Fusion Fuel Green PLC (HTOO) Earnings Call Transcript & Summary

Hello, everyone, and welcome to the Fusion Fuel Green's First Quarter 2022 Investor Update. My name is Ben Schwarz, I'm Head of Investor Relations at Fusion Fuel. I would first like to remind everyone that this call may contain forward-looking statements, including, but not limited to, the company's expectations or predictions of financial and business performance, which are based on numerous assumptions around sales, margins, competitive factors, industry performance and other factors which cannot be predicted. Forward-looking statements are inherently subject to risks, uncertainties and assumptions, and they are not guarantees of performance. I encourage you to read the disclaimer slide in the investor presentation for a discussion of the risks that may affect our business or may cause our assumptions to prove incorrect. The company's under no obligation and expressly disclaims any obligation to update, alter or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. So thank you all for joining us today. I'll briefly run through our agenda for the next hour. We'll begin with an overview of our value proposition as well as some commentary around what we're seeing in the market from a macro perspective. Then the management team will share some first quarter highlights, financial results and a business update focusing on commercial progress and the latest on tech and production. We'll then close with some remarks from Fusion Fuel's Chairman and open up the floor then for a half hour or so of facilitated Q&A. As in our previous quarterly calls, questions can be submitted in the chat box in the webcast platform at any point during the next hour. Alternatively, you can also submit your questions to the Investor Relations mailbox at ir@fusion-fuel.eu. So let's begin with an overview of Fusion Fuel's business case. For those who are new to the name or in need of a refresher, Fusion Fuel's in the business of developing and delivering cost-effective, clean hydrogen solutions to accelerate the global energy transition. Our aspiration is to take a meaningful share to the global hydrogen opportunity, which between legacy demand and emerging applications already a significant market today, and one that's poised to experience tremendous growth over the coming decades. At its core, Fusion Fuel is a technology company. We've developed and commercialized proprietary, integrated solar to hydrogen generator that unlocks grid independent hydrogen production at a market-leading levelized cost. We're only one of a handful of companies that are producing green hydrogen today at our demonstration plant in Portugal and are moving quickly to capitalize on that early mover advantage and execute on the substantial commercial pipeline as been built over the last 1.5 years. We believe we have the right technology and the right team at the right time to make Fusion Fuel a major player in the green hydrogen business. So before we dive into the business update, and as we have in recent meetings, we want to take a step back and touch on the hydrogen market more broadly. So as has been the case for much of the last year, the economics of conventional hydro production remains under pressure, most acutely in Europe amidst a sustained increase in the price of natural gas. And similarly, the levelized cost of green hydrogen extremely sensitive to electricity prices and the pervasive volatility in both the price and availability of renewables is challenging. The economics and the viability of large-scale electrolyzers, particularly when you include between $1 and $2 per kilogram in last mile logistics from centralized production. In this market environment, our integrated grid independent solution is significantly advantaged. Not only can we offer known long-term certainty of cost, but we can do so at market-leading levels at small or large scale without grants. We have clear line of sight to derisk cost reductions from the ramp-up of automated productions at our Benavente facility. Along with the introduction of successive generations of our HEVO technology, which will help sustain our advantage even as the competition continues to drive down the cost curve. So having set that context, I'll now pass it over to Frederico, who will provide an update on the quarter.

