum-based catalysts that others are reliant on. There's a lot of work done by other companies about the recyclability of some of these materials. We tend to just try to design them out if we can and then ensure that our product is highly recyclable. Considering that about 80% of all the goods that we, you know, manufacture today contain common steels, steel is one of those materials that is highly recyclable.
In the future, we need to move to a world of green steel, and again, part of our agenda is to enable that through the green hydrogen production as well. We already use a high proportion of recycled material in the steel we source. You know, going forward, we want to also enable, you know, green steel production globally. I think inherent in our materials, we do have advantages, but I think you'd have to do a comparison over, first of all, other solid oxide technologies and then wider technologies that are involved in the electrolysis and fuel cell space.
Yeah, great. Thanks, Phil. There's a question here. How do we quantify and what specific KPIs do we use to establish whether ESG and sustainability adds value to the business?
I can speak to that. I don't see ESG as an add-on. You know, talk about added value, I just don't see the world that way. It's absolutely core to what we do. I don't think we need to adjust, you know, to justify additional spending or reporting on what we're doing to tick an ESG box. I think it's absolutely core to everything that we do at Ceres, and I think the direction of travel that we're having on reporting and disclosures is actually really helpful for us internally in terms of making the right decisions on how we operate the business and how we look after stakeholders and employees. I just don't recognize it in that way.
Yeah. Absolutely. There's one last question here which perhaps goes to a similar point. Have we seen any interest from potential new institutional investors on the back of the report? I guess actually we've been speaking to many of these aspects of our activity and indeed, you know, we're probably playing catch up a little bit on the reporting versus what we've been doing and embedding into our, into our business. Would you agree, Phil?
Yeah, I would agree. I know, Elizabeth, you particularly, we did actually seek investor input and feedback into what was important from the investor lens. Obviously, the investor lens is only one aspect of the audience for the ESG. I think we felt we were already doing a lot of these activities, but we needed to be more transparent and more clear in how we reported it. Hopefully this is our first report, but it certainly won't be the last, and this will continue to build upon and be improved upon in the future.
Yes. Absolutely. There are no more questions on the sustainability aspects at this time. I'll hand back to you, Phil, to close out.
Look, thank you, everybody, for joining the webinar today. We wanted to give a dedicated time today to just focus on the progress we've made on sustainability, and for you to meet some of the team responsible for the governance and the production of this report. It's very key to us at Ceres. We're gonna continue to put more and more effort into this over the coming years and you can expect to hear more from us as we go on this journey. Thank you for your time today.
That's great, Phil. To the ESG committee, thank you very much indeed for your time in updating those on the call this afternoon. Could I please ask the attendees on the call not to close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order that the company can better understand your views and expectations. This only 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 Ceres Power Holdings plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.