Hydrogen Capital Growth (Frankfurt:65U) — Investor Presentation

0:01 Good morning, ladies and gentlemen, and welcome to the Hydrogen One Capital Growth PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the q and a tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today, and we'll publish those responses where it is appropriate to do so. Before we begin, we would just like to submit the following poll, which will just appear

0:33 on your screens now. And I would now like to hand you over to doctor JJ Trainer. JJ, good morning, sir. Well, good morning. Thank you all for joining this webcast at such short notice. We've got some exciting and important news on Hydrogen One this morning. Very pleased to be joined by Richard Hulff, who's managing director of HYDROGEN Hydrogen One, and Ben Makuta, who's the CEO of HYDROGEN CAPITAL. So welcome, everybody. The disclaimer statement. In summary, very pleased to announce this morning the combination of the investment adviser to Hydrogen One Capital Growth with Cordian Capital, which creates a new force, a very powerful new force in clean hydrogen, which which we're calling Cordian Hydrogen One. As the hydrogen sector continues strove... To show strong growth, we must increase our scale to remain competitive and to continue to add value for our shareholders.

1:29 By combining forces with the team at Claudius,

1:32 we expect there to be a wide range of benefits to the company and its shareholders, including an acceleration in market access and the enhanced capability and the enhanced efficiencies that come with a larger investment platform. So so just a reminder of of HYDROWN CAPITAL, the investment adviser. We established in 2020. We did the IPO in 2021. We raised a 130,000,000. The teams deployed the capital into multiple positions, companies, and projects with the 130 AUM so far as at q three twenty four. That's a 160,000 tons of avoided c o two. The The investment advisable transfer to HYDROMINUS transaction we're announcing this morning completes later on in the year.

2:29 Accordion Capital UK has agreed to purchase the company's investment adviser. Ben will take you through more details on Accordion in a moment. But, basically, is a specialist global infrastructure, a real assets manager with about 4,000,000,000 under management worldwide. Some investors will be familiar with the the digital infrastructure

2:53 funds. So Accordion are familiar with the investment trust format. The transaction is expected to result in an acceleration in HGEN's market access and capabilities compared to the stand alone strategy that we were talking to you about before. And the current team from the investment adviser will become part of and continue to provide asset management adviser services to HGEN. The completion is expected in early two thousand twenty five subject to customary regulatory approvals. And And I'm I'm pleased pleased to to introduce Ben Mickler now. Thank you very much, Richard, and good morning, ladies and gentlemen. It's indeed a pleasure to be here today welcoming Richard, JJ, and the rest of their colleagues to the Accordion team. And I'd like to take a little bit of time, telling you about Cordient and about why this will hopefully be, an undertaking that, serves to benefit you as shareholders of, Cordient Hydrogen One.

3:52 Cordient is a partner owned firm. It is a sector specialist investor in infrastructure focused on what we call infrastructure two dot o, which are the three sectors of infrastructure, are characterized by, high growth, sustained growth over the next decade, by a requirement for specialist knowledge in particular about some of the technology trends, and, where there is a societal demand for sustainability coming to bear. And these three sectors are the energy transition infrastructure or clean energy, digital infrastructure, and the agriculture value chain, three sectors of immense importance to the global economy.

4:37 Across all three, we invest largely in the middle market, largely supporting the growth of promising companies, and we do so through sector specialist teams. As Richard mentioned, some of you may be familiar with Cornean Digital Infrastructure Limited, an investment company listed on the LSE, which has a specialist team. We also have a specialist team in agriculture and a specialist team in energy transition infrastructure, which is what Richard JJ and the balance of the HYDROGEN ONE team will be joining. Coriant, has, as was mentioned earlier, approximately $4,000,000 of assets under management, and, that is in both investment trusts, investment companies, as well as in, GPLP funds, private capital funds serving pension plans and insurance companies, in Europe, North America, and The United Kingdom.

