Invinity Energy Systems (LSE:IES) — Investor Presentation

0:00 Good afternoon, and welcome to the INVINITY ENERGY SYSTEMS PLC investor presentation. Throughout this recorded presentation, listeners will be in listen only mode. Questions are encouraged and be submitted anytime by the Q and A tab situated on the right hand corner of your screen. Just click Q and A, scroll to the bottom, type your question and press send. The company may not be in a position to answer every question received during the meeting itself, and the company review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Larry Zorce, CEO. Good afternoon.

0:30 Welcome, everyone, to the, investor presentation for our interim results for first half of twenty twenty two. So I'm Larry Zulch. I'm the CEO, and, I'm joined by Matt Harper, our chief commercial officer Peter Dixon Clark, our chief financial officer and Jonathan Marin, who will become our interim CFO, and has become our interim CFO, I should say.

0:57 So I'm gonna turn it over to, Peter first to go over the financial results, and then we'll discuss some of the other operational issues and, and then open it up for questions. So, Peter? Yep. Thanks, Larry. Good afternoon, everybody. Welcome to the results presentation. I'll try to focus on the two areas we get the most questions being revenue and cash, and I'll sort of draw your attention to a couple of things in between. But let's get right into it with with revenue. £1,400,000 recognized in the period. Pretty much all of that related to the EMEC project, which is up in the Orkneys. It's a great project. It's where our batteries sit between tidal flow generating power and an electrolyzer.

1:49 The electrolyzer likes to have steady input of energy, and our batteries do that in a way that really other batteries, particularly lithium, just just wouldn't be able to hack it. So we're we're, you know, we're very pleased to have that that project under our belt. The other question we get about revenue, of course, is, you know, okay. You've You've recognized 1,400,000. What's coming down the track? So moving to the next bullet, three point sorry. Not the next page, next bullet. 3.4 megawatt hours shipped. So that's closed sales that have left the left the left the warehouse and, you know, are en route being installed with the customer. So revenue will be recognized on that very soon. And that's all part of a closed sales backlog.

2:37 So we're focusing on closed sales here because they're closest to revenue, but clearly, there's a number of contracts that we are close to closing, and they will they they will flow through in due course. So £13,000,000, 12,900,000, 13,000,000 of closed sales backlog. And well over half of that is near term cash, in respect of milestone payments that we're expecting to drop into our accounts, you know, within the next sort of twelve months. Period end end inventory of 10,900,000, so a a large use of cash. We include prepaid inventory in that amount because we the balance of system is manufactured

3:21 by a sort of a contract manufacturer for us in China. So prepaid inventory is where we've paid for the inventory. It's work in progress. And then inventory itself is where the the result is sitting in our warehouse. Period end cash of about 16,000,000, and the group remains debt free. We do have to account for leases as right of use assets, but, you know, we are essentially debt free. Great. Thank you. Next slide, please. Okay. This is a snapshot of the the two primary statements. I've talked about revenue, cost of sales, 3,700,000. Of that 3.7, only 1.6 relates to actual

4:09 materials effectively. The rest is production costs. Now as output increases, we get a better absorption on those production costs and so the margins improve. We split admin out between staff costs and other. Those other, we should see savings in the second half of the year, particularly things certain certain fees will not recur in the second half, particularly things like audit costs. So that's the p and l. The balance sheet, we haven't provided comparatives, but it's a relatively stable balance sheet. Not much movement there. The story is all in the income statement. Next slide, please. Okay. So the other question we get asked the most is about cash.

4:54 So what we've done here is we've taken the taken the cash flow and and sort of pulled out the highlights and and tried to summarize it. So there's the 11,600,000 loss from the first slide and the second slide. Adjustments for noncash items, that can be a number of things, changes in provisions or share based payments and the like.

5:18 Increase in inventory, prepaid inventory, that's predominantly prepaid inventory. That's the 1,200,000. Other than that, the the other movements are balance sheet movements, and they're they're relatively modest. So that's given a cash burn during that first six months of £10,300,000. So if we look across the other table, we've taken that that 11,600,000 loss after tax, stripped out the noncash items giving us 10.4 of movement, and then analyze that between those in respect of gross the the gross loss or the gross result, which is a a good proxy for our variable costs.

6:04 And then the other the other part is the impact on our operating costs, which is our sort of proxy for fixed costs. So that leaves us with about 7,800,000 of fixed costs, And we've done that, so that we can derive a monthly cash burn, which if you divide 7.8 by six comes out at about £1,300,000 a month. And those are the highlights. Thank you very much. Thank you, Peter. Our highlights in in the commercial operational strategic area during this six months have been significant. And, you know, we start with the commercial side where we had the largest flow battery in North America on sale to Elemental Energy.

