Provaris Announces Quarterly Activities Report – December 2023

Source: 1/31/2024, Location: Europe

Provaris Energy Ltd is pleased to provide the following summary of the Company’s development activities for the quarter that ended 31 December 2023.

• Completed design milestone for the compressed hydrogen prototype tank; construction in Norway on schedule to start in Q1 CY2024.
• Expanded tank intellectual property (IP) to include new small-scale hydrogen storage tanks for onshore and maritime solutions (1 to 10 tonne capacity), opening a fresh commercial avenue with early revenue opportunities in 2024.
• Engaged DNV to issue a Front-End Engineering Design Statement for Provaris’ proprietary H2Neo carrier design and gain approval for the prototype tank.

• Signed a non-binding Memorandum of Understanding with Uniper Global Commodities SE to assess the supply of green hydrogen to Germany using Provaris’ compressed hydrogen H2Neo carriers.
• Secured a second non-binding Memorandum of Understanding with a major German energy utility to jointly evaluate Provaris’ complete compressed hydrogen delivery chain.
• Growing interest from German utilities, end-users, port owners, and pipeline operators seeking low-cost green hydrogen imports before 2030.
• Independent research studies in Germany on hydrogen supply chain costs support Provaris’ 2023 Hydrogen Transport Comparison Report, affirming compression as the most cost-effective marine transportation option over regional distances.
• Ongoing techno-economic qualification with major European utilities, ports, and pipeline companies to incorporate compression as a carrier for gaseous green hydrogen import.
• Ongoing development in two collaboration projects in Norway for exporting green hydrogen using Provaris’ compressed hydrogen storage barge and carriers. Exploring regional opportunities beyond Norway for a compressed hydrogen supply chain.
• Collaboration Agreement with Norwegian Hydrogen extended to continue the Fjord H2 project and jointly evaluate other potential green hydrogen production and export sites in Norway and the Nordic region.

• Raised $1.9 million in November 2023 through a well-subscribed placement to existing and new institutional and sophisticated investors.
• Allocated funds for Provaris’ proprietary hydrogen prototype tank construction and testing program in Norway, as well as ongoing project development costs.
• Appointed Garry Triglavcanin as Product Development Director in November, focusing on the continuous development and optimization of our compressed hydrogen supply chain, which is gaining increased attention as a marine transport alternative in Europe.

Provaris Managing Director and CEO, Martin Carolan, commented: "Our momentum across Germany and Norway surged in the quarter, reflecting the vibrant progress we're making. The signing of two MoUs with reputable German utilities not only underscores the growing acknowledgment of compression in the region but also positions it as a trusted and viable alternative for hydrogen supply and import.

As Europe accelerates toward its 2030 renewables targets, there's a notable realisation among governments and major companies about the limitations of existing supply alternatives and the scarcity of gaseous hydrogen being developed for import. Provaris, with its innovative approach, stands at the forefront, ready to seize the opportunity presented by the pressing timeline to meet decarbonization targets and fulfill commitments made by both industry and government for widespread adoption.

The upcoming near-term milestones, including prototype testing and final class approvals for our H2Neo carrier, will not only enhance our credibility but also validate our business model, reinforcing our position as a key player in the dynamic and evolving landscape of hydrogen solutions."

Prototype Tank Progress
In the December quarter, we achieved a crucial milestone by finalizing the design for a groundbreaking multi-layered carbon steel prototype tank, the first of its scale. Production design activities included the development of a digital twin and the procurement of carbon-steel material for outer layers and stainless steel for the liner. Construction, scheduled for Q1 CY2024 at the Prodtex facility in Fiskå, Norway, remains on track.

DNV Engagement and Approval
The first quarter of CY2024 commenced with a strong start as DNV was engaged to issue a Front-End Engineering Design Statement (FEED Statement) for our proprietary H2Neo carrier design, along with approval for the prototype tank.

Successful prototype tank testing will secure final Class Approval for Provaris’ H2Neo compressed hydrogen carrier and position Provaris to enter ship building agreements.

Collaborative Expertise
Throughout the engagement, DNV will leverage its extensive experience in maritime gas shipping and storage, along with intimate knowledge of Prodtex’s manufacturing processes. ABS and DNV will jointly oversee construction and participate in prototype tank testing, conducted by SINTEF, a recognized Norwegian research facility. The testing includes a rigorous low-cycle fatigue program of ~30,000 cycles and over pressurization.

Near Term Milestones
Construction of the prototype tank to commence in Q1 CY 2024, with testing and approvals projected to conclude in Q2 CY2024, propelling us closer to establishing a robust platform for regional hydrogen supply chains. Additionally, successful milestones can unlock new revenue opportunities, including the production and sale of small-scale tanks by late CY2024.

