Bergen Carbon Solutions AS (BCS) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to our third quarter presentation. Today, I brought with me Håvard, our Chief Technology Officer; and Fredrik, our Chief Commercial Officer, to do this presentation. We will present the latest news to you. This will include a financial, a technological and a commercial update. We will then finish with our development plans, our goals and the road map ahead. But first, I will give you a short introduction of Bergen Carbon Solutions and what we do since some of you are new viewers. For those of you who doesn't know me, my name is Finn Blydt-Svendsen. I am the interim CEO and one of the founders of Bergen Carbon Solutions. Bergen Carbon Solutions is a company in the green technology sector. We have a unique and proven core technology, where we produce a wide range of carbon products from CO2. The company was founded in 2016, and since then we have attracted approximately 40 highly qualified people and reached multiple milestones. The company has gone through some major changes both in the management and in the Board. I am confident that this new configuration will take us through the next important phases. Last year, in April, we were listed on Euronext Growth. Our mission is to create highly valuable carbon nano materials from CO2. This way, we can be one of the pioneering companies in the important carbon capture and utilization industry that will lead the way to decarbonize existing industries. Our technology gives us the opportunity to supply a new generation of materials for several industries, while, at the same time, utilize CO2. We are driven by the eager to further improve our technology to make sure that it can be used to excel the green shift. From the very beginning, we produced carbon nano fiber in small scale. Then we got our first prototype at Garnes outside Bergen. This gave us the possibility to explore different production parameters and inputs. Through this testing, we found out that it was possible to fine-tune the production and its output. This know-how gives us a great advantage for the further development of new carbon products. We are now working towards industrial adoption, and new potential partnerships are being considered each week. Håvard and Fredrik will add more on this topic later. As you can see in the figure, the potential offtake volume is greatest in the graphite sector. While the price is lower, our new discoveries show that we will be able to produce this at a fraction of the cost and at a higher efficiency than our existing methods. The initial findings are promising so we have grounds to explore this business case further. Graphite is one form of the element, carbon. In graphite, carbon atoms are arranged in layers. This layering gives graphite many of its properties. The global demand for graphite as battery materials will increase in the upcoming years. Our technology is fundamentally climate-positive. We see that through intensive research and development, we can improve several aspects of our business. We're introducing a new and groundbreaking separation technology and increasing the energy efficiency of our core process. This will push our competitive advantage even further. We are also expanding our product portfolio with the introduction of multi-walled carbon nano tubes and now graphite through latest Project C. These developments will further strengthen our climate positive advantage compared to traditional methods. The industry we are going to build requires the right strategic partners. We seek investors and partners with the right know-how and potential to help us excel our development. We are working towards material suppliers, industry-leading companies and national authorities to place Bergen Carbon Solutions on the industrial map and secure political attention. The development in the geopolitical situation with -- following disruptions in supply chains has made it more and more obvious that there is a need for Europe to become more self-sufficient when it comes to critical raw materials. This is a megatrend that works in our favor. This can only be achieved by broad industrial partnerships and technological developments. Overall, the company is moving ahead according to the plan. We have several exciting projects going on, for example, Project C, where we are investigating how we can use our technology to mass produce graphite from CO2. This is really exciting because it can enable us to utilize substantial amounts of CO2 while contributing to solve the geopolitical challenges in the raw material supply. Our main focus area is still in the battery sector. It is a clear shortfall in several of the important materials needed to cover the demand. We have continued the discussion with multiple companies that are investigating the possibility to use our green materials into their battery chemistry. The letter of intent that we have with our Japanese partner has evolved into an MOU, with the intention of setting up a joint venture. During the third quarter, we have done multiple testings at Flesland for our Project C. We are aiming to get the first initial results within this year. The BIR test module is installed, and we hope to have the results within this year. And now over to Håvard.

