Ceres Power Holdings plc (CWR) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the Ceres Power Holdings plc interim results investor presentation. [Operator Instructions] Before we begin, we'd like to submit the following poll. And as usual, I'm sure the company would be most grateful for your participation. And I'd now like to hand over to CEO, Phil Caldwell. Good morning.

Good morning, everybody, and thank you for joining us. I'm Phil, Chief Executive, and I'm joined obviously, with Eric Lakin, our CFO; and Elizabeth, Director of Investor Relations this morning. I'm very pleased to talk you through the interim results for the period ending 30th of June this year. So the business continues to make good progress, both operationally and strategically. We've got a number of key activities going on, particularly with our 2 main licensee partners, Bosch and Doosan progressing towards start of production. A significant milestone this year was Bosch receiving IPCEI funding of around EUR 160 million for their facility in Bamberg, in Germany. So that's obviously a big step forward, and we're very active with Doosan, which we'll talk about during the presentation. We made a big move into electrolysis just under 2 years ago, really. And I'm very pleased, in fact, the testing that we've done so far, the progress we've made has surpassed expectations. And we've signed a number of collaborations. Obviously, we are already working with Shell. And earlier this year, we signed a collaboration with Linde Engineering and Bosch, and we'll talk further about electrolysis during this session. And we're in active discussions with a growing number of potential licensees, both on the SOFC side and interestingly, more and more on the SOEC side, we're seeing very strong interest in this technology. And we strengthened our global commercial footprint now in terms of the business development team that we have pursuing these opportunities. On the technology side, we passed some critical milestones this period. We have a new second-generation stack, which is designed for the industrialization and the scale-up and that's gone through a critical design review, and we expect that to go into production in our facility next year and obviously, moving on into partners shortly after. And not insignificantly, we are pleased to say that earlier this month, we achieved FTSE 250 indexation, having been on the AIM market for quite a while. We've successfully graduated to the main market. I would like to address the issue of the Weichai China JV. We're going to talk a lot today about a lot of the advantages of the licensing model in terms of its ability to scale, its gross margins. The one downside is we're not always in control of our own time line. We have a continued delay, as we've said, between Bosch and Weichai on the sign-off of the JV. So as per the statement we made earlier this year, we've actually taken the associated revenue with the JV out of this financial period. But I would like to also point out though that our relationship with both Bosch and Weichai remains very healthy, we've this year been supporting the development of larger 120-kilowatt station units at Weichai in China, which are now on test at several sites. We have a new Board directive appointment we've announced this morning with Dr. Sun, who's one of the leading technologists in Weichai joining Ceres Board. So the Weichai collaboration is very much remains strong. And we'll obviously update you when we can on progress on the collaboration between Weichai and Bosch as we go. So with that introduction, I'd like to hand over to Eric to go into the numbers of the first half in more detail. And then I'll talk to you again about the strategic direction once we've been through the numbers. Eric?