6:49 We went through phase one, received an award from LODES, a base funded UK competition, and are looking forward to phase two of this process. And we also secured a number of reseller relationships in key markets. All of this activity in commercial is just, in some sense, the the the tip of the iceberg, the point above it, and Matt will go into that, shortly. But before we go, to, Matt discussing further the commercial side, Operationally, we've been shipping products to site. Having them really sets a milestone for us that we are shipping consistent product, having it arrive on-site, connecting it, turning it on, having it operate correctly. Now this does not sound necessarily like as significant as it is, but in the area of alternative to lithium storage, this is this puts us into a very unique category.

7:57 In anticipation of the amount that we will be needing to ship o over the remainder of the year and next year, We expanded our manufacturing relationship, started a new relationship with Bausch and ENERGY, which has vastly more capabilities than our previous contract manufacturer and has great deal of experience in renewable energy equipment production. And then we also have been working with our supply chain. So all of these things are relatively invisible, but they are allowing us to meet the requirements we have of being able to ship the product projects that we've already contracted for and reduce costs at the same time. Strategically, we've been working on expanding into The United States. There's been a great deal of support in The US for energy storage, and we'll talk more about that further on.

8:50 We

8:53 had a memorandum of understanding with Hyosung Heavy Industries. This is a powerhouse in Korea and could not be a better partner for us. One notable component of that is that they, have shipped gigawatt hours or placed gigawatt hours of lithium ion batteries, in into various installations in Korea and are interested in expanding beyond that, into other battery technologies. And then, we've been making progress toward MISTRAL, which is the code name for the project that we're currently developing with Siemens Gamesa. But before we go into further detail on the operational strategic side, let's go dig a bit with Matt. Thank you very much, Larry.

9:38 So our focus over the last four months has been on, you know, step stepping away a little bit from, you know, trying to build, you know, massive long term volumes of potential business and really focusing in on accelerating near term sales. You know, we we we have not had the volume of deals closed over the first half of the year that we'd like. And so what our team has been focused on is is doubling down on looking at the near term opportunities where people need a battery that has the capabilities that ours delivers and working with those customers to get those deals over the line. How that manifests itself in our reported figures is in the base category. Those who have been of you who have been following the company for a while know that we categorize our, our pipeline in in in three groups.

10:30 We call qualified deals, the ones where we have established, that, you know, need timing and and an INVINITY advantage is available. As deals progress, they become what what we call our advanced category, whereas which is where, Infinity's products have been selected, for a particular job and where things like site engineering and and and and planning permission are underway. And then finally, the last category is is what we call our base, which is the deals that we are basing our business on. Right? These are the opportunities that are in final negotiation in most cases and and very, very, very likely to close in the near in the near term. What has been exciting for us over the last two months is that that base category has gone up significantly. You know, we're now we now have 22.8 megawatt hours for the business that is, as I said, in the final stages of negotiation.

11:20 And, you know, though those negotiations can can can happen at varying speeds, we have to feel very confident that in the near term, we will announcing we will be announcing a successful close of those deals, and we'll move those deals into the operational and and delivery phase. Part of what is driving that increase in base is what we talk about on the next slide, which is that we are starting to deliver a lot of our key projects. Yeah. We we we discussed at length in in our annual report published earlier this year that that the biggest factor that we were trying to push on was proof of capability.

12:05 You know, proof that our products can be that we, as as a company, can deliver our products and proof that our products themselves are capable of delivering on the very demanding needs that our customers put on in the field. And that is, you know, essentially what we're seeing today. We are now able to deliver that through through deliveries that are starting, you know, that that that that Larry talked about at places like EMEC and and and at projects that are now shipping to the field that are that are at a much larger scale. You know, we're we we we are happy to note that production from our new production facility with with has been initiated. We have now shipped over a megawatt hour of product to the elemental energy project here here in Canada.

12:52 The balance of that equipment is expected to be shipped before the end of this year. Similarly, the Yalde Melka Energy project that had been that had been delayed in part because of development concerns around the original site. That project has been relocated to a second site. That second site is now confirmed, and construction has begun at that site. The first site remains under development, and we expect that that will be, you know, a further piece of business for us down the road. But most notably, the manufacturing for the eight megawatt hours worth of our batteries that will serve that project is now is it has now recommenced, and, you know, the shipping phase is is is currently in progress.

13:35 Against this background of projects being delivered, if we go to the next slide, you know, what we see in the broader industry is is some very encouraging movements in the macro environment. You know, the last two years has been very challenging for everyone in our industry in terms of materials costs, in terms of labor availability, in terms of the ability to move goods around the world. And and we have seen some and, you know, we have been impacted by those those effects as as much as everyone else in in our industry. Over the last period, we've seen some very encouraging movement where prices on shipping have dropped significantly. The cost to ship containers from Asia to North America has fallen by over 60% in in, you know, in the last year.