Thank you, Finn. My name is Håvard Husby. I'm Chief Technology Officer here in Bergen Carbon Solutions. My education is electrochemist from NTNU, and I have experience from land-based industry in Norway. Today, I was hoping to give you a little bit more insight into the process and that of our competitors. I will then do a short comparison and show you why our production route is superior to the conventional method of production. I will start by introducing chemical vapor deposition, which is the method used by most of our competitors. It's the major method of production both for carbon nano fibers and carbon nano tubes. It's a well-established method of production and can be used for structuring all kind of carbon materials. for example, diamonds for grinding tools. The process is 3-step. First, natural gas typically is let into the reaction zone at high temperatures and low pressures. The exact conditions depend on which kind of materials you want to produce. Second, the gas adsorbs onto a substrate. You grow fibers or tubes from nucleation points. The carbon from the gas is incorporated in the structure while the remaining components remain in gas phase. Then after some given time, the substrate with the nano structures is taken out of the chamber, the carbon is purified and prepared. As you can understand, this is a batch process and output is limited by the gas let into the reactor, the size of the reactor and the reaction time allowed. The temperature is significant, and it is also energy costly to remain -- to maintain a vacuum in the reaction zone. All of these points give a high energy consumption for the process and a low output. This, in turn, means high CO2 emissions for the process. Our process is fundamentally different. We have a 2-step process, where we are converting CO2 into nano fibers, nano tubes or even graphite, as you will hear more about later in the presentation. Firstly, CO2 from -- in principle, any source chemically reacts with the electrolyte. You can think of it like a bubbling CO2 in water in your SodaStream machine. The carbonate formed is then transformed through electrolysis. Carbon is deposited on the cathode and there is oxygen evolution on the anode. After the production is finished, the electrolyte is brought back into its pre-carbonated state and ready to consume more CO2. Forming carbon is quite straightforward. The trick is to structure it into fibers, tubes or graphite. We do this with our trade secret combination of a lot of parameters, including current densities and voltage control, which kind of substrate materials we use, nucleation agents and trace components and much more. After we have built up our fibers or tubes or graphite to some given thickness, the cathode is extracted and harvested. Our nano materials are quite fluffy of nature and acts like a sponge in the electrolyte. That means what we actually extract from our process is about 90% electrolyte and 10% product. We then have to separate the electrolyte from the carbon product to gain a sellable product. For some time, this has been the major cost driver for our process. But we have gained a lot of experience in performing this process, and in a few slides I will present a novel process solution we have developed that drastically improves our recovery of electrolyte. This decreases production costs and increases profitability. The process developed by our company has a lot of advantages over the conventional methods. We operate at relatively moderate temperatures, around 800 degrees compared to 1,000-plus in CVD. We also operate at ambient pressure. Our process is more compact because it is performed in liquid state instead of gas. The concentration in liquid state is much higher than what is possible in gas state, and the energy consumption is thus just a fraction of CVD. Our technology is still maturing from a level already highly competitive compared to CVD. We are constantly doing incremental improvements to get more and more efficient and profitable, and from time to time, we also have huge leaps in efficiency, like the new separation concept that I will soon introduce. From time to time, our highly competent personnel comes up with game changers that drastically improve our process and profitability. And one of these breakthroughs has been on separation of the electrolyte from carbon product. Remember that I told you that our major cost driver was the electrolyte. Well, we have found outlines of a new process where we use CO2 in water to dissolve the electrolyte. This mix will not dissolve carbon, and the carbon product can easily be filtered away. By changing the process conditions, the electrolyte is precipitated. That means it sinks to the bottom of the reaction vessel again. It can then be extracted and reused, and the electrolyte is even purified from it in its inlet state. As you can understand, this is a new process that drastically improves our profitability and it's a possibility too good to skip over. So we have therefore decided to include this in our factory design. It has been quite some journey in this company, and that includes for the technical development. At admission to the stock exchange, our plan was to use containers in a decentralized production setup to produce CNF where the emitters were. After engineering and calculating, we altered this strategy to a factory-based setup. This meant a higher output and a lower OpEx to fit with market needs. There is no change to the strategy, but we are constantly developing and implementing new improvements to improve profits in the long run. Since IPO, we have had several upscaling steps and we have commissioned a lot of new production units in the passing year, increasing our design capacity and making it possible for us to do a lot more testing. We completed the installation at BIR and we hope to conclude and report on this in December. This project allows us to test the robustness of our process and to find the outer limits of our operational range. That will be very useful in the further design of the factory. Thank you.