Okay. Thanks, Phil. So for the 6 months ending June this year, revenue was GBP 11.3 million. So that reflects an increase of 17% from the same period last year. And that reflects primarily progress with our commercial partners as they move towards industrialization and we meet some milestones and KPIs during the half. Gross margin was up at 61% compared to 49% for the first half of 2022, and that reflects a combination of increase in revenue and also an evolving mix and maintaining industry-leading sector margins. Gross profit of GBP 6.9 million compares to GBP 4.7 million in the first half of last year. That increase largely reflects the increase in revenue as well as the improved gross margin year-on-year. Adjusted EBITDA loss of GBP 23.8 million in the half compared to GBP 20.8 million loss last year. That reflects an increase in our expenditure on targeted investments for the future, which I'll come on to later. As a reminder, we made a change to our P&L reporting last year, and we've been consistent with that now and the R&D expenditure credits, which is becoming quite significant following an increase in the rates from those, we show us other operating income, no longer show within cost of sales. That's a separate line. So our headline revenue is our KPI, but other operating income, we put out separately now includes RDEC. This is a reminder of that. And we've made a like-for-like comparisons for the prior year. In terms of the balance sheet, 30th of June position is GBP 161 million, so a healthy strong cash position and employees of 586 compared to 570 at the end of the prior year. And that reflects a reduced growth in headcount as you reach critical mass, and we're really targeting investments. And so we're going to see a slowdown in the growth of our headcount continuing through the year. Order backlog of GBP 61.1 million compares to GBP 67.8 million at the end of the prior year. And that reflects a reduction from the revenue recognized in that backlog, offset by some new order intake in the half. And the other key metric for us was the planned partner capacity that was unchanged at 250 megawatts, and that reflects 200 megawatts factory being constructed by Bosch and 50 megawatts from Doosan. In terms of the development and trends for revenue, gross profit and margin, as you can see, it's -- the revenue is relatively lumpy, and that -- a lot of the variability reflects the timing of license fee income and revenue recognition, and that will continue to be the case until the point where our royalty revenue income becomes a significant part of the overall revenue mix. And the gross profit margin, as I mentioned before, is a combination of total revenue level of absorption of our factory costs revenue mix. So this slide here shows the different revenue components. I'll just give a reminder of what they are. Many of you will be familiar with this, but we've currently got 3 main contributions to our top line. Engineering Services, which is really time of our engineering team as we support our partners with collaboration and joint collaboration for system development and manufacturing progression. That is relatively predictable, and that's charged on a sort of hourly, daily rate basis. Supply represents prototype technology to the provision of sales and stacks and components for our partners, the existing partners for developing systems, but also new partners who are looking to test the product with the consideration of potentially becoming new licensees. And that is recognized at a point in time at the point of shipment of stacks and components, and that's again relatively stable line. It was higher this half compared to this time last year as we're supporting our partners moving towards start of production next year. License fee income. So that's a high margin. It can be 100% margin. That includes both upfront license fees for technology transfer as well as ongoing development license revenue. The latter is the largest component of that right now. So typically with Bosch and Doosan as we're continuing with the joint collaborations with them for the -- under the collaboration license agreements. Royalties, we note here, that is not yet part of our revenue, that is longer-term high-margin revenue. And as a reminder, we received royalties at the point of commercial sale of stacks into which -- of systems rather, into which our stacks go. So it's not triggered by stack production by partners, but ultimately by revenue. So we're not expecting material royalty revenue next year, even though our partners are moving to a start of production next year on series mass manufacture production, but have become more material in 2025, when those stacks being manufactured go into systems, which are ultimately sold to end users. So that's the trigger for our royalty income, which we expect to be an increasing component of our business going forward. As I mentioned earlier, we continue to invest in a targeted way for the future. Investment in the future is defined by us as being our research and development spend as well as our capital expenditure or CapEx as well as capitalized investments. So together, that reflects investments in capacity and capability for future revenue. It increased year-on-year. And a lot of the investment now is going into projects, particularly SOEC. It includes investment in our demonstrators, the SOEC demonstrators. We've got 2, 1 -- first one for Shell, the second one for Linde and Bosch. It also reflects significant investment in our test capability, including the outsourced test with HORIBA MIRA. There's an image on this slide, which shows that new test facility in Nuneaton, which was inaugurated this year. And also development in fuel sales, particularly investments in future fuels compatibility. And as Phil mentioned earlier, the next generation of sales and stacks, which provide performance improvements and reduce costs. It is -- the spend is down from last 6 months. We are, again, as I mentioned before, having very focused targeted investments and to the level of growth of our investment in the future will be less than prior years as we get to critical mass. And some of these one-off projects such as the system demonstrated SOEC, they will effectively come to an end towards the end of next year. In terms of the cash outflows or cash burn, it is reduced from last -- this time last year and certainly the prior 6 months as well. And that is a reflection of -- partly, we had some one-off benefit. We reduced receivables in the half. There was a significant outstanding receivables balance at the end of last year with existing partners, which got paid down early in the half. So that's a one-off benefit that won't repeat in the second half. But having said that, we expect the cash outflow in the second half of this year to be less than the second half of last year. So still second half loaded, but the overall cash outflow this year we expect to be lower than prior year as we manage our cash carefully and ensure it's being invested in the right -- with the areas of highest return. It's also worth noting, we are benefiting from having a strong cash balance and higher interest rates. So we're making sure we safeguard our funds and deposits with only high -- very high investment-grade counterparties, but ensuring a reasonable economic return for those. And the effective interest rates have improved significantly year-on-year. So we had interest income of GBP 2.8 million in the first half compared to just GBP 0.7 million in the first half of last year, and we expect a similar type of interest income for the second half as well. And with that, I'll hand back to Phil.

