Well, hello, and good morning, everyone. With us today, we've got ReFuels, who are gonna present their results for the first half of the fiscal year 2024, and their Q2 results. With us, we have Philip, who's the CEO, and Baden Gowrie-Smith, who is the CFO of ReFuels. Following their presentation, we'll also have a Q&A, so if you've got any questions, please add them to the chat, and we'll look at them after the presentation. First off is Philip Fjeld.
Thank you very much, and good morning to everyone. As Barg said, we're gonna go through the first half of 2024 and the Q2 results today. Just a brief reminder, a couple of slides to remind you who we are and what we do. We have a mission to try to decarbonize particularly long-haul transport using biomethane or biogas as it's known in the Nordics. We currently have 13 stations in operation. We have a longer-term target up to the end of 2026 of having 30-40 stations in operation. And we currently have... it says 1,450 here, but we currently have more than 1,500 trucks going through our stations on an exclusive basis every day.
We are a vertically integrated supplier of Bio-CNG or biomethane as a truck fuel. All the way from the station network, which you can see on this on this chart on the right-hand side, all the way up upstream through RTFS, Renewable Transport Fuel Services. And we are a large player when it comes to sourcing biomethane across Europe that we then put into transport. So what does one of our typical CNG stations look like? You probably shouldn't think too much about a regular petrol forecourt. This is one of our stations that we opened in June of this year in the northeast of England.
It can refuel 60-80 trucks per hour, as many as 800 trucks per day, 14 trucks simultaneously, and as such is a, you know, very, very efficient energy dispensing infrastructure. They're unmanned, and as such, also, provide very good economics once utilization rates start to increase. So what have we been up to, and what has the company been doing over the last 3-6 months? We're continuing to see very, very strong growth rates, 75% up when we compare to the same period a year ago. We continue to see a lot of orders being placed.
We expect towards the end of this year to be close to or beyond 1,000 trucks that our customers have ordered, that will be delivered over the next 12 months. We've got a lot of trials running. In fact, we could do with more demo trucks on the road. Some of the demo trucks have got an order backlog or a trial backlog of close to a year. We have been busy building stations and opening new stations. And also, we announced, I think it was about a month ago now, that we are part of a consortium in the U.K. that has received some government grant funding in order to run a hydrogen trial project.
If we look at some of our key figures, once again, we have shown some of these already, but if you look at the dispensed volume up 75%, average number of trucks per day, customer fleets, et cetera. One thing I would add, on this slide, which might look a bit odd to those of you who've followed us more closely, why is there only a 22% increase in certificates generated and sold when dispensed volume is up more, and there is a correlation there? That is purely a timing effect between when applications are handed in and these applications are approved, and therefore certificates are generated and sold. That will even itself out over the next periods to come.
Once again, if you look at where we've come from when it comes to growth, we achieved an important milestone in October. First month ever that we were above 4,000 tons, 4,000 tons dispensed. If you look at the underlying capacity that we've got at our station network today, I mentioned previously we're now north of 1,500 trucks going through our stations every day. We actually have capacity through our existing network to handle 6,500 trucks a day. Also, when it comes to what metrics and what can we do when it comes to reducing greenhouse gas emissions, the total network can handle as much as 300,000 tons of biomethane annually.
Which is a very large number, and which would take us close to 1 million tons of greenhouse gas emissions saved if we were to dispense that. We've got a wide customer network, a wide list of blue-chip customers that have, you know, come along the journey with us, if you want. But, you know, many of them are only getting started. And if you look at the total amount of fleet they've got, they've got more than 30,000 HGVs, or heavy goods vehicles, today, but only a fraction, a very small fraction of those are currently running on biomethane.
Even if you add the order book on there, to take us from basically 1,500 today up to 2,500, you see there's still a lot of work to do here and a lot of potential to grow into. If you then look at, as I mentioned previously, on trials, we've been working very closely with a long, long list of existing and potentially new customers when it comes to trialing vehicles and so on and so forth. Typically, they will trial a vehicle for maybe 2-3 weeks, and then we are seeing a high conversion rate of those then going on to order vehicles. We are currently backlogged when it comes to the ability to actually have trials running because we haven't got enough demo vehicles.