5:38 The structure of Cordient, is highly germane to what we're talking about today, and that is that each specialist investment team is supported by the resources of the firm in terms of talking to investors in both the public and private capital worlds, ESG team, compliance, governance, and legal, top quality, back office, and indeed other resources. So it's bringing a much more scaled up platform to bear that can support the existing HYDROGEN ONE team in further focusing, on delivering shareholder value in this, important market. And I just note that over the past number of years, Accordion has beaten its mandate returns in every strategy that has managed. So we pride ourselves as being, not only focused on investors, but on delivering good returns for investors.

6:40 And if we can go to the next slide, please.

6:45 I'd like to, specifically, focus on what this means for you as investors in Hydrogen One. And there's a lot on this slide which I could talk through, but I think it might be most germane to talk about some of the things that are important for you in the context of the London listed entity. And I think the most important thing is that we can offer enhanced access to capital enhanced access to capital that can partner with the HYDROGEN ONE portfolio, delivering future returns for investors by making additional investments. And so one of the themes that I think is worth mentioning, was recently highlighted by a transaction done by our digital infrastructure team, by the team at Cord.

7:37 They purchased a Belgian data center platform, and part of the funding for that came from a continental insurer through an SPV. So in effect, there was the investment company and an SPV fully aligned, economically aligned, governance aligned with the investment trust that together deployed capital in an interesting opportunity.

7:58 And whilst I can make no promises that we'll be able to do this, this toolkit, this set of relationships that we have is certainly something that we can bring to bear to assist the HYDROGEN ONE team in developing this portfolio to the benefit of shareholders. So I'll end my remarks here by saying that Cordient is a specialist firm. It's a partner owned firm, a firm dedicated to the art of investing in infrastructure focused only on three sectors of which the clean energy transition is one. We're highly enthusiastic about bringing Richard, JJ, and their team into our family because we think that hydrogen is a sector which is already large, and it's promising because it's a critical part, not the only part, but a critical part in the journey towards a lower carbon economy and, frankly, a journey towards bringing Europe greater energy security.

8:50 So we think with that, notwithstanding the odd bump in the road, with that, we think there is a great deal of promise ahead. And together, we can bring many more resources to serve you as shareholders, and we look forward to doing so together. And, Richard JJ, I'll pass the microphone back to you. Thanks, Ben. I mean, just to underscore Ben's point there about the immediacy of of the growth potential in in the hydrogen sector, which is now. Let's just reiterate our strategy, which was was about long term mobility becomes a a real growth sector. But the the the real real growth we're seeing in the in the sector now is is the existing hydrogen market. Hydrogen's being produced for for for decades. It's the gray market today. It's a $170,000,000,000 market, and that gray market is converting over to green, and that's where we see the opportunity now. We need to scale up now.

9:44 We need capital now. This is why we're we're working with. You see some McKinsey data there on the right hand side talking about the longer term prospects for for the the sector. Sector. So... But that... So that's beyond where we are right now, but we need capital now, and that's why we're we're aligning with with Cordian and going on to the platform to to do this. Interesting to note, some numbers behind the hydrogen market from from our friends at Fortune. So we've got a $170,000,000,000 gray hydrogen market now. That overall hydrogen market, which includes all forms of green and gray and others, is is set to grow to 278,000,000,000 by 2032. An interesting 6% CAGR. Okay. That's great. But if you go into the details of that gray sector converting over to green, green is a very small sector at the moment. Green hydrogen is a 2,500,000,000 market.

10:39 Set to grow to a 144,000,000,000 by 2032 within those those larger numbers. That's a 50% CAGR that we're looking at. That's what we're trying to invest into now, and that's why we need access to more capital. And that's what's gonna happen with with.