Thanks, Eric. So I'd just like to spend a little bit of time talking about the strategic progress of the business. As you may be aware, we view this technology as a platform technology that addresses both the power generation side and now the green hydrogen side, so it's quite unique in the industry. On the power side, we're obviously targeting distributed power, commercial power and potentially maritime applications as well. On the green hydrogen side, we're very focused on industrial decarbonization. We see the market opportunities for this being green steel, green ammonia and the future fuel synthetic fuels market, where we have a very distinct advantage. Our strategy -- execution of this strategy is based upon 3 pillars. One is enabling our license partners to succeed. What that means is supporting our partners as they scale up because our target is to get multi-gigawatts of production of this technology in place by the end of this decade. That's what ultimately turns the business into royalty generating and a very profitable business. We're moving forward on that with both Bosch and Doosan. And as we've mentioned, we'll come on to the funding of that helps from the European Union. As well as our existing partners, we're building commercial scale. And part of that is obviously the move into electrolysis, where we see huge market opportunity and building some of the initial partnerships with Shell, Bosch and Linde, those demonstrations are obviously key. But also, we're building a wider engagement across the hydrogen value chain. The hydrogen side of the business is quite different from the power systems side of the business, and that's why we're engaging with end users, EPCs and manufacturers, and we'll talk a little bit about that in a few minutes. And key, obviously, is a licensing business is to maintain technology leadership and a lot of our investments going into the next generation of stack technology, next sets of materials, both for FC and for EC and continuing the innovation on the IP side and capturing that both for the fuel cell and the electrolyzer systems. So just a couple of key points of highlights. Doosan's 50-megawatt factory is nearing completion. By that, building is complete. All the equipment is in. We've got teams on the ground actually starting to commission that equipment now. And that's on schedule for commissioning into the second half of 2024. Doosan's obviously secured domestic supply chain, which is what we expect and laid the foundations beyond the 10-kilowatt system into higher power applications, particularly targeting some of those markets I talked about in marine and commercial power. And they have the relationships as mentioned here with Shell and Korean shipbuilding and offshore engineering. So a very strong relationship with Doosan. Here, you see Stefan Hartung, Chief Executive of Bosch, looking very pleased to receive his EUR 160 million of IPCEI funding, and that's specifically for the mass production of our technology. So that's to fund the solid oxide fuel cell program and scale up. Or it's a contribution that the whole investment by Bosch is closer to EUR 500 million. What they have developed is systems that offer the plug and play up to 100 kilowatts, and they've got that in various demonstrations, you can see on their websites, including for applications like hospitals and for data centers and those kind of applications. And moving on, expanding the relationship with Bosch. Obviously, Bosch as a manufacturing partner, a logical step could be into the SOEC market. And what we have signed this year is that relationship with the 3-way between Bosch and Linde Engineering to demonstrate, again, at a megawatt scale, our system on a facility in Stuttgart in Germany. This is going to be slightly different from the first system deployed with Shell because we see this more of a test bed where we can actually put in newer versions of the technology. So more of a development partnership than the pure demonstration that we have with Shell. And obviously, our interest in this relationship with Bosch is a mass manufacturer and Linde as a leading EPC and system integrator, our key components into that value chain. Here, we've got a video -- a very short video if we can show