Nel ASA
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Nel ASA
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Okay then. I guess, we will start. Welcome, everyone, to this Q3 presentation for Nel. Thank you very much for joining us. I hope you had the chance to see my brand-new hydrogen car that was parked just outside the main entrance. Welcome, everyone, also that is following this over the Web. And as normal, you will be able to ask questions after the formal presentation, both here in the room and over the Web. So let's get started. We will go through the highlights of the third quarter. We will go through the developments in the various segments. We've had a number of activities this quarter, which we will talk more about. And then we have decided to highlight 2 particular projects which we feel is of -- could be of particular interest this time. We want to talk a bit more about the EUR 40 million funding opportunity that we are pursuing together with H2Bus partnership. And we also want to talk a bit more about the train project that we are doing together with the consortium towards Alstom. And then, obviously, we will finish off with the summary and questions. But let's start off with the highlights. The top line ended at NOK 116 million. The growth, not a growth that we were hoping for. This were particularly due to 2 groups of activities. First of all, we have some customers that have experienced certain project delays. That means that we have to also -- our revenue recognition will also be delayed. And then we also saw significantly lower construction activities in the hydropower plant market, and that may sound strange. But a hydropower generator is typically cooled by hydrogen gas, and this has been a significant segment for Proton and our activities in Wallingford. And as we saw this market, particularly in the second half of 2018, we obviously need to turn around and replace also activities in all the markets, which we will be able to do, but we will not be able -- we were not able to fully compensate for that in the third quarter. Having said that, and on a more positive note, we have never seen or never had a larger pipeline of projects all over the place and in different markets. Other highlights. This was a very hectic quarter. We finalized our repair issue, as you all know. We received 2 purchase orders, 4 stations, 2 in Norway and -- 2 stations in Norway and 2 stations in Germany. We decided to construct the world's largest electrolyzer plant. We invested USD 5 million in Nikola as part of the C-round financing. We also received a purchase order from Australia for a Power-to-Gas project. We officially opened the station, our new H2Station factory in Denmark, and we were selected for a proposal for award of EUR 40 million for the H2BusEurope project. So it was a hectic quarter, and we will talk about all of these elements in due course during this presentation. In terms of EBITDA, we had a number of nonrecurring and other negative effects, which I think is important to understand. Some of them, we have talked about already and mentioned in our guiding, in particular the legal and other costs related to the PDC case in the United States, which ended at NOK 19 million. This is due to substantial efforts that was undertaken both by Nel, but more importantly, by legal counsel in Europe and in the U.S. and also a number of technical experts that we have brought in to basically make sure that we defend our case the best possible way. But we have been able to reach an agreement. We have been able, together with PDC, to look forward, and I'm very happy for that. And we will now pursue a number of activities and opportunities in the market in a much more constructive way together going forward. We also experienced cost overruns on 2 particular projects of NOK 7 million. And to be able to avoid this in the future, we are implementing new routines and some additional resources. We do see that we need to strengthen ourselves in basically project execution, which is far away from our home base. So that is basically what we're doing. We've got an extraordinary VAT charge in Norway of NOK 3.4 million related to earlier periods. That has been a discussion which is ongoing for some time, but that was the final outcome. And we incurred the ramp-up and other related costs of NOK 4.5 million and noncash cost related to option. So this accumulates to NOK 36.5 million, which is obviously significantly higher than we typically see in a normal quarter. Looking at the income statement. We already covered parts of the EBITDA discussion. The -- a lower revenue will also contribute to a slightly lower EBITDA. Overall, I can say that we are not satisfied with the revenue development nor the EBITDA development. Keep in mind that we are now positioned to carry a significantly higher level of revenue, and we will work very hard in terms of bringing Nel back to what you've seen in earlier revenue trajectories. So let's move on to talk a