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

Okay. Good morning, ladies and gentlemen and thank you very much for joining the Ceres team here today. We have an exciting product launch today, which culminates 25 years of science and technology developed here in the U.K. But the thematic of today really is about a new era of power generation and how Ceres and its partners can deliver at scale and pace to need what is now becoming a strategic and acute need, not just in the U.K. but globally. I'm joined by my team today. So you're going to hear a bit more from me on the market dynamics. Then you're going to hear from Filip Smeets, my Chief Commercial Officer, who's got over 25 years in the industry. We're delighted to be joined by Lauren Dickerson, Director of Strategy at Centrica. We obviously announced a recent partnership with Centrica. So we're going to give you a bit more color on that relationship. And then we have a product launch today but we're also going to talk in a facilitated session with Chris Leonard from UBS, with Caroline Hargrove, that's my CTO; and Nick Lawrence, CPO, our Chief Product Officer, who are really the team behind this core technology and the product that we're launching today. Stuart will wrap up on what this means, the financial opportunity, the business opportunity and then the Ceres team will take questions. So that's the outline for the day. I don't think there's any fire alarms or anything. So let's get started. So let's talk about what I think is one of the critical issues right now is time to power. We are on this journey for decarbonization and that is meaning increased electrification of all areas of society. Now power demand or primary energy demand in the EU is set to double by 2050. And all of these plans were put in place even before we laid on top what's happening now with the AI demand. AI growth is increasing. That's clear and there's all kinds of numbers on this. But when we switch from the learning mode into inference AI, we see that energy demand starting to go from 20 gigawatts to 120 gigawatts in this decade just on the AI side. So we already have companies like Ceres, like others that need low-cost available power for industrial strategy. Every country wants industrial growth, industrial strategy that starts with affordable, reliable energy. On top of that, every country is now talking about sovereign AI as well. So that's another layer on top. So we need affordable, reliable access to power. But the reality of this is the problem. Time to power is the critical issue. So if you want a conventional gas turbine, good news for the turbine manufacturers, they're sold out until the next decade. You can be waiting now 2031, 2032 for an order for a gas turbine. New nuclear, SMRs, of which -- and AMRs, of which Centrica is a pioneer, we're still probably middle of 2030s before we're really going to see deployment of new nuclear. Now that's going to be a key part of zero carbon energy but -- and also our technology works very well with that but it's not going to be here in the next 5 years. And then grid connection. We are at least 5 years away and probably longer for grid connections. It's estimated that there's going to be about $5 trillion globally spent on grid reinforcement and it's still not going to keep up. And I'll give you an example from Ceres. A few years ago, we were actually going to amalgamate our 2 sites. We have our R&D facility, our manufacturing facility. We were told by Power Networks U.K. we had a 5-year wait and we had to pay about several million to actually get that grid connection. So this is not just a data center issue. This is actually a fundamental issue for commercial and industrial customers as well. Affordable power as well is also in the news. I mean we saw last week, OpenAI delaying infrastructure decision in terms of big investment into the U.K. So it's access to power and it's affordability of power. And that's where we believe fuel cells now come in. So at Ceres, we are world leaders in electrochemical technology. What does that mean? That is the most efficient way to convert fuel to power known to physics. It's more efficient than a gas turbine. It's more efficient than a combustion engine. And also, it goes both ways. So we can turn fuel into power and also power into low-carbon fuels like hydrogen in the future. So this technology is the culmination of 25 years of British ingenuity coming out of Imperial College. It's robust. It uses everyday materials like steel, widely available rare earth materials. So we're not constrained on supply chains. It's highly efficient, like I said, it's more efficient than any other form of power generation out there. And it's modular and modularity matters because that is speed to market. So we're going to talk about speed to market in terms of entering businesses into this market today. But it also opens up something called behind the meter or on-site power generation, which can be complementary to grid power or in some cases, it can be your own power but that is the thematic that we're talking about. So really, what we're talking about here is designed for cost, low-cost materials designed for efficiency and designed for scale. And we fundamentally believe it's a no regret technology. You can run this on our existing fuel infrastructure today, which is the natural gas grid that we have. You can run it on blends. If you inject hydrogen into those grids, you can run it on hydrogen, you can run it on future fuels. So that technology is a no regret technology. We're super excited to introduce to you the technology today. And without further ado, I'd like you to be introduced to Endura, the new technology. [Presentation]

