Good morning, and welcome to HydrogenPro's second quarter presentation. Today, I'm accompanied by CFO Martin Holte, who will present the financial results of the first half year. We are still in a market which is moving slower than expected some years ago, but we do see on back of our deliveries to ACES and Andritz Salzgitter ever increased attention. Of the highlights from the second quarter, we decided to invest in increased capacity of our Generation 3 electrodes, as we are receiving more and more interest and request to quote, including the Generation 3 electrodes. Thus, we decided to enlarge the capacity in Denmark to match our capacity in China. We had a positive development of the cash balance of 62 million NOK. We have good progress on delivery of components from our plant in Tianjin to Andritz plant in Erfurt.
All electrolyzers and gas separation skids are delivered and installed at ACES. We are in good progress of commissioning preparation. We are also learning that some additional work has been required, mainly on equipment delivered from sub-suppliers. It has led to additional cost for the period, but we will seek recourse from our sub-suppliers. Martin will comment further on the effect of this. As well known, our partnership with Andritz was strengthened through the NOK 82.7 million investment in HydrogenPro. Again, as mentioned, based on increasing requests for quotation of Generation 3 electrodes, there is a need to prepare capacity. We first announced a conservative number on the capacity, but having worked closer with the engineering and design of the production line, we now see that we, within the same CapEx frame, can reach a higher production volume from 100 MW to 350 MW.
We are mainly optimizing on takt time, rinsing, and drying capacity. This enables a higher production. We are also now studying the possibility of even further capacity increase and expansion within the current CapEx frame. As we often point out, that capital discipline is a strong focus, point in HydrogenPro, and therefore, we're working hard on getting out the most of each kroner investment, as we are in this project. The plant will start operating in Q1, 2025. HydrogenPro is one of the very few hydrogen OEMs delivering on large projects. We are now proving that we can deliver large complex system. I cannot give an exact date for the start-up of ACES, but at that time, no other can currently demonstrate or having similar references at such scale. You do not find any better proof of concept.
We have also, in cooperation with Andritz and the customer, decided to enhance the performance of our delivery and of the delivery to Salzgitter, we will equip a certain number of electrolyzers with Generation 3 electrodes. This gives a unique opportunity to demonstrate the effect of the Generation 3 electrodes at full scale. I just visited ACES, and it's impressive to be there and to see 20 electrolyzers side by side in one of the production halls. I must say, one gets humbled but also very proud to see what we have accomplished in this delivery. According to the EIA, excuse me, IEA, there are 10 projects with a size of 100 MW or larger that will come online in 2025, outside of China. Probably, some of them will stretch into 2026.
HydrogenPro is one of five or six OEMs that will deliver on mega projects. This puts us in a forefront position with operational projects. As our two projects are among the first one to start operations, few will have the same reference and documented performance. New customers are asking for references and documented performance. There are very few OEMs who can refer to such installations and document their performance. The significance of the two projects has created recognition and attention, whereas we see an increase in requests from new potential customers. Yes, it is a long way from request to FID, where we have to recognize that there has been a slowdown in FIDs completed due to cost of energy prices, increased inflation, and unclarity in incentive schemes. But all in all, having delivered two mega projects is giving us recognition and a leading position.
Before starting up the ACES project, Mitsubishi invested in a full stack installation at our site on Herøya, called our VP. The electrolyzer is still there and has been taken over by HydrogenPro. Now, Andritz is investing in an additional stack called Stack One, which will be installed alongside with the first our VP electrolyzer. Stack One will be equipped with 50% of the electrolyzers being the Generation 3 electrodes. In addition to design improvements we have done to further reduce shunt current effects. The combination of reducing shunt currents and using Generation 3 electrodes will enhance the performance by reducing the energy consumption or kilowatt- hour per kilo hydrogen we are producing. The result being a reduced levelized cost of hydrogen. The Stack One is now being assembled in Erfurt and will be shipped to Herøya in October, and then being installed.
