ITEM
3. KEY INFORMATION
A. [RESERVED]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
You should carefully consider
the following risk factors and all of the information contained in this Annual Report, including but not limited to, the matters addressed
in the section titled “Forward-Looking Statements,” and the financial information with respect to Parent before you decide
whether to invest in our securities. The value of your investment will be subject to the significant risks affecting us and inherent in
the Green Hydrogen industry and the Iberian market. Any of the following risks could materially adversely affect our business, financial
condition or results of operations. This could cause the trading price of the Class A Ordinary Shares and/or Warrants to decline,
perhaps significantly, and you could lose all or a part of your investment. Additional risks and uncertainties not currently known to
us or that we currently do not consider to be material may also materially and adversely affect our business, financial condition or results
of operations.
Risks Relating to Our Business
Parent and Fusion Fuel Portugal have a limited
operating history.
Parent and Fusion Fuel Portugal
have a limited operating history. Because of this, your basis upon which to evaluate our ability to achieve our business objectives and
operate profitably is correspondingly limited. This could adversely affect the price of our securities and future prospects.
We may need additional capital in the future
to meet our financial obligations and to pursue our business objectives. Additional capital may not be available on favorable terms, or
at all, which could compromise our ability to meet our financial obligations and grow our business.
Our future capital requirements depend on many factors,
including our research, development, and sales and marketing activities. We intend to continue to make investments to support our business
growth. Accordingly, we may require additional funds to:
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continue our research and development; |
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commercialize our new products and services; |
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achieve market acceptance of our products and services; |
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establish and expand our sales, marketing, and distribution capabilities for our products and services; |
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protect our intellectual property rights or defend, in litigation or otherwise, any claims we infringe third-party
patents or other intellectual property rights; |
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invest in businesses, products and technologies, although we currently have no commitments or agreements to
do so; and |
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keep progressing the development of projects in Fusion Fuel´s own project portfolio |
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otherwise fund our operations. |
If we do not have, or are not able to obtain, sufficient funds, we may
have to delay product development initiatives or license to third parties the rights to commercialize products or technologies we would
otherwise seek to market. We also may have to reduce marketing, customer support or other resources devoted to our products.
If we need to raise additional capital through public
or private equity or debt offerings or through arrangements with strategic partners or other sources in the future in order to continue
to develop and commercialize our products and product candidates, we cannot assure you that additional capital will be available when
needed or on terms satisfactory to us, if at all. To the extent we raise additional capital by issuing equity securities, our shareholders
may experience substantial dilution and the new equity securities may have greater rights, preferences or privileges than our existing
Class A ordinary shares.
The green hydrogen production industry is
an emerging market and green hydrogen production may not receive widespread market acceptance.
The green hydrogen production
industry is still relatively nascent in an otherwise mature and heavily regulated industry, and we cannot be sure that potential customers
will accept hydrogen production broadly, or our HEVO based products specifically. Enterprises may be unwilling to adopt our solution over
traditional or competing power sources for any number of reasons including the perception that our technology is unproven, a lack of confidence
in our business model, the perceived unavailability of back-up service providers to operate and maintain our technology, and lack
of awareness of our product or the perception of regulatory or political headwinds. In addition, companies may take longer than expected
to use green hydrogen over brown hydrogen due to potential price differentiation. Because this is an emerging industry, broad acceptance
of our products and services is subject to a high level of uncertainty and risk. If the market develops more slowly than we anticipate,
our business will be harmed.
Our limited operating history and our nascent
industry make evaluating our business and future prospects difficult.
The Fusion Fuel team began
its work in the renewable energy industry in 2008, and since such time we have been focused principally on research and development activities
relating to concentrated solar power, part of which we have applied to our technology. Fusion Fuel´s hydrogen project began in 2018.
Although the hydrogen project is an extension of our historical business it comes with some different challenges, including the challenges
described elsewhere in these “Risk Factors” which we may not have the experience or ability to successfully overcome. Furthermore,
our hydrogen generator, the HEVO, is a new type of product in the nascent hydrogen industry. Consequently, predicting our future revenue
and appropriately budgeting for our expenses is difficult, and we have limited insight into trends that may emerge and affect our business.
If actual results differ from our estimates or if we adjust our estimates in future periods, our operating results and financial position
could be materially and adversely affected.
Fusion Fuel’s products involve a lengthy
sales and installation cycle and if we fail to close sales on a regular and timely basis, our business could be harmed.
Fusion Fuel’s
sales cycle is typically 12 to 24 months but can vary considerably. In order to make a sale, we must typically provide a significant
level of education to prospective customers regarding the use and benefits of Fusion Fuel’s products and technology. The period
between initial discussions with a potential customer and the eventual sale of even a single product typically depends on a number of
factors, including the potential customer’s budget, required construction and production licenses, and the decision as to the type
of financing it chooses to use as well as the arrangement of such financing. Prospective customers often undertake a significant evaluation
process which may further extend the sales cycle. Once a customer makes a formal decision to purchase our product, the fulfilment of the
sales order by us will require a substantial amount of time. We expect the time between the entry into a sales contract with a customer
and the installation of our technology to range from three to nine months or more depending on the licensing and permitting stages of
a project. This lengthy sales and installation cycle is subject to a number of significant risks over which we have little or no control.
Because of both the long sales and long installation cycles, we may expend significant resources without having certainty of generating
a sale.
These lengthy sales and installation
cycles increase the risk that an installation may be delayed and/or may not be completed. In some instances, a customer can cancel an
order for a particular site prior to installation, and we may be unable to recover some or all of our costs in connection with design,
permitting, installation and site preparations incurred prior to cancellation. Our operating expenses are based on anticipated sales levels,
and many of our expenses are fixed. If we are unsuccessful in closing sales after expending significant resources or if we experience
delays or cancellations, our business could be materially and adversely affected. Since we do not recognize revenue on the sales of our
products until installation and acceptance, a small fluctuation in the timing of the completion of our sales transactions could cause
operating results to vary materially from period to period.
We believe that part of the
cancellation risk is mitigated in these early years, as our first projects are being developed for Fusion Fuel’s own business line.
Fusion Fuel will then operate the first green hydrogen plants.
The economic benefits to our customers of
our HEVO-Solar solution over competitor products depend on the cost of electricity available from alternative sources including local
electric utility companies, which cost structure is subject to change.
We believe that a customer’s
decision to purchase our HEVO-Solar technology is significantly influenced by the price predictability of electricity generated by the
system in comparison to the retail price and the future price outlook of electricity from the local utility grid and other energy sources.
The economic benefit of our solution to our customers includes, among other things, the benefit of reducing such customer’s payments
to the local utility company. The rates at which electricity is available from a customer’s local electric utility company is subject
to change and any changes in such rates may affect the relative benefits of our products. Even in markets where we are competitive today,
rates for electricity could decrease and render our solutions uncompetitive. Several factors could lead to a reduction in the price or
future price outlook for grid electricity, including the impact of energy conservation initiatives that reduce electricity consumption,
construction of additional power generation plants (including nuclear, coal or natural gas) and technological developments by others in
the electric power industry which could result in electricity being available at costs lower than those that we can achieve. If the retail
price of grid electricity decreases at a faster rate than we or our customers expect, it could reduce demand for our HEVO-Solar products
and harm our business.
Fusion Fuel also has a centralized
electrolyzer offering, the HEVO-Chain, which is able to compete with other electrolyzers in the market and therefore we believe this risk
can be mitigated.
We currently face and will continue to face
significant competition.
Fusion Fuel operates in a
highly competitive industry. We compete for customers, financing partners, and incentive dollars with other electric power providers and
hydrogen solutions. Several of our primary competitors are diversified multinational companies with substantially larger operating staff
and greater capital resources. Further, many providers, such as traditional utilities and other companies offering distributed generation
products, have longer operating histories, have customer incumbency advantages, have access to and influence with local and state governments,
and have access to more capital resources than do we. These larger competitors’ greater resources could allow them to better withstand
industry downturns and to compete more effectively on the basis of technology, geographic scope and retained skilled personnel. If these
competitors substantially increase the resources they devote to developing and marketing competitive solutions and services, we may not
be able to compete effectively. Similarly, consolidation among their competitors could enhance their product and service offerings and
financial resources, further intensifying competition. Significant developments in alternative technologies, such as energy storage, wind,
solar, or hydro power generation, or improvements in the efficiency or cost of traditional energy sources, including coal, oil, natural
gas used in combustion, or nuclear power, may materially and adversely affect our business and prospects in ways we cannot anticipate.
We may also face new competitors who are not currently in the market. If we fail to adapt to changing market conditions and to compete
successfully with grid electricity or new competitors, our growth will be limited which would adversely affect our business results.
We depend on a few customers for the majority
of our revenues and the loss of any such customers could adversely affect our business, financial condition, results of operations and
cash flows.
We sell most of Fusion Fuel’s
products to a range of customers that currently includes a few anchor customers, and, while we are continually seeking to expand our customer
base, we expect this concentration of our customer base will continue for the next several years. Accordingly, our near-term success depends
upon the continued purchases of our products by a small number of customers, and any fluctuation or decline in business with our major
customers could have an adverse impact on our business, financial condition and results of operations. Our dependence on a small number
of major customers may expose us to additional risks. For instance, a slowdown, delay or reduction in a customer’s orders could
result in excess inventories or unexpected quarterly fluctuations in our operating results and liquidity. Our major customers may have
significant purchasing leverage over us to require changes in sales terms including pricing, payment terms and product delivery schedules,
which could adversely affect our business, financial condition, results of operations and cash flows. If one of our major customers delays
payment of or is unable to pay their receivables, that could have a material adverse effect on our business, financial condition, results
of operations and cash flows. While we believe that part of this cancellation risk will be mitigated in the early years as the first projects
will be developed for Fusion Fuel’s own business line, and Fusion Fuel will then operate the first green hydrogen plants, we cannot
assure you of that. If we are unable to build and maintain a broad customer base and build relationships with potential new customers,
our business may be adversely affected.
