Good morning and Welcome to HydrogenPro's First, excuse me, Q3 presentation. Today I'm accompanied by CFO Martin Holtet, who will present the financial result for the Q3. We posted 72 million NOK in revenues during the quarter, compared to 50 million NOK previous quarter, and with a gross margin of 26%, we're reaching the milestone of completion of production to Salzgitter project, and here also Martin will elaborate more on revenue recognition on this project. As announced, we received the approval of EU funding of 16.5 million EUR. The expansion project in Denmark is well on time and within budget and lastly, the ACES project is getting into the commissioning phase, I want to start with placing HydrogenPro in the IEA's world map of ongoing hydrogen projects. HydrogenPro is one of five to seven OEMs having delivered on mega projects.
This puts us in a forefront position with operational projects. As our two projects are among the first ones to start operation, we'll have the same reference and documented performance. HydrogenPro has a long tradition and experience with attracting funding for our R&D projects. To clarify on the development stages, on the core development phase, we have over the years attracted around 200 million NOK related to technology development, illustrated in the blue rectangle. The 350 MW expansion was decided in Q2 this year, based on our commitments of Salzgitter and other customer requests, but funded from our own balance sheet. For the next level giga project, we are able to attract 16.5 million EUR, this time not for R&D, but for scaling our electrode manufacturing, t his is in addition to already 4.75 million EUR granted by the IFO.
The Export and Investment Fund of Denmark, a total of 21 million EUR to capacity expansion. We are now planning to make decisions on this expansion later during 2025. As we have initiated the 350 megawatt expansion project already, we are now in process to apply for scope change and relocate parts of the funding from EU and IFO to the existing expansion. I am happy to announce that the partnership with JHK, sorry, HydrogenPro alone, or together with Andritz and Mitsubishi, respectively, is addressing the large-scale market. But we recognize that parts of the market are entering the energy transition by initially smaller-scale scopes as basis for expanding to larger-scale production later, we see this in several markets, but especially in Germany. Particularly publicly owned enterprises like municipality energy providers, where they now need to reduce their carbon footprint.
Together with the Bremerhaven-based JHK, we will address this market, where JHK has already a strong customer base and is now working on specific projects. HydrogenPro will deliver its core offering, where JHK will provide the EPC and commissioning service. JHK will remain the base pool of commissioning engineers, which HydrogenPro can draw on, on an as-needed basis and without having them permanently on our payroll. Safe work environment is our number one goal. In 2023, we unfortunately had eight recorded accidents, but luckily all with only minor impacts, I am therefore really happy to report that we have now worked more than 300 days without any recordable accidents. That is a testament to our daily focus on EHS paying off, t he European Hydrogen Bank announced September 27 that EU-funded projects.
Will have to fulfill certain criteria for European manufacturing in order to qualify to obtain the funding. First, I want to emphasize here that import from China is not banned or embargoed. The European content is only relevant for those projects being subsidized by EU. Together with Andritz, we are now in direct communication with the Hydrogen Bank to get a clear interpretation of the criteria and to understand what it really means, what qualifies and what doesn't qualify? Until now, the Hydrogen Bank has admitted that they cannot answer and do not know themselves how to understand their own requirements. So when stating 25% megawatt equivalents, there is no answer to what it means. In our project portfolio, I would say that six out of eight projects, or 75%, are not dependent on EU funding.
For those projects being linked to EU funding, we are confident that HydrogenPro is qualifying as European supply, which we are also confirming to potential clients. We have a European base, we are assembling in Europe, and we are quoting in Europe. With this basis, Salzgitter qualified for EUR 1 billion in subsidies. Having said this, we are, in order to be proactive, looking into our supply chain to assess if other parts of the supply can be sourced in Europe, but without driving the cost to the roof. As referred to in my first slide, HydrogenPro being among the five to six suppliers of mega projects in the world. The development of these projects is that we will be among the first to commission and operate mega projects, most others will start later.
For many prospects, reference to existing projects and having an installed base is a key decisive factor when choosing their supplier. We have already had potential clients visiting the ACES site in order to see for themselves the impressive installation. ACES is now going into commissioning and will reach operation during the H1 year 2025. This is the same time as the equipment will be delivered to Salzgitter and which will be in operation a year later, the Gen3 capacity project is progressing well, and it is according to timeline and on budget. Our previously announced validation program started November 1st, this is the long-term impact test for the third generation electrodes. Having run the electrolyzer now for 12 days, we see good results, t he production is very stable, good gas quality.
And foremost energy consumption in line with previous tests, w e will run the test now for a minimum of 1,000 hours. As we will then go into the next step, we will conduct a full-scale testing of the Stack 1 at Herøya. The Stack 1 is now completed in Erfurt, Germany, and will be shipped to Herøya one of these days. Before starting the ACES project, MHI or Mitsubishi invested in a full stack installation at our site on Herøya called RVP. This electrolyzer is still there and has been taken over by HydrogenPro. Andritz has now invested in one additional stack, Stack 1, and will be installed alongside the first RVP electrolyzer, and this is before Christmas. Stack 1 will operate for 500-hour tests, where we will test and validate the Generation 3 electrode at large scale.
