Aker Carbon Capture ASA

OSE:ACC

Earnings Call Transcript 2022-Q4

[Operator]

Good afternoon, and welcome to the presentation for Aker Carbon Capture's results for the fourth quarter of 2022. My name is David Phillips, Head of the U.K. and Investor Relations. And I'm joined today by my colleagues, Valborg Lundegaard, our CEO; and Egil Fagerland, our CFO.

First, Valborg will take us through our main achievements and developments from the fourth quarter of this year, and we'll run through a number of topics that are important to our strategy. Then Egil will take us through our key Q4 financials, including some outlook commentary for the rest of the year. And finally, we will take your Q&A via the online system. Just as a reminder, you can post your questions into this system at any time. And at the end, we will try to work through as many of them as time allows.

So, Valborg, over to you.

[Valborg Lundegaard, Chief Executive Officer]

Thank you, David. This is the agenda for our presentation today following an active and interesting fourth quarter. We will address the highlights of the quarter, our operations and business development, the delivery models, the financial highlights, finally, a summary of 2022 and the way forward, and then we will move to Q&A. But first, before we start with the highlights from Q4, we have a short introduction to the company.

Aker Carbon Capture is a pure-play carbon capture company, with the strength of the Aker Group behind it. Our proprietary patented technology has been developed over 20 years, and is validated to close to 60,000 operating hours and verified across several applications. Aker Carbon Capture technology is cost and energy-effective, robust and flexible, meaning it can be applied to existing plants or new builds. The process uses a biodegradable mixture of water and organic amine solvents to absorb the CO2 and has a market-leading HSE profile. Since mid-2020, Aker Carbon Capture has focused on the European market, with Scandinavia, Benelux and U.K. leading the way.

We also note increased policy support and early-stage corporate activity around CCUS market in North America. We continue to prioritize four market segments where our technology has been tested and verified; cement, bio and waste-to-energy, gas-to-power, and blue hydrogen. And we're also seeing good engagement with a number of additional segments where our technology is well suited to capture CO2, such as refining and process industry.

Now, the highlights of the quarter, there are two large carbon capture projects under construction in Europe today. Aker Carbon Capture is delivering both; Brevik CCS, the world's first carbon capture plant on a cement facility where more key equipment has been delivered and installed, and Twence CCU, a modular carbon capture plant on a waste-to-energy facility where, last weekend, the columns have been installed. In addition, we are the carbon capture provider to a consortium of Aker Solutions, Siemens Energy and Altrad Babcock for two FEEDS in the U.K., both mega scale gas-to-power plants with carbon capture, this is BP Net Zero Teesside Power and SSE Keadby 3. Both developments have been short listed for Track 1 funding.

When we look at new potential work we have signed a letter of intent for the delivery of two modular Just Catch. In the U.K., we're partnering with waste-to-energy, Viridor, to deliver a pre-FEED study on the Runcorn CCS project. We are also expanding into new industries and countries by winning studies for St1 in Finland, and Röhm in Germany. The mobile test unit campaign for smelters in Rana, Norway, was officially inaugurated in January. This pilot is part of the CO2 Hub Nord, where the participants include Elkem and SMA Mineral, and have the potential to capture up to 2 million tonnes of CO2 annually.

When we look at our financial results, I am happy to share that, through the past quarter, we have seen continued revenue growth. Overall revenue for the fourth quarter was NOK 239 million. We have a robust cash position at NOK 1.1 billion. Despite the war in Ukraine and the consequent energy crisis, political and corporate efforts to fight climate change remain strong. These efforts are exactly why the level of activity at Aker Carbon Capture continues to be high.

I'm proud to announce that we have accelerated our market activity in the fourth quarter of 2022. First of all, we signed a letter of intent for the delivery of two Just Catch for a large carbon capture project with a planned capacity of 200,000 tonnes per year. The concept, with two Just Catch in parallel, demonstrates the cost and schedule effective attractiveness of this standardized and modularized product. Secondly, we became Viridor's partner on a pre-FEED study for the Runcorn CCS project. This project is short listed for U.K. Track 1 funding, and has an impressive capture capacity of 1 million tonnes CO2 per year, a clear addition to our strong U.K. market presence.

Thirdly, we are entering into new regions and industries by winning two studies, a power-to-X study for energy company St1, that the captured CO2 from Finnsementti's cement plant will be used for the first renewable synthetic methanol project in Finland. We also secured a study for the development of two carbon capture plants for Röhm, a leading German chemical manufacturer, to capture up to 500,000 tonnes per year. Given Germany's new CO2 strategy, which could be announced later this month, our collaboration with Röhm couldn't be more timely [indiscernible]. For us, bold innovation within energy optimization is a critical component to deliver on our CCUS prosperity ambitions.