14:25 We've also seen a significant cost decrease in some of the base commodities that go into our products, you know, notably the vanadium that goes into our electrolyte, which is, you know, yielded significant reductions in that, you know, critical element of our product cost. And then and then and then finally, you know, as we mentioned earlier, you know, the transition from a sort of more pilot production oriented manufacturing facility to a new partnership with who are, you know, currently shipping solar products in the gigawatt scale is going to help us continue that path to cost reduction of our products.

15:08 That's the picture sort of in the broader industry, but on the on on on on my final slide, you know, what we also see is challenges in the lithium ion industry as well. The macro environment for lithium is becoming ever more challenging. You know, there have been a number of living fires that have happened over the past the past few months that have been, you know, quite public and have had some very negative impacts on, you know, not only, obviously, the the battery systems themselves, but the the people and the businesses who operate and live near these near these facilities, which is driving a lot of our prospective customers to think about what alternatives may exist like our, you know, fundamentally safe vanadium flow batteries.

15:56 Safety matters notwithstanding, either there there are significant headwinds within the lithium industry as well in terms of materials availability. You know, cost of cost of of lithium ion batteries has gone up depending on who which analyst you wanna look at anywhere from 20 to 50% over the last the last over the last year. You know, all of which is is is is causing our prospective customers to consider alternatives far more than they were over the last or, you know, as as compared to the year ago. And then finally, you know, there is, you know you know, safety and cost notwithstanding. There's simply the question of availability. You know, we're hearing from our customers that, you know, major lithium ion battery supply contracts are now projecting deliveries anywhere from twelve to eighteen months or longer from the present time simply because so much of the lithium battery supply chain is being absorbed, by the automotive sector. This is not a trend that we think is going to alleviate anytime soon. And as

16:57 that those supply constraints around lithium become more and more acute, especially with the background of increasing safety concerns and increasing lithium ion costs. We think that the the macro trends are really going to be pointing more and more customers to increase their level of interest and and and and push them towards buying decisions in our products.

17:23 Those are the moves in the broader industry, but we also see some very, very interesting movements in the regulatory sector as well. I'm gonna hand it back to Larry to talk to you a little bit about those, those movements. So let's, step back for a moment because this is a critical component of, of where we are and what we're doing. The we are moving from having a product that is promising but not on the market, and that's a past phase to a future phase where we have a economically compelling product meeting a a clear requirement. That in between stage is difficult.

18:08 It's difficult because we're looking to improve the capabilities of our products, reduce the cost,

18:15 increase their acceptance, and and and, awareness in the market, to provide many respects an alternative to the, incumbent product, which is lithium batteries. There's no question about the need for energy storage. There's there's no question about that. The question is, how will that storage be provided? And in that context that Matt was just talking about with lithium having challenges,

18:41 the there's a clear and strong need for an alternative. That alternative is one that we are in the process of creating, and we're in the lead for doing that. There are many other companies that are also doing the same thing. But it is it is that challenging valley of of of problems and opportunities that we are working through. So,

19:07 having government support that takes our batteries, are not economically as persuasive as the lithium products, and making them available is in the best interest of the of the governments. And they believe, and they are correct in that belief in in the need for having a stable grid energy supply system that is quite dependent on renewable energy, looking for alternatives. And we're seeing that in a variety of different places. So these this is something where we are translating that support,

19:45 and and taking advantage of that support. And and and this slide is showing a few examples of that. But primarily, the takeaway from this slide is governments are acknowledging the need to have energy storage and to have alternatives to lithium energy storage as part of the larger energy mix. And we are in a very good position to take advantage of that, but we're not fully capable

20:08 of taking advantage of it this moment. And so that's of the challenge that we've run into and one that we are, working to overcome. Now a piece of what we're doing is to gain further acknowledgment, within The US market, of where we are and and and what capabilities we have. There are, other alternative to lithium battery companies in The US that are not as far along as we are, but, have more resources. And, and so we felt that it was strategically important for us to, increase our presence in The United States in a variety of different ways. And we've done that through our joint venture with US Vanadium, that we've announced where we're looking at increasing The US content of our products,

21:01 and and looking for ways to support manufacturing in The US because that is a portion of what is supported by the bipartisan infrastructure bill and the inflation reduction act. We also have gained UL certification, which, in The United States is a demonstration of safety that is widely acknowledged and one that we, are we we think differentiate ourselves very clearly from products that are unable to get UL certification. And and then, of course, having a US presence. And finally, California Energy Commission, that CEC there, is they they set the policy and standards for, California, which is an economy approximately equivalent to The UK's in size.

21:49 And and and setting that policy is one that they have identified as the need for storage and the need for nonlithium storage. So, that's, an area where they've given support to us in the past, and we anticipate support in the future. Now all of this context is still focused on our current v s three product, and it's one that we're very proud of and that we're shipping and that's working.

