Earnings Call: Q2 2021

Aug 20, 2021

Quarterly report

Good morning, everyone, and welcome to Saltex Technology Holding Report for Quarter 2. Karl Johan Leninger, CEO of the company and with Maasai Dir, I have also CFO, Hardout. Good morning. Very welcome to this presentation. We will have some we have some packages for pictures here that we're going to go through. And we will you know that it's possible to put to raise questions during the whole presentation in the chat forum, so that we will take at the end of the presentation. Yes, we're right at 20th August after a fantastic summer in Sweden here. We are really up to speed after the vacation. And we are happy to make this presentation to you. There will be some new slides, some old slides, But this is a slide that actually describe what Solvayx Technology is all about. And we are And then enabler, I like that word. We are an enabler that make the transition towards global decarbonization possible. And I think everyone has seen and everyone has a great interest in the discussion that is going on now in media for all of us. And I'm particularly thinking about the IPCC report, intergovernmental panel climate changes report that was released in 9th August, which was and is a bit of it's a sort of an alarm clock that really says that we are the damages are quite it's very it's severe. It's much, much more than we thought. And the transition is actually accelerating more than we think. And This report is really a very important tool for the politicians and for other decision makers. And it's actually based on 14 more than 14,000 scientific reports. So it's actually the true situation that we have. And we can see that the global heating is taking place quicker and faster than we thought. And the CO2 emission is also all more or less on the same level. It's unbelievable, 40,000,000,000 ton per year in a global situation. And it's really motivating us to do what we can to enable the transition to a fossil free society. And because the climate, that's our future. There's no doubt about that. So we will do what we can to this. And we Could go back now and see what has happened since the last report that we did. A lot of things that has happened, of course, and Some of them, we will we are able to officially tell you, but there's a lot of other things going on also. But what I would like to raise now is, 1st of all, that we have taken an agreement with Lule NFRI and LuleCraft in the North of Sweden to build a of its kind to charge and so on. And then it's actually waste sort of waste gas that we are going to use to heat the nonalcoholic salt. So this will be the first of its kind in the world. And that will be we have started to plan for it, and We are in a phase that we need to finalize the installation the pilot installation in Stockholm that we are working with at the moment. So Stockholm will be the base for the upscaling of the sizes here. The Stockholm case will be we have installed the discharging reactor, And the charging reactor is on its way. So we will see the results in short time here. The second thing is actually that we have entered a partnership with ABB regarding the control system, the process control system, which is very, very important because We have seen that the nonacotta salt needs to be optimized towards the reactor and the reactor needs to be optimized toward the salt. So it's a very mutual sort of mutual interest in those two parts. So that's why it's very so important that we have a control system that we can rely on when it comes to the flow, to the speed and to the heating and to the pressure and time inside the fluid as bad reactor. We are not since we have signed this agreement pretty recently, We will not use ABB Stockholm pilot, but we will use it in the Luleo case that we are starting to plan for. The third thing that has happened, I think everyone is aware of that, we have managed to raise a new We have completed a €60,000,000 issue. That was very successful, and we have now put the base for us to continue the development when it comes to the pilot installation that we are planning for the future. So that's the subscription price was set to SEK 4 per share. And yes, so that's history now. So The milestones, you might have seen this picture before also. The milestones from 2013, 2021, you can see here. And in April 2019, we actually we opened up the Berlin plant, which was the First, large scale installation power to steam in the world. And that was with with a technology that was used to spare joule, a heating screw that was actually heating up the nonalcoholic salt to charge the salt and the same technology with the discharging vector. We came out with good results from that installation. However, the technology with Spirojool was not possible to use in large scale applications that we had that we wanted to go So therefore, we have to change it to that and that's the technology we're going to use we are using in Stockholm pilot. I will come more I will show more later on to that one also. The Helsinki Energy Challenge was an application that we put in, and we became 1 of 4 winners. That was more than 250 applications from all over the world. And the task was to get Helsinki fossil free, to close down the carbon heating elements and all those things. And that, to me, shows that we have the right competence, we have the right technology 2 to make this happen. We are, as I said in the beginning, the enabler to make this happen. The Lulyo pilot has not happened yet, as you know, as I said. And we are starting to plan for it, And we are working together with partners to make up the technical platform for it. But again, Stockholm pilot needs to be finalized before we can start push the green button to build Lune. Very often, we hear the word peak shifting, and we know that, that's What it's all about is that we would like to store the energy once the energy is cheap. And that's especially in the when you talk about the wind and the PV charging is that You have to take care of that one because you cannot guarantee the 20 fourseven production of percent of energy. So 20% of the installed capacity by experience, by all experts says 20% needs to be in as an energy storage. And this is also accelerating the process here because the fluctuation, the volatility is increasing all the time of the energy prices. So It's an open door maybe, but we think this is very important to keep in mind. The technology