that of the first system being actually installed at AVL SCHRICK in Germany. So here you see the containerized system for the first time with the electrolyzer modules in it. And that's actually literally going through hot commissioning now. So we expect to be making hydrogen with the system any day now, and that's the validation step before that system then gets shipped to Bangalore in India with Shell at the end of this year. I think that's a pretty impressive achievement from a standing start of less than 2 years to get to that megawatt scale. I think the other thing that's very exciting about this technology is the types of efficiencies that we are getting already without heat are in the mid-40 to 45-kilowatt hours per kilo or less going down into the high 30s of kilowatt hours per kilo of hydrogen. That's world-class in terms of with heat integration and potentially without heat integration as well. So I think the data that we're going to get from this pretty soon will validate this technology, particularly for the industrial decarbonization markets and potentially into the non-heat markets as well. If we can move on. And what we have done is a modular scale of concept. I mentioned we have the next generation of stack technology, what we've been doing over the past year or 2. And some of you may have seen this in our CP2 facility is we've now gone to larger footprint cells, which then enable us to build larger building blocks and also lower cost, much simpler to manufacture stacks and some of that work we've done in collaboration with our scale up with Bosch. And then we're building those into arrays. And the first modules that we've developed are 1-megawatt demonstrators, but we're now looking at larger scale building blocks, which will then be built into repeat units into 100s of megawatts to gigawatt scale. And the area that we're looking at now is how we scale these on the right, and we're doing some work with a number of EPCs on how you actually take it from low megawatts to 100s of megawatts to gigawatts. So that's the logical progression that the company is making in this electrolyzer market. And as I mentioned, it's a different industry that we're now playing in for the hydrogen side of the business. So Ceres, as a technology provider, works with our stack manufacturers and module manufacturers and then we're doing a lot of work and relationship buildings with EPCs and system integrators and also the hydrogen end users. So the way we see this, for example, is Shell would be a hydrogen end user, Linde is a potential EPC or system integrator and Bosch is a manufacturer. So that's the kind of ecosystem that we're starting to build on the electrolyzer side. So in terms of the outlook for the year ahead, I think what we've done over the past year or so is really do some of the hard yards on scale up. We've done some really solid work on the next generation of stack technology, which is now coming forward. We're supporting our partners on second and third factory build. So this will be after CP2 and Doosan and Germany. We've done this 3x now in terms of taking it from pilot scale into mass production. As you can see, the level of engineering that we've been able to do, all of that electrolyzer and all those modules is all built by Ceres. So that's not something that we've had to rely on others for. We've outsourced some of the engineering to build it, but it's all our design, it's all our capability, and that's quite impressive on the demonstrators with Shell, with Bosch and Linde. The full year revenue growth, I mentioned, obviously, were frustrated by the delay in the China JV, but depending on signing of new license partners, we still can expect full year revenue growth this year. And we are building a pipeline of interest, both on the power side and on the electrolysis side. And I don't think we're that far away from now being able to offer electrolysis as an offering now that could be licensed. And the work is underway on the next scale of modularization to enable us to address 100s of megawatts to gigawatts of the green hydrogen opportunities, which we clearly see as a big opportunity and will be an increasing focus for the company going forward. So with that, I'll take any questions with Eric.

