Good morning, ladies and gentlemen, and welcome to the Hydrogen One Capital Growth investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged; they can be submitted at any time via the Q&A tab that's just situated on the right-hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and will publish those responses where it's appropriate to do so on the Investor Meet Company platform. Before we begin, as usual, we would just like to submit the following poll, and if you could give that your kind attention, I'm sure the company would be most grateful. I would now like to hand you over to Managing Partner JJ Traynor.
JJ, good morning, sir.
Good morning, everybody. Thanks for joining the call this morning. I'm JJ Traynor, one of the Managing Partners here at Hydrogen One, joined by Richard Hulf, who's also.
Morning, everybody.
Also Managing Partner, one of the co-founders. We'll take you through the results and trends in the sector, and of course, plenty of time for Q&A. The disclaimer statement, and then the agenda for the call. I'll kick off by going through the first quarter results and then hand over to Richard to talk about portfolio developments and what we see happening in the portfolio companies. I think to say that we had our annual report presentation with everybody just two weeks ago, so there isn't really a lot of new news on the portfolio companies, nor the numbers, as you'd expect in just a two-week period. What we thought we'd do is slightly change focus on this call. We've published a report this morning called the Hydrogen Handbook, which is our annual outlook, summary and outlook for the hydrogen sector.
Let me give you a summary of the conclusions of that report as we turn the slides this morning. First of all, the highlights for the first quarter. NAV per share, similar to the prior quarter, and NAV now sitting at GBP 115 million. Portfolio continued to deliver strong growth. The private portfolio revenues in our six portfolio companies grew 21% year -over -year, now reaching GBP 92 million. There is good momentum, strong momentum, and news from several portfolio companies: Strohm, Sunfire, Cranfield, for example, and Richard will take you through all of that. Cash at the end of the quarter, just over GBP 2 million. The numbers in a bit more detail. The valuations are done using IPEV guidelines, reviewed and approved by the board per quarter and reviewed annually by our auditors, KPMG. NAV per share down slightly quarter -on -quarter, and down year -over -year.
That year over year impact is due to previously announced write-downs, which we updated on with the annual report a couple of weeks ago. Discount rates in the quarter slightly lower than at the end of the year, with a 0.3% difference, which is a very marginal uplift on the results, GBP 0.2 per share. Discount rate's not really a factor in these results. The results expressed as moving parts. The slide on the left-hand side shows NAV movements Q1 2025 versus Q4 2024 on a pence per share basis. There's a small decrease in holding values for portfolio companies overall, totaling around GBP 1.2 per share, with offsets from positive FX impacts and some offsets, of course, from fund costs.
On the right-hand side, on a longer-term basis, NAV per share since the mid-2021 IPO starting to rise, flattening, hopefully to rise following the write-downs that we announced for 2024. In a bit more detail, the chart shows the increases and decreases in NAV by company, again, compared to Q4 2024. Working from the bottom of the chart upwards, HiiROC and Strohm, values reducing as a result of delays in turning sales opportunities into firm orders. Elcogen and Sunfire, large holdings for the company, of course, essentially unchanged, some small delays to Elcogen projects as that company manages its cash. Bramble and Cranfield, both benefiting from discount rate uplift and business development, particularly at Cranfield. I think with that, I'll hand you over to Richard to talk more about the portfolio.
Thanks, JJ. Just a reminder of what's going on in the portfolio, trying to update on the news in the last couple of weeks. Yes, just a reminder, the six companies in the portfolio: Bramble, HiiROC, Cranfield, Sunfire, Elcogen, and Strohm. Bramble, it's about lightweight fuel cells being adopted into the mobility sector. Bramble is working closely with Tier 1 autos in Japan. Japanese Tier 1 autos are also very active in the U.S. We'll be talking about that in the section on hydrogen and the broader market. There are actually fuel cells going into Kenworth T680 trucks now in the U.S. and California. That's actually happening now. It's not a project or a joint venture because California has got a lot of hydrogen supply as a sort of a sub-market within the U.S.
HiiROC, this morning, actually, just about six minutes ago, announced a joint venture in the Saltend Chemicals Park up in Hull with Associated British Ports and PX Group, larger chemicals producer up there. We'll be seeing hydrogen being manufactured through the other HiiROC units. Cranfield also have been active in the last couple of weeks in announcing the—it's a subset of the Cranfield business. It's the flight simulator now being used for Formula 1 arcade simulation. F1 Arcade have put out an announcement in the last few days, and you'll see the Cranfield units on show there. This is a great sort of EBITDA-generating business as part of the overall Cranfield business. That's just a reminder of the portfolio. Just a little bit more in terms of the numbers, the snapshot of the fund, NAV GBP 115 million.
