Good morning and welcome to the HydrogenOne Capital Growth Investor Update. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged, and they can be submitted at any time via the Q&A tab situated in the right corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself; however, the company can review all the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to JJ Traynor. Good morning, sir.
Good morning. Thanks, everybody, for joining our third quarter 2024 results presentation. I'm JJ Traynor, one of the managing partners here at HydrogenOne Capital Growth, joined by Richard Hulf.
Good morning, everybody. Who's the other managing partner of the business?
We're going to take you through the results and a portfolio update, and then, as always, plenty of time for Q&A, so please do submit those questions, and we'll then respond to them as best we possibly can. The disclaimer statement. Here's the agenda for the call. I'll take you through the figures and then pass you over to Richard on the portfolio, and then, as I said, over to the audience for the Q&A. The highlights for the third quarter: good to see NAV per share essentially unchanged year-over-year, just around GBP 1 per share, and reduced slightly from Q2 2024. NAV is now GBP 130 million. The portfolio, which really drives all this, the portfolio continues to deliver strong growth.
Private portfolio revenues, the aggregate of all of the investments that we made on your behalf, those revenues are up 19% year-over-year to £75 million. We think there's more growth to come from that. We're seeing strong momentum and news flow from several portfolio companies. The exit from Gen2 Energy and strong order books from Sunfire. Richard will go into those companies in a bit more detail in a moment. Cash and listed shares together now stands at around £4 million at the end of the quarter, which is double the position that we reported to you at Q2 2024. Before we get into the results themselves, let me make a couple of comments on the policy hydrogen environment here in the U.K. in the aftermath of the election and the budget over the last couple of months.
The slide here shows really a summary of what's going on in the U.K. hydrogen sector and some comments on policy formation. Really positive to see the new government providing backing of GBP 6 billion for the projects that you see on the screen there, and in that GBP 6 billion, we've seen the first tranche of funding for two carbon capture and storage clusters with associated blue hydrogen on the West Coast of the U.K. and East Coast, and also GBP 2 billion announced in the budget last week for 11 green hydrogen projects, which you can see on the chart. Most of that green hydrogen is directed at storage into stationary power and the transport sector.
I think it's fair to say that everything that's on the screen in terms of projects have been underway for some time, and they predate the arrival of the Labour government. But what's new here is the funding, the confirmation of that funding. Looking forward, we're all waiting to hear what's the, you know, one of the details behind Great British Energy and the energy policy in the UK in more detail. That's a bit where we are in the UK, and we think quite, quite positive developments, actually. Summary of the fund: we are invested in eight private positions, a highly concentrated portfolio in high conviction holdings. Top holdings are over 90% of the NAV. Where do we invest? We invest in revenue-generating supply chain businesses and developer companies with plans for production around the middle of the decade.
We like to invest alongside strategic industrials, big businesses that are interested in the theme, and, of course, other institutional investors, and we look for diversity in the portfolio, which means global capital allocation right across the chain, the value chain, and we invest in companies, obviously, with good exit strategies, plans for IPOs, or trade sales, or risk-to-price value for our shareholders. Turning to the results themselves, and, you know, I think, as we said a few times now, we use IPEV guidelines for these figures, which are reviewed and approved by the board on a quarterly basis. NAV per share down slightly quarter on quarter and unchanged year-over-year.
Within these numbers, the discount rate at the end of September 2024 was 12.5%, which is lower than the 30th of June 2024 and lower than the 30th of September 2023. Discount rates are down sequentially year-over-year, which is a positive underpin for these results. Cash and listed holdings were GBP 4 million, following a divestment from Gen2 Energy, with divestments and secondaries expected to continue as we manage the financial framework in the business. Following the Gen2 sale, the company expects to have sufficient funding to meet its investment commitments and working capital requirements for at least 12 months. This is quite an improvement in our liquidity position.
The moving parts of the results are in a bit more detail. On the left-hand side of the chart, that shows the NAV movements in the third quarter versus the second quarter on a pence per share basis. In these numbers, there's a small decline in holding values for portfolio companies overall, totaling around GBP 0.01 per share, with further reductions from exchange rate movements and fund costs. On the right-hand side of the chart, NAV per share since the IPO, rising steadily over time with some volatility. We would characterize this as organic growth, as the companies grow their businesses with our investment, with the small ups and downs due to fluctuations in listed markets and discount rates, essentially, and the effects on business plans. Those are the moving parts.
