Itm Power (LSE:ITM) — Final results for the year ended 30 April 2022

0:01 Good afternoon, and welcome to the ITM POWER PLC final results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, can be submitted at any time via the q and a tab situated in 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. However, the company review your questions submitted today and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll.

0:27 I'd now like to hand you over to doctor Graham Cooley, CEO, and Andy Allen, CFO. Good afternoon. Good afternoon. Thanks for the introduction, and thanks for everybody for joining the call. So this is the results presentation for the full year ending 04/30/2022. I'm Graham Cooley. I'm the CEO of ITM POWER, and I'm also joined by Andy Allen, who's our chief financial officer. So it's been a very important year for ITM POWER. Actually, it was an important year last year, and it will certainly be an important year next year as well. I'm going to talk you through very briefly the macro picture in which we're working. I'm going to talk you through the product road map, the production road map, and then I'm going to hand over to Andy to talk about finances and guidance.

1:22 And then we'll run through a quick summary at the end. So the macro picture then, a developing and very significant macro picture in the energy markets. So what you see on the right hand side is a graph of the spot market price for natural gas in The UK. It's a five year chart. What you can see is prior to the Russian invasion of the Ukraine, a steady price for natural gas is somewhere around 30 to 40p a firm. And, actually, we've entered an unprecedented period, a period of the geopoliticalization of fossil fuels, the weaponization, you might say, of fossil fuels, and the gas price is very, very significantly higher. In fact, this is unprecedented in history.

2:23 The result of this is that industrial gray hydrogen is now very expensive. And, actually, as a result of that, green hydrogen now has parity with industrial hydrogen. Not only does it have parity with industrial hydrogen, it has lower volatility. It gives you energy security, and it's also net zero. I can show you some examples of prices of 200p per firm for natural gas. You turn that into industrial hydrogen, which is used in huge volume worldwide. You're looking at $4 a kilogram, and that doesn't include the carbon price.

3:11 At 500p per therm, you're looking at an industrial hydrogen price of $10 a kilogram. And between those two values, we have been sitting for some considerable time. The significance of this, of course, is that governments around the world are looking to energy security packages and to get themselves off of Russian gas, and the market is massive. The market alone for industrial hydrogen is 70,000,000 tons per annum today. That's equivalent to 600 gigawatts of electrolysis.

3:57 So the macro picture for green hydrogen, it is very, very significant. I and people often ask me, well, what happens when natural gas prices normalize? And what you see is a futures graph for natural gas from Bloomberg. We used to be at around thirty to forty pence a firm. Their view over the next period and and out to 2027 is that natural gas will normalize to $1.40 per firm. So we will still have a gas price which is significantly higher than it used to be, and we'll still have green hydrogen parity all over Europe even after that normalization.

4:52 So our backlog our backlog is 755 megawatts. Only 10% of it, 77 megawatts, is under contract. 340 megawatts is in the final stages of negotiation, and three hundred and thirty three hundred and thirty eight megawatts is preferred supplier status. If you look at the graph and you add up under contract plus in negotiation for three periods, that's to the top of the gray bar. For three periods, it hasn't changed. And if you look at it to the top of the yellow bar, which also includes preferred supplier status for two periods, it hasn't changed.

5:38 So what's going on? What is going on is that under this very important macro picture, we have the EU, The UK, and around the world implementation of policy. Policy that means that green hydrogen can find the market that we all predict it will find. But today, those policies aren't in place. And so FIDs, that's a financial investment decisions, the final investment decisions, haven't happened. And, actually, we had a very important piece of news from the EU that the first important project of common European interest had passed and gone and was delegated then to the nation states.

6:33 So I'm expecting that those projects under negotiation will unwind pretty rapidly as this policy goes into place. But that's the reason. So we have some delays on those decisions where which are out of our control. We also have delays which are within our control, and that is new product introduction particularly at Loiner. And I'm gonna talk you through where we are with that, and I think there's incredibly positive news about that. So a mixed picture of a a very strong backlog tempered with the need for final investment decisions.