We're happy with Sunfire, HiiROC, and Elcogen as our top quality companies, the largest shareholdings, 2/3 of the portfolio, about 60% of the portfolio in Europe and the rest in the U.K. By theme, mostly in the energy transition, which means a now focus and green hydrogen covered by Sunfire, again with short-term revenue growth. The yellow portion is mobility with high innovation value. We showed you this before in the last couple of weeks, just a reminder to those investors about how the portfolio breaks down. A little bit of news flow, Q1 2025, Sunfire, great headline for the fund, EUR 200 million in financing provided by a consortium led by Commerzbank. The sector is being funded now, and we're highlighting that here. Strohm teamed up with Unitech on some subsea applications, fluid flow using Strohm Pipe, and secured orders from Saudi Aramco.
This is technology now being used in the Middle East. Bramble working with another one worth highlighting with Tripod Systems in Taiwan for PCB fuel cell-based power systems. A lot going on in the portfolio and a few other headlines there for you to digest. Just as the portfolio continues to grow, updating on the Q1 there, looking at the overall revenue generation of the companies in the portfolio. On the left, the revenue growth by companies since we invested. The early investments in Sunfire have grown the most, 12-16 times. You can see there on the top right of that chart. Other investments, HiiROC, Strohm, Elcogen, and [HDO] have grown 1-8 times. Great potential in the fund, demonstrating revenue growth in the here and now.
Revenues aggregated, 100% basis on the right-hand side, showing in Q1, GBP 92 million generated in revenues in the last 12 months compared to Q1 2024, up 21% from the equivalent period in 2024. We are really happy about the progress of the portfolio companies, and we will keep you updated on that as we go forward. We have now got a section that JJ is going to take you through on the macro, which coincides with the publishing of the Hydrogen Handbook, and JJ is going to talk to you about that now.
Brilliant. Thanks, Richard. Like Richard said, we published our annual review and outlook for the hydrogen sector this morning called the Hydrogen Handbook. It is available for free, downloaded off our website, and it is also on LinkedIn this morning. I hope you find that useful and interesting. Let me give you some of the highlights from that study, and obviously delighted to take questions. What we try to do in this study is address the long-term structural drivers of the hydrogen sector and how that is really underpinning the industry, but also to look at some of the short-term factors that are driving the news flow and some of the short-term developments. There is this long-term piece and a much more sort of here and now short-term aspect to that report.
Look, on a long-term basis, there are three big drivers of the hydrogen sector: energy transition, governments implementing targets to get to net zero, and the key role that hydrogen has to play in all of that. A nearer-term driver around air quality. This is basically about getting rid of diesel from power generation, especially portable power generation, and the transport sector. Of course, the third one, energy security, with a shift to renewables underway in many countries to get away from reliance on OPEC and Russia and so on for energy. Hydrogen sits very well within that new system of renewable power and electrification in many sectors. What that translates into over time is a very substantial opportunity to clean up the industrial gas sector.
Today's hydrogen market, $175 billion a year of revenue, the gray hydrogen sector, highly polluting hydrogen gas that's made with fossil fuels and is used in oil refining, steel, cement, and the fertilizer sector. Cleaning that up with clean hydrogen is the major demand pull that we see for most everything that we've invested in the fund. Over time, we do see the role of hydrogen, clean hydrogen more broadly, displacing fossil fuels in things like transport and the power sector over time. You can see again, there is substantial investment opportunity for our shareholders. What the report does in some detail is look at government policy around the world.
Increasingly, the types of government policy and the rate that it is being implemented is what is driving the rollout of the hydrogen sector, meaning that hydrogen is being deployed at different rates and in different settings in different parts of the world. The example on the screen there is the European Union, which is a multi-layered set of policies to get to net zero. Of course, then how hydrogen fits into all of that. I think the simple way to look at this is that demand is being stimulated. Renewables demand has been stimulated in the EU by the use of financial penalties on the incumbents. Bad news for oil refiners, bad news for fossil fuels retailers. That is also supported by grants and loans underpinning supply. There is this supply and demand stimulus in the EU.
