Nel ASA
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Nel ASA
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Okay, welcome everyone. Thank you for coming. Welcome everyone over the web whether you are watching this live or in the rerun. We will go through our first quarter presentation and we will also answer questions towards the end of the session, and Bjørn is sitting ready to receive your questions already now.So we will cover the following elements. We will start with the Q4 highlights and other highlights. We will as usual talk about the market development but this time we will actually focus on hydrogen buses and the fact that hydrogen buses are becoming competitive with diesel buses. Related to the segments we will go through the development there and we will finish off with a summary outlook and Q&As.In terms of our financial highlights, top line grew just over NOK 100 million to NOK 112 million, representing a tripling of revenues. Backlog remains solid at NOK 410 million and carried just over NOK 250 million in cash at the end of the first quarter.We received an additional order from Nikola under the exclusive partnership agreement. We finally secured UL certification, a project that we've been working very hard on for a long time. We got an order for a fueling station with SSAB, one of the largest steel producers in the world. And we purchased the building next to our facility in Herning which is ideal for a potential expansion scenario later. We'll talk more about all these elements during the presentation.Lastly, we had to stop work related to the H2V project. I want to make a few comments on that now because I'm not going to cover that later in the presentation. The project, first of all, has not gone away. We do remain friends with H2V but with the limited progress that was made, we had to focus our resources on near-term issues. If or when H2V is able to secure financing we are obviously ready to support them when they are ready to sign a contract. And in the meantime, we will focus our resources on other and other project with more momentum.If we then start with the income statement, top line more than tripled. Naturally, Proton contributed a lot to this development but please also note that the underlying organic growth was close to 60% in the first quarter 2018. Normally our first quarter is a bit slow but this one came off with a very good start and that is something that we are not very happy about.EBITDA continues to be negatively affected by so-called ramp-up cost and noncash cost related to options. When you grow your business you do need to invest in the future and we now have presence in many markets that do not generate revenues yet, and those costs we do carry. We also carried quite a lot of legal costs this quarter related to large strategic agreements that we worked on related to patent issues and also related to a case in the United States that we are running. So the underlying EBITDA when adjusting for this was negative NOK 5.5 million which is a development that we are quite happy with.We received around NOK 70 million worth of orders in the first quarter. Keep in mind again that this is firm purchase orders where we agree on price, volume and other terms and conditions, this is not framework agreements. That gives us a solid order backlog of NOK 410 million, slightly down from the last quarter. The orders received in Q1 is largely related to the running business that we have in United States, aftermarket sales and sales related to service the maintenance contracts. None of these orders typically is announced separately and that is something also to keep in mind for you that follows now on a regular basis.So during our market update this time we are going to focus on fuel cell electric buses and the fact that fuel cell electric buses is getting cheaper, cheaper than battery electric buses and even competing with diesel buses. But before we can dive into all the details related to that let's again look at the overall competitiveness of renewable hydrogen compared to fossil hydrogen. On the left-hand side, you have the Nel's price reduction roadmap that we also talked about last quarter. We see that we are becoming fully competitive with fossil solutions on the CapEx level. Basically, the most traditional way of producing fossil hydrogen is through steam-methane reforming, and through CapEx reduction and price reduction we are becoming competitive with that.That represents approximately 1/4 of the cost including return on capital. However, 3/4 of the cost relates to electricity and renewable hydrogen, price of renewable hydrogen obviously directly linked to electricity. So we have an updated graph on the right-hand side with the latest and greatest electricity prices for 2017, the average price of solar and the average price of wind. And as you can see, prices continue to go down. And we see that renewable hydrogen becoming more and more competitive in more and more markets around the globe. That is good news for anyone that is involved in renewable hydrogen that is interested in renewable hydrogen.Now when we now talk about fuel cell electric buses, let's start with what