Dear audience, welcome to HydrogenPro's fourth quarter and year-end presentation. My name is Elling Nygaard. I'm the CEO in HydrogenPro, and I will work through this presentation together with my good colleague and the CFO, Martin Holtet. I started in HydrogenPro in first of November last year, and these about 100 days in, the company have been really exciting days. Please feel free to ask questions during this presentation. This is the agenda for today. First of all, I will introduce HydrogenPro in brief. HydrogenPro was founded in 2013 by core team with several years of experience from electrolysis industry from Norsk Hydro. Headquarters is in Porsgrunn in Norway. The core technology development has been through a combination of Norwegian and Chinese electrolysis competence and experience. We own fabrication facilities in China and Denmark.
HydrogenPro has partnerships with Mitsubishi Power and ABB. I will talk about the highlights and achievements last year. HydrogenPro acquired the Advanced Surface Plating electrode technology in January last year and completed building a full-scale fabrication facility in Denmark year-end 2021. HydrogenPro acquired IP rights for electrolysis technology and fabrication facilities in China in November 2021 and is scaling up to 300 MW annual production capacity, which will be completed second quarter this year. These acquisitions turn HydrogenPro into a strong technology leader and an OEM supplier. Sales pipeline increased from 4.9 GW first quarter to 12 GW year-end. We got the purchase order for the world's largest alkaline electrolysis cell stack in August, which is manufactured in our factory for the time being.
We got two engineering contracts for detail engineering for these large alkaline electrolysis systems for Mitsubishi. We have done two engineering studies for major energy companies. These studies are completed. In the DG Fuels project, the FEL 2 study is ongoing and final investment decision is planned fourth quarter this year. HydrogenPro increased and developed our organization significantly 2021. New management, C-level senior management are in place, strengthened the board of the directors with three new members, doubled our local organization, and employed approximately 30 new employees in China year-end. HydrogenPro became ISO 9001, 14001 and 45001 certified. I have to highlight the extremely big breakthrough for our business. HydrogenPro signed second of February this year a contract for an initial delivery of 40 electrolyser with Mitsubishi Power Americas.
Initial value of the contract is more than $50 million for HydrogenPro's scope. This is one of the largest electrolysis systems contracts ever placed. The electrolysis system will use wind and solar as renewable energy sources, and green hydrogen produced will be used for power generation, transportation, and industrial applications. The purchase order depends on final investment decision estimated second quarter this year. A non-refundable commitment has been placed by Mitsubishi Power, enabling HydrogenPro to prepare for production. I will say some words about the market outlook. The market for clean hydrogen is huge. Shifting from fossil to green hydrogen production or large contract in U.S. is a proof of this, and only a beginning.
The global target is 850 GW green hydrogen production within 2030, which means 100 GW annual hydrogen production capacity on average has to be built every year until 2030. 3,600 GW hydrogen production capacity within 2050 means almost 140 GW annual increase hydrogen production capacity between 2030 and 2050. To give some idea of this volume. With a market share of 10% of this market, we have to deliver more than 50 MW systems on average every day until 2050. For this reason, our main focus in addition to sales are standardization, scalability and production capacity. HydrogenPro contribution in this global rapidly growing market is our core technology offerings in cooperation with partners to build large scale hydrogen production plants well-suited for renewable energy sources like solar and wind.
HydrogenPro will take a strong leading position in this market. Green hydrogen competes with grey hydrogen costs and prices. HydrogenPro even beat the costs. This is a game changer. Estimated cost for renewable energy against natural gas costs based on not today extremely high gas prices, but estimated energy prices, CO2 taxes and gas prices in 2023. This is a really good situation for the globe, for the energy transition, for the acceleration of the green hydrogen production, and for our business. There is a strong public commitment for the hydrogen production as a part of the energy transition. This is an example of the hydrogen commitments in 2019 and up to now. From 3 national strategies in 2019 to more than 40 countries in all continents in 2022.
The graph on the right side is planned hydrogen production development in the Indian market, where we just have signed an agreement with Larsen & Toubro for delivering of hydrogen production plants together. Larsen & Toubro is the largest EPC contractor in the region. Let's look into HydrogenPro's upscaling strategy and offerings. First of all, I have to talk about the core deliveries and complete turnkey deliveries. HydrogenPro continuously working with partners in addition to global manufacturing cooperation and setups. To meet market demand on the large upscaling upcoming volume, an average of more than 100 gigawatt annual increase hydrogen production every year the next decades, HydrogenPro increase our focus on partnerships with large EPCs and complementary suppliers, in addition to increased manufacturing volume, to ensure larger delivery capacity in the end market share.