that we are using is based on chemical storage process. We start with a calcium Hydroxide, we charge it up to 550 we heat it up to 550 degrees by electricity or by heat. And by doing that, you will get the chemical process that the steam, the water, H2O, will disappear And the calcium oxide would be left. And that is the polymer that you are that we are storing regardless of time, and you have the same energy day 1 as you have in after 6 months, 7 months. Once you will discharge it, you add on 120 degrees steam. And you will have the very, very quick process, chemical process, and you will get out 4.50 degrees Celsius of Steam, high valued steam that could be used in an industry or district heating or you can also buy a turbine, make electricity out of it. Of course, with a less efficiency level, but still, you can do that. We talk about product application. We talk about productification of the products, and we are mainly working with 3 areas, 3 applications that are under development. We are in a little bit different stages when it comes to those applications here. The heat to heat is the Lulyo case, as I talked about, enables the industry to store excess heat energy, and that's precisely what we are doing in that we will be doing in Oulu. Power to steam, Berlin installation was power to steam, where we used the Spirojole as a heating and discharging. And Stockholm is also, in this application, power to steel. And this is our first priority together with heat to heat. The power to power, we realize that it is a market for it, but we don't have we have a concept then we know what we will do. But the capacity is limited for us, so we have put the priorities to Power to Steam and Heated Heat. So again, this shows that we are working together with some very important partners. And when it comes to the charging reactor, We work with an Australian company called Carlixt Limited based in Sydney. And they are a very Competent company that are specializing in charging reactors, and they are they call this a falling bed reactor where you actually put the material on the top of it and you do the indirect heating and you get out the calcium oxide in the bottom. And then you store then the calcium oilseed in the shard salt. And then when you're going to discharge it, we use today through fluid as well technology in cooperation with the Japanese Global company is Sumitomo Fostervilleer and they are based in Finland. And with both Colleagues and Sumitomo, we have frequent technical meetings, and we are sitting in the same boat, and we are developing and optimizing the reactors in a best way suitable for our noncoated salt. The noncoated salt, again, everyone understands that, that this is the really the base for the whole thing. But when you look All those things here and you realize also that the control system, the process system is very, very important. And once again then, we come to the situation about this perfect match as we think it is, the partnership agreement with ABB. And they will support us, and we will start up the corporation in the very near time 2 to optimizing the Lulyo installation that we will do. And I'm very pleased with that because they are a global company, and they have a lot of expertise when it comes to large control system and big industrial sizes, but also for the small entrepreneurial companies that we are that they have decided to support us with this one. So this is, yes, perfect match. So the ecosystem Then as a summary, it's a living situation and it's all the time we have A lot of partners that are in the background of this that we were able to add on to this picture. But when it comes to the technical platform For the material, it is Nordkalk that's supplying the calcium hydroxide salt and it is Wacken, the company that supplied the nano coating itself. Nordkalk and Vakke, with our technique, make the recipe for the nonacoda salt. Then the technology, I mentioned ABB and Sumitorme and colleagues, they are really the key people here, the key companies that are making it possible to make a complete energy storage solution. Once we have the technical platform, we also need application partners to build the storages. And Sverin, which is a company in the north of Sweden well, in Sweden there in Stockholm also that are owned by the industry steel industry today and Partly also the government is one of the companies that are supporting us. Inelco, the Spanish Portugal South America Company is also one of the partners that are still developing storage system, and they are talking to the various customers, but also to various fundings in EU to make this going. Changliang is another one. We talked about that, the Chinese based company. Especially Xiangjiang Boilers Limited. And they have built an installation, pilot installation. And we need to support them to get the discharging reactor up and running, to be precise. We are a little bit disappointed maybe on Shanghai because we thought that they will they should build their own technology, their own reactor. But at the moment, we need 2 to increase the dialogue with them, and we need to support them in order to come to that reactor. So and that effect, we still talk to in Berlin, but even though on a very low frequent level at the moment. The drivers for the market growth We see a constant increased demand and increased questions from the market. I mentioned this IPCC in the beginning, and it's really I think it's really happening now. And I think that there will be a lot of more strong decisions from politicians and from the governments around the world that we need to take actions now because we have created this situation, and we need we all the people needs to take care of it also. So The U. S. Is back in the Paris Agreement. That's nothing new really, but we know that they are much, much more active now. China is active even if they are closing down carbon heating factories, but they're also building new ones. So it's a little bit unpredictable situation in China, I think. But we are certainly on our way to a new green era and it's a must. We don't have any choice. We just have to do. So that's driving the market growth. When it comes to the landscape competitive landscape, you might have seen the picture before also, is that we have a situation when we compare ourselves with molten salt and concrete and so on that we have a very higher density energy density of between 500 to 600 kilowatt hours