What's really dictating the pace of change in the EU is not the EU policies, but it's the rate at which they're being implemented at a country level. One to watch this year is a policy called RED III , which is due for implementation right across the European Union by the end of this year. That really will be a game changer for the hydrogen sector. I think many oil refiners are slightly concerned, frankly, about what's in that legislation. Over here in the U.K., just to give you another example, the pace has been slower in the U.K., but policies and activity is now catching up. The emphasis in the U.K. on the policy side has been stimulating supply.
Whereas in the EU, there's a lot of focus on demand, in the U.K., it tends to be around supply and incentivizing blue and green hydrogen, making the U.K. very similar in that regard and quite different to the EU. Funding from the government now in total is running into the billions, spanning green, blue, and CCS, and moving more quickly in recent years with the arrival of the new government. The recent announcements on carbon capture and storage are offshore Liverpool Bay, and the hard-to-green hydrogen roundup both obviously highly positive for the sector. Let me make a few comments on the transport sector, which people often ask us about. Look, hydrogen fuel cells and hydrogen engines are viable options for transport. That technology is there and is improving. Of course, battery technology is there and is also improving.
We think that these two technologies are quite complementary, and they are being rolled out at different rates in different regions and in different applications. Really, what is driving this is access to hydrogen, access to charging networks, and of course, price running through all of that. In the near term, hydrogen buses are being deployed in many cities around the world, especially in the EU. Who is doing it? Solaris, for example, has delivered 400 hydrogen buses and has another 400 buses in its order book. Wrightbus here in the U.K. has delivered 170 buses, and they are planning to make over 100 more this year. Buses are really moving, and this is all around cleaning up cities, air quality, and net zero.
On the HGV side, again, moving at different rates around the world, many OEMs in heavy goods vehicles are testing and trialing fuel cell and hydrogen engine solutions and working with suppliers to build out the refueling sites. This is particularly a busy sector in the EU, in China, South Korea, Japan, and California, the example that Richard mentioned. In light transport, where there is clear competition with battery EV, which is ahead in many markets, keep an eye on the Far East. Look at what Toyota are up to. Look at what Hyundai are up to in terms of deploying hydrogen fuel cell into light transport. A lot is happening on the transport sector. In terms of hydrogen supply, the chart shows green hydrogen supply on stream, under construction, under development by region.
Key message here is that there's going to be a 15%, sorry, a 15 times increase, a 15 increase in green hydrogen supply coming into the market by 2027. All of that's post-FID, post-final investment decision, with capital committed of over $60 billion. Real sector happening now and growing quickly. In terms of market development and putting all of these macro themes together, there are strong long-term, we think, unchangeable factors driving this sector. We talked about energy transition, air quality, energy security. At the same time, there have been headwinds in this industry, really from geopolitics, so Russia, Ukraine, U.S. policy development, and so on. There has been a slower development of projects in some regions as off-takers wait for pricing to develop and wait for government funding to arrive.
I think within all of that, there has been plenty of news flow around some oil companies retrenching back to oil and gas and moving away from renewables. That is particularly the case for Shell and BP here in the U.K. Some complex news flow there. Despite these headwinds, we are seeing strong growth overall, 15x increase in supply to 2027, $60 billion of committed capital, and particular progress in the industrial gas sector in buses and coming pretty quickly, e-fuels and stationary power. That is a short canter through the Hydrogen Handbook. As I say, that report is available on our website. Please do read it and delighted to take questions on it. With that, Richard, over to you to close us out.
Thanks, JJ. Q1 2025 picked up with the pace. We see revenue growth in our companies. Despite the general economic headwinds globally, hydrogen is looking good. Looking ahead, Hydrogen One remains focused on delivering long-term value by investing in the energy transition and scaling up the hydrogen economy. Our portfolio companies continue to make solid operational progress, and we are well positioned to capitalize on the growing momentum behind clean energy infrastructure. We thank our shareholders for their continued support as we work to build a more sustainable energy future, working hard with new like-minded investors and joint venture partners to build on the platform of HydrogenOne. Thank you very much, and we will take your questions and talk through the sector.
Perfect. Richard, JJ, if I may just jump back in there, and thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab that's situated on the right-hand corner of your screen. While the team take a few moments to review those questions that have been submitted already, I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can all be accessed via your investor dashboards. Guys, as you can see there, we have received a number of questions that were both pre-submitted ahead of today's event, as well as those that have made their way through this morning as well. Firstly, thank you to all of those on the call for taking the time to submit their questions.
