Fusion Fuel Green PLC Q2 FY2022 Earnings Call

Hello, everyone. Welcome to the Fusion Fuel Green's Second Quarter 2022 Investor Update. My name is Ben Schwarz, and I'm Head of Investor Relations at Fusion Fuel. I would first like to remind everyone that this call may contain forward-looking statements, including but not limited to, the company's expectations or predictions of financial and business performance which are based on numerous assumptions about sales, margins, competitive factors, industry performance, and other factors which cannot be predicted. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions and they are not guarantees of performance. I encourage you to read the disclaimer slide in the investor presentation for a discussion of the risks that may affect our business or may cause our assumptions to prove incorrect. The Company is under no obligation and expressly disclaims any obligation to update, alter or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Okay. Thank you all for joining us today. As always, I will run through our agenda for the next hour. We will open with some remarks from Fusion Fuel’s Chairman, followed by an overview of our value proposition as well as some observations about valuations in the green hydrogen sector. And then the management team will share second quarter highlights, financial results, the latest on our technology, and an update on our commercial strategy and pipeline. As we always do, we'll end with a recap of our 2022 milestones before opening up the floor for a Q&A. Questions can be entered in the chat box in the webcast platform during the next 58 minutes, or you can also submit your questions to the investor relations mailbox at [email protected]. So without any further ado, I'll pass it over to Jeffrey Schwarz, Fusion Fuel’s Chairman.

Thanks, Ben. I'm Jeffrey Schwarz, Chairman of Fusion Fuel Green PLC, and I want to add my welcome to our Q2 and six months investor presentation. The equity markets have not been kind to growth stories this year. The Federal Reserve's efforts to rein in inflation by raising interest rates has had a disproportionate effect on the share prices of fast-growing companies due to the discounting of our future cash flows, or so Wall Street analysts would have you believe. Then again, most of those strategists began the year predicting double-digit equity market returns. So I’d take their advice with more than a few grains of salt. I know I say this almost every quarter, and I apologize if I sound like the proverbial broken record, but I've been in the investment business for more than 40 years, and the one investment strategy that has proven to work consistently over time is to uncover businesses that serve a growing market with a superior technology and a strong management team. That is what we identified with Fusion Fuel Green. Recent events in particular, the energy crisis in Europe, and the passage of the Inflation Reduction Act of 2022 in the United States, have only served to magnify the opportunity. A chief concern for producers or off-takers of green hydrogen is a concept called the levelized cost of hydrogen, which is driven primarily by the interplay of two factors: the cost of electricity required for electrolysis and the capital expenditure for the electrolyzer and balance of plant. Fusion's solution offers advantages on both counts. Grid independence and scalability are what makes our solution unique and especially ideal for the high-value-added mobility market, which is a key near-term target for Fusion. In the production of green hydrogen, grid independence enables eliminating exposure to highly volatile prices for electricity and natural gas, a benefit that is very much in focus during this time of historically high energy prices in Europe. The benefit of eliminating this form of uncertainty is quite straightforward. The fact that our HEVO-Solar generators can produce low-cost green hydrogen, even at very modest levels of production eliminates risk in a less obvious but potentially more important way. And I beg your indulgence for a moment as I use an analogy to explain. Imagine, if you will, two suppliers of equipment used to produce widgets. Supplier A offers a machine that can produce 10,000 widgets per year, but at a high cost. Alternatively, a second machine can produce 100,000 widgets per year at a lower cost, but with a significant upfront capital investment. Supplier B has a machine that can produce 10,000 widgets per year at that same lower cost but with just a fraction of the required capital expenditure. Also, let's assume that the expectation is that the market for widgets will grow significantly over time. But next year, when the equipment will be delivered, the market is projected to be 10,000 widgets. Which one would you recommend purchasing? To me, the answer is obvious: supplier B. The ability to meet current demand while retaining the potential to grow productive capacity as the market grows is the slam dunk winner. And that's even more so if one believes the price of widget-making equipment may decline in the years ahead. Well, I suspect it won't come as a surprise to you, but in this analogy, manufacturers of centralized electrolyzers are supplier A and Fusion is supplier B. This feature of being able to start with modest production of green hydrogen and grow as demand grows is especially important in a nascent market like mobility, with a very large existing stock of diesel fuel trucks, buses, and heavy-duty equipment. The demand for green hydrogen today is modest; however, it is expected to grow over time as existing equipment reaches end of life and is replaced by equipment powered by hydrogen fuel cells. I'll conclude by saying this: keep your eye on the prize. If you believe that the future of green hydrogen is bright and believe our HEVO-Solar solution offers unique advantages, there is every reason to believe, as I do, and mind you, I have never sold a share of Fusion, that we will be successful in building a company that is valued highly in the marketplace. With that, I'll turn the call back over to Ben.

