RedFlow Limited (RFX) Earnings Call Transcript & Summary

[Audio Gap] Tim Harris, our CEO; and Michael Hipwood, CFO. Tim and Michael will give a presentation, followed by the opportunity to ask some questions. [Operator Instructions] So with that, Tim, I'll now hand across to you.

Thanks very much, Craig. And look, good morning, and I think it's afternoon to some other people in other states. Thanks, everyone, for joining today. I think we're going to follow the usual format we have done with previous results, where we've run through that set of slides and then we'll allow some [indiscernible] time for Q&A. I'm delighted to be joined today by Michael, our relatively new CFO. I think we were just talking about how we [indiscernible] on the 20th of January. Michael will handle the financials, but I think delighted to have Michael joined us at a [indiscernible] time in terms of our evolution we're making an impact. What do we do in terms of this strategy is really, let's take a few moments, I think, at the start of this to just highlight, I suppose, some really interesting and exciting developments that we've seen, including the announcement that we made earlier on this morning, particularly given the opportunities that we see for us in our home state of Queensland. Now a number of people on this call will have noticed that the Queensland government launched a major new initiative around energy storage last week. This is an initiative that really looks to supercharge the energy storage industry in Queensland with over $570 million of funding, including about [ $210 million ] of new funding. What I think is exciting about this is it really, I think it's going to add significant stimulus to the industry here. But also specifically, we think it's going to have some very important implications in terms of Redflow itself. And if you look at the quote on the right hand side by Queensland Premier, Steven Miles, the strategy specifically identifies the role of flow batteries needed to play as a core part of that strategy. So that's super exciting, where we see today. And you'll notice that there's much -- 3 major things in terms of that strategy, investing commercialization, growing the sector and making sure that companies like Redflow can continue to invest in Queensland and also position and promote, making sure that Queensland can really develop its industry and ecosystem in Queensland, but also we can promote our capabilities like Redflow on a global basis. And so that's a super exciting development that we've had, and I think that acts as a very important springboard for our business and going forward. Next slide, please. And so as we said before, we think is a potential game changer. Now we were involved in consultation in terms of the development of the strategy. And I think it significantly underpins the leadership role that Queensland is playing in Australia's broader energy transition. As people know, there's now an 80% target in terms of emission reduction in Queensland by 2035. The Queensland Energy and Jobs Plan was launched in September 2022 with about $62 billion of funding to enable that transition. But critically, there are also that activity to identify over 22-gigawatt hours of energy storage that's required to execute against that plan. As we said before, we've had a great opportunity for us to kind of feed into that process. And we think the industry strategy has a number of [indiscernible] for us. It references specific grants and other sources of nondilutive funding that we believe that we can start to tap into to enable our continued commercial and technical progression, but also has other strong linkages across other federal-based initiatives that are also, we think, are very important and interesting to us, notably the Australian Battery Industrialization Center. So we very much look forward to partnering with Queensland government as the plan moves to an execution mode. And I think it's worth noting where we feel we are relative to the strategy. We're the only Queensland fully developed energy storage technology, with technology developed right here in Brisbane with a global presence. And I think it's also worth noting, as shareholders will be aware, our long-standing and deep commitment to Queensland, including now having global headquarters here. We built a local supply ecosystem, and we have a number of record projects, including the Energy Queensland Project that we have an image behind us that's acting as a major springboard to develop and expands, we think our presence and a battery and solutions that's very well suited to where Queensland needs and wants to get to. And so what we announced earlier on this morning is a partnership with Queensland governments to undertake a feasibility study to develop a large-scale prototype for us that's targeting multimegawatt hour systems and a feasibility study to establish a fully automated battery manufacturing facility in Queensland. I think the context of this is important to note as well. As I think we've shared to investors over many months