Stack One will be then operating for 500 hours, when we will document all operational performance data. We are now in discussions with an interested party to acquire both stacks and to operate them commercially. Given the slow market with FID announcements first half years, we will illustrate a snapshot of our pipeline. And rest assured, we are working with a healthy pipeline. The mega projects we are delivering is clearly drawing attention and interest, where we are taking step by step in terms of completing and finishing them. We are now currently focusing on 43 projects with a total capacity of 7.6 GW. Obviously, there are no guarantees that all these projects will cross the finish line to an FID, but I remain very optimistic for the future. Going forward, we are focusing on five key priorities.
Firstly, and as commented already, a successful installation and commissioning of ACES and the delivery to Salzgitter. We are focusing on increased order intake and continuously building a healthy pipeline. And as we see projects coming to maturity, leading to increase of order intake, and then the full scale documentation and testing together with Andritz. I will now hand over the rest of the presentation to Martin.
Thank you, Jarle. Then I will walk you through the Q2 results. So, in the second quarter, we generated revenues of NOK 50 million. This is mainly related to the first deliveries on the Salzgitter project. Further on, the quarter is then significantly impacted by the ACES project, and the gross profit was -NOK 22 million, and the EBITDA was -NOK 65 million, with a net loss of NOK 77 million in the quarter. The negative gross profit is then attributable to additional costs on the ACES project, with a total negative result impact of NOK 36 million in the quarter. So, to get a better understanding of the underlying business, we have then excluded the negative impact of the ACES project on the group level in the columns on the far right side.
When excluding ACES, the revenues come in at NOK 54 million, gross profit at NOK 14 million, which equals then a 25% gross margin, and the EBITDA is then improved to -NOK 29 million. Let's look at the liquidity position. The cash balance ended at NOK 247 million, an increase of NOK 62 million during the quarter. Looking at the changes in the cash balance, going from left to right, the quarter started at NOK 185 million. We had the EBITDA of -NOK 65 million. No investments were made in the quarter, as the payments now in for the investment in Denmark started in early part of the third quarter. But we had the Andritz equity injection of NOK 83 million.
And then lastly, a positive change in net working capital and others amounts to a positive impact of 45 million NOK. And the main driver of the change in net working capital is prepayments on contracts. This results then in a cash balance of 247 million NOK at end of the second quarter. The order backlog ended at 416 million NOK versus 445 million NOK at end of first quarter, as there were no significant contract awards in the second quarter. So, HydrogenPro has proved that it's possible to scale up and grow profitably while maintaining a strict capital discipline, and we will continue to do so going forward.
Our top priority is to invest in technology, to be a technology leader, and our high R&D activity during the last few years is very much enabled by significant amount of R&D grants in Denmark. The electrode technology is a game-changing technology, and we have decided to now expand the manufacturing capacity in Denmark. HydrogenPro has chosen one core electrolyzer technology, large-scale, high-pressure alkaline, hence a focused offering that is scalable to meet different project sizes, and with this platform, it gives us then an operational leverage where we can grow and, at the same time, maintain a lean global organization, and further to that, instead of building a large organization, we have partnered up with Andritz in Europe, and we see this gives us a far better market reach.
To generate industry-leading returns, we also have then a strong focus on a competitive and flexible supply chain with our setup in Tianjin and then now building the electrode manufacturing in Aarhus, Denmark, as well. Lastly, we focus on retaining a sustainable net working capital when we take on new contracts to continue to grow the company, and that became now evident in the second quarter this year. First of all, HydrogenPro is a technology company. The total addressable market for hydrogen is huge. Green hydrogen can replace fossil hydrogen, being from natural gas or from coal, but it can also replace fossil fuels where hydrogen is not used today. Hydrogen is all about bringing the levelized cost down. With our large-scale offering and technology, we are in a very, very good position to be competitive on a global scale.
Delivering on ACES and the Andritz contract now with Salzgitter gives us credibility with a track record that demonstrates our ability to deliver on the large projects. We have a manufacturing capacity of around 500 MW of electrolyzers and 350 MW of electrode capacity now being built in Denmark. We have a scalable offering. We can deliver up to giga-scale sizes on projects, and a large part of the revenues will be from after-sales when we... which then will create recurring revenues when we have installed several plants going forward. We are a team with extensive experience in the electrolyzer space, bringing the best out of the competence we have in Europe, Asia, and also the U.S. So with that, that concludes today's presentation.