JJ, Richard, at this point, if I may just hand back to you just to read out those questions and give your responses where it's appropriate to do so. If I pick up from you at the end, that would be great. Thank you.
Yeah, there's a number of questions rightly about how are we dealing with the discount between the share price and the NAV, and where are we in the environment after Cordiant? Investors will have seen that we're very proud to have announced a new financial advisor and broker in the form of Shore Capital. JJ and I have been, and the team have been working very hard on other partners and other investors who share our enthusiasm for the long-term view and midterm view on hydrogen. We've been working closely with those entities and then engaging Shore Capital on that process to sort of formalize that. That's as much as we can say really about what we're doing, but we're doing a lot to secure our future and to secure the best value for our shareholders going forward.
Great. There's a pre-submitted question around the costs in the fund. I think there's perhaps in the question, there's a bit of a jumble on the numbers. The cost for the fund last year, taking the investment advisor fee and the overall costs of running the fund, were around GBP 3.5 million. What we flagged in the annual report was that those costs are expected to be around GBP 3.1 million this year with downside as we continue to take out costs and focus on that. I hope that answers the question around the cost piece. There's a question from Neil, which is Neil M, around, I guess the question is, given the state of the hydrogen sector in the forms of the fund, do you still think, would you still invest in similar companies going forward? I mean, look, Neil, it's a sort of philosophical question.
Our investment mandate's pretty broad. I think what we've learned is that focusing on supply chain businesses is the right place to be. If you remember, we exited from developer businesses last year and focused on those supply chain companies, particularly electrolyzer and Fuel Cell. We continue to believe that that's a good place to be in the industry.
Question from Stuart E about cost reduction. Yes, Stuart, we are working on a cost-cutting program between the HydrogenOne advisor and the board at all levels and include some of the options that you mentioned there. We are confident that we have cash to run the business going forward and are working very hard on an alternative strategy.
Stuart is also asking, was there a cost to the aborted Cordiant transaction? The answer is there's no cost to the shareholders in any way on Cordiant.
Graham, given cash constraints, what's the risk of?
No, we've covered that.
Yeah.
There's some macro questions coming through. Perhaps one for you, Richard. I've an [audio disstortion] any thoughts on the use of ammonia to deliver hydrogen, especially with respect to AFC's pivot to mobile ammonia cracking?
Yes. We actually were with AFC last week looking at that very, very interesting technology of the ammonia cracking, which is highly scalable. You can have an ammonia cracker in the size of a sort of a one-liter Coke bottle, or you can have an entire plant. The short-term application we see in ammonia, apart from the fertilizer sector, which is already a massive sector and converting over into sustainable green ammonia, is also in shipping. The shipping industry and the changes implemented by the regulator in the shipping world are also pushing us fast towards ammonia as a solution in that area. Hyundai invested into the portfolio, into one of our companies, is the shipping part of that business. Yes, we have real connections and we see real upside there.
There's a long question from Ian O, which, if I could summarize, Ian, it's around the cash position of the company and alternative strategies to address the cash position and realize value for the shareholders. Ian, if I could just say, we're working very hard on a number of options to address that and to improve the share price performance. I think it's been mentioned that we've recently appointed Shore Capital to come on now as the broker and the financial advisor. I think it'd be better if we updated as to the outcome of that rather than speculate as to the routes that we may or may not follow. Yeah, thanks for the question and all the comments are well noted.
There was a question from Nathan about continued support from largest shareholders in [audio distortion] and others. Yes, the answer is yes. We have been engaging with the largest shareholders. People know the current situation. Yeah, there is continued support for us and what we are doing in the hydrogen sector.
There's a question, a pre-submitted question coming from David. Thanks for the question. Could you summarize the state of play in the U.S. hydrogen sector? It's quite a complicated question. Richard perhaps would like to have a go at that. The U.S. sector?
Oh, yes, yeah, the U.S. sector. Now, the U.S., yes, is interesting. We've got committed markets in California and the East Coast that will continue to support hydrogen. The example that we gave earlier backs that up of Toyota putting their fuel cells into Kenworth trucks that are running along the supply chain in California because there's a long-term commitment to hydrogen production in that state. The way we see hydrogen developing in the U.S. is targeting the right markets in California and East Coast. There's also quite a lot of talk in the U.S. about drill, baby drill, sort of coincided with the U.S. Geological Survey report on white hydrogen coming out of the ground with the oil and gas, which I know is an area that JJ is interested in. There could be upside potential there.