Aker Carbon Capture has developed solutions for minimizing the net energy use. As a baseline, using the industry reference MEA solvent and with no heat integration, the external energy demand is about 4.1 gigajoules per tonne CO2 for capture and liquefaction. By using waste heat from the carbon capture process, Aker Carbon Capture offer solutions where the external energy demand can be reduced to 1.6 gigajoules per tonne. If excess heat is available from the emitting plant, the external energy demand can be further reduced through heat integration to 0.8 gigajoules per tonne. This significant reduction in net energy use has a major impact on the overall cost of carbon capture.

If you want to learn more about Aker Carbon Capture's solutions for energy optimization, please follow the link on our Web site to the Technology Day that was held in London, in January.

Now we move on to look at in more detail at our operation and business development. Maturing our technology and products has been an essential part of our journey. Scaling from a pilot plant to an industrial-size plant was demonstrated already in 2012, when we delivered the technology [indiscernible], in Norway, with a capacity of 80,000 tonnes of CO2 per year, 80 times the size of the mobile test unit. Through standardization and modularization we can deliver a similar size plant Just Catch of 100,000 tonnes of CO2 per year through Twence with a reduction in footprint and cost of close to 90% compared to the plant from 2012.

In addition, we are delivering a Big Catch Brevik CCS, four times the size of the Just Catch, and FEEDs for two mega scale carbon capture facilities for gas power plans in the U.K., each five times the size of the Brevik plant. Our technology is proven, scaled, and industrialized. Let's have a closer look at these projects. The Mobile Test Unit was built in 2008, and has, since then, been upgraded in accordance with our latest technology development. Aker Carbon Capture can therefore offer our customers a unique opportunity to test our technology at their site, and de-risk their project prior to full-scale CCUS implementation.

The Mobile Test Unit is now in Rana, Norway, and a test campaign for Elkem Rana and SMA Mineral Smelters has started. The pilot test is part of a larger R&D project, CO2 Hub Nord. The main goal of the project is to verify the technology on real industrial gases from smelters and other process industries in order to prepare for a full-scale plant. CO2 Hub Nord is a collaboration between Elkem, Mo Industripark, SMA Mineral, SINTEF, Alcoa, Celsa Group, Ferroglobe, Norcem, NorFraKalk, ACT Cluster, and Aker Carbon Capture. With full-scale implementation, 2 million tonne of CO2 per year can be captured from their combined emissions.

Due to the high interest of test campaigns from our customers, we have started building a second mobile test unit, which will be ready by the middle of this year. In the Netherlands, at Twence waste-to-energy plant, in Hengelo, we are the delivering solid progress. Key equipment has been delivered from our suppliers throughout the past quarter. Last weekend, all three columns have been installed, reaching a new major milestone. Aker Carbon Capture is delivering standardized Just Catch. This first-of-a-kind modular carbon capture project is on track and will start capturing 100,000 tonnes of CO2 per year already from the end of this year.

The Twence CCU will reduce CO2 emissions associated with the energy generation from their incineration of non-recyclable waste. The captured CO2 will be used as fertilizer in greenhouses; a unique example of circular economy. Also at Brevik CCS, we are making solid progress, having installed more key equipment such as the Flue Gas Fan and Direct Compact Cooler. All nine waste heat recovery units have been installed. The columns, which you can see on this great picture, have arrived Brevik one month ahead of schedule. The installation work will gradually accelerate as more equipment arrives. From next year, the plant will capture 400,000 tonnes of CO2 per year.

The Brevik CCS project is proud of launching a full CCS value chain development and the largest climate project in Norwegian industry ever. The cement industry represents 6% to 7% of the global CO2 emissions, and CCS is a key solution to decarbonize this hard-to-abate segment. Through the Brevik CCS project, we help to create local employment and establish strong partnerships with local companies and other stakeholders. This delivery model is scalable also for other carbon capture projects.

In the U.K., we are the carbon capture provider to a consortium of Aker Solutions, Siemens Energy, and Altrad Babcock for two FEEDs, both mega-scale gas-to-power plants with carbon capture, BP's Net Zero Teesside Power, and SSE's Keadby 3. Both developments strengthen energy security in the U.K., and has now been shortlisted for Track 1 funding. Keadby 3 received planning permission, the first carbon capture power station in the U.K. Each of these carbon capture facilities will have the ability to capture up to 2 million tonnes of CO2 annually. Siemens Energy is providing cutting-edge gas turbine technology for the plant, which each will have a generating capacity of around 900 megawatt.

As mentioned before, we have partnered with Viridor in a pre-FEED study for waste-to-energy of Runcorn CCS projects targeting 1 million tonnes CO2 per year. These FEEDs are crucial steps forward for Aker Carbon Capture in terms of further cementing our carbon capture business in the U.K. U.K. has an ambitious CCS strategy, and aim to capture 20 million to 30 million tonnes of CO2 per year by 2030. A CCS infrastructure fund of £1 billion has been established to reach these targets. Aker Carbon Capture's proprietary technology is based on post-combustion capture. Our technology is cost and energy efficient, robust, and flexible, and has been verified across a number of emitting industries.