Risks Relating to our Products and Manufacturing
Weakness in the economy, market trends and
other conditions affecting the profitability and financial stability of our customers could negatively impact our sales growth and results
of operations.
The demand for our products
and services is sensitive to the production activity, capital spending and demand for products and services of our customers. Many of
our potential customers operate in markets that are subject to cyclical fluctuations resulting from market uncertainty, trade and tariff
policies, currency exchange rates, central bank interest rate changes, foreign competition, offshoring of production,
oil and natural gas prices, geopolitical developments, labor shortages, inflation, deflation, and a variety of other factors beyond our
control. Any of these factors could cause customers to idle or close facilities, delay purchases, reduce production levels, or experience
reductions in the demand for their own products or services. Any of these events could also reduce the volume of products and services
these customers purchase from us or impair the ability of our customers to make full and timely payments and could cause increased pressure
on our selling prices and terms of sale. Accordingly, a significant or prolonged slowdown in activity in any major world economy, or a
segment of any such economy, could negatively impact our sales growth and results of operations.
Our future success depends in part on our
ability to increase our production capacity, and we may not be able to do so in a cost-effective manner and cannot guarantee that our
production partners ramp up in time.
To the extent we are
successful in growing our business, we may need to increase our production capacity. Our ability to plan, obtain financing,
construct, and equip additional manufacturing facilities is subject to significant risks and uncertainties, including the
following:
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The expansion or construction of any manufacturing facilities will be subject
to the risks inherent in the development and construction of new facilities, including risks of delays and cost overruns as a result of
factors outside our control such as delays in government approvals, burdensome permitting conditions, and delays in the delivery of manufacturing
equipment and subsystems that we manufacture or obtain from suppliers. |
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Adding manufacturing capacity in any international location will subject us
to new laws and regulations including those pertaining to labor and employment, environmental and export import. In addition, it brings
with it the risk of managing larger scale foreign operations. |
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We may be unable to achieve the production throughput necessary to achieve our
target annualized production run rate at our current and future manufacturing facilities. |
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Manufacturing equipment may take longer and cost more to engineer and build
than expected and may not operate as required to meet our production plans. |
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We may depend on third-party relationships in the development and operation
of additional production capacity, which may subject us to the risk that such third parties do not fulfil their obligations to us under
our arrangements with them. |
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We may be unable to attract or retain qualified personnel. |
This risk is partially mitigated
because we currently outsource all production functions which are non-related to our HEVO technology to third parties. If any of our key
suppliers are unable to expand their manufacturing facilities, we may be unable to further scale our business. Over the next three to
five years, Fusion Fuel is in the process of establishing its own assembly line(s) and production plant(s). If we are unable to do so,
this could limit the ability of Fusion Fuel to scale its business. If the demand for our technology or our production output decreases
or does not rise as expected, we may not be able to spread a significant amount of our fixed costs over the production volume, resulting
in a greater than expected per unit fixed cost, which would have a negative impact on our financial condition and our results of operations.
The performance of our technology may be
affected by field conditions and other factors outside of our control, which could result in harm to our business and financial results.
Field conditions, such as
the natural elements and utility processes which vary by region and may be subject to seasonal fluctuations, are not always possible to
predict until the plant is in operation. Although we believe we have designed the units to withstand the variety of field conditions we
expect to encounter, as we move into new geographies and deploy new service configurations, we may encounter new and unanticipated field
conditions. Adverse impacts on performance may require us to incur significant re-engineering costs or divert the attention of our
engineering personnel from product development efforts. Furthermore, we may be unable to adequately address the impacts of factors outside
of our control in a manner satisfactory to our customers. Any of these circumstances could significantly and adversely affect customer
satisfaction, market acceptance, and our business reputation.
If our products contain manufacturing defects,
our business and financial results could be harmed.
Our units are complex products
and they may contain undetected or latent errors or defects. Changes in our supply chain or the failure of our suppliers to otherwise
provide us with components or materials that meet our specifications could also introduce defects into our products. In addition, as we
grow our manufacturing volume, the chance of manufacturing defects could increase. Any manufacturing defects or other failures of our
systems to perform as expected could cause us to incur significant re-engineering and replacement costs, divert the attention of our engineering
personnel from product development efforts, and significantly and adversely affect customer satisfaction, market acceptance, and our business
reputation. Given the fact that the electrolyzers only produce around 20 grams of hydrogen each day and that they operate in an open area,
there is little to no safety risk to employees or customers.
Furthermore, we may be unable
to correct manufacturing defects or other failures of our products in a manner satisfactory to our customers, which could adversely affect
customer satisfaction, market acceptance, and our business reputation.
Fusion Fuel’s products create a flammable
fuel that is an inherently dangerous substance.
Our systems create hydrogen
gas through electrolysis. While our products do not use this fuel in a combustion process, hydrogen gas is a flammable fuel that could
leak and combust if ignited by another source. Further, any such accidents involving our products or other products using similar flammable
fuels could materially suppress demand for, or heighten regulatory scrutiny of, our products.
The risk of product liability
claims and associated adverse publicity is inherent in the development, manufacturing, marketing and sale of hydrogen, a flammable gas.
Any liability for damages resulting from malfunctions or design defects could be substantial and could materially adversely affect our
business, financial condition, results of operations and prospects. In addition, an actual or perceived problem with our products could
adversely affect the market’s perception of our products resulting in a decline in demand for our products, which may materially
and adversely affect our business, financial condition, results of operations and prospects.
Each green hydrogen production
plant will consider purchasing an insurance policy to insure such project to mitigate this operational risk, but due to the nascent industry
and market for these products, it is unknown what the financial burden might be of any such insurance policy, and we may determine that
the costs of insuring for these risks make it impractical for us to obtain insurance. Accordingly, we cannot assure you that each plant
will purchase insurance nor that any insurance coverage purchased will be adequate. Any uninsured occurrence of business disruption, litigation,
natural disaster, or significant damages to our uninsured equipment or technology infrastructure could result in substantial costs and
diversion of resources for us and could adversely affect our financial condition and results of operations.
Fusion Fuel’s purchase orders may
not ship, be commissioned or installed, or convert to revenue.
Some of the orders we accept
from customers may require certain conditions or contingencies to be satisfied, or may be cancelled, prior to shipment or prior to commissioning
or installation, some of which are outside of our control. The time periods from receipt of an order to shipment date and installation
vary widely and are determined by a number of factors, including the terms of the customer contract and the customer’s deployment
plan. There may also be product redesign or modification requirements that must be satisfied prior to shipment of units under certain
of our agreements. If the redesigns or modifications are not completed, some or all of our orders may not ship or convert to revenue.
In certain cases, we may publicly disclose anticipated, pending orders with prospective customers; however, those prospective customers
may require certain conditions or contingencies to be satisfied prior to entering into a purchase order with us, some of which are outside
of our control. Such conditions or contingencies that may be required to be satisfied before we receive a purchase order may include,
but are not limited to, successful product demonstrations or field trials. Converting orders into revenue may also depend upon our customers’
ability to obtain financing. Some conditions or contingencies that are out of our control may include, but are not limited to, government
tax policy, government funding programs, and government incentive programs. Additionally, some conditions and contingencies may extend
for several years. We may have to compensate customers, by either reimbursement, forfeiting portions of associated revenue, or other methods
depending on the terms of the customer contract, based on the failure on any of these conditions or contingencies. While not probable,
this could have an adverse impact on our revenue and cash flow.
If our estimates of the useful life for
our units are inaccurate or we do not meet service and performance warranties and guaranties, or if we fail to accrue adequate warranty
and guaranty reserves, our business and financial results could be harmed.
We will provide performance
warranties and guaranties covering the efficiency and output performance of our Hydrogen Generators for the first five years. Our pricing
of these contracts and our reserves for warranty and replacement will be based upon our estimates of the useful life of our units and
their components, including assumptions regarding improvements in power module life that may fail to materialize. Although there is a
12-year history on the solar tracking systems, the Direct Coupled Photo Electrochemical Hydrogen Generator (the “HEVO”),
which produces green hydrogen at one of the highest efficiency ratios and at the most competitive cost (€/Kg) in the green hydrogen
industry, does not have a long history with a large number of field deployments, and our estimates may prove to be incorrect. Failure
to meet these performance warranties and guaranty levels may require us to replace the units at our expense or refund their cost to the
customer, or require us to make cash payments to the customer based on actual performance, as compared to expected performance, capped
at a percentage of the relevant equipment purchase prices. We will accrue for product warranty costs and recognize losses on service or
performance warranties when required by IFRS based on our estimates of costs that may be incurred and based on historical experience.
However, as we expect our customers to renew their maintenance service agreements each year, the total liability over time may be more
than the accrual. Actual warranty expenses have in the past been below and may in the future be greater than we have assumed in our estimates,
the accuracy of which may be hindered due to our limited history operating at our current scale.
Our business is subject to risks associated
with construction, utility interconnection, cost overruns and delays, including those related to obtaining government permits and other
contingencies that may arise in the course of completing installations.
Payments on the sales of our
units are paid in instalments, including an up-front payment upon placing an order, a payment on delivery, and a final payment upon
the installation and acceptance (except where a third party is responsible for installation). Therefore, our financial results may be
impacted by the timeliness of the installation or delivery of the units. Furthermore, in some cases, the installation of the units may
be on a fixed price basis, which subjects us to the risk of cost overruns or other unforeseen expenses in the installation process.