So this is the Endura platform. This is the platform that our partners are now scaling, investing hundreds of millions in building manufacturing facilities globally. And we believe fundamentally at Ceres that in a constrained energy world, the winner is going to be the platform that scales fastest and scales globally as well. And that's why we believe that Ceres will win because it's not just about the technology, it's also about how we go to market and how we partner to bring this technology to a global stage. So I talked a little bit earlier about behind-the-meter opportunities. We believe that the opportunity by the end of this decade is about 22 gigawatts is the total addressable market that solid oxide fuel cells can play in. No surprise, about 50% of that is the data center market. But 50% of it almost is conventional power generation for everyday businesses, for industries, for buildings like this. When you look at where this is geographically, there's a lot of attention today on hyperscalers in the U.S., et cetera but this is not just a U.S. issue. This is a global issue. So we see the U.S. market is about 25% but we see Europe, Middle East, about 20%. And then 50% of that is Asia. We have energy constraints in places like Taiwan, Korea, Japan. You can expect manufacturing in China, et cetera. So globally, 50% Asia, 25% U.S., about 20% Europe. And what's unique about Ceres' approach is, it's not just a technology. It's not just the entry of a stack. What we are actually doing is enabling people to build businesses and enter into this market. So we license not just the stack technology but we also license the whole factory blueprint to enable people to enter this market, all the supply chain, everything that goes around that. And we're building out this very strong ecosystem of partners. On the top, running in one direction, we have Doosan in South Korea that's entered production; Weichai, which is scaling now; and Delta Electronics, one of the leading players in the data center industry. On the hydrogen side, we also have Delta on dual license; Denso, very large Japanese automotive manufacturer; and we have relationships with Thermax and Shell around India, one of the key markets for this. We believe the fastest way to address this demand is through partnerships. The Doosan factory that you see behind me was built in about 4 years. Current projects are coming in at less than 3 years and Filip will talk to you a bit more about how we're actually approaching these partnerships. But we work with these high-quality global OEMs for a reason. They have the ability to scale, they have the ability for supply chains. And what we do with the Endura is, we give them the confidence to invest hundreds of millions. So when you actually back Ceres technology, you're building a business around it. It's a make, not buy decision. And we're seeing a world now where more and more people want localization of production. They want shorter supply chains. And this technology, if you want to get into this business, you have a long road ahead of R&D or you can partner with somebody like Ceres and we can give you the factory blueprint and the reliable technology and the confidence to invest. So different partners, different geographies and in many cases, different end markets are all choosing Ceres Endura and we expect that to become the global standard. So just recently, there was an announcement just yesterday actually about 2.8 gigawatts in the U.S. with Oracle and Bloom announcing for fuel cells for data centers. If you think about that 22 gigawatt market, what we're creating is businesses that can also play in that market space. So it's not just one company is going to dominate this. We expect new entrants based upon our technology to enter and we provide those companies with that ability to build those businesses. We're continuing to grow this network. We've signed 3 partners in the last 2 years, high-quality partners, building those businesses. And like I said, our aim is to become that industry standard. We're running the business on 3 strategic pillars. One is signing more partners, signing new manufacturing license agreements. And Filip will talk in a moment about how we address that. But we also realize that we also need to connect with the end market. And that's where accelerating partners to market and the relationship we have with the likes of Centrica comes in because you have these global manufacturing giants but you also have the end customer, who quite often, they just want power. And bringing the 2 together is now part of our strategy. And then we have this single stack technology platform, which is Endura and it's how do we maintain the advantage that we have on that, how do we stay ahead. So when people have invested in this platform, how does that keep progressing over time. So without further ado, we're going to talk about the first strategic pillar, which is signing new manufacturing licensees. And I'd like to invite Filip to the stage. Filip has been with us a couple of years but has over 25 years in the fuel cell industry. So Filip?