bit about some of the development in the quarter, but first, we need to start with the basics, and most of you know this already. Nel is increasingly becoming a global player. We have activities in the U.S., in Europe and in Denmark, factories, and we have agents and distributors in all relevant markets now. We cover most of the value chain from hydrogen production in different sizes of equipment to fueling and also are able to deliver combined solutions to our customers throughout solution deliver -- divisions. We have delivered equipment to -- electrolyzer equipment to now around about 80 countries, and we have delivered fueling equipment to around about 10 countries, if you -- or country number 10, if you include South Korea. Relatively early in Q3, we got another order for 2 stations from Uno-X Hydrogen, 2 more fueling stations for Norway. This will most likely be installed as the third station outside Oslo and as the second station outside Bergen. So that means that Uno-X in total is in the process of establishing 5 stations in Norway. These stations will be delivered in the first half of 2019, and Uno-X Hydrogen has also applied for additional funding from Enova for further station developments, and we will know over the next number of months the conclusion on that application. We got an additional order from Germany, 2 stations, from H2 Mobility. And as you know, H2 Mobility is a company that owns and operates the infrastructure in Germany. The H2 Mobility is a joint venture, but with more partners than we see here in Norway. We are not the partner, but we still deliver equipment into the partnership, which we are very happy about. As the only non-joint venture partner, we are capable of delivering equipment into that joint venture. And these stations will be installed around about middle of 2019. And last quarter, we talked about the app. I don't know if you had a chance to download it, but you should take a look at that. It doesn't only show stations in Germany, it also shows for the entire Europe, including Norway. And it shows the station which are online, and it shows the station which are in the process of being constructed. So it's a useful and interesting tool from that perspective. On June 28, we announced a major contract with Nikola. And under the contract, as you know, Nikola will buy 448 electrolyzers and associated fueling equipment. Now 448 electrolyzers is equivalent to around about 1,000 megawatt or 1 gigawatt, which is the largest electrolyzer contract that the world has ever seen. Nikola also successfully were able to raise their first $100 million in the -- in their C funding round. The valuation was set at USD 1.1 billion pre-money, and they are working to increase that funding further. On September 5, we decided to invest $5 million into Nikola on the same terms, exactly the same terms as the other parties in the funding round, even though we are small and they're big, and that I think is very good. The investment will strengthen the partnership and the collaboration with Nikola. And we are also making good progress when it comes to the demo stations, the 2 demo stations will be delivered around about -- from just after New Year and into the first quarter. The first demo station will be installed in -- outside the plant in Arizona. And we're also making good progress on the pre-engineering that Nikola wants us to do, pre-engineering of designing the large-scale 8-ton commercial stations. So the technical teams are working together and collaborating on a weekly basis. Now on the response to the Nikola contract, we decided to construct the world's largest electrolyzer facility. We decided to expand our Notodden factory, and this will be the largest electrolyzer facility in the world with a nameplate capacity of 360 megawatt, roughly 10x larger than our current capacity. It will be a highly automated factory, which is designed to achieve all-time low cost, which is important for many reasons. We will build it in extension to our existing facility. So they will be integrated as one site, and the investment will be in the range of NOK 150 million. It should be able -- it should allow us to support not only Nikola, but also other customers which are also looking for getting into large-scale green hydrogen production. And we are working on many such projects around the world for similar equipment. Now the 360-megawatt production capacity means around about 160 full-sized cell stacks. That assumes that we run 5 shifts, and it assumes that we run the new line and the old line. So it's quite a flexible setup. We can run only the new line, and we -- or we can run both lines, and we can run with 1 shift or 2 shifts or even add more shifts. So it gives us a flexible production setup, which we can align to customer offtakes basically. We are here targeting cost reductions on the system level of more than 40%, more than 40%. So that means that we will, through this facility, make green hydrogen competitive with fossil