NHOA S.A. (NHOA) Earnings Call Transcript & Summary

Welcome to ENGIE Eps Technology Revolution Day, and thank you for being with us today. We are here in our industrial plant in Cosio Valtellino in Northern Italy, the beating heart of the energy and mobility industries. I'm really excited for today and the news we have to share with you. Today is the day because we will unveil our 2023 technology road map, but let me take a quick step back. In 2015, during the IPO process, you will remember, we presented our products like the ElectroSelf one of the first ever developed hydrogen batteries in the world, but we also present our first technology road map, developing HyESS, hybrid energy storage system, hybrid technology vertically integrated into an open architecture, able to integrate the renewables and batteries or even hydrogen with the national grid, diesel generation or even thermal power plants, to address the storage market and off-grid applications at the grid-scale level. This was the ambition. Think about it. This was clearly written into our IPO prospectus, and 2 years later, we made it, becoming the #1 player in the world for microgrids and integrating the first largest multi-megawatt storage systems in Europe. Then with 36 projects realized, 47 megawatt hours in operation and 86 people at that time, in May 2017, we launched the 2020 technology road map, which was in essence distributed smart storage, advanced energy storage systems for enhanced frequency regulation, spinning reserve and capacity firming; but also eMobility, with clear projects related to vehicle-to-grid and fast charge for electric vehicles. This was 2017; and made it again, with over 175 megawatts in operation and over 700 megawatt hours of projects awarded and under construction. So today, we are here launching our new 2023 technology road map but just from a new, different perspective. I mean, in 2015, Eps was a tech start-up moving its very first step in the energy world, while today we are one of the few international and competitive players in this space, a technology company and even more importantly an industrial player, one of the most successful storage system integrator in the world and certainly one of the eMobility leaders in Europe able to transform technological disruptions into industrial products, but Eps is mainly its people. In 2015, Eps had 38 employees. Today, we are over 140 people. In 2015, we were almost all Italians. Now we have 18 nationalities. And 1/3 of us has a PhD or an MBA because in Eps we choose talents and we make our best to raise them. And thanks to our talents, in these years, we have been able to file more than 130 patents and more than 1,200 industrial secrets, introducing iconic innovations in the energy storage and eMobility sectors, you'll remember, from the very first battery-powered black start of a national grid with the Terna Storage Lab in 2016; to eventually the Easy Wallbox, our unique charging device for electric vehicles, launched in 2020. And this led us to become in 2020, although it was a year marked by the devastating COVID-19 pandemic, a worldwide Tier 1 player. We have been awarded with over 700 megawatt hours of storage projects worldwide. We are manufacturing more than 50,000 charging devices for electric vehicles. And we recently signed a joint venture with Stellantis, one of the largest automaker in the world, to create a major European player in the eMobility sector, but again, this is the past and it's now time to announce what's next. Because thanks to Eps people's extraordinary work, today we launch our 2023 technology road map that will revolutionize the future of energy, unveiling the seamless link between energy storage and eMobility. And this will not be made by me, no, no. This will be made by our extraordinary people that you deserve to meet. And for this reason, I then leave the floor to our technology, research and development teams, the epicenter of change for Eps and the future of energy.