Thank you. So good morning, everyone. So just a quick clarification on my role within Ceres. So my role is to sign up new manufacturing license partners and that's really a very exciting endeavor. We have accelerated these partners over the past couple of years, the ones that we have already under contract. So that's another focus of my department is to make sure that they get to production fast and make sure that we support their go-to-market effort. And then, of course, we create also market pull and Centrica is one of those examples, I think, that we will highlight and explain a bit more to you today. So first of all, it is probably good if I explain you a little bit on what has changed over the past year within Ceres and within the commercial department. First of all, we have changed our strategy. We have improved the tools that we need in order to improve our pipeline. We have also invested in more disciplined execution of that strategy. On top of that, we have also invested in resources. Also in the U.S., so we have invested in new resources in key markets so that we are more effective in our pipeline buildup. That resulted in a quintupling of our pipeline over the past period, which is very promising for the future. Now, the demand side is also important because over the past year, we have seen that there has been a significant increase in the demand signal in the market, especially for SOFC. And that helps us also to reach out to new potential licensees. One of the things that we did was also defining who are the targets that we need to go after in order to convert them into licensees over the past year and that has been so far quite promising. In this slide, what I would like to highlight is that those customers that come to us, even if we don't have approached them yet because of the demand signal that is there, they come to us not only for our technology, there is more that they see. First of all, there is the technology, of course, because we invested several decades in developing a leading solid oxide platform. And by signing up to our technology, they bring down their -- they gain at least 10 years to bring that technology to the market because our platform is already mature and it's ready to go. So that is the first pillar. Our technology is ready to go and we help them leapfrog from R&D immediately to fast commercialization in growth markets. The second pillar is industrialization partner. Ceres is a true industrialization partner. That means that we stand shoulder to shoulder to our partner when they invest and build out their manufacturing footprint. And the way we do that is we bring a lot to the table. We bring the manufacturing reference processes to the table. We bring a Ceres [ house line ] builder to the table if they need it. We bring equipment specifications to the table. We bring our mature supply chain to the table. We have experience on how they need to organize quality control and the control of the manufacturing process. So all of that we bring to the table, which means that their investment is de facto already derisked. And that is very difficult to find in the market. Actually, you can't find it in our market, only with Ceres. So the third pillar that I want to highlight and it's the third one but probably the most important one because here, what we are doing and what we are offering to our partners is an evergreen -- being an evergreen external R&D engine for their future. That means that we continue to innovate. We continue to upgrade our technology platform and we bring those improvements to our partners' base. That means that they can be sure that they will sustain competitiveness and they will have sustained growth in the market. So this is probably the most important pillar and very often overlooked when they approach us initially. Now on this slide, I would like to introduce you to one of our partners, Delta Electronics. And this slide shows a high-level flow chart of how they have translated our SOFC platform into a solution for the market and in this case, for data centers. And it's a little bit complicated, so I will take you through it from left to right, so I can make sure that you get a complete flavor of the enormity of the value stack that SOFC offers to the data center application because that's very important. Over the past 1.5 years, we have seen the value stack being increased and increased as this application started to develop. So first of all, let's start at the left-hand side here. That's the energy that is fed into the system, which is very often gaseous fuel. And currently and for the foreseeable future, it will be natural gas. So our technology runs on natural gas but it is fuel flexible. It is future-proof with regard to the fuel that you're going to use because our platform can also run with biogas, can run with hydrogen, can run with methanol, can run with ammonia or blends of those fuels. So when and if those renewable greener fuels will become available in the future at scale, our technology is already ready. And a customer who has invested in an SOFC park, they can simply switch. They don't need to throw away the investment. They can simply use the existing assets to convert that to clean power. Then this part here, the SOFC system, I will not go into detail into that because I have a couple of slides talking to that. But what it delivers is very important because the SOFC systems, they deliver high-quality electrons to the data center white space. Very important because that means that a lot of the balance of plant stuff that you normally need, if you get the power from a gas turbine, you can reduce that because the quality of the electrons of the power that is delivered is of very high quality, plus it's direct current and it can deliver up to and more than 800-volt DC power to the white space. And that's very important because what we have seen over the past year is that NVIDIA and others are scaling up power density. We will see in the future 1 megawatt racks. And that means that there is a trend to move towards 800-volt DC power input into the white space of the data center. And that is a perfect pairing with SOFC because SOFC delivers that kind of power without any conversion. That's not the case with gas turbines or other conventional alternative generation assets. So because of that, you can save a lot of investment on the conversion hardware that you would be needing here in the power infrastructure, plus the fact that we have a very modular high-quality redundancy solution with our SOFC, you can also cut back on the centralized UPS and on the battery or backup power solutions that you need to integrate in that system. So the result is that you can get to GBP 1 million to GBP 3 million of savings on CapEx in the power architecture when you move to 800-volt DC and you switch to SOFC. So that's a very important data point to remember and that drives SOFC, I think, in the future in this market. On top of that, we are not done yet with the value pack. SOFC also delivers an exhaust gas with high concentrations of CO2. So it's basically a carbon capture ready and the carbon capture asset or technology that you need to install on the system will be of a lower CapEx than, for instance, on a gas turbine because the exhaust gas is so rich in CO2. So that's another important future-proof value element. And then the waste heat can also be used for the absorption chilling. So reduce the power consumption of that part, if that's important in your structure. And then something which is not mentioned in here but SOFC systems deliver water. And that is something that in certain countries can be leveraged if you're not obliged to recycle the water from your absorption chilling infrastructure. So that is my high-level walk-through of what you can do with our technology and a practical example of how our partners convert Ceres technology into a commercial system-level offering for large and fast-growing data centers. Now you will see an animation here that shows you how we go from the Endura stack, coupling that together into modules of 100 kilowatts. That's what you see here, 12 fuel cell stacks of the Endura stack coupled in one repeatable factory-led module that can then be coupled together into a 500-kilowatt fully integrated system that is ready, plug-and-play to be connected with the grid and deliver clean power. And then it's a question of simply replicating that into, in this case, a 100-megawatt power solution that can be coupled with the data center. So you see the enormous benefit of -- you see the enormous benefit of the modularity of SOFC technology. And it's put in practice here because before it was an animation, this is the real life. It's put in practice by Delta Electronics again. There, above you see a 550-kilowatt fully integrated self-contained system, plug-and-play, that you can drop ship to a site and connect with the grid and connect with the data center. But it's 550 kilowatt, you can then cluster it together in aggregated solutions of 1.5 megawatt and 5.5 megawatt centralized systems that then can further be replicated into a 25-megawatt power tower concept that can be used for larger-scale solutions for data centers or for data center campus like energy infrastructure. You have seen before Phil showed you that an external picture of the Doosan factory that was built over the past couple of years. This is an internal picture of the process area of the Doosan factory. What I want to highlight here is that the Doosan factory was built over a period of -- well, designed, procured, built, et cetera, over a total period of less than 4 years. But that was with a certain purpose because we wanted to go through the learning curve of properly designing the manufacturing processes, properly specifying the equipment, properly selecting suppliers of that hardware into the system, properly designing the automation, properly coming up with the test kits for the quality control, et cetera, et cetera. And by the way, during that period, we had COVID. But that was necessary, that learning curve to wrap that into a much tighter factory blueprint that we are now rolling out. So the current factories, they get on stream within 3 years. And for the next ones that are coming, in the months to come or the years to come, we are confident that we will be able to bring that down below 2 years. So that is very important because that means that our next licensees, they have -- and the existing, if they expand their capacity, have an opportunity to benefit from the surge in the data center market and also coming distributed power markets by building extra capacity very fast and bringing mature derisked products to the market. So this was my talk. I showed you how we are convincing new licensees to invest in a license agreement with Ceres. But there is more than that, that we are doing. We, of course, focus on bringing them fast to production but we also need to make sure that they find their way to very strong anchor customers in the market. And that's why I would like Phil to introduce you to one of those anchor customers.

So a few weeks ago, we made significant announcements of a partnership with Centrica. And I'm delighted today to be joined by Lauren Dickerson, Director of Strategy at Centrica. Lauren, if you'd mind coming up to the stage. And I think we just wanted to have a chat really about how this partnership is working. It's early stages but I'm delighted that Lauren has agreed to talk to us today from the Centrica point of view. So ladies and gentlemen, Lauren Dickerson.

So I don't think Centrica needs any introduction really. We all are familiar with Centrica but Centrica is changing as a company as well. I mean, you are investing in things like storage, new nuclear, behind-the-meter. I suppose the obvious question is why you getting into solid oxide fuel cells and how does this fit in that kind of strategy?

