Provaris Energy Ltd is pleased to provide the following summary of the
Company’s development activities for the quarter that ended 30 June 2024.
H2NEO CLASS APPROVALS & PROTOTYPE TANK DEVELOPMENT
• H2Neo carrier prototype tank fabrication in Norway continued during April, May, and early June, providing
confidence in the translation of the 3D models and detailed design into automated robotic handling and laser welding
of the first half of Provaris’ innovative and proprietary hydrogen prototype tank.
• In early June, Provaris was advised that all activities at the fabrication facility were suspended due to the unexpected
bankruptcy of the main sub-contractor.
• Provaris is in dialogue with the facility’s secured lenders in relation to alternatives for the resumption and completion
of the prototype tank, which includes a potential acquisition of the facility and all material, plant, and equipment.
Suitable partners are being identified and discussions commenced on a NewCo to restart the prototype tank
fabrication as soon as possible.
• Completion and successful testing of the prototype tank will secure Class Approval for the H2Neo carrier, a worldfirst achievement in bulk-scale hydrogen marine transportation.
• Prototype tank completion can also unlock early revenue streams for Provaris through the production and sale of
smaller-scale hydrogen storage tanks to Norwegian and EU based industrial users of hydrogen, with an early pipeline
of opportunities identified in maritime and industrial storage applications.
• Dialogue with ship builders remains ongoing on the H2Neo carrier outline specifications to identify the preferred
tank installation method and assist in shipyard selection.
EUROPEAN SUPPLY CHAIN DEVELOPMENTS
• Dialogue and workshops were held with all three MOUs with German utility companies, with the focus on both
technical, operational, and economic aspects of compression and potential hydrogen supply sources in the Nordics
and Iberia that can match the early hydrogen demand requirements of industrial users.
• Pre-development activities commenced, including a site visit in May, with Global Energy Storage to develop a
compressed hydrogen import facility at their terminal site in the Port of Rotterdam, Netherlands. Joint marketing
meetings held at the World Hydrogen Summit provided indicative support for the terminal’s location.
• Technical and commercial due diligence activities continued for potential new collaboration partners to establish
hydrogen supply based on compression, demonstrating industries need for alternative pathways to supply and
transport hydrogen in regional Europe.
NORWAY COLLABORATION FOR H2 SUPPLY
• Extension of our collaboration agreement with Norwegian Hydrogen, building on the feasibility work completed in
early 2024 in Norway, with Finland added to the export locations being evaluated. New sites are now being assessed
for suitable compressed hydrogen production and export project sites and partners and import terminal alternatives,
along with preferred offtake partners.
CORPORATE
• $3 million strategic convertible bond standby facility secured with Macquarie Bank, with the first tranche of $500,000
drawn down and further tranches subject to Provaris’ discretion. Announced Share Purchase Plan completion on 11
July 2024, which raised $1 million.
• Attendance at World Hydrogen Summit, Rotterdam, in May 2024, raised awareness of our development, providing
opportunities to showcase compressed hydrogen as an alternative supply chain and generated new commercial and
technical leads.
Provaris Managing Director and CEO, Martin Carolan, commented: “The June quarter highlights that we
continue to demonstrate our commercial progress with partners for European supply chains. The increasing awareness
and commercial support for Provaris comes at a favorable time, as the EU continues to direct efforts and finances to
lead the charge on low-carbon hydrogen supply. Continued growth in the region delineates the effectiveness of our
strategy to direct all our efforts within the region, capitalizing on our first mover advantage.
Prototype Tank construction demonstrates use of automation and robotic laser-welding for multilayered design
Construction of the H2Neo carrier prototype hydrogen tank continued, making good progress in the quarter.
Fabrication of the tank includes advanced automated robotic handling and laser-welding and will mark a significant
step forward in showcasing the safety and performance benefits of Provaris' proprietary multi-layered tank design
utilising carbon steel and a stainless steel liner.