Now, in a bit more detail, the chart shows the largest increases and the largest decreases in NAV by company over the third quarter of 2024. Working from the bottom of the chart upwards, Elcogen, Bramble, and HH2E have all seen reductions in carrying value as a result of slower near-term order book developments, although the medium-term fundamentals in those businesses do remain very positive, we believe. And at the top of the chart, we saw strong NAV increases in HiiROC and Sunfire as a result of roll-forward of discounted cash flow into strong cash flow growth and continued momentum in their order books. So those are the moving parts within the results. And now over to Richard on the portfolio.
Thanks, JJ. If I can just give us a quick summary, just a reminder of what's in the portfolio, look at some key news, look where the revenue growth is in the portfolio, explain a little bit more about Gen2 and some of the future pipeline, so just a summary of the fund, where do we invest into the supply chain on the left-hand side there. Private assets now really dominate the fund, 99%, but the remainder in cash. Virtually all the listed investments have now been disposed, just a small number remaining. Investing into revenue-generating supply chain companies, that's 70%. And the UK and the EU now dominating with 63% of the portfolio, with a higher weighting in cash-generating companies, so that's just a reminder of what we've got at the end of the Q3.
We usually go through the chart on the left-hand side there, just reminding investors about who we've co-invested with. What we want to do over the next coming quarters is get into a little bit more detail about what some of our co-investors are doing. And this month, we wanted to talk about Amazon. Amazon have co-invested with us into Sunfire with their $2 billion Climate Pledge Fund. Just an interesting anecdote here about the Gen2 H2 trucks. Amazon joined Air Products, INEOS, one of our co-investors, Holcim, and Wiedmann & Winz, German logistics businesses. You can see their trucks for delivery on the right-hand side there.
These are full HGV trucks that have been tested and are now being trialed on a commercial basis by these companies. In terms of payload, that's 25 tons. These are full HGV vehicles. They're running on liquid hydrogen going into fuel cells. The fuel cell technology can give these vehicles the range of up to 1,000 km. After rigorous testing, these things will be scaled up. This is just a glimpse of real hydrogen happening now in the sector. Just a summary of the bit of news flow we had in the third quarter, late summer news flow captured here. Strohm, large order from Total, we're mentioning here. Elcogen, new applications in megawatt-scale plants, which is interesting. I'll take you through that in a bit more detail in a moment.
Sunfire also supplying grid applications with RWE. Swift, remember, our hydrogen logistics and moving company received GBP 0.3 million of funding. Just a summary of those news flow points there. So the sale, this is great news for us with Gen2 Energy, and we just explained a little bit of detail here. It was a small part, 3% of the portfolio. We owned 6.5% of Gen2. Great project, by the way, in Norway, and Gen2 will continue. Sold to an undisclosed buyer, GBP 3 million, basically our book value, kind of underscores, underpins the legitimacy of our NAV values and generates cash for operations going forward, as JJ mentioned, in alleviating short-term liquidity risks.
So that was a great deal for us. Also, Sunfire, major contracts awarded, as we mentioned. Just to recap on Sunfire, that's 800 megawatt order book, 650 staff in Germany. So this is a big part of the fund. This is a big part of the hydrogen sector. Awarded a major contract for 100 megawatts pressurized alkaline electrolyzer, RWE's hydrogen site in Lingen, an upgrade to a smaller test facility that Sunfire sort of passed the test on. Sunfire will supply RWE with a total of 10 modules of its reliable pressurized alkaline technology, each with a 10 megawatt capacity. So it's a modularized set of electrolyzers being brought together. And in addition, Sunfire will be responsible for installing and commissioning these electrolyzers, that's demonstrating the skill set that sits inside the great company Sunfire.
On HiiROC, HiiROC now moving to scale up manufacturing of the HiCom Gen 5 units installed with the Centrica and Cemex. And you can see the installation on the right-hand side there with Centrica. Focus areas for this technology in cement and steel, energy storage and management. Recent investment from the US. We'll see HiiROC access the U.S. gas supply chain, and that validated our current holding value for the business as well. Runtime on these units is now building up to commercial scale. And you'll see the rollout of this technology at scale next year. A lot of interest from industry in this sort of transition part of the portfolio. Strohm, an investment here. Remember, Strohm made this thermoplastic composite pipe for the TCP, 50% lower carbon footprint than equivalent steel pipes.