10:56 Great. Look. In summary, thanks thanks, everybody. Very pleased to announce the formation of Cordian Hydrogen One. This is in response to the strong growth that we're seeing in the sector and our strong desire to remain competitive in in this industry for the benefit of of of our shareholders, accelerating market access, enhancing our our our capabilities as fund managers and better access to capital to deploy on behalf of shareholders. With that, operator, over to you for Q and A. And there's plenty of time for Q and A, so please do do poll

11:32 your questions. Perfect, JJ, Richard, Ben. Thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's situated on the right hand corner of your screen. But just while the team take a few moments to review those questions that were submitted already, I just like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can all be accessed via your investor dashboard. Guys, as you can see there, we have

11:57 received a number of questions throughout your presentation this morning. And thank you to all of those on the call for taking the time to submit their questions. But JJ, at this point, sir, if I may hand over to you to chair the q and a. And if I pick up from you at the end, that'd be great. Thank you. Great. Thanks a lot. There's a number of questions that have come in that are all kind of asking the same thing. What does this fundamentally mean for Hydrogen One shareholders?

12:19 Perhaps, Richard, you wanna pick that up, and then, Ben, over to you. Yeah. Let me have a go first of all. So this means we need access to capital. We need access to international capital on a much larger scale as the hydrogen sector is is scaling up now.

12:35 And and it's about timing. We we we have to get access immediately as the companies and the projects that that... Where where we've got a line of sight investment in are are going ahead. That might not be the perception amongst the the HYDROGEN sector amongst investors. There seems to be quite a lot of negative news flow against HYDROGEN at the moment. But but but believe us that that there are scalable opportunities right now. And scale is the key thing. We need to scale up. And I think that's what it really means for HGEN. And and, Ben, perhaps you can you can add to that.

13:15 Certainly. Thank you, Richard. I think you can really identify three elements. The first is that there will be the benefit of a larger team and more resources working for you as shareholders. The second, which we've all discussed in a variety of manners, throughout this presentation, is an expansion of opportunities to tap into other sources of capital beyond the investment company, the investment trust universe. And I think together, those can bring the third thing, which is, the ability to deliver continued and even stronger results for investors. Obviously, we make no forward looking statements, but that really is the aim. So those would be the three things that are at the top of the list. There are obviously others, but I think those are the things that are at the top of the list for you as shareholders.

14:05 Great. There... There's a... Again, there's a number of questions on a on a symbathymatic here. What... Why... So why did Caudian see this as a valuable opportunity given that there's quite a lot of negative press coverage on the hydrogen sector at the moment? So, Ben, I think that's that's one for you. Well, certainly. I spend... I've spent most of my career in investing in digital infrastructure. And throughout that career, I've seen that market cycles bring periods of of bright, even excessive sunshine, and periods of great gloom. And the weather forecast for hydrogen right now is overcast because of some,

14:50 news, news items that have have come through, largely driven by government uncertainty. But the weather looks set to change over the next coming years, and a brighter forecast, I think, is is, in view. Hydrogen is a large market today. Hydrogen is critical as we've talked about for both the energy transition and energy security. Major industrial companies have a vested interest in the success of this sector. Right now, if you look through the the current overcast period towards those factors, you can feel confident about adding these capabilities onto a platform, and that is the call that Cordient has made. Great. If I just throw throw some extra numbers into that. I mean, the hydrogen market today, 90,000,000 tons per annum. As Richard mentioned, the gray hydrogen market, which is a a big market, but it's a highly polluting sector because that's hydrogen that's manufactured using fossil fuels. Now clearing that up

15:53 using clean hydrogen. So today, there are 300,000 tons of clean hydrogen on stream around the world compared to 90,000,000 tons of total market. Under construction, another 3,000,000 tons of clean hydrogen. Capital cost of that, €40,000,000,000 or so. Serious money, serious projects, not a science project, you know, genuine industrial activity. When that's delivered, that's only 4% of the cleanup activity that needs to happen in the sector. So there's a lot happening, and there's a lot to go for despite despite those headlines. And then look at the government level. Here in The UK, new new labor government on sea, they have already committed £6,000,000,000 to to to various forms of clean hydrogen at CCS. So we think there's a lot more to come there, particularly in the hydrogen to power sector.