That's great. Eric, Phil, thank you very much, indeed, for updating investors. [Operator Instructions] While the company take a few moments to recall to review those questions submitted today, I'd like to remind you the recording of this presentation, along with a copy of the slides and the published Q&A can be accessed by your Investor Meet Company dashboard. Phil, perhaps if we could take the questions from the room first. And I'll start. Sorry.

Erwan from RBC. Just one question for me, please, on Doosan. Is it fair to expect first production more in 2025 now versus late 2024?

So we've got -- we expect stack production in 2024 as in the -- like I said, we've got teams there now very active who go to coal commissioning, hot commissioning and then into production. If you're talking about the whole system production, I think that's going to be late '24, possibly '25, but that's really Doosan's. We are not involved on the system side of this application with Doosan. That's Doosan doing that scale from production.

Alex Smith from Investec. Just a quick one on the electrolysis business. I guess you kind of commented that it could potentially be one of the largest parts of the business towards the second half of the decade. It seems like quite an aggressive ramp up on where we are today. If you could maybe outline maybe the key milestones, I guess, you looking at produce -- well, looking at a product would be 2 to 3 megawatts that can then be modularized and sold. But maybe the key milestones for the next 2 years to kind of get you on that path.

That's a good question. I think the key -- look, first of all, the megawatt scale demonstrate is obviously a key milestone because in this industry, people want to actually be able to touch and kick something that's real and of a significant size. And also, we want to demonstrate -- we've obviously done a lot of module testing. We want to test it in the whole balance of plant largest system arena. We know that, that megawatt is literally a test bed. So the work we're looking at is the modularization of that. So what's the next or not the next, what is the minimum viable module size that we need to be able to scale to address that market? And we're doing -- like I said, we're doing work on that with EPCs now because we're not necessarily experts in that we need to work with industry on that. And probably they won't be containerized systems in the future. They'll look and feel a lot more like chemical plants. So that's going to be a key step for us. And I also think the next key step will be signing licensees. So what we have with the interest from Shell and Linde and Bosch is really at the demonstration/evaluation phase. But what we are seeing is given the potential of the performance and if you remember, when we did the electrolysis teaching, you're talking about a 25% saving in OpEx, a 25% saving in CapEx, a 25% saving in upstream renewables that you don't need to have. If you're 55-kilowatt hours on conventional low-temperature electrolysis and you can get down to 40% or below with SOEC. That's a -- you don't -- that's a big saving on the upstream capacity that you need. So I think that's really becoming a compelling sales case for this technology. And because of that, we're seeing people who are interested in early adoption. So they are the proof points, which is get the megawatt scale up and running the modularization for large scale and licensing partners, and I expect all of those in the coming year or so.

James Carmichael from Berenberg. Maybe could you just provide a bit more detail on the second-generation fuel cell stack you've outlined maybe just -- anything specific you can give us on the cost and performance improvements? And then just to confirm, I think it's right to say that, that doesn't automatically flow through to existing license partners, but they need a new license to get access to that? And then just a quick second one, just on, I guess, the big sort of moving part for the second half is signing a new licensing partner in terms of the P&L. Can you maybe just sort of give us a bit on your level of confidence there and how that could impact the gross margin?

Yes. Well, if I take the second part of the question first. We've got a number of active, I can't say too much, but we're quite advanced on a number of opportunities. You can never guarantee timing or if they're even going to happen. That's just the way the pipeline works. But I think there's a good -- we've got some good candidates there that would satisfy what we need for the targets that we've got for this year. But obviously, they're not certain yet. So I'm not going to make a future forecast on that. In terms of the next generation of cell and stack technology, it's quite simple. We've actually gone to larger footprint, streamline the number of processes, the number of repeating units that it takes to build cells and stacks. So that has a knock-on effect in both the CapEx and the OpEx. When we do license deals with Doosan and Bosch, we have KPIs on the cost per unit of stacks produced, and we are hitting those KPIs with these designs and also the previous generation as well. Your question about, does everybody get it automatically? It depends on the nature of the license. So -- but very often, what we do is based upon minimum royalties or minimum payments than those technology refreshes that come into the license. And look, it's part of our long-term partnership. We want our partners to be competitive and stay ahead, and that's how we justify our -- that technology leadership I talked about. We have to maintain our value through continuous innovation.

James, just pick up your specific question on gross margin. If we -- as I've talked about with a new license partner, if achieved this year to support the revenue, the technology transfer, the license element will be effectively or close to 100% margin. So the margin in the second half would be higher than the first half, should we make the consensus revenue.

It's Ed Maravanyika from Liberum. Just a question on Doosan. Do you have any visibility or any sense of whether they have tied up sales to their customers? So -- because you mentioned that it's not production that triggers revenue but actual sales.

We do have some visibility on that. But again, I think I'd refer you to their public statements because they are a publicly listed company. So you have to follow Doosan's guidance. But obviously, what I can say in South Korea, they have an existing market already with the phosphoric acid business. So they're selling into a distributed power market already. Government has very ambitious targets for the penetration of fuel cells as a renewable technology by -- I think it's 16 gigawatts by 2040 or something like this. So they're very much backed by government policies as well. So all of that helps. But in terms of a specific sales number, I can't comment on that. And again, I think Doosan is quite useful because it's public. So you'll see -- in the fullness of time, you'll see that -- their own communication on that.