Our main focus are standardization and production capacity of the core components for electrolyzer production trains. While the auxiliary systems will in many cases be an integrated part together with preferred partners as electrical system delivered by electrical suppliers like ABB and overall plant engineering and contract by contractors and EPCs like Larsen & Toubro. HydrogenPro main targets is rapid upscaling, volume and increase global market share. The high pressure alkaline technology gives a number of advantages. First of all, the gas production train is fully standardized and for efficient manufacturing and easy to scale. Compact plant design due to the high pressure gives efficient footprint, CapEx efficiency due to the design, OpEx efficiency due to the reduced energy cost by the advanced electrode technology, and operation window that is well-suited for renewable energy sources, and no use of noble metals or PFAS.
Energy cost is by far the largest costs in the levelized cost of hydrogen perspective. Our advanced electrode technology gives 93% electrolyzer efficiency, which is very strong, and gives significant reduced energy consumptions and costs during hydrogen production. You see HydrogenPro's electrode efficiency shown in the figure in the middle and the main OpEx costs, the energy costs, dominate the total cost of ownership shown in the pie on the left side. The business update. 2021 was an incredible year for HydrogenPro related to technology and market positioning. HydrogenPro acquired the core technology for the electrolysis system from our partner in China and in addition acquired world-leading electrode technology, Advanced Surface Plating, which scientists in Denmark have developed and improved over the last 10 years.
Directly after the acquisition of the technology and the IP right in Denmark in January 2021, HydrogenPro started building a factory facility in Aarhus in Denmark. This factory for the advanced electrode technology manufacturing was finalized year-end 2021. After the acquisition of the core technology and IP rights for the electrolysis system in China fourth quarter last year, HydrogenPro started immediately building a new fabrication facility for 300 MW annual production capacity in Tianjin in China. This factory will be finalized second quarter this year. Key achievements in sales the last year were two contracts for engineering of large electrolysis cell stack systems, including one delivery this year. In addition, we have delivered two studies for major energy companies. During 2021, we increased the active sales pipeline from 4.9 GW in first quarter to 12 GW year-end.
HydrogenPro improved and increased the board of directors with three members and employed the C-level senior management, more than doubled our organization in Norway and increased our organization in China with more than 30 employees through the acquisition of the fabrication facility there. Our working processes and tools are moving into a higher professional level and the year-end was finalized with ISO certifications. We started this year with this large $50 million-plus contract in U.S. and are continuing next step growth in the global market, focusing on global sales and end user contracts and building new manufacturing capacity outside China. In addition, continue building up our business through organization development, project execution and strategic partnering.
The last significant achievement is the signing of the MOU for market cooperation, manufacturing and fabrication setup with a global company, Larsen & Toubro in India. Similar processes are ongoing in North America and Europe as well. We currently have 84 active projects in the sales pipeline, 18 more than last quarter, and the plant sizes are increasing significantly. The average plant size is now 143 MW compared to 124 MW last quarter. It's especially interesting that the average size of the new projects is more than 200 MW. In addition to the large contract with Mitsubishi second of February this month, we are getting closer to final investment decisions in other projects. We are in contract negotiations in some of the projects which are expected to be finalized during this year.
The production capacity has to and will be aligned to these increased volumes. A major milestone is reached. After the acquisition in the fourth quarter last year, HydrogenPro is building up a new factory in Tianjin in China. The new factory manager in Tianjin is Jan-Henrik Kuhlefelt, China-based Norwegian from Porsgrunn. Jan has been dedicated for fabrication setups and production optimization for Western companies in China the last 20 years. He is really what we call the right man at the right place for us. As earlier mentioned, the production capacity will be 300 MW annually. Total investment approximately 73 million NOK, and we have got more than 30 new local employees. After more than 10 years of research of advanced surface plating technology, we acquired the technology and built a new electrode production factory in Aarhus in Denmark last year.
We are proud to announce the production factory for next generation electrodes now is ready for large orders. We continue our global fabrication upscaling strategy. The first 300 MW production lines are in operation second quarter this year. We have signed the MOU with the EPC company Larsen & Toubro in India and for manufacturing and sales in the Indian market. This preparation work is planned to be completed this summer. We are preparing a similar cooperation and setup in North America and Europe. Unfortunately, these companies' name are confidential in this stage. Through the partnership with these global companies, we are preparing to build more than 1 GW production capacity in 2023, and up to 1 GW additional production as the next steps. In fact, I recognize these numbers are realistic due to our strong partners and partnerships.
