Market Update

Achieving net zero requires a comprehensive transformation of the energy system, and governments worldwide are implementing policies, regulatory frameworks, and financial support mechanisms. As the only net-zero gas, green hydrogen is becoming a significant pillar of the global energy mix, whether as a feedstock in sectors such as chemicals and refining, as a fuel where electrification is not possible due to the need for high-temperature heat, or as a source of flexible power generation. Given government ambitions worldwide, supported by significant funding, the potential of the green hydrogen and electrolyser industry remains phenomenal and provides optimism for the future.

The new UK government reaffirmed support for 11 electrolytic hydrogen projects selected in the Hydrogen Allocation Round 1 (HAR1) auction last December, signalling an ongoing commitment to hydrogen. The timeframe between awards and contract signatures for HAR2 is expected to be shorter.

The EU has an ambitious strategy to position hydrogen as a cornerstone of the energy transition. Its target is to produce up to 10Mt of renewable hydrogen by 2030, requiring around 100GW of electrolyser capacity. According to the European Union Agency for the Cooperation of Energy Regulators (ACER), this equates to more than 500 times the installed capacity at the end of 2023. Within the EU, some Member States are also making significant efforts to foster, develop and promote their hydrogen markets. The European Commission awarded €4.8bn in grants to 85 net-zero projects across 18 countries, focusing on energy-intensive industries, renewable energy, hydrogen production, carbon management and sustainable mobility. Expected to reduce CO2 emissions by 476Mt by 2030, this largest Innovation Fund allocation brings total support to €12bn, advancing the EU's Net-Zero Industry Act goals.

Germany has led the world in policy and funding support for green hydrogen. The Federal Network Agency recently approved a 9,040km hydrogen core network, set to be operational by 2032, with the first approximately 500km of pipeline announced to come online this year. The €18.9bn network will repurpose 60% of natural gas pipelines by connecting hydrogen production centres, storage, and end-users. It is supported by state guarantees and an amortisation scheme to balance early-stage low revenues. The initiative aims to advance Germany's decarbonisation, create jobs and support industrial growth, with capped user fees to keep early adoption affordable. KfW, the German development bank, has also announced that it will provide €24bn to support the construction of Germany's hydrogen core network.

US energy policy and related net-zero targets remain uncertain after the US election. The Inflation Reduction Act (IRA) has always had bi-partisan support, and much of the investment in manufacturing has been concentrated in Republican states. The Hydrogen Production Tax Credit, Section 45V, was introduced with the IRA and proposes to award up to $3 per kg of hydrogen produced with low lifecycle greenhouse gas emissions. The US Treasury Department and the Internal Revenue Service (IRS) released the long-awaited 'final' rules in early January. Certain provisions within the three pillars of Incrementality, Deliverability and Time Matching have been relaxed; most notably, the implementation of hourly matching requirements has been pushed back to 2030 versus the original guidance of 2028. However, President Trump has since signed an Executive Order immediately pausing the disbursement of funding appropriated through the IRA and the Infrastructure Investment and Jobs Act (IIJA). All agencies must review their processes, policies, and programmes for issuing grants, loans, contracts, or any other financial disbursements of these appropriated funds for consistency with a set of criteria. Until the outcome is clearer, industry participants will likely hold off making material investment decisions in the US.

Board changes

Post-period end, we welcomed two new Directors to the Board, with Amy Grey starting as CFO on 6th January and Matthias von Plotho appointed as Linde's nominated Board representative, a Non-executive role. They replace Andy Allen and Jürgen Nowicki, respectively. Amy brings a wealth of experience, joining us from Sheffield Forgemasters, where she served as CFO. Before this, Amy was Vice President of Finance for Greenlane Renewables, a global provider of biogas upgrading systems. Matthias joined Linde in 2001 as Team Lead Accounting and subsequently held different positions in Finance & Controlling, and Global Head of M&A. He is currently Senior Vice President Finance EMEA at Linde Gas.

Improved financial guidance for FY25

ITM's financial performance in the first half of the year was pleasing, which allowed guidance to be refreshed positively in our trading update in December. We reiterate revenue and EBITDA whilst improving cash:

· Full-year revenue of £18m to £22m

· Adjusted EBITDA loss range between £32m and £36m

· Cash at year-end in the range of £185-195m, up from original guidance of £160-175m and previously already improved guidance of £170-180m

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Results for the six months ended 31 October 2024

	Note	Six months to 31 October 2024 (unaudited) £'000	Six months to 31 October 2023 Restated (unaudited) £'000	Year ended 30 April 2024 (audited) £'000
Revenue	3	15,534	8,883	16,509
Cost of sales		(25,722)	(17,029)	(33,173)
Gross loss		(10,188)	(8,146)	(16,664)

Administrative expenses		(23,894)	(12,778)	(22,575)
Other income - government grants		295	225	1,228
Loss from operations before exceptional items		(20,705)	(20,699)	(38,011)
Exceptional items	8	(13,082)	-	-
Loss from operations		(33,787)	(20,699)	(38,011)

Share of loss of associate companies		(2)	(260)	(291)
Finance income		5,496	6,269	12,219
Finance costs		(499)	(295)	(643)
Loss on disposal of joint venture		-	(331)	(331)
Loss before tax		(28,792)	(15,316)	(27,057)

Tax		(68)	(26)	(167)
Loss after tax		(28,860)	(15,342)	(27,224)

Other comprehensive income:
Foreign currency translation differences on foreign operations		(142)	(152)	174
Total comprehensive loss for the period		(29,002)	(15,494)	(27,050)

UBS: What’s Holding Back Europe’s Green Hydrogen Projects