Great. Thank you so much, Ben. So good afternoon. Thank you, everyone, for joining us today. So today is exciting day for both me and Zach, it's the first time that we present to you as co-heads of Fusion Fuel. And we're very excited to present the latest developments of the company. And before we go into the details and show you all the great things that are going on here, we'll briefly go through the -- some of the financials and quarter highlights. So first to note is, as part of our drive to strengthen the senior levels of the company, we continue to hire key personnel, including most recently, Zach, but also Jason Baran, who will, together with Zach jointly oversee Fusion USA. Later in the presentation, I'll provide more details on our personnel developments overall. But you'll see there's been huge advances in that department, and we still expect to increase the significantly the talent in the firm. In this update, we want to highlight a very important development for us. As of today, we have secured confirmed binding income for 2022 of EUR 8.4 million, composed of both technology sales and grants income related to our projects and to Benavente. In addition, we have another 6 projects in late-stage developments that could generate up to EUR 20 million of revenue potential in 2022. So, that is EUR 8 million confirmed and additional EUR 20 million income in late-stage negotiations for a total of potential income in 2022 of EUR 28 million. In the first quarter, we also entered into agreements with AESA regarding projects aimed at decarbonizing the industrial sector and hydro mobility projects in Spain, as well as with Hive to develop an already established portfolio of projects with Fusion Fuel's technology. I will touch on some of the points here regarding Benavente and our partnership with Toshiba later on in the presentation. Regarding financials in the first quarter, we recorded an operating loss of EUR 3.8 million, of which EUR 3 million are related to operating expenses. Around EUR 1.6 million of those are related to personnel costs, the single biggest item. But overall, the costs are in line with the guidance we provided at the last update of between EUR 2.3 million to EUR 3 million of operating costs per quarter expected in 2022. Even as you'll see with the ramp-up later on in one of the sites of the personnel, our guidance still continues to be between that EUR 2.3 million to EUR 3 million of operating costs per quarter expectations in 2022. We've booked EUR 800,000 of share-based payment expenses. These are noncash expenses and are related to restricted stock units and options awarded to Fusion Fuel personnel. This is a charge that will be recurrent as it amortized over the vesting period. We do intend to keep using securities with vesting clauses as a means to attract talent, to reward staff and ensure alignment with shareholders. Therefore, a noncash expense line related to these should be expected to continue over the coming years. As mentioned in previous quarters, we need to recognize the fair value movement on outstanding warrants. With the increase in stock price in the first quarter, we need to account for the fair value movements of around EUR 4.7 million in the warrants. This is simply an accounting recognition. This is, as I mentioned before, this is a noncash item. With FX movements as well as movements in the value of short-term investments we hold, we booked a charge of around EUR 0.5 million. The EUR 115,000 charge of equity-accounted investees is related to our Fusion Fuel joint venture and our share of their results. So this entity that has recently started or started last year's activities, continues its ramp up. And as we expect it to still continue to operate free revenues for a while. We do expect this line to continue to show a loss for the foreseeable future as we invest in that entity. One point I'd like to mention here, and it's also related -- as you will find more information on that in our 20-F we got for the full year financials for 2021 that it's our total assets. So as you can see, we have here around EUR 23 million of cash and short-term investment instruments, sort of liquidity instruments. But in addition to this EUR 23 million, we have around EUR 23.5 million in TTE assets related to our 2 Evora projects, our HEVO-Sul project in Sines and our Benavente production facility. We have around EUR 11 million of inventory in materials that we have prepaid to secure all their delivery. And we have around EUR 5 million of VAT that we will be recovering through the regular process. This actually brings our total assets to around EUR 68 million, of which EUR 23 million is our cash and short instruments. It's important that everyone is aware that we have been significantly investing the company and the assets of the company over the last year, and that's -- is reflected in that total assets value. On outstanding shares and warrants, they remain unchanged from previous quarters. The 92,000 restricted stock units are related to our employee incentive plan that we touched upon in last couple of quarters. The increase is regarding new hires that have been named as we award them restricted stock units with a several year vesting period. The options granted are related to options granted to members of senior management and Board of Directors to vest over 3 to 5 years. Now I'll pass on to Zach, who will take us through some of our projects and the more exciting stuff of the presentation.