There are other types of carbon capture technology in the market. But many of these address rather different markets to the industrial hard-to-abate emissions that we focus on. From a high level, we see the capture market in six categories, CO2 from fermentation, CO2 from cleaning up natural gas, various pre and post combustion approaches, and direct air capture.

When we analyze the future potential market for the carbon capture industry, we see by far the largest share of fitting into the post combustion capture category. Now there are a few industries that could fit into more than one category. But even after that, the post combustion addressable market is by some distance the largest. We have certain ambitious target to secure contract to capture 10 million tonne of CO2 by 2025, our turning 25 target.

In order to better reflect our activity status, we visualize the progress towards this target across four categories. Secured development contract, tenders for development contracts and secured FEED contracts, pre-FEED studies, and mobile test unit campaigns. And finally, prospects. Here, the 0.5 million tonne represent our already secured contract with Norcem and Twence. Then the tenders and FEEDS. Now, 8.1 million tonne, which reflects Net Zero Teesside and Keadby 3 as well as ongoing tender activity for development contracts, we have seen continued growth in pre-FEED studies and mobile test unit campaign. This category now totals 12.2 million tonne.

Now, our CFO, Egil Fagerland will take us through our delivery models and financials.

[Egil Fagerland, Chief Financial Officer]

Thank you, Valborg. We have two main product offerings; Just Catch and Big Catch. The Big Catch can handle from 400,000 tonnes of CO2 per year and up to several million tonnes per year. The standardized Just Catch comes with a modular capacity of 40,000 and 10,000 tonnes. Several Just Catch modules can installed in parallel trains and allow higher total capture capacity up to 300,000 tonnes of CO2 per year before a Big Catch module would make more sense.

The Just Catch is also available in a larger modular design for offshore gas turbines and FPSO vessels and platforms. We could deliver all of these products on EPC basis. And for Big Catch and Just Catch and the Just Catch offshore, we can also offer a license model with key equipment. And as a rough guidance, you could expect a license and key equipment contract to be in the size of around a third of a full EPC delivery, but with a higher margin potential.

Our standardized Just Catch is the key to our carbon capture as a service offering. And, as a final reminder, we do offer aftermarket services to all our clients across all our products. Since the third quarter of 2021, we have shared quarterly updates for the estimated levelized cost of the full value chain carbon capture as a service offering. These figures which are based on European delivery model have been adjusted to reflect the current market conditions. The overall range is unchanged since last quarter to range between EUR 75 and EUR 175 per tonne. However, compared to the update shared with you around this time last year, the combined range has increased by between 10% to 15%, mainly driven by market conditions and energy prices across Europe.

The CapEx for the Just Catch plant including liquefaction, temporary storage, and financing remain within an estimated range of EUR 30 to EUR 45 per tonne CO2. Since we are currently delivering Just Catch 100 unit for Twence in the Netherlands, we have recent placed purchase orders and started fabrication installation which confirms that we are delivering CapEx within this illustrated cost range.

We have also been able to validate this range in recent tenders. The OpEx for our Just Catch unit which includes solvent supply, energy, digital operation center, labor and maintenance covers a range of EUR 15 to EUR 55 per tonne driven mainly by higher long-term energy cost expectations. And energy is the single largest component of this range. And our engagement with customers through studies, test campaigns, and tenders has allowed us to identify several opportunities where it is possible to utilize excess heat or implement waste recovery systems. And as Valborg shared with you earlier in the presentation today, energy optimization through our innovative heat integration and waste heat recovery systems can significantly reduce the energy consumption and have an impact on the overall OpEx cost.

If we apply the current high energy price forecast on the opportunities with no excess heat to utilize in the process, we would see the OpEx fall in the higher range of this bar. However, we see that most of our targeted prospects fall within the middle of the EUR 15 to EUR 55 per tonne range due to available heat. Then, the highest range we see for transportation and storage. It’s ranging between EUR 30 to EUR 75 per tonne. But please note that this is what we currently see for Europe with marine transportation. In North America indications are that this range can be significantly lower due to CO2 transportation via pipelines both offshore and onshore. The most attractive projects we see are typically located in hubs close to the permanent storage site where lower cost for transportation can be applied.

Then, the EUA or the EUA or the EU EST has towards the end of 2022 been less volatile due to the recent reduced uncertainty around the political interference with the EST system. The EUA now stands at around EUR 90 per tonne. And although we have seen a short-term volatility through the last year, the long-term outlook remains sound. And analyst carbon price forecast by 2023 continue to be in the range of EUR 80 to EUR 165 per tonne. And this is supported by the IEA’s recent World Energy Outlook report which based on net zero pledges expects the carbon price at EUR 135 per tonne in 2030. These prices still compare with our range for the levelized cost of carbon capture as a service where some projects are already economically viable above EUR 75 per tonne without any help from government funding. However, it is dependent on good transportation and storage systems.