Nick Walker from Peel Hunt. Three quick questions, if I may. First of all, there's a lot of talk obviously in your statement and obviously some of the sentiments you've had today that quite a lot of the emphasis of the company is shifting towards electrolysis and you're saying that's going to be the big part of the business mid-decade onwards. My question is, why do you think that given that your power business, obviously, with Bosch and Doosan and others. Would you say that, that is not taking off as fast as you thought it might be and because of the offer is quite compelling, in my view, obviously, particularly with regards to efficiency and cost saving of power which should be of concern to everybody in the world. Would you say that sort of the interest level generally globally and within your customers is moving towards the hydrogen potential? I'm just interested in that sort of power versus hydrogen emphasis within the customer base. And if you see the horse is traveling, if you like, in terms of speed, first of all. Secondly, with respect to once your partners, Bosch and Doosan and others start to manufacture and obviously generate royalties. As you said, you're not in control of that clearly. Is that going to enable you or hinder you from giving guidance going forward from the company's perspective, okay? That's that. And thirdly, just quickly with respect to AVL, obviously, you mentioned quite a few times that there were quite a few sort of new prospects in the hopper, some of which are quite advanced. Has AVL been quite a significant generator of those system opportunities?

Okay. In terms of the market pace, we still see big market opportunities for SOFC. I think what we're seeing is if you look at the demand now, there's more and more demand on the green hydrogen side than on the fuel cell side. Would I say actually slow down? Perhaps to some extent with what's happened in new Ukraine gas prices locally, that's obviously given people a little bit of pause for thought maybe in the European markets. I think in the Asian markets, I still think natural gas is going to be a big driver in the future. And when some of the people we're talking to for potential for new SOFC licensees are in that part of the world. So I think it's a bit of a geographic play to be honest, Nick, in terms of where we see the demand coming from. But I think what we are realizing is the way things are going, the green hydrogen side is going to be even bigger demand than the fuel cell side. And we want to make sure that we are in the game and go fast enough to capture that. So I think that's -- we could take approach of -- the strategic question we're going to face is, well, keep FC going to as a primary and then slowly build a BC or put the accelerator on to EC as well. And I think that's probably -- that's what the market is telling us is the sensible thing to do is to accelerate EC. The second question, I didn't quite understand. Can you repeat it? Or did you -- maybe Eric's got it.

So what's our ability to support guidance or revenue forecast from royalties, given it's sort of part out of our hands, it's our partners selling. So yes, it's a good question. So this will be a new obviously, revenue stream for us. So we'll -- there's 2 -- so formally, it varies by contract. We have rights around some estimates of what the royalties could be. And also, there'll be sort of quarterly updates from the partners. So we'll be able to see not just annually, but on an ongoing basis, what their sales are. We also need to establish, as you imagine, new processes for auditing and reviewing those sales and agreeing the royalties that will be due to us. So that's all understood and effectively embedded in the contracts. Informally, they are partners. They're not just customers, so we'll have ongoing dialogue and conversation with them as we do today, but it will evolve into getting a sense of their pipeline opportunities and sales forecasts. So I think whilst it won't be an exact science, and it will depend ultimately on understanding the timing of their manufacturer and building inventory and ultimately selling. I think we'll -- we should have a reasonable handle on understanding what those royalties would be, at least on a short-term basis.

There was a third question.

On AVL?

Yes.

Has AVL been a significant generator of prospects?

I think AVL hasn't materialized in the way we hoped. So it has had -- it's generated prospects, but not of the material scale that we've hoped for. The new prospects that we are pursuing right now is coming actually to our extended commercial team. So we've actually invested regionally in our own sales team, and that's really where these opportunities are starting to come from. But I mean, one thing on AVL is they've been a key partner in the build and test of that video that you saw there, that's AVL SCHRICK. So they are still a very useful partner for us in some aspects of the business.

Kenneth Rumph from Goodbody. Two questions. Firstly, just where in the boiler walls, if you like, in Germany, to phrase it that way? Obviously, Bosch aren't intended to make a boiler in a sense, they're now talking about kind of 100-kilowatt units for data centers and stuff. But where does a gas with the potential for hydrogen or other fuels, technology fit in where we've ended up in Germany? Second question was just, once again, updating on Japan. You've got a partner there, and nothing much has happened really, but it's another Asian market that is interested in both fuel cells and hydrogen.

