Oracle Power (LSE:ORCP) — Q2 Trading Update

0:01 Good morning, and welcome to the ORACLE POWER PLC Q2 Trading Update Investor Presentation. Throughout the quarter presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated at the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question received in the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to split the following poll. I'd now like to hand you over to Roheed Mehmon, CEO. Good morning.

0:32 Good morning, and thank you. I'm very happy to be sharing the update that we just announced last week. And as our shareholders would have seen, it is fairly detailed, comprehensive, and a lot has really gone on in the last quarter. So I'll begin by providing sort of a summary, which would essentially be synopsis of what we had published. So we you know, in continuation of our development of Block 6, we sort of moved forward with a very substantial and important understanding and relationship with POWER China for the development of a one gigawatt solar facility on our land at TALB Block 6.

1:24 And this is now work in progress and a natural priority for us. We have that lease. We've had it for a while, and that lease is primarily meant for the development for coal to power plant. However, now we've got conditional approval to also set up a solar facility in the desert, which is significant in in multiple ways. And there's a lot of interest that we have for this from financiers and also from the office of his highness, etcetera. There's a lot of interest from The UAE and so on. And Power China has come on board to be our technical partners, and they would also consider investment in due course as we proceed with the feasibility studies, etcetera. So that work is now on track.

2:15 That is for third Block 6 in parallel with our ongoing development for power plant, etcetera. All of that is separate to this. It's just that we are now utilizing this land also for solar, which, you know, obviously means that there'll be another project that we can put up in the same place.

2:38 Very, very importantly, the next thing that we accomplished was something that we had worked very hard for, and we had done all the initial work. We had come up with very good results, and that I refer to the Australian Northern Zone project. And we had established that it is more drilling sort of ready, and we had worked on all the initial programs. But as we had updated the market earlier, it was our intention to form a partnership with a domestic specialist player on ground, and we managed to achieve that through a farming agreement with Rivers Gold. And and we announced that in the last quarter, which now has completely derisked us.

3:27 Our development carries on. And at the end of the farming agreement, when the joint venture is formed, Hopefully, when the results turn out to be the way we expect them to be and we move towards a mine, ORACLE retains a share of 20%, which it can either retain or further sell out if it's so vicious depending upon the value that we expect this mine to have once it is established to be so. So so that's that's, like, one project which has gone across the line for us, and that is a sort of, also sets up a precedent, and we hope to take other projects also, forward similarly. In parallel, what we also managed to achieve in the last quarter, as I had said at the, you know, at the beginning of today's presentation, is that it has been a very, very fruitful, quarter for us. So in parallel, we signed, a very, important off take agreement with the biggest distribution company in Pakistan called K Electric.

4:36 And but more importantly, we also got the government of Synth to come on board with us. In the in the understanding, it was a four way relationship that we established with K Electric as an off taker, government of Synth as a facilitator and a potential investor, and POWER China as our technical partner and a potential investor as well. So, the four of us coming together has made this project very robust, and now we can proceed further, which we are doing so. We are now working, with the government on seeking, support for, Chinese lending. And, you know, I'll I'll pick that up once I come to the questions in some more detail if needed.

5:23 With respect to our green hydrogen project, which is moving very fast, we've carried on. We set up a steering committee, and, of course, now all that seems history because, since then, we probably have, like, two meetings a day, so a lot has been happening. But we laid the foundation of all of that in the last quarter. Again, another very significant milestone, with respect to the development of a green hydrogen project. We signed on an offtake MOU understanding with the largest petro I mean, petro petroleum company in Asia, which is called PetroChina, and their international arm based in The Middle East for the offtake of our hydrogen ammonia as well as the associated carbon credits.

6:11 And, I mean, just to clarify, they are, petroleum companies, so they basically move and buy, petroleum products globally all over the world, and they would like to be an off taker. So that would not then be for captive use, but then they would be, you know, a distribution company, and they could move up Molecule wherever they find a market for it. So this gives us an access to, I would say, regional markets for sure, markets that we have already been targeting such as Japan and Korea, China, etcetera, and all of these markets can now be accessed through PetroChina. And then lastly, we also managed to raise funds for the continued, you know, development of our green hydrogen project.