In addition to rising carbon prices going forward, we expect the EU Green Deal industrial plant and the U.S. Inflation Reduction Act to provide overall better access to funding for CCUS. Combined with implementation of EU taxonomy, the overall fundamentals foresee increased investment in CCUS is getting stronger. I will now take you through the key financial highlights of the fourth quarter before we move on to summary by Valborg and then a Q&A.

Bear in mind that all the numbers that I mentioned are in Norwegian Krone. And we will start with the income statement. The overall revenue for the fourth quarter was NOK 239 million which is up 85% compared to the same period last year. This reflects the periodic progress related to the Brevik CCS and Twence CCU projects. The FEEDS in the U.K. with BP Net Zero Teesside Power and SSE Keadby 3 and also activity on CO2 Hub Nord with the MTU campaign for Elkem.

Our reported fourth quarter EBITDA was negative NOR 47 million which is an improvement of NOR 19 million compared to the same quarter last year. The EBITDA now includes profit recognition on the Twence project which started in Q4 after placement of the site installation purchase order and good progress. Both the Twence and Brevik projects are now recognizing profit and are expected to continue to deliver positive results through 2023.

The overall EBITDA continue to be driven mainly by high sales and tender activity and R&D projects. And the efforts that we currently invest in our business will have a significant future value. And for some of them, they qualify for capitalization, which we see as fixed assets and intangible assets in our balance sheet.

In the balance sheet, our fourth quarter net current operating assets ended negative NOK 333 million, which represents a continued positive cash position on our key projects. The overall operating assets and liabilities are net capital employed, which includes fixed assets and intangible assets was negative NOK 216 million. This shows that both our short-term and our long-term business activities are funded by our net working capital position. And we continue to have a healthy cash position at NOK 1.1 billion, which could cover all our liabilities 2.6 times. The derivative financial instruments are related to projects where we hedge our currency risk. And finally, our equity remains strong at NOK 0.9 billion represented -- and this represents a 68% equity-to-asset ratio.

We started the quarter with NOK 1.373 billion in cash and cash equivalents. Through the quarter we saw an overall cash outflow of NOK 280 million. The main driver was vendor payments on our key projects, represented by a NOK 205 million net current operating asset cash outflow. The loss before tax was NOK 42 million, which is in line with EBITDA and the interest income in the quarter. And CapEx was NOK 39 million mainly related to standardization and modularization of our product portfolio. In addition, we were capitalizing the construction of our new mobile test unit. In total, cash and cash equivalents ended the quarter at NOK 1.093 billion. And these were the highlights of our historicals. Now let's have a look at the time ahead.

So, we outlined some key figures concerning our outlook. And these remain broadly in line with what we have shared with you in previous quarters. First, our backlog ended the fourth quarter at NOK 1.3 billion. And by year of execution, we see this work roughly faced at NOK 1.1 billion in 2023 and around NOK 200 million in 2024. Please note that the Letter of Intent for the two new Just Catch units, which was announced 3rd of January 2023 is not included in the backlog facing and we will only include such order intake once a firm award has been announced.

Second, our operating expenses. For the fourth quarter last year, we saw our salary and other personnel costs and other operating expenses together total around NOK 65 million. Excluding salary and personnel costs, costs belonging to our projects, we expect these costs to remain around similar levels with a significant flexibility as we move through the next six months.

And third, we continue to show a strong liquidity position ending the quarter with a net cash position of NOK 1.1 billion. Through the first-half of 2023, we expect to see cash strengthening. However, towards the end of the year, we expected to see some of this cash flow out again, as our project portfolio matures and our current favorable net working capital position is consumed. Please note that these comments do not include any assumptions for cash spend on M&A or additional investment opportunities that might arise going forward or any positive working capital effects from potential new contracts.

Now back to Valborg for a summary.

[Valborg Lundegaard, Chief Executive Officer]

Thank you, Egil. Now let me share with you a summary of 2022 and the way forward, 2022 has been the year of progress and partnership, we have made strong progress on existing projects and secured new contracts. There are two large carbon capture projects under construction in Europe today. Aker Carbon Capture is delivering both, Brevik CCS, the world's first carbon capture plant on a cement facility, and Twence CCU, a modular carbon capture plant on waste-to-energy facility.

In the U.K., we are the carbon capture provider to a consortium of Aker Solutions, Siemens Energy, and Altrad Babcock for two FEEDs, both mega-scale gas-to-power plants with carbon capture, BP Net Zero Teesside Power, and SSE Keadby 3. Viridor selected Aker Carbon Capture as partner for a pre-FEED study for the large Runcorn CCS project. All these FEEDs are crucial step forward in terms of further cementing our carbon capture business in the U.K.