7:24 But during all of this, we really have been cracking on. We've started serial manufacture of our new product, which we're deploying at Loina. We're working very closely with Linde Engineering. Refiners been running at full load. We have first hydrogen at Loina, and I can tell you that we've now manufactured all of the stacks for Loina. We in the photograph, you can see four of the modules which are deployed at Leuna, and I'm gonna show you more photographs of the plant as we go along. We've been investing in skills. Those skills required for deployment, and we've been very careful about our underlying costs.

8:14 So and very importantly, we've modified our manufacturing strategy and plan so that we can optimize our capital deployment. And again, I'm gonna tell you more about that as we go along.

8:32 So first of all, product roadmap. So at refine, we've deployed the first generation of our two megawatt module, m e p one. It's 20 bar. It's deployed at the Rhineland Refinery with what was at the time the world's largest electrolyzer and the largest one still at a refinery. And we've demonstrated it a 100% load and some great successes in terms of technical results. And I'm gonna show you the technical results in the coming slides. In terms of Leuna then, we moved up to a cube which has a module which has a higher efficiency and a higher pressure responding to targets, and we've now achieved first hydrogen.

9:30 And that is the unit that we then integrate into the 10 megawatt module announced by Linda at their webinar on the July 7, and that's the platform that we build much larger plant. So I'm I'm I'm gonna show you some results. It's the first time we've shown results. So let me explain this chart first of all. This is performance of our electrolyzer stacks. You can see, first of all, that as you go down the diagram, you reduce the amount of energy required to make a kilogram of hydrogen kilowatt hours per kilogram. Okay. That means as you go down the diagram, you're increasing efficiency and also reducing OpEx.

10:21 And as you go across the diagram, you're reducing CapEx because you're increasing current density. So at any one time, a snapshot, what is the efficiency of your electrolyzer? It depends on the current density. So an efficiency diagram is a line. You could see for the stacks at at refine with Shell, the line is significantly lower than the FCHJU target for 2020. That was the target we were responding to. 2.2 amps per square centimeter, we needed to be below 55 kilowatt hours per kilo.

11:08 In fact, we beat the target by some considerable margin and are much more efficient. Of course, as the, as the industry develops, the targets move. And the FCHJU twenty twenty four target is at a higher current density to produce a lower CapEx, and also it is at a lower energy rating. So how have we responded to that? Well, with LOINR. LOINR is the cubes are increased efficiency and also increased pressure. You can see the green line is the line of efficiency against current density for the very first modules and stacks that we have made for Loiner.

12:03 Now if you look at the PEM average across the industry, we're also at a better efficiency than the PEM average. And you can also look at the red line, which is where we think we'll be with continuous improvement. Certainly, that's borne out with all sorts of development work that we've done. Where you want to be, of course, is in the bottom left hand side of the diagram. And if you extrapolate the line down, you'll notice that we are higher efficiency than alkaline electrolysis. And the reason for that, and I've been saying this for a long time to analysts, is that the only reason alkaline electrolyzers claim to be high efficiency is because they work at high at low current density.

13:00 Okay? If you get to high efficiency at high current density, then you're better maximizing reduction in CapEx along with reduction in OpEx. So we have world class technology in the field as evidenced by both refine and the Leuna project. If you look at the picture, you can see on the right hand side four of our modules on-site at Leuner. If you look at the right hand side, you see Linda's balance of plant. What you can see in that picture, it is those 11 rectangular boxes are 11 power supplies. Actually, the plant has 12 power supplies.

13:48 The reason there's only 11 in the picture is the other power supply has been at ITM POWER. We've been working with Linda

13:58 at on-site in at ITM with Linda engineers at ITM and the ITM engineers at LOINR. And they've had a very successful first deployments and the collaboration between the engineers on the ground is extremely good. So very pleased to be able to show you those results. The production road map, again, a very important announcement for us. We have expanded the nameplate capacity of Bessemer Park from one gigawatt nameplate to one and a half gigawatts. This is all about us sweating our asset in The UK and putting our money on the on the ground with an existing asset.