Great, thanks very much. So with the benefit of that context, let's begin with an overview of Fusion Fuel’s business case and value proposition. For those of you who are new to the name or need a refresher, Fusion Fuel is in the business of developing and delivering cost-effective clean hydrogen solutions to accelerate the global energy transition. As I've said before, at its core, Fusion Fuel is a technology company. We have developed and commercialized a proprietary integrated solar-to-hydrogen generator that unlocks grid-independent green hydrogen production at a market-leading levelized cost. Our decentralized approach is a truly unique source of differentiation in the market, where everyone else is going bigger to drive down costs. We've gone small scale and modular, and in doing so, have been able to eliminate some of the cost and complexity of hydrogen production and distribution. While others are talking about developing green hydrogen projects, we're doing it as we speak. Our HEVO-Solar technology is producing green hydrogen at our demonstration facility in Portugal, and our unique approach and differentiated technology have enabled us to build a robust commercial pipeline of tech sales and development projects, led by our pilot project with Exolum in Madrid, which will be up and running by the end of the year. Yet, despite all that, it's not lost on us that we continue to be persistently and significantly undervalued relative to our peers in the green hydrogen sector, a group of names that undoubtedly has advantages from maturity, scale, and balance sheet perspective. But as our Chairman rightly pointed out, in a market where most everyone has fundamentally the same offering, what customers care about more than anything is the levelized cost of hydrogen. That is and will continue to be the key differentiator. That also happens to be where we believe we have a clear competitive advantage. Not only do we offer known long-term certainty of costs through our integrated solution, but we can do so at market-leading levels, agnostic of scale and without grants. We have a differentiated business model of selling both technology and green hydrogen and have a clear path to revenue generation and delivery at scale. So another way of looking at this chart would be to say Fusion Fuel is the cheapest green hydrogen pure-play stock out there today by an order of magnitude. Hopefully, the next 50 minutes or so together will lead you to share a similar perspective. So I'll now pass it over to Frederico, who will provide an update on the quarter and subsequent events.