There are more demo vehicles coming, but once again, had we had more demo vehicles on the road in the U.K. today, we would be able to handle more trials, and actually more trials and probably more vehicles would already have been ordered. This is something that we haven't spent a lot of time talking about in the past, but we figured we'd, you know, also explain a bit what we do outside of only having the large grid-connected stations. Three years ago, we developed a mobile refueling unit concept, which means that we've now rolled that out, and we've got seven of these that we are now in active operation around the U.K. So what do these do?
Well, these are ones that we can take onto a customer's property or take onto a piece of land that we are actually building, and which will soon become a permanent station, but isn't today. By putting this on a customer's premises, they can then order trucks ahead of when we have a station operational. Max capacity for one of these is typically about 100 trucks per day.
Currently, we've got about 500 trucks, so about a third of the vehicles that we service every day across our network, use the MRUs, and this has been an important enabler for us and something that we will continue to grow going forward because it means that customers can actually order trucks much earlier compared to if we were only relying on grid-connected stations. We opened two new stations, one in July, one in November. Corby on your left here, and our first Welsh... Our first Welsh station only a couple of weeks ago. And if you then look at what we're doing on the construction side of things, we've got two stations now in construction, plans for many, many more next year.
But this side of Christmas, these are the two grid-connected stations that are currently in build. Our first in Southeast England in Kent, which is an important station there, opening up that part of the country. And then we've got one in Doncaster, which is close to one of the largest distribution centers or hotspots in the U.K. We've spent a lot of time the last 4-5 years in screening sites and in bringing sites forward. Developing the type of stations we do does take a lot of time. It's not controversial what we do. We haven't had any planning applications ever turned down, but it does take a long time to negotiate sites, to get surveys done, and to get the approvals you need before you can build.
But because we've been doing this now for so many years, we have a strong backlog of sites coming through, which means that once we get into 2024, we want to, later in 2024, ramp up, to a run rate of between 2-3 stations going into construction every quarter. Now, that's something we feel strongly that we can deliver on because we've done a lot of the heavy lifting, if you want, and we've done a lot of the hard work in getting these sites through to a stage that we call shovel ready, which means that we can essentially put a construction crew on site, and eight months later, it should be operational. Mentioned previously that we've been successful in the Hy Haul consortium bid.
So that is a group of companies that have come together and have now attracted government grant funding close to GBP 32 million in order to build a hydrogen supply chain for initially 30 trucks. We are part of the consortium here that will be developing mobile refueling units for hydrogen vehicles and also dealing with the logistics here. And this is something that we will provide additional clarity on next year. We operate under the RTFO, the Renewable Transport Fuel Obligation, in the U.K., which is the blending obligation, and through that, we generate certificates.
There has been, and we mentioned this in the last quarterly report, and it's probably not the last time that we'll mention this, 2023 has been a difficult year, particularly in the European biofuel biofuel sector. There has been an influx of biodiesel coming in from Asia, predominantly from China, which has impacted the biofuel sector in Europe negatively. We've seen that 70%-75% of European biodiesel production has been shut, and that has had the effect that it has pushed down and has caused biodiesel prices over the last year to essentially more than halve in Europe. Which again has an effect on the equivalent RTFC prices that, of course, we rely on.
Measures have been taken by the E.U. Commission and other European countries, and we are now starting to see effects in the market. Yes, it will take some time to wash through fully, but biodiesel flows from Asia are now considerably less than they were earlier in the year, and there are signs that the market is starting to rebalance, which once again should have a positive impact on RTC pricing as we head into 2024... and with that, I will hand it over to Baden.
Thank you, Philip. So this is our first full quarter of reporting revenue and financials. We had received revenue of GBP 29.2 million in this quarter, versus the partial period of 17.1 in the previous quarter. On this, we generated a gross profit of GBP 3.1 million, which was largely due to the CNG Fuels operating business, which went into construction, an EPC construction contract, on our upcoming site in Aylesford. In the Renewable Transport Fuel Service, RTFS business, we also had a gross profit on the RTFCs sold in the period, at an average price of about GBP 0.223, margin about 8%.
