Corre Energy B : Document

Corre Energy Full Year

2021 Results

Tuesday, 31st May 2022

Disclaimer:

This transcript is derived from a recording of the event. Every possible effort has been made to transcribe accurately. However, neither Corre Energy nor Company Webcast (A Euronext Company) shall be liable for any inaccuracies, errors, or omissions.

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Corre Energy Full Year 2021 Results

Tuesday, 31st May 2022

Corre Energy Full Year 2021 Results

Operator: Hello, and welcome to the Corre Energy Annual Results webcast.

I will now hand you over to your host, Mr Colin Grant, Equity Analyst of Davy, to introduce the management team. Thank you.

Colin Grant: I'd like to introduce the CEO of Corre Energy, Keith McGrane; the interim CFO, Matt Savage; and the Chief Strategy Officer, Patrick McClughan. So I'll hand it over to you, Keith, to run through your presentation. Thank you.

Keith McGrane: Great, Colin, and good morning, everyone. It's a pleasure to be here today. I'm delighted to walk you through our achievements in the company for 2021 and want to emphasise that the Corre Energy solution provides a much needed time-shifting of renewable energy by absorbing surplus generation, avoiding grid congestion, whilst providing a range of grid services such as inertia, fast frequency response, and black start to grid operators who were seeing a deficit of zero carbon synchronous generation, particularly in Western and Southern Europe, as we see dramatic increases in renewable energy.

Energy storage plays a very significant role in ensuring flexibility and security of supply in the energy system, like facilitating the integration of renewable generation, supporting the grid, and shifting energy to the time when it's most needed. This reduces renewable energy waste and reduces the reliance on conventional fossil fuel plants in the energy system.

Our agenda today is going to start with an overview of 2021 given by myself, followed by an account of our business and projects by Patrick McClughan. This will lead into the financial highlights section which will be delivered by Matthew Savage, our interim CFO, and then Matt will hand back to me to provide a summary outlook for the business. And for reference, there are appendices also in the slide deck.

You can see a disclaimer there, which we will come back to the section about Corre Energy, but the disclaimer is there for reference. So many of you joining the call today would be familiar with the company and what we do. But just to remind ourselves, Corre Energy is in the business of the development, operation and commercialisation of long-duration energy storage.

On the right-hand side, the Corre solution is illustrated. In summary, our solution provides for the storage of renewable energy at scale. We do so through the compression of air into underground salt caverns, storing that air when electricity prices are low and renewable output is high. At later stages, when prices are high and renewable output is low, the electricity generation from the storage redelivers stored renewable energy to the grid. And the effect of this is the time-shifting of renewables, while the action of compression and generation provides

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Corre Energy Full Year 2021 Results

Tuesday, 31st May 2022

critical grid services to the transmission system operators, keeping the system in balance and enabling highest levels of renewable energy.

What's unique in terms of this solution is that we can store renewable energy for 84 hours or three-and-a-half days with a 320-megawatt generation output. This is a key selling point to our customers and to system operators. And in addition, benefiting society through the acceleration of renewable energy, the reduction of electricity costs and CO2 emissions, while enhancing energy security.

Our key achievements across 2021 starting with, on the right-hand side, a summary of the main points I want to draw attention to, the total funding for the period to December '21 amounted to €23 million. Our funding position has recently been augmented with an equity raise of €10.9 million on 23rd May. And this is in response to quite unprecedented measures called out in REPowerEU, which was announced by the European Commission in response to the Ukrainian situation.

Our closing cash balance as of December '21 was €13.4 million to be exact. And in terms of key operational highlights, we secured grid capacity for the flagship compressed air Zuidwending project of 640 megawatts. We have 11 projects designated in the European Union's ten-year network development plans. And we have secured partnership agreements and arrangements, specifically with Geostock for ten years and Siemens Energy under a collaboration memorandum of understanding.

I'm now going to hand over to Patrick, who will bring us through business and projects. Patrick?

Patrick McClughan: Thank you, Keith. Hello, everybody. So, we listed in 2021 under a development-led model that involves sell-down at financial close. And today, we have a platform approach across several markets, involving the parallel development of projects.

Our plan will transition our business to storage IPP, where we seek to maintain majority ownership on each project. On a selected basis, we sell-down an equity portion of a project, then recycle that capital back into the pipeline. Doing so positions us well to provide value- adding growth for shareholders. And by 2030, we aim to have eight projects in operation with another four to five in construction or development.

When built, our fleet will provide baseload controllable power to system operators and reminding ourselves that by 2030 Europe will move to a 45% renewable target. You can correlate how compressed air energy storage, solves a range of issues for transmission system operators.

So on the left of this slide, we see that as transmission system operators integrate more renewables, they experience more balancing issues, and in turn they require more storage capacity over longer time periods. Corre Energy can provide hundreds of megawatts for over 84 hours. And as you can see, that puts our pipeline right into a sweet spot for shareholder returns.

Today's electricity system operators are placing a heavier reliance on grid balancing and electricity storage. And we will see inexpensive intermittent wind and solar being asked to guarantee supply, if they are to be connected and integrated to a grid that has to offer secure and reliable energy to its customers. This places a reliance on considerable electricity storage

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Corre Energy Full Year 2021 Results

Tuesday, 31st May 2022

capacity, which will be rewarded for providing long-duration energy storage and bulk power management for days and weeks.