Yes. Look, I'm not an expert on the German market. I think boiler walls, as you call it, is I think something that's not clear which way that's going to go. I think the offering of Bosch is very different because it is basically distributed power at a very efficient scale and is hydrogen-ready. And Germany is looking at putting hydrogen into gas goods, et cetera, in the future. I think that kind of metric and sentiment probably doesn't help if you're targeting something as a boiler, but this clearly isn't. This is something a lot more sophisticated than that. Japan is interesting actually for me because, look, we've been doing business in Japan for a number of years. I think Japan has lost the way in terms of its leadership that it had on fuel cells, if you go back as far as like any farm units and the big push they had on automotive and refueling stations. However, just this year, in -- consistent with the approach around the world, I think Japan has announced over GBP 100 billion of funding -- of government policy funding directly now into Japanese companies. So a bit of a mini IRA-type approach or a mini IPCEI approach, not even mini, pretty substantial, is happening in Japan as well. So we're starting to see renewed interest now in Japan in hydrogen technologies and -- but that's a fairly recent step, I would say. So it's still -- again, we've got sales office in Japan and Korea in that part of the world as well. So it's definitely an interesting market for us, but it's only just, I think, waking up again.

Sean McLoughlin, HSBC. A couple of questions from me. Could I just get your view on Weichai change of Board member? Any reasoning for the switch? And Dr. Sun in the release talked of the next phase of the partnership. If you could just maybe elaborate on what that means and maybe changes you'd expect with Dr. Sun? The second question, maybe more for Eric. You mentioned tapering of R&D. I mean is this -- how do you -- let's say, is this sensible, how do you make this work with your ambition to conserve technology leadership and stay ahead of PS?

I can comment on the board change. I think Powell, who is our previous Board member, who is there for 3 years. He was -- he's a really good guy, but he was corporate development type person who was involved in the original JV negotiations, et cetera. Dr. Sun heads up a lot more technology and is responsible for SOFC within Weichai. So it's a lot more, I think, hands on and closer to the core business of sellers. So I think it's a positive step because I think he's very capable and actually, like I said, is closer to the technology and closer to the business. So I think it's kind of a natural cycle for the Board member to change, but I think it's a good appointment.

Yes. Thanks for the question, Sean. In terms of R&D, let me clarify. There's 2 things going on. So first of all, to your point, R&D continued investment is absolutely key to our business, both staying at the forefront of SOFC technology as well as electrolysis, and that will continue. And we've invested a lot in people and capability, and that will continue. And so there's elements of that will be stable, if not grow. The tapering point is really our total investment in the future, which covers R&D OpEx, CapEx, capitalized development. It includes some nonrecurring significant projects, right? And that's -- the ones to call out would be the 2 demonstration units we've mentioned, which are not small costs. I won't clarify what they are, but they are -- that includes all of our own stack production, which is internal consumption for R&D, which is expensed, the module developments, the container. And those projects will continue through to next year. But after next year, they won't be repeated. We're not planning more than to demonstrate at this point. Similarly, with the test infrastructure, significant investment, a lot of CapEx, but sell OpEx as well that goes into the capabilities, particularly with an uneaten building. So it's a fabrication of test units, which don't come cheap, but also development of the site for test capability. And again, that will be phasing out towards the end of next year. So I think the point being in terms of we look at our total spend and cash burn, there are known projects with a finite life, but this underlying investment will continue for sure, particularly material science, engineering.

Okay. If there are no more questions in the room, maybe I'll hand back to Elizabeth for any that may be online that need to address.

Thanks, Mark. We have 5 questions. If I can just come to you first, Phil. We've got a couple of questions understandably around the SOEC business. So perhaps you could elaborate on the time frame for trials in SOEC to actually convert into licenses and maybe bundling with that, someone asks when will green hygiene opportunities be significant in replacing gas? So I guess, if you could also just touch on actually again where we see those SOEC opportunities.