Great. Thank you, Ben. And good afternoon, and thank you everyone for joining us. As always, we're excited to share with you the latest developments at Fusion Fuel, particularly given the recent macro events and industry news that make it a very bright and exciting future for us. From a technology and production side, we've not only fallen in line with production of our HEVO electrolyzer, but also the new Benavente facility being the first to produce electrolyzers on a mass scale in Iberia. We've also completed an assessment of our technology and manufacturing process with Black & Veatch. In addition, we have TUV SUD performing ongoing performance tracking of HEVO-Solar units, and it continues to perform 10% above our expectations. As part of our continued investment and commitment to our technology development, we filed two more patents, which we believe will continue to provide us with a technological edge in the markets. On the project side, we continue to secure significant grants for our project portfolio, in particular with the recent announcements of our C-14 and C-5 awards in Portugal. In July and August, we also raised around $2 million through our ATM offering. This is a facility we expect to continue to tap into opportunistically, as we see great opportunities for us to pursue within our project portfolio that I mentioned. At times, we may feel that we may tap into this toolbox if we feel it's appropriate. The past weeks have been among the most active, particularly around the Inflation Reduction Act in the US, which has heightened market volumes and we opportunistically dipped into those. That said, we continue to be in strategic partnership discussions of various types, which will have longer-term importance to the firm. Next slide please. In the second quarter, we recorded an operating loss of EUR 4.8 million, of which EUR 4 million related to operating expenses. Of these, EUR 1.9 million are related to personnel costs and EUR 1.3 million are related to non-recurring professional administration costs as well as one-off annual costs related to company audits, filings, and related legal fees. We maintain our guidance of around EUR 3 million a quarter of operational costs until year-end. We booked EUR 150,000 euros of share-based expenses as a non-cash expense, related to restricted stock units and options related to Fusion Fuel personnel. As previously highlighted, this is a charge that will be recurring as it is amortized over the vesting period. We intend to keep using securities with vesting clauses as a means to attract talent, reward staff, and ensure alignment with shareholders. Therefore, non-cash expense line related to these should be expected over the coming years. Each quarter we need to recognize fair value movements on outstanding warrants. With the market movements, particularly related to energy and gross sales, we have a positive impact of EUR 6.7 million. This is simply accounting recognition and is a non-cash item. In the quarter, we also got a EUR 0.5 million gain drawn by positive FX movements in our cash and short-term positions. We also had a EUR 170,000 charge related to our Fusion Fuel Spain joint venture and our share of those results. We ended the quarter with EUR 10.6 million in our cash and cash equivalents. As previously mentioned, in the second half of 2021 and the first half of 2022, we made strategic long-term purchase orders to secure our supply chain. With those deliveries now having taken place significantly, we expect these expenditures to decline considerably in the second half of the year. We closed the quarter with EUR 63 million of assets, of which EUR 32 million are related to PPE assets such as our Evora project, Azambuja project in Sines, our Benavente facility, and our intellectual property. We also hold around EUR 21 million in inventory materials we have prepaid and receivables. Our receivables and certain liabilities are driven by VAT to be recovered, which we have split out here, and our grants awarded. At the end of the second quarter, we continue to have the same number of outstanding shares. We have an increase of around 7,000 restricted stock units versus the first quarter, related to instruments issued. In Q3, we will have a modest increase in the outstanding shares due to the ATM facility and some shares that will vest for employees. We've added this slide to provide transparency on the grants we're pursuing, and the ones that have already been approved. This is an area where we have been incredibly successful in pursuing and we have amassed a great portfolio of projects with substantial support. The numbers here exclude our IPCEI submission, as that project is so large that it would significantly distort the numbers, but rest assured, we are still pursuing it. As a reminder, it is a project that represents total investment of more than EUR 500 million. We have made submissions for just under EUR 80 million of grant financing. These are projects principally in Portugal, but also a few in Spain. EUR 19 million of grants have already been approved, and we have already submitted EUR 3.5 million to be released. This number will grow as we continue to implement these projects. In the EUR 60 million of other grant applications, we have the C-5 senior projects in that. This is a grant we have been awarded but we have not yet received confirmation of the value. We will communicate this as soon as we can. As we've noted before, we have a differentiated value proposition with both our technology and our projects being developed, creating substantial value. We have seen several projects with developers be abandoned even after being awarded grants. We are one of the very few that are in actual development and implementation. This highlights the success of our multi-pronged approach, a strategy we will continue to pursue in Iberia and other markets. We continue to rapidly evolve our technology to keep us ahead of the curve. On this slide, you can see the continuous evolution about the miniaturized electrolyzer and the HEVO. In fact, I have four of them in front of me, as well for those who can see them on the small screen. When the HEVO was first created, a significant portion of our cost reduction came from simplifying the heavy design. We have maintained that simplification principle and have further applied it to the HEVO and also to the HEVO-Solar overall. We are reducing the number of HEVOs and HEVO-Solar systems, which helps us drastically reduce the number of components of piping required, the maintenance costs of the plant, and it also reduces the installation time and costs. This more powerful HEVO and the cost reductions related to our product evolution continue to position us at the forefront of green hydrogen in terms of cost competitiveness. As mentioned before, we completed an independent assessment of our technology and manufacturing process with Black & Veatch. Additionally, TUV SUD is performing an ongoing track record analysis of HEVO-Solar, and it continues to beat our expectations in terms of hydrogen production performance. In addition to our HEVO evolution, we're also working on new and exciting technology advances, which we hope to be able to share with you in one of the upcoming updates. With this, I will pass it to Zach, who will give an update on our commercial efforts.