Top right of the slide, we can see that Corre Energy's projects have some of the highest discharge in electricity storage capacity outputs of all the key storage technologies. And that's not something I made up, as this statement has been independently validated by a range of independent advisors during all of our 2021 transactions.

So here's our Dutch project, Zuidwending 1, a fantastic construction project with a very well- balanced risk profile that has certainty of revenue. We have tremendous support from a broad range of stakeholders, as shown here. And having received EU co-financing, secured 640 megawatt of grid, commenced permitting and selected an institutional investor, we see how important our strategic partnerships are to de-risking operations and protecting our captive market position.

The salt dome in this location is very well understood with a 100% permitting record for solutions-mined caverns. Commercial off-take arrangements involve large utilities and energy companies who want fixed-price, upside sharing, long-term15-year contracts. And with €200 million of capital already allocated on a very manageable checklist to financial close, we, at Corre Energy, see Zuidwending as a quality project for equity investors; all in all, a very attractive project.

And here we are in Denmark, this time we have the whole integrated value chain and our approach to integrating electrolysis from an economic perspective. The green hydrogen hub is our blueprint for the pipeline; and co-locating electrolysers with hydrogen storage and CAES strengthens and improves economics, in turn making our projects unique, as bulk hydrogen storage allows us access seasonal storage. And this means we can always provide a complete and secure supply of 100% green renewable power by using hydrogen to power the CAES facility.

Using green hydrogen to generate green power via compressed air energy storage allows our product to optimise downstream, where electricity demand is always independent of renewables. Those downstream consumers cannot wait for the sun to shine or the wind to blow for the power, they want it 24/7.

And with a high value portfolio, partnerships become key to de-risking our operational environment, and are an important factor in planning for success. We take these relationships seriously because they add to our competencies and enhance our capabilities. With Nobian for example, we own exclusive rights to develop solution-mined CAES caverns in the Netherlands and beyond. This shared benefit extends beyond the parties and directly adds to the advantageous partnership with Siemens Energy, where we facilitate project and technology collaboration alongside joint advocacy and demonstrating the value and benefits of LDES.

Our funding partners are also powerful advocates for, and strong supporters of the long-term value accretive opportunity they are invested in. We have long enduring relationships with the EU, and they now consider electricity storage assets as being in the overriding public interest and requests that member states facilitate permitting for their deployment. And indeed, two of our projects hold PCI designations and are hailed as investible by the European Clean Hydrogen Alliance.

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Corre Energy Full Year 2021 Results

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As a regulated industry, we ensure activities have due regard to the relevant legislation. And we are a strong voice in advocacy across a range of forums in that regard. In the Netherlands, Denmark and Germany, we have strong allies such as Gas Storage Denmark, alongside system operators, Energinet and TenneT, having spent many years building strategic partnerships both for success and longevity. Matt?

Matt Savage: Thank you, Patrick. 2021 was a pivotal year for Corre Energy from developing our projects to the initial listing on Euronext Growth, which, alongside additional investment puts us on a strong financial foundation to support our ongoing growth.

During 2021, we raised net proceeds of €12 million from our September Euronext Growth listing, a substantial achievement and thanks to the team at Corre and our listing partners. We also secured our relationship with the IEEF II, the Italian reserved alternative investment fund set up and managed by FIEE, and received their equity participation contribution of €11 million.

To-date, we have capitalised €5.2 million of development costs for Zuidwending, two significant outputs from this investment have been securing 640-megawatt grid connection and ongoing customer negotiations for offtake agreement. Our disciplined approach to capital allocation has enabled us to meet our strategic plan during 2021 and with a strong cash balance at the end of the year.

Our full year 2021 total operating expense was €7.6 million, employee costs of €2.7 million. Our admin costs of €4.8 million consisting largely of €4.1 million related to legal and professional costs. This cost was offset by the recognition of grant income received on Zuidwending. Our headcount at period end was stable at 23, which has grown to 41 at the end of May. Our focus is having the correct blend of highly skilled owned and contracted resource at the right time.

In relation to legal and professional costs, a large part of this expense was related to advisory and consultancy and other legal costs that relate to the private placement on Euronext and not directly attributed to the transaction which we see as a one-off exceptional cost relating to the listing.

The finance costs related directly to the options granted in relation to the equity-linked funding agreements with our partners at FIEE. And looking forward, we expect operating expenses to gradually increase as we initiate our next phase of growth, notably around project resource and development. We invest in our talent, and we build the infrastructure to support the continued growth of the business and ensure we execute this growth in a controlled manner.

Carried in cash resource at €13.4 million has further been strengthened by our recent equity raise. Our long-term loans are with investment grade partners and alternative investment managers, IEEF II. Further value will be added to our balance sheet as we develop our projects in 2022 and beyond.

As announced last week, we've secured an additional €10.9 million of equity funding with leading investment grade investors. We believe in having a secured funding path that is diverse and unconcentrated. This is made up of a mixture of highly rated existing funding partners, increased investor activity, new funding partners, and this is reflected by strong share price in volatile equity markets. This recent equity raise further secures our runway for strategic growth plans of the business.

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