Extension of tank IP for alternative industrial solutions targeting commercialisation in 2024 Provaris extends its tank intellectual property (IP) to address a market gap for cost-effective static storage solutions in industrial applications requiring long-duration storage of over 1 tonne of renewable hydrogen. Through scaling up the prototype tank specifications, Provaris has developed versatile tank designs with capacities of 1, 5, and 10 tonnes of gaseous hydrogen, using layered carbon-steel with a design pressure of 250 barg.

While not designed for the mobility market, these tanks will find applications in marine bunkering, refuelling stations, and industrial buffer storage, offering an alternative to current containerized composite solutions.

Early commercialization in late 2024 aims to showcase scale-up, constructability, reliability, and safety, presenting revenue opportunities.

Diameter: 2.5 meters
Length: 9 meters
Capacity: ~650 kg hydrogen at 250 barg
Weight: ~35 tonnes.

MOUs signed with German Energy Utilities
Provaris ended the quarter with the signing of a non-binding MOU with Uniper Global Commodities SE, a major player with 22.5 GW generation capacity in Europe. This milestone event recognizes Provaris' compressed hydrogen carriers as a potential solution for green hydrogen import, aiding in decarbonizing industrial applications. Uniper is evaluating the benefits of Provaris' H2Neo carriers and supply chain across the entire hydrogen value chain.

Second non-binding MoU with a major German energy utility for joint evaluation of Provaris' complete hydrogen delivery chain and aligns with the German utilities' portfolio strategy for green hydrogen supply and requirement for imported volumes of gaseous hydrogen by 2028 when the decommissioning of GW-scale coal-fired generation is implemented.

Scarcity of viable alternatives to supply gaseous hydrogen
Provaris continues to be engaged in detailed workshops in Germany with stakeholders across the supply chain. Focused on technical and commercial assessments and considering the delivered cost of hydrogen and integration of H2Neo carriers in downstream infrastructure. Scarcity of viable alternatives to supply gaseous hydrogen required for industry is increasing the focus on compression.

Positioned for Hydrogen offtake tenders in 2024
Thyssenkrupp Steel's recent tender in early 2024 for clean hydrogen supply of 150,000 tonnes per annum for 10yr starting in 2028 underscores market opportunities. Provaris is well-positioned for upcoming tenders for gaseous hydrogen supply in 2024 given:

• Existing MOUs and compression technology advantages enhance Provaris' competitiveness.
• Momentum with end-users, port owners, and pipeline operators aligns with REPowerEU ambitions for importing 10Mptpa of green hydrogen by 2030.
• EU legislation, including Renewable Energy Directive (RED III), underscores requirement for green hydrogen.
• Completion of all approvals for the H2Neo carrier in 1H CY 2024 increases Provaris' strategic position in the evolving hydrogen landscape.
Independent Report Supports Compression as Most Competitive Cost for Regional Supply Source to EU

In early 2024 an independent report produced by ClimateXChange and ARUP for the Scottish Government, assessed the hydrogen production pathways to Europe by either pipeline, shipping ammonia or shipping compressed hydrogen, and comparison with costs for other regions of supply.

Notably the conclusions are consistent with our 2023 Hydrogen Transport Comparison report release in May 2023 and reinforces the robustness of our earlier analysis, underscores the viability of our insights in the evolving landscape of hydrogen transport and supported by the focus from German utilities on our supply chain.

Collaboration with Norwegian Hydrogen (FjordH2 Project):
The quarter continued to progress our collaboration with Norwegian Hydrogen on the FjordH2 project, with completion of pre-feasibility design and engineering work. This included consultations with capital equipment suppliers, ensuring a robust economic model for hydrogen production, compression, and maritime export infrastructure.

Specialist surveys, such as a bathymetric survey at the export site, and a successful Quantitative Risk Assessment (QRA) according to The Norwegian Directorate for Civil Protection's criteria, yielded positive results. Notably, the QRA report identified no unexpected risks or exclusion zones, affirming the project's sound design.

All planned project activities for 2023 were successfully executed, maturing the FjordH2 project toward FEED-level engineering and permitting as a bulk-scale hydrogen export site. Feasibility outcomes confirmed the capital and energy efficiency advantages of a compressed hydrogen supply chain, showcasing a highly competitive cost for delivering gaseous hydrogen from Norway to Europe.

