Good morning, everyone, and welcome to this 2nd quarter presentation from Hydro Ghentro. My name is Martin Lunde. I'm the CEO of the company. I'm here together with Martin Talenholte, who is of our CFO who will cover the financial part of the presentation. So this is a broadcasted presentation.
You are welcome to Send us questions as we move forward on the presentation and we'll have an organized Q and A session towards the and of the presentation. So the usual disclaimers. 1st, we go to the agenda. We'll cover some highlights from the quarter. 1st, we'll go through the financial section and the numbers, and at the end, we'll provide an update from the business.
So the key highlights for the Q2 for Hydro Genpro is that we see that momentum is continuing to build up in all of the key markets. There's it's been a very active quarter from a sales and marketing point of view. And obviously, we are extremely pleased that the construction of the next generation Electrode Technology facility in Denmark has been completed during the quarter. We are ready now to start full scale testing in Denmark. And I'm very pleased to report to our shareholders that the Building and construction of the facility has gone completely in accordance with plans on time and on budgets.
We're also pleased that late in the quarter and recently after the close of the quarter, We have also started operations at our test and R and D center at next to our office with 2 container based installations. We have continued during the quarter to secure production capacity and plan the expansion of our global supply chain, and I'll certainly revert to that later on. We're seeing that the contract opportunities that we have been focusing on continue to develop and being further matured. And in France, we have signed an MoU with H2V of a client and Mitsubishi Power about an expanded corporation in addition to the 2 well known projects in Dunkirk and Normandy. The as I mentioned, The prospect pipeline increasing to even higher levels, and we see projects being matured.
And typically, we see this that The contract and the commercial discussions with clients, they move from rather being very technically focused towards becoming more focused on contractual and pure legal clauses. From the outside, We've seen an accelerated focus on the towards the energy transitions. Recently, we have had the Fit for 55 package in Europe. We had the UN EPCC report very recently. The IPCAI funding arrangements are coming towards conclusion.
And on the U. S. Guide. We've had a number of very interesting initiative initiatives launched from the new Biden administration. So this is all very exciting and certainly pushing towards the energy transition in an even further speed than previously anticipated.
Internally, in HydroGenPro, we have also been scaling up organization. Recently we have appointed a Chief Commercial Officer who will start on 1st September. The ISO certification process is going ahead. According to plans and during the Q4, we expect to have the ISO certification completed. Martin will cover the financial figures on the next slides.
And yes, we did report net loss for the quarter of $13,000,000 I would like to highlight that about 50% of this is related to on cash items because we have these arrangements of an option related compensation to key staff and personnel. So adjusted for this, we had a very small negative EBITDA of $5,300,000 in the quarter. And in relation to our quarter balance sheet with a cash position of 471,000,000 I would conclude the Q2 that we are commercially, technically and financially in a very strong position. I will cover all of this in the Industry Update section, and then I'll leave it to Martin to present the financials.
Great. Thank you. Thank you, Martin. Then let me walk you through the financials during the quarter. So as Morten stated, we delivered a net loss of SEK 13,100,000 during the quarter with the EBITDA or a negative EBITDA of SEK 12,000,000.
And also as Morten stated, this is negatively acted by a non cash effect of the option program cost of SEK6,700,000 So on the left hand side, we have Separated the non cash operating expenditures to arrive then at an adjusted EBITDA of minus 5.3 And the comparable figure in Q1 was minus 5.4. It's an important focus for us to invest to have an early mover advantage and during the Q2 we invested 20,300,000. This includes the factory for the next generation electrodes in Denmark Completed now during Q3 on budget and on time, we are investing in additional production capacity. Our R and D center in at Haroyah is now in operations. And we're also developing systems and processes in connection with the HTV projects.
So the quarter ended with a cash position of SEK 471,200,000 and that is a reduction of SEK 18,300,000 compared to end of Q1. So on the left hand side you will find the breakdown of the changes in the cash position. So in addition to then the adjusted EBITDA of minus 5.3 and investments, so 20.3, We have other items which mainly consists of changes in net working capital that gives a positive impact on the cash position for the quarter. It's great to see all the interest in the company. When we did the IPO in October Last year we had 2 25 shareholders 1st day of trading and now we have more than 2,600 shareholders.
An important focus for us going forward. Yeah. So looking at the balance sheet, we have a very, very well capitalized balance sheet. On the left hand side, you will find the key figures. And the fixed assets mainly consists of intangible assets related to the acquisition of ASP and the investments we have made so far in 2021.
As mentioned, so we ended the quarter with a cash position of 471.2 And we have no interest bearing debt and the book equity ratio then ended the quarter at 96.4%. So, how do we want to grow this company? We have a very, very clear plan in terms of how we want to grow. In essence, we want to combine a partnership strategy with a focused capital deployment plan. So number 1, partnership strategy.