and years, our goal is to move into multi-megawatt hour systems. And we're seeing a growing demand based on some of the reference projects that we've announced about interest in Australia and in the U.S. about the growing demand at multi-megawatt hour scope. But we also know that to we need demonstrate our pathway towards that scale. And as we grow, we need to have a competitive large-scale battery system that can be produced using automation that gets us to the price point we need to in the market, while also generating attractive return to our shareholders. And so this funding is a $1.1 million grant that's coming from the government. It's an overall $3 million project cost to get us to that point. And that's going to look at the development and the design of what we had previously kind of [ existing ] model that's enabling us to accelerate that work and also in parallel understanding what a large-scale manufacturing plant needs to look like and also the feasibility of establishing that in Queensland. What I can say is that we've been hugely, I think, delighted with the engagement that we've had with the Queensland government over the last sort of 6 to 12 months as we've started to explore this concept. And this funding is through the Queensland Critical Minerals and Battery Technology Fund that's been managed by the Queensland Investment Corp. And that fund has 2 tranches. While the first tranche is providing funds for feasibility studies as we've now got, but we also note to investors there's a second tranche of that funding, which is available of up to $30 million of debt or equity to help fund scale up the companies like [indiscernible]. So the important message here is, I think, is that we've been recognized that flow batteries and Redflow are potentially a very important part of the energy storage ecosystem. The Queensland government is very keen for us to support, and they're very keen for us to make sure that, that can be [ located ] in Queensland. And we think that also has a role in terms of our global ambitions. The ability for us to create and manufacture particularly around our battery stack and then use Thailand going forward and other potential locations as sort of a simply [indiscernible] mechanisms I think to enable us to tap into those global markets while retaining, we believe, a core manufacturing capability here in Queensland. That's where all our technology and our IP and sort of high automation-wise while leveraging the best of both worlds. So we think it's a very exciting stage in our journey. We're really looking forward to rolling our sleeves up and working in partnership with Queensland, but also other customer partners as we start to evolve our thinking around what that large-scale [ existing ] model looks like and the business case forward [indiscernible] battery here in Queensland. Next slide, please. So I think from where we are today, just looking back there for at the half year for H1 FY '24, I think it's worth reiterating the real breakthrough that I think we manage to achieve over that period. The key highlights that we think are important to take context of from where we sit today is we announced projects over the last 9 months in other revenues that is totaling $50 million. And if you look at sort of our revenue history, certainly since I joined, that's a real step change, I think, in terms of the trajectory, but also the profile of projects that we've been successfully able to announce and also contract for. And we've talked a lot about bringing scale into our business and focusing on what's new with our systems, and that's having a very strong effect. The second aspect is that our pipeline continues to grow. A lot of customers have recognized the progress that we've made in terms of announcing these multi-megawatt hour deals, and they're coming to us with their own opportunities. That means that we've kind of transitioned through [indiscernible] and become a critical player [indiscernible] markets. And that's also reflected in our kind of large scale deployments. I think we were delighted to announce Valley Children's Hospital [ 34.4-megawatt ] hour project late last year. And I think that's moved sort of bringing into context. That's 7x the size of the previous largest deployment that we have operation now, which is the [ 2-megawatt hour ] system that we announced with Energy sort of like 2021. So you can see the trajectory I think that we are on in terms of our credibility and our ability to be successful in that multi-megawatt hour market. I think it's also worth nothing that, that comes along with some very high visibility, I think, projects and the fact that we have been recognized as part of the Californian Energy Commission and the U.S. Department of Energy long-duration energy storage programs. And we're the only Australian storage company to be selected as part of those programs, I think, reflect the global recognition that we are having is that we have a great technology, we have a great company, and we're ready to scale from where we are today going