14:53 So in October 2021, we had a plan of one gigawatt per annum in The UK, building a new factory, aviation park, an additional one and a half gigawatts taking us to two and a half gigawatts in The UK, and then building an international factory taking us to five gigawatts per annum across the whole of our portfolio. We made the decision to invest in an existing asset and not to build aviation park. So what are the reasons? Well, first thing is we didn't want a construction project on our critical path and on our expansion path in a period of uncertainty and inflation.

15:43 And, actually, construction projects are going up in cost because of costs in the supply chain, and they're also many of them are delayed. We also are seeing more and more incentives and deals to build factories all over the world where those incentives, and I'm talking about very significant contributions, are not available in The UK.

16:15 So we've made a strategic decision before we spend any CapEx on aviation part to expand our existing asset to then move one gigawatt of capacity into our five gigawatt aspiration and do three and a half gigawatts internationally, maybe in more than one country, seeking incentives, demand, and government support. And I think this is very important news for ITM because it conserves capital and more highly gears the capital that's been entrusted to us by investors.

17:03 Our existing assets today, Bessemer Park has now been reworked, and nameplate capacity has expanded to 1.5 gigawatts. I'm going to show you the buildup of manufacturing capacity at Besermann Park. We've also been working hard to exploit Europa Drive, which is where we do our engineering development and where we will be developing the larger electrolyzer platform platform and doing the prototyping. That's 18,000 square feet. We also announced Kurtstrasse in Germany, which is our EU rapid response center, 17,000 square foot.

17:48 We are at the moment in the advanced stages of looking at testing sites, and we're looking for outdoor testing for FAT and validation with power supply somewhere between fifteen and twenty five megawatts. And with these four facilities, we will be developing using existing assets and buildings and taking off of our critical path construction.

18:24 In terms of remodeling Bessemer Park and getting to one and a half gigawatts per annum, our plan incremental deployment of capital, we can expand the capacity and we will expand the capacity according to the blue bars. We also have the additional optional capacity and can deploy further capital assets in the factory within eight months notice. And so what we're doing is deploying the capital incrementally responding to demand. And we're talking about a very well defined product now.

19:11 It's very well tested at Leuner. We know exactly what we will be building, and so deploying the capital with the with the manufacturing equipment is much lower risk for us. Test capacity always needs to be in advance of manufacturing capacity. It's absolutely same principle. We have test capacity that we are deploying in blue, and we have optional additional test capacity that we can bring online quickly, effectively deploying capital as demand builds.

20:01 So I'm gonna hand over now to Andy Allen, our chief financial officer, to talk you through the finances and the guidance. Andy? Thanks, Graham, and hello, everybody. So I'm gonna talk about finances, the themes of the year,

20:15 sort of a snapshot of the financials, and try and pull out some of the the features that are affecting those financials. So in terms of the themes of the year, the big ones for ITM POWER were those delivery and positioning. Graham's already shown you the two major projects that we were in the process of delivering during f y twenty two. And that's Shell refine, and we're getting through installation into the commissioning stage, and also overcoming delays with the projects. We've telegraphed that

20:46 earlier in the year, but there was through supply chain, but then also unlocking manufacturing and testing bottlenecks as we went. In terms of looking forwards and positioning the company, we've been looking at key resource both at the top of the company, but also ensuring that we have staff for delivery, and I've got some slides on that. We've been building for the future in terms of future products, following through in terms of building to WIP and and completing on contracts that are committed. And finally, we have the joint venture with for motive fuels. So in terms of the financial snapshot, on the right hand side, you see a picture of our annual report that is going to print to us very soon and will be published towards the end of September.

21:34 In terms of numbers, the sales revenue was £5,600,000 against 4,300,000 the year before. That that 5.6, we'd flag that fairly early. It it it's disappointing for us. We had hoped to recognize revenue to do with Loina as part of the FY '22 numbers, and that project is now in delivery in the current financial year. In terms of adjusted EBITDA loss, we had a loss of 39,700,000, up from 21.7. The big impact of that is gross losses, and I'll show you a bit about what those gross losses are made up. But gross losses were at 23,500,000 for the year, up against 6.5 for the year before. All of this is done with the backdrop of a strong balance sheet with a cash balance of £366,000,000 at period end. And we spent about £53,000,000 in a year, of which 25 contributed to work in progress at year end.

