KGHM Polska Miedz S.A. (KGH) Earnings Call Transcript & Summary

[Interpreted] Ladies and gentlemen, please take your seats. Ladies and gentlemen, this is a pleasure and an honor for me to welcome you to a unique event. In a moment, by this table, we will sign a letter of intent on the construction of small nuclear reactors, which will be signed by the KGHM. This is one of the most important moments in our history -- in the history of our company. But this is also a very important moment for the -- in the history of Poland because we -- by this, we are responding to the challenges that lie ahead of us. And this is also our response to what will be happening in the near future. Using this opportunity, I would like to welcome our special guest, Dr. Kathryn Huff, Undersecretary of Energy, USA. Welcome. And now I would like to ask Minister [Indiscernible] Deputy Minister of State Assets to take the floor.

[Interpreted] Ladies and gentlemen, today, we are in the beginning of energy transformation in Poland. This is a historic moment for us. And this transformation is not only a challenge but also an opportunity and a driver for Polish economy, a driver and impulse not just in the aspect of ecological change, but this is an innovative change introduced to Polish economy. And we are developing renewable energy sources. We will be building wind farms on Baltic Sea, also on land, but also solar panels and plants, but we know that our energy security must be based on many pillars. And we know that we won't be able to achieve the security without nuclear energy. That's why I am so happy see that KGHM together with its American partners will build a first nuclear power plant of this type in Poland. And I'm sure you'll hear more about this from Marcin Chludzinski, but we want a clean energy, green energy but also stable and safe energy. We know that it must be balanced. We know that there are some problems with renewable energy because of the climate issues. That's why we want to focus and develop nuclear energy together with the renewable energy. I am very happy that we will be doing this together with Americans. America is a strategic ally, supports us in many areas and many fields, and I am so happy that the U.S. will participate in green transformation in Poland. Thank you so much.

[Interpreted] Thank you, Minister, ladies gentlemen. And today's meeting would -- today's event would not take part, if not 2 giants; KGHM, the seventh biggest copper producer and NuScale, on the other hand, one of the most advanced technological innovating companies in nuclear energy. That's why I have the honor to invite John Hopkins, the CEO of NuScale, to take the floor.

It's an honor to be here today. I certainly didn't expect this type of hospitality, but thank you very much. We're here to -- this is an important agreement for both our companies, NuScale Power, KGHM, and it's the start of a long-term relationship. I greatly appreciate Deputy Prime Minster, Sasin, being here. Dr. Kathryn Huff, who was introduced earlier. We also have Andrew Richards, who is the Chief of Staff. And obviously, honored guest here with me today, Chairman and Chief Executive Officer, Chludzinski. And I apologize if I mess these names up. Executive Director of Strategic Projects [Indiscernible] and then Chief Financial Officer, Kensbok. The signing of today's memorandum of understanding between our companies is an exciting step for our SMR technology and its international potential. We have excellent support from the U.S. Department of Energy and our major private investors, including Fluor Corporation. And we're excited to work with KGHM under this new agreement. Under the MAU signed here today, NuScale will support KGHM, examination of NuScale's SMR technology as a coal repowering, repurposing solution for existing coal fuel for power plants and more broadly for new nuclear plant implementations as well as for energy and support of industrial operations of Poland. The examination will likely include an analysis of technical, economical, legal, regulatory, financial and organizational factors. Despite the challenges of the pandemic this past 1.5 years, it's been record-breaking for NuScale. In August of last year, our technology made history as the first and only small module reactor to ever receive approval from the U.S. Nuclear Regulatory Commission. It was incredible rigor that we had to go through in a 40-month process. We also announced in November last year that our groundbreaking fully factory fabricated module can provide 25% more power per module and now produces 77 megawatts of electricity and then we're offering 2 new scalable power plant solutions based on a NuScale Power Module technology, providing the same features, capability and performance found in larger scale plants. Our SMR features unparalleled safety and a flexibility that goes beyond simply delivering high capacity base load. Our small multi-application module has the ability to reliably and sustainably follow the intermittent power of renewable energy, such as wind and solar. Under this new agreement with KGHM, we are excited to explore how our design can support our shared adjectives of meeting net zero energy demands while bettering the human condition. We are privileged to be here. The MOU is a symbolic of a welcome endorsement of our technology and international viability. We look forward to rapidly scaling up. We look forward to the fact and coming to Poland where you're making advances in aviation, and automobile and biotech, and we want to be with you for the advanced nuclear program as well. Our slogan on NuScale is changing the power that changes the world. This means improving the quality of the human kind by continuously improving nuclear power, and we are honored for the opportunity to make this vision a reality. At the end of the day, what we're going to bring, we are a technology, you'll see numerous jobs in the field. Thank you very much.

[Interpreted] Thank you. Ladies and gentlemen, today, what we will see is the moment when our dreams in KGHM meet a specific technology that helps us to implement a challenge of 21st century and secure us for several dozens of years in 21st century because the most valuable energy in economy, the electrical energy will be produced here. And now I would like to welcome Marcin Chludzinski, the CEO of KGHM, to the floor.

[Interpreted] Minister, Madam Minister, ladies and gentlemen, honorable guests, well, the access to cheap and stable energy is important for Poland. This is the competitive advantage for Polish industry, economy, but this also makes Poland a place where international companies investments are located in Poland. We are the second biggest consumer of power in Poland. Well, that comes with costs and the growing cost of electric power force us to look for safe sources of power, but also economically safe when it comes to price, of course. That's why we decided to cooperate with NuScale. This is also part of the governmental policy, Polish policy that focuses on cooperation and investments in nuclear power. And this cooperation is just the first step. Today, we are signing an agreement saying that we want -- that together, we want to build such technological context that can be used by KGHM. We are talking about SMRs. We need 4 reactors as such. Of course, the technologies are accelerating. It may take even less time than predicted. It depends on the certification, licenses in Poland. And we can see that this is a big chance for the sustainability of our business as a mining business where the price is so important for our economic profitability. That's why we are starting our cooperation with the company that is very advanced economically. Also when it comes to the certification and we are searching for partners that will be able to deliver us the final result, which is the power that we need. We hope that this first step will not only be the access to the technology, but as part of our cooperation, we hope to be able to develop the technology in our company and also promote this technology in Poland and in other European countries. We don't want to be only the consumer of energy, but we want to be a company that develops technologically while constructing this technology, this plant in Poland. So our goal is -- this is our goal for the future. And we keep on working. Recently, we told you that we will be using the nuclear projects as the alternative source of power. But at the same time, we remember about the offshore sources, renewable sources and hydrogen projects. We continue those projects. And if it turns out that some of those projects on a bigger scale are implemented, and this is our assumption, we will also be the seller of the power, if we have some surpluses, and this is our ambition. This is our goal. Today is the first step to achieve it. I'd like to thank our partners. I'd like to thank the CEO of NuScale. And I'd like to thank the government, Polish and American government, for their support because it is very important in the context of our governmental corporation. Thank you, ladies and gentlemen.

[Interpreted] Ladies and gentlemen, and now we will see the agreement on the construction of small nuclear reactors signed. And this agreement will be signed by the CEO of KGHM, Marcin Chludzinski; and the CEO of NuScale, John Hopkins. And according to the agreement until 2029, we will have the first nuclear reactors constructed in Poland, constructed by NuScale for KGHM, but this is not the end because our demand for this technology will be bigger. So we hope for further cooperation. So these will be small modular reactors. Thank you. Thank you. Ladies and gentlemen, and this is the end of the official part of our event and now time for you and for your conversations. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]