we define is fossil parity. And fossil parity for us is NOK 50 per kilo for hydrogen at the pump in the bus depot. And that means that is equivalent to approximately NOK 9 per liter for diesel. And NOK 9 per liter for diesel is competitive because if you look at then commercial diesel or industrial diesel, that has a price which is higher, NOK 9.6 to NOK 9.9 per liter. So NOK 50 per kilo hydrogen at the bus depot in the pump is what we define as fossil parity.We've not here added any cost related to pollution or emission of CO2 particles, NOx, et cetera. That would only benefit hydrogen, renewable hydrogen even more. And then a small fun fact, hydrogen electric bus and fuel cell vehicles actually cleans the city air. The bus sucks in air, filters that and combines the oxygen with hydrogen to make electricity, and that is actually a big motivation for cities in China, for example, having buses and cars running around in the city and sucking up and cleaning the air.A bus uses approximately 1,500 normal cubic meter of air in 1 day. That is equivalent to about 100 people what they are breathing in 1 day. So that is a unique selling point that not so many people have thought about but is actually becoming very relevant in more and more places.So how do we then reach this fossil parity, the NOK 50 per kilo to be competitive with diesel in the bus depot. Well, let's look at the business case then step-by-step throughout the value chain. We start with NOK 0.40 per kilowatt hour electricity which you can find in many locations in Norway and obviously many other locations around the globe.This will allow for hydrogen price at the factory of NOK 25 per kilo. That includes the return on capital employed which is necessary for the investor in that step. It further allows for NOK 13 per kilo for the distribution step and it allows for NOK 11 per kilo for the dispensing step, also including return on capital employed, and that brings us back to the magical number of NOK 50 per kilo in the bus depot, i.e. renewable hydrogen competitive with diesel.So let's look a bit further into how this concept works. Well, with this semi-centralized production you need a more efficient transportation solution represented on this picture here. This hydrogen transport solution can actually move 1,500 kilo of hydrogen in each run, making it very efficient. That mean that approximately -- fueling approximately 75 buses in one load. The distance should not be longer than 2.5 hours. Here time is more important than distance actually. So if you go beyond 2.5 hours it's difficult to make a return trip in 1 day. So we typically look at these semi-centralized productions in those areas. And again, this fully supports renewable hydrogen solution competitive with diesel.So if we then look at the specific example and use Oslo as a case. We have here talked to Akershus, [ and actually ] they have identified 4 locations along Glomma where we could install renewable hydrogen production. Now then you can imagine that you'd install an 8-cluster electrolyzer to produce hydrogen from hydro power. You then transport it to the bus depot outside Oslo in Rosenholm in this case. It takes you about 30 minutes to drive. And you are then able to use the hydrogen in the bus depot, the low-cost electricity -- low-cost renewable hydrogen.With this concept, you could obviously also sell or distribute hydrogen to other applications in Oslo and Akershus to cars, to heavy duty vehicles and to ferries on the Oslo Fjord. So we think that this is also a nice way that could allow for a wider distribution of hydrogen.If we look at Rosenholm as the case, you see that it's not only the electrolyzer technology that has become more efficient and cheaper it's also the associated fueling equipment. Now this picture is then from the Unibuss-Ruter bus depot at Rosenholm outside Oslo. And as you can see, the existing hydrogen production facility is on the right-hand side in -- within the black circle. You see the dispenser on the left-hand side of that structure. This installation was made back in 2012. It can handle around 8 to 10 buses. It has footprint which is quite far, quite large, about 350 square meters and the price of the hydrogen that comes out is NOK 110 per kilo. With the new solution that we now can offer you can actually get 10 times the capacity at half the price. You can fuel 150 buses, occupy only 200 square meters. And you can then sell the hydrogen at depot at NOK 50 per kilo.Space is important in many places, especially in large cities like London and Paris and Berlin and other locations like that.With this solution you can also grow your facility over time, you don't have to do the entire investment upfront, immediately. You can start with a smaller unit that can service 60 buses that only occupies, sorry 30 buses that only occupies 60 square meters. And then you can grow to the full size solution over time that can support 150 buses and occupies 200 square meters as we saw in the case on the previous page at Rosenholm.The hydrogen transport trailer then acts also as a storage at the same time. It can be dropped off by the driver and it can be quickly connected so you can