22:35 So in terms of revenue, I've got a series of bridges here, which will take us through the features of the p and l and the cash flow. The rep on the left hand side, the gray bars shows you the revenue from the year before, 4,300,000. On the right hand side, you've got the revenue for the year we're reporting of 5,600,000. And in the middle, we have the features that affect that. So what we have is an increase of 1,700,000 on containerized projects. A large feature of that is that we were delivering refine, recognizing that revenue on percentage of completion in f y twenty one. With refine broadly fully recognized before f y twenty two, we would expect that the modular program with Leuner would have recognized revenue going up, but we've delayed that revenue until this year. So that will appear in the most part financial year f y twenty two twenty three.

23:31 Finally, the big impact on the right hand side, 100,000 of feasibility studies and fuel sales. Those feasibility and FEED studies give us partners and also projects to develop into the future. So revenue for the full year, £5,600,000.

23:50 In terms of gross loss, it's very similar bridge. So on the left hand side, we had losses last year of 6,500,000 at a gross margin level. And this year, it's at £23,500,000. There are three main features that have contributed to that. Firstly, we've provided for first of a kind warranty. We provided £2,200,000 against that. Typically, we're providing a two year warranty on our products, and that can be extended at extra cost. And you can see that only 1% of that was utilized in the year. So we're gonna be collecting data as

24:21 we go through the next few years as to what that right warranty provision is for first of a kind plants, but we see that dropping to below 3% of sales price in the longer term. In terms of contract provisions, we've seen increased costs particularly around the refined project, increased testing, and some manufacturing activities to do in particularly around labor costs. We provided an extra £13,800,000 in the year, of which 7.4 was unwound by activity that was completed before year end. And final part of that is a lot of those costs are to do with staff. Partly, we've increased the absorption rate of our staff costs, but partly with the increased headcounts, we've been able to apply more staff to getting these projects delivered and over the line.

25:09 So gross margin of loss of 23,500,000.

25:17 In terms of EBITDA, last year, had an EBITDA loss of 21,400,000, and this year it's at 39.9. I've already spoken about the impact of the gross loss. We see some of that in in the flip side in in overheads. So by recharging more of our staff to both cost of sales and to development costs as we develop new products, you saw a reduction in staff charged to overheads. That reduction was about £5,200,000 before 1,100,000 of consultancy was added for short term solutions to projects. We've also incurred up to £4,500,000 of research costs on the p and l, and operations at Bessemer Park with a larger workforce, more actively going through the shop floor of £1,300,000.

26:05 So an EBITDA loss of of 39.9 for the year.

26:12 In terms of cash, we started the year with a £176,000,000, and the activities in the year would have taken us to 123,000,000, with the exception that we also raised 243,000,000 in q four last year in a in a fundraise. So we ended the year with £366,000,000. In terms of the activities in the year, we spoke about the losses. There were two features on the balance sheet. Firstly, building projects that are committed, contracted projects to WIP costing us £25,800,000. Against that, we've received deferred income, and also we've managed to get better payment terms with suppliers, improving our working cap position by 18,900,000. And finally, we've increased our provisions for contracts by 9,500,000 net in the period.

27:02 In terms of investing for the future, we spent 4,700,000 on our joint ventures. About 1.9 of that was with ILE, matched by Linda, developing sales channel and the larger projects. The balance was to do with the investment in Motive, not only the investment and the deal itself, but also set up with operational costs and also matched by by Vitol so that Motive can very much develop its business plan. We've also invested nearly £4,000,000 in fixed assets of Bessemer Park and a further 7,000,000 on product development for future generations of our technology.

27:38 So all told, we had a cash burn of £53,000,000 before the fundraise of 243, giving us 366,000,000 at year end. A little bit about people. So we've had three senior hires in the company. All of them were very recent. So Tim Calvert joined us about two weeks ago as commercial director. So Tim's history, his most recent role was at Ernst and Young as head of the hydrogen and water practice. Before that, he reported to the CEO of RWE. Before that, had a longer background in the power industry. So it's great to have Tim on board. Denise joins us as a nonexec director, Denise Cochrane. She has experience both on AIM and on full list companies as a CFO.