The construction, installation,
and operation of our units at a particular site is also generally subject to oversight and regulation in accordance with applicable laws
and ordinances relating to building codes, safety, environmental protection, and related matters, and typically require various governmental
approvals and permits, including environmental approvals and permits, that vary by jurisdiction. In some cases, these approvals and permits
require periodic renewal. It is difficult and costly to track the requirements of every individual authority having jurisdiction over
our installations, to design our units to comply with these varying standards, and to obtain all applicable approvals and permits. We
cannot predict whether or when all permits required for a given project will be granted or whether the conditions associated with the
permits will be achievable. The denial of a permit or utility connection essential to a project or the imposition of impractical conditions
would impair our ability to develop the project. In addition, we cannot predict whether the permitting process will be lengthened due
to complexities and appeals. Delay in the review and permitting process for a project can impair or delay our and our customers’
abilities to develop that project or may increase the cost so substantially that the project is no longer attractive to us or our customers.
Furthermore, unforeseen delays in the review and permitting process could delay the timing of the installation and could therefore adversely
affect the timing of the recognition of revenue related to the installation, which could harm our operating results in a particular period.
In addition, the completion
of many of our installations depends on the availability of and timely connection to the natural gas grid and the local electric grid.
In some jurisdictions, local utility companies or the municipality may deny our request for connection or may require us to reduce the
size of certain projects. Any delays in our ability to connect with utilities, delays in the performance of installation-related services,
or poor performance of installation-related services by our general contractors or sub-contractors will have a material adverse
effect on our results and could cause operating results to vary materially from period to period.
Furthermore, at times we may
rely on the ability of our third-party general contractors to install units at our customers’ sites and to meet our installation
requirements. Our work with contractors or their sub-contractors may have the effect of us being required to comply with additional
rules (including rules unique to our customers), working conditions, site remediation, and other union requirements, which can add costs
and complexity to an installation project. The timeliness, thoroughness, and quality of the installation-related services performed
by some of our general contractors and their sub-contractors in the past may not meet expectations or standards.
Any significant disruption in the operations
at our or our partner’s manufacturing facilities could delay the production of our products, which would harm our business and results
of operations.
We manufacture our solar concentration
units in a limited number of manufacturing facilities, and initially with one key partner, MagP, any of which could become unavailable
either temporarily or permanently for any number of reasons, including equipment failure, material supply, financial difficulties, public
health emergencies, catastrophic weather or geologic events, or if the relationship between us and MagP deteriorates. In the event of
a significant disruption to our manufacturing process, we may not be able to easily shift production to other facilities or to make up
for lost production, which could result in harm to our reputation, increased costs, and lower revenues. The planned new Fusion Fuel production
facility is expected to reduce our reliance on MagP, and, accordingly, would reduce the impact of any potential disruption at MagP’s
plant.
Delays in or not completing our product
development goals may adversely affect our revenue and profitability.
If we experience delays in
meeting our development goals, our products exhibit technical defects, or if we are unable to meet cost reduction targets or performance
goals, including power output, useful life and reliability, the profitable commercialization of our products will be delayed. In this
event, potential purchasers of our products may choose alternative technologies and any delays could allow potential competitors to gain
market advantages. We cannot assure that we will successfully meet our commercialization schedule in the future.
The failure of our suppliers to continue
to deliver necessary raw materials or other components of our products in a timely manner or at all, or our inability
to obtain substitute sources of these components on a timely basis or on terms acceptable to us, could prevent us from delivering our
products within required time frames, impair our ability to manufacture our products, could increase our costs of production and could
cause installation delays, cancellations, penalty payments, and damage to our reputation.
We rely on a limited number
of third-party suppliers for some of the raw materials and components for our products, including components that may be of limited
supply or require customized manufacturing specifications. If our suppliers provide insufficient inventory at the level of quality required
to meet customer demand or if our suppliers are unable or unwilling to provide us with the contracted quantities (as we have limited or
in some case no alternatives for supply), our results of operations could be materially and negatively impacted. If we fail to develop
or maintain our relationships with our suppliers, or if there is otherwise a shortage or lack of availability of any required raw materials
or components, we may be unable to manufacture our units or they may be available only at a higher cost or after a long delay. Such delays
could prevent us from delivering units to our customers within required time frames and cause order cancellations. We have had to create
our own supply chain for some of the components and materials utilized in our fuel cells. We have made significant expenditures in the
past to develop our supply chain. In many cases, we entered into contractual relationships with suppliers to jointly develop the components
we needed. These activities are time and capital intensive. Accordingly, the number of suppliers we have for some of our components and
materials is limited and, in some cases, sole sourced. Some of our suppliers use proprietary processes to manufacture components. We may
be unable to obtain comparable components from alternative suppliers without considerable delay, expense, or at all, as replacing these
suppliers could require us either to make significant investments to bring the capability in-house or to invest in a new supply chain
partner. Some of our suppliers are smaller, private companies, heavily dependent on us as a customer. If our suppliers face difficulties
obtaining the credit or capital necessary to expand their operations when needed, they could be unable to supply necessary raw materials
and components needed to support our planned sales and services operations, which would negatively impact our sales volumes and cash flows.
Moreover, we may experience
unanticipated disruptions and/or price increases to operations or other difficulties with our supply chain or internalized supply processes
due to exchange rate fluctuations, volatility in regional markets from where materials are obtained, changes in the general macroeconomic
outlook, global trade disputes, political instability, expropriation or nationalization of property, public health emergencies such as
the COVID-19 pandemic, civil strife, strikes, insurrections, acts of terrorism, acts of war, or natural disasters. The failure by us to
obtain raw materials or components in a timely manner or to obtain raw materials or components that meet our quantity and cost requirements
could impair our ability to manufacture items or increase their costs or service costs of our existing portfolio under maintenance services
agreements. If we cannot obtain substitute materials or components on a timely basis or on acceptable terms, we could be prevented from
delivering our solution to our customers within required time frames, which could result in sales and installation delays, cancellations,
penalty payments, or damage to our reputation, any of which could have a material adverse effect on our business and results of operations.
In addition, we rely on our suppliers to meet quality standards, and the failure of our suppliers to meet or exceed those quality standards
could cause delays in the delivery of our products, cause unanticipated servicing costs, and cause damage to our reputation.
Our ability to develop new products and
enter into new markets could be negatively impacted if we are unable to identify suppliers to deliver new materials and components on
a timely basis.
We continue to develop products
for new markets and, as we move into those markets, must qualify new suppliers to manufacture and deliver the necessary components required
to build and install those new products. Identifying new manufacturing partners is a lengthy process and is subject to significant risks
and uncertainties. If we are unable to identify reliable manufacturing partners in a new market, our ability to expand our business could
be limited and our financial conditions and results of operations could be harmed.
We face supply chain competition, including
competition from businesses in other industries, which could result in insufficient inventory and negatively affect our results of operations.
Certain of our suppliers also
supply parts and materials to other businesses including businesses engaged in the production of consumer electronics, satellite components
and other industries unrelated to fuel cells. As a relatively low-volume purchaser of certain of these parts and materials, we may
be unable to procure a sufficient supply of the items in the event that our suppliers fail to produce sufficient quantities to satisfy
the demands of all of their customers, which could materially harm our financial condition and our results of operations.
We, and some of our suppliers, obtain capital
equipment used in our manufacturing process from sole suppliers and, if this equipment is damaged or otherwise unavailable, our ability
to deliver on time will suffer.
Some of the equipment used
to manufacture our products and some of the equipment used by our suppliers have been developed and made specifically for us, are not
readily available from multiple vendors, and would be difficult to repair or replace if they did not function properly. If any of these
suppliers were to experience financial difficulties or go out of business or if there were any damage to or a breakdown of our manufacturing
equipment and we could not obtain replacement equipment in a timely manner, our business would suffer. In addition, a supplier’s
failure to supply this equipment in a timely manner with adequate quality and on terms acceptable to us could disrupt our production schedule
or increase our costs of production and service.
Possible new tariffs could have a material
adverse effect on our business.
Our business is dependent
on the availability of raw materials and components for our products, particularly electrical components common in the semiconductor industry,
specialty steel products and processing and raw materials. Tariffs or other trade protection measures which are proposed or threatened,
and the potential escalation of a trade war and retaliation measures could have a material adverse effect on our business, results of
operations and financial condition.
To the extent practicable,
given the limitations in supply chain previously discussed, although we currently maintain alternative sources for materials, our business
is subject to the risk of price fluctuations and periodic delays in the delivery of certain materials, which tariffs may exacerbate. Disruptions
in the supply of raw materials and components could temporarily impair our ability to manufacture our solutions for our customers or require
us to pay higher prices in order to obtain these raw materials or components from other sources, which could affect our business and our
results of operations.
Fusion Fuel Portugal’s business plan
leverages Portugal’s Hydrogen Strategy and Portugal’s investment in a green hydrogen economy. If there are any delays in the
rollout of legislation or changes to Portugal’s Hydrogen Strategy, this could materially impact our business.
Fusion Fuel Portugal has its
principal offices in Portugal, and all of its initial projects are located in Portugal and other jurisdictions in Southern Europe. All
of our projects in Portugal will be impacted by the Portuguese laws governing the energy sector generally and the use of hydrogen specifically
(including whether as a gas or fuel, and as pertains to production, storage, transportation, safety, and taxation). Delays in the rollout
of legislation or changes to any existing legislation could have a material financial impact on Fusion Fuel Portugal and could cause delays
to on-going projects and negotiations. Furthermore, economic difficulties or political changes in Portugal and other portions of
Southern Europe could alter these governments’ intentions with respect to projects to which they have not yet formally committed.
These same issues could have an impact in any new market into which we enter.
Any disruption to or elimination of Portugal’s
and Spain´s Hydrogen Strategy and other strategic plans for hydrogen production in could reduce demand for our products, lead to
a reduction in our revenues and adversely impact our operating results and liquidity.