6:57 We managed to do that, And, this is for our general administrative purposes, but mostly for the development of our green hydrogen project. And that places us, you know, in a position to actually carry on working, at the speed that we are working at now. And, on another sort of, front, which is also very important as we proceed to develop our green hydrogen project and our solar project, our renewable projects in general now, that we established a relationship with GDGI, which is the global green growth institute based in Seoul, Korea, which is headed by, Bankimoon. And that institute basically, facilitates financing, I e projects projects, it collaborates.

7:42 There's a knowledge sharing element, etcetera, but primarily, it really helps us connect with potential buyers and financiers as well as investors and so on. So and then, of course, the whole technology element, which is very, very important in this piece. So all of that, this institute is, another step forward, with respect to our position, in the global, green hydrogen development space as well as the renewable energy development space. So DGGI works with governments, but also works with some projects in

8:17 certain countries where it believes that there is a potential and the prospect is worthwhile. You know, it's it's worth its attention, and it can then support its development in in multiple ways. So that also happened, in the last quarter. And then, of course, there were developments post period, but I guess we can talk about that in the next thing. But just to summarize, our topography studies finished, etcetera, and, you know, our stud our other studies are all ongoing. And as I said, I can pick those up when I look at the questions that were submitted because I'm certain some of them would be, about certain studies, etcetera, which are ongoing. So, I mean, I guess that summarizes what we had published.

9:04 And, through the questions that I pick up, I guess, I could elaborate on certain elements or certain aspects which the shareholders have shown an interest in further. Naheed, thank you very much. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab, which is situated on the top right corner of your screen. As you can see, we received a number of questions throughout today's presentation, Nahid. And if I could just ask you to read out those questions and give responses where it's appropriate to do so, I'll pick up from you at the end. Thank you very much. Yeah. So we've I mean, I have some questions in front of me, which I've just seen come through. And, so I'll start picking up on these and try and answer them, as best as I can. So the first question is in relation to the twelfth JCC, and the second part of this question is in relation to the feasibility study for green hydrogen.

9:53 So in relation to the twelfth JCC, I don't know those of you who have followed the news. Yesterday, the one of the vice prime ministers of China, China has a few vice prime ministers, One of them visited Pakistan, and I think the visit is ongoing today or it has ended. It is a two day visit, to celebrate the tenth anniversary of CPEC. So it was a big deal here. The capital of Pakistan was closed down for security reasons, so it was it was huge. Government offices were closed, etcetera, just to give you an idea of what the significance of this visit. So that happened yesterday and day before. And just prior to that, there was the JCC. The JCC was very general, very generic. It just emphasized, the continuation of CPEC and, the development of CPEC's next phase, etcetera, which is primarily going to be industry now. That is the idea. It did not really go into the details of projects, which used to be the case before. But because this is the tenth anniversary here, it was much more about the essence, the spirit of CPEC, etcetera, etcetera. And they knew that this is gonna be followed on by this very high level visit. So the JCC but the initial minutes that had we haven't seen the final minutes, but the initial minutes that I am sort of aware of, which were sort of drafted but have not been published as yet, You know, block six, all the projects which are already in CPEC continue to be in CPEC,

11:23 and that was our only interest. And I am certain that our interest has been maintained, and we have no issues with our position in CPEC. So with respect to that, we are good. The next part of the question is in relation to the green hydrogen feasibility study, which as I have said earlier, it's ongoing. I mean, I would say that it is almost done. We are now in the final stages of collaboration review discussions with our study partners, testing group. And now, of course, there is an integration to that that we are also in parallel doing our POWER SITE study. So there is some integration work that we are doing ongoing.

12:10 It's sort of I can just say to you that our chief technology officer, the group team, as well as our power study team, they are all pretty much in a huddle, and everything is coming together. And we should be able to update the market in due course, and it will not be very long. But all that work has progressed significantly in the last, I would say, few weeks. Okay. The next question is when will we have no funding need? So we are a project developer. When we develop projects, obviously, we need monies to develop the project. But one, if the Australian project is something to go by, then the the objective is to find, the right partner, the right investor whereby we can then get the returns from the initial for the initial risk that we have taken, for the initial capital that we've invested.