Plus other improvements we have done, w e will see the first results of this test during January next year. We are seeking commercial utilization of the two electrolyzers after the test period and are in dialogue with interested parties to take over the electrolyzer for commercial operation. Along with the whole industry, we are disappointed with the slowdown in project realization. Both cost increase and promises by politicians falling behind have caused uncertainties by many project developers and also led to some project cancellations. Although we have not announced any new contracts yet, as for the HydrogenPro pipeline, we have not really had any cancellations of projects, but yes, we have also had project delays. We are therefore focusing on projects not being dependent on subsidies and in segments where there is infrastructure and offtake.
As the subsidized ones take much longer time to FID due to slow political and bureaucratic processes, our cooperation with Andritz and Mitsubishi is probably the strongest contribution to project development and pipeline build-up. Without going into details here, I am sure those of you who are following us have observed Andritz's announcements of being sole engineering supplier in several FEED studies. This is giving an indication of what to expect. Last quarter, we presented the project overview, and you have the numbers from last quarter in brackets. Here we can observe that there is an increase of all parameters. The increase of prioritized projects is a clear sign that projects are maturing and getting closer to FID. As we see from the media, there are rising concerns of what will happen with renewable projects in the U.S.
Once Trump comes to power. I don't share the same concerns from our U.S. counterparts. We are working with full force with our prospects and partners. In the pipeline, I would say that about 25% of the pipeline is populated by projects in the U.S., the remaining in Europe and other parts of the world. As late as last year, excuse me, as late as last week, we got a request for new projects in the U.S., but this time from one of our European prospects to quote for five projects in the U.S. ranging in size from 50 to up to 200 megawatt. These are at early stage as FEL1 and not included in the pipeline but the point is that concerns related to the political changes in the U.S. are not reflected by our prospects.
From my point of view, I am more optimistic now than what I was 15 months ago when I started my tenure. During 2024, we have been focusing on five key priorities: successful installation and commissioning of ACES, we are almost there, this will be the most important reference for new customers. Delivering on Salzgitter, we have completed production and is now going into the delivery phase. Increased order intake, continuously building a healthy pipeline. The pipeline has, explained on previous slide, grown healthier and more robust, the final FIDs are not taken, but we see these are getting closer. The full-scale validation will be prepared now during November and December and operated during January, we concluded on the electrode manufacturing capacity, and the project is running according to plan and within budget.
I would now like to hand over the presentation to Martin.
Thank you, Jarle, then I will go through the Q3 financials. So in the quarter, HydrogenPro generated revenues of NOK 72 million, mostly related to the delivery on the Salzgitter contract. We now have a total of 53% of contract revenues recognized in the second and Q3 in total. Revenue recognition on the contract is based on point-in-time principle, which requires that we deliver finished goods that are accepted by the client. That means that we have also semi-finished goods that are not completed and revenues not yet recognized in the Q3, but all main components were completed in October, which then will be reflected in the Q4 financials then let's look at the costs. So from this quarter, we have implemented a new structure on the income statement.
Previously, we used cost of goods sold, but this is now replaced and broken down into direct materials. And with project-related payroll and other OpEx that were previously part of COGS, it is now only included in payroll and other OpEx, meaning below the gross profit. So with this setup, our cost structure is also more comparable with other players in the industry. Direct materials is NOK 53 million in the quarter, with NOK 19 million then in gross profit, equaling a 26% gross margin. Further down, payroll increased from NOK 32 million to NOK 40 million, mainly driven by the increased activity in our operations in China for the delivery on the Salzgitter project. Other OpEx is down from NOK 25 million in Q2 to NOK 18 million in Q3.
We have initiated some cost measures, but the main reason for the reduction is a reversal of a provision of NOK six million in the quarter. The EBITDA then comes in at minus NOK 38 million, EBIT at minus NOK 44 million, and a net loss of NOK 38 million in the quarter. Let's look at the liquidity position and backlog. The quarter started with a cash balance of NOK 247 million, recalling that the EBITDA came in at minus NOK 38 million. Changes in working capital and other of minus NOK 3 million. Investments in the quarter summed up to NOK 15 million, related then to the ongoing construction of the electrode manufacturing capacity in Denmark, and we have some financing items, mainly payment of lease liabilities of NOK 2 million.
That brings then the cash position to NOK 188 million at the end of the Q3. The backlog is down from NOK 416 million at the start of the quarter to NOK 341 million at the end of the Q3. The reduction is in line with the revenues we have recognized in the quarter, as we did not enter into any new contracts in the quarter, so as Jarle alluded to, yes, the market is more challenging right now, and it's important to be conscious on spending. We have a very good starting point or foundation in place, as we have chosen one core electrolyzer technology, large scale, high pressure alkaline, hence a focused offering that is scalable to meet different project sizes. And we couple then this with strong partners in Europe and North America.