28:26 And finally, we will be welcoming Vicky Williams as COSEQ in November, and and Vicky has significant governance experience on the land market. It's not just at the top of the company that we are recruiting. We're also recruiting new early years employees as well as staff for delivery of our projects. These red jackets show that these these people are going through their induction on the shop floor and starting their journey with ITM POWER. We're delighted to welcome them and absolutely focused towards delivery of our projects. Final slide for me, some guidance for the current year and a little bit about '20 FY '24 as well. So in terms of product revenue, we're expecting that to be in a range of 23 to £28,000,000.

29:17 And that's reflecting 48 to 65 megawatts worth of revenue recognition. 48 is quite an easy number, actually. It's 24 megawatts of Leuna, 24 megawatts delivered at Yara. And on top of that, we'll be installing and commissioning containerized solutions on sites throughout the second half of this year. In terms of an adjusted EBITDA loss for the f y twenty three, we're expecting 45 to £50,000,000 of loss, and we've seen increased focus on maximizing our overheads and optimizing those so that we can get the best out of our people. In terms of capital expenditure, we'll spend between 30 and £40,000,000 in the year. 15 between 10 and £15,000,000 of that will be equipment going into Bessemer Park and reworking Bessemer Park to get to that one and a half gigawatt capacity.

30:05 The balance will be towards product development, particularly next generation platforms of the product. What we'll see in FY '24 is a reduction in the factory CapEx, but a continuation of those project development costs product development costs. Sorry. In terms of working capital, we'll be building to stock between 40 and £60,000,000 worth of product. This is gonna be particularly containerized systems for smaller applications. This is a strategy that we've articulated before about reducing lead times, and we see an opportunity to respond to a market that is demanding short lead times and representing an opportunity for ITM POWER. FY '23, we'll see that working capital being deployed into inventory and WIP.

30:53 FY '24, we'll start to see that unwind as we recognize sales against those units. So that won't be a consistent theme going forward. In terms of cash burn for FY '23, we'll see a range of a 110 to a £135,000,000 of cash flow. Greg? So great. Thanks, Andy. So just a quick summary for me. As I said right at the beginning, it's been an important year for ITM POWER working closely with Linda on the first deployments of the new modules. Look. Yeah. Key has been the macro picture, getting to cost parity, energy security plans, and the adoption of green hydrogen moving forwards rapidly with ammonia and refining.

31:45 And that has to be tempered by a need for final investment decisions as a result of long term incentives and policy. And so you see the macro picture developing in advance of the final investment decisions, and that is the key dynamic that's going on in the industry. We we've made very strong operational progress working with Linda, and we've developed a plan that ensures CapEx efficiency across a new manufacturing strategy and also in operations. So that's the results announcement.

32:30 Now there was one other announcement this morning at 07:01, and that was about my decision to stand down as the CEO of ITM POWER, to continue with ITM POWER through a transition period, and to welcome a new CEO into the company, and then adopt a new role at ITM POWER reporting to the chairman and the CEO in a strategic role. It is absolutely logical for me to do that at this stage. I've been the CEO of ITM POWER now for thirteen and a half years, and the skills that are required to take the company forward are the skills of a world class manufacturing professional who has expanded a manufacturing organization internationally.

33:30 So I very much look forward to finding the individual, introducing them to ITM, and working closely with them as we go forward. And, of course, that's all very important for me because I'm a major shareholder in ITM POWER with a very significant amount of my own personal wealth and effort, of course, in the company. So I think I'm very well aligned to making good decisions about those things with all of you shareholders. So any questions? Fantastic. Thank you very much indeed, doctor Gooley, Andy, for updating investors today. Ladies and gentlemen, please continue to submit your questions using the q and a tab situated on the right hand corner of your screen. Just while the team take a few moments to review those questions submitted already, I'd like to remind you the recording of the presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard.