Provaris and Norwegian Hydrogen have extended the Collaboration Agreement for an additional 6 months to June 2024. This extension not only underscores the success of the collaboration but also reflects our joint commitment to advancing the FjordH2 project and use this work as a benchmark to explore for other green hydrogen production and export opportunities in the Nordic region.

Post-quarter, Norwegian Hydrogen's 250 MW application remains assessed as mature, but it's in the capacity queue of Statnett (national TSO). Future development activities for the FjordH2 project will align with the confirmed power capacity reservation. While the original late-2027 export target timeline may shift based on Statnett projections, the continued progress and flexibility in the collaboration position us well for the evolving timeline of this transformative project.

Collaboration with Gen2 Energy AS (Afjord Project)
The past quarter has been instrumental in advancing collaboration activity for the Afjord Project, focusing on achieving Gate 2 and 3 milestones which include the development an integrated schedule for the project, completion of a comprehensive technical and safety review of the H2Neo carrier and containment tank, and carried out thorough assessments during site visits and meetings with Prodtex to review the prototype tank program and production facility.

Additionally, a preliminary review of all safety risks and hazards for the project site has been completed.

Building on the successful Gate 1 completion in 3Q CY2023 and ongoing economic modeling, we continue to underscore the compelling economics offered by Provaris' unique supply chain solution for Norwegian export sites, surpassing alternative carriers.

A final study report is well on track for completion in Q1 CY2024. The positive momentum and successful milestones achieved so far positions a bulk-scale export solution using Provaris’ H2Neo carriers for the next stage of development to be assessed in the 1H of 2024.

During the quarter, Management met with the Tiwi Plantation Corporation (TPC) Board and discussed access rights to the plantation land for solar monitoring, engineering studies, and future construction and operation of solar panels.

We have also taken proactive steps by presenting a draft agreement to TPC, reflecting our commitment to collaborative development.

Provaris also continued its dialogue with the Tiwi Land Council (TLC) regarding a formal response to draft Project Agreements submitted in Q2 CY2023, which include a commercial agreement for land use and a benefits package to the Munupi Clan and Tiwi Island people. Pending the outcome of the TLC February 2024 elections, Provaris will again request community engagement on its proposal.

While minimal expenditure was allocated in Q1 CY2024, we remain steadfast in our commitment to the Tiwi H2 project. Any future substantial expenditure hinges on reaching agreements with TLC and TPC, underscoring our strategic and measured approach.

Looking ahead, the Board intends to review progress in the June quarter CY2024, especially in collaboration with TLC and TPC post the community elections. This assessment will guide our determination of the level of focus and commitment the Company will allocate to the Tiwi H2 Project for the remainder of CY2024. Despite current developments, we maintain a positive outlook and are dedicated to navigating the path forward in a manner that aligns with the best interests of all stakeholders involved.

Equity Capital Raise
In late November 2023, a successful equity capital raise generated $1.9 million through a placement to institutional, sophisticated, and professional investors. This injection of funds positions us strategically for key initiatives, primarily the construction and testing of the prototype tank in Norway, aiming to secure Final Class Approvals for our proprietary H2Neo hydrogen carrier. Additionally, the funds will support development activities on ongoing hydrogen collaboration projects in Norway and cover essential corporate costs.

A noteworthy display of confidence came from our Directors, who committed $230,000, pending shareholder approval at a General Meeting scheduled for Tuesday, 27 February 2024. This commitment underscores their belief in the Company's vision and strategic direction.

Board Change and Appointment of Product Development Director
In a positive organizational development, Garry Triglavcanin, a founding shareholder and director, transitioned into a new executive leadership role as the Company’s Product Development Officer. This shift enhances our focus on development pathways in 2024, emphasizing our commitment to innovation and growth.

AGM Meeting
Our Annual General Meeting on 30 November 2023 witnessed the successful passing of all resolutions, reflecting the strong support from our shareholders.

Cash balance on 31 December 2023 was $2.5 million.

During the quarter, our cash expenditure remained within budget, with a focus on advancing the prototype tank program and final class approvals in Norway. Our commitment to research and development in the compressed hydrogen supply chain, completion of CFER material and weld testing in Canada, and project development costs associated with Norwegian collaborations for hydrogen supply, exemplifies our strategic allocation of resources.

The aggregate amount for payments to related parties and their associates during the quarter was $243,000, covering fees, salaries, and superannuation for Directors, including Executive Directors. This disclosure reflects our commitment to accountability and responsible financial management.

As we move forward, the Company is well-positioned for the next phase of growth and development, thanks to the support of our investors, the dedication of our Directors, and our strategic financial management.

This ASX announcement has been authorised by the Board of Provaris Energy Ltd.

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