Good morning, and welcome to the third quarter report presentation for Horisont Energi. My name is Bjørgulf Haukelidsæter Eidesen, and I am the CEO of Horisont Energi. Together with me, I have two colleagues today that take us through this agenda, please.
Siri Melberg, Communication and Branding, Horisont Energi. Leiv, please.
Good morning. Leiv Kallestad, I'm the CFO in Horisont Energi.
Thank you. So, we have set up an agenda here. I will go through the highlights as a beginning, and then Leiv will take us through the key financials, and I will take you through, project review on our ammonia and CCS activities, and then finalize with some key takeaways. And in the end, there is a Q&A. So note, there's a Q&A button, so you can add your questions. So please add your questions as we go, so we have the questions ready for the Q&A session towards the end. Okay, so let's start. Horisont Energi is a company that has two business areas. We do clean energy production, where we focus on clean ammonia. So clean ammonia is, is a carrier of hydrogen, so it's an emission-free type of fuel that can be used in industry, in, in, in power production, fuel, fertilizer.
It has many uses. It's the world's second-largest industrial gas. So, clean ammonia will be a big part of the low-carbon society, and it's already the second-largest industrial gas in the world. The other area is carbon capture and storage. We focus on the carbon storage part of the value chain, so we develop offshore carbon storages and midstream positions, and we also work with... First off, very pleased, we signed a letter of intent with PGNiG, PGNiG Upstream Norway, to partner up and take over the operatorship of the CO2 license Polaris. EXL003 is located in the Barents Sea and is located close to our Blue Ammonia project in northern Norway. So this is the carbon storage for that project.
With PGNiG coming in, we get a large, experienced industrial company that has a long-term vision and wish to develop a CCS business. We had a very nice launching session in their offices in Norway, in Kurti. There's a picture on the right-hand side, by the CEO of ORLEN. The ORLEN Group, which is the owner of PGNiG, was part of this session. Next up, in September, Statnett was granted a concession for a new 420 kV power line to Haugaland Industrial Park. This is the location where we are developing our CO2 terminal for offshore carbon storages in the south of Norway.
So it's a big terminal, which can take up to 24 million tons of CO2 imported from Norway and Europe through ships, and this location will be an enabler for many carbon storages. So getting this power was an enabler to move forward with this project. Furthermore, we are looking into expanding the industrial complex around Barents Blue with introduction of power production to the grid. There is a power deficit in Northern Norway, and the Barents Blue location is ideal for providing carbon-free power to the Northern Norwegian power system. And this presents significant synergies with the Barents Blue project. It will not be owned by Horisont Energi or even operated.
There will be a separate consortium of players that will, develop and operate, this facility, but it will create synergies and will, will help with the current power deficit in Northern Norway. Horisont Energi has gotten power for our activities, but there is still a lot of power demand in the region. We have a few subsequent events that are also notable. First off, we signed a letter of intent, and a term sheet for sale of ammonia to, VNG, a German industrial company that will offtake 100,000-300,000 tons of clean ammonia from Barents Blue per year in a long-term contract. Furthermore, we signed an LOI, on the same topic with Barents NaturGass in Northern Norway, so it's a significant offtake contract in Northern Norway for clean ammonia.
We signed an MoU with Koole Terminals to jointly develop CCS opportunities in the midstream of the CCS value chain. So there are terminal positions across Europe. We'll get back to these points. Then we have planned some changes in the legal structure of Horisont Energi. We plan to establish three subsidiary companies by business area, and we will own; these subsidiaries will own the project-specific companies. And the approval of the new legal structure will be requested at next ordinary general meeting later this year, which we'll call for later. So we have decided to move forward with this. Okay, next up, financial statements. So please, Leiv... Thank you, Stuart.
Yes, thank you, Bjørgulf. As we communicated last quarter, we expected the losses to decrease as activities in Errai, but also Barents Blue and Polaris came down and the loss was therefore reduced to around NOK 40 million in the quarter, compared to 59 in 2Q, and it was also lower than Q1 consequently. So this is in line with expectations. What we do see, though, is that there are still small amounts of costs coming through for these other projects, as our partners have their invoicing processes, et cetera, but not significant if we talk about expectations for the coming quarters.
Losses were for the year to date naturally higher compared to last year since particularly Q1, but also Q2, had a lot of costs from Errai in particular, but also the two aforementioned projects. So it includes, amongst other things, an extensive use of services from our external partners in these projects earlier this year. And also, if you look at the headcount in Horisont, it is on average higher in 2023 compared to 2022, since we ramped up the project activities. Cash at the end of the quarter was NOK 242 million, and that's a reduction of about 25 or so from 23, I mean, from the previous quarter.