Yes. So first of all, I'm delighted to be here. Thanks so much for inviting us, Phil. When it comes to the market and actually, the presentations that we've heard earlier today, I think, really drive this point home. Our observation is that the market has really come to us right now. The biggest game in town everybody is talking about is AI infrastructure and it's a massive opportunity but it's also a huge challenge. And the challenge really hits us when it comes to how are you going to build this infrastructure that connects to the grid quickly and cost effectively. It used to take 18 months, 2 years to get a grid connection. And now we're looking at a much longer, much more extended time frame that oftentimes ends up with delays, so 4, 5, 6 years or longer. And this is time that data center providers just cannot afford to lose. Every month that their data centers sit idle is lost revenue. And for a country like the U.K. and many others out there, they've got to do everything they possibly can to alleviate the bottlenecks that will bring this infrastructure online. So as a result, we're really seeing urgency and also momentum in behind-the-meter solutions. And the kinds of solutions that customers are looking for have lower emissions, are reliable, cost effective and high efficiency. And that's where we think solid oxide fuel cells really will come into this. And equally, just one very important point here is that the grid is not going away. There's tens of billions that's been invested and that will continue to be invested in the grid over the long haul. And we think that there's a real opportunity to bring hybrid architecture that involves behind-the-meter solutions with grid-connected power, which is really what those end customers want alongside storage and potentially other solutions. We heard a little bit about carbon capture today. So this sort of a hybrid architecture that's going to be a go-to for customers that are looking for power quickly.

Great. Thanks, Lauren. And then I suppose the follow-on question is, okay, this need for behind-the-meter solutions is there. So why did you choose to work with Ceres?

It's a good question. We didn't run a kind of beauty pageant to have all of the SOFC companies come to us and tell us what they could do. What we really tried to do, our homework. And the first thing that really stood out to us about Ceres is the SteelCell. It's a technology that runs on mains gas, so existing infrastructure. And if you were to run it in reverse and use electricity as the input rather than natural gas or another hydrocarbon, you can produce hydrogen. And for us, that, that sort of really differentiates Ceres from others in the market. No one else can use the same platform to do 2 very distinct applications. And equally, for us, as a new nuclear investor, we're looking at the possibility of pushing to incorporate SOEC with new nuclear in order to produce cost-effective hydrogen. The other thing that really stood out to us is the licensing ecosystem. It's really matured over the course of the last couple of years as your colleagues have talked about today. And one of the things that is a major proof point to us is the Doosan production facility. They're actually producing fuel cells and it's a major proof point that gives us a lot of confidence and helps to derisk that offtake piece. The final thing. And I think that's really worthwhile spending a second to talk about this is the strategic fit. Centrica is not a technology company. We are an energy services provider. We deploy systems for our customers. We optimize them, we manage them. We need technology partners, of which Ceres is one. And one of the really interesting things about Ceres is, as a British company with British-generated IP, operating in kind of what I see as the sweet spot of how a British technology company can work in the global environment and be really competitive. We think that this is really significant. And for us as a company that's trying to both support U.K. economic competitiveness that has the deep British heritage that we have, we think that, that sort of tie-up is a really neat one.

Okay. That's great. And you mentioned that the depth of the ecosystem of partners was important. I know you've met those partners firsthand. You've engaged -- you've actually seen some of the -- your Chief Strategy Officer seen the manufacturing facilities. What's your view of the ecosystem? Do you have particular thoughts on which partners at this stage? Or how do you see that playing out?

Yes. So the first thing that stood out to us is the breadth of the partner ecosystem and also the seriousness of these companies. These are really big, significant manufacturers that are making major investments. They have gone through really rigorous procurement processes. And the ones that we're engaging with, they've all chosen you and it's really significant to see this momentum amongst these really big serious companies backing a single technology. So that in and of itself is a kind of diligence that is quite interesting. In terms of the specific partners, we've gone out to see 3 of them for ourselves. We've gone out to Doosan in Korea, Weichai in China and also Delta in Taiwan. And it's actually my boss, our Chief Strategy and Transformation Officer, Robert Booker, who has been to site several times over the course of the last 6 months. And I mean, genuinely, he came back so impressed by the scale of the manufacturing and the investment that's going in. I mean he actually took the same picture of the Doosan factory but from the ground. And when you look at it on his phone, the end of the factory goes into the horizon. It's absolutely massive. And it's hard to appreciate, I think, if you haven't actually been there to see it for yourself. So as to the specific partners themselves, you've got Doosan, let's start with them. We think they're probably the one to watch because they actually have production up and running right now. And this is a really interesting one because for us, we look at it and say, well, we've gone from a world where the question was, what's the time line that you're going to be producing this on to the question of how do we access this technology. So Doosan, we're keeping an eye on them. Delta, we heard today a lot about the end-to-end architecture of solutions that are specifically designed for the data center market. And we think there's a really big opportunity here in the U.K. for data center development to then incorporate SOFC to increase that speed to power. So very much looking forward to working with them on that. And then finally, Weichai, a Chinese company that is specialist in powertrain manufacturing and power systems. And I think that SOFC forms a really nice extension of their portfolio. And for us, the Centrica, too, we're a company that's been around for close to 200 years in a variety of guises. And that sort of evolution of how you incorporate new products into your portfolio to serve your customers differently but ultimately to provide them with the service that they need, it's something that really resonates with us.

Okay. That's great. And the question that I'm getting is, well, what's Centrica's strategy? How are you actually going to approach this market? Are you going to sell modules, services? What's your approach on this?