forward. So I think it's a very exciting time for us. I think we've made some significant progress over the period. And for us, it's really important that we begin to execute on there from where we are today. I'll go on to the next slide, please. I know what's a lot on people's minds at the moment is production. I think it's clear to see and that's reflected in the financial results that Michael will go through later on. Challenges with production and supply quality is really hinged on us over the last 6 months. What I am delighted to say is that RedFlow production is now back -- is now on track. We've met our targets for February production [indiscernible] slowly exceeded those targets. We now have those injection molded parts that we've talked about before that supply the grass [indiscernible] that's been really Achilles' heels for us over the last 6 months. And we're in the final stages of implementing those key community projects to mean that we can scale using those plants and where we are today. So look, I think we have turned the corner. I'm delighted with the progress that we've made since February. I know it's been a long hard road for investors to navigate and work through that. We are confident now that we have a good platform of quality batteries that we can start scale up to. I think alongside that is the timing that we've had in terms of the notice to proceed for the 15-megawatt-hour Paskenta CEC project that we received not too long ago. So we're aligning our production ramp-up with the needs of the deliveries of the announcements that we've made previously. So we're going to be targeting scaling up the battery facility in Thailand to 20-megawatt hours in around about June of this year. And then we're going to be targeting to scale that facility up to about 40-megawatt hours by September and conceptually aligned in terms of the customer delivery requirements that we start to see coming through. I think we've talked some more about the opportunity to scale targeting beyond that 40-megawatt hours to about 80-megawatt hours. We are ready to do that, and we do have a plan. But as I said before, we really want to have that customer confidence around customer demand and contracts to make that investment as we start to [indiscernible]. But we're not standing still. We have a number of productivity and continued projects that we have been executing for quite some time, going to now come online, but actually making sure we can make that scale up target, but also we're driving better quality and better productivity to that Thailand-based facility. And as I mentioned before, a lot of this in parallel is going to start to look at that large-scale facility about what that is. If I had give you a broad sense of what our ambition is, we are starting to look at a facility of at least sort of 500-megawatt-hour per annum with the target of [indiscernible] producing batteries sometime in 2026. So we now have the capability in Thailand to execute on very key record projects that we've talked about before. To extend that production into new projects, but also in parallel, really accelerate that lean into new highly automated plant is going to get us to the volume and the cost profile and margin that all of our stakeholders are looking forward to. Next slide, please. So just touching quickly on some of the engineering projects that we have been doing. We have a number of things that the team here in Queensland but also in Thailand is also focused on. That includes things like CNC optimization. So this is the way that we prepare some of the electrodes. And just through some pretty simple automation type approaches, we've been able to simplify that program significantly and led to a 30% reduction CNC run time per battery, which goes into the bottom line in terms of making sure that we can produce more batteries and releasing into our increased cost. Things like our spray lines, we've been working on this for about the last 6 months, making sure that we have the capacity as we can start to ramp up the Thailand facility at the right quality management, but also making sure that we can increase that spray line to a number of electrodes that going through that spray lines by at least 50%. And I talked to before the injection molded parts, increasing part quality, de-risking our supply chain and improving productivity as well. And that's really, I think, a key example of some of the opportunities that we see as we start to get in production. We can make some of these parts cheaper, we can do it faster and higher quality. And that's some of the things that we're going to be executing against them and we'll continue to keep investors informed as we go that kind of manufacturing. But we do know that for us in the business, it's been a bit of a 6 months have not been able to manufacture batteries [indiscernible] quality and volume as we wanted to. But we are looking forward, and we are confident about where we are today. So what I'd like to do now maybe hand over to Michael just to summarize where we are in terms of financials.