22:16 But it is expensive compared to the alternatives of of lithium products. And so we are developing the next generation of flow battery with Siemens Gamesa. Now like all large companies, they understandably don't want to talk about, products under development until they're able to, announce that they are available, what their price will be, what their capabilities will be, etcetera, etcetera. So we're constrained by what we can say other than to say that we've been working very, very hard with full effort on this next generation product, which will significantly reduce the cost of of of the product on a on measured by the amount of capacity it has on a per kilowatt hour basis.

23:03 We are on track. There have been some delays. Some are not in our control, course, of but but, nothing, major. Just, didn't quite hit some of our internal milestones. So in the interest of being candid, we're letting you know that. But it is, still focused on a 2023 announcement joint announcement. You can imagine what that will mean for us and for the alternative lithium industry to have

23:36 someone with or a company with the credibility of a Siemens Gamesa talking about the product they have, jointly developed with us and that it's available and on the market. And that's something that we anticipate, next year. So this has been been highly significant. Development has taken a very large amount of our resources and is and represents a significant amount of overhead.

24:03 So to close this this portion of the presentation, our forward focus is to conclude and announce commercial deals. We are acutely aware of the that that we have not met our own internal standards or your standards or the market standards for for announcing those deals. And and though our our base level of pipeline has grown, which means that they are close, That's not something that we, you know, are can be proud of is the the the the drought that we've demonstrated so far, and we are very committed to demonstrating our ability to close deals in in the near term.

24:51 We have major contracts that we are in the process of successfully delivering and converting that inventory into revenue. So that portion of our business, we're confident in despite challenges from supply chains and the like. So this is an area that we're very, very focused. And then the third major area of focus is is on, continuing to progress that, development of the next generation product of of the MISTRAL product. We have to do more than those three things, though, of course. We're continuing to develop strategic relationships. Some of those relationships are ones where they give us access to a particular market.

25:36 Other relationships are ones where they support our efforts within our core markets of The UK, Australia, and The United States, or North America, really. And so that's the gain footholds in new markets through partnership agreements. We can't afford to go into every market that would be appropriate for our products without a partner who's able to do most of the heavy lifting as it were. And then we're also looking at reducing the cost of our products so that we're able to make with government support or subsidies or grants, that kind of thing, we we need to continue to lower our costs, and the combination of those two should allow us to be selling future projects with a positive margin.

26:25 So those are our our focuses. We're very dedicated to that. We were working very, very hard on that. We'll now, open it up to questions, and we have received a number of questions. And so I'll read some questions, and then either, I or or, or Matt or Peter or Jonathan can answer them. The first one received, you've been consistently consistently been promoting the exciting future of the company yet consistently refused to put your money where your mouth is. That is, say, not investing in the company shares in a significant manner. Why should we believe you now? Well, actually, I have put, and I believe all of us have, but I certainly have a significant portion of my net worth in in company shares, and I'm no happier than anyone else in in that.

27:17 And I've paid a very large amount of money, over $1,000,000 in in taxes to have the the opportunity to own those shares that came out of the Avalon acquisition and money that I've spent since then. That's me personally. There's little we can say, though, on in terms of, having immediate transactions and whether we do them or not, because it would be inappropriate. There are times when it isn't appropriate for us to make transactions and other times that it would be. And and we can't always disclose the reasons in either direction for that. But what I will say is there is no lack of commitment, on on our part in any way, to this business, nor disappointment at the current share price, nor confidence that, that you will see it, become much better.

28:13 But let's go to the next question, and then I'm gonna I'm gonna get Jonathan to answer it since he was, on on the board and before joining us. The board has presided over a rapid disastrous decline in share price, which continues thus far today, costing private investors tens of millions of pounds. Let me just note parenthetically that that it costs them when they sell. And if you remain confident in us, I am that's not a loss until you sell, and and I think it would be, I don't wanna go too far here, but this is we're very confident in the future. Costing private investors tens of millions of pounds and the underlying business closing in on being valueless. Nope. Not true.

28:59 Given their off state confidence sorry, just moved around. I mean, about the future, isn't it time they sacrifice their salaries for an equivalence and share options struck at a price above the recent cash raise? Jonathan, what would you say in the answer? Taking that in a in a number of different parts. I mean, just to reiterate, none none of us are happy with the the share price performance. You know, I I joined the board as executive in in July, and I I did I did put for me a considerable sum of money, and that was £20,000. And, yeah, that's significantly underwater. And, actually, I haven't looked at my shareholding recently in terms of what it's worth, but certainly losses wise, I'm well north of a couple of £100,000. So, you know, I I likewise, as a personal investor, that is very, very meaningful for me and, yeah, it's painful. But, you know, why why why why did I join? I I can see the the opportunity for the business, and I've actually seen the opportunity develop even over the past three months I've been here. And picking up from what Matt and Larry have said about, you know, some of the difficulties of making sales, I can see why that is. I think the the product with Mistral is a total game changer. And in my role as chief development officer, I've been having conversations with very, very large organizations.