Every 3 years, Eps presents its technology road map. Today, we define once more the innovation and technology strategy to maintain our pioneering leadership in energy storage and eMobility. In a world that change rapidly, our mantra is to keep our eyes open to capture any market evolution and react as soon as possible, focusing only on the main deliverables to produce. So even if Eps is already one of most advanced system providers and a solid industrial player, we continue to push technological limits beyond any state-of-the-art, adapting our nature and structure to the booming of our reference markets with the philosophy "evolve or die." We do not believe in incremental innovation, nor in cost optimization. We focus entirely our R&D efforts in technological disruption, in innovation that can create a tangible impact in this world. For our evolution, we have always followed a clear road map, and looking back every 3 years, we felt very proud. Before unveiling our next road map, let's focus on the main results we achieved in 2017 and 2020 plans. In the last 6 years, we shaped and completed our unique HyESS technology platform. Today, HyESS is composed by 4 technology families and more than 30 products designed and developed entirely by Eps. HyESS is the outcome of more than 15 years of research and development started when we were young researcher in our spin-off of Politecnico di Milano. We started from the pivotal element of our power conversion system family, C-BESSHD, a storage inverter designed specifically for high-power dense-energy storage. Then we developed the new HyESS HD containers, 6 new solutions with high power and energy density, to allow us to secure projects for over 700 megawatt hours. Thanks to the iconic Prophet project, launched in 2018 with Politecnico di Milano, our control platform evolved to cutting-edge digital products, namely Prophet EMS and K-WIZE. In addition, we extended the HyESS platform to the new technology family Move, to include EV-charging solution V2X and second-life applications. We realized the Mirafiori 2-megawatt vehicle-to-grid charging station, the largest in the world; and launched on the market the first wallbox that you can install yourself, which is now distributed in 19 European countries, but such results didn't come out of the blue but from a 4-year collaboration with FCA, now Stellantis, to support the launch of their electric platform. Driven by such great successes and with a development road map in common, we decided to launch a new eMobility company, an ambitious joint venture with an immense potential. To tell you more about it, I'll hand over to Giorgio.

I'm excited to tell you more about the newco stemmed from the collaboration between Eps; and FCA, now Stellantis. The JV will focus on the development and supply of innovative and unique products and services. In the wake of our recent achievements, we will deliver a full platform of EV-charging devices for B2C, B2B and public infrastructure. We will also provide charging package services and even large turnkey solutions with storage, V2G functionality and battery life management. Thanks to the combination of our extraordinary skills and the strength of a global carmaker as Stellantis, the newco will be an unparalleled player in the booming electric mobility market. Eps will share its know-how and experience in designing, developing and realizing innovative eMobility and storage solutions to guarantee the newco's success. To boost Eps growth and the newco ambitions within a very short time, we outlined our 2023 technology road map, a joint development plan that is at the same time futuristic and very concrete. The entire road map revolves around a crucial axis, the synergic integration between eMobility and energy storage. We shaped the plan on 5 clear pillars: seamless connection between energy storage and eMobility, as we are the only team that can handle its entire technological complexity; restless focus on strategic battery procurement, reinforcing partnerships with selected preeminent suppliers, leveraging on our position in the eMobility segment; variety reduction program, building innovative and flexible product families exploiting our HyESS technological platform. Driving eMobility disruption, we will launch products that competitors cannot even imagine such as vehicle-to-X functionalities, EV battery used as stationary storage and advanced services for private and public charging. Military-grade processes with a 100% agile organization to enhance productivity, minimize the time to market. We divided such an ambitious 2023 technology road map into 18 R&D projects led by a team of 43 researchers, for a total investment of EUR 25 million. Our HyESS technological platform is composed of 4 technology families, where we funnel our vertically integrated expertise: Move, a complete suite of AC and DC electric vehicles charging solutions for a quick and easy electrification of mobility. Store, with a range of containerized housings for battery and hydrogen storage fulfilling world-class density, operational, safety and affordability requirements. Convert & Connect, systems designed to interface battery and electrical vehicles with the surrounding electrical environment, from microgrids to continental grids. Control, a groundbreaking suite of cutting-edge digital control systems to maximize safety and performance of all our products. Sure to have increased your curiosity, it's time to get ready. I'm now leaving the floor to our team to lead you on this exciting journey to discover details and key aspects of our 2023 technological road map. Enjoy.