SENCO, private equity firm, invested EUR 20 million completing the total EUR 30 million funding round, which HGEN participated in. New contracts with Exxon and TotalEnergies in the Lapa. It's an industry first in ultra-deep water. And remember, this is about moving CO2 around in these locations, which is a greenhouse gas, obviously. And that's a key part of what Strohm are providing. So just to wrap up on this part of the deck, with revenue growth from the portfolio since we invested on the left, revenue growth by company.
You can see there we've got Bramble and Sunfire have grown the most, we're 12-16 times since we invested. And the more recent investments in HiiROC, Strohm, Elcogen, HH2E, 1-8 times on the sort of bottom right-hand side there. Revenues in aggregate on the right-hand side on a 100% basis, slightly moderated on Q2, but still generating a combined GBP 75 million in revenues in the last 12 months since 2024, up 19% from the equivalent period in Q2 2023 on a pro forma basis. So revenue growth continuing to back up our investments, which these are not early-stage investments. These are investments that are growing.
So just to close out, well on track this quarter with robust NAV liquidity of about GBP 4 million, with additional asset sales to come. Lots of levers to pull to upgrade NAV over the next three to six months. The Gen2 exit underlines the strength of our valuation process and pushes back on the discount of the share price to NAV. Our larger industrial strategics, just a reminder with our example on Amazon there, also got Hyundai, Baker Hughes, Vitol, and others. This is a big investment game and a very important part of the energy landscape. So the portfolio is formed of well-established revenue-generating businesses, and hydrogen projects with attractive takeout potential as well. So I'd just like to round off there and pass it back, and we'll move into the Q&A session. Thank you very much.
Perfect, JJ. Thanks very much for your presentation. Ladies and gentlemen, please do continue to submit your questions, and you can do that just by using the Q&A tab, which is situated on the top right-hand corner of your screen. Just while the company takes a few moments to read the questions that have been submitted already, I'd like to remind you that the recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your Investor Dashboard. As you can see, we have received questions both pre-submitted and throughout today's live event. Richard, JJ, if I could hand back to you to read out those questions, that'd be great, and I'll pick up from you both at the end.
Great. Thanks, Josh. So the first one up is from Ian M. So Ian, thanks for your question. What is the likely impact of the Labour government in the U.K. and the recently elected President Trump in the U.S.? What's the implication of that, if anything, for the hydrogen sector? Well, look, Ian, thanks for the question. It's kind of a big topic. I think from a U.K. perspective, we see the Labour government as very positive for the hydrogen sector. And in one of the slides, we talked to GBP 6 billion of funding that's been announced for blue and green CCS projects just in the first couple of months of the Labour administration. There's more policy formation to come here in the U.K.
We're waiting to see what's going to come from Great British Energy and how some of the other manifesto commitments around energy transition are actually put into practice. But essentially, that's a positive environment for us and one looking at very closely. In the U.S., I think this is a moment where there's going to be a pause. The incoming government are very much putting the emphasis on fossil fuels, so developing more supplies of oil and natural gas for price reasons and for geopolitical reasons. But it's not to say that fossil fuel is the only policy focus for the energy system in the U.S. The Inflation Reduction Act, which included considerable support for renewables, including hydrogen, we do expect that to be reviewed now by the new government.
But it's not to say that all of that is going to go away. Highlight, the big oil companies in the U.S. are heavily involved in big hydrogen projects. Just a couple of examples, Chevron are involved in a large green hydrogen project in Utah, and ExxonMobil are setting a large blue hydrogen project on the Gulf Coast with Middle Eastern partners. So big oil in the U.S. does see a lot of positives in the hydrogen sector. We think over time that will continue under the new government.
Second question, given the very low share value, is there any way the company can compensate shareholders? I believe dividends are not under consideration. I think this is a bigger question that probably covers a lot of other questions as well. We've talked about something called the hype cycle. We think hydrogen is in the hype cycle where there's the initial rollout, same as the internet. It's going to solve everybody's problems. And then it doesn't because it shouldn't. Hydrogen isn't going to solve everybody's problems. It's a specialist part of the energy sector.
And then everything overshoots. And we're just coming out of that now, where we're starting to see real investments, real projects going ahead. 200 green hydrogen projects already on stream globally. And we're part of that build-up. I suppose the compensation comes from the sort of realization within investment strategy that this wasn't an instant return. Hydrogen is a longer-term return. But the point of inflection everybody will miss if it's not bedded down as a solid part of their portfolio. So a lot of institutional investors, I think, are looking at hydrogen in that way, that it's not something you tinker and interfere with right now. But when it does start to jump, people will miss it because it will happen very quickly.