However, this was offset by some of our hedging, which is to protect the business from adverse natural gas moves in the same period. We've done a lot of work on having a look at the scalability of the business over time and the overhead costs that we currently face, having built out a nationwide network that continues to grow. It is the belief of the business presently that an increase in roughly 15% of the overhead in the years, 15% in our overhead costs, will be sufficient to sustain operations for the 30-40 CNG stations we're looking at as our medium-term target, in the 2026, 2027 timescale.
So that is, of course, very positive operating leverage we've now got and a great structure ready for the growth business in the period ahead. We are continuing with this process to secure additional station financing to meet the goal of 30-40 stations from the existing 15, which are operational or in build right now. So that 15-25 stations will be financed by a new incoming funder, and that process is ongoing and currently progressing very well. Balance sheet for the business has not changed dramatically since the end of the last period. We've GBP 128 million of total equity on a GBP 206 million pounds of assets. But what...
But the only point of note, really, in this period, is an adjustment to the amortization on goodwill, which we have taken, which has extended the life over which the amortization period will be taken, to reflect the value of those assets and a realistic period over which we believe they'll be adding benefit to the company. Cash flow was very stable across the group in the period, with the ending cash flow balance of GBP 6.6 million across the group.
And this, yeah, and, but in the subsequent period, since then, CNG Fuels operating business has secured a working capital facility with our funder of the joint venture, the Foresight Group, in order to maintain business operations during the period we're looking to, to, to secure the larger, larger station financing process.
And consistent with the last quarter, we've taken our EBITDA, the reported EBITDA, and we've adjusted it for one-off or timing adjustments, so the EPC adjustment for the value coming in from the Aylesford period, from the Aylesford development, the one-off transaction costs still relating to the private placement, which are now largely completed, equity-based payments, and then derivative movements, which end up with a negative EBITDA of GBP 3 million on an adjusted basis for the period.
Thank you, Baden. So if we then look at the market we're operating in and the outlook. Mentioned already, we've currently got north of 1,500 trucks going through our network. What you see here is October, clearly now into November, and we continue to grow, and we're expecting in the next 12 months to have there or thereabouts 2,500 trucks on the road. The addressable market that we've got ahead of us is, of course, much larger. And I think that just highlights the beginning of the long journey we're on and the long journey with growth ahead that we're on.
Of course, in order to get that journey off to a good start and to maintain momentum, as Baden mentioned, additional funding for continued station rollout is something that we're actively working on, and is a key focus for us over the next couple of months. If you then look at our station network, we've got, you know, 13 stations in operation today. We've got another two in build, and once again, we have a plan to get to somewhere between 30-40 stations in operation or in build by the end of 2026. That is a target that we're confident we can meet. Yes, the company's been around for almost 10 years.
It's taken us, you know, almost 10, 10 years to get to 13 stations. But of course, the amount of, of sites we've now got, at shovel-ready or very close to shovel-ready, puts us in a very good position to, to truly accelerate, that rollout, so that we can hit, our medium-term target, or end of 2026 targets, of 30-40 stations. Then finally, just to bring, bring this all together, there is a lot of focus out there, on, you know, zero-emission tailpipe, you know, battery, electric, hydrogen trucks, et cetera. As you've seen, you know, we will be part of those type of solutions as well.
But here and now, there is really only one option in town, and that is biomethane if you want to decarbonize your heavy goods vehicles over the medium term or over the next 5-10 years. We've got a very strong position. We continue to grow rapidly, and we're supported by an increasingly wide range of blue-chip fleets, fleet customers out there. The economics of our stations are favorable. That also means that we can, as I say, continue to grow rapidly on that basis. We are a fully integrated company.
As we've, you know, shown previously, what we're looking to achieve here over the next 6-12 months is not only to focus growth downstream on stations, but also to direct, you know, and increase our attention upstream so that we can strengthen the fully integrated part of the business, and the fully integrated, or sorry, fully integrated offering that we can provide across the biomethane supply chain. Thank you very much. Do we have any questions?
We do have some questions, yeah. So, I'll just read them out to you, and then you can decide who gets it.
Yeah.