30:19 And, you know, their eyes light up when you start talking about the opportunities there. So, yeah, the share price reacts at the moment in a poor market to a lack of news, and we're aware of that. And, you know, there are the the backlog of deals in which Matt's Commercial Department looks after are there. They are real, and they're working very hard to close them. It's frustrating they're not closed yet, but we've got confidence that will happen and that will that will move the share price. Yeah. I am I am aware that the sector itself is down significantly. If you look across our peers, you know, SYSTEMS, ITM, AFC, they are all down significantly. Frankly, that doesn't make me feel any better as a shareholder, and I doubt it does the same to you as well. But I have I have I have good confidence from what's going on that will recover.

31:08 You know, in terms of sacrificing our salaries, I I I can't talk to the rest of my directors. I simply couldn't afford to do that, I'm afraid. I I'm not a not a not a not a wealthy individual. This means a lot to me to succeed. And, unfortunately, I think that's just not something we could we could do. But, hopefully, that answers most of the questions. So a question for Matt. When during the last nine months you've lost a deal in a final bid stage to a competitor, what have been the reasons? Price, concern about your financial strength, concern about your ability to provide after sales service? The look. It's a it's a great question, Roger, and and and one that we spend a lot of time considering. I would say that there's there there there's no one reason.

31:54 You know, price is certainly something that comes up regularly. You you'll note that in that in that qualified group of deals, we we went from our last reported about 600 megawatt hours in the four hundreds. And the majority of that was because there were, you know, there were two or three deals that were simply too large for us to be able to consider, you know, as as as as closeable in the near term. These were opportunities in the hundreds of megawatt hours that, you know, for us to deliver in the next year with our current product, you know, at the price point that those deals needed to be at simply wasn't possible. However, those deals are exactly in the sweet spot for where Mistral will be when we bring that to market in in in in about a year from now. So, you know, definitely sort of the the the relative size the the relative combination of sort of size and price is is is one of the things at the at the, you know, the the qualified end of the pipeline that has seen deals lost.

32:53 You know? And I would say that the majority of these deals are not lost. They are they're they're pushed out into the future. You know, those those opportunities remain very real. Those customers are still very interested and have funding to do, you know, flow battery projects in the hundreds of megawatt hours. And, you know, we will we will be probably the first ones, not among the first companies able to get there. To talk briefly about the the the nearer end of the the the the pipeline. You know, if we looked at deals that were in advanced and base, majority of you know, for a deal to get into advanced, people all you know, our our our consumers are already they already know what the price is. They already know the basic specifications of the product.

33:41 So, you know, that that that hurdle has already been overcome. I would say that the majority of the time, the reasons for those deals falling out of qualification is either because of specific technical aspects of the project, you know, either the space that's available or, you know, the the the the the location where these things need to be installed or, the projects, you know, simply have just have been have been pushed out to a time horizon that is beyond what we would call them as qualified within our pipeline. One a question came in. Do you think that from Adam. Do you think the recent connection of a rival 400 megawatt hour flow battery at Balian in China points to a larger application sizing for flow battery projects going forward?

34:30 A good question. First of all, it's not really a rival product, project in that, you know, we don't currently have a sustained presence in China, and that size of battery is not an area that we're currently working on. We're thrilled to have vanadium flow batteries be proven in the marketplace because, this is establishing the viability of the technology. And we're we're convinced when we come out with MISTRASL, we will have, the most advanced flow battery on the market along multiple axes. So that's one answer. Another one is that if you look at the need for energy storage of any kind, but enter battery energy storage, let's just be clear, battery energy storage as opposed to, for example, pumped hydro or something or long term, you know, compressed air. If you look at battery energy storage requirements, the only way they really make a difference in the in today's electric grids in every jurisdiction in which we're working is to be of significant size.

35:37 The MISTROL product really was designed to start at about 50 megawatts of four hour storage. So that's a 200 megawatt battery system, and that's the starting point. So does this 400 megawatt hour battery flip point to the future? Absolutely. Do we hope it works well? Yes. We do. Are will ours work well? Yes. It will. And and that's part of what's taking time for us to develop this next generation and also something that we've learned significantly in the current projects, and we'll talk about that. I see there's another question that'll allow us to talk about that. But let's go to the next question. You mentioned, I think, that the cost of lithium ion batteries increased by 20 to 50%. What's the current difference between the initial cost of a lithium ion battery system and a VFB system of equivalent capacity, Matt?

36:30 Great. So as it stands right now, it really depends on the size of the project. You know, lithium battery arrays that are being installed in the hundreds of megawatt hours to gigawatt hours are obviously sort of the absolute lowest cost instance of those devices anywhere in the world. And and and there's a there's a gap between our pricing and theirs. Where we are selling the majority of our products though are to large medium to large scale commercial and industrial opportunities where, you know, the those are, you know, in the order of single digit to tens of megawatt hours. And the prod for projects of that scale, the gap between our pricing and lithium's pricing is is is is slim too, in some cases, at parity.