We have delivered a high number of studies to our customers. And we end the year with tenders and FEEDs representing 8.1 million tonnes of CO2 per year. We deeply believe partnerships are crucial to grow the CCUS industry. We have therefore continued to mature and strengthen our existing partnerships with companies like Siemens Energy, [MANG] [Ph], and Carbfix. And we have established new partnerships with a number of CO2 transportation and storage providers to offer our customer the full CCUS value chain. In March, we entered into a unique partnership with Microsoft to pursue joint innovation and services to accelerating deployment of carbon capture. All these steps represent the successful work of our employees. And I am extremely grateful indeed for their focus and determined work throughout the year.

We have set a clear direction to position for the huge market ahead of us. We have prioritized the European market and four markets segments; cement, bio and waste-to-energy, gas-to-power, and blue hydrogen. We see opportunities emerging in North America and in other industry segments such as refining and process industry. Our proven technology is market-leading. We will further improve energy efficiency and capture rate, and increase focus on new technologies.

Through standardization, modularization, and digitalization we are expanding our cost-efficient product portfolio. Collaboration with strategic supplier is an important part of this journey. We will continue to offer EPC and license models, followed by long-term service agreements. We are also bringing the full CCUS value chain together through carbon capture as a service. To meet the expected rapid growth in the market, we will continue to build strong partnership. And finally, we are building our company through committed people thriving in a collaborative and innovative environment.

We are in a strong position to make a positive impact on our planet and contribute to creating a sustainable future. Thank you.

And after a short video, we will move to the Q&A section.

[David Phillips, Head, U.K. and Investor Relations]

[Indiscernible] and welcome to the Q&A section of our fourth quarter results presentation. I am joined with Valborg and Egil. Thank you, everyone, for already putting a good lot of questions into the system. As a reminder, if you -- you could enter more questions any time. So, please do keep them coming in. But we have a good list here already. So, let's in the interest of time, kick things off. So, first question from John de los Santos from Redburn. Aside from the projects that have been previously announced, what else has -- is behind the growth in our tenders and FEEDs, and pre-FEED pipelines, Valborg?

[Valborg Lundegaard, Chief Executive Officer]

I think the -- this large growth up to 8.1 million tonne per year in FEEDs and tenders really reflects that we are now moving closer to storage being available in Northern Europe. We see Northern Lights being in operation already from next year on. And then, there is a lot of other storage projects also coming on-stream. And with the storage projects we also see the hubs developing. And what we experienced, for instance, in the U.K. where you have Humber, and Teesside, and also a hub around HyNet, that there are a number of new emitters now looking into how they can tap into this existing infrastructure.

[David Phillips, Head, U.K. and Investor Relations]

Actually, I think it's a very important point. I think in the tenders and FEEDs growth, a big chunk, very roughly two-thirds of the additional activity we put in the chart in our fourth quarter presentation is from the U.K., so some [indiscernible].

[Valborg Lundegaard, Chief Executive Officer]

Yes, lots of activity in U.K. Yes.

[David Phillips, Head, U.K. and Investor Relations]

Absolutely. Okay, thank you. Moving on, from James Winchester, Bank of America, can you talk about the timeline for U.K. Track 1 financing? It looks like it's getting pushback. What's the risk if this keeps happening? And in the worst case scenario, how would this affect our 2025 target if the U.K. funding didn't go through?

[Valborg Lundegaard, Chief Executive Officer]

Well, we are now in the last phase of our FEED contracts and are ready to move forward into more tendering phase. When the actual final investment decision will be made is really up to the customer. But not only the customer, but also, here, we're talking about the new Ministry of Energy Security and Net Zero, which I believe it's being [indiscernible]. And there is a process ongoing. And -- but we are ready from our side.

[David Phillips, Head, U.K. and Investor Relations]

Yes, and actually -- and just worth -- I mean, this is something that you have to keep your eye on by looking at lots of government Web sites. But as a reminder, that this is currently in the House of Lords, and very soon, in the next one or two months, going into the House of Commons. And then the expectation is it comes out during the summer. And then the next steps happen. But really, this very much is in control from the government, and from the new ministry, and also from our clients as well, our customers. But the most recent comments are still very supportive, it's very clear that CCS is front and center in terms of the U.K. net zero policy.

And Egil, maybe just in terms of the scenario, if in a worst case scenario, how would we think about this 10 in '25, if the U.K. didn't deliver?

[Egil Fagerland, Chief Financial Officer]

I think, given the opportunity pipeline that we are showing right now, there are coming more and more backups to those projects as well. And as you see, the tendering and FEED pipeline is growing. So, I think we have a decent group of other prospects and opportunities that can backfill.