Thanks, Tim. So with our profit and loss, as Tim has already discussed, our revenue was quite a lot lower than the previous time period, simply because of the lack of production, which we now have under control and have a result. The overall loss came in at 12.8. In the 4C guidance, I was forecasting around about [ 14 ]. So it's an improvement of $1.2 million, and that is primarily with the warranty provision. The warranty provision was decreased by a similar amount with further reviews since the 4C guidance. Next slide. With the balance sheet, the balance sheet also improved from the 4C guidance. I was forecasting a $6.5 million net assets. It's actually $7.4 million. The -- we have, at the time of reporting [ $1.6 million ] worth of cash, noting the $11.6 million worth of raise in the late 2023. And we also received good [indiscernible] the receivables, sorry have also decreased, but that adds to the cash because obviously R&D tax rebate. If we go to the cash flow. So once again, cash flow at that time was [ $11.6 million ]. We did have a slight increase in suppliers and employees costs in anticipation of the ramp-up that we're now seeing being done in Thailand. And also, as I discussed, the R&D grant, we're able to receive both that period and previous periods grant in this time frame. Now back to you, Tim.

Great. Thanks very much, Michael. So look, I think next essentially what we just want to do is just reiterate where we think we are now with our strategy, what some of signals are we seeing from our customers and looking forward. So look, we have a clear and consistent strategy, and this will be a slide that's familiar to many of the people on this call. Our sweet spot at energy-focused application, so soaking up a lot of solar and then being able to ship that over a kind of medium duration period with 4 hours to 12-plus sales and also leveraging some unique characteristics that we have including our hibernation attributes that generates a lot of interest. And I think we've talked before about that's the main reason that we provide the U.S. defense undertaking projects with us. Our key customer focus is still the same. I think we've talked before about moving into largest our systems. And I think the projects that we announced over the last 9 months reflect that focus [indiscernible] that. But increasingly, we're also seeing opportunities for us [indiscernible] opportunities at multi-megawatt hour site at scale. We talked previously about Queensland being our first real utility-based projects that's acting as a [indiscernible] in substation [indiscernible] not too far down the road from where we are today. But we're also seeing interest from other large organizations that are highly interested in behind the meter long-duration energy storage using RedFlow solution. And I think as I mentioned before, we have been shortlisted for a 50-plus megawatt hour opportunity for a large organization here in Australia that reflects, I think, the traction and credibility that we've had with us this strategy going forward. In terms of our geographic focus, I think we see huge opportunities to continue to exist in the U.S. and in California. We see huge opportunities for us in Australia, and I think Queensland government signals that we talked about earlier, really actively support us, further investing in the Australian market. And I think we mentioned before, we see a number of interesting opportunities in other markets, and we'll react to those where we see the opportunity is [indiscernible]. Next slide, please. So I think we've really positioned RedFlow the last 9 months for accelerated growth. We have these breakthrough projects. We have blue chip customers with large scale energy storage needs, and we have key endorsements from institutions around those projects that provide references for us to move forward. Now when we start to look at the production ramp-up, our production is full based on where we see we want to ramp Thailand on a measured basis, but also our customer requirements, delivery and then [indiscernible] well into 2025. And as we're starting to scale, our life becomes easier. Our life becomes easier in terms of getting productivity into our Thailand RedFlow facility. It becomes easier in terms of looking for productivity and efficiency improvements that we can make in terms of our production line, but also needs to have much more certainty and constructive dialogue with our strategic suppliers as they're starting to get more confidence in terms of as we start to scale up and really start to fill that bucket. At the same time, I think that recognition of our leadership around long-duration energy storage is really starting to come into focus. We are delighted to spend some time with partners [indiscernible] in Washington. We have dialogue going state level and federal level here in Australia about what our plans are, but also strong support at the state level and federal level in our key