Hey, thanks Frederico, and hello everyone. From a commercial standpoint, our mandate is simple: to secure commitments for the full production of our Benavente facility in 2023 and beyond. Our goal is to confirm over 2,500 orders in 2023 and approximately 4,700 in 2024. We are concentrating on efforts in Portugal and are strategically expanding into other markets such as Spain, Italy, Greece, the United States, and Canada. Each project or geography goes through a detailed review to ensure it is a good fit for our technology, our strategy, and most importantly, something we're confident we can execute. To do this, we've implemented a multifaceted approach to deliver on our business plan, focusing on technology sales, and developing our own projects and mobility sector, as well as strategic industrial hubs. Our vision is to build a mobility backbone throughout Portugal and use this as a blueprint to expand into other strategic markets in southern Europe and North America. In parallel, we're also focused on being a major part of the solution in strategic and heavy industrial locations in Portugal and other markets we expand into. We have several third-party sales in our pipeline, seven of which are in more advanced stages of development, which total over 507 HEVO-Solar units and represent over EUR 25 million in potential revenue in 2023. Our expectations for our current Fusion Fuel development projects are to account for the balance of our production in 2023 and 2024. Almost all of our projects have grants which make them more competitive for our customers from a pricing standpoint and financially attractive for investors. We've secured over EUR 40 million in grants and plan to hear back shortly on additional programs as Frederico mentioned, the C-5 in Portugal and also the Porto program in Spain, which we've already been notified of awards. As I mentioned, we've sought to narrow our commercial focus to two strategic platforms: mobility and industrial decarbonization. We continue to focus on developing a mobility backbone in Portugal by providing turnkey solutions to the market. We have a number of mobility projects in Portugal in various stages of the development cycle and are looking to build on that template into other markets. Focusing on strategic industrial locations is the other key platform, and we believe Portugal is poised to play a critical role in addressing the energy crisis, which continues to plague all of Europe. That starts with Sines in Portugal, and we are committed to being a leader in decarbonizing the Sines industrial zone, while also ensuring we are positioned to capitalize on the hydrogen export opportunity. We recognize that a development-focused approach is capital-intensive, and as a result, we are working on multiple solutions to secure equity capital from infrastructure funds and exploring project financing alternatives. Fusion Fuel’s competitive advantages are our decentralized and scalable approach to green hydrogen production. Large centralized projects require substantial investment, not just in the electrolyzer itself, but also surrounding infrastructure such as pipelines, trucks, and other balance of plant equipment. This also takes significant time and creates additional complexities for large-scale, centralized projects to secure permitting and financing to develop that additional infrastructure. We're seeing the cost of last-mile logistics and distribution of hydrogen to be as much as $2 per kilogram, which often goes unnoticed when you talk about the levelized cost of hydrogen. Our approach is to co-locate our system on site next to the end user and use our HEVO-Solar solution, even at small sizes as it's still competitive. This allows customers to not have to make capital and time-intensive bets on a centralized system and instead start small and grow with market demand over time. This option doesn't exist in the market today and is needed in a nascent market like green hydrogen. As pioneers in green hydrogen, Fusion Fuel notices the problem in the market with our customers and is providing a solution to let our customers grow with us and ease into the hydrogen ecosystem while offering the lowest possible levelized cost of hydrogen in the market, especially when you factor in avoided distribution costs. As previously noted, we're focused on two core markets: mobility and decarbonizing specific industrial hubs. First on mobility, we've learned many important lessons from our first project with Exolum, the largest refined products distribution company in Europe. The key takeaway from our experience thus far on Exolum is that we must not just offer our technology, but we must provide solutions to our customers, which can include supporting development, permitting, grant applications, construction, and operations of the overall facility. This experience has led us to offer customers several solutions in mobility, such as just selling technology as a solution, building the facility and selling them hydrogen, or building the entire hydrogen value chain offering hydrogen as a service. This provides our customers multiple options to transition to the hydrogen ecosystem. Our offerings include hydrogen production, but also include the refueling station and the vehicles. We are establishing a network of companies to offer a suite of services, including trucks, forklifts, and buses to our customers. We are seeing substantial interest not just in Portugal, but throughout the Iberian Peninsula, Italy, and Greece, and are beginning to see interest in North America, particularly in light of the passing of the Inflation Reduction Act. Portugal, as I noted, is a strategic market for Fusion Fuel, and in order to make hydrogen a reality in 2023, we are focused on developing our own pipeline of projects to build out the hydrogen refueling infrastructure in Portugal. We're focused on building a mobility backbone centered around major distribution hubs along the coast in Azambuja and Sines, as well as Elvas and Evora. These are key areas of focus, and we plan to build off these locations to put green hydrogen production and refueling stations every 150 kilometers to connect Porto to the Algarve and Lisbon to Spain. We are also selectively looking at working with municipalities throughout Portugal to offer solutions to them. The Sines region is also core to Fusion Fuel, as I noted, and it's not just Fusion Fuel, but it's also important for Portugal and Fusion Fuel’s ambition for the domestic hydrogen market. Sines currently has one LNG terminal and also has a Galp Refinery that consumes 60,000 tons per year of hydrogen, with planned green ammonia export facilities and other industrial customers. Sines is currently planning to build a hydrogen pipeline that will supply hydrogen to customers in Sines and potentially export to other markets. Today, we have secured $40 million in grants for projects in Sines and are awaiting the award of additional grants to help us achieve our target of 10,000 tons per year of green hydrogen production in the region. In summary, this represents over 3,700 HEVO-Solar units that will be produced in 2023 and 2024. That's over 50% of our 2023 and 2024 production, and these projects will come online in 2024 and 2025. Our company continues to evaluate, negotiate, and develop opportunities in Spain, Italy, Greece, and North America to fill the remaining orders for 2023 and 2024 production. To continue to fill out our planning capacity for 2023 and beyond, we're not just focused on development projects but also looking to provide solutions to our third-party customers. We have over 500 HEVO-Solar units of tech sales in advanced stages that are either signed, awaiting the award of a grant, or in negotiations to be signed. The ones we are waiting to sign or receive grants are marked as confidential. Our pipeline of tech sale projects is focused in Portugal, Spain, and Italy. We are actively evaluating opportunities in other markets as well. We are not just selling technology to our customers, but in many cases, we're also providing a turnkey solution. One point I'd like to highlight is that the grant requests being made are exclusively using our technology, which gives us the ability to secure these projects as they are awarded. Our approach allows us to not only make margin on our technology sales, but also provides opportunities for additional revenue streams through the overall construction of the facility and revenue during operations while offering the best possible solution for that specific customer. Lastly, one of our core markets we're expanding into is North America. In the USA, the Inflation Reduction Act is a massive win for fighting climate change and accelerating the clean energy economy, specifically in green hydrogen. This is a true game changer for us and the rest of the hydrogen value chain. Focused specifically on Fusion Fuel, we qualify for the $3 per kilogram production tax credit or the 30% investment tax credit. The production tax credit can also be taken as cash payments via direct payments from the IRS. Fusion’s technology is rapidly reducing its levelized cost of hydrogen to under $3 per kilogram before subsidies in 2023, and is likely well below that in regions with superior solar radiance, such as California, Southern California, or southwest USA. This combined with our decentralized approach allows us to be able to offer lower prices than current hydrogen or diesel costs today after monetizing the production tax credits. Our team is working hard to build a large presence in North America. We're beginning to build out our team to provide us the bench strength to aggressively enter this very important market. We are enacting negotiations to secure projects and partnerships throughout North America. I cannot stress how big of an opportunity this is for the hydrogen market and for Fusion Fuel, especially due to our unique value proposition we can offer with our decentralized approach. We look forward to sharing more significant updates on this point over the coming months. I'll pass it back to you, Frederico.