34:26 I'd now like to hand you over to Simon Hudson to post questions to the ITM team where appropriate to do so. Simon, if I may just perhaps ask you to start and read out the question and even who it's from, that would be great. Thank you. Thanks, Paul. Question from Jayanti. How long will it take to recruit a new CEO? And do you have any candidates? Yeah. We we don't have any candidates right now. We will be working with a very well known and major recruitment firm. You might say, well, why have we decided to announce this before we've even started the process? And the process is beginning right now. And I think the answer is very simple. When you do a recruitment of a very significant individual, actually, you go through a process, and that process isn't necessarily good at retaining price sensitive information.

35:25 So we wanted to tell the market right from the beginning. The other thing is that if the process is one that can is visible publicly, it's likely to find the most important candidate. So for those two reasons, we elected to make the announcement as early as possible, And I'm pleased we did because I think that's the right thing to do. What skills will we be looking for? Well, I referred to them earlier. I think we'll find a a very significant individual that's gone through the journey that ITM POWER will be going through to internationalize its manufacturing business.

36:11 So an important process for for us and a process that I'm going to be fully engaged with and supportive of. Thank you. Does the five megawatt stack design achieve the maximum real world potential for PEM electrolysis technology? And and do you think there's room for further technology improvements in the future? Yeah. I mean, technology is all about continuous improvement. And you can see our move from these the stacks deploy that refine to those at Loin now that we've been very successful about beating continuous the continuously moving European targets.

37:00 And those targets have been really well thought out by the EU and by EU experts to optimize CapEx and OpEx together. And actually, I I think we've been the market leader in meeting and exceeding exceeding those targets. And and that continuous improvement journey will carry on, and it will carry on through the development of a larger stack platform and also the way that that stack platform is integrated. So in in development and continuous improvement, you never stop. You always have to stay ahead of the game. Thank you. Question from Robert.

37:47 Can you give us your thoughts on the on the date year that the company will cease burning cash? Yeah. I mean, there's considerable research notes and guidance out there. I can't put that number out into the market. I can tell you that if you have research notes, then you'll see what the analysts' opinion are of that of that transition. But, you know, being explicit on this call isn't something I'll be able to do. You you could see from guidance, though, that things are now between this year and next year in terms of the top line moving quickly. Could you elaborate a little bit more on the timeline for the introduction of the five megawatt stack platform and and when you think that will be available for purchase by customers?

38:43 Yeah. So so we learned some very considerable lessons when we introduced m e p one and now that we've introduced m e p two at Loina. And and one of the things we know now is that product introduction, validation, and working with Linde Engineering on validation is very important. And I think, you know, we will be going through a strong process of product introduction. I can tell you this that actually integrating two megawatts into the 10 megawatt cube to a certain extent for from a customer's point of view, leapfrogs the five megawatt units anyway because we are now talking about integrating with customers 10 megawatt modules based on our two megawatt units being integrated together.

39:47 So in some sense, it's looking inside the 10 megawatt module is isn't something that concerns customers. They want big building blocks, and that's what we have with the 10 megawatt unit. Thanks. What territories are under consideration for your next international gigafactories? Because so look, when you when you look at hydrogen, you make the lowest cost green hydrogen in places where you have considerable amounts of low cost, high load factor renewable power. That's how you make low cost green hydrogen. You also as the inter intervention and the amount of green of renewable power goes up, you need more and more long duration energy storage. So that's the first consideration.

40:44 Lots of high load factor renewable power. Second is you need strong policy that is has incentives and also has firm policy that's long enough duration for investors to make investments. So we need hydrogen strategies as well. And there are many places in the world where these two things are combined. So Europe, The UK are obviously now in important territories. Also, The US, Australia, The Middle East, and and additionally South America. So I I think there are many places around the world. For ITM POWER, it's all about accessing major government grant funding so that we can gear our CapEx and also looking at our the incentives that our potential customers have got in the market.

41:51 It's a combination of all of those things. What's the value of the Loinen project? Yeah. I I mean, I think we've we've already made a number of announcements about revenue recognition. Do you want to say a bit more about that with with regard to consensus and so on? Well, I mean, the the the value of the 48 megawatts of modules, which I'll repeat, is broadly in the region of £23,000,000, which is the £23,000,000 you have as the minimum for this year's expectations. The scope between the two projects changes slightly, but that's 48 megawatts of contracts.