[David Phillips, Head, U.K. and Investor Relations]

Absolutely. And, of course, North America, which we have lots of, I'm sure. I've already seen it mentioned many times in some questions down the list here. So, I'm sure we'll come on to that in a moment as well. Just one, back to the U.K. again, if U.K. does go through in the first quarter of next year, given our work on pre-FEED with Runcorn, does it give us enough time to get the engineering work done by that timeframe?

[Egil Fagerland, Chief Financial Officer]

I think, in general, like Valborg said here, we are now nearing the completion of our FEEDs, and we are ready to go. And we follow the client pipeline when projects come along, and deliver on that.

[David Phillips, Head, U.K. and Investor Relations]

Absolutely. One working capital question which, again, I think is a very popular one today. Can we give some color on the order of magnitude for working capital outflow in 2023?

[Egil Fagerland, Chief Financial Officer]

So, what we're seeing now is that, through the next couple of quarters, we will see a strengthening of the cash balance in the company related to inflow. But towards the end of the year, last six months of the year, we will see an outflow. And that will be in the order of magnitude of the net working capital position that we have plus-minus new activities coming in, and so forth, about NOK 300 million to NOK 400 million is what we see.

[David Phillips, Head, U.K. and Investor Relations]

Yes, absolutely. And the last one, as James does say testing is luck. 2025, if we achieve 10 million tonnes, target EBIT margin? I think we all know the answer to this one already, but --

[Egil Fagerland, Chief Financial Officer]

Yes, as we've shared the earlier quarters, we are not going to start guiding on this, on our margins just yet. And it's too early to say, and too many moving pieces in terms of the new markets, new opportunities, and where this will go.

[David Phillips, Head, U.K. and Investor Relations]

Absolutely. Moving on, [Christopher Balkin] [Ph], a very short question, our forecast for revenues and net profit for 2023?

[Egil Fagerland, Chief Financial Officer]

So, when looking into 2023, what we can say is that we provide our backlog-facing and we are facing NOK 1.1 billion worth of work in 2023. And additional new projects could contribute to that. But the secured work we have is NOK 1.1 billion expected this year.

[David Phillips, Head, U.K. and Investor Relations]

Yes, absolutely. And we don't [indiscernible] any further down the P&L in terms of any guiding or any comments whatsoever.

So, moving on, [Ton Hogan] [Ph], last four quarters, it's very difficult to work out any breakeven turnover for the company. What can we say about our average gross margin for Just Catch, and Big Catch, and so on? And when do we think we might have the first FEED on a Just Catch offshore? Maybe you could take the gross margin one first.

[Egil Fagerland, Chief Financial Officer]

I think, again I have to say, we don't guide on these margins; it's too early to say, we have said before and we can say again that for some of these projects, it's tickets to enter the market now. However, we do see a favorable effect from delivering a standardized solution like the Just Catch. And when it comes to, when these will be breakeven, we don't guide on that.

[David Phillips, Head, U.K. and Investor Relations]

Absolutely. And of course, from a company level, the breakeven also reflects our own position in terms of personnel cost, how much we grow ahead of growing market, and so on. So, it's yes, a lot of moving parts. Is it easy way to answer that, Just Catch Offshore?

[Valborg Lundegaard, Chief Executive Officer]

Yes, we've done a number of studies for Just Catch Offshore in various regions. And now DNV has qualified the product. So, we are really ready to move forward. And with the growth that we see within the oil and gas industry, these days, I'm very optimistic that we soon will see a FEED for Just Catch Offshore.

[David Phillips, Head, U.K. and Investor Relations]

Absolutely. Thank you. And moving on, Nikhil Gupta from Citigroup, so the first question is, around the U.K., again, we mentioned this already. There's a lot of known to unknowns, I think there's a phrase goes in the U.K. policy radar screen. But as we talked about, the main bill is soon moving into the House of Commons in the U.K. And then the expectation is that it will during the summer, it will appear, and then a little bit of a pass through the system, and then the next steps come. But further than that, it's very hard to say, and I think it will be unfair of us to speculate too much at the moment. And a financial question ago about salary and personnel costs did decrease in Q4. Is this phasing linked to construction or something else?

[Egil Fagerland, Chief Financial Officer]

Yes, I think you have to look at both the salary and personnel cost line and material goods and service line a little bit in together. So, when we report these lines, the personnel cost related both due to our overhead personnel, but also our projects is split out on the personnel line. So, right now, we have projects in a heavy procurement phase and also some of them into installation phase you've seen in the presentation today, pictures of Twence lifting up columns. So, there are effects of that impacting these numbers now that we have a more procurement and construction heavy phase.

[David Phillips, Head, U.K. and Investor Relations]

Absolutely. Okay. So, moving onto Victoria from RBC, she has questions around the LOIs, as we talked about the two Just Catch, all these are awaiting EU funding commitments?