hydrogen, not only from the scale of the factory, which is important, but also from smart product design. So as you know, and if you look at our web page, we are basically now marketing our new 8-cluster electrolyzer. It's a 20-megawatt standard unit, which you can see on the picture here on the right-hand side, which you can basically implement. And by doing it, by sharing the infrastructure like that, you -- in this unit, you basically get the cost on equipment far down, which is important for the end customer, which means that our customers will be able to outcompete fossil solutions like natural gas reforming in different parts of the world. We target to have this factory up and running in the first half of 2020. We were awarded Power-to-Gas contract at the end of September in Australia. We've done a number of Power-to-Gas contracts in the past, around about 20, but this one is a bit special and it's a bit unique. First of all, it opens up a new market for us, Australia. We haven't done a lot of business in Australia. Secondly, Australia has a lot of wind and sun. So in many ways, it's ideal for renewable hydrogen production. As you know, there are many other players thinking about moving on to renewable hydrogen production in the region. In this particular case, we are using a PEM electrolyzer. It's connected directly to solar, and it will produce hydrogen during -- when the sun is shining. The hydrogen will be stored, and it will be turned around to electricity through a fuel cell when the sun is not shining. And the excess hydrogen will be pumped into the natural gas grid, so making the natural gas greener. It's quite a nice showcase for what you can do with this technology while storing the energy, turning it back into electricity and pumping it into the natural gas grid. On top of that, it's in the new market. So this project was particularly important from many perspectives, and we hope that this showcase will open up new opportunities for us also in the region. Last but not least in this part of the presentation, we opened up our -- formally, I would say, opened up our facility in Herning, Denmark, the H2Station factory. We had about 200 guests participating on September 21, partners, suppliers, customers and other stakeholders. It was an event that was -- that took all day. We had different tours and we had a seminar. On this facility, we can produce up to 300 stations, as you know, and here you will have standard fueling station units coming off the line, which are precertified for either the U.S. with the UL certification or for Europe with the EC certification. So it should make it easy for the end customer. And I wanted to take you here also on a little tour, so we have a little video which we would like to show you of this new facility. So if I press here and you press there, we should be good to go. So let's try. Maybe I'll take off the sound like that. [Presentation ]
So this is the facility. You see the offices in the front. You see the R&D in the second part, and you see the production further. And this is the production line, so it's a 5-step production line very much inspired by the automotive industry. So now you see every time when you -- when the step is complete, you see that the station moves down the line, and they put in a new frame and they start putting in the walls in between. And then you have subassemblies being implemented into the station. So we do subassemblies on the side. They come to the production line, and they are then slotted into the station. So pretty much the same way as you produce a car. If you switch around now, this is at the end of the line, so here we see we are basically completing the station. We're putting on the side walls. So this unit can stand outside. It's an integrated part of the final design, is that it's fully closed, so you can keep it on the outside. We move it into our testing area. This is the dispenser assembly. We do assemble it horizontally, and you see here this is a new dispenser this time with a big screen. Here are some of the dispensers that are going over to Shell in California. And we run -- we have a test -- full test opportunity on the outside where we can basically fuel the station before we ship it. So this is our new screen here. Here, we can actually show to the customers -- we can give them instruction on how to fuel or we can run ads or whatever the customer wants. This is obviously a picture of our [ duration ] station. So a very quick tour for you on the new factory in Herning. But it runs well, and it was very nice to basically be able to bring customers and partners into the factory and show them this is the way we do it, this is the way we think it should be done. And we had a lot of happy people there during our -- during the official opening. So let's move on to the 2 topics that we wanted to talk about. H2BusEurope, commercializing hydrogen buses. Here, Nel has been proposed for a EUR 40 million funding that we are pursuing together with