We believe that the demand
of our hydrogen energy technologies is impacted by Portugal’s and Spain´s Hydrogen Strategy and other strategic plans for
hydrogen production that are emerging in Europe and around the world. These plans could be reduced or discontinued for other reasons,
and the reduction, elimination, or expiration of these plans may result in the diminished economic competitiveness of our products to
our customers and could materially and adversely affect the growth of alternative energy technologies, including our products, as well
as our future operating results and liquidity.
Our business may become subject to increased
government regulation.
Our products are subject to
laws and regulations, including, for example, state and local ordinances relating to building codes, public safety, electrical and gas
pipeline connections, hydrogen transportation and siting and related matters. In certain jurisdictions, these regulatory requirements
may be more stringent than in other jurisdictions. Further, as products are introduced into the market commercially, governments may impose
new regulations. We do not know the extent to which any such regulations may impact our ability to manufacture, distribute, install and
service our products. Any regulation of our products in any of the jurisdictions in which we intend to operate, including any regulations
relating to the production, operation, installation, and servicing of our products may increase our costs and the price of our products,
and noncompliance with applicable laws and regulations could subject us to investigations, sanctions, enforcement actions, fines, damages,
civil and criminal penalties or injunctions. If any governmental sanctions are imposed, our business, operating results, and financial
condition could be materially adversely affected. In addition, responding to any action will likely result in a significant diversion
of management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could harm our business,
operating results and financial condition.
Risks Relating to Legal Matters and Regulations
We are subject to various environmental
laws and regulations that could impose substantial costs upon us and cause delays in the delivery and installation of our units.
We are subject environmental
laws and regulations as well as environmental laws in each jurisdiction in which we operate. Environmental laws and regulations can be
complex and may often change. These laws can give rise to liability for administrative oversight costs, cleanup costs, property damage,
bodily injury, fines, and penalties. Capital and operating expenses needed to comply with environmental laws and regulations can be significant,
and violations may result in substantial fines and penalties or third-party damages. In addition, ensuring we are in compliance with
applicable environmental laws requires significant time and management resources and could cause delays in our ability to build out, equip
and operate our facilities as well as service our fleet, which would adversely impact our business, our prospects, our financial condition,
and our operating results. If contamination is discovered in the future at properties formerly owned or operated by us or currently owned
or operated by us, or properties to which hazardous substances were sent by us, it could result in our liability under environmental laws
and regulations. Many of our customers have high sustainability standards, and any environmental noncompliance by us could harm our reputation
and impact a current or potential customer’s buying decision. Additionally, in many cases we contractually commit to performing
all necessary installation work on a fixed-price basis, and unanticipated costs associated with environmental remediation and/or
compliance expenses may cause the cost of performing such work to exceed our revenue. The costs of complying with environmental laws,
regulations, and customer requirements, and any claims concerning noncompliance or liability with respect to contamination in the future,
could have a material adverse effect on our financial condition or our operating results.
The installation and operation of hydrogen
production units and renewable energy systems is subject to environmental laws and regulations in various jurisdictions, and there is
uncertainty with respect to the interpretation of how certain environmental laws and regulations apply to our technology, especially as
these regulations evolve over time.
We are committed to compliance
with applicable environmental laws and regulations including health and safety standards, and we continually review the operation of our
units for health, safety, and environmental compliance. Maintaining compliance with laws and regulations can be challenging given the
changing patchwork of environmental laws and regulations that prevail at the federal, state, regional, and local level. Most existing
environmental laws and regulations preceded the introduction of our innovative fuel cell technology and were adopted to apply to technologies
existing at the time (i.e., large coal, oil, or gas-fired power plants). Currently, there is generally little guidance from these
agencies on how certain environmental laws and regulations may or may not be applied to our technology. Furthermore, we have not yet determined
whether our units will satisfy regulatory requirements in locations in which we do not currently sell our solution but may pursue in the
future. While we have determined that the HEVO-Solar units do not present any significant health hazard, based on our modelling, testing
methodology, and measurements, we cannot assure you that regulators or governments in the regions where we sell and intend to be present
will reach the same conclusions. We may not be able to adapt to changing laws and regulations, or changing interpretations of existing
laws and regulations. Any such failure could materially and adversely affect our business, results of operations, and financial condition.
We may become subject to product liability
claims which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.
We may in the future become
subject to product liability claims. Our technology produces flammable gases and therefore must operate in accordance with the required
safety standards and rules applicable in each jurisdiction. These claims could require us to incur significant costs to defend. Furthermore,
any successful product liability claim could require us to pay a substantial monetary award. Moreover, a product liability claim could
generate substantial negative publicity about our Company and our product, which could harm our brand, our business prospects, and our
operating results.
Future litigation or administrative proceedings
could have a material adverse effect on our business, our financial condition and our results of operations.
From time to time, we may
be involved in legal proceedings, administrative proceedings, claims, and other litigation that could arise in the ordinary course of
business. We may incur costs and expenses in connection with defending ourselves or in connection with the payment of any settlement or
judgment or compliance with any ruling in connection therewith. The expense of defending litigation may be significant. The amount of
time to resolve lawsuits is unpredictable and defending ourselves may divert management’s attention from the day to day operations
of our business, which could adversely affect our business, financial condition, results of operations and cash flows. Unfavorable outcomes
or developments relating to proceedings to which we are a party or transactions involving our products such as judgments for monetary
damages, injunctions, or denial or revocation of permits, could have a material adverse effect on our business, our financial condition,
and our results of operations. In addition, settlement of claims could adversely affect our financial condition and our results of operations.
In addition, since the HEVO
is a new type of product in a nascent market, we may in the future need to seek the amendment of existing regulations, or in some cases
the development of new regulations, in order to operate our business in some jurisdictions. Such regulatory processes may require public
hearings concerning our business, which could expose us to subsequent litigation.
Changes in tax laws or regulations or adverse
outcomes resulting from examination of our income or other tax returns could adversely affect our operating results and financial condition.
As we continue to expand internationally,
we will be subject to income taxes in various jurisdictions. Given that the Fusion Fuel’s owned plants have a life span of 25 years
a number of factors may adversely affect our future effective tax rates, such as the jurisdictions in which our profits are determined
to be earned and taxed; changes in the valuation of our deferred tax assets and liabilities; adjustments to estimated taxes upon finalization
of various tax returns; changes in available tax credits, grants and other incentives; changes in stock-based compensation expense;
the availability of loss or credit carryforwards to offset taxable income; changes in tax laws, regulations, accounting principles or
interpretations thereof; or examinations by jurisdictions that disagree with interpretations of tax rules and regulations in regard to
positions taken on tax filings. A change in our effective tax rate due to any of these factors may adversely affect our future results
from operations.
In addition, as our business
grows, we are required to comply with increasingly complex taxation rules and practices. We will be subject to tax in additional jurisdictions
as we continue to expand internationally. The development of our tax strategies requires additional expertise and may impact how we conduct
our business. If our tax strategies are ineffective or we are not in compliance with domestic and international tax laws, our financial
position, operating results and cash flows could be adversely affected.
Risks Relating to our Intellectual Property
Our failure to protect our intellectual
property rights may undermine our competitive position, and litigation to protect our intellectual property rights may be costly.
Our ability to compete effectively
will depend, in part, on our ability to protect our proprietary technologies and processes. Although we have taken many protective measures
to protect our trade secrets including agreements, limited access, segregation of knowledge, password protections, and other measures,
policing unauthorized use of proprietary technology can be difficult and expensive. Also, litigation may be necessary to enforce our intellectual
property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others. Such litigation
may result in our intellectual property rights being challenged, limited in scope, or declared invalid or unenforceable. We cannot be
certain that the outcome of any litigation will be in our favor, and an adverse determination in any such litigation could impair our
intellectual property rights, our business, our prospects, and our reputation.
We rely primarily on patent,
trade secret, and non-disclosure, confidentiality, and other types of contractual restrictions to establish, maintain, and enforce our
intellectual property and proprietary rights. However, our rights under these laws and agreements afford us only limited protection and
the actions we take to establish, maintain, and enforce our intellectual property rights may not be adequate. For example, our trade secrets
and other confidential information could be disclosed in an unauthorized manner to third parties, our owned or licensed intellectual property
rights could be challenged, invalidated, circumvented, infringed, or misappropriated or our intellectual property rights may not be sufficient
to provide us with a competitive advantage, any of which could have a material adverse effect on our business, financial condition, or
operating results. In addition, the laws of some countries do not protect proprietary rights as fully as do the laws of the United States
or countries across Europe. As a result, we may not be able to protect our proprietary rights adequately abroad.
Our patent applications may not result in
issued patents, and our issued patents may not provide adequate protection, either of which may have a material adverse effect on our
ability to prevent others from commercially exploiting products similar to ours.
We cannot be certain that
our pending patent applications will result in issued patents or that any of our issued patents will afford protection against a competitor.
The status of patents involves complex legal and factual questions, and the breadth of claims allowed is uncertain. As a result, we cannot
be certain that the patent applications that we file will result in patents being issued or that our patents and any patents that may
be issued to us in the future will afford protection against competitors with similar technology. In the case of patents to be issued,
we do not know that the claims allowed will be sufficiently broad to protect our technology or processes. Even if all of our patent applications
are issued and are sufficiently broad, our patents may be challenged or invalidated. We could incur substantial costs in prosecuting or
defending patent infringement suits or otherwise protecting our intellectual property rights. Furthermore, even if these patent applications
are accepted and the associated patents issued, some foreign countries provide significantly less effective patent enforcement than in
the United States or countries across Europe.
In addition, patents issued
to us may be infringed upon or designed around by others and others may obtain patents that we need to license or design around, either
of which would increase costs and may adversely affect our business, our prospects, and our operating results.
We may need to defend ourselves against
claims that we infringed, misappropriated, or otherwise violated the intellectual property rights of others, which may be time-consuming
and would cause us to incur substantial costs.
The tools, techniques, methodologies,
processes, programs, and components that we use to provide our solutions may infringe upon the intellectual property rights of others.