Okay. So thank you, Håvard. My name is Fredrik Oksnes, and I'm the Chief Commercial Officer here at Bergen Carbon Solutions. I will use this opportunity to guide you through our commercial development. The company is currently in a very exciting position. We know that the value of our product is dependent on the specific improvement we can bring to our customers. The improvement in general is a function about the physical properties of the product, if it's graphite, CNF, multi-walled carbon nano tubes and so on, but also the morphology within each product spectrum. The degree of purity of the carbon material in itself is also a huge importancy for our customers. As you probably have guessed, we have also seen that dispersion technology in itself is crucial for a good blending in the mother material. The technical properties of our material in each case is -- and how it's prepared is also affecting the results greatly. In general, industrial materials need to be tested and verified into each individual application before large-scale industrial adoption takes place. This extensive time to market is longer than we have expected earlier on. The good thing about it, though, is it means that when you finally get acceptancy for your product, you can expect to get long contracts. Our extended product portfolio, especially the introduction of multi-walled carbon nano tubes, which is very exciting for us, enables us to target a much, much bigger market than earlier. This market is expected to be at least 10x bigger than the CNF market, and the growth rate seems to be much, much higher as well due to the technical properties of the material. To commercialize our brand-new technology is a very interesting exercise. Even if we see a huge potential to reduce CO2 emissions by blending in our nano materials in many different industries, we need to focus our efforts towards the area where we expect the potential to be highest first. We have already got some very good initial results, showing that our material is well suited for use as an additive into electrodes for batteries. By blending in our nano materials like the CNF, multi-walled CNT, you can expect to increase the energy storage capacity of the cell, increase the charging capabilities of the cell and reduce the deterioration rate of the cell. This means that our material will reduce the need for materials in the first place, while, at the same time, increase the properties of the cell. This is really good news for the battery manufacturer, especially the European ones. As you can see from the graph presented here, we need new solution to fulfill the gap because we have a significant shortfall when it comes to graphite in Europe that will be used in anode graphite. We need solution to fulfill this critical need for materials. And as you can see, until now, we needed some drastic changes. This is where Bergen Carbon Solutions are coming in. We are producing both a nano material that will reduce the need for graphite in the first place. And we have recently launched our Project C with the intention of investigating our ability to produce anode graphite directly from the CO2 emissions. Overall, meaning that by implementing our technology in the European battery value chain, we can help sorting out the geopolitical situation and reduce the European addiction for raw materials from, for instance, China. And this is why we have launched our newest project, Project C. With Project C, we are aiming to investigate our ability to produce large volumes of graphite to support the European energy transition towards 2030. If we succeed with bringing a highly efficient, large-scale graphite production system within the price range of anode graphite materials, this project can be the start of a business area of tremendous scales. Just think, if Europe can be self-sufficient of anode graphite for the battery adventure, while, at the same time, reducing our CO2 emissions. That must be the most valued CCU value chain out there. As an example, in our hometown, Bergen, we have a waste facility center there where they're letting out roughly 250,000 tonnes of CO2 each year. With our technology, we will be able to produce approximately 50,000 tonnes of anode graphites yearly. This is huge numbers, guys, and it's underlying the overall business potential of our technology. Overall, the nano carbon market is highly competitive industry. Due to the price sensitivity in the market, we will not continue to bring updates regarding price levels of different nano carbons like we have done until now. Within the total market, we have identified huge market variation in both product quality, purity levels, price levels and concluded that we need to gather a deeper understanding of the different market segments. Some market indications shows lower prices than previously guided, while, at the same time, seems to be significantly higher volumes, underlying that we actually need to build a deeper understanding. Based on the fact that our process is fundamentally more energy efficient and climate positive compared to our competitors, it's important for us to make sure that when we are industrializing our technology now, we need to make use of the whole part of the technology to use all our competitive advantage. That was it. Finn?

Thank you. I will cover the outlook before we move over to the Q&As. But let me start by saying that we have been able to sign Odd Stromsnes as our new Chief Executive Officer. He has more than 12 years of experience in the role as a CEO. I am convinced that he is the right man to lead the company for the coming period. He brings the required competency and experience needed to achieve our industrial ambitions. In this short time I have had to get to Odd, I am also convinced that we will work well together and that he complements the team in a good way. I will now return full time to my COO position, and this role will be increasingly more important going forward. As you have seen through this presentation, we are well situated and always evolving our market and technological position. We have given you a few examples of the last months' development indicating huge potentials in several fields, including improvements in separation process and the core technology. In the market segment, we are utilizing our flexibility to move into new markets and explore business opportunities that we believe has a potential for profitability. Our technology is still maturing and we constantly identify opportunities to improve on today's situation. It's therefore important to move quickly but at a controlled pace so that we are not missing out on low-hanging fruits that should be incorporated into our design. Because of the potentials identified through the latest months, we have made a decision to extend the time line of our factory. It is important for us to manage the capital and trust given to us by the investors in as good manner as possible. And the possibilities identified are considered too good to not be included in the first phase of our factory development. We still believe that Høyanger is the ideal location for the factory, and we are working closely with the industrial park and the municipality of Høyanger to realize this. The power agreement is already in place as just announced a few days ago. The key result from the strategic adjustments are a deeper understanding of the markets, optimization and development of the technology and we will also verify technology in pilots. We will implement improvements as well. All of this will contribute to reduce risk and improve the cost position. Our short-term goals are therefore to accelerate the work towards potential offtakes and business developments to acquire further market knowledge. An extended factory time line also gives us the important possibility of applying for soft funding. Regarding the technology in the short term, we will complete testing in BIR in December this year and continue the work on the CO2-based separation pilot so it will be ready within next year. The long-term goal for our company is to ensure that when upscaling, we are doing it with the correct technology and that we have secured profitability -- profitable long-term offtake agreements. We believe the best route to this is connecting with industrial partners that share our ambition of an industrial greener shift. This forms a good foundation for stable and profitable company set for the future. Thank you for watching, and we are now open for a Q&A session, and we will switch to Norwegian when we do that. Thank you.

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