37:25 So, just to note, you know, we're looking at MISTRAL products being about 40% less expensive in cost than, the v s three product, as the moment it becomes available, and then further cost reduction possibilities from there. The the next question, what do shareholders need to know about the warranties you've given to Oxford and the Orkney says the downtime in your batteries at Oxford been greater or less than anticipated? So, a great question. This there have never been so many flow batteries on one site, as at Oxford. A 162 separate flow battery units all working together. We've learned a tremendous amount.

38:13 We, I think optimistically thought there'd be it would be easier than it's turned out to be, but that's meant has been terrifically valuable for us because we have learned how to make those batteries work well in concert. And it's a very good indicator for and a very good supporter of what we're doing with the MISTRAL product because that, again, has you know, each module in MISTRAL is many times the size of the ones in the v s three. And, therefore, a 162 MISTRAL units is much larger than than the Oxford project. And yet the control requirements, the requirements for them working is very similar, equivalent.

39:00 So so that Oxford project's been fantastic. What we we do look very carefully at at at o and m, at the operations and maintenance. We're looking to minimize that. We have a great team who works on that, and we're do we're a learning organization in terms of that. I will say that the products everyone that we've installed has been getting progressively more reliable each subsequent product and through time. So, so we're we're quite confident, that we're learning the right things. Orkney, you know, the we're is it's not, yet been operating long enough for us to have good data, but this is this is is a a good sized project that we are very confident in. We'll meet our requirements for for downtime, which will not be significant.

39:54 And and and to date, our downtime has been significantly less than that of the electrolyzer that's on-site by by a lot. But I don't wanna say more than that. That. Let's see. When you're bidding generally, you're going head to head against lithium or vanadium or other technologies. Matt, do you wanna talk about that? Sure. Yeah. It it look. It really depends on the project again as with the other question, yeah, Roger. I'd say, you know, we are, you know, bidding into projects specifically where customers are interested in the advantages that a vanadium flow battery can bring to, you know, to to their applications, to their facilities. And in that case, we are, in some instances, bidding against other flow battery companies. But I would say that generally speaking, you know, in in what I would think of as true commercial applications where our batteries are, you know, in the field, you know, operating in delivering revenue to customers in, you know, market facing applications as with, for example, is we're doing at the ENERGY SYSTEMS PLC.

40:59 It is primarily lithium who we are who we're competing against. Yeah. So, Joseph asked, who do you see as your main flow battery competitors, and how do you view them? From a flow battery perspective, you know, there's really two categories. There's vanadium flow batteries and then any other chemistry. And no other flow battery chemistry is at the point where they are deploying their products in a in a commercially viable fashion. I mean, there's ESS with their iron flow. There's some organic chemistry ones. There's some interesting various alternative chemistries. We're not seeing them, in in real projects at this point, and it's hard to say, you know, what their capabilities are. From our perspective, it was very difficult, for us to in in previous incarnations, this is before INVINITY, you know, to move from from a technology that was promising in the lab into one that is commercially viable. And that really that step was taken by RedTEA and Avalon and then, increased by INVINITY, and we're in the process of continuing that. So it's not something that that we're particularly concerned with. There are some other alternate chemistries, other than lithium. But the truth is lithium is gonna be running into significant supply shortages.

42:31 In addition to the other issues, there are gonna be significant supply shortages. And that is going to provide an enormous market for stationary energy stores supplied by alternate technologies. And so every one of them, and and the market will sort of, you know, have a tendency to segment into various durations and different capabilities. We see that the primary area of need for battery energy storage will be in the four to twelve hour range. That's where we are. We don't see other technologies that are proven than vanadium flow batteries, and we see ourselves as being the the leader in developing that next generation of technology in vanadium flow battery. So you put all those things together, that's not the issue.

43:21 The the issue is getting sales over the line, and and and and getting, and and in some ways talking addressing correctly the when is the the next question, which is when is the next funding funding raising share dilution, etcetera? Peter or Jonathan, can I turn it to, to one of you guys to answer that? Yep. No. I don't. I asked that. I mean, I think the the fair thing to say is that we have no genuinely no current intention to look to look to existing shareholders for, additional funds. We are absolutely conscious the equity markets are not present at the moment, and our share price at the moment does not in any way represent our our true value. So we have we have to say no no no intention to no current intention to do that. And, you know, I wouldn't say that if I thought I was working on something to to to achieve that.

44:14 You know, we one of my roles as chief development officer is to look at strategic partnerships, and we are having many conversations with large large entities that can join us on this journey. And if you look at our peers, a lot of them have have partnered up with others. And, you know, it would make sense to do that at some at some point in time. You know, we we do monitor where we are on a regular basis as you'd expect from a cash position, and we are cutting our cloth accordingly. So, you know, we we do not have any current intention to tap the market. Thank you. Eduardo asked, did you bid for any university project or research grant? Matt, you wanna cover that? Yeah. I mean, we we we absolutely have engaged with projects with universities.