Companies, organizations, or individuals, including our competitors, may hold or obtain patents or other proprietary rights that they
may in the future believe are infringed by our products or services. Although we are not currently subject to any claims related to intellectual
property, these companies holding patents or other intellectual property rights allegedly relating to our technologies could, in the future,
make claims or bring suits alleging infringement, misappropriation, or other violations of such rights, or otherwise assert their rights
and by seeking licenses or injunctions. Infringement claims generally result in significant legal and other costs and may distract our
management from running our core business. We also generally indemnify our customers against claims that the products we supply infringe,
misappropriate, or otherwise violate third party intellectual property rights, and we therefore may be required to defend our customers
against such claims. If a claim is successfully brought in the future and we or our products are determined to have infringed, misappropriated,
or otherwise violated a third party’s intellectual property rights, we may be required to do one or more of the following:
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cease selling or using our products that incorporate the challenged intellectual
property; |
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pay substantial damages (including treble damages and attorneys’ fees
if our infringement is determined to be willful); |
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obtain a license from the holder of the intellectual property right, which may
not be available on reasonable terms or at all; or |
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redesign our products or means of production, which may not be possible or cost-effective. |
Any of the foregoing could
adversely affect our business, prospects, operating results, and financial condition. In addition, any litigation or claims, whether or
not valid, could harm our reputation, result in substantial costs and divert resources and management attention. We may need to pursue
lawsuits or legal action in the future to enforce our intellectual property rights, to protect our trade secrets, and to determine the
validity and scope of the proprietary rights of others. If third parties prepare and file applications for trademarks used or registered
by us, we may oppose those applications and be required to participate in proceedings to determine the priority of rights to the trademark.
Similarly, competitors may have filed applications for patents, may have received patents and may obtain additional patents and proprietary
rights relating to products or technology that block or compete with ours. We may have to participate in interference proceedings to determine
the priority of invention and the right to a patent for the technology. Litigation and interference proceedings, even if they are successful,
are expensive to pursue and time consuming, and we could use a substantial amount of our management and financial resources in either
case.
Confidentiality agreements
to which we are party may be breached, and we may not have adequate remedies for any breach. Our trade secrets may also be known without
breach of such agreements or may be independently developed by competitors. Our inability to maintain the proprietary nature of our technology
and processes could allow our competitors to limit or eliminate any competitive advantages we may have.
Risks Relating to our Financial Condition and
Operating Results
We are required to maintain effective internal
control over financial reporting. Our management previously identified a material weakness in our internal control over financial reporting
as of December 31, 2020. This material weakness was still under remediation as of December 31, 2022. If we are unable to develop and maintain
an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely
manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
As a public company, we are
subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act,
and the rules and regulations of the applicable listing standards of the Nasdaq Global Market. The Sarbanes-Oxley Act requires, among
other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. Our current
controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses
in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain
effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause
us to fail to meet our reporting obligations and may result in a restatement of our consolidated financial statements for prior periods.
Any failure to implement and maintain effective internal control over financial reporting could also adversely affect the results of periodic
management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our
internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with
the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose
confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our ordinary
shares. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the Nasdaq Global
Market.
Pursuant to Section 404 of
the Sarbanes-Oxley Act, this Annual Report on Form 20-F includes a report by our management on our internal control over financial reporting.
However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over
financial reporting issued by our independent registered public accounting firm. In connection with achieving compliance with Section
404 within the prescribed period, we engaged in a process to document and evaluate our internal control over financial reporting, which
was both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants
and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve
control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting
and improvement process for internal control over financial reporting.
Our management previously identified
material weaknesses in our internal control over financial reporting primarily related to (i) clearly defined control processes,
roles and segregation of duties and sufficient financial reporting and accounting personnel within our business processes to ensure appropriate
financial reporting, and (ii) the design and operating effectiveness of IT general controls for information systems that are significant
to the preparation of our consolidated financial statements. We have worked to remediate these material weaknesses and other deficiencies.
We re-designed key processes and included significant measures to develop an effective internal control over financial reporting. In implementing
these processes, we have engaged the assistance of external advisors with expertise in these matters. Additionally, we have and continue
to train our accounting and finance staff and hired financial reporting personnel to develop and implement appropriate internal controls
and reporting procedures. These remediation measures, which continue as of December 31, 2022 have been time consuming and costly and there
is no assurance that these initiatives will remediate all issues.
Moreover, because of
the inherent limitations of any control system, material misstatements due to error or fraud may not be prevented or detected and corrected
on a timely basis, or at all. If we are unable to provide reliable and timely financial reports in the future, our business and reputation
may be further harmed. Failures in internal control may also cause us to fail to meet reporting obligations, negatively affect investor
confidence in our management and the accuracy of our financial statements and disclosures, or result in adverse publicity and concerns
from investors, any of which could have a negative effect on the price of our securities, subject us to regulatory investigations and
penalties or shareholder litigation, and have a material adverse impact on our financial condition.
Our financial condition and results of operations
and other key metrics are likely to fluctuate on a quarterly basis in future periods, which could cause our results for a particular period
to fall below expectations, resulting in a severe decline in the price of the Class A Ordinary Shares and Warrants.
Our financial condition and
results of operations and other key metrics may fluctuate due to a variety of factors, many of which are beyond our control. For example,
the amount of product revenue we will recognize in a given period is materially dependent on the volume of installations of our units
in that period and the type of financing used by the customer.
In addition to the other risks
described herein, the following factors could also cause our financial condition and results of operations to fluctuate on a quarterly
basis:
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the timing of installations, which may depend on many factors such as availability
of inventory, product quality or performance issues, or local permitting requirements, utility requirements, environmental, health, and
safety requirements, weather, and customer facility construction schedules; |
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size of particular installations and number of sites involved in any particular
quarter; |
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the mix in the type of purchase or financing options used by customers in a
period, the geographical mix of customer sales, and the rates of return required by financing parties in such period; |
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whether we are able to structure our sales agreements in a manner that would
allow for the product and installation revenue to be recognized upfront at acceptance; |
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delays or cancellations of installations; |
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fluctuations in our service costs, particularly due to unexpected costs of servicing
and maintaining our products; |
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weaker than anticipated demand for our solutions due to changes in government
incentives and policies or due to other conditions; |
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fluctuations in our research and development expense, including periodic increases associated with the pre-
production qualification of additional tools as we expand our production capacity; |
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interruptions in our supply chain; |
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the length of the sales and installation cycle for a particular customer; |
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the timing and level of additional purchases by existing customers; |
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unanticipated expenses or installation delays associated with changes in governmental
regulations, permitting requirements by local authorities at particular sites, utility requirements and environmental, health, and safety
requirements; |
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disruptions in our sales, production, service or other business activities resulting
from disagreements with our labor force or our inability to attract and retain qualified personnel; |
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unanticipated changes in federal, state, local, or foreign government incentive
programs available for us, our customers, and tax equity financing parties; and |
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the ability of counterparties to Hydrogen Power Purchase Agreements (“PPAs”)
to fulfil their purchase contracts and payment plans and timely pay invoices as they become due. |
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Fluctuations in our operating
results and cash flow could, among other things, give rise to short-term liquidity issues. In addition, our revenue, key operating
metrics, and other operating results in future quarters may fall short of the expectations of investors and financial analysts, which
could have an adverse effect on the price of the Class A Ordinary Shares or Warrants.
If we fail to manage our growth effectively,
our business and operating results may suffer.
Our current growth and future
growth plans may make it difficult for us to efficiently operate our business, challenging us to effectively manage our capital expenditures
and control our costs while we expand our operations to increase our revenue. If we experience a significant growth in orders without
improvements in automation and efficiency, we may need additional manufacturing capacity and we and some of our suppliers may need additional
and capital intensive equipment. Any growth in manufacturing must include a scaling of quality control as the increase in production increases
the possible impact of manufacturing defects. In addition, any growth in the volume of sales of our units may outpace our ability to engage
sufficient and experienced personnel to manage the higher number of installations and to engage contractors to complete installations
on a timely basis and in accordance with our expectations and standards. Any failure to manage our growth effectively could materially
and adversely affect our business, our prospects, our operating results, and our financial condition. Our future operating results depend
to a large extent on our ability to manage this expansion and growth successfully.
The accounting treatment related to
our revenue-generating transactions is expected to be complex, and if we are unable to attract and retain highly qualified
accounting personnel to evaluate the accounting implications of our complex or non-routine transactions, our ability to accurately
report our financial results may be harmed.
Our
revenue-generating transactions include traditional leases, Managed Services Agreements, technology sales and PPA transactions,
all of which will be accounted for differently in our financial statements in future years. Many of the accounting rules related to our
financing transactions are complex and require experienced and highly skilled personnel to review and interpret the proper
accounting treatment with respect thereto. If we are unable to recruit and retain personnel with the required level of expertise to
evaluate and accurately classify our revenue-producing transactions, our ability to accurately report our financial results may
be harmed.
Changes in or new interpretations of tax
law and currency/repatriation controls could impact the determination of our income tax liabilities for a tax year.
We are subject to the jurisdiction
of taxing authorities in all countries in which we operate. The income earned in these various jurisdictions may be taxed on differing
bases, including net income actually earned, net income deemed earned, and revenue-based tax withholding. The final determination
of our income tax liabilities involves the interpretation of local tax laws, tax treaties and related authorities in each jurisdiction,
as well as the significant use of estimates and assumptions regarding the scope of future operations and results achieved and the timing
and nature of income earned and expenditures incurred. Changes in the operating environment, including changes in or new interpretations
of tax law and currency/repatriation controls, could impact the determination of our income tax liabilities for the tax year.
Parent expects to experience foreign currency
gains and losses. Fluctuations in currency exchange rates can adversely affect its profitability.