13:09 And then we can, I would say, to lack of another word, park the project in a profitable manner? And that's what we've done in Australia. Fingers crossed. Hopefully hopefully, that becomes a mine, and we are can we can reap the benefits from that. And similarly, this is what we would like to do with our other ongoing projects and continue to grow, so that the investors can start to benefit from a continuous share of, of an upside from different projects in our portfolio. But to say that we will not need any money, etcetera, well, if one or two or three of our projects become, you know, there's a revenue stream that comes from them through royalties, through, through sales, etcetera, then, of course, our requirement becomes less and less, but we are growing into a company which is going to get there. So there are, you know, there are certain development needs right now which can which need to be met as we continue to develop and continue to grow. But the benefit then eventually will be, the shareholders, and that's what we are aiming for.

14:17 The next question is, we know you are having regular meetings with this group, and this is about the feasibility study. I think I answered that in detail that it's pretty intense right now, and we are very, very, I would say, completely bogged down with this. This is our main, job as far as the green hydrogen project is concerned is to align all the work and studies that are ongoing, especially the Thyssen Group study.

14:44 Then the next question is, are we looking to replace the director share program and that it would boost investor confidence? Well, I think I'm gonna put that down as a top agenda item for the next for the month of August and discuss that internally with our secretary and with the other directors as well. Everyone is completely sort of in agreement with doing this. We just have to find the right way to do it. And that, as I said, was the only reason why we had to exit that because the administration costs involved in actually running a program like this are very high. And, you know, how transactions are very costly in the markets. So this is just a transaction. Now the value of the transaction is very low, but the cost of doing that transaction is very high. So we need to just work out the economics around this. And as soon as we feel that it's it's you know, the benefit is more and the cost is less, we'll jump straight into it. So to answer this question, soon, it's just a matter of finding the right way to do it.

16:00 In terms of our shareholding and whether we would like to consolidate, etcetera, I think that that is a certain I mean, we have a couple of projects in the pipeline in the third coal area specifically that I would really like to get across the line. And once that is done, I think our position as a company will be so much stronger in parallel to our green hydrogen development, which is also now moving so fast. So I think the next two or three months, we'd really be telling. And, hopefully, then our our shareholding, we would let we would be in a stronger position, and there would be a sort of sort of an automatic resetting in this manner.

16:57 Ladies and gentlemen, I I believe we have given the go ahead for the call project. So our call Ladies and gentlemen, I believe we have momentarily lost Naheed's audio. What I'll do is I'll just bring her back through momentarily. If you could just bear with us, that'd be great.

17:34 Naheed, I can see you just coming through again now. I think we did momentarily just lose you. If I could just request control and just bring your mic and your camera back on, that'd be great. Thank you. You're you're back with us now, Naheed. Please do carry on. Okay. So I don't know when you lost me, but I'll just pick up from the last question. Yeah. So if you I think it was a consolidating shares question if you could. Yeah. Yeah. Yeah. And I said that that we are trying to get a couple of other projects across the line, and then hopefully after that, we would there would be sort of a resetting of our, you know, valuations, etcetera, and we should be in a much stronger position to consider something like that. And then the next question that came through was, have CPEC given the go ahead for the CORE project? So I was answering that, that we have been in CPEC since 2014.

18:29 So we are a CPEC project. In fact, in 2016, we became a CPEC priority listed project, meaning that out of the CPEC projects in the energy group, we would be given priority when it comes to, financing. So we are a CPEC priority listed project. So there's no question about CPEC giving it a go ahead. But since the question has come up, let me explain what we are after. So being in CPEC means that when China Chinese government says, okay. Let's finance projects in Pakistan, and we are already financing projects in Pakistan. So they'll say, alright. So there are four or five groups. There's energy infrastructure, oil and gas, transport communications. These are the and now industry. These are the working groups as we call them in CPEC, and they're already a part of this. So they'll go, okay. Fine. We're gonna now allocate $10,000,000,000 or $20,000,000,000 to finance projects in Pakistan, and then we're going to look at some projects in different working groups, and we'll go to the energy group. Now out of the energy group, which projects do we see? ORACLE's already in it.