Yes. So again, we're not a technology company. We are not in the business of just selling fuel cells. We like the idea of bringing together a managed package essentially for customers to help them incorporate this technology into their facilities and make best use of it in a way that's going to be cost-effective, cost predictable and also to take the worry out of how you actually manage these systems for your customers. So our go-to-market strategy kind of revolves around 3 pillars. The first is relying on and utilizing the customer relationships that we already have. At Centrica, we have, through British Gas and through our business energy division, we've got hundreds of thousands of business customers that we already serve and who have come to us, many of whom have come to us with the same problems that I've been articulating about speed to power. And I should say also not just data centers. Data centers are a particular kind of customer but they're not alone. Many other C&I customers are experiencing the same challenge. So -- and coming back to the data center point, as Centrica, by virtue of who we are, we have relationships with companies that invest in, build, operate data centers for themselves. And they're coming to us to say, well, how can we work together to solve this challenge for building these facilities here in the U.K. So it's, that -- those customer relationships and partnerships that we're really going to lean on in the first instance as part of our exploratory phase for how we deliver a service to the market. The second point that I'd say about our go-to-market is the delivery side. We already have in-house really significant delivery infrastructure for providing on-site behind-the-meter power solutions to customers. This is a really difficult to replicate capability and it's one that we seek to really leverage as we incorporate this new product into our portfolio. And the third piece and I think probably the one that's maybe the least appreciated is the optimization capability that we bring to the offering. Ultimately, the way that we think this technology is going to be -- achieve its greatest economic potential is around leveraging the ability to utilize the technology in flexibility markets, demand response programs, grid balancing. It's a highly dispatchable, highly efficient technology and we think it will really form a nice part of the overall value stack that should also deliver considerable value to customers and also to us as a business.

That's great. So I mean, this is all really exciting. We're tremendously excited about this partnership. The question I get and we can -- can't always say too much but -- so what could we expect next from Centrica?

Well, I'm definitely not going to make news here today. So please don't get too excited anybody. But what I can talk about is the fact that we are still very much in this evaluation and structuring phase but with a lot of clear direction and intent around where we think we're going. In terms of those concrete next steps, please watch the space. We believe -- we're really -- reasonably confident that we're going to actually start getting some of the modules from these manufacturing partners into one of our facilities in the second half of this year. And when we do and this is a really important part because Centrica doesn't deploy technology that we ourselves don't understand and haven't done our own due diligence around. But when we get these facility -- these units into our facility and can start testing them, we're absolutely going to invite customers and stakeholders and partners along to actually see them for themselves because I'm a big believer that seeing is believing. And we'll also make the data available so that people can look at them for themselves and make their own judgment. But this is all part of the process for us, in moving from our market and technology thesis to really hands-on technical assessment. And I have to say I'm personally really excited about it and I'm also seeing a lot of excitement around the company for what's next.

Great. Lauren, thank you so much for giving us those insights today. And I think we're thrilled. It's great to have a U.K. partner where we can really showcase this world-class technology and the scale. And I think your insight today has given us more cause for excitement. So thank you very much for joining us today, Lauren.

So -- if I don't stand on the clicker, that's what I was looking for. We're now going to have a session that's facilitated about the technology platform itself. So we move into the third pillar, how do we maintain technology leadership. And I'm delighted that we're going to have a session that's moderated by Chris Leonard of UBS. And we're going to have Caroline Hargrove, our CTO, who has a long pedigree in digital twins, did the race car for Lewis Hamilton at McLaren. So knows all about digitalization, how we bring that forward. And Nick Lawrence, our Chief Product Officer, who's been with the company over 10 years and over 15 years in this clean energy space. So if I can welcome you guys to the stage. Thank you very much.

Great. Hopefully, the mic is on. So thank you, Phil. Thank you for the introduction and a real pleasure to be here today to host Caroline and to host Nick to go deeper into the technology behind the product and the journey, how Ceres got there and equally, how this will now benefit the Ceres manufacturing partners. So Caroline, welcome and maybe starting with you, as CTO, clearly, the journey for R&D is pivotal for Ceres in the last 25 years, we've seen a huge development. So can you comment on that R&D strategy, what led you to the development of the Ceres Endura stack?

Yes. Well, first of all, I'm going to say that we have an amazing team of scientists and engineers. So of course, it's lovely to work on technology when you have really dedicated and really, really bright people around you. But actually, one thing I wanted to stress today was the fact that all of this knowledge and know-how that we've developed over the last 25 years, what I'm really proud that we've been doing in the last probably 2 years really in massive earnest is, how we've put this knowledge, this codification into models and simulation and the digital twins. And the reason why this is so important is on many levels, is the fact that -- in fact, we've got a little animation here and I'm going to talk you through it to illustrate this. We do models at the cell level, the chemistry to understand what happens at the molecular level, the nanoscale. And then each of these cells, as you saw, get stacked into our Endura product. And then we need to understand how that works. And then we put those into systems and we simulate that as well because we need to understand how our systems work. And at each stage, there's a hell of a lot of value to be gained from the digital twins and the simulations. But it's because essentially, it accelerates development. And why we've been doing this before is because we needed to gain this understanding, especially at the chemistry level that's -- is not easy to do. It is something that is years and years and years of understanding what's going on in order to then understand where do we put our effort to do our next bit of R&D so that our Endura product continues. As Filip mentioned, we need to keep innovating. And unless we've got this really good digital infrastructure, it's a hard thing to keep doing at pace. But we also need it at the system levels because our partners build their own systems. You heard Centrica, talking to our partners, they have their own application. Our partners will have a number of applications, as you heard today. How do we help them build their own systems as fast as possible where we're not actually doing the system, they are. But we want them to be successful. We want them to accelerate that system development. So we do need our suite of simulation very much. And what I'm really proud that we've done is we've managed to really codify this in a way that is helpful to us and to our partners.

And I think that you mentioned the sort of the speed and the speed for your partners and perhaps also this digital approach, if you could maybe touch on the potential cost savings you've also unlocked through the digital approach for your partners.