Thanks, Frederico, and it's nice to meet everyone. Fusion has established ourselves as a leading player in the Iberian green hydrogen market, and built a foundation for significant growth over the last year by building out a well-rounded and experienced management team and building off of our initial projects across multiple applications, which are mobility, industrial applications in green ammonia. Fusion's decentralized electrolyzer provides multiple solutions to our customers, which is to sell turnkey technology solutions as sales, as well as to sell hydrogen through our own projects that we develop. Our unique offering provides several key advantages. First, our modular technology is viable at competitive costs on even small volumes. Usually centralized electrolyzers are not economical below 5 megawatts capacity. However, Fusion can be competitive on projects as small as 25 to 50 kilowatt hours of capacity. Second, Fusion's HEVO-Solar technology is grid independent, and we do not have energy cost fluctuations unlike our competitors, which is an important feature when energy prices continue to rise as the majority of our cost is actually CapEx related. Third, through our integrated solar solution, we can take advantage of existing solar investment tax credits in the U.S. as well as cash grants in Europe, which further reduce our CapEx. As Ben noted earlier, we already have a quite an advantage as -- from a levelized cost of hydrogen standpoint without grants. But with the grants or tax credits, it could be an additional 10% to 30% cost reduction, which would make us world-class pricing for -- in the hydrogen markets. Lastly, we have a low carbon intensity, which is an attractive feature for industrial applications, in particular. Typical grid-connected power has an estimated 26 kilograms of CO2 per kilogram of hydrogen, where our HEVO-Solar provides a solution with almost 0 emissions. This means we're not just greener, but we can also provide better netbacks on offsetting carbon taxes and tariffs for our customers, again, to further reduce their costs. Next page. Our solution, as you can tell on this page, is gaining traction globally. The pipeline has expanded substantially and now includes projects in 5 countries with a combined pipeline of over 170,000 metric tons per annum of green hydrogen. This pipeline represents over 4x our expected capacity through the end of 2025. We have built a significant presence, as most people are probably aware, in Southern Europe, which is made up mainly of mobility and industrial application projects. In MENA, we're developing projects in Morocco, which will be a low-cost green ammonia export project. And lastly, with Jason Baran and I joined the company, we have recently started our business development efforts in North America. We're excited that in a short period of time that we've already built early stage opportunities totaling over 2,500 tonnes of green hydrogen potential. We believe the United States is about to take off as several subsidies are already in place that will help drive hydrogen development. These subsidies are the green hydrogen hubs, which is over $8 billion of investments, the Department of Energy loan guarantee programs and low carbon fuel standard credits in the states such as California. These programs, along with Fusion's unique ability to utilize the solar investment tax credit makes the U.S. market very attractive as a platform for the company. These projects we're highlighting on this page are in advanced stage of receiving brands and/or near-term opportunities for technology sales, which represent a total of 43,000 tonnes of our 170,000-tonne pipeline. We submitted for over EUR 60 million in grants for these projects and have been awarded thus far EUR 8 million. As noted earlier, we're already providing industry-leading cost of hydrogen without grants, but these grants just further help support us closing projects and building our pipeline. Over the coming months, we hope to announce that we've been awarded additional grants, which will further bolster our project pipeline. As I noted earlier, our company is focused on several key applications, which are mobility, industrial applications and green ammonia. These applications have a total addressable market potential of over 150 million tonnes per annum of hydrogen by 2030. Our first application I'll discuss right now is mobility. Fusion Fuel provides a low-cost modular scalable solution to our customers in the mobility sector. The mobility sector will grow to an estimated 12 million tonnes per annum by 2030. We're currently constructing our first refueling station in Madrid, which is with Exolum. This is a pioneering project and a first of its kind application in Iberia. As we continue to pioneer this market in Iberia, we built a pipeline that represents over 20 projects, totaling EUR 140 million capital costs, EUR 65 million grants that have been submitted for, the net capital exposure of EUR 75 million. These projects are a combination of tech sales and Fusion owned projects. Fusion's technology provides decentralized and low-cost hydrogen, which are attractive features in industrial applications. Also, our low carbon intensity, as I noted before, provides not only emissions reductions, which is important, but also just as important it provides customers with the ability to reduce their carbon taxes and tariffs. Industrial applications is made up of power generation midstream assets with natural gas blending, refining, heavy industrial applications such as steel and cement manufacturing and the oil and gas markets. The total addressable market by 2030 is an estimated 110 million tonnes per annum of hydrogen potential worldwide. Building off our early successes with Evora and GreenGas, which most of you all are aware of, we've advanced our pipeline to 7 projects with a total of EUR 43 million capital costs with EUR 14 million grants submitted for or have been awarded for a net capital exposure of EUR 29 million. As we continue to build out our presence in both North America and Australia, we believe our advantages for industrial applications will continue to gain traction to further build out of our pipeline. And lastly is green ammonia. Green ammonia is the most efficient way to transport hydrogen today. Green ammonia market is estimated to be approximately 40 million tonnes of hydrogen by 2030. Our technology is perfectly suited to provide low-cost hydrogen in markets with strong solar radiance and with a suitable amount of land. Morocco is an ideal first location for Fusion to develop a green ammonia export project. Fusion's role in these projects is to provide green hydrogen in partnership with other technologies and companies to build the ammonia facility and related export infrastructure. The project is approximately 32,000 metric tons per annum of hydrogen and totals over 180,000 tonnes per annum of ammonia. And I will now pass it off to Frederico to talk about production and technology.