19:33 It's priority. This one wants to come in, etcetera. And we've got $10,000,000,000, so let's start to now finance or sanction the financing of one, two, three, or one the first two or the first one. What that basically means is that, obviously, they're not gonna start financing all of them at the same time. I'm talking about financing here. I'm talking about lending. This is why we are in CPEC because you can get money from their lenders, from the Chinese government acting as a lender. So what we want from them now is to finance or to lend to our coal to power project. And that is what we are trying to now get through because being in CPAC doesn't mean that they're just gonna give in give out the money every day. They also have timings. They also have, you know, it's based on a strategy. It it's based on the current priorities of both the governments and so on. So that's what we are trying to now get through, I e, get the financing sanctioned under CPEC. It's already in CPEC.

20:32 So I hope that, makes it clearer. When are the best goal going to drill and why is it not mentioned, on their web page under project? So I will be able to update the market in relation to this, I would say, very soon. And, their programs of work was approved, so I think they are now, you know, very close to the commencement and so on, but we should be able to proceed and be able to update the market, in this regard. And as far as not being on their web page, I will, talk to our, geologist and our team there to see that they should bring it up to their Rivers Gold Communications and see how this can be, amended.

21:23 Why haven't OR Oracle signed LOI, and why is it only a candidate project in the IGCEP portfolio? So candidate is good. Right? Candidate means that we are a candidate. That means we sit in a place where we would be able to proceed as soon as we have the go ahead. Now signing an agreement with K Electric basically makes any LOI from PPIB redundant, null, and void. We don't need it. And in any case, even if K Electric was not onboard, we still don't need an LOI anymore because the market structure in Pakistan has so changed. And now, the way this will be done is that it'll be done through, you know so this is in coal to power, really an auction, but in other projects, there would be another source, driven powers. They will be, like, in in renewables and some other LNG and and what I there could be there would probably be an auction. But now the whole concept of PPIB giving an LOI, etcetera, has been replaced by the fact that you are admitted into IGCEP, then there is an auction. You bid, and you can go ahead. So you don't really need the the basic simple LOI that you used to. Having said that, the LOI system was applicable till two thousand and nineteen twenty.

22:40 We applied in '20. It was still applicable, etcetera. But since then, the government introduced market reforms. Nevertheless, PPIB necessarily doesn't now need to give us anything. We've already got an agreement with K Electric. And if we get, if we proceed further, K Electric will give us an LOI, and that will suffice because financing can be done on the basis of an offtake, from K Electric. And, well, the fact that we spent a lot of money on this now has given we have four projects under development as a result. We have a mine. We have a coal to power plant. We have a coal to gasification and liquefaction possibility as well as a solar plant on this land.

23:26 So, I would say that, hopefully, as soon as one of these projects gets across the line, there would be,

23:33 more return than was originally even anticipated. So I don't think that this is a write off at all. This, in fact, is contrary to that because we've managed to build tremendous value in this one single project and and developed it in a very comprehensive manner so far. When will we need funds again? Well, as I said earlier, it's a project development company. We develop projects. We're not a fully developed company selling anything as yet, and we are trying to get into that position whereby we can benefit from sales, from revenues, from royalties, etcetera. And, hopefully, you've seen with Australia. And as that progresses, there would be probably less and less need for us to keep going to the market, to to sort of support our development, and there would be more organic development. But till such a time, we would obviously need support from our shareholders, our investors, and our supporters to continue helping us grow as a company.

24:40 But everything that we do is is visible, transparent, and we continue to grow our portfolio in the most opportunistic manner and trying to bring on projects which are which are, you know, lucrative and will and and there's a market for them. There's a question about carbon credits. And so there are two projects really, essentially, Solar, which could perhaps give us some support. But the green hydrogen project, because it fits well into the energy transition scheme, you know, of of the agreement, climate change. So we believe that is something that we would be able to count on for financing and to support the price.