Parent expects to incur foreign
currency transaction gains and losses, primarily related to foreign currency exposures that may arise from its financial reporting in
euros and holding significant assets in U.S. dollars.
A sizeable portion of Parent’s
consolidated operating expenses is in foreign currencies. As a result, Parent will be subject to potential limitations that might be imposed
on its ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries.
Risks Relating to our Operations
If Fusion Fuel is unable to attract and
retain key employees and hire qualified management, technical, engineering, and sales personnel, our ability to compete and successfully
grow our business could be harmed.
We believe that our success
and our ability to reach our strategic objectives are highly dependent on the contributions of our key management, technical, engineering,
and sales personnel. The loss of members of Fusion Fuel’s senior management team and other key employees, whether voluntarily or
involuntarily, could significantly limit Fusion Fuel’s ability to achieve its strategic objectives by delaying the development and
introduction of its products and services and negatively impact our business, prospects, and operating results. Our future success also
depends on Fusion Fuel’s ability to attract, retain and motivate highly skilled employees, particularly employees with electrical
and/or mechanical engineering skills or gas management specialties that would enable Fusion Fuel to effectively deliver its green hydrogen
solutions to its clients on time and on budget, as well as client relationship managers with relevant regional and international experience.
Competition for these executives in Fusion Fuel’s industry is intense and Fusion Fuel may experience difficulty in recruiting and
retaining such individuals. Many of the companies with which Fusion Fuel competes for experienced executives and key personnel also have
greater resources than it has. As a result, Fusion Fuel may be unable to attract or retain the green energy industry professionals that
are critical to its success, resulting in harm to its key client relationships, loss of key information, expertise or know-how and
unanticipated recruitment and retaining costs. Additionally, our ability to achieve revenue growth in the future will depend, in part,
on Fusion Fuel’s success in recruiting and retaining client development executives. Such executives may require significant on-boarding time
and effort in order to achieve full productivity which may impair business and revenue growth. Additionally, the loss of the services
of Fusion Fuel’s senior management could make it more difficult to successfully operate its business and pursue Fusion Fuel’s
business goals. In addition, we do not have “key person” life insurance policies covering any of Fusion Fuel’s officers
or other key employees.
A breach or failure of our networks or computer
or data management systems could damage our operations and our reputation.
Our business is dependent
on the security and efficacy of our networks and computer and data management systems. For example, all of our hydrogen production units
are connected to and controlled and monitored by our centralized remote monitoring service, and we rely on our internal computer networks
for many of the systems we use to operate our business generally. Although we take protective measures and endeavor to modify them as
circumstances warrant, the security of our infrastructure, including the network that connects our plants to the remote monitoring service,
may be vulnerable to breaches, unauthorized access, misuse, computer viruses, or other malicious code and cyber-attacks that could
have a material adverse impact on our business. A breach or failure of our networks or computer or data management systems due to intentional
actions such as cyber-attacks, negligence, or other reasons could seriously disrupt our operations or could affect our ability to control
or to assess the performance of our units in the field and could result in disruption to our business and potentially legal liability.
In addition, if certain of our IT systems failed, our production line might be affected, which could impact our business and operating
results. These events, in addition to impacting our financial results, could result in significant costs or reputational consequences.
Parent is a holding company. Its material
assets are its cash balances and equity interest in its direct and indirect subsidiaries and it is accordingly dependent upon distributions
from them to pay taxes and cover its corporate and other overhead expenses.
We are a holding company and
will have no material assets other than our cash balances and equity interest in our direct and indirect subsidiaries. We have no independent
means of generating revenue. To the extent that we need funds and a subsidiary is restricted from making such distributions or payment
under applicable law or regulation or under the terms of any financing arrangements due to restrictive covenants or otherwise, or are
otherwise unable to provide such funds, our liquidity and financial condition could be materially adversely affected.
Fusion Fuel’s ability to generate
revenues is substantially dependent upon it entering into satisfactory hydrogen purchase agreements with third parties.
Fusion Fuel plans to own
and operate some of the hydrogen farms it develops and will require a hydrogen off-taker (a buyer) to purchase the green hydrogen produced
as an output over the first 10-15 years of the hydrogen projects developed. Notwithstanding that Fusion Fuel has entered into some commercial
arrangements to date, there is no guarantee that future satisfactory commercial arrangements with third parties for its green hydrogen
solutions will be entered into. Because Fusion Fuel’s business plan is substantially dependent on it entering into hydrogen purchase
and technology sale agreements with third parties, if Fusion Fuel is unable to enter into such agreements, its results of operations
and financial condition would suffer.
Fusion Fuel’s activities are subject
to a number of development risks, operational hazards, regulatory approvals and other risks which may not be fully covered by insurance,
and which could cause cost overruns and delays that could have a material adverse effect on its business, results of operations, financial
condition, liquidity and prospects.
Siting, development, and delivery
of Fusion Fuel’s green hydrogen solution are subject to the risks of delay or cost overruns inherent in any industrial development
project resulting from numerous factors, including but not limited to the following:
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Difficulties or delays in obtaining, or failure to obtain, sufficient debt or
equity financing on reasonable terms; |
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Failure to obtain all necessary government and third-party permits, approvals
and licenses for the construction and operation of any of the proposed facilities; |
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Failure to secure land plots and offshore sites required for the siting and
construction of any of the proposed facilities; |
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Failure to enter into power purchase agreements with clients that generate sufficient
revenue to support the financing and operation of the project; |
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Difficulties in engaging qualified contractors necessary to the construction
of the contemplated project; |
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Shortages of equipment, material or skilled labor; |
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Natural disasters and catastrophes, such as hurricanes, explosions, fires, floods,
industrial accidents, hostile military action and terrorism; |
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Unscheduled delays in the delivery of ordered materials; |
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Work stoppages, industrial and labor disputes; |
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Competition with other domestic and international hydrocarbon fuel suppliers
and alternative energy providers; |
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Political and regulatory change in the countries in which Parent or any subsidiary
of Parent operates; |
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Unanticipated changes in domestic and international marked demand for and supply
of green hydrogen, which will depend in part on supplies of and prices for alternative energy sources, coal, natural gas, LNG, crude oil
and diesel, and the discovery of new sources of natural resources; and |
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Adverse general economic conditions. |
Delays beyond the estimated
development periods, as well as cost overruns, could increase the cost of completion beyond the amounts that are currently estimated,
which could require Parent to obtain additional sources of financing to fund the activities until the proposed project operational (which
could cause further delays). The need for more financing may also make the project uneconomic. Delays could also trigger penalties or
termination of our agreements with third parties, cause a delay in receipt of revenues projected from the Project or cause a loss of one
or more clients. As a result, any significant delay, whatever the cause, could have a material adverse effect on Parent’s business,
results of operations, financial condition, liquidity and prospects.
Increases in costs, disruption of supply
or shortage of raw materials, including membranes and concentrating lenses, could harm our business.
We may experience increases
in the cost or a sustained interruption in the supply or shortage of raw materials, including membranes, concentrating lenses, semiconductors,
and integrated circuits. Any such increase or supply interruption could materially impact our business, prospects, financial condition
and operating results. We have experienced, and may continue in the future to experience, certain supply chain constraints, including
with respect to membranes, concentrating lenses, integrated circuits, and displays. Certain production-ready components such as chipsets
and displays may not arrive at our facilities in accordance with our production schedule, which has and may continue to cause delays in
testing and qualification of these components, which would in turn create a delay in the availability of our units.
We use various raw materials
including aluminum, steel, carbon fiber, non-ferrous metals (such as copper), and cobalt. The prices for these raw materials, as
well as other components such as membranes and concentrating lenses, fluctuate depending on market conditions and global demand and could
adversely affect our business and operating results.
Any disruption in the supply
of components such as membranes, concentrating lenses, semiconductors, or integrated circuits could temporarily disrupt our production
until a different supplier is fully qualified. Furthermore, fluctuations or shortages in petroleum and other economic conditions may cause
us to experience significant increases in freight charges and raw material costs. Substantial increases in the prices for our raw materials
and key components would increase our operating costs and could reduce our margins if the increased costs cannot be recouped through increased
hydrogen prices. There can be no assurance that we will be able to recoup increasing costs of raw materials by increasing green hydrogen
prices.
We may experience significant delays in
the design, manufacture, launch, and financing of our technology, including in the build out of our manufacturing plant, which could harm
our business and prospects.
Any delay in the financing,
design, manufacture, and launch of our product, including the build-out of our manufacturing plant in Benavente, could materially damage
our brand, business, prospects, financial condition, and operating results. Machinery manufacturers often experience delays in the design,
manufacture, and commercial release of new and made-to-order products. To the extent the launch of our manufacturing plant is delayed,
our growth prospects could be adversely affected as we may fail to grow our market share. Furthermore, we rely on third party suppliers
for the provision and development of many of the key components and materials we use. To the extent our suppliers experience any delays
in providing us with or developing necessary components, we could experience delays in delivering on our timelines.
If our manufacturing plant in Benavente
becomes inoperable, we will be unable to produce our electrolyzers and our business will be harmed.
We expect to produce a large
portion of our electrolyzers at our manufacturing plant in Benavente after completion of the plant. Our plant and the equipment we use
to manufacture our electrolyzers would be costly to replace and could require substantial lead time to replace and qualify for use. Our
plant may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, flooding, fire and power outages,
or by health epidemics, such as the COVID-19 pandemic, which may render it difficult or impossible for us to manufacture our
electrolyzers for some period of time. The inability to produce our electrolyzers or the backlog that could develop if our manufacturing
plant is inoperable for even a short period of time may result in the loss of customers or harm our reputation. Although we maintain insurance
for damage to our property and the disruption of our business, this insurance may not be sufficient to cover all of our potential losses
and may not continue to be available to us on acceptable terms, if at all. While we maintain the relationship with outsourced production
partners, like MagP, a small amount of units potentially would still be delivered, but this would be unable to cover the projected production
requirements if Benavente were to become inoperable.