16:44 In Germany, another target market for us, the government's changing, but but there is a 9,000 kilometer hydrogen pipeline

16:53 go... Going ahead with government funding of €24,000,000,000. So so despite the, as Ben says, the overcast weather and the bad headlines, there's a lot of positives in this sector. We think that's very much worth worth going forward as investors. Okay. Next question. I I think several questions again on the same thing. Richard, this is for you. Think who is running the investment adviser? Who is the adviser to HYDROGEN CAPITAL after the... After this announcement? And when when do you get access to Cordient resources to help you to do that?

17:27 Yeah. Okay. Well, I mean, effective immediately, we're we're all part of Cordient, And we have access immediately to the infrastructure, the other team members. But in terms of the mechanics, JJ and I are still the directors on all all of our portfolio companies. We've conversations had with them this morning reassuring them of that fact. It's the same team working on the same projects. We are the hydrogen specialists, and that... And that's how things are gonna gonna continue.

17:57 So question for Ignatio. Thanks very much. Do you... Can you publish the shareholder percentage ownerships of the companies for hydrogen and one is invested? Ignatio, we do that already, actually. It's it's in the in the annual report.

18:10 Look. If you drop us an email to the inquiries email address, we can certainly provide you that information off the call. There's a question from Pim. Pim s, do you expect any changes regarding ESG approach? Nope. This is a SFDR article nine proposition. Keep the KPI for ESG as avoided GHG emissions, and we avoided a 160,000 tons since since the inception of the of the fund. There's question here. Will the... Richard, I think this is for you. Will the portfolio managers be committing time to other funds, other products as a result of this this act... Results of this transaction? We we will remain as hydrogen specialists.

18:56 That that that... That's all we've done. That's all we're gonna continue to do. So for the time being, we are we are completely 100% dedicated to HYDROGEN one. We will, however, be ensuring that there are additional resources and additional team members, so you'll be getting more for the same money.

19:19 Question from RS. Will will will will HYDROWN still be listed on the London Stock Exchange? The answer, yes. We we collectively believe in the investment trust model. We believe in the business cycle, and we we think investment trust listing is a is a good good place to be.

19:45 So question from Andrew L. I think, Andrew, thanks for joining. You're a frequent participant on this call. So I'm a supporter of HGEN's geographical focus on the EU. Will that strategy continue? Or is it too early to say? Well, Andrew, our our mandate is actually OECD, which is obviously a bit broader than the EU. I mean, the reality is our deployment so far has been in the European Union and and The UK. There are, as you know, political changes underway in many important hydrogen countries around the world, US, Germany, recently UK, etcetera. And we we just we just thought, you know, almost to that pretty closely. But I think no no no change to that to that OECD OECD mandate.

20:33 Just looking.

20:38 Address Just most of these questions. Yeah. Patient Is that... Sorry. It should... Jamie, is this an acquisition or a merger, and at what share price is this being done? So so, Jamie, thanks for the question. This is not a share price related transaction. This is a transaction which affects the investment adviser to the fund and not not something which is to do with the with the list... The listed shares. There there... There's no impact. There's no share price embedded in in this transaction, which Yes. Question about how will this improve HGEN's access to capital markets. I mean, really, this is about access to to private equity, the private equity market globally. We've got a bit of an EU focus.

21:24 Of course, coming from North America is giving us greater access over the pond. And and debt markets as well, debt into the companies and possibly into the into the portfolio as well. It

21:36 really does expand the capital horizons for investors. And we we expect the discount to to the current share price to to to improve... To to to lessen as as we go on and demonstrate that. So a question from John c. Could you... Thanks, John. Could you comment on the on the potential impact from the current German political situation and and when could that be resolved?

22:04 And so I guess the answer to that one is is elections. But look. In Germany, we we have an investment in an in an electrolyzer business called Sunfire. Their order book is is global, so they're not particularly affected by the the political change in in Germany. In terms of Germany and its hydrogen legislation and hydrogen support, it is one of the more advanced countries from our perspective in terms of investing in the hydrogen sector. They've enshrined red two

22:34 into into into laws. So red red two is the is the renewable energy directives that they are about to enshrine red three into into laws. They set a a pipeline network for pure hydrogen, which will be a 9,000 kilometer network with €24,000,000,000 of of government funding coming in coming in behind that.