fuel immediately, and the driver can then pick up the empty container. That means that you can start to fuel as immediately when you are connected. You do not need any large investment into charging infrastructure which you would've had if you went for battery electric buses.The price of the actual bus is also going down. Hydrogen electric buses are now becoming cheaper than battery electric buses and they are on the same level as diesel electric buses on the cost of ownership basis. The price has gone down massively over the last 7 years primarily due to technology developments. So now it's basically all about volume and getting the volumes up.If we look back at the first EU-funded project, that was the CHIC project, that was also the project that delivered 5 buses to Oslo. Ruter did a great job here. They were very, very early and showed that hydrogen buses can work in cities. But now you can purchase larger quantities of buses at a much lower price and with the latest targets that we have from H2Bus Europe, the 1000 bus program, we see that the price of hydrogen buses is below EUR 400,000 and the target price is EUR 380,000 per bus. Nel is also participating in and supporting this project. EUR 380,000 per bus is approximately 1/3 of where the price was back in the CHIC project.So that was enough about buses. I think it's interesting to follow this development. It's going to be relevant not only in Oslo but also in many other places around the world. So look out for that.So now let's move then into the company specific section, Nel in brief and an update on the segments. As you know Nel is becoming an increasingly global company. We now have our facilities in Norway, in Denmark, in the U.S., and we also have contract manufacturing in Hungary. We have dealers and agents in all relevant markets. We have also own employees in markets like China, in Japan, in Korea, in California in addition to obviously the factory -- the people associated with the factories.We are capable of delivering any type of electrolyzer in any size, large and small, and a range of different fueling applications. And as you know we have installed more than 3,500 units in 80 countries on the electrolyzer side and we are now working with station number 40 in 8 countries and we have started also delivering into California for Shell and others.We decided to purchase the building that we started to talk about last quarter in the Q1 presentation. It's the facility next to our existing facility at Notodden, and it's a perfect fit for our purpose. It's an open-floor building. It has good infrastructure in good condition, good utilities. It is also ideal because we can connect into our existing infrastructure, water treatment, power supply and those elements. We can also use the same material flow going into the facility and going out of the facility. This also enables us if and when we push the button to expand to do it in parallel so we don't disturb our existing operations.Now this building was obviously an opportunity that we had to take. It was for sale now and it was ideal. It does not mean that we have formally made an investment decision into the actual capacity expansion. That will be aligned with further large contracts on electrolyzers and we will return to you when we have more information to share on the topic.Yesterday we successfully started testing our new high pressure alkaline electrolyzer technology. That testing is ongoing at Notodden at the test center. It's a completely unique product. We have not seen anyone in the space of electrolysis that has anything like it. The goal is to develop an electrolyzer which is -- has twice the -- twice of the capacity and significantly smaller in terms of footprint, ideal for tying to shifting loads, tying directly to wind, tying directly to solar and therefore ideal for, for example, making large-scale renewable ammonia production. This project is supported by the Norwegian Research Council, so we receive funding from them. And so far the testing is running well and we will keep you posted on the development going forward.In the beginning of 2018, we signed an agreement with SSAB for the sale of a fueling station. This would be used to supporting their large forklifts at one of their steel production facilities. SSAB is one of the biggest steel producers in the world, Swedish company, and they are also very focused on making CO2-free steel.Today they burn coal to remove oxygen from the steel, but they could instead burn hydrogen to remove oxygen from the steel. And that is obviously a process and a technology that has a huge potential. We have talked about this as part of the power-to-X list of activities, but certainly something that you should look out for. And we will obviously continue to support SSAB if and when they want to introduce this into their production also.Fueling and Solution has moved into the new building. You know that the production people and the production crew moved into the production facility already in July last year. We started production back in August last year, but we took over the office space later, we have then remodeled and fixed that up. And now the admin and sales