We created our technology family Move to design and craft revolutionary solution to make the charging experience easy. We don't just supply wallboxes. Leveraging on 15-year expertise in microgrids and energy storage systems, we provide unique solutions, from a 2-kilowatt domestic AC charger to a 25-megawatt DC fast-charging station in a single vehicle-to-grid EV facility. For our R&D team, easy is not just a slogan. It is a technological driver during each phase of a solution development, as we already proved last year with Easy Wallbox. We started from the market segment that needed the simplest user experience, charging electric vehicles at home. Easy Wallbox is an AC single-phase wallbox with a revolutionary plug-and-play design that tears down installation costs. Any user can complete the setup in about 20 minutes, plugging Easy Wallbox directly in an existing socket up to 2.3 kilowatt. If more power is needed, it can be extended up to 7.4 with a power upgrade. Also, we wanted to avoid blackouts while charging, so we implemented dynamic power management. Everything needed is included in the product package: the current sensor, the connection interface and all the software. With Easy Wallbox, we started from the hardest challenge, as our technical team had to switch from designing multi-megawatt power plants to a mass-scale tiny product. Easy Wallbox was a success. We started selling eMobility products 9 months ago and we are currently delivering 50,000 wallboxes, but this is just the first step, as our ambitious plan aims at more than 1.2 million units delivered within 2030, spreading the "easy" revolution even further. To do that, we are extending the product lineup with 5 new products. Let's start with eproWallbox, a 3-phase AC wallbox that inherits all Easy Wallbox advantages. With a wide span of charging configurations from 2 to 22 kilowatt, eproWallbox pushes the flexibility even forward; plug-and-play connection in mode 2 and power upgrade, both single- and 3-phase connection supported, eproWallbox takes any ambitious customer through his electrification journey. We innovated also the connectivity, exploiting the power line communication to make the dynamic power management seamless. Also, eproWallbox will solve in advance the connectivity problems in areas with low wireless and 4G coverage such as home garages or underground parking lots. eproWallbox will be a crucial innovation, but the global easy electrification is not complete without public and semipublic applications. The development of easyPublic was just our first step in that direction, an AC charging station with 2 charging points of 22 kilowatts each. easyPublic is designed specifically to satisfy the needs both of eMobility service providers and charging point operators, thanks to an integrated dedicated platform and a robust design. Our back-end platform is offered for installation on premises or according to the Software as a Service paradigm. It also supports roaming, load management and the entire payment definition and process to enable and support any business model. However, the real added value for public applications will be offering a full fast charging experience, but this would imply a shock for the electrical distribution grid, as installing only 4 fast-charging points can require up to 600 kilowatts. As the average size of a step-down transformer in Europe is 500 kilowatt, fast charging seems impossible, at least without a huge amount of grid transformation and civil works, quite a problem especially in an urban context. This is why we designed and patented ePost Cityway, a revolutionary DC fast-charging solution born to exploit all tramway and trolleybus existing infrastructures. ePost Cityway will deliver DC fast charging up to 100 kilowatts, getting the energy directly from tramway and trolleybus DC power supplies. It will fully exploit an existing infrastructure, also helping energy recovery while tramways brake. The connection of ePost Cityway will have 0 impact on the AC distribution network and will require no civil works, making also the fast charging experience easy. But this is not enough for us. Eps has its maximum experience in handling microgrids and complex power plants. This is why our greatest effort in the Move family in 2023 technology road map will be in designing bidirectional DC fast-charging station for large EV parking areas as an evolution of our 2-megawatt vehicle-to-grid plant in Mirafiori. Francesco will tell you more.