Great. Thanks, Zach. So I now have the pleasure of speaking to you all about the fruits of someone else's work, because this is all due to the R&D team that's done a great job. We're very excited to introduce to you our second-generation HEVO that we plan to launch during the summer. Through changes in the product design, we've been able to consolidate 2 of our first-generation HEVOs into one HEVO for the second generation. This has not only reduced the raw materials used in the HEVO, but it also reduces the complexity and the amount of hydrogen and water and network provided on the back of each HEVO-solar, which is driving a lot of the cost reductions that you see there. We're also already designing the third generation model to further reduce costs, and we hope to be able to further this third generation's production in the first quarter of next year already. So we are -- as I mentioned last time, we're fast, we're nimble, and we very much wanted to stay at the forefront of innovation. So we believe that this is -- will keep us relevant and will keep us also -- keep our projects to be very attractive in the green hydrogen market. So this is a phenomenal job from the R&D and production teams. On the production team, we've also got very exciting news to share with you from Benavente. So we bought the property 1 year ago, and we spent most of last year extensively renovating the site to be able to house what will be one of the leading production facilities of electrolyzers in Europe. Next week, we will do our soft launch of the facility with the first production line for the HEVOs going live. It's an incredibly exciting milestone for the entire team, and it also marks the first large-scale manufacturing of electrolyzers in Portugal, possibly Iberia. So it's a phenomenal step for the company. Next year, we expect to produce around 100 -- to have around 100 megawatts of electrolyzer capacity and be able to ramp that up to 500 megawatts in 2025. One thing I will note about production outlook with production capacity, one of the things that we want to make sure we do is we tie as closely as possible the actual output with when we can put things into the field. The projects have their own timelines with regarding to development, licensing and permitting processes. And what we want to avoid doing is having too much stock of previous generations. So you saw in the slide before, how quickly our technology is evolving. So we want to make sure that we are producing as much as we can the latest generation when we're putting -- installing things in the field. So the numbers I mentioned before is our production capacity. Our production output, we'll try and match that as closely as possible to the actual needs in the field. Now I want to touch upon a press release that several of you may have seen already between ourselves and Toshiba. This was the agreement with Toshiba to study procurement, manufacturing and sales process and R&D partnerships together. This is a partnership between 2 companies with disruptive technology in the electrolyzer space. So Toshiba has a new membrane production approach, which fits incredibly well with our HEVO and our miniaturized PEM concepts and the potential that, that partnership can do to further our costs and to take hydrogen production and cost efficient hydrogen production to next level is incredibly exciting. So we are -- this is a joint sort of R&D and production partnership and agreement that we are starting together. And in addition, there is also a commercial angle to this. There are, from both the Fusion Fuel technology as well as the Toshiba technology, there are partnerships where both sides relationships can benefit from a commercial collaboration, representing each other's products. So we're extremely excited about this partnership, this agreement and over the coming months, both the Toshiba team and the Fusion Fuel team will work closely together to put the final point on it. So as I've mentioned before, I want to touch upon the team, the team that has grown incredibly quickly. So note at the end of the first quarter last year we were -- the grand total of 18, having only a few months before spun-off and become sort of independent body. Since then, we have substantially invested and dedicated substantial time as well to finding the right resources, talent and experience to make our team robust and senior and put us in a position to actually execute on our aggressive growth plans. So we have been able to attract phenomenal talent with a significant experience across a variety of areas, whether that's gas management, hydrogen infrastructure, electrolyzers and all sorts of engineering specials and also a world-class production team. So this is keeping us at the forefront of innovation, positioning us in a place where we feel confident that we can execute an aggressive growth strategy. So we will continue to hire. In particular towards the end of the year, we do expect to see still substantial growth in the teams and in particular, in Benavente with the production line as well as talk of come live. Now lastly, before I pass on to Jeffrey, I want to touch upon the key milestones that we communicated for 2022. For those of you who follow us for some time, I'd like to make sure that we're updating you on what we said we would look to accomplish. So, on the far side we have to go live with the Benavente facility and also securing grants and financing for Benavente. So we will have the first, as I mentioned, soft go-live next week already for Benavente, and then we'll ramp up and continue to install other production lines in the second half of 2022. We have secured grants nearly to the tune of EUR 10 million for Benavente. So, which was a -- which is phenomenal support also from the Portuguese government to -- for this world-class facility. On HPA sales and grants, as we noted before, we had an extremely large pipeline, larger than we could hope to tackle. And now as we're working hard to convert those into confirmed orders, as mentioned before, we had EUR 8 million of confirmed sort of income related to our pipeline. And as we noted, we have a potential of up to EUR 28 million just for 2022. So the team is working hard on closing those as well as preparing ourselves for 2023. We have, and as Zach noted, put in a large -- we've submitted for large orders of grants related to projects, both of ourselves and third parties that are using our technology. And we believe that, that will also position us very well for 2023, even 2024. On the tech development, I mentioned, now the launch of the -- in the summer, the launch of the Gen 2. And our expectation to go into Gen 3 in Q1 of next year. One thing that's exciting is we are already working on an oxygen capture system. So this would allow us to actually be able to capture green oxygen produced with no -- without carbon footprint. This is something the -- our engineering team is working on, and we hope to have a demonstrated pilots on that in the next 12 to 18 months. And we do continue the R&D team continues on product innovation and also new product developments. I will hopefully be able to share some of that with you towards the end of the year. Project development, this is now the delivery of, as mentioned, our Evora's Sines project HEVO-Sul, as well as the Exolum and the kickoff of the other projects that we expect to put in place in 2022 or 2023. So that is ongoing work. But one point we need to -- we will note is that on safety, we've -- Zach and I and the executive committee overall are completely committed to making safety a core pillar of our firm's culture. This is something that we continue to push and install and implement robust safety protocols. We are happy to report that we have had 0 serious safety incidents in the company so far, and we hope to be able to maintain that hopefully throughout the life of the company, so this is something that we want to make sure that is in the core DNA of the company. So it's been in a very exciting start of the year. Also for us, personally, as we enter into our partnership, and it's been great. And things are now really starting to come together, and we are live where others are still thinking about how to get in. So with that, I will stop here, but I will now pass to Jeffrey, our Chairman, who will do some…