The position as such is satisfactory since we are not generating revenue as a business, but spending money on the projects. What we see here is that the cash flow was lower than the losses, and that's more timing-related issues when it comes to the various cash settlements we have with the projects in Errai and the other Polaris and Barents Blue. When we look at the future, and people are obviously interested in this, we see that we are funded until the end of next year based on the current activity levels that we have.
What we do plan to do is, of course, to ensure that we have sufficient funding to push other projects forward when we meet the milestones that we need to meet before we go out and raise money. So we do expect that, to the extent we need additional funding, we will go out, and we will explore for it. Thank you, Bjørgulf.
Thank you, Leiv. Moving forward, I'm going into this section and looking into the projects. I will take you through an update on the Barents Blue clean ammonia. We will talk about the development partner, Vår Energi, and the power supply and the off-take agreements, and also partly the next step for the funding. On Polaris, we will talk about the onboarding of the new operator, PGNiG. The project is a key part of Barents Blue, but there is also work now to develop that as a third-party storage or for other customers than Barents Blue, not third party, but other customers in principle. Gismarvik Terminal, we have developed that from a single terminal, single project terminal to a multi-carbon storage terminal with a very large capacity, being now the largest plant terminal in Norway for CCS.
There is power supply coming in, and it is a CCS value chain enabler, both for the carbon storages and also for the incoming customer volumes. So with these three activities, we provide a gateway to new ventures in clean ammonia and CCS. Move forward. So, first off, PGNiG in Norway, they are now was set out to be the new operator for the CO2 storage, Polaris, incoming into a 50/50 ownership with Horisont Energi. And we did sign an LOI with them, which initiated a formal process towards them finally getting to be operator formally, and that is subject to approval from the Norwegian authorities. We are currently in the process, and nearing the end of that process. It's anticipated now to end early December.
We also expect Polaris to have the capacity to provide for the first train of Barents Blue and additional storage for third-party customers. So there is an initial phase, and then there is an further development phase. I will get back to this on more detail on the Polaris side. So we have also signed with E.ON, an LOI for storage of above 1 billion tons of CO2 for Polaris, and with additional CO2 volumes from the industry in Northern Norway, that has to be a substantial commercial basis for the development of the Polaris license. But that will happen over several phases of the project.
Another notable event, which is also a subsequent event, is the signing of an LOI with VNG Handel & Vertrieb for offtake of 100-300,000 tons per year of clean ammonia on the Barents Blue project. VNG is a forward-leaning industrial player that is actively taking a role in the energy transition and has large industrial plants or even large investment plans for getting into the energy transition as in the forefront. So we are happy with this agreement, and they will make the ammonia available to their customers and also either as ammonia or crack it to hydrogen.
For your information, ammonia seems to develop into something similar to LNG, and being received at terminals where you can either use it as ammonia or crack it into hydrogen. In particular, in Europe, that is something that is developing quickly. Barents NaturGass is another big player, which is now a customer on the Barents Blue project, which will offtake about 100,000 tons per year in Northern Norway, and now will develop activity in Northern Norway based upon the clean ammonia. We're also very happy about this agreement, and it creates synergies in Northern Norway, beyond the development of the Barents Blue project itself. And we will collaborate with them to further develop this market in Northern Norway. We also strengthened the partnership with Koole Terminals.
From before, we already have an agreement for development of clean ammonia value chain. Now we expanded that with an agreement for developing the CO2 value chain together with Koole. There is a development of terminals ongoing on the European continent, in particular in Rotterdam, but also in other ports. There are developments that Koole are doing, and we will connect the Koole terminals in joint value chains with the Gismarvik terminal, and also with the value chain beyond Koole terminals. For instance, the Delta Rhine Corridor CO2 pipeline, which has its outlet very close to the Rotterdam CO2 terminal of Koole. So we will be able to connect a large value chain of CO2 through Koole terminals and into the Gismarvik terminal in Norway.
So over to the Barents Blue project, to give you an update. Just as an introduction, the Barents Blue project is what is called an IPCEI project in Europe, part of the IPCEI Hydrogen program, called Hy2Use. So IPCEI is Important Project of Common European Interest. That is, there are about 38 projects in this Hy2Use, and it creates a value chain, a complete value chain for hydrogen, which Barents Blue project is part of. And what characterizes Barents Blue is a very high level of sustainability. It has the best-in-class CO2 footprint for scope 1, 2, and 3 in the hydrogen ammonia sector. Currently, with a carbon footprint of around 50 grams of CO2 equivalents per kilogram of ammonia. We have above 99% CO2 capture rate, which provides for the low carbon footprint.