Yes. The more -- maybe obvious one is to understand what is the sweet spot for utilizing your stacks in order to make the most of it, eke out as much performance as possible so that you have a better levelized cost of energy. But actually, you also will save money by having an efficient system. So as a partner, that's very useful. We share data with our partners in explaining how our systems -- our stack works, how the system will work by being quite open like this, it also -- and actually, I probably need to stress this, when you're licensing technology, you've got to be really open with the partners. We can't just kind of hide the problems and then just go and fix them. It's open kimono, like we've just got to share everything. It's hard. It's hard on us. You just got to be able to say and believe what you say. And the simulations are really helpful in doing this because how are you going to say, yes, it lasts for 5 years unless you run it for 5 years. Well, it's simulations. That's what you need. You need to be able to prove that it will last 5 years. And you need to bring them along that journey so that they see that it will do that. And on the cost saving front, as I said before, when you start understanding the mechanism that happen even at the nano scale, this is when you also understand that if I make this change, then because what we want to do when we reduce cost is, at all levels is potentially improve how we manufacture it, remove steps in that. To do that, you need to understand what will be the impact of it. So hence, we use the digital side all the way along and we're priding ourselves now to really do digital first and reduce the number of tests that we need to do, although we still test a lot, obviously, because it is something that is needed to convince our partners. They still want the seeing is believing that Lauren was saying is there. But the more they see that our simulation match the test results, the better it is and the more we gain from it. So we do increase the speed that way.

Sure. No, that makes a lot of sense. And actually, there, you mentioned on sort of stack lifetime when you went towards 5 years. So it may be helpful to bring Nick in here. And obviously, the name of the stack is Endura. So with a tagline built to last. So I'm sure I can guess but maybe talk to us why you chose the name, please.

Yes. So hopefully, it's obvious but Endura is based off a shortened version of endurance. And it connects to one of the most unique selling points of our stack and our technology. And it's the fact that our cell chemistry is a really thin layer printed on a metal support. And that metal support gives our cell a robustness that's the envy of our competition. So effectively, our SteelCell is really robust. You can smack it around, you can put it through a normal manufacturing facility without worrying about it breaking. You can stack these cells into really tall stacks without worrying about those cells cracking. You can transport them from that factory to site without any problems. And it's also really robust to real-world events that happen on power sites, power outages, emergency stops, those sorts of things. So really, the unique part of Endura is its robustness. The fact that it's built to last, the fact that it's built for the real world. But with that robustness also comes ultra-low cost too. So we've built Endura based off really low-cost steels and seals. So the steels on this cell and in the stack are all ferritic steels that you can get in your car exhaust. They're freely available all the way around the world. 85% of the stack is steel. And the chemistry on our cells allows us to operate at a fundamentally lower temperature than high-temperature solid oxide. And what that means is we can choose cheaper components throughout the whole balance of plant in the system. And effectively, what we've done is we've turned high-temperature aerospace tech into something that's mass manufacturable in automotive domain, automotive tech. And that gives our licensee partners confidence to enter the market now at a cost competitive position compared to the incumbents at relatively low volume, say, 100 megawatts. But as they scale, say they got to 1 gigawatt worth of production scale, which might be similar to where others are now. I think our models show that we would be probably 1/3 less in terms of production cost than that competition. So it's truly low cost and we've only got further to go down that route. But we didn't stop there. So you think we might have compromised a bit on performance because of all of that low cost but it's absolutely not true. This is still world-class, both in fuel cell and electrolysis mode. So we have system net efficiencies in fuel cell mode approaching 65% at start of life. But the really important thing compared to the competition is that performance holds through life. So after 5 years, you're probably 10 percentage points on system efficiency better than an equivalent high-temperature solid oxide cell. But I think for me and also the team at Ceres that Caroline spoke to, too, we've got such an awesome technology and engineering team. The name Endura and the branding that we've put around it now marks the transition from an R&D company to full commercial realization. So this is the cell. This is the stack that's going to get manufactured at high volume, at pace and scale, entering a market where there's clearly opportunity and a tailwind and it's one that's built to last and designed for scale.

I think that's an excellent answer. And I think I guess you've kind of helped me on my next question in terms of the addressable market and what we're seeing here. You just mentioned the cost benefit as well that Ceres could unlock. So obviously, Phil mentioned, Bloom Energy just announced yesterday a very sizable fuel cell order for data centers out of Oracle, 2.8 gigawatts. How do you see Ceres fitting into this ecosystem alongside Bloom?

I think, firstly, it's great to see Bloom making a market for solid oxide, making it real, making it a proper technology choice, a proper power platform choice. And we've got a lot to thank Bloom for that. They're doing well. However, the market size is beyond what Bloom can scale to. So the market opportunity is still there for all our licensee partners. And we're going to be entering a market with a product that's fundamentally higher performance and lower cost at scale.

And I suppose going back maybe to Caroline in terms of the cadence of this technology development as well. I mean you're not going to stand still here. You've said that you're going to continue -- obviously, R&D is going to be the lifeblood of the company. So what kind of cadence of sort of technology development should we expect over the coming years? And how then does that affect your manufacturing partners linking into their current operations?

Well, we're going to continue to innovate. That's for sure. We also want to make sure that our partners feel that they have a stable platform. So a stable platform means that you're not changing it all the time. But there are some things that you can do continuous improvement on, which is things that don't require any factory changes of any sort. And all of that will happen. But it can happen also at the cadence that our partners are happy to take on. But we want to keep innovating and we will have bigger platform improvements roughly every 2, 3 years. That's the intent because you don't want to overwhelm our partners. You want something that they -- well, we truly believe that this is good as it is anyway but we will continue to innovate. As Filip said, this is why it's a lifeblood for licensees to keep ahead of what others do.

Yes. I mean I'll just add to that. We've got a large backlog of changes we want to put into the stack. But for a licensee partner and also a user of a system that is going to be installed maybe for 20 years, what you'll see is upgrades to that stack. So the box and the interface will probably change very little, if not at all. But what changes will be inside that box. And what changes is probably things that are very easy to change on a production line. So it's not a tear up of a current production line. It's minor changes only but with major opportunity.

And I suppose you've spoken previously about the cost and the scale benefits. We hit -- you guys hit gigawatt scale and you're very competitive and they're probably undercutting current systems out there. Can you talk to us about how Endura will equally help your partners hit that key manufacturing scale that's required and is helping them accelerate their time into market?