Great. Thanks, Zach. It promises to be a very exciting future, particularly given all the US development and technology advances. Before moving to our Q&A session, I'll briefly recap our core milestones for this year to help understand the progress we've made. We've highlighted which items are completed, which ones are in progress and which ones have not yet started as of Q2. On production, we went live with HEVO production at Benavente, reminding everyone that is about 120 megawatts of electrolyzer production capacity for next year. How much we produce depends on when the project goes live. The rest of the production lines in Benavente are expected to go live in Q1 and Q2 of next year. On the commercial scale, we've also secured the grant for the Benavente facility. So on the production side, that is progressing well in the first half of the year. On the commercial side, Zach has already covered the great progress in securing the orders, projects, securing the related grants, and the exciting developments happening in the US. On technology, the same; we continue to evolve and maintain our leadership position. In the second half of the year, we started designing the oxygen capture setups, and we intend to prototype this in 2023. Therefore, we will be able to capture not only and sell or position ourselves on the green hydrogen production process but also green oxygen production. As seen before, we hope to share some of the new innovations we've been working on in one of our upcoming updates. Project development and implementation are well underway for several projects. As we've noted several times, we're actually making green hydrogen a reality. Safety is a central piece of our culture, and a point that we've been instilling across all areas of the organization. This will continue throughout our growth. Overall, the momentum we see within the firm and in the whole hydrogen market has been incredible. I'm excited about the opportunities we have in front of us. Now, I pass over to Ben to moderate some Q&A. Thank you.