42:39 And that's what's in the guidance slide. Okay. Thank you. You were planning to, for Aviation Park, to be fully automated. Will Bessemer Park get some full automation? Or will it be the first international factory? So we will develop the automation, firstly, with a number of selected processes, and we'll be doing that now at Bessemer Park. And we'll be progressively automating our process here. And when we build the next factory, there will be additional automation. The word fully is an interesting word. I think we if you look at a number of the interviews with Elon Elon Musk on automating Tesla factories, you'll see that he says there are some processes, and I totally agree with this and so do our engineers.

43:39 There are some process that are very appropriate to automation and others that are less appropriate. And we are working very closely with our specialists and consultants to work out how we introduce automation and with which processes. So absolutely automation is without a doubt on our roadmap and it's part of our cost reduction exercise. But let me tell you this. The the parameter that gives you the most rapid reduction in CapEx is current density. As I showed you in the diagram, as you increase the current density, long as you retain the same efficiency, I. E. The same OpEx, you reduce CapEx.

44:32 Because for a given size of electrolyzer, you can make more hydrogen. And all the components get smaller because the amount of power that you put in is across a smaller area, and it's a square function. That means it's rapid cost reduction. So when you see us talking about increasing current density, we're talking about decreasing the capital cost of the equipment. Okay. With some offshore wind taking center stage, what's the current situation with the Oyster project? Yeah. So I'm not going to disclose on this call specifically where we are with any of our projects.

45:21 I can tell you that we work very closely with on in a number of different areas. And the the the size of the projects that we're working on I mean, for instance, the largest project we work on with them that is direct coupling is in Humberside. And as you know, there are now there's now a round of bids for 250 megawatts in The UK, which was announced when the hydrogen business model was announced. And there's a second phase in The UK, a 750 megawatts, and that should be announced before the end of this year. So the the UK government are moving forwards with some significant CFD funding in The UK.

46:19 Are you fully financed to get to the five gigawatt production target? So we are being incredibly careful with our CapEx so that we will be fully funded, but we are gearing it. And we're it with government funding so that we can reduce the overall capital deployment, but still get to the five gigawatt aspiration that we had. So the answer is yes. Can you talk us through how it's going with Motive and what their plans are for rollout of stations this year and next year? Yeah. So the the the good news with Motive was the publication of the consultation of the RTFO, which was published a couple of months ago.

47:15 That one follows the low carbon hydrogen standard, which means according to that standard, there's a relaxation in additionality and correlation, something that we've all been discussing with the department for transport. I think the new secretary of state for transport, Anne Marie Trevelyan, is a great supporter of hydrogen in transport for heavy vehicles. That means for buses and trucks and trains. And we know not only secretary of state transport, but also some of the ministers and a lot of the civil servants in the department.

48:04 So, you know, concentrating on buses, trucks, and trains and those transport modes that come back to the same place to refuel, I think, is a a strategy that's now being validated by the UK government. So we have a very strong relationship with it all. We see more and more vehicle manufacturers producing heavy hydrogen vehicles. There's an announcement nearly every week about heavy vehicles that go back to the same place to refuel. So I think a very positive outlook for Motive. Did you incur any CapEx on Aviation Park?

48:49 And what happened to the land that you purchased? We didn't purchase the land. Andy, maybe you'd like to talk to that one. Yep. Certainly. As Graham said, we didn't purchase the land. We incurred design costs for one and a half gigawatt factory. So we we have plans which we can pull out again as we develop the international factory locations anew. So the no no sunk costs, and we've we've taken our first step towards that international factory in terms of design. We reviewed our manufacturing strategy very carefully with the board before we deployed any capital. We made sure that we were responding to a rapidly changing world.

49:40 We've not put a construction project on our critical path. We deployed the capital at the existing factory so that a construction project susceptible to world inflation isn't on our critical path. And I think it's a very well thought through new strategy. How do you see the relevance of ammonia in your product mix? Do you think it could reach 50% of product sales? Yes. So the market for industrial gray hydrogen made using natural gas is slightly more than 50% ammonia. Most of the rest is refining.