Good morning, good afternoon to everyone. I want to add my thanks to everyone who has tuned in today for giving us the opportunity to update you on developments at Fusion Fuel. As anyone with even a passing interest in financial news has observed, it's been a challenging year for the stock market. However, as any sophisticated investor understands the term stock market is a misnomer, a more apt description would be a market of stocks. That conveys the idea that every company is different. And so, I find it frustrating when people say to me that Fusion Fuel has done well compared to other SPACs. The taint of being this SPAC company makes no sense to me, as we have nothing in common with the vast majority of companies that have entered the public markets through the SPAC structure. We were not the third company with a plan to develop a market for flying taxis, or the fifth company with a plan to mine the moon for rare elements, or the 19th electric vehicles company with plans to compete with Tesla, Audi, Volkswagen, Porsche and the rest of the global auto giants. And unlike them, we did not have a valuation measured in the billions or tens of billions. No, we are a real company, targeting a nascent but use real market opportunity, using a differentiated technology that enables us to produce green hydrogen more cheaply than our competitors. And that shields the cost to produce that green hydrogen from the vagaries of the electricity and natural gas markets. And we control our own destiny as we are about to begin producing that technology in our own factory. But don't take my word for it. I encourage you come, conduct on-site due diligence in Portugal, visit our initial hydrogen farm in Evora. If you come this summer, I fully expect you'll find it in commercial operation. Visit our state-of-the-art factory in Benavente. Our head of production would love to give you a tour. We'll take you to see the progress of the construction of the hydrogen plant we're building in Spain for Exolum. See it all for yourself. Make diligence inquiries of developers who are asking manufacturers about availability and price for centralized electrolyzers for delivery next year. Can they deliver and at what price? Fusion Fuel may be a small company, but we are ready to take on all comers, not with promises of what we hope to be able to do sometime in the future, not in 2025, like some of our competitors are talking about, but today. In my 40 years as a professional investor, I've learned that if a well-run business with a product-to-service that is differentiated from its competitors, and that serves a growing market, can be bought at an attractive valuation relative to the size of that market opportunity, then you have a very high likelihood of generating attractive risk-adjusted returns over time. So do your own diligence and see if you agree with me that indeed Fusion Fuel is one of the rare companies that possess those attributes. With that, I'll turn it back over to Ben, and we'll open it up for Q&A.