Our business is subject to the risks of
earthquakes, fires, floods, tsunamis, pandemics, and other natural catastrophic events and to interruption by man-made problems such as
technogenic catastrophic events, computer viruses or terrorism.
Fusion Fuel’s facilities
and operations are vulnerable to damage or interruption from earthquakes, fires, floods, pandemics, power losses, natural gas explosions,
telecommunications failures, terrorist attacks, acts of war, human errors, break-ins and similar events. For example, a significant
natural disaster, such as a hurricane, earthquake, tsunami or flood, could have a material adverse effect on our business, results of
operations and financial conditions, and our insurance coverage may be insufficient to compensate us for losses that may occur. In addition,
acts of terrorism, which may be targeted at power stations as crucial elements of a country’s infrastructure, could cause disruptions
in Fusion Fuel’s or its clients’ business or the economy as a whole. Green hydrogen energy transport IT infrastructure may
also be vulnerable to computer viruses, break-ins, denial-of-service attacks and similar disruptions from unauthorized tampering with
Fusion Fuel’s or its clients’ IT systems, which could lead to interruptions, delays and loss of critical data. We may not
have sufficient protection or recovery plans in the event such a disaster should occur. As Fusion Fuel relies heavily on physical infrastructure,
computer and communications systems to conduct its business, such disruptions could negatively impact its ability to run its business
and either directly or indirectly disrupt its clients’ or supplier’s businesses, which could have a material adverse effect
on our business, results of operations and financial condition.
Cybersecurity risks and threats could adversely
affect our business.
We rely heavily on information
technology networks and systems, including the Internet, to process, transmit and store electronic and financial information and to manage
a variety of business processes and activities, including communication with our production, manufacturing, financial, logistics, sales,
marketing and administrative functions. Additionally, we collect and store data that is sensitive to us and to third parties. Operating
these information technology networks and systems and processing and maintaining this data, in a secure manner, are critical to our business
operations and strategy. We depend on our information technology infrastructure to communicate internally and externally with employees,
customers, suppliers and others. We also use information technology networks and systems to comply with regulatory, legal and tax requirements
and to operate our hydrogen farms. These information technology systems, many of which are managed by third parties, may be susceptible
to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software databases or components thereof,
power outages, hardware failures, computer viruses, attacks by computer hackers or other cybersecurity risks, telecommunication failures,
user errors, natural disasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems
suffer severe damage, disruption or shutdown, and our disaster recovery and business continuity plans do not effectively resolve the issues
in a timely manner, our product sales, financial condition and results of operations may be materially and adversely affected, and we
could experience delays in reporting our financial results, or our hydrogen farm operations may be disrupted, exposing us to performance
penalties under our contracts with customers and potential loss of our intellectual property.
In addition, information technology
security threats — from user error to cybersecurity attacks designed to gain unauthorized access to our systems, networks and
data — are increasing in frequency and sophistication. Cybersecurity attacks may range from random attempts to coordinated
and targeted attacks, including sophisticated computer crime and advanced persistent threats. In addition, as a result of the COVID-19
pandemic, the increased prevalence of employees working from home may exacerbate the aforementioned cybersecurity risks. These threats
pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data.
Cybersecurity attacks could
also include attacks targeting customer data or the security, integrity and/or reliability of the hardware and software installed in our
products. We have experienced, and may continue to experience in the future, cybersecurity attacks that have resulted in unauthorized
parties gaining access to our information technology systems and networks. However, to date, no cybersecurity attack has resulted in any
material loss of data, interrupted our day-to-day operations or had a material impact on our financial condition, results of operations
or liquidity. While we actively manage information technology security risks within our control, there can be no assurance that such actions
will be sufficient to mitigate all potential risks to our systems, networks and data. In addition to the direct potential financial risk
as we continue to build, own and operate generation assets, other potential consequences of a material cybersecurity attack include reputational
damage, litigation with third parties, disruption to systems, unauthorized release of confidential or otherwise protected information,
corruption of data, diminution in the value of our investment in research, development and engineering, and increased cybersecurity protection
and remediation costs, which in turn could adversely affect our competitiveness, results of operations and financial condition. The amount
of insurance coverage we maintain may be inadequate to cover claims or liabilities relating to a cybersecurity attack.
Additionally, the legal and
regulatory environment surrounding information security and privacy in the U.S. and international jurisdictions is constantly evolving.
Violation or non-compliance with any of these laws or regulations, contractual requirements relating to data security and privacy, or
our own privacy and security policies, either intentionally or unintentionally, or through the acts of intermediaries could have a material
adverse effect on our brand, reputation, business, financial condition and results of operations, as well as subject us to significant
fines, litigation losses, third-party damages and other liabilities.
If Fusion Fuel is unable to keep pace with
technology developments in its industry, this could adversely affect its ability to win, maintain and grow market share.
The alternative energy industry
is subject to the introduction of new technologies, some of which may be subject to patent or other intellectual property protections.
We intend to introduce and integrate new technologies and procedures used by us and our customers; however, we cannot be certain that
we will be able to develop and implement new technologies or services on a timely basis or at an acceptable cost. The alternative energy
industry is highly competitive and dominated by a few large players that have resources to invest in new technologies. Our ability to
continually provide competitive technology, solutions and services can impact our ability to win, maintain and grow our market share and
to negotiate acceptable commercial terms with our potential clients. If we are unable to acquire or develop competitive technology or
deliver it to our clients in a timely and cost-competitive manner in the markets we serve, it could adversely affect our financial
condition, results of operations and cash flows.
Our growth strategy is aggressive and includes
operating in more territories.
Our growth plans include offering
standard products to more territories. As such, there are risks of compliance, contract risk, health and safety and managing a global
operation. The demand for electrolyzer products generating hydrogen exceeds the Group's ability to match supply, potentially granting
an advantage to other competitors who have larger supply capacity or who can ramp up faster. As the business increases its capacity and
delivery of products, it will have a greater reliance on third parties for installation and maintenance of critical components, including
a reliance on the expertise of its partners. Poor selection / management of suppliers & sub-contractors could lead to supply of sub-standard
products or services. This could also lead to contractual risk, health and safety risk and reputational risk for if those suppliers do
not have appropriate and effective compliance processes in place to manage those.
Our growth strategies depend
in part on our ability to further penetrate markets outside Europe, particularly in markets such as Morocco, Australia, the United States
and the Middle East, and involve significantly larger and more complex projects, including ammonia and large-scale hydrogen projects,
some in regions where there is the potential for significant economic and political disruptions. We are actively investing large amounts
of capital and other resources, in some cases through joint ventures, in developing markets, which we believe to have high growth potential.
Our operations in these markets may be subject to greater risks than those faced by our operations in mature economies, including political
and economic instability, project delay or abandonment due to unanticipated government actions, inadequate investment in infrastructure,
undeveloped property rights and legal systems, unfamiliar regulatory environments, relationships with local partners, language and cultural
differences and increased difficulty recruiting, training and retaining qualified employees. In addition, our properties and contracts
in these locations may be subject to seizure and cancellation, respectively, without full compensation for loss. Successful operation
of facilities or execution of projects may be disrupted by civil unrest, acts of war, nationalization efforts, sabotage or terrorism,
and other local security concerns. Such concerns may require us to incur greater costs for security or require us to shut down operations
for a period.
Furthermore, because a significant
portion of our revenue is expected to be generated from sales outside Europe, we are exposed to fluctuations in foreign currency exchange
rates. Our business is primarily exposed to translational currency risk as the results of our foreign operations are translated into Euro
at current exchange rates throughout the fiscal period.
We are subject to extensive government regulation
in the jurisdictions in which we do business. Regulations addressing, among other things, import/export restrictions, anti-bribery and
corruption, and taxes, can negatively impact our financial condition, results of operation, and cash flows.
We are subject to government
regulation in Europe and in the foreign jurisdictions where we conduct business. The application of laws and regulations to our business
is sometimes unclear. Compliance with laws and regulations may involve significant costs or require changes in business practices that
could result in reduced profitability. If there is a determination that we have failed to comply with applicable laws or regulations,
we may be subject to penalties or sanctions that could adversely impact our reputation and financial results. Compliance with changes
in laws or regulations can result in increased operating costs and require additional, unplanned capital expenditures. Export controls
or other regulatory restrictions could prevent us from shipping our products to and from some markets or increase the cost of doing so.
Changes in tax laws and regulations and international tax treaties could affect the financial results of our businesses. Increasingly
aggressive enforcement of anti-bribery and anti-corruption requirements could subject us to criminal or civil sanctions if a violation
is deemed to have occurred. Such restrictions may provide a competitive advantage to competitors who are not subject to comparable restrictions
or prevent us from taking advantage of growth opportunities.
Parent’s failure to comply with complex
U.S. and foreign laws and regulations could have a material adverse effect on its operations.
We are subject to complex
U.S. and foreign laws and regulations, such as the U.S. Foreign Corrupt Practices Act, the U.S. Foreign Account Tax Compliance Act, and
various other anti-bribery and anti-corruption laws. We may also be subject to trade control regulations and trade sanctions
laws that restrict the movement of certain goods to, and certain operations in, various countries or with certain persons. The internal
controls, policies and procedures, and employee training and compliance programs we expect to implement to deter prohibited practices
may not be effective in preventing employees, contractors or agents from violating or circumventing such internal policies or violating
applicable laws and regulations. Any determination that we have violated or are responsible for violations of anti-bribery, trade control,
trade sanctions or anti-corruption laws could have a material adverse effect on our financial condition and may result in fines and
penalties, administrative remedies or restrictions on business conduct, and could have a material adverse effect on our reputation and
our business.
We are subject to an increasing sustainability
focus.