[Valborg Lundegaard, Chief Executive Officer]

Well, we cannot go in detail into this Letter of Intent. But we are really pleased that we have a customer who's decided to select our Just Catch concept, we've seen very good progress with the [technical difficulty] we now can demonstrate that we can deliver within less than two years. So, hopefully, we will see final investment decision soon and based on the experiments [technical difficulty], we are ready to start.

[David Phillips, Head, U.K. and Investor Relations]

Absolutely. And purely theoretically, if you have a project like this reached FID in second quarter, [technical difficulty] or when will we expect to be able to recognize revenue and so on through the year?

[Egil Fagerland, Chief Financial Officer]

So, when we get order of Just Catch, we would start activity straightaway. So, if you let's say we get that in second quarter, we would start recognizing revenues straight away. In terms of profit recognition, we are looking at the Twence project we've spent the year now before we started recognizing profit, we are going to continue to be prudent on that. So, in terms of how that project would look, you could expect around the same timing as the funds with some flexibility. So, between six months to a year, it could be expected.

[David Phillips, Head, U.K. and Investor Relations]

Yes, that's very clear. And just going back to the working capital and Just Catch question again, I know we should cover this a little bit before but it's worth pointing out because I know it's important in modeling us, given our cash position, given cash flows in the year-end, how much do you think will be absorbed by working capital and progress in the first-half of the year and so on?

[Egil Fagerland, Chief Financial Officer]

Yes, actually some of the current working capital will be absorbed but we will build-up new negative work capital position and the cash position will strengthen through the three to six next months or the first six months of this year. The last half of this year, we will have outflows in line with what you see as negative working capital today.

[David Phillips, Head, U.K. and Investor Relations]

Yes, absolutely. Last one, CapEx and when we got on CapEx, but what can you say about the spend in 2023?

[Egil Fagerland, Chief Financial Officer]

So, CapEx is heavily dependent on what the initiatives we also start during this period. And Valborg mentioned in our summary that we focus on developing our own technology, but also look into new technologies. If you put all the new stuff aside, we will continue working on our new mobile test unit, then you can expect that the fixed asset line continue roughly about the same level that you've seen in Q3, Q4 on average, through the next six to nine months. Then in terms of intangible assets, you can expect roughly the same levels for underlying improvement activities for current technology.

[David Phillips, Head, U.K. and Investor Relations]

Okay, great. And moving onto the U.S. market, what's our opportunity set and how do we hope to participate in the U.S.?

[Valborg Lundegaard, Chief Executive Officer]

Well, first, I really like to announce that we have our first employee in the U.S. this week, actually, based in Houston, and we are really pleased that we now can have an establishment, because this will be so important for us being close to our customers, and partners, those that are already strong in the U.S. like Microsoft and Siemens Energy, but also establishing new partnerships. So, we see now, after the Inflation Reduction Act, being signed back in August, the market in North America is really now ready to accelerate. And we want to be part of that acceleration. Having said that, Europe is still important, and as a response to the RRA, we've also seen EU coming up with, for instance, more flexibility regarding national funding. So, we also expect the European market to be important for us going forward.

[David Phillips, Head, U.K. and Investor Relations]

Absolutely. Okay, moving on. Next question is from [Manny Brown] [Ph]. This actually looks more like a technical question more on the commercial side. Mainly, what I recommend was, if you look on our Web site, you can get my direct email in the Investor Relations section. So, just drop me an email and I'll link you up with the right people. I think that's the best way to take that one. So, Egil, what is included in other operating expenses? And are some of these costs linked to NORCEM and Twence?

[Egil Fagerland, Chief Financial Officer]

The other operating expenses is -- consists of various third-party costs mainly, but mostly not related to our projects and very limited to Brevik and Twence.

[David Phillips, Head, U.K. and Investor Relations]

Yes, okay. That's very clear. Jumping on to James Carmichael from Berenberg, again, the very public question about the U.K., I think we've covered this one a few times now. But do feel free to chase me afterwards as well for any more details. But yes again, known, unknown. Capture as a Service, are we any closer to signing a contract for Carbon Capture as a Service?

[Egil Fagerland, Chief Financial Officer]

Yes, it's the Carbon Capture as a Service offering has been very popular when we discuss with clients. There are two elements that really drive the selection the way we see it right now. Number one, is there a permanent storage available nearby where the emitter sits and right now, we have Northern Lights coming up first, and then others in the U.K., and you have Denmark and Netherlands coming a little bit after. So, until we see a clear line of sight to when these sites will be operational, it has been a bit challenging to commit for the whole value chain offering for the emitters but also for us, we can't offer a transportation and service until the transportation and service partners are fully there. The other element is the funding mechanisms around the different countries. Some of them focus more on CapEx support. And that would favor a slightly different business model.