Great. Thanks so much. As a reminder, for anyone who has questions, there are already have been a handful submitted into the chat box in the webcast platform. You can submit questions there or via e-mail at -- to the IR mailbox at ir@fusion-fuel.eu. So we'll start with a handful of questions that came in through e-mail. This is for Zach or Frederico. Can you provide a status update on what you expect in the second quarter from a grant perspective? I think you guys maybe muted. While they sort that out, I will take a question myself. There was a question that came in to the webcast platform around our supply chain, potential impacts from lockdowns in China. I was just chatting with our head of production, who also manages procurement as well. And he confirmed no impact from lockdowns in China up to this point, and the procurement team is securing buffer stocks and also has backup for nearly every component in the case of a more extensive shutdown.

Ben, why don't I jump in, I had one thought while they're sorting technology in Portugal. Just to mention that some proposed legislation has been introduced in the EU that would require for hydrogen to be deemed green hydrogen that it would have to be produced in conjunction with newly built electric generation, specifically tied to that production. This is something that will be just, I guess, as an example of our advantage versus the traditional centralized electrolyzers who, if this legislation were to come into force, would not be able to be using electricity from existing renewables, whether it's solar or wind projects, but would have to be built in conjunction with new solar or wind prospects. That CapEx -- that extra CapEx is something that we don't have because we generate our own electricity, and that will be a headwind for the sale of electrolyzers by the traditional centralized electrolyzer companies and plays directly to our strength. Any other questions? That looks like they're ready in Portugal to answer.

They may not be ready. While they sort that out, another question around -- well, we can talk about the -- I'm getting confirmation from Frederico that they are ready to go. You want to try again, Frederico on that grants questions?

No, that's not working.

Okay. Well, then for you, question came through around growth and responsibilities, given that the new leadership structure between Frederico and Zach, do you have a perspective on how those co-head role is expected to be split and how that they'll work best together?

Yes. So we as a Board -- and we have a very and actively engaged Board, but we've been monitoring the progress of the co-head relationship and have been very pleased. I think what's happened is that Zach has taken on certain areas of responsibilities such as the commercial, business development and execution, and Frederico is focused on the R&D, tech, production in addition to his roles as CFO. They jointly oversee the executive committee, which is comprised of, I think, 7 -- maybe 7 members. And so -- and then Frederico and Zach are in touch every single day, keeping one another abreast of what's doing in kind of in the others portfolio. So we, as a Board, the non-execs are very pleased with how the co-head management structure has been working so far.

We are happy to hear that. Can you hear us now?

We can.

Great. So with that perfect timing to jump into the grants now. Apologies for the technical difficulties. So what we're expecting on grants is approximately EUR 55 million of grants have been applied for that -- I will go through the programs now. So C14 is a program in Portugal, that's just under $10 million in grants we submitted for. We are already eligible for -- we've been confirmed eligible for the grant and we expect a year for award of the grant in the June-July time frame. There's another program is called C5 in Portugal, which is a total of $45 million of grants we submitted for. Again, we expect -- that would be about a month or 2 behind C14, so between July and September time frame, we hope to be awarded that grant as well. The company has done a great job on filing for grants and has a good track record of securing them. So we're -- we hope to update you in the Q2 about some new announcements on the grants rewards. So I'll just add for anyone working on the model, the way the grants work is this, you're reimbursed against invoices. There are some grants that we have already processed the first reimbursements. So we probably expect to be booking the first grant income be it in Q2 or Q3. We don't control that time line with reimbursements, but somewhere been Q2 and Q3, we expect to be doing the first bookings of that income.

