ReFuels N.V. (REFL) Earnings Call Transcript & Summary

Good morning, and welcome to this investor presentation from ReFuels. So with me today to give this presentation, we have, as usual, CEO, Philip Fjeld; and CFO and Managing Director, Baden Gowrie-Smith. We will first have a presentation and then afterwards, we will have a Q&A session, and you can submit your written questions in the chat functions during the presentation or you can also submit an e-mail to ir@investorweb.no, and then we'll deal with the questions afterwards. So with that, I hand the word over to Philip.

Thank you, Erlend, and good morning to everyone, whether you're watching this live or on catch-up. Very pleased to have announced this morning that the debt facility that we've been talking about for months now has finally been concluded, GBP 25 million debt facility with Foresight. Baden will give some more information about that debt facility in a bit. But it's a good day for us, clearly. We're now able to roll out more stations. And of course, we are very pleased with the relationship we've got with Foresight that they want to continue to fund going forward. So they must obviously like what the business is doing. And with that, we'll go through some slides here. Next, please. We'll skip the -- there we are. So what is it we're doing? Just to give you a bit of a reminder on that one. We'll also give you a bit of a market update through these slides. We are decarbonizing HGVs, heavy goods vehicles focused on the U.K. today. There is a very small part of the vehicles on the road that make up a large part of the emissions, typically 1% of vehicles on the road being the heavy goods vehicles make up almost 20% of greenhouse gas emissions, and that's what we are busy decarbonizing. Next slide, please. There we are. So if we then look at biomethane or Bio-CNG that we are putting into vehicles, it is not only a green 100% sustainable and renewable fuel, it is also cost competitive and considerably cheaper than regular diesel or HVO 100% biodiesel. It offers typically 80%, 85%, 90% lower greenhouse gas emissions with diesel. It's also possible to go negative, and we will increasingly be sourcing biomethane that does go negative going forward. We often get a question -- okay, so there is seen in the industry that there is a limitation on how much biodiesel can be produced from sustainably sourced feedstock, what is the potential for biomethane? There, we are really only scratching the surface. There is a megatrend currently across Europe of huge investments going into additional upstream capacity to produce biomethane. I think about 6 months ago, there was an estimate that came out of EUR 27 billion going into that sector. Since that, we've seen other announcements. So I presume that number is higher at this point in time, but there's a huge wave currently of projects underway, which, of course, is very positive for us and our customers because that means we're going to have a strong pipeline of biomethane supply going forward. Next slide, please. If we then just take a look at where we are today, we've got 16 large public access stations in operation. We're currently refueling north of 2,100 trucks per day. And we're very proud that we saved our customers or helped our customers reduce their greenhouse gas emissions by more than 220,000 tonnes of greenhouse gas emissions last year. And more importantly, this isn't just a niche application that a couple of fleets in the U.K., large fleets in the U.K. are using. No, we've got now north of 175 unique customers on our system, and that is looking -- we are confident that, that will continue to grow over the coming months and quarters. Next slide, please. Just to give you a bit of a refresher, we put a new structure in place together with Foresight back in April of this year when we announced it. Why? Because the previous structure was complicated and was making it hard for us to attract growth financing going forward. We are 100% equity financed. So therefore, we needed a new structure to attract debt. That is the new structure we've now got, where we've got what was previously 3 verticals of the business, the upstream part, RTFS with the biomethane sourcing and supply, CNG Fuels basically being the engine room, if you want, of the company and then also the stations. That's now all being come together under CNG Fuels and that is the platform, which we are now raising debt through, and we've got a strong balance sheet there. Next slide, please. This is just a reminder of what a typical station looks like. This is our most recent opening. This is Livingston up in Scotland, our second station in Scotland. Here, you see that these are unmanned facilities. So the drivers turn up. They do all the work on site. We remotely monitor them. Livingston at full capacity will be able to refuel probably somewhere in the range of 600 to 800 trucks per day. As I said, completely unmanned facilities as such. And if you then look at how do you put renewable energy vectors into vehicles, whether that be liquid biofuels, whether it be gaseous such as biomethane or potentially green electrons for battery electric trucks. There's no infrastructure anywhere in Europe that we are aware of that are as large and as efficient as this in putting renewable energy vectors into trucks. Next slide, please. So where are we currently in market penetration? How is that looking going forward? Since the company was founded in 2014, we have -- up until, I'd say, the last 12 months, we've been limited to basically only growing and penetrating the so-called 4x2 truck market. There are about 25,100 -- 21,500 trucks on the road today, which are so-called 4x2s. If you then look at the so-called 6x2, which is the heavier part of the spectrum, which can go up to 44 tonnes, there weren't really CNG trucks available there before plus/minus at scale about 12 months ago. If you look at our market penetration into the 4x2 market, we're currently sitting at about 10%. Now we expect that to continue to grow going forward, whilst our market penetration in the 6x2 market is pretty much 0. That is starting to change. We're now starting to see mass adoption also happen in the 6x2 market. And as such, of course, if we can achieve the market share that we've today got in the 4x2 market in the 6x2 market, we have a lot of growth ahead of us. Next slide, please. These are just 2 new customers that came on board just in the last 6 months, Tesco and Co-op. For those of you who aren't British, Tesco is the largest supermarket or food retailer in the U.K. Co-op is also a large one. And I think the statements here to the right speak for themselves. Very excited, of course, to have them on board. And once again, this is just showing that we're not dealing now with a niche application that only a couple of select fleets are actually adopting. Now this is going into the mainstream. We're now seeing mass adoption, and we expect to see a lot more similar announcements from similar customers or large customers in the U.K. in the coming quarters. Next slide, please. And that's for Baden. Thank you.