For us to take a leading position in this market, It's important to scale up fast, but we see that the size and the complexity of the projects are increasing. So our plan is then to grow through a partnership approach where each of the parties can contribute with their key competencies. And second, we are combining this partnership approach with a very focused capital deployment plan. We are investing in a global supply chain and fabrication setup. Morten will elaborate more on this later on presentation.
We definitely want to take the role as a technology leader through investments in R and D and Innovation. Of course, the completion of the factory in Denmark and our R and D center in Porskund are two great examples of that. We were not satisfied and we will continue to invest in R and D and Innovation to continue to stay ahead. And we will of course continue to grow the organization. We will hire experienced people with capabilities and experience of running or executing projects and we will also continue to invest in systems to always deliver high quality.
And lastly, it is likely to be some working capital need on larger projects, But of course, this will depend on several parameters on the project characteristics, on payment terms with clients versus subcontractors. And of course, it will also be a matter of the timing of the different projects when we in the future And then plan to run several projects in parallel. So I hope the message is clear. Very, very exciting times ahead. So with that, back to you, Martin.
Okay. Thank you, Martin, for that. And let's move on to the business update and first talk about the sales pipeline. It's been a very active quarter. We've added some 13 projects to the pipeline during the quarter, with in total representing about 2 gigawatts.
And as you can tell from the right hand side here, You see the increase recently, particularly coming from Europe. We're also seeing what we have since before that the average project size continue to increase. And the activity really comes from the whole range of potential applications for green hydrogen. There's, among the others, metal industry, there's reason, Power to Gas. It's really a broad based activity level throughout both Europe and the U.
S. In particular. So we also see that this high level of market activity continues into the Q3. And as we've said before, we believe that we are definitely getting closer to final investment decision dates. And as we've said before, we think that the possible awards under this Ipke and Green Europe Green Deal Funding Programs will be an important catalyst to actually getting on with the major and large projects.
We've as I said, we continue to focus on Europe and Americas in particular. We also see interest in Asia and Oceania. In particular, recently there's been some new significant projects being launched out of Australia. So we also expect that during the coming months and quarters, we have to rethink and redefine also our strategy for Australia. On this slide, We're showing in orange color the key contract opportunities that we focused on previously and then added in green the rest of the sales pipeline that we are working with.
And in Europe, I don't have any particular specific news to share on the for contract opportunities that we have covered a lot in the past. In Europe, we continue to work closely with H2V on the projects in Dunkirk and Neuromandi. In October there is going to be a public hearing in Dunkirk regarding the 100 Megawatt projects for H2V. So that needs to happen this fall. And in parallel, H2V continued to mature the contracts both financially and also commercially.
So no specific sort of update rather than we continue to work in a very close relationship with the clients. And the same is the case in the U. S. We are continuing our dialogue and conversations with DG Fuel and Mitsubishi. These are all very active processes and dialogue.
And we remain confident that we will see some of these final investment dates materialize late this year or into early part of 2022. So all in all, we're in Good shape on all these opportunities, and we see also new opportunities continue to surface all the time. Then turning a bit and back the focus to Denmark and over next generation electro technology that we have spoken a lot about. I mentioned upfront that we were able to complete this installation on time and on budget. So we're totally in accordance with the time schedule that we first presented to you last fall.
So what's happening now is that we will do some of the factories complete. So what we will do Now is to do some testing and validation of our smaller R and D electrodes, Do some surface treatment and performance test and then during the Q4 we will move into full scale testing of the electrode technology. So that's for ASP. We have now set the stage for a very exciting few months ahead of us. And we are very impressed and pleased with what the our dedicated team in Denmark have achieved over a few months this spring summer.
This is a picture from this new plating line. We will produce something better when we really get going. This was done Just before the close of before this presentation, but this is now a fully automated line providing a facility to apply this coating technology and then move the electrodes from in in a pre sort of pre controlled manner through various forms of bath where we will apply This surface treatment that has been developed in this proprietary technology owned by ASP and thereby HydroGen Tru. This is the test and the demo plant that we have established in at Harjoa outside our offices. There are 2 containers here with an electrolyzer system, with a capacity of about 20 to 30 normal cubic meter per hour.
That's about each of these containers will produce about 2 to 3 kilograms of hydrogen per hour. So these two containers will give us the opportunity to perform R and D, to do innovation and really improve and streamline our production and optimize the equipment. So we're very pleased that this is now in operation and will be very active and also Subsequently, we have the opportunity to present this in more detail to our shareholders and also to clients. On this slide, this is not I have to say that this is not Hydro Gerempro's own slide. This is an effort to benchmark the competitive landscape between various OEMs, of producers of electrolyzers.