It is Europe's first large-scale clean ammonia plant. It's of a size that we haven't seen in Europe before. Furthermore, we are developing the Northern Norway as a new production hub for clean ammonia, and the Barents Blue project will enable a lot of other ammonia projects in the north, as it opens up a large-scale value chain towards Europe. We are compliant to EU Taxonomy for the delegated acts related to hydrogen and indirect ammonia, meaning that we provide a sustainable product across all these parameters that is defined in the EU Taxonomy. So it's a high-quality, sustainable product. On the project side, we have the joint development agreement operational with Fertiberia, moving the Barents Blue project towards concept select, which is the next milestone, after which we will initiate a FEED study.
We focus now on the first train of the project, which provides 1 million tons of ammonia per year, and you saw that we have now term sheets for up to 400,000 tons of this production. But Fertiberia will also take up a significant part of this production, and we will announce further agreements later. We are aligned on the scope for concept select milestone, so we are technically very mature in the project, one of the most mature projects in Europe currently. We have some small technical studies that we need to finalize before we initiate the FEED to get it to the right maturity level. We also have interface activities with the Polaris storage. We have a firm definition of that prior to starting up the FEED studies.
So there will be a CO2 terminal at Melkøya for the import of the CO2 to Polaris beyond the Barents Blue scope. But with all the learnings we had from the CO2 terminal at Gismarvik, we will be able to develop a very cost-efficient, energy-efficient CO2 terminal. We have conducted modification studies with Aibel at Melkøya for the gas supply to firm and simplify that scope. Furthermore, we have good progress on the commercial aspects of the project. We have presented to you offtake agreements, but also good progress on the feedstock side. We furthermore secured power supply for this first phase of the project, 45 MW, and we will now... when we start FEED, we will be in position to start drawing upon the state aid granted from Enova, NOK 402 million.
75 million as a first for, directed towards FEED. And we have identified upside of producing blue power at the site of Barents Blue, which creates synergies for the project and makes it an even better project. And over to the CO2 storage part. So on the Polaris side, as you know, we are in the progress, progressing with PGNiG, trying to complete the formal process of getting them into being operator. And we are very happy about that, and we are on working to onboard them into the license and have that completed, early December. And there is an approval point by the Norwegian government, which finalizes this formal approval.
We have completed all the work obligations for the first part, phase of the license, and we almost also completed all the work obligations for the second part of the license, but there is some work that we will conduct in the first half of 2024, together with PGNiG, which will complete this work obligation also for the second phase. So we have a very mature work program and a scope for the carbon storage. We have mature two main concepts: direct option injection and also use of a terminal, similarly to the Gismarvik terminal, but in smaller scale. So two concepts for the storage that we will bring with us until concept select for the Polaris carbon storage.
We also, together with this project, establish a CO2 value chain in Northern Norway, which also is important in terms of reducing climate emissions in Norway. Next up, Gismarvik CO2 terminal. We have developed this into one of the largest CO2 injection hubs in Europe, with a capacity of 24 million tons per year, based on shipping imports. In addition, we can take CO2 volumes directly from local industry to take it beyond this capacity. And this terminal provides solutions for several carbon storages offshore. It provides also significant economies of scale because of the large size. So we get to a very, very interesting unit costs for this terminal and these storages that are connected.
It's dependable and robust operations, and our technology, CO2 terminal is based upon proven technologies, so we have a very technically mature concept for development of this terminal. It's also an enabler for local value creation and CO2 reductions, and we have several new industrial establishments close to the terminal that can utilize the terminal as an infrastructure for their development, being able to store the CO2. So both existing and new industries are establishing themselves in conjunction with the terminal. It is a scalable development, so we will initiate the project with 12-15 million tons and scale up to 24 as the market develops and the storages develop.
It's also prepared for the anticipated CO2 pipeline from the continent, so we can connect that into the system, and be part of a European system. There was a significant event in this quarter. We are starting a bureaucratic concession for a new power line that secures power for the first development step of this project, and also for the second phase, going up to 24 million. So there is sufficient power, and we are in dialogues with the power company to facilitate for this power into the project. So what are the key takeaways from this quarter? For Barents Blue, we are looking at the concept select for the first half of next year, based upon all the work that has been done and the commercial processes coming together.
With the signing of the offtake agreements, we are now moving forward towards a fully built project. There is a potential upside for delivering blue power, which provides for significant synergies, and we will start drawing upon the funding when we initiate the FEED. The first NOK 75 million of this funding is dedicated to the FEED phase, which we will initiate following the concept select. For Polaris, getting onboarded a new operator with in the PGNiG Upstream Norway is a significant and important event, and we will finalize this early in Q4... I mean, late in Q4, early December, based on approval of regional authorities.