So, the first one out is: over the past year, you've grown from 8-13 stations, and planning on growing to 30-40 stations. How has the organization handled the growth over the last year, and how are you planning to handle it over the next couple of years?
Okay.
Yeah.
Good question. Very relevant question. And I think Baden briefly mentioned it in one of the slides, the scalability of the organization. What's important here to understand is that the organization we've built up, the skill set, the capabilities of the entire company, has, of course, been focused around making sure that we can scale the business into the future. If you look at a lot of the overhead that we've taken on and the overhead growth we've seen within the company in the last year, that has been required in order to provide a near 100% availability across our network, in order to provide excellent customer service.
But what's important here to understand is that that organization you can grow by very little and almost triple the amount of stations that we can look after in the future, which, of course, is, as Baden mentioned, provides us with great operational leverage into the future. So just because we are looking to grow our station network by almost 3x into the future, we won't be troubling our overhead. On the contrary, a roundabout 15% growth means that we can handle somewhere between 30-40 stations in the future.
Thank you. And also on the station growth over the next couple of years, how are you planning to fund the station builds, and are you seeing any interest as to the funding of this growth?
Yeah.
Yeah. Yes, and so, as mentioned, we have an ongoing process at the moment, being run with the advisors, EY. The interest has been very strong so far, and we'll continue to develop this process over the coming months. We obviously look to complete it as soon as possible, so we can continue a rapid rollout of the CNG station network. But yeah, indications so far have been very positive, and we're looking forward to any new funding relationship.
Yep, thank you. Now there's one about the demo trucks. You mentioned in the presentation that there's about 6- 9 month waiting period-
Yeah
... to get a demo truck. Are you planning on adding more to the demo offer, and also, how many vehicles will you add for this?
Good question. First of all, I need just to clarify, of course, we don't, we don't sell trucks. But, I mean, that's, that's up to the truck manufacturers. But allowing existing customers to trial a new model of a truck or a different type of gas truck, or potential new customers to trial a gas truck for the or a CNG truck for the first time, is an important part of ensuring that we are on the adoption path that we are on. We have always taken the view and have always had the policy that we will have some of our own demo vehicles, so that we can run trials without having to rely on the manufacturers having their demo vehicles. That said, we work very close with the manufacturers, have an excellent relationship with them.
So what we're now seeing or expecting over the next six months is that the manufacturers and us combined will be bringing in more demo vehicles. Of course, some demo vehicles are being taken off the road, 'cause they are the older models, and so on and so forth. But we are hoping that that will mean that we are getting close to 10 demo vehicles on the road in the U.K., across not just us, but also the manufacturers, and that will then continue to drive growth in orders forward. And I think it's important to understand here that, as I say, we don't sell the trucks. We work very closely with the manufacturers.
But at the end of the day, whether a fleet demos through us or through the manufacturers, it doesn't really matter, 'cause they'll go up and... But, well, by working closely and by we having some of our own demo vehicles, that gives us unique insights into what the customers really want to see in the future.
Yep. Now there's one on the hedging. Can you provide a bit more color on the hedging loss and any remaining hedges in place for the rest of 2023, 2024, and 2024 to 2025?
... Yes, happy to do that. Yep. Yes, so, so there is, we have, different forms of hedging throughout the business, specifically within the Renewable Transport Fuel Services part of the business, where we are exposed to various market movements, and we obviously try and minimize those to the extent possible. The goal of the business has always been to deliver as much biomethane into the CNG Fuels business, so we can, we can pass that on to trucks, and that is, that is a principal activity.
So within those, we would usually have foreign exchange hedges as well as as well as being able to forward sell to the extent possible RTFCs, renewable transport fuel certificates, which are able to be sold up to about a year, a year and a half in advance when the market conditions and pricing obviously right and compelling for the sourcing of biomethane.
The loss in the specific gross loss in for this period was due to a separate type of natural gas risk, which was which is due to cross-border bookings of of capacity and to protection because during the conflict during the conflict last year where the between between Russia and Ukraine, the differences in prices in natural gas in the U.K. and the E.U. diverged significantly. And so in order to prevent in order to prevent risks around that for for this year, we have protection in place to ensure that those very large potential movements are something that we can we we can negate.
Of course, there is a cost associated with that, but significant protection is bought with it as well.