This was a slide that was prepared by Green Hydrogen Systems in connection with their investor presentations and material in connection with the stock exchange listing this summer. So this is just showing how green hydrogen systems at the time presented the competitive landscape on 3 variables. 1 being the efficiency, which in overview is the far most important parameter for the electrolyzer industry. 2nd here in the middle column is the product footprint, the physical size And the third is the system delivery pressure. With the time available now, I'm only going to focus on the efficiency side.
What we have done with this slide is to insert the comparable figures for Hydro Gentro in this competitive landscape. And we've inserted over 100 Megawatt system based on our next generation electrode technology. And as you can tell from the scale here, we are launching our new technology, Expecting an efficiency rate of 93% of theoretical maximum, which is a drastic increase in compared to what other producer are able to deliver at the time being. But again, as I said, this is not our slide. We've simply just inserted for comparative reasons over specific Hydro Genpro figures.
And you all know that efficiency is a key, The absolute single most key driver to the cost of producing hydrogen as the electricity Cost represents about 80% of the cost of green hydrogen. So This is also then the reason why we continue to repeat this ambitious message on our ability to Produce, green hydrogen at a cost of $1.2 per kilo in 2022 as we introduce the new electrode technology to the market. We think that's going to happen next year already, which is several years before the more official EU targets of getting even close to these cost levels. So this is based on applying overcurrent high pressure alkaline solutions in combination with the proprietary Electro technology owned by ASP and Hydro Gantro. The I mentioned the importance of the electricity costs.
So to get this kind of efficiency levels is absolutely key of making green hydrogen competitive to fossil based alternatives, which we normally refer to as Gray Hydrogen. And it's also important to point out that in this process And with our high pressure alkaline technology, we are not dependent on the use of noble metals. We know that for a large part of the renewable industry and also for the producers of Electrolyzers PEM Technology, at least as far as we know at current standards. There's an important difference between alkaline and PEM that we're not relying on the use of noble metals. So this is why we think that HydroGenPro will take an industry leading role in making green hydrogen competitive for fossil based alternatives.
This slide You have seen before this continue to be very important to us. We are planning and working with a global rollout of our Technology through independent supply chains in each of Asia, Europe and U. S. We will build these, supply chains with, important fabrication hubs in each of the continents. And we will develop a very dynamic supply chain with assembly sites to be located very close to where we have the large projects.
So to some extent, this will be driven by the location of the first large projects that will be awarded to us. We have this target of short- to medium term reaching production capacity of about and above 1 gigawatts per year. And what we have been doing, as we also communicated after Q1, We have continued to work with getting all the licenses right, the technology rights, the know how, the documentation that we need to roll this out internationally in a cooperation, as Martin said, with large industrial partners, where our contribution mainly will be to provide the softer components of the rollout plan. There's been a lot of activity in our surroundings during the last weeks months. We We have had several reports and initiatives.
I won't go through in detail all of this, but these are just recent, I would say measures and reports that will impact the future of renewable energy and green hydrogen. And without exception, all of these initiatives and programs are pulling in over the direction. There's been set very even more aggressive targets for a renewable future already in 2,030. And renewable hydrogen is going to play an absolutely key role in this. In EU, We see now that there is a structured process, how these new initiatives will go through rounds So discussions and negotiation and finally find a way into legislation some months ahead of us.
But all of these efforts are pulling towards an accelerated energy transaction. And in the U. S, we really see this market is catching up quite fast. The new Biden administration has launched Several in forceful initiatives, which really will ensure that U. S.
Will catch up with Europe on this development towards a renewable future. So all of this is pulling in our direction. And to sum up this presentation, I would say that, we are taking an industry leadership within technology and driving the development of increased efficiency. And we are, of course, obviously also going to paid in CapEx reduction and industrializing the production of electrolyzers. We are relying on a partnership strategy to expand internationally with our supply chain, and fabrication is going to be a key part of this.
Momentum is building up and the sales pipeline is increasing, and we are scaling up our capacities and competencies to play a key role in this market. And we see that the public measures and the public The support continue to be extensive, increasing and even more committing almost on a monthly basis. So I would say we're in a very strong position technically, commercially and financially to move forward with the year and hopefully have some exciting news ahead of us in the near future. Many thanks for the presentation and we'll see if there's some questions.
Yeah, there are several questions been asked during your presentation. And I can take the first one, and that is related to the Normandy project. Do you still see a chance that For the Normandy project will not be provided by Air Liquide, but by Hydrogen Pro. And that's the first one. And the second, how do you see the chances for the Dunkirk project?
And when do you expect FID for both projects, Dan Kirk and Normandy.
Well, I think as I said during the presentation, we have no specific news on either of the 2 projects in France. There's no change neither in Durnkirk nor in Normandy. We continue to work with H2V as our important client and partner in France. And we all know that Within the application, the framework of the applications that's been forwarded to French authorities, it's all based on a Hydrogen Pro Technical Solutions. So there is nothing in our dialogue with H2V indicating any changes or different direction on this.