Which provides a platform to give us operational leverage where we can grow and maintain a lean global organization. And not the least, we have a cost-competitive supply chain. So we combine this foundation with a set of focus areas. We can now rather quickly adjust some of the cost base in line with the project activity, as we are now significantly reducing the running costs in our operations in China when the Salzgitter delivery is completed. The electrode technology is a game-changing technology, and we are currently prioritizing to build now the manufacturing capacity of this technology in Denmark. Our top priority is to invest in technology, to be a technology leader and our high R&D activity is to a large extent enabled by R&D grants, which is, of course, very cost-efficient.
And lastly, we focus on retaining a sustainable net working capital when we take on new contracts. That concludes the presentation. So now over to Q and A. Then I will ask Jarle to join me on the stage.
Thank you very much for the presentation, Martin and Jarle. We are now moving on to the Q and A session, and the Q and A function is now open for viewers to ask questions. As a reminder, we will not comment on forward-looking financials or specific contract terms. If there are any questions we do not have time to answer today, please contact us directly. Contact details can be found on our website. The first question is on EU restrictions, w ith new restrictions imposed by the EU, what is the impact for you, and how do you adapt to this going forward?
Yeah, thank you for the question, I think I can just refer to the presentation we just made that we really do not see any significant impact of our pipeline or the projects that we are working on. We see that we have been qualifying through the Salzgitter project. We also observed, as I mentioned, that the Hydrogen Bank are not able to explain themselves what their requirements are. So we are confident with our basis as we have it now, with coating in Denmark, with assembly in Germany, with being a European company that we are qualifying. But we are also looking into other adjustments we need to do in our supply chain. We do not see that at the moment a nd most of our projects, by the way, are not dependent on EU funding.
So to us, we do not see any negative impacts or changes.
Thank you. Second question is on R&D and grants. Why do you have a high focus on Denmark in terms of spending R&D efforts and grants?
Yeah, so I think it's, first of all, HydrogenPro is a technology company. So for us to differentiate from, call it, more standard technology, it's important because we see with our electrode technology that has a tremendous benefit to the end user. So from our perspective, it's clear that to invest in, call it, high tech, which our electrode technology is, makes a lot of sense. And of course, we can sort of have that supported also with public grants. That makes a lot of sense a nd we are now moving ahead now after this, call it, initial award with submitting the final, call it, application within the EU.
Thank you. And a follow-up question on that. Given the Giga factory has an estimated cost of NOK 500 million with corresponding 500 megawatt electrode capacity, how is this different from the current 350 megawatt capacity for NOK 70 million investment?
Yeah, so I think the number that was mentioned there, that was based on some, call it, very preliminary figures. We see that now we can, with all the, call it, the improvements we have made on the production line, that we can produce significantly higher volumes at the same investment cost. So we expect then, call it, for the NOK 500 million to produce significantly more than before. So that's a good thing.
Thank you. One more on R&D and Denmark. Do you intend to sell electrodes only?
We are first now focusing on delivering the electrodes as the capacity comes on stream to the Salzgitter project and to provide our own sales pipeline when they materialize to contracts from it. We do not exclude that it can be an additional source of revenue going forward. There are, of course, requests of the possibility. We have not taken a final decision, but we absolutely do not exclude that it could be an additional revenue source going forward.
Thank you. How do you see the U.S. election result impact activity for green hydrogen going forwards?
Yeah, again, I have to refer back to my presentation that I think Trump has stated earlier that he is not a big fan of hydrogen. At the same time, he is a fan of creating jobs. We see that in many of the so-called red states are the highest activities when it comes to renewable energy and also transition into hydrogen, whether it's ammonia projects and others. It might create some uncertainties to the IRA, but this is already written in a law, so it's a long process to change that. What I hear from our people in the U.S. and also from potential customers we are discussing with, that there's a lot of dust riled up now with the election. But I do not, as I said in my presentation, see any major concerns.
They are working with their project, and they intend to bring them on as the projects make sense. And what makes financial sense will also be supported by the current office.
Thank you. Moving on to some questions on the pipeline and customer side. Do you already have projects with JHK in the pipeline, and how mature are these projects?
We have not included projects in the pipeline with JHK. We have one particular, but there are also two coming, but which we are addressing now specifically that they have on their plate. It will also here take a little bit of time before it becomes part of the pipeline and FID. But there are specific projects, which is also one of the reasons why they initially contacted us for setting up a partnership, as they had already a customer base requesting energy transition and going into hydrogen.
Thank you. And the last question is, the reclassified personnel expenses are higher than quarters last year when project delivery was significantly higher. What is the reason for this?
I'm not sure what is referred to now, whether it's direct materials or whether it's payroll or other OpEx. I can very much go through that in detail with the question, with the one that's raised that question. But I think if you compare our operating running costs in Q2 with now the Q3, yes, we had an increase in payroll, meaning that we due to the fact that we have increased activity in the plant in Tianjin to deliver and we have also, at the same time, been able to reduce the other OpEx and if you look at the Q3 last year, the other OpEx was higher than it was in the Q3 this year. But feel free to ask more detailed questions, and I will be very much available.
But I think cost consciousness for HydrogenPro is imperative. We are now sort of toning down the activity level, of course, with now completing the delivery on the Salzgitter order. That will very much be reflected, of course, in the cash burn in our Chinese operations onwards.
Thank you very much. With that, we will conclude the presentation.
Thank you.