23 September 2022

Clean Power Hydrogen Plc

("CPH2", the "Company" or the "Group")

Interim results for the six months ending 30 June 2022

CPH2 (AIM: CPH2), the UK-based green hydrogen technology and manufacturing company that has developed the IP-protected Membrane-Free Electrolyser ™ ("MFE"), is pleased to announce its unaudited results and report for the six months ending 30 June 2022 ("H1 2022").

Highlights

·      Successful admission to AIM, a market operated by the London Stock Exchange, in February 2022, raising gross proceeds of £30.5m

o  Awarded the London Stock Exchange Green Economy Mark at admission

·      Order book momentum:

o  Entered into a purchase order with AFCyro, for the sale of a 1MW MFE220 unit, the second unit purchased by the company

o  Order placed by ATOME Energy, for one 1MW MFE220 unit

·      License agreement momentum:

o  Signed a 2 gigawatts ("GW") license to GHFG Ltd, a subsidiary of Alternus Energy Group Plc, over a period of up to 20 years, with production expected in 2023.

o  Technical Cooperation Agreement with Bentec GmbH, an operating company entity of Kenera Energy Solutions ("Kenera") providing for the manufacture of up to 30 MFE220 units for CPH2 at its manufacturing facility in Germany. Kenera is a business unit of our strategic shareholder, the KCA Deutag Group.

o  Kenera has been awarded a non-exclusive license to sell and manufacture CPH2 products in Germany, Scotland, Azerbaijan, Denmark and Norway up to a maximum of 150 MFE units per annum.

o  CPH2 has also granted Kenera an exclusive license to sell and manufacture CPH2 products across the Middle East up to a maximum level of 2GW (including Oman, Saudi Arabia, United Arab Emirates, Qatar, Kuwait and Iraq).

·      The appointment of James Hobson as Chief Financial Officer ("CFO") and executive director joining later in the year

·      Significantly invested in its workforce, increasing the head count from under 30 at IPO to over 50 as at 23 September 2022. This includes the appointment of Arash Selahi as the new Head of Production

·      Period end net asset position of £27.4 million, of which £23.2 million was in cash or current assets investments (bank deposits).

Jon Duffy, CPH2 CEO commented:

"The first half of 2022 was a notable period for the Company as it listed on AIM and funded itself for a rapid ramp up and expansion.  We have also seen both purchase order and license agreement momentum in the period, as customers from around the world have seen the value of the low cost, highly robust membrane free electrolyser technology owned, manufactured and licensed by CPH2.  We are working successfully to overcome the engineering challenges and look to the future with confidence."

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To find out more, please visit: https://www.cph2.com

Overview of CPH2

CPH2 is the holding company of Clean Power Hydrogen Group Limited ("Clean Power") which has almost a decade of dedicated research and product development experience. This experience has resulted in the creation of simple, safe and sustainable technology which is designed to deliver a modular solution to the hydrogen production market in a cost-effective, scalable, reliable and long-lasting manner. The Group's strategic objective is to deliver the lowest LCOH in the market in relation to the production of green hydrogen. The Group's MFE technology is already commercially available and demonstrating cost efficiencies and technological advantages. CPH2 is listed on the AIM market and trades under the ticker LON:CPH2.

CEO statement

Introduction and IPO

H1 2022 is the first reporting period for CPH2 as a plc and it has been a period of significant progress as we gear up to production of the MFE units. The Company admitted to trading on AIM on 16 February, successfully raising £30.5 million (before expenses) in an over-subscribed Placing at 45p per share.  These funds enable the Company to build out its Doncaster manufacturing facility and fund the Company's growth.   At the same time, we were awarded the London Stock Exchange's Green Economy Mark, which recognises companies that derive 50% or more of their total annual revenues from products and services that contribute to the global green economy.

Order book momentum

Shortly after IPO, the Company announced that ATOME Energy purchased a 1MW MFE220 electrolyser unit to be deployed in ATOME's Paraguay mobility project. At the same time, CPH2 and ATOME entered into non-binding letters of intent confirming the parties' mutual intentions to collaborate in respect of potential future orders of electrolyser units for ATOME's international hydrogen and ammonia projects and to investigate and discuss a potential joint venture for the future production of electrolysers in country to serve the Latin American market using CPH2's technology and know-how. ATOME has confirmed that it expects that further orders will follow in due course.

This first unit for ATOME's Mobility Division will be based within the region of Asuncion, the capital of Paraguay, with commencement of production planned during 2023, which is anticipated to be the first commercial production of hydrogen for transport in Paraguay. 

We were also pleased to announce a purchase order with AFCryo, a New Zealand based manufacturer of composite cryostats and cryogenic cooling systems, for the sale of a 1MW MFE220 electrolyser unit to be delivered in 2023. This is the second 1MW electrolyser unit that AFCryo has purchased within 18 months. CPH2 has an established working relationship with AFCryo and utilises the AFCryo cryogenic cooling system in its MFEs. CPH2's MFE220 runs with 1MW of input power with eight stacks and is capable of producing 450kg/day of high purity hydrogen output.