The Mirafiori pilot project is one of our 2020 greatest successes. It's a full-operating vehicle-to-grid DC fast-charging station with 2 megawatt of installed power. It is currently testing grid services from the batteries of Nuova 500 to optimize vehicle-to-grid functionalities. With this project, we unlocked all our microgrids and storage experience by transforming electric vehicles into the largest form of flexibility for the European electrical grid. Within the end of the year, the innovative plant will be extended to 25 megawatt, operating as Fast Reserve unit for Terna, the Italian transmission system operator, 600 electric vehicles connected together, acting as a single storage system to improve the stability of the grid frequency. To help fast response in less than 300 millisecond, the plant will also integrate a stationary system based on 140-second-life Nuova 500 batteries. Such a pioneering power plant will be deployed with our new product line eFleet, our centralized solution to DC fast-charge EV fleets and provide vehicle-to-grid services. eFleet is a 800-, 1,500-voltage DC microgrid composed by our ePost, a distributed 100-kilowatt bidirectional charging unit; and our proprietary centralized power conversion system with a medium-voltage grid interconnection. eFleet is scalable from 20 to 1,000 electric vehicles, each one charged and controlled independently by Prophet EMS, our proprietary control platform. What today is just an innovative 25-megawatt vehicle-to-grid parking is already the product that we will provide to commercial EV fleets, airports, malls and large parking areas in the next 3 years. In 2025, 25% of public installation will be in DC. And commercial vehicle charging points will be 4x the ones installed in 2020, but DC fast charging booming has a tough obstacle to overcome: the challenge of expensive grid upgrades. For this reason, we are developing eFast. It will allow to unlock DC fast charging everywhere. eFast is equipped with a grid inverter up to 22 kilowatt, 50-kilowatts DC fast charger and an embedded stationary battery up to 85 kilowatt hour. The battery pack affects up to 55% of the total cost. For these reasons, we equipped eFast with second-life battery modules coming from electric vehicles, reducing the product cost by 35%. Exploiting the existing interconnection, eFast can provide more than 100 kilometer of autonomy in less than 30 minutes, just the time for a shower or a business video call. Thanks to our vertical integrated know-how and our machine learning algorithms, eFast optimizes the use of the embedded battery to provide the easiest charging experience. Also, exploiting its bidirectional grid inverter, eFast unlocks vehicle-to-grid functionalities, including power peak shaving, energy time shifting and black start in case of grid outage. We have both product and system design in our DNA, so we already conceived eFast as a flexible product family. With our eFast Maxi, we combine 3 eFast units to reach ultra-fast charging up to 150 kilowatt. This is a flexible and scalable solution for fuel stations, hotels, commercial buildings and small EV fleets. With an add-on, eFast Maxi reaches up to 500 kilowatt hour of installed capacity, more than 1,000 kilometers fast charging without getting energy from the grid, in less than 8 square meters. eFast solution is extremely compact. Anyway, we know that it requires a space not always available. As an example, adding a dedicated storage system in a domestic garage is pretty much impossible. To overcome this problem, for our 2023 technology road map, we designed and patented the eFast Carpet, a flat charging solution to push the easy DC fast charging experience even forward. eFast Carpet includes all eFast features with a new engineering approach, a 30-centimeters-high mechanical platform with an optimized design to exploit a usually wasted space. Now eFast Carpet is designed with a traditional DC dispenser with socket and cable, but when the vehicle will allow it, we will equip it with an automatic robotic charging device to enable EV charging with no human effort. With our technology family Move, we are fostering an easy charging experience for everyone, unlocking fast charging everywhere. Our solutions exploits EV batteries at their most with vehicle-to-grid services and second-life applications, but how can we be so confident that we optimize battery usage? How can we be sure that there is no impact on their performance and safety? Nicola, from our battery center of excellence, will give you the answer.

I'm here to present you our technology family Store, starting from its core, the batteries. Eps has 15 year of battery integration expertise with a long and proven competence in battery integration out of more than 20 different chemistries. A couple of example are here. This is the latest generation of NMC lithium-ion 714-kilowatt-hour and 1,500-volts battery racks that are integrated in our high-density containers for storage, while on this side there is an example of a 42-kilowatt-hour EV battery that will be integrated in a second-life application in our eFleet and eFast. Battery modules are the core components of our solutions having a great impact on our systems' final cost, from 50% in a 1-hour storage system up to 85% in a 4-hour storage system. I mean access to best prices is vital; and that's the reason why we are working with the top global battery manufacturers such as Samsung SDI, CATL and LG Chem. And