Great. Zach, you referred to the solar investment tax credit in the States. Can you give a little bit more color on that and what it might mean for Fusion and Fuel and its aspirations here in the U.S?

Sure, Ben. That's a great question. So the solar industry over the last decade plus really took off in the U.S., mainly funded through -- supported by tax subsidies. So the investment tax credit used to represent about 30% of the solar CapEx for solar projects, which was funded through tax equity structures, which is very common structure. So right now, it's 26% this year. It's a tax credit, and it's going down every year after that, starting next year. So the HEVO-Solar would qualify for about 50% of our capital costs are solar equipment related. So we believe somewhere between 10% to 12% tax credit would qualify as our capital cost. And that includes bonus depreciation or additional benefits of depreciation.

Zach, aren't I right in saying that Congress is also considering potential subsidies for clean hydrogen production. You never know what comes out of Congress, but that's certainly something that's being discussed.

Yes. You're correct, Jeffrey. So the Build Back Better plan -- again, if it passed or a version of it passes this year, the Build Back Better plan had up to $3 per kilogram of production tax credits for hydrogen. It was based on carbon intensity score. So with us having a world-class carbon intensity score, we would qualify for a full $3 where blue hydrogen would qualify for much less. And a point to note there is if we didn't track market share now, just slight on -- because of the cost for hydrogen and then you add on top of the investment tax credit, you have loan guarantee programs. And then you looked at our levelized cost of hydrogen have been shared in the presentation and you take $3 a kilogram of the tax credits out of our globalized cost of hydrogen, it becomes extremely competitive.

Thanks Zach. A question here around the offtakers for some of the projects currently under development in Evora or Sines.

So where we are on offtake with Evora and Sines is just generally -- we're right now in discussions with several offtakers around the refueling stations, applications as well as selling into the power grid. Those conversations are ongoing. And as we -- our strategy is after we get through the licensing process on the projects, we will then be commencing -- negotiating offtake agreements because one thing I learned from doing development is that you go and you seek your offtake too soon before the projects are licensed and ready for construction, you usually pay a pretty big discount. So we want to make sure that we maximize returns to the company and we plan to execute on offtake post licensing. So specifically to Evora, the plan is to sell into the grid. Right now it's a hydrogen power project, and we're well along the way for doing that starting in this summer.

Great. Thanks, Zach. Question around current utilization at Benavente. Is there a minimum level of activity needed? Or can you ramp up or down production as sales come in? I have an answer, but I'll let Frederico chime in first.

Sure. So we do expect that for 2023 roundabout the sort of 100 megawatt level or let's call between 70 to 100 megawatt level to the production capacity we need to be targeting to be able to have it on a full utilization of the lines installed. So that's where we're targeting to make sure that we're having those economies of scale as much as possible. For this year, so there is a gradual ramp-up, of course, and we're doing it by sort of a soft launch. So we will add shifts as needed later in the year when we see the production required. So I think that's more of a 2023 question than the question for 2022 as Benavente continues to build out. And then I would say it's between the 70 and 100 megawatt level in 2023.

Yes. Sure. I think just adding to that, in terms of near-term production on Benavente, Frederico mentioned the introduction of the installation and go-live of the initial production activities and the HEVO line, in particular. So at kind of the -- they were around a minimum of 120 HEVOs as opposed to HEVO-Solars, HEVO micro-electrolyzer per day at -- kind of running on -- that's kind at the minimum production throughput with the ability to ramp up as needed. There's a question around the project pipeline through 2026, the slide that Zach had presented. Are those figures per annum or the sum over the next 4 years? It's a pretty obvious one, but I'll -- Zach you want to take that?