partners in the H2BusEurope project. Now this EUR 40 million funding is to rollout up to 600 hydrogen buses in 3 different regions, so U.K., Denmark and Latvia are the 3 regions that we are working on. We will supply electrolyzer equipment and fueling equipment, and then we're working closely together with partners on buses, on tank solutions and on fuel cells. And we're still working to kind of get the structure and the partnership in place, and we intend to do a joint event later in the fourth quarter. Now overall, this will make hydrogen buses competitive with diesel, and the reason is because the biggest hurdle for a hydrogen bus has been production volume. Now 600 buses is going to solve that to the large extent. So it will be able to bring the cost of the bus down significantly. And then you may ask, is 600 buses a lot? It sounds like a lot, but we've included at the bottom of the slide the EU target, current EU targets, for zero-emission buses, which is 15,000 buses per year. That's the target that the EU is working on now currently. Secondly, how many buses is it running around in Europe at the moment? The total fleet of city buses is around 350,000. So from this perspective, 600 buses is only a very, very small start. And you clearly see that there is big opportunities beyond 600 buses in Europe. Now we had to look at Norway. And you remember back in the first quarter presentation this year, we talked about the bus case. We went into quite some detail, and we wanted to look how can Norway or can Norway benefit from these projects. Well, directly, we cannot benefit because we're not a member of the EU. So we will not receive funding directly, but we can benefit indirectly because we can enjoy the low prices for buses that this project will generate. So that means that -- so that's an important element, and we believe that this could be very interesting case also for Norway. And more importantly, we think that one important element that maybe the Norwegian politician hasn't completely understood is that if you build infrastructure for hydrogen, you can share it. It's not a dedicated infrastructure for only this bus. The infrastructure can be used by buses, by cars and by trucks. So basically, by doing -- for example, doing what we are showing here, you install 3 8-cluster electrolyzers solutions in Oslo, Bergen and Trondheim, you basically distribute the compressed gas. And you will be -- this infrastructure would also then be able to support the Norsk Hydrogenforum's target of 1,000 fuel-cell trucks in Norway by 2023. So if you basically share the infrastructure, it's not like charging infrastructure that every plug is different, different from this car to this car, different from this bus to the other. So that, I think, is important. And we want to just show you one other slide, which I think is maybe even more interesting, and that is that if you compare now the various bus solutions -- here, we have compared diesel bus, battery electric and fuel cell electric. And you can see, by doing it this way, the total cost of ownership for a battery -- no, for a hydrogen electric bus is lower than diesel and lower than battery electric. And that means Norwegian kroner per kilometer, how much does it cost per kilometer to run a bus? And we are still assuming bus prices of NOK 3.3 million per bus, so it's still a relatively high number. It will come down. That means that this gap will increase over the coming years. So I think that is an important benchmark that you also, here, sitting in this room and following this over the Web should start to talk about. We need to wake up here in Norway and basically take -- use these opportunities. At the end of the quarter, we also announced that we were selected as the preferred partner to -- for the European train project that Alstom is running. In particular, we were the preferred supplier for production and fueling equipment for Alstom in the Schleswig-Holstein region in Germany. And here, we're working together with consortium. You'll see the partners here on this slide, and we are obviously coordinating very closely with Alstom. We are pursuing and helping Alstom to win, hopefully, their zero-emission tender, train tender, that they're doing in the region. We will know the outcome of that sometime in the beginning of 2019, and the execution will most likely be sometime in 2021. It's an important showcase, this project, again. And why is that? Well, if you look across Europe, as much as 40% of the trains are currently running on diesel, 40% of the trains. Now you can electrify by wire. But if you electrify by wire, it will cost you NOK 15 million per kilometer, NOK 15 million per kilometer. So it's an enormous investment that you have to take. So we have to think about other opportunities, how can you basically create a zero-emission train alternative. Now the Alstom train, you don't compromise with a diesel train. You have the same range, 1,000 kilometers. You have the same number of passengers, 