of course, we will do the same with car manufacturer partners in order to remain a top player in the energy storage market, a market that is continuously evolving, proposing new solutions and chemistries for stationary and electric vehicles. We are so flexible and reactive in battery integration, thanks to our proprietary software for battery management system developed to manage performances and safety of batteries. It allows us to design systems compliant with the main automotive and stationary storage international standards. Dealing with batteries, safety-related aspects must be a top priority. This requires a deep knowledge of cells and modules' details and a continuous quality and performance check, as we proved, being the first to certificate our system for the new IEC 62933 standard. We have a strong focus on battery safety based on 3 key pillars. First, we pursue the maximum safety level by design. In fact, in any battery container, we implement and set 33 risk-reduction measure on the basis of a project-specific risk assessment analysis. Second, we perform a severe supplier selection through audits and in-house battery validation tests to verify the declared performance and safety parameters, reducing long-term technological risks. And third, we carefully focus on the monitoring of common-mode voltages since, according to several international studies, uncontrolled common-mode voltages have been the main cause of storage plant fire hazards in the last 3 years. In this context, we have developed a specific control board to monitor and reduce common-mode voltages among battery racks. This small control board can save any plant from a fire estimate. For our 2023 technology road map, we clearly identify the technological trends to take into account for our development: continuous increase of cell capacity, a necessary reduction in the use of cobalt, voltage increase up to 1,500 volts, adoption for stationary of a liquid cooling system typical of EV batteries, the necessary harmonization of standard and regulation and the increasing connection between eMobility and storage. Leading battery know-how to anticipate technology evolution is crucial. For this reason, in the next year, we will continue developing our online battery aging and performance monitoring system based on the integration of MoniCa platform developed with ENGIE Laborelec. This is a near-real-time data acquisition system which monitors and forecasts battery health and performances, thanks to an adaptive model based on advanced big data analysis and machine learning algorithms. Estimation of future capacity degradation and an early fault detection enables the possibility of optimizing the operating condition, increasing the battery lifetime. Finally, in our 2023 technology road map, we will also take full advantage from the partnership with a carmaker. This partnership will give us a simplified access to competitive prices and new battery technologies as well as to hundreds of megawatt hour of second-life battery modules per year to power our new HyESS HD containerized product line. To tell you more on this product line, let me pass to Enrico.

Here at Eps, we have an obsession for continuous improvements in technical design. Our HyESS HD container family is the result of this drive. We have developed this new family, raising the DC bus voltage level from 1,000 to 1,500 volts; and increasing by more than 3x the power and energy density of our solution, reaching up to 14.4 MVA of power conversion systems and 6 megawatt hour of batteries in a 40-feet ISO container. This new technological platform had an outstanding application last year, allowing Eps to design the battery storage systems that won some of the most aggressive PV-plus-storage and utility-scale storage tenders worldwide, proving our great competitiveness. We have secured contracts for more than 700 megawatt hour of storage plants to be commissioned in the next 3 years. For example, in Puako, Hawaii, a 240-megawatt-hour usable storage system will be AC-coupled to a 60 megawatt solar plant. On the Guam island Micronesia, a total of 300-megawatt-hour storage system will be DC-coupled to more than 50 megawatt of solar plant in 2 solar-plus-storage projects. In New England U.S.A. mainland, Eps will install 50 megawatt hour of utility-scale storage systems to provide grid services to the local utility. In Italy, in the context of the highly competitive Fast Reserve frequency regulation project, Eps will install more than 70 megawatts of storage plants, having won about 30% of the total capacity auctioned by the Italian transmission system operator Terna. If you are wondering how we manage to be so successful, here it is, the answer: We adopt a smart industrial concept. Leveraging on lean manufacturing and agile management processes, we go beyond the pure product manufacturing to play the role of a full system provider with an unparalleled combination of pioneering technology and extensive know-how. The key-points of our successful model are proprietary sizing optimization tools through advanced artificial intelligence-based algorithms prioritizing both competitiveness and system stability and reliability; use case modeling starting from detailed energy and power flows, down to the single component of the system, adding the overarching economic layer; vertical integration and experienced commissioning capabilities, thanks to the presence of multi-sectoral teams that can manage