Thanks, Frederico. Looks like we've got quite a few questions coming through. I'll work through the questions as they come in.

So on the C-5 grant, C-5 is a component of grants that is in mobilizing agendas. There are many companies involved in these programs, around 90 or so companies that are involved in discussions with the government. Only when all of those are finalized do we have confirmation on our final value. We hope to communicate this by September, but I’d say the timeline is not within our control. We have already been confirmed that we will receive an award; the question now is the value. For Benavente, what other milestones need to be met before you can invoice the remaining EUR 3.5 million? The reimbursement process is a proportion of spent. In line with our spending for Benavente, we are able to ask for reimbursements and cost cutting as part of the production lines that will start being delivered in Q1 and Q2. We expect to also be submitting the reimbursement requests for all costs incurred.

Let’s skip to a different question then. If demand increases significantly, at what speed would it be possible to ramp up production?

With the first production lines already designed and ready, it would likely take around a year to develop the second and third production lines, which could be a copy-paste of the existing ones. However, we are working on some new solutions where we believe the ramp-up ability could be faster and potentially cheaper. So hopefully, we will be able to share that with you in the next quarter or possibly the one after that.

On slide 19 of the presentation, it mentions an EPC turnkey project. Can you talk about what that means? Are those potential own projects or are they technology sale projects?

Yes, those are technology sales. When we mention EPC turnkey, we're offering support in grant applications, development, permitting, and also includes building the entire project, not just HEVO-Solar's technology.

On that same slide for the tech sales, can you help us understand how the pricing works and how the projects may differ from one another?

Sure. Some projects have additional equipment such as compression, storage, and other balance of plant equipment that drives up the cost of the overall system, which is why it's higher on a per unit basis in Italy than the projects in Portugal.

A question for our Chairman about potential partners or customers in the US market. Can you share your perspective on the strategic partnership process and how you and the executive team are thinking about it?

