Fusion Fuel Green PLC Q2 FY2023 earnings call

• Awarded a €2.5 million contract to supply a 550-kilowatt solar to green hydrogen plant by CSIC. - Published inaugural ESG report. - Finalized acceptance tests at Exolum hydrogen plant and signed a long-term offtake contract. - Worked on strategic partnership with Duferco and signed agreement with Hydrogen Ventures for a €20 million project in Portugal. - Transitioning from HEVO-Solar to HEVO-Chain, resulting in inventory impairment. - Exolum project completed, with HEVO-Solar and HEVOs producing at higher rates. - Progress on own projects in Portugal, Spain, US, and Morocco, with €44 million in grants secured. - Strategic partnerships with Duferco for Italian market and others for growth. - HEVO-Chain's advantages in modularity, efficiency, and simplified licensing.

During the second quarter, Fusion Fuel Green recognized no revenue. They invoiced customers a total of €1 million, but these were deferred as performance obligations weren't satisfied. An impairment charge of €7.2 million was recorded due to inventory components not expected to be used in HEVO-Chain projects. Operating costs decreased for the second quarter, excluding non-recurring expenses, with personnel-related costs reduced. Pre-tax loss for the quarter was €12.4 million, with non-cash items accounting for approximately €8.1 million. Property, plant, and equipment increased due to new equipment for the Benavente production facility and a land lease. Inventory balance was net of the €7.2 million impairment charge.

• Revised 2023 guidance, excluding revenues from two projects due to licensing delays. - Technology sale revenues expected to remain €5 million. - Invoicing ahead of plan but revenues lagging due to technology sale agreement nature. - Reduced production capacity for 2023 by 10 megawatts. - Investment in second production line pushed to 2024. - Expect revised guidance for 2024 in Q3 investor update.

• Permitting challenges in Portugal and Spain affecting HEVO-Solar projects. - Delays in project completions impacting grant revenues. - Potential further inventory impairments if not managed properly. - Capital position challenges requiring raising funds. - Regulatory uncertainties in hydrogen project permitting and grants.

Q: How do you plan to fund the remaining €2.5 million of capital investment for the H2 Pioneers project?

A: Frederico Figueira de Chaves mentioned they are in advanced discussions with a renewable investor for the project, which is changed to HEVO-Chain and has a hydrogen purchase agreement.

Q: Are the remaining three projects still in contention for the H2 Pioneers call?

A: Frederico Figueira de Chaves said one was awarded, two let go, and one (Toledo II) resubmitted.

Q: What is the pathway to monetize approved grants and why did grants decrease?

A: Frederico Figueira de Chaves and Gavin Jones explained grants decreased due to two projects not completing by year-end, and grants will be monetized through selling projects to infrastructure investors.

Q: What are the next steps regarding product simplification and will there be further impairments?

A: Frederico Figueira de Chaves said focusing on HEVO-Chain, and Gavin Jones said no further impairments expected but can't be 100% definitive.

Q: What is the U.S. strategy and impact of three pillars regulations?

A: Frederico Figueira de Chaves said U.S. is a priority, and regulations are consistent with European delegated acts, so no meaningful hurdles for U.S. projects.

Q: Status of HEVO-Solar and permitting issues?

A: Frederico Figueira de Chaves discussed changing regulatory requirements in Portugal and Spain causing challenges for HEVO-Solar, separating hydrogen and power production to mitigate issues.

Q: When will clarity on capital position be provided?

A: Gavin Jones said in advanced discussions with capital providers, goal is to bridge to cash flow breakeven.

Q: Levelized cost of hydrogen and customer willingness to pay premium?

A: Frederico Figueira de Chaves said levelized cost is industry-leading, and there's appetite for green hydrogen at a premium.

Q: Status of IPCEI submission?

A: Frederico Figueira de Chaves said awaiting final decision, no timing indication.

Q: How are fixed costs being reduced?

A: Gavin Jones said conducting rigorous review of cost base to match reduced inflows.

Q: Status of U.S. strategy and leadership?

A: Frederico Figueira de Chaves said U.S. is a priority, engaged in partnership discussions, and intends to have coverage in America.

Q: Drivers of India project given subsidy environment?

A: Frederico Figueira de Chaves said India has substantial support, part of broader effort with BGR Energy.

Q: Contextualize €20 million revenue guidance reduction?

A: Gavin Jones and Frederico Figueira de Chaves said due to two projects not completing in 2023, timing issue rather than grants not recognized.

Q: Status of strategic partnerships?

A: Frederico Figueira de Chaves said engaged in various partnerships, including with Duferco and others for growth.