[David Phillips, Head, U.K. and Investor Relations]

Absolutely very clear. And Valborg, Denmark, do we expect to take part in the next round of activity there?

[Valborg Lundegaard, Chief Executive Officer]

Well, Denmark is a very exciting market, and you know already since we established the company, we have said in Scandinavia is really a core market to us. So, of course, with all the activities that were generated in Denmark among emitters, by offering this funding we have focused on this market. So, we are looking forward to see the results, the outcome from the DEA and when they will award but of course everything is open until we see that.

[David Phillips, Head, U.K. and Investor Relations]

Absolutely. And last one, I think the very short answer is can you give any details on margins and profit from Twence and Brevik, and the answer is no, we don't -- we haven't --

[Egil Fagerland, Chief Financial Officer]

And even in the future, we will not provide on specific project margins.

[David Phillips, Head, U.K. and Investor Relations]

No, exactly. It's very sensitive information indeed.

Okay, so moving on, from [indiscernible]. And again, this again is the fourth version of the U.K. question, so, is the fourth answer. And also looking at working capital, we're looking at also working capital in the quarter, and the changes linking to the cash position. How should we think about this working capital over the coming quarters? I think you covered that in some detail already, so --

[Egil Fagerland, Chief Financial Officer]

And the answer is that our cash position will strengthen somewhat now going forward in the next three to six months.

[David Phillips, Head, U.K. and Investor Relations]

Yes, absolutely. A question about getting the presentation files from today's presentation. On our Web site, looking at under Investor Relations, that's -- that should be -- make sure that you open up, once you go on to our homepage as well; should be easy to find.

[Egil Fagerland, Chief Financial Officer]

The front page --

[David Phillips, Head, U.K. and Investor Relations]

Yes, exactly. Okay, [indiscernible], is it fair to assume some growth in capitalized development expenses from the Q3 and Q4 that were going forward when you think about this year?

[Egil Fagerland, Chief Financial Officer]

Yes, when you look at our strategy I think it's fair to assume that, over time, our capitalized development cost, both for internal asset and fixed assets could increase. But I'm not going to guide specifically on when. This depends on the actual investment decisions that we make on a running basis.

[David Phillips, Head, U.K. and Investor Relations]

Yes, that's fine. Okay. Moving on, which -- we talked about carbon capture as a service. On the financing angle of carbon capture as a service, can we give any update in terms of that -- the financing progress is moving now?

[Egil Fagerland, Chief Financial Officer]

Yes, I can share that we have been working quite broadly on this topic. And we have a large amount of interest. We've developed the models, and explored models together with several different potential partners. But also, given that there are -- we have not moved any specific prospect into that commercialization phase and actually going into a real contract, we have not moved forward with one specific financial partner yet either.

[David Phillips, Head, U.K. and Investor Relations]

Yes, fine. Okay. We're almost at the last question actually. I would say for everyone, one quick reminder, if you do have any last questions, please do post them shortly because once we finish the last question we'll be running off to have our tea break. But one from Elliott Jones in Nordea, we talked a little bit about capture as a service already, so we're getting quite a few questions on this, which is great. What can we say about when we might see the first real business coming through?

[Egil Fagerland, Chief Financial Officer]

I think also, that is early to guide. We do see several interesting opportunities that are below that current EUR 80 to EUR 90 per tonne business case threshold. So, those would mainly depend on the transportation and storage providers being ready, and also the underlying business case being ready with funding and whatever they need. So, we are fairly optimistic about this, but it will tie up to the timing of the storage ops.

[David Phillips, Head, U.K. and Investor Relations]

Yes. And is this anything we might see all in the -- in North America as well, in due course?

[Egil Fagerland, Chief Financial Officer]

I do think, in North America, it's a slightly different picture. The big hubs in North America, they will have a requirement to make the whole hub go breakeven below $85 which is the new support level. And that typically will require a big -- one or two big anchor emitters and the whole value chain put together. So, I think we will see something similar to what we are offering with our Just Catch, but maybe even a bigger scale with Big Catch and Just Catch around. So, it's going to be a very interesting development, but it's too early to be specific on how they will look in the U.S.

[David Phillips, Head, U.K. and Investor Relations]

Yes, absolutely, great. And okay, that is the last question on the system. So, I think [it really went] [Ph] to all of us to say, thank you so much for spending some time listening to our 2022 story this afternoon. I hope you enjoyed the question and answers as well. And as always, please do reach out, and get in contact if you have any more questions afterwards. As I mentioned before, my details, use me as a point of contact initially, on the Web site. So, please link up then. But thank you again. And we look forward to speaking to you in a few months' time, at the very, very least for our Q1 results. Thank you.

[Egil Fagerland, Chief Financial Officer]

Thank you.