team are also moved into the new facility and that happened earlier in the quarter.The facility is therefore complete. It came in under or roughly at the budgeted investment level. And here you see some pictures of the new facility. You can see the path to the main entrance. You can see the reception area. And you can see the production line which I actually showed you also last quarter, the 5-step production line.We will now -- we are now planning the formal opening. I need to find a date. We want to attract also some big celebrities, so -- to cut the ribbon, so we need to kind of align the date better. But in the meantime, everyone is happy and are enjoying their new facility. And as you know, here we have the capacity to produce up to 300 fueling stations per year.In California, we have installed the first station. We'll continue to install stations for Sunline and Shell throughout the rest of this year. This is a picture of the new station and you can see the dispenser. We've here installed, as you can see, a large LCD screen and a speaker, which is different from the previous European version and that means that we can run instructional videos while the customers are fueling. So basically making life easier for the end user.We are working on a number of large RFQs and a number of larger offers in terms of fueling stations. And previously you typically had one station here one station there, many small orders. What you tend to see now is that the orders and the request for proposals and the request for quotations are getting bigger. So it takes more time and we obviously need to respond to them in a good way. But that means that the projects are also getting larger. And we hope to come back to you with more information on that topic.I'm also very happy to report that we finished our UL certification process for the U.S. station. It's basically factory-certified station, the first in the world. It comes off a standard production line. It's been a very, very tough project that we've been working on for a long time. It occupies a lot of resources. You also see a picture of the big LCD screen and the speaker and you see down in the corner you see the UL sticker that we can probably now display on our stations.And why it is important? Well, it makes life a lot easier for the end customer. They can then install and already have a preapproved product instead of basically approving each and every site that they build. So it makes life easier. And we think that our product offering is now more attractive. And it obviously generated quite a lot of attention in the market when we launched this new certification.We saw some interesting developments in Korea. The Korean government have decided to establish a special purpose company, pretty much the same as we've seen in Germany with H2 Mobility. For those of you that follow the development there, this company is designed to accelerate the rollout of the hydrogen fueling stations in Korea. And that is good news because we see this as a very promising market, but obviously the start has been a bit slow also for Nel. In this special purpose vehicle, Nel is participating directly ourselves through our joint venture together with many other major Korean and international corporations.We need to make sure now that we see concrete orders coming out of Korea and we hope to see progress there relatively soon. But as you know it is difficult to exactly know when we are -- when we'll be successful in placing or receiving orders, but I can assure you that we are working very hard on this topic.In April after the quarter closed we announced an additional order from Nikola related to demo stations. These stations consist of a standard A-485 electrolyser as well as a standard dispenser module which is tweaked slightly for heavy duty applications.We will install most likely one of the stations outside the facility that Nikola is now constructing in Arizona, Phoenix, Arizona, and then there will be one other station somewhere else so that Nikola can run their prototype trucks. They intend to launch their prototype trucks in the beginning of '19. We will start installing the station in the second half of 2018 and probably continue into 2019.So we're very happy with this order. It means that Nikola like what we are doing and they want more. And then obviously we saw the other big news last week, the big announcement from Nikola that they have received an order from Anheuser-Busch for 800 trucks. Anheuser-Busch is one of the largest breweries in the world. And they have now decided to switch all of their long-haul trucking over to Nikola trucks.And why is this important? Well, there are several good reasons for that. First of all, it is a great confirmation for Nikola that they have something unique, they are on the right track. And it obviously gives a big push in that direction. Secondly, having one massive order is -- gives more credibility than having a thousand small orders. So that is also very important.And lastly, it makes life easier both for Nikola and for us that wants to support when you basically know more about the locations. Anheuser-Busch has a certain number of breweries, have