RE: 500mw FID + UK gov backing = £2 per share 2024/202519 Aug 2024 11:25
Indeed, I really liked the Q&A session comments (from Dennis) on capacity reservations;
"Now the capacity reservation topic is an interesting one. And maybe if you allow me, I would just comment shortly on that one. Because capacity reservations in itself are a good thing, right? It means that the customer has basically selected us as a supplier, not just as one of many, but as the supplier of the project. And then they are typically prepaying a certain amount of the contract price, which is then later discounted against the actual contract award.
You have seen that with Shell REFHYNE, right? Shell gave us a capacity reservation, which was paid, and this amount is now discounted against the actual Shell REFHYNE II contract. And you still need to be very careful who you give these capacity reservations, too. There’s a lot of companies and among them are a lot of project developers, who have a very high — a very low likelihood of project realization, either because they’re dependent on funding, which is sometimes difficult to achieve. They have outstanding building permit issues. Some of them do not yet have an offtaker for the hydrogen molecules.
In all of these cases, you need to be careful who you commit manufacturing capacity to because whilst you do get a prepayment of the contract price and whilst you can keep it if it is not being used and not materialized as a contract, you may still end up with a production slot which is not utilized, which would lead to a fixed-cost under-absorption in your factory. That’s why we are very selective in who we sign capacity reservations with, which means they need to fulfill some very important criteria.
Among them, they need to have a confirmed offtaker. The company needs to have an industrial background. They need to have the financing in place or the balance sheet strength to pull off the project. And they need to have, I would say, relevant experience in deploying similar projects. So for us, the credibility of the customer is extremely important in that. If the customer cannot convince us of that, we would not took capacity reservations. But they would have basically need to wait in line for the next container to be finished".
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