And we're moving into that phase now where there's a realization of the reality. It's not potential. It's actually happening now. Hydrogen is happening now in a lot of sectors. And we're part of that. So I think that's the compensation. Hang in there. We're seeing all those positive signs. The asset disposal is evidence of a good market for hydrogen. Sold out NAV. And we'll take it from there.
There's a pre-submitted question, no name, but thanks for the question, which is about the announcements in Germany for a EUR 19 billion hydrogen infrastructure plan. What does that mean for our portfolio? Look, thanks for the question. About just over 30% of our NAV is actually in Germany, in HH2E and Sunfire, and just thematically very positive on the Germany macro environment. What's been announced recently there is a new pipeline network that's dedicated to hydrogen, which is called the Core Network, which is going to cost EUR 19 billion and to be deployed over thousands of kilometers in industrial Germany.
The purpose of this network is to connect supplies of green hydrogen to industrial clusters in Germany, particularly refineries and petrochemicals plants. We see this as a very positive development, of course, connecting the green hydrogen projects that we're introducing to HH2E into those customers. Just as a historical point, Germany has had a dedicated hydrogen partner network since the 1930s. So this isn't groundbreaking new technology. This is a rollout of technology that's very established and has been up and running in Germany for a very long time.
Next question, HydrogenOne one of the worst-performing stocks in my portfolio. What arguments can you give that this discount to NAV and market sentiment will narrow? Right. I suppose the best example we've got in the short term is the value that's been created is reflected in our NAV, and we have just realized cash from an asset at NAV in the hydrogen market. So that's the real evidence that there is real value in the NAV, and the NAV has been growing. I think the other thing to regard about hydrogen is that maybe there are some people that believe that hydrogen is a mistake and people were going down the wrong avenue.
That's definitely not the case. Hydrogen is going to happen. There has been a slowing as we get to this phase of projects taking FID, Final Investment Decision. They're going ahead, and people are cautious, but it's absolutely going ahead. It's very hard to abate parts of our energy system, and hydrogen is the solution, and it is going ahead. It's taken a bit longer to get there, and that's frustrating for all of us. We're all invested into this along with you as well, and we're pushing very hard to realize value in the portfolio, and we've done that this quarter, so stay with us. We'll carry on with more good news.
There's a question from Paul C. Paul, thanks for the question. This is around the results themselves. Paul's pointing out a cash increase, but also an increase in liabilities. The question is where do those new liabilities come from, and when do they fall due? Paul, this is the accounting treatment of the asset sales. We're showing at 30th September GBP 3 million for Gen2 Energy, and then a liability essentially of GBP 3 million. What will happen at Q4 is that the Gen2 NAV will be reduced to zero, the liability will be reduced to zero, and there will be cash of GBP 3 million. This is purely an accounting effect for the divestment, and it's not a new liability that we've taken off the balance sheet.
So you've liquidated listed investments." That's correct. "And the smallest unlisted investments stopped running out of cash." Correct. You've previously said 2024 would have transactions to realize cash for recycling into new holdings. Is that it? Well, this is it so far. We haven't finished 2024. So yeah, that's probably correct. We do want to keep just the right amount of cash to run the business, but have most of the investment into the market. That's good for everybody. So we will continue to try to deploy as much as we can in the hydrogen industry because we see real momentum building up now from the investments we've made and others beyond that as well.
John W. Thanks for the question, John. "Have you any other asset sales planned?" Answer, "Yes. That is our business model, John." So yes to that question. So John W. again, "What are the likely use cases for hydrogen apart from heavy transport that you've highlighted?" So John, the major use of hydrogen today around the world is in the refining chemicals and fertilizer industry. And this is a large sector. This is EUR 170 billion per year of revenue. And that is hydrogen that's known as gray hydrogen, manufactured from fossil fuels. And we see the major demand pull for green hydrogen today into that gray hydrogen sector, so to take out the fossil fuel components from today's hydrogen market. And then over time, we think clean hydrogen can grow in the transport sector and distributed power. So John, that's your question.
Will F says, "GBP 4 million in cash, but GBP 3 million yet to be received before closing the Gen2 transaction. Is there execution risk yet?" No, we have received the cash already. Equally, is there enough to follow for the next 12 months? Yes, there is.
And then John, again, "What are you going to do with the cash realized from Gen2?" I think we addressed that in the presentation, John. I mean, this is for working capital purposes, potentially for selective investments. But we would just see this as ongoing cash cover for at least the next 12 months.
That's it. What else is there?