Construction of the tank to date has provided Provaris’ mangement confidence that high-quality tanks can be
produced with the aid of automation. The transition from the 'digital twin' (design) to robotic handling and laser
welding has been successful, demonstrating the capability to create complex steel structures in a highly cost-effective
manner. This approach significantly reduces the typical high labor resource and cost component for complex steel
construction projects. Refer to the images below for illustrations of the production cell and prototype tank under
construction.
Robotic-laser welding is key to lowering the capital cost for the tanks by removing a significant amount of labour
cost, enabling up to 80% to 85% of costs to be related to materials and providing increased certainty of future
margins. Provaris’ focus has been to shift the cost ratio from the typical 50/50 split between material and labor to a
targeted 80/20 split, favoring material costs. Our experience to date indicates that we are on track to achieve this
goal, showcasing the efficiency and quality of our automated production process.
The prototype tank showcases Provaris' proprietary design, utilizing layered carbon steel and a stainless-steel liner.
With dimensions of approximately 2.5m diameter and 9m length, it boasts a capacity for 650 kg of hydrogen at a
design pressure of 250 barg. Testing will confirm that the full-scale tank design can safely store hydrogen through a
set of fatigue and over pressurization tests representative of 25 years of operations.
During the quarter two sites trips to the Fiska fabrication facility in Norway were attended by a delegation made up
of management, directors, advisors, shareholders and analysts. The site trips also included Norwegian Hydrogen’s
3MW Hellesylt Hydrogen Hub, which is now in production, ramping up to 1.3 tpd, and demonstrating one of Norway’s
first integrated hydrogen delivery chains for local industrial consumption, trucking and maritime vessels in the World
Heritage Geiranger fjord.
Unexpected delays to completion of the prototype tank program
In early June, Provaris was advised that Prodtex AS’ subsidiary and sub-contractor, Prodtex Industri AS, which
operates the Fiska facility and is responsible for constructing the Prototype Tank, announced its bankruptcy. This
action has resulted in a halt to all fabrication activities and delays to the timeline for completion and testing of the
protoype tank. Proactive measures and strategic planning are underway to develop viable plans for recommencement
of the prototype tank program as soon as possible.
Provaris is now in dialogue with the Fiska facility’s secured lenders about alternative pathways for the resumption
and completion of the prototype tank, which includes the potential lease and/or acquisition of the facility, including
all material, plant and equipment. Suitable partners are being identified and discussions commenced on a potential
lease of the facility from the secured lenders or establishing a NewCo to acquire the facility and restart operations
as soon as possible. Partners selection will include consideration of the operational and financial support for a restart
plan. Key personnel from Prodtex AS are co-operating in the evaluation and structuring of future development plans.
H2Neo design optimisation and dialogue with Asian shipyards continue
During the June quarter, further optimisation of the H2Neo ship design and cargo tank integration continued.
Significant reductions in weight have been achieved, allowing further optimization of the hull design and a reduction
of overall length and draft. These optimisation changes equate to lower CAPEX (less material and labour) and a 10%
reduction in fuel consumption.
Updated ship outline specifications are being reviewed with a select group of Asian shipbuilders, with support from
our appointed advisor Clarksons Plc, and dialogue will remain ongoing in the coming quarters.
Working with OEMs on Concept Design for Compression Facilities
During the quarter, Provaris advanced as concept design package for compression loading and unloading. Technical
partnership has been advanced with a preferred OEM to refine the compression design and equipment requirements,
to detail installed capacity (MW) and energy use (kWh), for the loading and unloading of compressed hydrogen to
and from Provaris’ H2Neo carrier and H2Leo storage barge.
Engagement with three German utilities under MOU for supply chain development
The June quarter included several meetings and workshops across the utilities focusing on the scope and objectives
under separate MOUs and collaboration frameworks. The primary objective of each MOU is to understand the
technical, operational and economic benefits of a compressed hydrogen supply chain from hydrogen production,
compression, loading, shipping and unloading. Focus also includes technical review of Provaris’ proprietary and
innovative H2Neo carriers and H2Leo barge solutions designed for regional gaseous hydrogen delivery.