So non news on the French contracts. And what was the rest of the question?
That was When do you expect FID for both projects?
Again, I'm reluctant to give provide a more specific date. You will hear from us when we have something more specific to report. So the only specific Event that I'm aware of for the time being is this, a public hearing that will happen in Dunkirk in October this year. And then We'll follow this obviously on a very close basis during the coming weeks months.
And I'll follow-up on again. And there is nothing related to the new electrode technology that is the reason why the H2B projects are delayed? Question
mark. No, there's nothing to do with Hydro Genpro. So these are all delayed out of our control.
And then a question related to Highdeal North America. Have you made any payments to Highdeal North America or any affiliate Our high deal during 2020 or 2021?
We have made a contribution to high deal North America because we are a sponsor to that initiative. So that's a very limited sponsorship. And I must say, I'm very pleased with our participation in HIDIEL North America. That is showing a lot of promise. We there's certainly a very Interesting development there with a mixture of public sector and private initiatives and we are A key part to several of these initiatives and opportunities for, Hydro Gantro.
So I'm very pleased with our participation in High Deal America. I think it adds a lot of potential to the company.
And you mentioned during your presentation, the Noble Metals and the question related to the margin picture, Iridium and other metals prices have skyrocketed. What is the margin picture you can guide?
Well, we see that the price of noble metals continue to shoot up. We also I mentioned during the presentation that we are It's reliant on the use of noble metals. We think that puts only us in a very competitive position as we will scale up and use more and more of our raw materials. Our main Raw material is carbon steel in our systems. Obviously, we've also seen price increases on carbon steel and steel in general.
But this cannot compare to what we've seen on price increases on noble metals. And clearly we when we see price increases on steel, we will eventually also have to transfer this to the clients and charge this to the project. So we continue to work with the same margins that we have previously done in the past. And given the turbulent situation in the kit for raw materials. Also on steel, we are generally setting fairly short validation valid times on the kind of offers that we are providing today just to make sure that we manage this exposure carefully.
And follow-up on H2B. What is The legal commitments made to H2B and is there a firm contract in place?
Well, there's a contract in place which has been in place for a long time since 2018 and We have performed a lot of work for H2V under a contract which and work that H2V has actually paid about to €2,800,000 for. So that continued to be in place. When you say And ask whether it's a firm contract. Yes, it's a firm contract, but it's still dependent on H2V making their final investment And that will not happen before they have everything commercially organized and structured and also before they have the financing in place. And clearly, the original commitment and agreements were made on based on pricing in 2018.
So we are also, As we have previously communicated, working with a repricing of the contract from our point of view.
And a couple of questions related to your investments. How does your investments translate in to an early mover advantage, referring to the comments made by the CFO.
Well, I think our investments into new technology have primarily been made through the factory in Denmark. And I think we have clearly highlighted throughout the presentation the importance of the next generation electrode technology and how we believe that will put us into an industry leading position in terms of and efficient electrolyzers. So that's key. The other part of our investments through the quarter has really been made into securing investments or production capacity in Asia. And this is really intended for our initial projects and before we have fully developed our independent supply chains internationally.
So we expect and the reason for making certain pre payments on this is that we expect to get the electrolysis and gas separators for our first projects from Asia. And then gradually, this will be made and fabricated internationally.
Then, you focused on, the cost per kilo hydrogen produced. And you assume I 20 US dollar per megawatt hour. Why are you using the 20 megawatt per hour?
Well, the 20 megawatt per hour is not picked coincidentally. It's this is actually the First of all this is the key assumption for making that calculation. So it's very important what electricity price assumption is put into the calculation. We're using $20 because we see that certain other Players in the market are using the same. We also see that some academic institutions, governmental agencies are also relying on at 20 megawatt per hour.
So this is the reason why we also simply applied what seems to be kind of a generally accepted benchmark in the industry.
Then some few questions related to Mitsubishi. Could you please be more specific on the project with Mitsubishi in the U. S? That's number 1. And since they are Shareholder and a partner also in Europe, one should expect that they are very eager to get the project started.
What is the reason for the FID being delayed?
Well, I cannot comment that question other than that we continue to, we are, of course, very pleased and proud to have Mitsubishi Heavy Industries as a main shareholder of the company. And I can only reaffirm that our discussions and work with the various Entities within Mitsubishi continue to be very active and very close, and we are working with Mitsubishi in Americas, perhaps in particular, both directly towards Mitsubishi in their sort of independently, but also we are working on several project opportunities together with Mitsubishi Power in the U. S. So Our dialogue with Mitsubishi all over the regions continue to be very active and interesting and strong. But I cannot go into more specific details on this
occasion.
Okay, thank you. I think then we have covered the questions being asked.
Okay. Thank you then everyone and we'll see see you at the 3rd quarter presentation. Thank you.