all on-site activities from installation to system start-up; competitive capacity maintenance packages, thanks to our proprietary augmentation strategy and holistic approach on the entire plant life cycle; finally, an evolution from customized solutions to standardized products. We leverage on proprietary technologies and solid partnerships with the most important battery manufacturers to reach cost competitiveness, modularity and replicability. In our 2023 road map, we will complete the industrialization of HyESS HD container family, which is composed of the EnergyHouse HD. That is our battery storage system designed for a wide range of power- and energy-intensive applications. It is suitable for giga-scale projects to provide grid services, renewable capacity firming and time shifting, including solar-plus-storage applications. It is available in 2 versions: the first one, up to 6 megawatt hour for long energy storage duration, more than hours; and the second one, up to 3.5 megawatt hour for up to 1-hour applications. They achieve maximum energy densities with 1,500-volts lithium-ion modules, with a full redundant and modular conditioning and a full integration of firefighting systems. The [ HybridHouse HD ] is an all-in-one battery energy storage solution suitable for utility-scale projects to provide ancillary services, renewables integration and power quality services. It is available in 3 different versions: 3.6 MVA, 3.5 megawatt hour for up to 1-hour applications; 2.8 MVA, 4.7 megawatt hour for 2-hour applications; 1.4 MVA, 5.3 megawatt-hour for 4-hour applications. They have an optimized layout to reduce installation costs and commissioning time. Finally, the PowerHouse HD is a containerized solution hosting a power conversion system and is powered by our HyESS C-BESS converter family, with a remarkable power density up to 14.4 MVA in a 40-feet container, which is the most power dense ever worldwide for standard technical requirements and is in line with market cost forecasts. It is air cooled and requires just a little effort for installation. The new PowerHouse HD leverages on our proprietary C-BESSHD inverter, which will be the fundamental building block to realize our future most complex systems. To tell you more on this, here is Massimo.

I am here in front of our C-BESSHD to present this product and the Eps technology family Convert & Connect, but let's first give you some insights on this market. Energy storage converters' price is going down, reaching value around $30,000 per megawatt, since solar inverters manufacturers are jumping into storage market with mass-produced solutions, but the increase of renewables and the switch-off of traditional thermal power plants call for specific inverter functionalities. We want to lead power conversion to shy away from commoditization. In fact, in the next years, our products' competitiveness will be secured by the increasing complexity of technical specifications required by grid operators, particularly in large tenders. We have been pioneers in innovative inverter functions for microgrids. It's time to introduce new advanced features also for utility-scale grid-connected plants such a virtual inertia, spinning reserve, black start, grid-forming capabilities and mitigation of asymmetric voltage sags with negative sequence current management. We have a 5-year advantage in managing such challenges with our proprietary technologies, as we demonstrated on field through the full seamless inverter transition from on grid to off grid and vice versa in a medium-voltage multi-megawatt plant as in our New Caledonia and Comoros microgrids. C-BESSHD is the last piece of our 15 years experience on C-BESS PCS family development. While we lead for advanced functionalities, we compete with the first in class also in terms of costs, leveraging the historical Northern Italian manufacturing industrial district for power electronics. C-BESSHD is a bidirectional power conversion system with a complete circular capability. It is based on a modular 1,500 VDC, 3-level NPC, IGBT-based power stack. And it is available in 3 different configurations from 1.1 to 1.8 MVA, with no thermal derating up to 45 Celsius degree. Thanks to the advantages of a full hardware and firmware design, this inverter can operate in transformerless configuration, with a consequent balance-of-plant cost reduction. It has a full modular configuration with a wide range of overload capability, which increases PCS reliability and maximizes plant availability, overcoming single-module faults, realizing an embedded N-1 feature. Each column has been conceived to be a stand-alone unit. This design represent also a plus for the assembly and the maintainability of the machine. To reinforce our leadership in advanced control functions, in our 2023 technology road map we want to upgrade C-BESSHD to act as a full virtual synchronous machine. We are also running to complete C-BESSHD UL certification to meet U.S. market needs and to integrate the use of C-BESS family in our eFleet products. However, we will keep a make-or-buy approach for each project in pursue of the most competitive solution for our customers. We are conscious that the technology world is running fast, asking for even more product modularity and short development time. It requires a technological paradigm shift in our next product generation, and we are ready to face also this great challenge. To tell you all about it, let me pass back to Daniele.