Yes. So the demonstration plans that we have are shelf delivery by the end of this year, installation commissioning early next year and operation then I think it's something like a 2- or 3-year period. It won't take us that long to actually get the data that we need and the confidence that we need in the performance of that, but that's going to be a key milestone. The Bosch Linde unit is about a year behind that. So planning for late next year. So we're building that second unit now, but then we've got -- and Bosch are actually preparing the site and then installation later next year. That's initially a 2-year period. But like I mentioned, we have the capability in that relationship to put different modules in different -- next generation of technology into that. So that's probably something that we'll keep on an ongoing basis. We kind of view that a little bit as a potential extension of our test capability because when you're testing electrolysis on that scale, you don't have -- it's not an insignificant energy bill you've got in terms of electricity costs and everything to actually generate and you need somewhere for that hydrogen to go as well. So these facilities are incredibly valuable test beds for us because they're real-world applications, but also the running costs of that are borne by our partners as well as contributions towards the project cost that Eric talked about. In terms of when green hydrogen become significant, I think versus natural gas was the question. We are not targeting generating that green hydrogen initially to put into gas grids. This is really targeting industrial applications. So this is hydrogen potentially to produce green steel, hydrogen to produce ammonia, hydrogen is part of the synthetic fuel process. That's where we see this technology. So I think you're still quite far off when you'll see hydrogen in gas grids because I think the primary -- the first use of hydrogen will be an industrial decarbonization. It's absolutely essential. It's a no-brainer when it's a high-value application.

Absolutely. And Anastasia, on the line from Goldman Sachs. She's asking which other EPC providers do we -- are we thinking about collaborating with beyond those that we've announced in Linde and Bosch?

Look, we've got a number that we're either working with already or starting to talk to. So I'm not going to list them off here. But obviously, if they become significant, we'll announce them.

Yes, absolutely. There's a question on the line. In terms of the North American market, excuse me, and whether we're looking at that closely and if we have a view on the sort of competitiveness of that market.

We are looking at that closely. We've just, again, put a regional sales person into that area. We're starting -- while we have collaborations with some of the national labs and places like that where we can demonstrate technology. The -- there's a lot of excitement about the U.S. market because of the IRA bill, but that tends to be on a tax credit kind of basis. So it's more at this point, favoring people who are actually getting into the production and we're actually looking at how do we actually get access to developers of the technology with definitely a target market for us, and we'll keep you up to date on that.

Great. And Eric, perhaps I could come to you. There's a question here just asking Doosan's current cash reserves cover the investment required to bring us through to profitability?

Okay. Yes. Good question. Yes. So as we've talked about a healthy balance sheet, strong cash position, no debt. The -- we obviously track the cash burn very closely. We're managing our costs whilst ensuring we balance that with investment for future growth. The -- it really comes down to commercial outcomes and the timing of that. So we're very comfortable where we are. And -- but the future cash flows over the coming years will clearly depend on the ramp-up of revenue and the timing of those new license partners as well as royalties.

Great. And there's a question here. It doesn't specify where, but I'm asking do we have any plans to do a dual listing? I'm assuming that's on the U.S. market, but the...

No, not yet. Not currently. I think give us a chance when it just got on to the main market.

I was going to say, don't tell me, that's my next job. Great. And just to close out, maybe somebody asks, do we have any view on the U.K. government green energy policy? And what else might we like to see?

We'd like to see a U.K. IRA type bill that would be very helpful. Look, I think -- look, the U.K. is in a state of flux at the moment. And my concern is, honestly speaking, that the green agenda is being politicized to some extent, which isn't helpful. But we're not expecting a great deal more to happen until the next election really. Personally, I think there is a -- the U.K. is falling behind in terms of policies when you look at what's happening in Europe, in the U.S., in Japan, as we've talked about today, in South Korea. The good news from Ceres point of view is we indirectly benefit from IPCEI funding to our partners and others, we can do the same in other parts of the world. But I would like to see more direct support for innovation and development of U.K. companies in the government, but I think we're going to have to wait until the next election to get clarity on whether that's even possible.

Thank you, Elizabeth, Phil, Eric for updating analysts this morning and the attendees investors online. Company's asking investors online, not to close the session as we're now automatically redirect you to the opportunity to provide your feedback in order that the company can better understand your views and expectations. This is going to take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Ceres Power, we'd like to thank you for attending today's presentation. Good morning to you.