Agreed objectives include the identification of hydrogen supply sources for delivery to a preferred port location in
Germany, or the proposed import terminal under development for the Port of Rotterdam with Global Energy Storage
(GES). One named utility partner is Uniper Global Commodities, with whom we are now at a stage of sourcing a
suitable hydrogen supply project(s) to advance development of a full supply chain, which will include further
agreements covering the full value chain from hydrogen supply site to import location.
Utilities are developing a portfolio approach to hydrogen supply and import alternatives and are evaluating how
compressed hydrogen can contribute to their offtake and import strategies.
During the quarter the German and European Commission continued to make progress on key legislation required
to unlock €3 billion to build out a hydrogen core pipeline network connecting several EU member countries. We see
this as a catalyst for more industrial users to step forward and progress discussions on hydrogen offtake volumes for
the near term.
Pipelines are built for pressurized gaseous hydrogen so, in the absence of a mature pathway for ammonia terminals
with cracking, the scarcity of hydrogen to meet demand and fill pipeline capacity puts significant focus on Provaris
compressed hydrogen storage and marine transport solutions.
Supporting our strategic focus on regional supply chains for Europe, Bloomberg NEF released its 1H 2024 Hydrogen
Market Outlook Report (20 May 2024), highlighting Europe is one of three markets set to dominate lowcarbon hydrogen supply this decade, driven by supportive policies and a pipeline of advanced projects.
Other regions only play a minor role in global clean H2 supply to 2030 in their outlook. These regions, which include
Australia, India and Latin America, provide large project pipelines but fewer policy incentives.
Joint Development of import facility at Port of Rotterdam provides market access to Europe
Provaris and GES enter into a collaboration agreement to develop a new hydrogen import facility at the GES terminal
in the Port of Rotterdam, the largest energy import terminal globally with 4.6Mt hydrogen import required for 2030.
GES is a leading provider of innovative energy storage solutions, offering a comprehensive range of services to meet
the evolving needs of the energy industry, and is developing a multi-client, multi-product terminal in Rotterdam, able
to import both refrigerated ammonia and compressed hydrogen, with redeliveries into barges, rail, truck and the H2
grid (HyNetwork) operated by Gasunie.
Pre-development activities commenced in the quarter, including a site visit in May. Joint marketing meetings were
held at the World Hydrogen Summit in May providing indicative support for the terminal location and an awareness
of gaseous hydrogen being available in the port by 2028.
Studies will be completed during 2024r, with a decision on commencing FEED to follow. GES will remain the owner
and operator of the terminal and fund future capital for the import infrastructure.
Partnership expanded with Norwegian Hydrogen across the Nordics
Early in the quarter, Provaris expanded a Collaboration Agreement with Norwegian Hydrogen AS to jointly progress
the identification and development of several sites in the Nordic region for the large-scale production and export of
hydrogen to European markets.
Leveraging past successes of our relationship, the agreement aims to utilize locally available renewable energy to
produce hydrogen for shipment to European ports. This will assist energy-intensive industries in making an impact
on their decarbonization plans and target a scale and level of innovation that aligns with various European Union
funding schemes.
Work has commenced on the identification and evaluation of potential with Norway a key priority for Provaris given
its regional location, available renewable generation capacity, and its ability to meet demand for hydrogen that meets
the RFNBO-standard (Renewable Fuels of Non-Biological Origin).
RFNBO means that the fuel was produced via electrolysis process, the electricity demand for the electrolysis process
was sourced according to the criteria defined by the RFNBO Delegated Act, achieves the Green House Gas saving
threshold of 70% compared to a fossil fuel 94 g CO2e/MJ according to the methodology defined by the RFNBO
Delegated Act compliant hydrogen.