300 passengers per train section. So you're basically not compromising. And SINTEF has done a bit of work on this. So here, we can actually lean on SINTEF and basically just refer to their data. And they calculate that the total cost of ownership for hydrogen train compared to diesel is half the cost and compared to battery is 1/3 -- sorry, compared to wire electric is 1/3. And this gap will increase as you see at the bottom of the slide. So in 2050, the hydrogen train will be 1/3 of diesel and 1/5 of electric wire train. Now the question is, is this relevant for Norway? Is this relevant for Norway? And you may know that we have a number of train lines, which are not electrified. We have Trønder- og Meråkerbanen. We have Rørosbanen og Solørbanen. We have Raumabanen, and we have Nordlandsbanen. And we see politicians centrally and locally discussing this as late as yesterday. We saw politicians in the [ Fokus Politiker ] talking about the Raumabanen. It's a total of 1,500 kilometers in Norway that is not electrified. And if you want to do that by wire, you would need to invest between NOK 20 billion and NOK 25 billion. So it's a huge, huge investment. So we just basically wanted to refer you again to a study which is done by SINTEF. You'll see it on the right-hand side of the slide. It basically just compares the different train alternatives, and in this particular case, it's the Nordlandsbanen which has been used as a basis for the calculation. And as you can see, diesel bus is the top alternative. It's more costly than hydrogen. Electric wire is the second one. It's much, much higher, much, much more costly. You see the second to the last alternative is battery electric trains, which are more expensive. And you see the cheapest alternative is hydrogen trains, hydrogen electric trains. So I guess, there's no other business case that you can find within the transport sector where hydrogen is so clearly the cheapest alternative. So another piece of information that you need to help us push also in Norway. So before we open up with questions, let's try to summarize a bit. We still have the same basic target. We still are working hard every day to generate a rapidly growing billion-NOK company. We do it through these 6 key initiatives. We want to keep the technology leadership. So we want to have the unique selling points that the customer wants, and we want the technology to be low cost. We want it to be the preferred solution together with the other services that we can provide the customers. So we want to be the preferred partner. We want to have strong commercial capabilities and be in all the relevant markets, not every market, but all the markets where there is momentum on hydrogen. And we want to combine that with a good set of financials and a good financial backing. That's how we keep moving forward and building this company. In terms of the outlook, we have already communicated that a number of the activities that we had ongoing will have a negative effect on the short-term EBITDA: building a factory in Notodden, not everything can be on the balance sheet; basically doing development together with Nikola and some of these elements. We're also moving into new markets. We have initiated the 10x expansion of our Notodden facility to support the Nikola project and also a number of other projects and customers. We continue to work on penetration strategy into China, and I was there only a few weeks ago and had a number of interesting discussions. There are different options and different ways of doing it. And if you look at some of our, what should I say, other related companies in the industry, some of them have taken steps into China. We are trying to also dissect that and learn what is smart and how should we do it. We are building up Nel Korea, South Korea, in response to very aggressive outlook in that market or aggressive ambitions from Korea. And then we continue to work on the collaboration related to H2BusEurope. And as you know, we were the preferred supplier for the train solution in Germany. We do see significant tender activities in -- basically, all the way through our business, in electrolyzers and in H2Station. So from a pipeline perspective, we've never had a stronger and bigger pipeline. So on that positive note, I think I will end this part of the presentation. We will be -- we will welcome your questions here in the room or across the Web. If you do have questions here, I think we need to wait for a microphone, and we would appreciate if you state your name. That's basically so that the people also sitting outside this room can follow the discussion. So I don't know if we should start here in the room. If there are any questions here or whether, Bjørn, you want to look at if we have received some questions over the Web.
Yes, I could start off with one of the questions from the Web. We have a question here which asks how soon can we imagine the H2 bus or H2 train projects will lead to actual purchase orders.
