Fusion Fuel Green PLC Q1 FY2023 earnings call

• Recently began commissioning first third-party project for Exolum in Madrid; awarded grant for Italy mobility project using HEVO-Chain; signed contract with CSIC for HEVO-Solar solution installation; collaborated with Toyota Material Handling España. - First Chief Executive Officer Frederico Figueira de Chaves appointed. - Recognized first revenues, cost base reduced, invested in core assets, entered debt facility, raised funds via ATM. - Over 25 projects in short-to-mid-term pipeline; Exolum project in Spain in commissioning; HEVO-Chain to be delivered; U.S. market has strategic importance; launched holistic hydrogen mobility solution in Spain; produced 4th gen HEVO; HEVO-Chain non-containerized unit to be deployed soon; continuing to execute contracts and see project interest increase; government support for hydrogen projects growing.

In the first quarter, Fusion Fuel recognized its first third-party revenues from the technology sale of 62 HEVO-Solar units. Compared to Q4 2022, the cost base reduced with notable cuts in onerous contract provisions, inventory scrappage costs, and professional service/consulting fees, though offset by a €1.4 million charge for a production line not installed as planned. The net loss was €2.6 million. During the quarter, the company continued to invest in core assets. Trade receivables were recognized, VAT receivable balance increased by €0.6 million. Entered first debt facility of €2 million (repaid in Q2), deferred income increased by €3.1 million. Sold ordinary shares via ATM facility raising net proceeds of €2.4 million, and share-based compensation reserve increased.

• Tracking positively towards 2023 projections, especially in revenue and costs, with cost reduction plans ongoing. - 2024 outlook maintained as per 4Q '22 call, project timing may impact targets but existing information supports original ambitions. - HEVO-Chain non-containerized unit to be ready for deployment in coming weeks; 2023 plans to launch related products.

• Grant payments are unpredictable, which could delay projects. - Licensing and regulatory frameworks are major bottlenecks in some situations, with Portugal's project progress slower than hoped.

Q: Regarding the Bakersfield in the U.S. and the JV with Electus, update on latest information and commentary on the JV structure and Fusion Fuel's prospective role on Electus Energy?

A: Continue to work with Electus Energy. Details of partnership can't be disclosed yet. Project in California requires lengthy licensing process, development continues. U.S. market remains a priority for Fusion Fuel.

Q: How are we tracking against our full year 2023 guidance?

A: Tracking positively, especially in revenue and costs. Excluding one-off charge, within guidance parameters, cost reduction plans ongoing, expect to continue within guidance.

Q: Can you walk us through how we plan to fund our CapEx requirements through this year and beyond?

A: Investigating various capital areas to strengthen balance sheet, in discussions with financial institutions. Invoiced three external clients in 2023, entered hydrogen purchase agreements, will use inflows to support CapEx, and capital raising means may reduce dilution from ATM sales.

Q: Should we expect continued delays in grants being paid out? And do we expect this to lead to any liquidity challenges or project delays down the road?

A: Grant payments are unpredictable. Partnering with commercial banks to reduce timing uncertainty. If not possible, could delay projects. Company not taking investment risk of projects, third parties bear timing risk.

Q: Preliminary 2024 outlook, has that changed since our 4Q '22 call?

A: Maintains the same guidance. Project phasing may impact targets, but existing information supports original ambitions.

Q: In light of the leadership changes announced, how should we be thinking about the Americas? Should we expect the appointment of a Head of Americas reporting to Frederico anytime soon?

A: Americas remains a strategic priority. Still working with Zach and Jason on U.S. projects, considering strategic partnerships. Still early days, multiple solutions likely for American market.

Q: Do we expect the current rate of dilution both through sales of securities through the ATM and the award of options to be steady at these levels for the foreseeable future? What would it take for this pace to increase or decrease?

A: Dilution rate likely to reduce. Options and RSUs mainly for retaining/attracting employees, not expecting many more grants soon. ATM not sold in Q2 2023 to date, successful capital raising would reduce future ATM dilution.

Q: Why is the development and evolution of the green hydrogen economy taking so long? What do you see as the primary challenges and obstacles? And what changes needed in order to address that and build some momentum in the competitive space?

A: Hydrogen historically used in low-margin commoditized processes. Green hydrogen still premium. Government support starting to emerge. Regulatory, licensing, and demand environments slowly aligning. IRA and European activities driving market dynamics.

Q: Can you speak to benefits of each [HEVO-Chain solutions] and where they would be more significant?

A: HEVO's modularity allows easy maintenance. HEVO-Chain containerized has full system included, non-containerized can be tailored to size. Both competitive in their markets, containerized for full system, non-containerized for customization.

Q: What's the process for technology sales, what that sales cycle looks like? And how those contracts tend to be structured?

A: Payment is phased with upfront payment, subsequent payments at milestones, remainder paid after successful commissioning and acceptance to ease working capital for production.

Q: Efficiency of HEVO 2023, and how many kilowatt hours is required to produce a kilogram of hydrogen?

A: Stack level efficiency is around 47-something, system level is around 52 kilowatt hours per kilo, highly competitive numbers.