Thank you very much, Philip. Yes, we're very pleased we've completed this fundraising. We are now fully equity funded from the perspective of -- from the view for our shareholders and believe that going forward, we should only need to use operational cash flow and debt as the combination to deliver the rollout plan, which is the current rollout plan of 3 years, 9 additional high-capacity stations and of course, a larger fleet of our mobile refueling units as well. The process for those who watch our releases more regularly, they'll know that we started in the first half of the calendar year. We ran a comprehensive marketing exercise to a number of different types of debt funders and received a number of compelling offers. And then the Foresight Group, who are existing funders came forward with a very attractive offer that really met what we need at the moment from a number of -- for a number of different features that were within there. Of course, the market -- we found the rates to be at market, which was positive and cheaper than our other loans and funding we have within the business. It also has low prepayment fees and no prepayment term, which essentially enables the business to go and have a look at additional funding as when we need it for the remainder of the rollout, depending on the cash flow profile of the business. We draw -- the way we're able to draw it down is very flexible. Clearly, again, having used an existing funder who understands the business has the benefit of them being able to see -- of them being able to sculpt drawdowns us, collectively being able to sculpt drawdowns much better, which again brings down that funding cost -- and yes, of course, we're very pleased that the Foresight Group have been happy to continue funding with us and to continue to invest in the rollout that we currently have. Once again, the current plan is for 3 stations per year for the next 3 years. But what we really have here now is the ability to have a look at how cash flows are performing -- cash flows and certificates are performing and manage our capital structure and -- to accelerate the rollout should we need to in the future. Next slide, please. Thank you very much. So here, we just show again what we believe would be an average station that we roll out now, the types of economics we see. Clearly, these aren't 3 identical stations for the next ones we're building. They all have different features. But on average, we see station CapEx coming in at around the GBP 8 million mark for new sites. IRRs in the 25% to 30% range and fast payback periods for these types of stations. It's important to note that when we consider these IRRs, it's a 15-year IRR. We don't use a terminal value on them, and these are unlevered, which, of course, we now are able to lever these, the station returns. And they also don't include the returns we make from RTFCs, which can be very substantial and would bring these payback periods down very -- quite considerably in the event we were to include them. Even with just stations alone, you can see the free cash flow yields that come off these sites go northwards towards 100% once the sites are established and reach their steady state rate, which is obviously a very compelling rate of return for an infrastructure investment. Thank you. Next slide, please.