45:04 Those have primarily been less where we are bidding for equipment delivery and more where we have decide you know, chosen chosen to contribute either services or testing or data or engineering work in kind, you know, less than sort of absolute, you know, delivery of hardware. That you know, have we have have we have we bid for some of the more, you know, more research based funding opportunities? Yeah. Absolutely. And and, you know, the the the the largest of which is the the LODES program, which I know there's another question on later in this in this in this set. But, you know, absolutely, you know, those kinds of opportunities are ones that are on our radar and that we're that we're actively chasing. I was I was presenting last week to the US Department of Energy's, energy storage grand challenge conference.

45:57 And all of The US national labs are very, interested in supporting, research that will see this technology, advanced, over the coming years. So Miguel asked, what does and I'm gonna go through a little bit more to make sure we get through all the questions. What does agreement with US vanadium that you did not get from relationship with Baozha in terms of local content? So Baozha is a Chinese company with a Malaysian footprint as well. Malaysia is useful for US importing products from Malaysia don't have the tariff implications in The US that Chinese products do. But US vanadium is the primary manufacturer of vanadium electrolyte in in The United States and therefore increases The US content significantly of our batteries. Approximately a third of our of the value or cost of of v s three battery is vanadium electrolyte.

46:57 So that immediately puts us in the position, where we're one third of is US content. And then because we're able to attribute, Canadian manufacturing and UK manufacturing for many purposes, as US content, we're able to meet, some of the thresholds for getting additional support in The US. So that's the answer, there. Your slide does seem to be presenting the INVINITY price, the one to get if a lithium alternative is in short supply. Is that a good long term approach or one that you have to take as the current product's cost? You know, there it isn't lithium is an incumbent technology. That is the one that people are correctly looking at as the as the only one, if you're buying a battery these days, that that you would consider if you don't have another consideration.

47:57 That environment that means it's creating the environment. And there are articles on what's called premature lock in where the various technologies are sometimes sort of locked in until the gap between that technology and a better technology. And and there's no question vanadium flow batteries, while they are less developed, they are inherently potentially a superior product because of safety, and because of, longevity, you know, their robustness. That combination needs to be expressed in commercial terms. So the answer is it's it is somewhat pragmatic. It it's also going to be changing the nature of of the battery energy storage system. I was talking with someone in the California Energy Commission at a senior level in the California Energy Commission, and they're saying that we anticipate enormous grid instability if we can't bring enough energy storage online.

48:55 And we're convinced that that won't be the case, that we won't be able to satisfy those needs with lithium, because it's gonna be used for mobility. So that's that's just pragmatic. Let's find an alternative that makes sense and, and provide that alternative that makes sense, and that's what we're focused on. So we see that as as being a real opportunity. Matt, do you wanna talk about what's the current thing on the timing of the LODES program when we see the award being granted, and are we in funding? What's the range of funding that LODES will grant? Absolutely. So the the the we do you know, we were awarded a little over £1,000,000 in for the phase one of the LOTEMS program, which that phase is currently in progress.

49:42 You know, we're advancing the plans for the project that would ultimately be funded in phase two. Our phase two submission well, all of phase two submissions for the program are due in before the end of this year. And then the the the notification of of war is expected, you know, within the first quarter of of of twenty twenty three. The the the range of funding, I mean, I think we've it it's it's in the public statements that, you know, the the the the figure for the phase two grant is £11,000,000, which would go towards delivering, you know, a pretty significant storage project alongside our partners. Is there a risk that orders are slowing down as people wait for the next gen product with Gomesa?

50:33 Matt, you're also in the best position to Yeah. Sure. So, look, what I would say is is no because there's a there's a there's a cleavage plan between our current product and our future product in terms of sort of the size at which they are meant to be installed. You know, while the the next generation products, you know, could is you know, could be used for the sort of the projects in the tens the low tens of megawatts, which is what we're actively considering today. Really, it's the projects in the sort of, you know, 50 megawatt hour and above range that is the target for MISTRAL. And and there's no you know, we think we there's no cannibalization of the opportunities that we are aggressively pushing to close now versus those much larger opportunities in the future.

51:20 So, Jonathan, why would we be confident in the company when we're burning cash at the rate of 50% of our market cap a year? Give me I'm not too sure that the, the two points are directly directly linked in terms of confidence and cash burn and market cap. The confidence for all the reasons we've discussed, the opportunity is very significant. The discussions we are having and continue to have are very significant. And, you know, on a on a daily basis, those volumes are are increasing. Yeah. The the the cash the cash burn and the market the market cap doesn't reflect that because of short term delivery of sales. That's something we are we are looking looking to address. And, you know, if you look if you look across at our competition, I think our our cash burn is probably significantly less than a lot of our peers. That's not to say that we think we think it's, you know, anything that meet needs needs to grow in the short term.