markets, such as the U.S. as well. And that's going to be very cumulative, I think, virtuous circle effect and in terms of attracting other end customers and partners to us as they start to look at their long-duration energy storage needs. And then sort of anticipating the ramp-up of where we see today, we have made moves to selectively invest in our capabilities going forward. Delighted to bring Michael onboard, as I said before, but also we announced that Juergen coming on as our Chief Engineer, who joined us just a short time ago as well, coming from a deep background in automotive manufacturing. He's already as well making a massive difference to make sure that we can ramp up our production with high-quality and productivity and cost downs that we're aiming for. Lastly, what I'd say is we believe that the LDES market is accelerating. We're now seeing renewed focus by large-scale operators looking for proven sort of medium to long duration type deployments. One large utility player that I was talking to last week in Queensland indicated something between the range 30- to 50-gigawatt hours medium-duration storage, take a lead that they'll need as they start to retire traditional coal-based assets moving forward. So that presents a huge opportunity for us and one that we're certainly leaning into and progressing a number of exciting opportunities around that. And I think you're starting to see that intended documentations, expressions of interest, et cetera, and specific customer dialogues that we're starting to see. And you can see from the government regulated point of view, you really are starting to see that look beyond lithium thematic that we've talked to investors for a number of times, really starting to start to come into focus now. Next slide, please. And so look, overall, we believe our transition -- our strategy and growth strategy [indiscernible]. We've enable that transition to be a credible multi-megawatt hour technology in some of the world's most exciting long duration energy storage markets of the planet. And when you start to look at Queensland, the CEC, DoD, DOE and most recently, another exciting project that we've announced in California, which is the Barona Band [indiscernible] project with 6.6 megawatt hours, you can start to see that our focus on megawatt hour projects is going to lead to step change in our profile, our scale and our commercials as we start to report. Next slide, please. And so this is just an update in terms of some -- I suppose some insight into where we see we are in terms of delivery and also revenue impact. I think as we mentioned before, we've got that full notice to proceed now after a bit of a delay [indiscernible] center once that final budget allocation was proceeded. We've got initial deployment kick-off meeting that's happening, I think really next month, which we ourselves and [indiscernible] and looking forward. The Energy Queensland project again is proceeding as per our expectations. Our [indiscernible] which is a very exciting reference project is also proceeding, and we were looking forward to engage further with [indiscernible] a long duration energy storage needs as well as the DoD projects, DOE and the Barona project, as I mentioned before. So we're on track with all those projects. We think that present exciting outlook both in terms of visibility, but also recognition and credibility that's leading on to other opportunities in the market. And I think it's also worth noting that some of the partnerships that we've developed through this process also starting to get through. I will draw shareholders' attention to the fact that we've partnered with [indiscernible] around that Barona [indiscernible] project again with the support of California Energy Commission. So those relationships that we've invested on over the last kind of 12 to 24 months is really just starting to pay dividends in terms of channels to market, market credibility and our ability to execute in field. Next slide, please. And so some of the dynamics we're seeing on macro basis [indiscernible] if you look at the duck curve that we presented to investors previously on the left-hand side, that duck curve is getting deeper and steeper that indicates the real opportunity and challenge that we have to provide a durable long duration energy storage solution. And when you start to look at parallels of the duck curve that's also happening in Queensland, those challenges are the same. And so we feel, when we start to look at some of those macro dynamics that we're starting to see in terms of the demand for long duration storage starting to happen in the key markets, it makes us incredibly exciting. Next slide, please. And some of the broader market trends that we are also accelerating are recognition of long-duration storage, it impacts that, that kind of medium to long into storage duration can have beyond lithium is standing to that. But also again some of our safety concerns, but