22:55 Going forward, I think what we and and other observers are are watching out for in Germany and and other countries is green gas blending mandates into natural gas grids. So a requirement to to to put to put clean gas in in... Into into legacy fossil fuel networks. And as of when that legislation comes, that will be an important demand pull for clean hydrogen beyond the the gray gas... The the gray hydrogen sector that that that we talked about now. Will the current investment manager be be paid for the merger in any way if they got any sort of earn out? Answer, no. There are no changes to the investment manager agreement. We will be... We'll we'll go on to the onto the accordion payroll, and we're we're paid accordingly.

23:43 And I think, guys, we've we've we've addressed the questions that I'm seeing on the... Perhaps last chance for anybody to poll poll a question. Did we answer the one on agriculture back up there? I I mean, the... One of the interesting areas that that that we see immediately, we've talked about, you know, the the the sources of of the hydrogen market now. A big part of the hydrogen sector currently is going into making ammonia, which is going into fertilizers. And, of course, we've got, you know, cross fertilization with there because there's an agricultural platform which we can feed into. And And that's that's gonna be a great source of generating new new new projects and ideas for us to invest too as well as bringing that capital across to to looking into the fund. Ben also mentioned a data center transaction.

24:38 You know, the electrification of the world, the the growth in electricity demand, a lot of that's going to data centers as we know. We're getting access into that market now through through through through that that being part of the the the the tech fund. Maybe Ben could could add to that as well. Well, we're very much looking forward to the the kind of conversations between the teams.

25:03 Richard and JJ, aren't just... They're they're not only not only the experts in hydrogen, but they bring a wealth of experience in the energy sector, which will only add depth and texture to the kind of internal conversations. And I think Richard's point about agriculture is is is quite relevant. Accordion has deployed about a billion dollars in agriculture over the last couple of years, and I think there are great many points of of contact for portfolio companies to build value for the teams to gain greater insight and to talk to each other. And and likewise, the data center sector has become an enormous consumer of electricity. And there are other areas where hydrogen is probably going to to play a role. And and just to give you, you know, one data point about that, and this is not going to become the largest driver of demand by any means, but it gives you a sense as to how hydrogen has potential over the coming one, three, five, ten years in unexpected places.

26:07 The mobile tower industry right now uses uses diesel generators for backup power at mobile tower sites. But there is quite a lot of discussion in the industry about using hydrogen fuel cells for that purpose. And that's something that the digital team can talk to the hydrogen team about within Coordinate, and you can see very much that cross fertilization of ideas and opportunities. So we we welcome that, and we look forward to that. Great. Operator, over to you to to close it down. Thank you. Absolutely. JJ, Richard, Ben, thank you very much indeed for addressing those questions there. But, JJ, perhaps before really just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments to wrap up with, that'd be great.

26:56 Great. Thanks. Look. Thanks everybody for for joining the call. And, again, thanks for joining at such such such short notice. And with a couple of close-up points, everybody presenting on this call firmly believes in the role of clean hydrogen as as an important part of delivering the energy transition to to to net zero. So that very much brings us brings us together. The combination of Cordient and Hydrogen One brings a big seasoned investment platform with with great access to the capital markets and great expertise. It combines that with a with a specialist in the hydrogen sector, and we think that's a very, very powerful combination. We think this is gonna be a leading force actually in in the clean hydrogen market. And then my final point is we see governments around the world engaging on the on the hydrogen sector and engaging with strategic industrials to to to to to to deliver hydrogen economy.

27:52 But there is a gap

27:53 between the governments, the strategic industrials, and the capital markets. And we very firmly intend to play in that gap and and work closely with with those strategics and those governments. So so watch watch this space. Great. And, operator, thanks thank... Thanks very much for the call. Thanks, JJ. That's great. And thank you once again for updating investors this morning. Could I please ask investors not to close this session? She will now be automatically redirected the opportunity to provide your feedback in order the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Hydrogen One Capital Growth PLC, we would like to thank you for attending today's presentation.

28:38 That now concludes today's session. So good morning to you all.