52:18 You know, it's something we monitor we monitor carefully. But, yeah, I think that's that's probably the the fairest answer. Okay. Question about changing the name to INVINITY battery systems might be helpful. You know, I think our awareness among the group of customers that matter as INVINITY ENERGY SYSTEMS providing batteries, it it it's quite high. We have and it's gonna get higher. So, you know, the the people where that would make a difference for the organizations is, to my mind, not the most important area. I think I think I think getting the cost of our products down, awareness in the marketplace of the name flow batteries in general up are are the are the the are the key things that we are working on.

53:09 And then, Juice asked, shouldn't you be focused on increasing production a lot by getting collateralized loans from banks? Demand will fall and so will sales, chicken or the egg. Yeah. It's a it's a interesting question. I mean, if we are selling at projects where we are unable to make much profit on them because we are not because there's not a lot because our costs are high on the current generation. Then just loans that allow us to provide those under market. And we have competitors, not flow battery competitors, but alternate lithium competitors who are significantly subsidizing their projects.

53:54 And when I mean I mean, with costs three times what they're selling them for and and doing it through loans. And and to us, that is probably a little bit of a sugar high. You know? It's one of those things where you first do it and think this is fantastic, but then it's gonna come back and bite later. And we're very proud of, you know, the fact that we don't have any long term debt, etcetera. So then the next question, when are you expecting to show a net profit? You know, we have analysts who follow us and do a very good job with that, and they're they're the ones to refer to. I can't speculate about that kind of thing appropriately in this context.

54:45 Is it fair to assume that any equity injection from strategic partnerships will be made at a significant premium to current share price? Jonathan, do you wanna answer that one? I'm not I I mean, it's it would be completely wrong for me to to judge and make make a comment on that other than to say, you know, I don't see today's share price as representative of value. It is much easier when you're having conversation with strategic investors for them to understand that. And therefore, one would hope, and my aspiration and absolute goal would be to do that above where we are now. I think we are significantly undervalued. And so any any conversation we have with investors, sorry, with strategic partners, would take that into account. But I'm not going to make any forecasts or any adjustments on that definitively.

55:33 And our last question is, do you see the Siemens Gamesa JV turning into one, where IES is paid a royal via royalty and SG manufacturing sell it? This is not just a joint development agreement. It's a joint development and commercialization agreement that we made with Siemens Gamesa. And the commercialization side was took a lot longer to negotiate and and than the development side because developing the next generation product, what it's a stage development effort, and you look at the various components and all the timing and everything else, but it's fairly straightforward. Determining how to jointly commercialize something, especially when you have the disparity in sizes that we have and yet our, you know, our entire focus is on selling vanadium flow batteries, and they have a multitude of interest. That's more challenging. What I will say is it would it is an advantageous to both sides kind of relationship, and it is true that there will be opportunities for Siemens Gamesa and what will become Siemens Energy because notice that Siemens Gamesa is being absorbed into Siemens Energy or that's been announced.

56:49 The Siemens Energy will be able to deploy vanadium flow batteries that they manufacture. However, we are the sole provider of the cell stacks, the and the the control software to high margin areas where that have a great deal of our expertise. We maintain full intellectual property for those. We have full rights to those, and they they won't be producing batteries without incorporating those just like we have the full rights to make and sell the batteries, but we will always use certain electrical components that they're contributing into the joint design with their expertise. So it's a very good relationship. It's a positive relationship.

57:34 It's a strategic relationship. It's one that we're very, very confident in, and one that I'm I'm I'm thrilled actually at the progress that we're making together, and it's not reflected in our current stock price or in the opportunities that we you know, that that are visible to the market. So it's understandable, but it's one that we're very, very confident in. So thank you all for for your attention. I'll turn it back to our Lauren, thank you very much, and thanks to the whole team for answering every single question that's come through. Of course, if any other questions do come through, the team will have the ability to review those. We publish responses where appropriate to do so on the investor meet company platform. Larry, perhaps I don't know if there's any final words. I know you just wrapped up there. If there's anything else you'd like to just say to the, attendees before we conclude and redirect them to give you some feedback.

58:26 I I think what I'd say is that, you know, we're we're very optimistic about what we're seeing in the near term in front of us. We ask for a certain amount of patients. We've been asking for patients before, so we have no right to ask for further patients, and yet I am doing so because the macro environment is positive and what we see coming forward is positive as well. So thank you all for your attention today. That's fantastic. Thank you very much all for your presentation. Ladies and gentlemen, please don't close the session. Now we automatically redirect to provide your feedback in order the team can better understand your views and expectations. This will only take a few moments to complete, and I know it's greatly valued by the company. On behalf of the management team of INVINITY ENERGY SYSTEMS PLC, we'd like to thank you for attending today's presentation. That concludes today's session. Thank you, and good afternoon to you all.