Yes. I'd say the beauty of the licensing model is that all licensing partners can source the materials and also source the machines from their own localized supply chains across China, Taiwan, Japan or wherever. And they can gain cost down through doing that. We're also now collaborating with licensee partners so that when we sell a license, we're not just selling some intellectual property, we're actually selling a blueprint to a validated design with a complete supply chain in place that they can access. So we're speeding their access to market but then they're also taking opportunities in their own markets to take cost out, too.

And I think, obviously, scale is naturally going to be important but the manufacturing partners have 2 routes to market. You have the fuel cell opportunity. In the future, if they take an electrolysis license, they also have that side as well to play into. And I guess, Caroline, can you maybe speak to how Endura is going to help assist the sort of the evolution of the hydrogen production for Ceres Power's technology?

Yes. When we started the technology development, we really concentrated on fuel cells. But all these technologies that you hear are -- intrinsically work either in fuel cell mode or electrolysis mode but most of them are not the same chemistry. We worked on our chemistry. A few years ago, we had a big push on electrolysis. And to our delight, we managed to get a technology that is the same, the same cells, the same stack that work in both direction. And that does future-proof our partners' factories. They can use it in both direction. But from an R&D perspective, when we started testing it in electrolysis mode, we learned a hell of a lot about our own chemistry and our own development have benefited from this understanding because we pushed the limits further than we had ever tested. And we realized that actually, we could improve one direction, it improved the other and we have a better product as a result. So from a R&D perspective, we're very confident that this is a massive bonus for our partners, even if they've taken a license to just one at the moment that they can also move into the other at a later stage.

And that's culminated in a conscious product strategy steer or decision, which is to make sure that an Endura fuel cell stack is as common as possible with an Endura electrolyzer stack. And what we're releasing to our partners can be effectively built along the same line. So the same line can produce electrolysis stacks as well as fuel cell stacks. There's virtually very little that they need to change to achieve the 2.

Caroline, I just wonder in terms of the digital approach and all the data that's been coming off and perhaps as you explored further on the electrolysis side, did that then generate sort of a data suite that you could send out to prospective new clients? Like has it been useful for further licensee developments thinking into '26, if we can see you guys land some further commercial deals?

Absolutely. Our demonstrator in Bangalore with Shell, this is our biggest test site, it's amazing. No, it's great. We're getting that data from Shell directly onto our system. We can share it with our partners. We've -- this was a while coming and we're so glad we've done this because we can see it. Not live live, not Formula 1 live but we don't need to. It's -- it will be minutes, maybe 1 hour later than what we have in Bangalore. That's plenty to inform how it works, to have insights and we want to keep building that. We want to build that with other partners because ultimately, if we share -- if they share data, we can share a summary of what is an aggregate data set back to them and they gain the benefit of everyone else that has pooled their data together. It's at times a process of convincing our partners that they will benefit from that but they do, and they want to collaborate with us when they get that benefit. But it's -- the other thing I need to mention is through our simulations and through some of the testing we've done in R&D, our stacks, as Lauren mentioned, they work in both directions. And we found that there is interest now in actually running reversible system. This wasn't something that we intended to do but it's lovely to see that there is interest and, therefore, we can make simulations of that, understand how that works and have positive conversation with potential partners that are interested in that space.

And you mentioned collaboration there. And obviously, Ceres Power was born out of Imperial College, London and obviously, we're very lucky in the U.K. to have some great research institutions and universities at the forefront. So historically, I think you've worked very closely with these bodies. Is that continuing? Is that very helpful? How do you see it?

Absolutely. One of the things we've done is, kept the relationship with Imperial, obviously. We still -- we've come from there and we have strong bonds. But we've strengthened our university links with several universities in the country. We have active programs with St. Andrews, Liverpool, Surrey, Manchester and the Royce Institute. And I'm going to do a shout out for the Royce Institute because a lot of what I've said, understanding what's going on at the nanoscale, it takes really good kit. It takes like really very detailed and expensive electron microscopes, for example. This is not something that we can invest in having all that suite of kits. But these research -- they're kind of a meta research centers, the Royce that does this research in materials. We're really good at doing this in the U.K. And having those collaboration means our understanding of those techniques we apply to our chemistry and then we understand it better. So it's really beneficial to us to have a thriving network of partners in academic institutions, for example. And we -- they like us, too, because they like to see that a lot of the fundamental work gets applied into British engineering.

Yes. No, I think that's absolutely clear. And just as a last one for me and maybe going back to Nick, your commentary in terms of gigawatt scale and the potential for dropping by 1/3 and maybe further cost evolution down after that point. How would that place you on a levelized cost of energy basis against other existing technologies that we saw previously?

It's a good question. I think in some markets today, in some applications, some of the C&I options we've got and also with high availability situations for data centers where you need very little oversizing to achieve Tier 4 availability. We're probably competitive with the AI crunch today on LCOE. But the important thing to say is I think we will remain competitive and we'll remain competitive for 2 reasons. Firstly, we're going to go up the manufacturing scale journey. So even if you assume a sort of simple learning rate of 12% to 15%, something like that, we will achieve cost down. And then our ambition to take cost out of the stack and the system also compounds with that. So I genuinely see a point in the early 30s where we will be conventional -- competitive with conventional generation technologies like natural gas CHP and gas turbines.

Amazing. Well, thank you both for the insights. Thank you for giving us all the detail behind the Endura launch. And yes, I think I'll now hand back to Ceres' management team who can do a much better job.