Thanks, Baden. So just to go through where we've come from and where we are going with regards to the next stations. I mentioned previously that we opened Livingston back in May. So that's our most recent new station being opened. We've also been clear in the past that we've got Magor in South Wales going into development very shortly. We've also got Swindon in Southwest England also getting ready there to go into development. Both of these are high-capacity sites that will add considerable new capacity. When we talk about capacity of our stations, by the way, just to give a bit of clarity there, it's not always very easy to give 100% clear answer what that capacity is because some of our stations might be constrained by the number of dispensers we have on site and other stations might be constrained by the amount of gas we can take off the grid. When we talk about high capacity and high-pressure pipeline that we are connecting to, such as Magor and Swindon, there, we will likely have unutilized compressor capacity, if you want, that we can then use to refuel MRSs in the future. So both of those are either ready to go or will soon be ready to go. And then we have a third one, which this facility will also permit in the future, which we will come back to the market and provide a bit more clarity which one there we will select. Next slide, please. If we then look at where are we with regards to the market we operate in with regards to biomethane, we operate under the so-called RTFO, Renewable Transport Fuel Obligation, which is a market-based mechanism. This is not a subsidy. It's been in place since 2008, et cetera. It's got increasingly tight blending obligations, which increase every year going forward. And there is a consultation expected over the coming quarters, which will look into whether or not the blending obligation should be stepped up further into the future because currently, it stops increasing in 2032 and the consultation will then look at what happens to increases post 2032. Next slide, please. If you look at where we've been on certificates, yes, there is volatility in that market for a number of reasons for those of you who have followed us for years. So what has been happening recently? We had a couple of years where certificate prices were depressed. The European market was being flooded predominantly by biodiesel or alleged biodiesel that came out of China. That has now stopped and has balanced. If you look at where we are currently with regards to the certificate pricing, we've been in a sort of 24p to 26p range for probably about 6 months. It's now broken out of that range, is now trading in the -- typically trading in the 27p to 28p range. Why is that? We are seeing a gradual tightening in the biodiesel market and in the biodiesel feedstock market, which is now translating into higher RTFC prices. We already mentioned this in the past, but we're now actually starting to see that come to fruition. Next slide, please. So if you then look at where we are currently, we're in October 2025 today. What we've said that we are guiding or we are basically saying that by 2030, we should be in a position to annualize about GBP 100 million worth of EBITDA. That means we need to grow there or thereabouts about 25% per annum. That's something that we currently feel confident is achievable. And if you look at where we are currently on profitability, we are pretty much on track to meet that GBP 100 million EBITDA number in 2030. Next slide, please. So what does that mean then? Clearly, this is just a fairly simplistic illustration of what that could mean with regards to share prices and with regards to value creation. Clearly, there are many things that will happen, positives and negatives between now and then. But this is just an illustration of what that could look like compared to where we are today and what the future could lead to. With the 6x2 now really starting to get into the hands of customers, we've had -- well, we haven't had -- we've got north of 100 fleets that want to trial the vehicle. As those orders start to be placed and start to be delivered, we should remain on track to deliver, as I previously mentioned, that GBP 100 million EBITDA number by 2030, which this is premised on. Next slide, please. So then finally, just to wrap up before we can take some questions here. So where are we currently? We are in a phase of mass adoption, where we're starting to see -- Tesco as an example here, where we're starting to see huge new fleets come on board with quite ambitious adoption plans going forward. They are going down the biomethane route because they see that as scalable, it's economical, and it is something that gives them quick wins very early on. These are companies that have maybe quite ambitious decarbonization targets. Maybe they want to be 50% of fossil by 2030, 100% by 2035. That means they need to start acting today. They can't sit on their hands and wait for something to come along in the future. And as such, for a lot of these fleets, biomethane is the chosen option. If you look at where we are currently on the RTFCs, that market had -- yes, it's volatile, but that has come up and has stabilized quite nicely. It's moving up gradually. That has put us in a position now to source biomethane profitably and to achieve solid margins, which we can then use to further grow the business. We've now announced the debt piece here, which is a result of the, I would say, the new structure we put in place, which means we've now got a very strong balance sheet. We've got strong positive cash flows coming in from the operation across the group, and that has put us in a very, very good position to now continue to grow going forward without having to tap the equity markets because we can now -- as we've just shown, we can tap attractive debt, and then we can continue to grow into the debt portion here at likely more attractive terms in the coming years. And with that, we can move to the last slide and then take some questions, please.

Yes. Thanks, Philip. So just a reminder, you can submit written questions in the chat or send an e-mail to ir@investorweb.no. So we have a couple of questions. So first one, it's now been a few months since you last reported your quarter. And how has the quarter been since then? And has it been going according to your expectations?

Thanks. That's a good question to try to tease out of us whether we are on track or below track on our guidance of GBP 8 million to GBP 10 million. All I can say is we've got our earnings report at the end of November. I'm not going to give out any information today whether we are on track, above track or below track, catch up with us at the end of November, and we'll give you a bit of an update then. All I can say in general, we're quite happy with the market, as you've seen for the RTFC prices here. We're quite happy with the growth that we've seen on our monthly reports. And then we'll come back to where we're at with regards to guidance, et cetera, at the end of November.

Good. Then we have one question on the build-out beyond these 3 stations. So you now have secured the debt to build out 3 stations. And to get to your '28 goal of 20,000 HGVs in capacity, are you fully funded?

Baden, do you want to take that one?

So we are now obviously fully funded for the next 3 sites. The amount of additional funding we require, which is not equity funding for the remaining sites really pivots on the speed of cash flow generation within the business itself. What's important to see, though, both from the marketing exercise we ran is that we are a compelling investment case for the provision of debt, which is great to know. We have -- so we have the ability to take on more if we need to, but also the cash flow generation over the next year, we expect to be very solid. And so really where that balance point is on debt versus cash flow is we'll decide in due course. But we certainly have the capacity to do it now, and we'll -- I'm very confident we'll be funding the following -- the next 6 stations with sensibly priced funding for investors.

Then we have another question here, which is, what is the opportunities for CNG fueling stations in Ireland or Northern Ireland?

Excellent question. If you look at the current market, I think there are 8 or 9 stations, fairly small stations in the Republic of Ireland at the moment. I think there's 1 or 2 private in Northern Ireland at the moment. Those are markets that we closely follow. We continue to have on and off discussions there, whether or not that could make sense for us to look at. We've got a quite unique competency, not only in running the stations that you've seen, but also in design, build, operational philosophy, the whole package. So that is something that is on our radar. If it's something that we actually get into, we'll, of course, inform the market. But sure, there are certain aspects there that make a lot of sense to us strategically, that make sense to us from an operational perspective. We've got customers using our stations across the U.K. today that also have a home base in Ireland or Northern Ireland. So tying that knot together, if you want, makes sense. But of course, it needs to also make sense from a financial perspective, strategic perspective. So it's on our radar. I will come back and inform the market if that's something that we will basically pull the trigger on.