per ton, which makes us unique in this situation. We have an environmental friendly material that I think that's don't it's not explosive, not flammable and it's not too corrosive. So it's also possible to transport the salt. You can charge the salt in one location place in geographically and you can discharge it in another without any problems to do that. Looking on the CapEx side, only look on the right hand side here, it's actually that The CapEx for this is a large Energy storage application, €120 per kilowatt hours, which is equal to SEK 1,000,000 Swedish kronor, around SEK 1,200,000 per megawatt hours. It's a lot of money, but It's compared to the others, we are competitive. And we think that we have a lot of other advantages versus molten salt and concrete size wise and also in the OpEx operations. We are on our way in the commercialization. You should read this picture from left to right. We are still in the sort of right hand side of the development phase where we are building the pilots, as I have talked about. And we take the full responsibility for the for those pilots. And we do that because We have to have the competence and we have to have the know how the various reactors and the control system and the non recontal salt works in total. We have We're spending our own money in this area, but we also do as much as possible Soft Money. And we have some support in Stockholm now. We are applying for Lule also in parallel here. But it's very important that we, as quick as possible, come to the Right hand side of this picture, from a marginal phase situation, where we need to or would need to come to a situation where the customer is prepared to pay for this. But there is no shortcuts here that we need to have a verification of the technology. We need to have a technology that is process orientated. And what I mean by that is that we need to have so called a 3rd part verification of that installation. That will then be the base for Luleo. And after that, We will continue to build the pre commercialization pilots 2023, which is not finalized yet, but we talked to a number of customers here. And we are focusing into the area of 5 megawatts size of charging and discharging reactor with a capacity of 120 megawatt hours. And they are fairly big, those energy storage applications. But Once we have done Stockholm, once we have done Luleo, we are ready to take that step. But looking on Stockholm compared to Luleo, Luleo is about 10x bigger than Stockholm. And going from NOLIO to the pre commercialization policy, is going to only to be 5x bigger, but that's quite a big step anyway. But this is the plan that we have worked out. And by year 2024, we the plan is that we will have commercial projects ready. Yes. Thank you, Kari Wang. Yes. There are 3 comments I'd like to share with you. Looking at our numbers, you can see that the money, other than just funding the operations here in the office, but development and market wise and so forth. We also, for the last few quarters and a bit into last year, are funding in and investing in the Stockholm pilot. And just the ones who know our balance sheet, That investment is being activated in our balance sheet. So that's number 1. Number 2 is Part of that investment is, as in the past, we are attracting some soft money, some public funding from the state energy agency. So part of it is funded. And as we go forward, as Kevalu just explained, we hope to increase the part funded by others, both from a SoftBank point of view as well as from partners and customers and going forward. The 3rd last comment has already been mentioned, but I would just like to point it out. The importance of it is that we raised capital in May and this time through a directed issue. It's become rather popular in Sweden to do so called accelerated rated book billings. And we did that, attracting we have a vast spread From a retail point of view, and we now wanted to attract some institutions. And we did so with some success, raised €60,000,000 to the company, which will allow us to go on with our operations for at least a year or so. That's all, Karl Johan, from Bank of America. Looking into the questions then. We have received some questions here. As a Company that have spent a lot of your investor's money, what is the plan forward? Can you only get financial support from the Swedish government and how about the EU. And we of course, it's important for us development company to raise capital and to attract capital from public funds. And that's not only and the Swedish government is have different institutions providing such capital, the Novae Swan, State Energy is another and different projects. And they are spending an awful lot of money, and we are working heavily. And we have successfully, in the past, been able to attract such capital, and we'll continue to do so. EU is the same thing. We have had funding from EU, and we continue to look for EU funding. And that's very important for early stage companies. And we are beyond early stage, but we are still in a development phase and then that those funds are very important. And as Karl Johan just explained a couple of slides back, We are, in addition to equity from shareholders and SoftBank, as we develop, we have support from our partners, tactical and some, they do things for free just to be part of the development. And we hope that portion and that portion will increase and eventually also lead to income to help us. I think you can add on only that we are doing this in parallel. We're looking to Horizon 2020 and EU and GreenWave money. Green deal. Green deal, yes. So but the how should I say, the administration time and the amount of Time and reports that we have to do is I shouldn't say 10x, but It's much, much more time consuming to do the EU fundings than the Swedish ones. That doesn't say that we will not do it after the knot. So we're doing this in parallel. We have been successful in the past, and we have the experience. So of course, We always look out for such fundings. It seems as if we've been rather you've been very Clear this time. There are a few questions. And yes, we round off. I would say that the we are in a very interesting phase now to continue our journey. And we are making something that we someone else hasn't done it yet, in a word. So We have all the respect for that, but we will be there. And Just be patient with us, and we'll come back with more information as soon as we have done.