I have only one message: Think big, think volume. Economy and finance. Please take the floor, Martin.
Thank you, Elling. Thank you. Let me walk you through the fourth quarter financials. In the fourth quarter, we generated revenues of NOK 11.1 million. These revenues are related to the delivery of the single stack electrolyzer system to Mitsubishi that will be transported and installed at Herøya. There are two engineering studies in addition to that. These revenues are then recognized in accordance with the percentage of completion principle. The adjusted EBITDA, meaning excluding non-cash operating expenses, ended at NOK -13.1 million during the quarter, reported EBITDA of NOK -16.5 million, and the net loss was NOK 16.8 million during the quarter. These numbers then reflect that now we are building up the organization to deliver on the future contracts.
It's an important focus for us to invest to stay ahead, to have an early mover advantage. During the quarter, we invested 51.8 million NOK, that includes a convertible note to DG Fuels of $3 million or then approximately 25 million NOK. On that project, HydrogenPro is the exclusive supplier of electrolyzer systems. Other investments include technology and production capacity in China, the next generation electrode, completion of the fabrication facility in Denmark. The total was then 8.3 million NOK, whereof 4.8 million NOK was due to an earn-out related to the acquisition of Advanced Surface Plating. If you look on the left-hand side, we can see the changes in the lower part of the table.
We can see the changes in the cash balance during the quarter. The quarter started with a cash balance of NOK 443.4 million. We have the adjusted EBITDA of -13.9. We add on the investments of NOK 51.8 million, and then we have other including changes in working capital with a net positive impact of NOK 3.8 million, meaning that we ended the year with NOK 382.3 million in the cash balance. Yes. We have a well-capitalized balance sheet. As mentioned, we ended the quarter with NOK 382.3 million in the bank. We have no interest-bearing debt, and the quarter ended with a net book equity ratio of 95.8%.
From first of January this year, we will implement IFRS reporting. To go over to international reporting standard is another good example of our global upscaling plans. In addition, we will also publish a sustainability report, the first ever for the company, and that will be an integrated part of the annual report for 2021, which will be published on eighth of April this year. We have a clear, very well-defined and clear growth plan. As Elling has alluded to, we want to grow this company together with large partners, but then in conjunction with a very focused capital deployment plan.
When it comes to the capital deployment plan, we will invest in global supply chain and fabrication together with large industrial players that has the infrastructure, that has the established footprint in the relevant regions that we are pursuing. That includes Asia and Pacific, Europe and North America. I think L&T is a very good example of that, a company that has a very well-established footprint and infrastructure, not least in place. We want to take the role as a technology leader. We will continue to invest in technology and innovation. Two good examples being the electrodes, the next electrode technology, the fabrication facility related to that, which has been completed now, and the test and technology center at Herøya as well, close to our headquarters.
We will also continue to scale up the organization in order to deliver on the larger projects. There could also be some working capital needs on larger scale projects. With that, back to you, Elling, to walk us through the summary.
Thank you, Martin. Yeah. To sum up, what are the main takeaways, highlights, I would like you to retain from today's presentation? First of all, HydrogenPro won the large scale hydrogen production plant contract second of February. The order value is more than $50 million. Active sales pipeline growing. 84 active projects and 12 GW in the sales pipeline year-end 2021. The available market will be more than 100 GW increase annual production the next decades. HydrogenPro will take a strong leading position in this market. Technology leadership through the electrolyzer technology and the efficient electrodes. HydrogenPro own the IP rights for this core technology. Preparation of global partnership with large industrial partners and EPCs ongoing. Global fabrication, upscaling preparation ongoing as well. HydrogenPro is expanding our organization rapidly.
We more than doubled our organization last year, plus extended more than 30 employees in China. In addition to steadily growing our global partnerships. We see strong public commitments to meet the 2030 and 2050 targets, which will greatly increase the speed of clean hydrogen market growth. That sums up my presentation. Very exciting time ahead. Thank you. We are ready for the Q&A session. Please, Martin, join with me.
Thank you.
During the presentation, there are several questions asked, and some of them are related to the Mitsubishi contract, and we'll start with a couple of those. I guess these are for you, Elling. Then you mentioned during your presentation that the initial delivery of them to Mitsubishi was some 40 electrolyzers. Does this mean that the project is bigger?