I think we gave an indication about the train project. The deployment that Alstom was talking about for this Schleswig-Holstein region is in the 2020, 2021 time frame. There's a bit of time out. And then we keep working on these projects in other parts. When it comes to the H2BusEurope, it will be region-by-region dependent, so -- and I don't think we have exact details on that, and I don't think I should even go into it. We will, as I said, have an event later in this quarter when we get everything in place with our partners. And I don't want to kind of guess exactly. It's not only depending on now, but it's also depending on the partners and when the partnership can together deliver the total solution. I don't think I should guess that, but the H2BusEurope is closer in time compared to the train project, let me put it like that.
Okay. Then we have one from Tomas Skeivys. He asks if we can indicate revenue level for fourth quarter.
That, we have decided not to do. So we will not start doing that now unfortunately. Any questions from anyone in the room?
Just a question about hydropower in Norway. Is that due to the drought that there was low production that you had low sales or...
Well, this is on a global basis. This is not Norway-related, and it's related to the facility that they have in the U.S. So this facility have typically sold -- some of the small units have been very popular. When you construct a hydropower plant, the generator has cooling gas inside, and the cooling gas is typically hydrogen. So they use the hydrogen inside the generator to cool the generator. But when there is a lower construction, lower number of construction of new hydropower plants, which we saw in the second half of '18, some of those projects drops off. So this is a market that our facility in the U.S. has. They had a kind of a very steady business over many, many, many years. And then in the second half of '18, we saw that drop off. I -- we will be able to switch and replace this. So -- but it's just a matter of seeing it quickly and being able to execute quickly enough. Any other questions from the room? Okay.
So there's a question from [ Birk Hagan ]. Do you think the China visit had a positive effect on your process of entering that market?
We had some very good discussions with some important partners. And you may have noticed there is a lot of interest out of China to try to find partners. So we do get a number of requests. So for the time being, it feels a bit like -- I mean, you can basically pick and choose a bit at the moment. So we need to use that momentum, but we also need to find the right partner. So we had some good discussions, and some of this process takes time. So we've been there regularly. And obviously this time, it was a good opportunity because there was a lot of things happening at the same time. And when he had the big Norwegian delegation, it basically creates even more momentum. So we were piggybacking on that, and then we're able to get some interesting meetings and get some good discussions accelerated basically. So I think we will find a way. But as I said a few times before, we need to do it in the right way.
Do we have any questions from the crowd here? No? Then there's a question from [ Stephan Young ]. He -- the question goes like this: What are the activities of Nel in Switzerland since Switzerland has now a consortium to expand H2 Mobility for trucks and are planning to build 100 hydrogen stations?
So Switzerland suddenly became a very interesting market, but let me first say we already have delivered quite a lot of equipment to Switzerland, not on fueling stations, but on electrolyzers. So all the -- if you have read about the Coop, they have hydrogen trucks, a small fleet, and have fueling stations. We have not supplied the stations. It happened a few years ago, but we did supply all the production equipment, all the PEM electrolyzers. And obviously, we would like to continue to pursue Switzerland. We think it's a good market. We already have customers there. We have a distributor there. So we are working definitely on that market. And the interesting part with Switzerland is that they are putting heavy penalties on diesel trucks. So you have to pay quite a significant chunk of money if you want to run your diesel truck and if you don't want to switch. So there is an underlying -- like we have on battery electric cars in Norway, we have very strong incentives to switch away from a diesel truck in Switzerland. And that's also why Hyundai said that they will supply the first 1,000 trucks to Switzerland. They will basically prioritize most of their truck production just to feed that market. So we think that's -- the Swiss truck market in Europe is going to be the first one that takes off. And again, I think it's good that some of these countries basically decide on which platform they will showcase. And I think that many countries will look to Switzerland and see what they are doing. Like people are looking to Norway when it comes to battery electric, we will look at Switzerland when it comes to hydrogen electric trucks. So we are doing whatever we can to position ourself for that market. Okay. I think we will wrap it up there. Again, thank you very much for coming. If the hydrogen car is not towed away, you can have a look at it. If you want to have a ride, you can borrow it, just let me know. Thank you very much for coming, and look forward to seeing you again. Thank you.