In May 2021 AFCryo placed an order for its first 1MW MFE220 electrolyser, with delivery anticipated in 2023. Additionally, in 2021, AFCryo was appointed as a non-exclusive agent for the marketing and sale of the CPH2 electrolyser system in Australia, New Zealand and the Pacific Islands.

Both of these electrolysers will be used as part of the decarbonisation of New Zealand's heavy transport fleet.

Future order momentum through license agreements

Since IPO, as well as unit sales, we have also announced two significant license agreements, which will play an important role in providing order momentum into the future as we scale up the business and expand overseas.

The first one is with GHFG for the construction of 2GW of MFE electrolysers over a period of up to 20 years. GHFG is a subsidiary of Alternus. Under the licence agreement, GHFG will produce the CPH2 MFE electrolysers at a new facility in Ireland and plans to start production during 2023. Each electrolyser produced by GHFG under this agreement will be installed alongside and powered from solar energy projects owned and operated by Alternus. Under the agreement, CPH2 will receive an upfront licence fee, and thereafter, a technology fee per unit, followed by service and maintenance licences during the unit's life, supplying key components with a margin to CPH2. The upfront licence fee is expected to be received in Q4 2022 and Q1 2023 and is to be recognised as revenue over the life of the contract.

In September 2022, we also signed a Technology Cooperation Agreement with Bentec GmbH, an operating company entity of Kenera Energy Solutions, a newly formed business unit within leading drilling, engineering and technology company KCA Deutag Group. Kenera has been formed as the platform from which the KCA Deutag Group plans to grow its offering within hydrocarbon and energy transition markets and is a significant investor in CPH2. Under the Agreement, Kenera will manufacture up to 30 MFE220 units for CPH2 at its manufacturing facility in Germany with the first units expected to be produced in late 2023. We have also granted Kenera a non-exclusive license to sell and manufacture CPH2 products in Germany, Scotland, Azerbaijan, Denmark and Norway up to a maximum of 150 MFE units per annum and we have granted Kenera an exclusive license to sell and manufacture CPH2 products across the Middle East up to a maximum level of 2GW over the length of the license (including Oman, Saudi Arabia, United Arab Emirates, Qatar, Kuwait and Iraq).

Addressing engineering issues

As we previously announced, our early-stage commissioning of our initial units highlighted certain engineering and scale up issues. A number of design changes have been made but this has resulted in delays. At the same time, we have experienced delays in the supply chain as the global situation impacted. We are working hard to overcome all these issues. However, as previously reported, these delays will have an impact on the income for the Company during 2022. We are not expecting any income from sales in this financial year as the invoice point for MFE220's shipped in 2022 will get rolled into 2023. We are expecting the first two MFE220's to leave our premises in October 2022, there will then follow a period of commissioning and testing on site. There will be an option to exchange these units for upgraded units in 2023 as design changes are implemented. These would then be upgraded to the new specifications and will be available for sale.

We recognise the importance of getting our first MFE220's working 'in the field' and are deploying all necessary resources to make this happen.

Financial Review

These sixth month interim accounts are the first to be published by the Company since its IPO in February, and this dominated the results for this six month period. The £30.5m gross fundraise transforms the Balance Sheet from a net liability position at 31st December 2021 of £0.4 million into a net asset position of £27.4 million at 30 June 2022. Of this £23.2 million was held in cash or current asset investments (cash deposits).

The Statement of Comprehensive Income for the six months set out below shows trading losses continue as the business continues to build work-in-progress on its confirmed orders, ahead of the delivery of those orders to the customer, at which time a sale is taken to Income. Losses continue as expected with administration expenses increasing, as we invest some of the IPO proceeds in building our human and technical resource capability.

Board and team

During the first half we have invested significantly in the team which has increased from 30 people to over 50 people currently, including the appointment of Arash Selahi as the new Head of Production.

Post period end we were pleased to announce the appointment of James Hobson as Chief Financial Officer and Executive Director. It is expected that James' employment will commence in Q4 2022, at which point Clive Brook will retire as an executive director and CFO of the Company. James will join CPH2 from AMTE Power plc, where he has been CFO since October 2021. James has a wealth of experience across the energy sector, having worked as a senior finance executive in the sector for ten years. I would like to take this opportunity of thanking Clive for all his support over the years and speak on behalf of the entire CPH2 team in wishing him all the best in his retirement.

I would like to take this opportunity to thank all my colleagues at CPH2 for their hard work and dedication during the first half of the year and since.

Outlook

The continued drive to net zero combined with the current geo-political situation in Ukraine, has, in the view of the directors, increased the potential market for green hydrogen and the pace at which the technology will be deployed. The Company remains confident that its significant pipeline will start to transition to sales and we expect very positive cash inflows on future orders as they are taken. Production of these orders will be in Doncaster and Germany. Whilst the Company is still planning to launch a 2MW MFE440, final design work on this has been suspended until we have working MFE220's in the field. The Company is progressing the potential opening of a CPH2 run assembly plant in Northern Ireland. Whilst engineering and scale up issues have delayed our initial MFE220 sales, our success in securing license partners of the quality of Kenera and GHFG ensures that we will be able to ramp up production quickly to meet demand.

The Company remains committed to its strategic target of 4GW MFE annual production by 2030; of this 1GW will be in-house manufacturing and assembly and 3GW will be via license agreements.

Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2022