50:26 There is some metals treatment as well. There is actually before I move on from that point, it it's not just the 70,000,000 tons of clean industrial hydrogen made with a very carbonizing route, but also syngas for the production of methanol uses an additional 20,000,000 tons. That takes you to 90,000,000 tons. So ammonia, is it important? Yes. It is. What was it's important very important for this reason that ammonia is the world's fertilizer. And as the price of natural gas goes up, the price of industrial ammonia goes up. We have the first major ammonia project with Yara, 24 megawatts, and and and that's an important reference plant in the industry.

51:25 But let's be very clear. We are in an energy crisis that's led to a crisis in the cost of fertilizer, which will lead from this planting season on to a food crisis as well. And look, the world is getting itself into a position referred to as the triple f crisis, which is food sorry, which is fuel, fertilizer, and food. And that's all derived from the politicization from the geopolitics, weaponization of natural gas. And you can fight that with two things. One is renewable power, and the other one is green hydrogen.

52:17 Means that you have net zero molecules and net zero electrons, and that helps you with the climate crisis and also with the energy and food crisis. Just got time for a couple more questions. Do you have any thoughts on The US inflation reduction act and what it does to the potential cost of green hydrogen production? What are your plans to take advantage of it? Yeah. It's a very significant announcement. It's a significant announcement because there's a tangible incentive, $3 a kilogram. I now we we have a hydrogen strategy and we have a energy security strategy in The UK and and the same in Europe.

53:09 We we have in The UK one of the first CFDs ever to be announced for green hydrogen. It starts with 250 megawatts, moves at the end of the year to an additional 750 making a gigawatt. But there isn't a specific priced incentive per kilogram for hydrogen, whereas there is in The US, $3 a kilogram. That makes it more tangible. It makes the business modeling and the investment decision easier. And I've been talking to the UK government and across Europe about the need to be that explicit about the incentives.

53:55 So I think it was an important announcement by the Biden administration. Okay. Last last question. We're considerably over time. How much hydrogen do you think will be deployed into the metals market for a direct reduction of iron to displace blast furnaces? So I think the first reduction introduction of green hydrogen into the steel industry won't be in the blast furnace. I think you there will be incremental decarbonization, first starting with the blanket gas that's used in in steel making and steel fabrication. The next will be the use of hydrogen and oxygen combined at blast furnaces to batch the hydrogen into the fuel gases and also use the oxygen as oxygen torches, which is, of course, why you have so much oxygen supplied to the steel industry.

55:03 The direct reduction iron is absolutely essential because the steel industry is a huge emitter, and we have to have a replacement for the primary reducing agent, which is carbon, which is inside coke. And and so DRI, direct reduction iron, is the only strategy, net zero strategy that the steel industry has. So we will see its introduction, but I think it will be progressive. It will start with blanket gas. It will move to batching the hydrogen into fuel gases and then move to direct reduction iron.

55:54 Thank you very much indeed. And, Paul, back to you. Thank you very much indeed, Simon. Of course, the company review all questions submitted and we published responses where appropriate to do so on the Investor Meet company platform. Doctor. Cooley, before redirecting investors to provide you their feedback, which is particularly important to you, may I just ask you for a few closing comments, please? Yeah. So, look, thanks for coming to this investor meet presentation. I think we've made incredible progress in technology and our new modules and with working closely with Linda on the line of project. We were disappointed to meet the record revenue recognition. I think we've given very clear guidance to the market about where we'll be. And and I really look forward to working with a new CEO to take the company forwards. And I think, you know, with a with a new guy at the helm that's got the experience that the company needs, I think we have a very bright future.

56:50 So thank you for being a shareholder in ITM. That's important to me because I am as well. Fantastic. Doctor Cooley, Andy, thank you indeed for updating investors today. Can I please ask investors not to close the session? It should be automatically redirected to provide your feedback in order the management 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 ITM POWER 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. Thanks, everyone. You.