It's a key part of the Barents Blue project, and we also prepare the storage for other customers than Barents Blue, so that we can scale up the business and create very interesting project. It makes a CO2 terminal a significant event, getting the power, one of the most timely with other terminals for developing the initial part of the CO2 value chain and connecting this terminal through, through a, to a significant value chain of, of CO2 terminals and CO2 pipelines on the European continent. So all in all, with, with these activities, it really provides a gateway to new ventures in clean ammonia and CCS. So with that, we conclude the presentation, and we go into the Q&A session part of this presentation. We have received a few questions. There is a first, there is a question. I'll read it out loud.
So, your cash position was reduced from NOK 267 million to NOK 242 million in the quarter. How comfortable are you with the current cash balance? I think I will leave this one to Leiv. So, Leiv, would you like to respond?
Yes. Thank you. Where we are now, we have good control over the money we spend. As we have stated before, we have taken down spending on the projects compared to previous quarters, which is natural of course, but most of the money we spent now are basically Horisont's own resources, being our employees and a few consultants that are working with us as in-house consultants. So where we are now, we are funded for next year. So our run rate compared to a lot of other companies in our position is not, it's not extreme, it's actually reasonable.
But obviously, we need to watch our cash, and we need to look at the work program for next year and ensure that we are funded on a satisfactory level at all times.
Thank you. There's the next question. Would a potential agreement with ORLEN mean that they have to pay for ownership in Polaris? I can answer that one. When you enter into a new party, into a license, they do negotiate what is called a sales purchase agreement as part of that, and that includes potential payments. So, you know, what extent or what they, what they are paying, we will get back to, but, but, that is part of the sales purchase agreement of entering a license. What are the current milestones to secure further financing? Leiv, what can you say about the plans for capital raise? What would you-
Yeah-
Say
Well, one milestone is to get PGNiG on board as an operator, and then, as a next first step, agree to a work program that the license will approve. So, that will set forth a need for us to fulfill our obligation in the license. So that is one milestone that, if we pass it, it will be one key element for us when we go forward to look at our funding requirements. The other one is concept select for Barents Blue, and a successful conclusion of the ongoing process there.
As we have communicated earlier, this is an IPCEI project, so when we go into the next phase beyond concept select, we will be able to start drawing on IPCEI funding for the FEED. That will be a natural next step then after concept select. However, we will also then increase other activity levels for Barents Blue. That's another milestone that would be a part of our considerations when we look at the funding requirement. And the third milestone is progress on the Gismarvik terminal, and there we're talking about CCS licenses being licenses that we can be a part of or licenses that we might not be a part of that will select Gismarvik as the injection hub for their CCS activities. That's the third milestone.
So with successful achievement of getting there, that's also one that will trigger then capital requirements for the company. So when you look at where we are today, without going into specifics about timelines, that we will raise financing in 2024, that seems to be a reasonable assumption.
Yeah. Thank you. There's a question on the gas deal. So when do you expect to close the gas deal? Obviously, we are working on this particular topic, and signing a gas agreement will be a significant milestone for the project and also for Vår Energi and Barents Blue as such. It is one of our highest priorities, and I just want to confirm that we are still experiencing very good progress in these discussions and the commercial aspects around this, and I will revert with additional updates when we have more to report. But I would say that currently, we have good progress, and we are working with the commercial discussions on gas in parallel with the offtake contracts for ammonia.
Obviously, there's a link between the two, and that is why we are doing these two things in parallel. There's a question on: How can you sign off the agreements without having gas purchase agreements? It's okay, so as I said, we do that in parallel. So we work both on the gas purchase agreements and the offtake agreements for ammonia, because there is a link between the two. So that is why we do those in parallel. Will Vår Energi be an owner in the sub-holding company? The sub-holdings that we discussed in the presentation is sub-holdings above the project level, so these sub-holdings will be the owners of specific project companies.
So on that level below, Vår Energi is planned to be an owner in that, sub-holding, or below the sub-holding level, the project-specific company of Barents Blue. There's another question here. Does E.ON or Vår Energi plan to purchase blue ammonia as well? Well, part of Vår Energi joining is obviously because they also want to secure, blue ammonia from Barents Blue and because it is a very strong project also globally. So yes, there is an intention from Vår Energi to purchase blue ammonia. Whether or not E.ON will purchase ammonia, I will not disclose at this moment because we haven't gone public with any such information yet. But, E.ON is into the hydrogen clean ammonia space, so, we will be able to revert with any updates there.
And how does Horisont plan to be funded beyond 2024? I think that also follows from the answer that Leiv gave just now, that based upon successful delivery of some of the key milestones, we have funding to draw upon, stated funding to draw upon, but beyond that, at some point, we need to raise more capital, and that will be based upon the completion of successful completion of milestones. How exactly to do that, we will get back to. So I think that was the questions that we have received. So thank you all for attending, and I wish you all a nice day. Thanks.
Thank you.