also those geopolitical elements and dynamics that we've talked about before, really start coming to fruition. Sort of draw shareholders' attention to the left-hand side news announcement with U.S. bans, depending on purchases from Chinese lithium-based producers CATL and BYD. And when you take into account that we've got a huge exciting project with the U.S. Department of Defense for the Stewart Air Force base and another other projects and discussions but then we feel we really will place to tap into some of those global dynamics that we see accelerating in the market and where we are in today. Next slide, please. And look at [indiscernible] slide, it should be fairly familiar to investors, but we had some really core competitive advantages. Now we work hard about making sure we have a very strong value proposition for [indiscernible]. We think the core competitive advantages around the modular approach that we have, the low cost deployment that we have, the fact that we had the highest energy density around commercial growth actually is available and that timing which we know puts us in an excellent position within which the catch the wave of this growth in the -- any storage demand that we're seeing in our frontline. Next slide, please. So looking at it, as I mentioned before, we now have a full production shift that we are looking to execute on for the remainder of this year, and that's going to drive, we think, some productivity improvements, but also some learnings that we believe that we can take into when we're starting to think about that 0.5-gigawatt hour to a facility that we will establish in 2026. Those multi-megawatt hour projects, I think we mentioned about they're allowing further participation in large scale market. And whether it's a project that we've announced, like CEC, [indiscernible] their desire for the companies in the program to move to 200 to 400 multi-megawatt hour, we're also seeing a lot of that dialogue about customers wanting to do initial projects with us are very much looking forward into '26, '27 plus time frame, and they're confident in us that we can scale, get to the right point to be a healthy driving energy storage company within that time frames and met their needs. And so we've seen a number of key deals in that pipeline advancing, and we hope to share with some of those in the not-too-distant future. And with that, further support that we're getting from the U.S. government and Australian government and very specifically Queensland government, we feel really excited about the future and our ability to establish a really strong pathway to profitability and being a successful company at scale that we talked about before. Again, we've mentioned the desire and the actions we're taking to build credibility into RedFlow to be ready for the next scale of growth. And as I mentioned before, and we mentioned regularly, we continue to have engagements with various parties around opportunities for us to scale in a way is going over to shareholders as we progress and we'll be updating to you all in the not-too-distant future. But much more broadly, we feel that we're very well positioned as a leading Australian energy storage company and have to manage for the easy transition in a market that's growing rapidly and be very, very significant in the future. And over the last 9 months, we've successfully made that transition to be a credible player in that multi-megawatt hour market that we think really provides a key pathway for us to grow the business significantly, not only over the next 12 months, but over the next 3, 4 years. And if we just go to the next slide, and as we've, I think, highlighted to investors, we've been working hard on just refreshing our strategy and our pathway forward. Michael has said, I think, an immediate impact in terms of us thinking about how those -- where we can take this going forward. And so we're looking forward to sharing that insight with you in the not-too-distant future. I think we've flagged before to investors that we want to rely or an investor strategy presentation in March. We'll shortly be announcing that, but what we want to do during that session is provide some further insight about some of the trends that we're seeing around the long duration in the storage market. What is our growth strategy to meet the customer needs that they have indicated to us in an entire market, identify where we see those kind of key drivers of success and what is the pathway to profitability for us as we start to look forward about and our goal to be really -- to a large scale and successful company in the future. So we'll let you know the date as soon as we can, but we're very excited to be sharing that insight with you that I think sets a platform for us moving forward. So Craig, that's the kind of the view of the presentation. I hope that was illuminating people, and now I'm happy to take any questions that you might have from the audience.