So thank you, Chris, Caroline, Nick. I'm Stuart Paynter. I'm the Chief Financial Officer. And I'm going to give you a couple of slides today to just tell a bit of a story. We've been on a bit of a journey today. And that journey is to the Endura stack. And that is a very important journey for us. And what I'm going to do is, I'm just going to give you a view of what it's taken to get there, the benefits of that and how we are continuing to be very strong, financially robust and disciplined in order that we maintain our high-margin business, our asset-light business and we can try and actualize some of the opportunities I'm going to take you through on the second slide. So on this first slide, this is the cash burn in the last few years from 2022 to 2025. And you can see that, that's been significantly reducing. That is the work that's gone into the Endura stack, right? We've talked about this 25-year journey. We raised a lot of money in 2021 and this is crystallized into this dual use and reversible, potentially, as Caroline was mentioning, single platform stack, which is going to be available to all of our existing partners and our new partners will come on to this technology. This is, we believe, going to be the industry standard fuel cell offering. And that's what it's taken to get there. And what do we do once we got there? Well, we had to maintain financial discipline. And that discipline involved optimizing our cost base to have a correct cost base to achieve the strategic goals that Phil was laying out earlier. Are we going to stop innovating? No, we're not. But our innovation is now going to be more focused on lifetime and cost within this platform. That means that in 2026, our cost base will be roughly 20% lower than in 2025. That's good financial discipline. Our cash, GBP 83 million at the end of the year. So we've got a good cash balance. How are we going to maintain that cash balance? Well, you can see in 2025, we were cash positive in the first half. What this means is that we've now got a cost base and the opportunities in front of us that we need to sign an MLA on a cadence of 1 every 12 months on average and we'll be roughly breakeven from a cash flow and profitability perspective. Very important to us because that is financial robustness. That is a non-reliance on the capital markets, which are tricky, we understand. Our contracted revenues for 2026 already at GBP 45 million. That doesn't include any new business for the year. No new business at all in that number. One new MLA in this year, depending on timing, et cetera, et cetera, caveats. And we are going to see roughly cash flow neutrality in the year. Okay. So I spend the first slide talking about cash flow neutrality, which is, okay, right, it's good, financial robustness, nonreliance on the capital markets but it's not exciting. We understand it's not exciting. What is exciting? Well, we've heard a lot about accelerating partners to gigawatt scale. We've heard a lot about the market today. What if we can become an industry standard? We have a heavy ARM influence on our Board. Founder of ARM is one of our Board members. We love the ARM model, becoming industry standard, low asset-light business, high-margin business, licensing business, we like it. What does that actually mean if we can succeed in doing this? Well, we heard the 2.8 gigawatt order this week for Bloom. This market is becoming real. What if you're a player who is looking at this market and wants to get into it. We've already got 3 people into that power market in our portfolio. We want more. What is their option to get into this market? They've got 3 options if they want to get into this market and play in this market. They've got the option of doing their own R&D. And we've seen on the cash flow slide previously, that takes a long time, and it costs a lot of money and you need hundreds of people. People typically don't attack that problem in that way. That's a big barrier to entry, a big protection for us as well as all the IP around SteelCell, et cetera. Option 2 is you can acquire capacity already in the market. There's only one real player in the market now, that's Bloom. Their capacity is between 1 and 2 gigawatts. And if you wanted to acquire Bloom today, you're probably talking close to 11 figures. They're at $60 billion market cap as of today. The third option is derisk the R&D. Come and take a license to the technology we're offering, build a factory and you've seen that we're aiming for those factory builds to be under 2 years. That's a very fast derisked entry point into the market. We think that's becoming more and more compelling as an offering and Filip relayed that to us in the health of our pipeline. What does it actually mean if we can bring our partners, both existing and new to gigawatt scale? So let's imagine a world in which they get to 1 gigawatt capacity. Bloom are already at 1 gigawatt to 2 gigawatt, right? So this is not pie in the sky. This is being done. Our annual royalties from a 1 gigawatt scale partner of ours reaching that sort of scale per year, $50 million to $100 million, depending on the mix. The valuation on that royalty stream, 15% to 20%. It's a high quality. Our partners are world-class and the R&D we're doing gives longevity to that royalty stream. They'll keep on coming back because we'll keep on improving their experience. You do some simple maths on that and it's approximately $1 billion per gigawatt scale partner we can create into this competitive landscape with Bloom. Remember, it's a 22 gigawatt market. Bloom are at 2 -- 1 to 2 gigawatts now, maybe 2 to 3 gigawatts soon. That's still only 10%, 12%, 15% of that marketplace. There's room for multiple other players in this market. And each one of those creations is worth $1 billion to us. We sit here today with a market cap of roughly $1 billion, excuse me, for flipping into dollars for a moment. But you can see that every success we have in bringing our partners forward, we've already got 3 of them moving on this journey, we want many, many more is worth $1 billion to us. That is the opportunity, the financial opportunity for all the stakeholders in Ceres Power. It's multiple times today's market cap, multiple times today's share price without reliance on the capital markets. Okay. With that, I'm going to hand back to Phil, who will give you some final remarks.

Thanks, Stuart. So I hope today, we've kind of taken you on a bit of a journey from the foundation of the technology all the way through to where the business is positioned. And we genuinely believe we're at this exciting time and a pivot in the market and the product all coming together at the same time. Power demand is accelerating. That's come towards us at a very good time as the business is ready for prime time. Time to market, you heard it from Centrica, that is a key constraint. And what we have now with the Endura platform is a platform that's designed for scale. And it's not just a technology platform. As you heard from Filip, it's the whole ecosystem. It's also the manufacturing blueprint. We're helping partners enter a market. We're not selling them products. We're actually selling them businesses here, and that's what the really exciting part of this is. So that will be the foundation going forward on which we believe that we will address this global market opportunity. I'd like to thank you all for your time today. I'd like to thank the team for walking us through that. And particularly, I'd like to thank Lauren for joining us from Centrica to give us that outside perspective as well. So thank you, everybody.