Analysis continues to demonstrate compelling economics of Compression vs Ammonia supply chains
for grid connected sites in the Nordics, highlighting the benefits for German Utilities seeking a regional
supply of gaseous hydrogen.
Provaris continues to optimise its analysis to showcase the economic and commercial advantages of a compressed
hydrogen supply chain from regional grid connected hydrogen production sites in the Nordics to deliver hydrogen in
gaseous form to the core hydrogen network in Europe.
The key outcomes for compression, based on a 300MW grid connected site in Norway and within a regional 1,000
nautical mile shipping distance, when compared to the ammonia supply chain include:
- 50% More Gaseous Hydrogen delivered: Compression delivers 50% more gaseous hydrogen to the
customer.
- 20% Lower Delivered Cost: The cost is reduced by approximately 20%, offering a discount of around
€1.80 per kg.
- 20% Reduction in Capital Intensity: Capital intensity is decreased by 20% per kilogram of hydrogen
delivered.
- Material Increase in Value: The value and returns of grid connected sites can increase materially (5-10x)
by generating improved net-back returns on the molecules available from such a site.
Nordic sites also address the current scarcity of gaseous hydrogen required to scale up supply for industrial sectors
in Germany and other EU countries. The low volumetric density of hydrogen is offset by a substantial increase in
energy efficiency - 97% for compression compared to 65% for ammonia when delivered as gas.
Limited activity was provided on the Tiwi H2 Project during the quarter with all expenditure on hold. We are pleased
to be advised the Tiwi Land Council successfully completed elections to appoint a new Board and expect to meet
with the new Chief Executive Officer and management team shortly. We look forward to re-engagement with the
leadership team and the key stakeholders on outstanding draft project agreements.
Attendance at World Hydrogen Summit 2024, Rotterdam, with Norwegian
Delegation
In May, management attended the World Hydrogen Summit 2024, Rotterdam, as a
delegate of the Norwegian Pavilion. The event provided Provaris with valuable exposure to
bilateral events run by Norway with other European country delegations an efficient and
cost effective way to have in-person meetings with several existing partners and
stakeholders along with the identification of several new leads for further commercial
opportunities.
Cash balance on 30 June 2024 was $0.958 million (excluding $1 million SPP funds received post the
quarter)
Operating and R&D cash outflows related to prototype tank ceased in June. Furthermore, project costs will be
materially reduced while the prototype tank construction and testing program remains on hold.
The aggregate amount for payments to related parties and their associates included in item 6.1 of the Company’s ASX
Appendix 4C for the quarter ended 30 June 2024 was $152,000 comprising of fees, salaries and superannuation paid
to Directors, including Executive Directors.
Share Purchas Plan (SPP)
Subsequent to the quarter, the partially underwritten SPP was completed, raising $1.0 million (before costs). Final
applications received under the SPP totaled $724,500, with $275,500 placed under the underwriting agreement with
five existing shareholders.
Participants in the SPP (including the underwriters) will also receive 1 free attaching option for every 3 shares
subscribed for (Options). Each free attaching Option will have an exercise price of $0.075 and an expiry date of 2
years from the date of issue.
$3 million standby funding facility with Macquarie
Provaris finalised a $3 million convertible bond facility (Facility) with Macquarie Bank, to be issued in multiple tranches.
A first tranche of $500,000 Convertible Bonds was executed as part of the Facility agreements, with a two-year term
to maturity. The issuance of further tranches remains at the discretion of Provaris and Macquarie, ensuring strategic
alignment with the Company's evolving financial requirements.
During the quarter Macquarie Bank converted bonds with a face value of $85,000 into fully paid ordinary Provaris
shares and subsequent to the quarter converted a further $55,000 into shares. As at the date of this Quarterly
Report the face value of the outstanding first tranche convertible bonds is $360,000.
The Facility provides Provaris with access to cost-effective and flexible standby capital during its two-year term and
supports Provaris’ forward-looking development program in 2024-2025.