Now we will go to the Q&A session, and I will ask Jarle to join me on the stage.
Thank you for the presentation. It's now time for some Q&A. The first question we have received today is, "Can you provide an update on DG Fuels?
The update on DG Fuels is basically that the project is now with the DOE, the Department of Energy, where they have applied for the grants and the incentives that's provided from the U.S. government, and there's not much more we can say about it. It's not in our control. It's the DOE and DG Fuels discussions that brings it forward. But there's progress in the project.
Second question is: "Can you elaborate on the additional costs for ACES, and what is it precisely? What has happened there?
I think Jarle mentioned that, so yes, there are some of the equipment, and will need to be replaced. Of course, we will now sort of have a process both with the client, but not the least also with sub-suppliers, to understand if there is a possibility. But important to say, in the second quarter, we have chosen to be, I would say, conservative when it comes to the cost recognition during that quarter.
Maybe I can add that this is not a matter of changing any substantial parts of the delivery. These are adjustments that was needed to be made when the equipment was installed at the site. We are in discussions both with the client and with the sub-suppliers of the cost and who is bearing the cost. But as Martin was saying, that for conservative reasons, to be careful, we have recognized the cost added.
Will the extra cost for the ACES project be compensated by extra revenues, or are all the cost for remedies of defects?
There will not be extra revenues, but again, repeating myself, discussions both again with the clients as well as the sub-supplier who will bear these costs is yet to be determined finally.
We have received some questions here related to customers and their financing status. We cannot comment on that, in this session, so we'll move on to the next question: Is HydrogenPro working on a FEED study with H2V in France?
We are not in a FEED study with H2V, no.
In terms of pipeline, are you seeing any changes in use cases developing, especially new use cases?
Can you elaborate more? What do you mean?
New use cases, new uses for hydrogen.
We are focusing in some main areas of call it usage. We are not, as such, addressing the user and the end users. But on general basis, we can say that the ammonia space, the fertilizer space, jet fuel, fuel space, e-fuel space, decarbonization in different industry, steel, other industries as well. But so in general, large-scale industrial projects.
Can you give a broad geographic split of the pipeline as it stands today?
Probably, I would say 60% Europe, 40% U.S. Whereas maybe I could also add, we see an increased number of requests coming into the... from the U.S.
Do you think the winning formula will be lower cost or better product in the future?
I think the winning formula will be proven and documented technology. As I mentioned in my presentation, there are very few OEMs being able to either document or demonstrate their equipment in operation. We are on the way to that, and basically, I would say more or less without comparison there. Yes, there are a handful that we are aligned with, but the rest, I think it's fair to say that we see a lot of promises undocumented, but being able to document and prove that there is a certain performance, gives the clients the assurance that when they are calculating on their own levelized cost of the hydrogen.
Just to add to that, I think there is no contradiction between best technology and low Levelized Cost of Hydrogen. The best technology enables you to deliver lower Levelized Cost of Hydrogen. When, with our electrolyzer technology, we bring down the Levelized Cost of Hydrogen.
With reference to the recent update on Denmark, will you have 500 MW of capacity in China and then 350 MW of capacity in Denmark in 2025?
That's where it stands right now. As I mentioned, we have also been improving from a conservative number of the capacity in Denmark. We see that optimizing the line, we are able to bring it up to 350 MW. We are looking into further optimization, again, within the same frame of CapEx. So I expect further increase without having to invest more.
We have only received one more question, and it is probably going to be the last question for this session, unless there is any further received soon. What do you consider to be the current market price for electrolyzer cell stacks?
We are not going out with that number as a specific number. I think we can mention that each project is unique, and there's a pricing based on the complexity of the project.
There are no further questions received, so I think we can round off this Q&A session for today. So that marks the end of the webcast. So thank you everyone for watching and submitting questions.
Thank you.