about 5 big breweries and have a distribution network and you can then start to identify these are the dedicated routes that where we need to start to build the infrastructure.I've said this before. We are working on agreements, we are not done yet, but we'll keep pushing on that. And we will return to you when we have more news on this topic.Now before we move over to the summary and outlook, I want to give you a quick update on Hyon. Hyon is our joint development together with PowerCell and Hexagon. Hyon is a one-stop-shop that delivers complete solutions and focusing primarily on marine applications. Hyon puts together leading technologies from parent company and building solutions for end customer, fueling solution, transport solution and whatever you need onboard in the ship or the vessel in terms of fuel cells and tank solutions.Hyon has now generated sales leads of around NOK 1.3 billion. We are pretty happy with the work that they are performing. Hyon can now offer onboard power generation solutions based on hydrogen with tank and fuel cell, and the footprint is smaller and the efficiency is higher than the traditional diesel generators that you see in the market.Hyon can also offer production and bunkering solution for propulsion for a whole range of different vessels and ships based on -- all based on renewable power and renewable hydrogen. Hyon is also working to certify their products with DNV and are working systematically with that. But they've also received requests from onshore applications, so developments related to storage of power and backup power for hospitals, for commercial buildings and for residential applications. And some of these projects are actually quite large. I mean, for example, one of them you store -- you have to store up to 6 tons of hydrogen on your 4 megawatt of fuel cell. So we look forward to continue to work on Hyon and support Hyon and having them as part of our strategy.So let's look briefly at this summary and outlook before we move into questions. We are focusing on creating NOK 1 billion fast growing company. We still focus on these 6 topics: technology leadership, cost leadership, being the preferred partner, having the right commercial capabilities and the commercial team, having a strong financial position, and having a global presence at least in the markets that are relevant.The outlook. Since we have recently launched our annual report, and you will actually find a few copies here if you would like to pick up after the presentation. We have decided to mirror some of the outlook elements that are in the annual report also in this Q1 presentation. We are continuing to work on synergies between our newly acquired U.S. operation and the Norwegian electrolyzer business which is now organized in one segment.We have both our -- the building in Herning. And we'll continue to work on evaluating expansions at Notodden. We continue to ramp up our facility in Denmark, tying that to the market demand. We have a good comfortable contract coverage for 2018. We continue to install stations into California for Sunline and Shell, and the installation team is -- and the service team is in place over there.We are working to secure contracts in South Korea and in Europe. We are exploring market opportunities in China and looking at alternative penetration strategies in that market. And we have an ongoing collaboration with H2Bus Europe for large-scale hydrogen bus rollout. And last but not least, we see significant tender activities for larger projects for H2Stations in various markets.So that was the presentation, the formal part of the presentation that I intended to say. And we are now ready to take some questions both here in the room and over the web. I don't know where we should start. If there is anyone here we can do that. Otherwise, we can start with taking question on the web.Bjørn, do you have anything interesting for us?
We have a lot of questions from the web. Several people are very curious about the Nikola Motors and especially the tweets of Nikola Motors. One here says, "Please let us know what you think about Nikola Motor Company's tweet last late yesterday evening that it plans for 100 hydrogen stations in 2020."
I am a big fan of Nikola. I like them a lot. We have a good dialogue. I think they are a great team. I'm so happy that someone like that came into the world of hydrogen, and it's starting to shake up things and showing the world how it is done, basically revolutionizing heavy duty trucking. So whatever they do I'm happy for what they're doing. And we will do whatever we can to support them obviously. Even if we didn't have any contact with them we will do whatever we could to support them because they are so important for what's going on in the industry of hydrogen. And now that we have an exclusive contract we will obviously do whatever we can to support them. So I love their enthusiasm, I love the fact that they are here and are pushing. So I'm not going to change anything in the way that they're doing basically.
Then there's another one here. "The demand for hydrogen is on the rise. Will Nel try to become the #1 producer and delivery of hydrogen worldwide?"