25:37 And what have we done in that regard? So we as I said, we're working with PetroChina on the carbon side, and we've already started. Thyssenkrupp study will give us a lot of benchmark parameters as to what type of emissions are allowed and what type of emissions are not allowed. In parallel, we set up a certification company. Relationship is already in place. So together, we are now going to proceed to set up a mechanism for registration and verification. And we're already in talk with companies, etcetera. And as soon as something is finalized, we would be able to update the market of of a partnership with respect to registration and verification. Once that is done, then that process kicks off, and, we get into the the sort of the pipeline for carbon credit registration, which a buyer like PetroChina then benefits hugely from. By the way, they are already working on carbon credits, and their London team PetroChina's London team is already fairly advanced in in in in this work, and we are also collaborating with them. However, none of these developments are concrete enough, I e, in terms of relationship that I can announce.

26:44 But just to let you know that this is, this is right on our agenda, a very important, factor, in fact, because this will, as you very rightly point out, finance. I I mean, to use the word finance is very big and broad, but support is a very, I think, apt word to use because it is absolutely required to support the development, and that is the intention. That's what carbon credits are. And for a project like green hydrogen, which is transitioning essentially from hydrocarbons to sustainability, that requires more support, than others. So, hence, we will be tapping into it, and we're setting the grounds for that. High oxygen, is a is a byproduct, but in the big scheme of things, the revenues attached to that are very minimal, and, we cannot we can as a as a little support, but we can't place that as a priority in our, in our sort of business model to say that, okay. I'm gonna be able to get so much money from oxygen and then build my business case on that.

27:57 So we're not really counting on that. However, that will be brought into it as soon as we have finished our feasibility studies and all of that because this is a fairly simple derivative, and there isn't much, you know, much of a problem with respect to either using it or producing it, etcetera. But, you know, there is plenty of oxygen out there. Yet, there is a use, but as I said, the value is minimal, and, we can't really be counting on it, you know, beyond reason. But, I mean, yes, it's viable, but, you need to compare and because the question is about commercial viability. So we we need to see whether you know, what is the pricing right now and how much will it cost. But in any green hydrogen and green ammonia project, anywhere globally, high the oxygen derivative is not really brought into the scheme of things as a, as a revenue source primarily.

28:57 It's a secondary revenue source. But when you do feasibility studies and you build a business case, you really need to focus on your primary revenue sources. There's a question. Do you think it would be better to utilize the hydrogen for green ammonia production? Well, that's exactly what we're doing. Hydrogen, at this point in time, liquid hydrogen, yes, gaseous to some extent, but primarily our focus is on green ammonia because that's bankable in terms of transport and usability, and that's exactly what we're going to do. In fact, when you transport hydrogen, you tend to transport it as ammonia, and then it can be cracked back into hydrogen if the need arises or if it is being used for transport or if it is used for some other utility, etcetera. But, generally, it is green ammonia which is being used in industry, and that's what we are targeting as well.

29:48 Also, as I said initially, transportability is also much better for green ammonia. Alright. So there are I think these were all the questions that were sent earlier. I believe there are more questions. And if they come in, then we can pick them up, and I'll be happy to, you know, script some answers, put them together, and share them. Perfect, Nahid. Thank you very much for that. And as you said, I think you have addressed those questions you can from investors. And, of course, as you said, you will review all the questions submitted today, we'll publish those responses on the investor meet company platform. But just before redirecting investors, provide you with their feedback, which is particularly important to yourself. Naheed, could I just ask you for a few closing comments?

30:35 Yeah. Certainly. Thank you, and thank you for your time. Thank you for to everyone who joined in today. Thank you for everyone who is taking an interest in our company for their support. And and then in the end, as I I mean, as you probably can tell, we are working very hard. We continue to work very, very, very hard. And, you know, we we hope that, you know, I work hard as well as are trying to see what we should do first and fast, sort of, you know, smartly, and so that you can benefit from everything that is going on behind the scenes. So, we hope to deliver, fast, and continue delivering. And certain things you'll see sooner than later, and you've asked me about those today. So all those are, as I've said that, very close to being announced.

31:29 And, hopefully, you would be able to, you know, see the the sort of the upside from those developments as we keep proceeding. Thank you very much once again for all your support. Thank you. Naheed, thank you very much for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will only take a few moments to complete. So I'm sure it'll be greatly valued by the company. On behalf of the management team of ORACLE POWER PLC, we'd like to thank you for attending today's presentation, and good morning to you all.