Given our oil and gas backgrounds, we're well on top of any progress that could be made in that area.
There's a question from Ian M. Thanks for the question. Are fund managers receiving any bonuses on this performance, either last year or predicted for this year? The bonus arrangement, so this is really a question for Richard and myself. We are incentivized to sell assets at a premium to the prices that were paid for those assets. As and when that transpires, we receive a carry, so if you like a share of those gains. Outside of those asset sales, we do not receive bonuses here. I think that answers your question. Again, there's a pre-submitted question. Can you comment on activity in the hydrogen sector outside of your portfolio companies? What do you see more broadly in the market? Richard, this may be one for you.
Yeah. I mean, just outside of the first quarter, just in the last few days, we've seen some great announcements. ITM supplying 300 megawatts of electrolyzers to a client in Asia-Pacific, as well as 35 megawatts going into Aldbrough in the U.K. with SSE and Equinor as the clients for that. Again, back in the U.S., also Exxon signed a supply deal with Marubeni for blue ammonia. thyssenkrupp nucera supplied 740 megawatts of electrolyzers to Stegra, a client in Boden, in Sweden. Toyota we mentioned again in the U.S. Yeah, there's a lot going on in the sector globally. We find we're sort of working against the headwind of the press that wants to see the downside of hydrogen. There is quite a lot of announcements around that. We probably see sort of a five-to-one ratio of good news to bad news.
Yeah, it's finding its way into infrastructure. It's finding its way into the existing hydrogen sector, as we always said, which is a large sector which sits behind ammonia production going into fertilizers and the hydrogen sector that goes into cement and steel as a reducing agent. A lot of what we're seeing is electrolyzer supply into people that are converting driven by the legislation in Europe that you just simply cannot carry on producing gray hydrogen. You've got to change. You've got to start buying electrolyzers. That's what we're seeing globally.
There's a couple more questions. Stuart E, thanks, Stuart, is asking about the large spread on the share price. He's talking about a 15% spread of the share price being created by the market makers. Is there a way to resolve that? Thanks for that. This is something which I think we should pick up with our new broker, Shore Capital. Stuart, thanks for the comment there. Graham R is asking about cash constraints. Given the cash constraints, what's the risk of dilution to the portfolio companies needing funds over the next year? I mean, that risk is there, Graham, for sure. I think so far we've been quite successful at mitigating that by the use of convertibles.
If you remember, in 2023 and 2024, we made relatively small investments in the portfolio companies into convertibles, which obviously converted at a discount against fresh investment, which protects our shareholders in as much as we can from those dilution effects.
How big is your analytical team currently? It's the six of us. We're all working on analysis. I guess two out of the six are intensely working on the analysis of the existing fund. Yes, we are on top of the existing six investments. There's a familiarity, but we have to, we can't be sloppy. We've got to keep on top of each of those companies. JJ and I are on the boards of most of these companies. There's a lot of work to do. We also stay on top of the potential investments into the pipeline so that we are expecting to carry on investing into the hydrogen sector as it grows. We have to find new ways of raising capital to do that. Yes, we're hoping we don't miss these opportunities as we go forward.
There was a question which appeared and then has disappeared, actually, which was about some of the aspects of the Hydrogen Handbook. So apologies that question's gone. Let's just get in touch. Either repost it or get in touch by email, then I'm sure we can look at that.
I think that's it. Absolutely. Absolutely.
Guys. JJ, Richard, thank you very much indeed for being so generous of your time and addressing all of those questions that came in from investors this morning. Of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended. Richard, perhaps before really now just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with, that'd be great.
Yeah, thanks. Thank you to our shareholders for your continued support as we work to build a more sustainable energy future, working hard with you like-minded investors to solve this problem of the discount between the share price and the net asset value. We're happy with the NAV. We're happy with the actual valuation of the assets. We're not happy with the market valuation, and we're doing everything we can to address that. We'll be updating you shortly as we go forward. Thanks, everybody, and until next time.
Perfect. Richard, JJ, thank you once again for updating investors this morning. Could I please ask investors not to close this session? It will now be automatically redirected for the opportunity to provide your feedback in order that the management team can really 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, we would like to thank you for attending today's presentation. That now concludes today's session. Good morning to you all.