Thanks, Tim and Michael. First question that's come in is, can you talk a little bit more, please, about what's been done to reduce costs? In particular around salary and overhead, et cetera, the Thailand facility cost?

So yes, so one thing that we're trying to do over this period is we've managed our costs very carefully. Thailand, we've made adjustment all the time so that if we wanted to reduce costs, the cost of retraining people to make sure when we get back in production. That's always a judgment call that you made with your international business that's ahead of you. But what I can say is you start to scale where we are at today, get into that 20-megawatt hours per annum that we made [indiscernible] quite efficiently. So for now we rely overhead business already as we start to scale 30 to 40-megawatt hours, some of that components will move -- will remain into double shift with some processes and that will make selective investment in terms of just increasing that capacity [indiscernible] that we can do that to get to that kind of 30- to 40-megawatt hours. But what I think you can expect as we go forward is the cost of batteries will start to scale up, [indiscernible] and that's not something that we can sort of provide an insight [indiscernible] moving to that kind of strategy presentation in March.

Next question is to the revenue target of $50 million. Can you talk through how the pathway to get to that $50 million and the confidence that you have in the projects behind that target, please?

Yes. So I think you've got the targets that we had was on breaking down there any customer that's on Slide 17. I think as we've indicated in the presentation, if we can break down that $50 million into what's it going to happen this financial year, what's going to happen in FY '25 and then what's going to happen in FY '26. Now the bulk of that kind of $50 million as we start to ramp up, we think we're going to be recognizing in FY '25. Now if you take into account the delivery of batteries to certain locations takes somewhere between 4 to 8 weeks or further recognition, revenue recognition marks says it's delivered and installed and we can recognize that revenue just necessarily lag for this kind of FY, but -- and so you'll see, I think, reasonably significant amount of that, where you probably at least $25 million if we had to think about a number as a target for FY '25 that will be targeting onto deliver and now that will spill into '25, '26 as we go forward. And second, in terms of the confidence of those numbers, a number of those will go into kind of formal contraction notice to proceed such as the U.S. DoD, such as biggest [indiscernible] projects such as Acciona, whereas others are, well, we're going to say more revenue opportunity, but those are ones we're actual in final negotiations with. So for example, for the Energy Queensland project, we have provided guidance at about $2.5 million, split somewhere between FY '24 and '25 and all that will be on where the end customers ready to receive those batteries to make the switch side. We're now in final contract negotiations with them and then say, I don't see any reasons why that would kind of go off track. And so that's not attractive, but I have quite a lot of confidence about meeting those revenues for us and that client from.

Probably subset question to that on the Paskenta project. I notice it has been [indiscernible]. So probably you anticipate, you get the initial 7 -- or sorry, the initial payment of $7 million...

So that really depends on the payment terms of -- we are we expecting that to come in. The booking that were kind of pay in terms of, I think, is at all the indications that we have earlier, some conversations we've had with CEC. So I can't give sort of much more of a guidance around that, but we have high confidence that are coming well in future days.

Right. Next one is around the announcement this morning, Queensland government. Can you talk about the official Queensland manufacturing facility might impact the qualification under these IRA requirements?

Yes, that's a really good question. And it's something which we're doing quite a bit, spending quite a time around in terms of what that means. In a nutshell, we think that we can actually be the best of both worlds. So it's going to have a highly synchronized state manufacturing capability ideally here in Queensland, which [indiscernible] and which we have announced, but also then being able to sort of bring and do a local assembly in the U.S. and in terms of being able to qualify under that U.S. Inflation Reduction Act criteria. So the devil is in the detail, but that certainly seems to be fashion in the market so we have brought is if we don't own the retail model, then we will refine the U.S. Inflation Reduction, but I would say that was taken quite a lot of detailed analysis and there's no kind of [indiscernible] you could have a choose that, but that's certainly where we see ourselves going at the moment. What I would also say on that is that we're starting to look at building out local capability in U.S., the ability for us to use third parties that they seem really, et cetera, which is a kind of fairly low sophistication elements, part of our manufacturing is available to us as well. So your ability to get the best of both worlds, you start to look forward, and we think is coming into interviews. And we'll share some of that concept, I suppose, in March as well. The only thing I would also add is that we know there's a lot of discussions going on in Australia at the moment about a formal Australian response to the U.S. Inflation Reduction Act. And so we look forward to seeing what response Australia answer would be which we start to look at our local manufacturing here that benefit us going forward.

A couple of other questions just around it. Can you elaborate a little bit more please on the difference between government equity and grant funding? And the debt investment model, in particular, I guess, with payback periods and returning the capital?

Why don't you take that?

Yes. So very different agencies either federally or in Queensland have different models. So as an example, ARENA provides grant fund, so that would be deemed to be given, and there's no payback period. It's paid on reaching the milestones with other entity, so the national rig construction fund [indiscernible] equity, provide equity as long as no government agency is more than 49% of the equity of the company or the other agencies so like the North Australian infrastructure facility and some government could provide debt, terms are very favorable to a company like RedFlow, where we would have delayed interest payments or capitalized interest payments until we -- a year of EBITDA positive, so to be able to show that we can repay those interest payments. And then the term of that debt is once again conducive to the success of the company. So there is no strict time frame. It's not like repay 2 years or anything like that. So if we -- if and when we get to that stage, we'll most certainly be discussing that. Other avenues are Export Finance Australia for funding working capital for our inventory for any exports to, say U.S., they can also provide guarantees on deposits. So if they're a customer in the U.S., we are a sort of made a deposit of 20% to 30%. The Australian government via the Export Finance Australia will guarantee that deposit. So there's not a credit risk for that customer. So there's many of opportunities for nondilutive funding and assistance from various different government agencies.