Just reviewing the questions, everybody. There are quite a few questions about the impact of the U.S. elections in different shapes and forms. I think we've kind of covered that, actually, everybody. I mean, I think in essence, we would expect to see a pause on renewable policy development in the U.S. while the new administration comes on the scene. We do think there is still a positive outlook for renewables in the United States, but maybe not in the form that's set out in the Inflation Reduction Act.
There was an interesting question around the approval of the €19B German infrastructure. Yeah, that was just to add to that. I mean, this is an €18.9 billion infrastructure plan, so this is a lot of capital that the Germans are committing that perhaps we don't see the almost highest for hydrogen in Central Europe from the UK. It's a 9,000-kilometer hydrogen pipeline, and that really benefits our German hydrogen project with HH2E and to companies like Sunfire supplying electrolyzers to people at RWE that all form part of that infrastructure, so perhaps a reminder that what you see going on in the UK isn't necessarily what's going on in the world of hydrogen, and as we said, more than 60% of the fund is already invested into Europe.
So Charles Evans asked a question around the cost of producing green hydrogen and how that is evolving and how does that compare to traditional methods of producing hydrogen? The gray hydrogen sector, which is the fossil fuel-based sector, typically the costs per kilo, so this is a dollar per kilo cost metric, are in the $1-$3 per kilo range. Green hydrogen using electrolysis and renewable power is in the $3-$6 per kilo range. That's typically where the cost structure sits between those two different segments. Now, we do think that the green hydrogen production costs are falling as electrolysis becomes larger and more efficient and the unit cost of electrolyzers comes down.
At the same time, we do think the cost of fossil fuel-generated hydrogen is rising because of the CO2 costs that go around in the manufacturing of that gray hydrogen. So we do see oil refineries in Europe and other parts of the world changing out gray hydrogen for green on a greenhouse gas basis, but of course, on a profitability basis as well.
Can I just add to that? I mean, we're going to be at the Wood Mackenzie conference this afternoon talking about exactly this. And yeah, green hydrogen is in that sort of three to six range, but it depends where you are in the world. If you go to Chile, for example, you can produce it for $1.5 per barrel. So it's per kilo, sorry, my old oil background coming in there. Australia is $1.6, Saudi Arabia $1.7, U.S. $1.8, U.K. $2.8. And the reason for the difference is that the biggest cost in making green hydrogen is the cost of the green electricity. And it's in abundance in Chile. A lot of solar, a lot of wind, low land cost as well out there, a lot of government support.
It's highly exploitable, exportable, sorry, it's in just the right place for exporting to markets in Korea and Asia and to the U.S. as well. So a lot of interesting projects going ahead in Chile, and we're looking at that now. Question there, saw a comment that Cranfield have a major competitor in Europe. Well, what is Cranfield's competitive edge? Well, the competitive edge for Cranfield is the IP, it's the expertise. What Cranfield have always had, even before they were working on hydrogen, is the ability to certify modifications to major aircraft.
Because of that, the expertise of the aeronautical engineers. So it's that edge that they've got that others will have to come to Cranfield to get their things certified to go into the air. It's that know-how, which is providing the cooling systems that's going into the projects with Project Fresson for the development of turboprop aircraft and other hydrogen applications as well.
Perfect. James, Richard, I might just jump in there and thank you very much for answering all of those questions. You can't for investors. Of course, the company can review all the questions submitted today, and we will publish those responses on the Investor Meet Company platform but just before redirecting investors provide with their feedback, which I know is particularly important to you both. Richard, could I just ask you for a few closing comments?
Yeah, thanks very much. Look, we've vindicated the value of the portfolio through the sale of Gen2 this quarter. I know we've had to be very careful about not talking about that before, but we did say to investors, "This is what was coming." So we think that that's really important for the fund in terms of underpinning the value of the fund and the liquidity that already exists in the hydrogen market for buying and selling of assets and projects. And we've had material news flow into the existing portfolio as well in terms of other strategic investors putting capital into the sector.
So please stay with this. The hydrogen is moving. It has slowed down slightly, but there's no change in direction in terms of hydrogen being a key part of primary energy markets in the future. And Hydrogen One is the best way to play that in the listed market. So thanks for your attention. Thanks for being with us, and look forward to seeing you the next quarter. Thank you.
Okay, James, Richard, thanks so much again for updating to investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order the management team can better understand your views and expectations? This will only take a few moments to complete, but I'm sure it will be greatly valued by the company. On behalf of the management team of HydrogenOne Capital Growth plc, we'd like to thank you for attending today's presentation, and good morning to you all.