Yeah. There's another one about the hedging of, well, RTFCs. You say in a statement that there are no forward RTFC sales in place for 2024 and 2025. Is the intention to sell all the RTFCs at spots for the coming year to potentially benefit from a rising RTFC price?
So I'll take that one. As Baden previously mentioned on the previous one, we have historically and we prefer to forward sell RTFCs, or at least to forward sell a certain portion of the RTFCs that we're looking to generate. Because of the dislocations we've seen in the biodiesel market in Europe this year, for calendar year 2023, the actual RTFC market for 2024, which usually starts to trade in April, May, maybe June of the previous year. So that meant that, you know, in normal times, the 2024 market would start to trade in April, May, and June. The first trades really started to emerge in October.
So the 2024 market, first of all, has very little trading going on at the moment because of the current dislocation in the market. Second point is, yes, we have not sold forward 2024s at these prices, which we don't feel are sustainable. We are not in this market to necessarily speculate on RTFC levels up or down over the longer term, but for 2024, we will take positions and hedge and sell forward when we see that opportune and also match that against some of the sourcing of biomethane that we do. As for the question on 2025s, you know, once again, you can't really trade them today. That would be something we'd be looking to do when the market normalizes.
Those will typically start to become traded around June time, you know, April, May, June of next year.
Thank you. Now, the final question, also regarding the funding of stations. What funding alternatives are on the table, regarding future station rollout?
Yes, as mentioned, we've got an ongoing process at the moment to take ourselves from 15 CNG stations up to 30-40 stations. Historically, of course, we've used off-balance sheet funding for our first several stations back from 2017. 2020, we secured GBP 80 million from the Foresight Group and additional GBP 20 million subsequently from them, which we had as off-balance sheet, essentially funding via a joint venture to build out our station network. What does that look like in the future?
Clearly, we need a large amount of infrastructure or style funding to build those new CNG stations and meet other needs of the business as an integrated energy company. And that we are open to a variety of different structures, and obviously we'll consider their deliverability, but also their effect on shareholder value over the medium to long term. And obviously, we are aligned with shareholders there and making sure that we choose the right style of funding for the speed of the business and the ambitions of the business.
I'll just maybe just add one point to that one, and that is that the current ReFuels structure that we've got with the integration, you know, integration of upstream sourcing all the way down to downstream sourcing, means that we have a broad array of potential funding options available to us. And I think that's reflected in the process that's now ongoing, because there's not just one option for us, if you want, on the menu. There are actually a number of financial avenues here, or financing avenues, sorry, that can make sense to us and can be used maybe slightly differently than we have typically in the past.
Yeah, the next question is actually on exactly that. So, and it's a new final question. So the funding partner you're working with, will the set up with them be similar to the one you have with Foresight in terms of who is entitled to station EBITDA, RTFCs, et cetera, or are you looking for a more traditional funding partner on a top co level?
I think the answer there is sort of been given in what we've just said. We have a lot of options available to us. Different funders, and maybe just take a slight step back on the process as well. We've been positively surprised by the amount of parties who are interested in looking at this process and participating in the process. We are also very pleased with the high quality type of investors who are now interested. But it's also, what's also interesting is that they've a lot of them have got different angles that they, and different lenses that they look at the business through.
Some of them look at it through a more traditional approach, like the one we've had with Foresight, others look at it through a more integrated approach. So it's far too early today to say exactly what this will look like over the coming months, other than to say, and as Baden also said, it's about doing what's best for the business, making sure that our shareholders, you know, are looked after clearly here. And over time, that we have a structure that means that we can maximize the growth opportunities both downstream and upstream. And we will, of course, get back to the market in the coming months as we achieve certain milestones through this process to provide an update.
Because as of today, we recognize there isn't a lot of information, but we will start to provide more information as it becomes more clear.
Yep. Okay, I think that that's all the questions. So if you have any more questions, I presume they can send an email to ReFuels?
Absolutely.
Yeah. And of course, the reports and presentation will be available on refuels.com, the website. We also recommend everyone to follow ReFuels on LinkedIn, as they are very active on that channel. Yeah.
Thank you very much.
Thanks.