This 40 electrolyzer is the first step in a larger project, yes. I would say we are well-positioned for next steps as well, which is coming later.
The follow-up question will be, what is then the time schedule for the Mitsubishi project?
Yeah. We had the internal kickoff last Friday, in fact. The final investment decision will be second quarter. Roughly it's a half year now preparation, engineering, work, and so on. We will have one year production of the equipment and one year at site. Roughly we will finalize the project fourth quarter 2024.
There is one question also with regard to Mitsubishi and the Rapid Validation Project, the first contract you announced last fall. The question there is how much of this is completed, and when will it be delivered in China?
Yeah. The project is engineered and is in production in our production manufacturing facilities in China for the time being, and will be shipped in end of March. It will be shipped to Norway.
Okay. One question I guess that is for you, Martin. During your presentation, you said that you had the company were also well capitalized, had a well capitalized balance sheet. The questions, there are several of them, related to your capitalization. I guess I can summarize those questions into one. Are you comfortable with the current capitalization of the company regarding the ambitious plan of reaching about one gigawatt in manufacturing capacity a year?
Yeah. First of all, I think it's important to understand our strategy when it comes to scaling up. The fact that we are doing this together with large industrial players with the infrastructure in place puts us then also in a very different position with regards to capital spend to scale up. Very important still to say that, yes, now we have during 2021 made two very important strategic decisions to go over to an OEM role, so it will be some CapEx need for sure. We have quite a differentiating strategy when it comes to global fabrication scale-up compared to our competitors.
Mm-hmm.
Okay. One question related to THM, and that is related to the revenue you potentially has to give up when you only own the 75 percent of the total company in the JV. The question is actually, does that mean that you have to give 25 percent of your electrolyzer revenue to THM since you only own 75 percent of the company?
Mm-hmm. Yeah.
Important to say that the Chinese operations, that's a fabrication company and HydrogenPro can enter into a contract and of course then earn an additional margin on top of that because we deliver engineering and other services as well. The fabrication company in China will of course earn a normalized standard margin for those type of companies. We can then earn significant amount on top of that.
Mm-hmm.
with our technology and insight.
It's another question related to the JV with THM. You said that during the presentation that the setup cost for the JV were NOK 48 million. Will there be recurring cost in connection with this JV? And has there been any payment to THM for the transfer of the IP? I don't know which of you that will take this question, but-
I think I can take that.
Mm-hmm.
When we say NOK 48 million initially, that is for the prepayment of some of the investments that we have made, which also was accounted for in the fourth quarter. It includes the equity ticket to then acquire the 75% stake in the company. That will be paid when the new co is established in China. In total that amounts to NOK 48 million. Prepayments and the equity ticket. On top of that, we see that there is a need to do some further upgrades of the fabrication facility, and we have quantified that to be approximately NOK 25 million.
Okay. Back to the Mitsubishi contract again. It's one question related to the margin on the $50 million-plus contract you won in February. Could you be more specific with regard to that, please?
No. Unfortunately we are not guiding on margins.
Mm-hmm.
That was clear answer to that one.
Of course we will seek, of course, to have this. This is a growing market and of course if there is money to be earned, of course we will be there. We also see that with Mitsubishi we also have the potential and to as Elling said this is the initial contract. If there are further add-ons as well, it's important for us of course to stay competitive to be able to then be awarded future contracts.
Your cooperation with H2V. It's one question related to that. I will read it as it is. Do your cooperation and project development with H2V work as forecasted? For example, there was some big announcement of a EUR 750 million investment in Marseille between Marseille harbor and H2V. Are HydrogenPro involved in this project?
We are in very good contact with HydrogenPro.
H2V.
H2V. We have this engineered projects for H2V. We are in dialogue with them in the other projects. Specifically, this project we haven't bid on yet, but we are in discussion with H2V on several projects, in fact, in France.
One question related to India. What is exactly the physical footprint for HydrogenPro in India, and is the focus for HydrogenPro to do more deals in this specific H2 market going forward?
Our cooperation in India is mainly working together with Larsen & Toubro in the local market. They have a very strong footprint in the energy market in India for the time being. Our part in this cooperation will be that we will be a technology supplier and with our IPs and our technology together with Larsen & Toubro. In fact, they have the strong market connection in the local market there.
Okay. The last question that is related to China and THM. Do you have to pay royalties on electrolyzer sales to THM?
No.
No.
Okay. I think that concludes the Q&A session then.
Okay. Thank you very much for listening to us. Okay.