Yes, as we've said on numerous occasions, we're a small company today approaching a very large opportunity. We understand our growth trajectory can steepen significantly with partners who have either financial or operational scale. We've been in conversations with potential strategic partners, whether they're technology providers or companies interested in our HEVO-Solar solution. We've been able to deliver confirmation of our technology's efficiency through validation processes completed by Black & Veatch and TUV SUD. The size of grants has a significant impact on the economics of those projects.

On the ATM facility, isn't it counterintuitive to use it and further dilute shareholders at this point? Would it be better to concentrate on technology sales with faster returns instead?

To what Jeffrey alluded to, we have a massive runway ahead of us, and we need to think strategically about our coverage. The ATM is a tool we look to tap into opportunistically, and its use allows us to be in a position to find the right partnership opportunities without feeling rushed. So we do not want to slow down our activities.

I'd like to add that we've built up an inventory of both key components and finished goods, enabling us to move quickly on projects where grants have been received. There are projects we are looking at that require rapid action due to impending deadlines for grant qualifications. As Frederico mentioned, the expenditures will decline materially in the back half of the year, allowing us to not need as much working capital as compared to prior periods.

A question for Zach regarding funding strategy, are you leaning towards using your own capital for development projects?

Yes, while it's capital-intensive, we are actively in discussions with infrastructure funds and other equity sources to fund our development pipeline.

Can you comment on the economies of scale? Is there an increased levelized cost of hydrogen at smaller scale projects?

We benefit from balance of plant equipment at larger scales, but with our technology, we believe we can compete even with smaller projects in the market today.

What is the price per kilogram at which Fusion Fuel’s technology is profitable?

It depends on the market. For example, for gas blending at 4 bar, we can inject directly into the gas grid with profitability at $4.75 per kilogram. In mobility, where we have higher demand, that can be as high as $8 to $10 per kilogram at the dispenser level, giving us significant margins.

Why is the market taking so long to materialize, particularly in the EU?

The industry is heavily focused on large-scale projects that require additional land and complexities, leading to delays. Our decentralized approach helps reduce costs and appeal to clients seeking lower-risk investments at the moment. As we demonstrate our technology and showcase production capacity, we're seeing more interest.

This is a nascent industry, and there's been significant legislative progress around licensing. The time taken for project approval is something we're seeing evolve, as regulations are catching up with the market.

I think much of the delay stems from clients wishing to finalize grants before committing to projects. We anticipate that as these grant approvals speed up, project initiations are likely to gain momentum.

Frederico, can you provide a quick update on where things stand with Evora?

With Evora, we will have all the permits and licenses for hydrogen production and to connect to the grid. We're waiting for the Portuguese regulator company to do the physical connection to the grid. We expect to start producing into storage tanks potentially as early as next week, and as soon as we're connected to the grid, we will sell electricity to the grid.

Questions about the German market; can the benefits of avoiding transportation costs be limited to sunny countries or regions?

Yes, we are focused on markets with strong solar radiance to maximize our project advantages, which is why we are primarily concentrating efforts in Portugal, Spain, Italy, Greece, and specific areas within North America.

How many employees do we have at this time?

We have 140 employees, driven significantly by our production facility in Benavente, with the rest distributed among R&D, EPC teams, and other administrative and commercial functions.

Can you touch on the process of building out the Benavente facility and what the cadence will look like over the near term?

The electrolyzer production is the main focus, with the next two lines to arrive for producing the solar concentrator module. These are units that the current manufacturing facility can already produce. Therefore, we can service projects that require immediate deployment. The critical go-live has been HEVO; the lines for the solar concentrator will follow in Q1 and Q2 of next year, with a target production capacity of 120 megawatts.

That will do it for our second quarter webcast. Thanks to everyone who's joined. If you have additional questions or if we didn't get around to answering your question, feel free to reach out to me and the IR team at [email protected]. We look forward to seeing you all again at our next update.