We have a strategy we are a technology supplier, so we supply them the best and the cheapest or most cost-effective technology in each of our areas. We are not in the business of producing and selling molecules. That is our customers that do that. So we do not intend to be a big supplier of hydrogen and a big distributor of hydrogen. We do get involved in the market development in some cases basically to push to market but primarily we are a technology company that should have the best available technology in the steps of the value chain that we are, that we decide to be and basically support our customers that then produce the hydrogen and sell the hydrogen or use the hydrogen. Any questions here in the room? Should we continue with the few of them from the web, Bjørn?
Yes, we can do that. "Do you think that the share price today represents a correct value of Nel, or do you honestly think it should be a lot higher at this point especially considering the Nikola agreement?"
It's a good question. I never comment on the share price, never comment on the share price because that's not my job. And to be honest it's not even my field of specialty. So I will allow the market and the analysts to have an opinion about the share price and then we can focus on what we can do and let's build a company.
And there is another one. Is there any news around the stations for first element in California?
Not as far as we know. We have -- this is a small world. So obviously we know them and we have a dialogue with them. But so far it seems that things have stopped up a bit for FirstElement. As far as I know, they have not even decided on the supplier that they are going to use for the funding that they received last year. And I can't tell you why but it seems that things are taking a bit more time for them.
Yes, we have a question here.
[Foreign Language].
[Foreign Language]. The question was whether we have an update on the SunPower development. It has been quiet for a while. We have been working on different projects, setting up renewable hydrogen production. But they need to also be tied with funding. So we want to make sure that we do attract the funding, we find a good location. We are working on combining wind and solar because if we see that we combine wind and solar we see that we get the utilization of the equipment up higher than 60%. In California, the grid price is very, very expensive. So you don't want to -- you don't even want to connect to the grid because the connection fee is very, very high. So you would like to find -- I mean the ideal scenario is you find a wind firm which has been in the market for a long time and which is now -- have basically run their power purchase agreement out. You install solar and then you build electrolyzers next to it and then you connect it directly to the wind and solar. Then you get utilization directly from the wind and solar of 65%, something like that, that is the ideal scenario. And then obviously you need to find a location which is not too far away from downtown San Francisco and downtown LA and need to sign up contracts. So that is what we are working on and it's still, you're absolutely right, there hasn't been a lot of news, but, you know, this is a long-term game, so we need to just keep focusing on these things and then eventually something will happen. Okay.
"Is the potential 250 megawatt expansion at Notodden based on single-shift operation or does it include 2 or 3 shifts?"
250 megawatt is 3-shift operation basically 24/5.
"You have a production capacity of 300 hydrogen stations per year. Since Nikola will order more than 700, are you able to ramp up capacity?"
We tie the ramp-up of the capacity to the market and the number of the contracts that we have signed. We have said very clearly that we do not intend to produce a station and put an inventory, that doesn't make sense. When it comes to Nikola, you have to keep in mind that the station except for the first 2, the commercial stations are a very, very different animal, it's a big site. So we will have to also do some reconfiguring of our equipment. We need to tailor it to this particular application. We need to fuel large volumes fast. But obviously, if we get a contract like that Herning and Notodden should be very busy for the next number of years.
So here is another a little bit more overreaching question. "What do you see as the most challenging hurdles for the hydrogen community to concur in order to secure the role of hydrogen as a vital part of our energy future?"
Bjørn, this is a question for you, I think.
I think hydrogen is the solution for scale. It's if you get to scale then the economy works well. And in fact, that is exactly what we see is happening in China now. They are not taking it small steps, they're going to full scale straightaway. Then you can more easily get to a sustainable business case. So I think the biggest hurdle that we see now considering the electricity and energy prices that we have, which are in fact at the right point, we just need to get to scale on the utilization of the technology we put out there, so I would say that is the biggest challenge.
Okay, then I think we are running out of time. I would like to thank everyone for coming, also thank you for participating over the web and look forward to seeing you again when we release our second quarter. Thank you very much.