The increasing environmental,
social and governance requirements from governments and customers as well as potential financing restrictions from governments on carbon
emitting processes could result in additional supply chain and operational costs. Additionally, business involvement in sensitive environmental,
social or governance activities might be negatively perceived and trigger adverse media attention. This could lead to reputational damage
and have an impact on achieving our business goals.
Our business and territories that we operate
in are subject to changes of regulations, laws and policies.
As a growing company with
operations commencing in new territories, we are exposed to various product- and country-related regulations, laws and policies influencing
our business activities and processes. We monitor the political and regulatory landscape in all our key markets to anticipate potential
problem areas, with the aim of quickly adjusting our business activities and processes to reflect the changed conditions. However, any
changes in regulations, laws and policies could adversely affect our business activities and processes as well as our financial condition
and results of operations.
Risks Relating to Irish Law
A transfer of Class A Ordinary Shares
or Warrants, other than one effected by means of the transfer of book-entry interests in the Depositary Trust Company, may be subject
to Irish stamp duty.
The Irish Revenue Commissioners
have confirmed that transfers of Class A Ordinary Shares and Warrants effected by means of the transfer of book entry interests in
the Depositary Trust Company (“DTC”) will not be subject to Irish stamp duty. It is anticipated that the majority of
Class A Ordinary Shares and Warrants will be traded through DTC by brokers who hold such shares on behalf of customers. However,
if you hold your Class A Ordinary Shares and/or Warrants directly rather than beneficially through DTC, any transfer of your Class A
Ordinary Shares and/or Warrants could be subject to Irish stamp duty. Payment of Irish stamp duty is generally a legal obligation of the
transferee. The potential for stamp duty could adversely affect the price of your securities.
If the Class A Ordinary Shares or Warrants
are not eligible for deposit and clearing within the facilities of DTC, then transactions in the Class A Ordinary Shares and/or Warrants
may be disrupted.
The facilities of DTC are
a widely-used mechanism that allow for rapid electronic transfers of securities between the participants in the DTC system, which
include many large banks and brokerage firms. The Class A Ordinary Shares and the Warrants are eligible for deposit and clearing
within the DTC system. On December 10, 2020, we entered into arrangements with DTC whereby we agreed to indemnify DTC for any Irish stamp
duty that may be assessed upon it as a result of its service as a depository and clearing agency for the Class A Ordinary Shares
and Warrants and, in consideration for such indemnification, DTC agreed to accept the Class A Ordinary Shares and Warrants for deposit
and clearing within its facilities.
However, although DTC has
initially accepted the Class A Ordinary Shares and Warrants, it generally will have discretion to cease to act as a depository and
clearing agency for the Class A Ordinary Shares and/or Warrants. If DTC determines at any time that the Class A Ordinary Shares
and/or Warrants are not eligible for continued deposit and clearance within its facilities, then we believe the Class A Ordinary
Shares and/or Warrants would not be eligible for continued listing on a U.S. securities exchange and trading in the Class A Ordinary
Shares and/or Warrants would be disrupted. While we would pursue alternative arrangements to preserve our listing and maintain trading,
any such disruption could have a material adverse effect on the trading price of the Class A Ordinary Shares and/or Warrants.
An investment in the Class A Ordinary
Shares may result in uncertain U.S. federal income tax consequences.
An investment in the Class A
Ordinary Shares may result in uncertain U.S. federal income tax consequences. See “Anticipated Material U.S. Federal Income Tax
Consequences to U.S. Holders of Parent Securities”. Prospective investors are urged to consult their tax advisors with
respect to these and other tax consequences when purchasing, holding and disposing of the Class A Ordinary Shares.
In certain limited circumstances, dividends
paid by Parent may be subject to Irish dividend withholding tax.
Parent does not intend to
pay dividends on its capital stock in the foreseeable future. If Parent were to declare and pay dividends, in certain limited circumstances,
dividend withholding tax (currently at a rate of 25%) may arise in respect of dividends paid on the Class A Ordinary Shares. A number
of exemptions from dividend withholding tax exist such that shareholders resident in the U.S. and other exempt countries may be entitled
to exemptions from dividend withholding tax.
The Irish Revenue Commissioners
have confirmed that shareholders resident in the U.S. that hold their Class A Ordinary Shares through DTC will not be subject to
dividend withholding tax, provided the addressees of the beneficial owners of such Class A Ordinary Shares in the records of the
brokers holding such Class A Ordinary Shares are recorded as being in the U.S. (and such brokers have further transmitted the relevant
information to a qualifying intermediary appointed by Parent). However, other holders of Class A Ordinary Shares may be subject to
dividend withholding tax, which could adversely affect the price of their Class A Ordinary Shares.
Dividends received by Irish residents and
certain other shareholders may be subject to Irish income tax.
Shareholders entitled to an
exemption from Irish dividend withholding tax on dividends received from Parent will not be subject to Irish income tax in respect of
those dividends unless they have some connection with Ireland other than their shareholding in Parent (for example, they are resident
in Ireland). Shareholders who receive dividends subject to Irish dividend withholding tax will generally have no further liability to
Irish income tax on those dividends.
Class A Ordinary Shares or Warrants
received by means of a gift or inheritance could be subject to Irish capital acquisitions tax.
Irish capital acquisitions
tax (“CAT”) could apply to a gift or inheritance of Class A Ordinary Shares or Warrants irrespective of the place
of residence, ordinary residence or domicile of the parties. This is because Class A Ordinary Shares and Warrants will be regarded as
property situated in Ireland. The person who receives the gift or inheritance has primary liability for CAT. Gifts and inheritances passing
between spouses are exempt from CAT. Children have a tax-free threshold of €335,000 in respect of taxable gifts or inheritances
received from their parents.
It is recommended that
each shareholder consult his or her own tax advisor as to the tax consequences of holding Class A Ordinary Shares and Warrants in,
and receiving distributions from, Parent.
Provisions in our Memorandum and Articles
of Association and under Irish law could make an acquisition of us more difficult, may limit attempts by our shareholders to replace or
remove our management, may limit shareholders’ ability to obtain a favorable judicial forum for disputes with directors, officers,
or employees, and may limit the market price of the Class A Ordinary Shares and/or Warrants.
Provisions in our Memorandum
and Articles of Association (“M&A”) may have the effect of delaying or preventing a change of control or changes
in our management. The M&A includes provisions that:
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require that Parent’s board of directors is classified into three classes of directors
with staggered three-year
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permit the board of directors to establish the number of directors and fill any vacancies and newly created
directorships. |
As an Irish public limited company, certain
capital structure decisions regarding Parent will require the approval of the shareholders of Parent, which may limit Parent’s flexibility
to manage its capital structure.
Irish law generally provides
that a board of directors may allot and issue shares (or rights to subscribe for or convert into shares) if authorized to do so by a company’s
constitution or by an ordinary resolution. Such authorization may be granted for up to the maximum of a company’s authorized but
unissued share capital and for a maximum period of five years, at which point it must be renewed by another ordinary resolution. Parent’s
M&A authorizes the board of directors of Parent to allot shares up to the maximum of Parent’s authorized but unissued share
capital until December 31, 2023. This authorization will need to be renewed by ordinary resolution upon its expiration and at periodic
intervals thereafter. Under Irish law, an allotment authority may be given for up to five years at each renewal, but governance considerations
may result in renewals for shorter periods or for less than the maximum permitted number of shares being sought or approved.
While Irish law also generally
provides shareholders with pre-emptive rights when new shares are issued for cash, it is possible for Parent’s M&A, or
for shareholders of Parent in a general meeting, to exclude such pre-emptive rights. Parent’s M&A excludes pre-emptive rights
until December 31, 2023. This exclusion will need to be renewed by special resolution upon its expiration and at periodic intervals thereafter.
Under Irish law, a disapplication of pre-emption rights may be authorized for up to five years at each renewal, but governance considerations
may result in renewals for shorter periods or for less than the maximum permitted number of unissued shares being sought or approved.
Attempted takeovers of Parent will be subject
to the Irish Takeover Rules and will be under the supervisory jurisdiction of the Irish Takeover Panel. Accordingly, Parent’s board
of directors may be limited by the Irish Takeover Rules in its ability to defend an unsolicited takeover attempt.
Due to the listing of the
Class A Ordinary Shares on Nasdaq, Parent is subject to the Irish Takeover Panel Act, 1997, Irish Takeover Rules 2013 (“Irish Takeover
Rules”), under which Parent is not be permitted to take certain actions that might “frustrate” an offer for Class A
Ordinary Shares once the board of directors has received an offer, or has reason to believe an offer is or may be imminent, without the
approval of more than 50% of shareholders entitled to vote at a general meeting of our shareholders or the consent of the Irish Takeover
Panel. This could limit the ability of Parent’s board of directors to take defensive actions even if it believes that such defensive
actions would be in our best interests or the best interests of our shareholders.
The Irish Takeover Rules are
administered by the Irish Takeover Panel, which has supervisory jurisdiction over such transactions. Among other matters, the Irish Takeover
Rules operate to ensure that no offer is frustrated or unfairly prejudiced and, in situations involving multiple bidders, that there is
a level playing field. For example, pursuant to the Irish Takeover Rules, the board of directors of Parent will not be permitted, without
shareholder approval, to take certain actions which might frustrate an offer for Parent Shares once the board of directors of Parent has
received an approach that might lead to an offer or has reason to believe that an offer is, or may be, imminent.
Under the Irish Takeover Rules,
if an acquisition of Class A Ordinary Shares and Class B Ordinary Shares were to increase the aggregate holdings of the acquirer (together
with its concert parties) to 30% or more of the voting rights of Parent, such acquirer and, in certain circumstances, its concert parties
would be required (except with the consent of the Irish Takeover Panel) to make an offer for the outstanding Class A Ordinary Shares and
Class B Ordinary Shares at a price not less than the highest price paid by such acquirer or its concert parties for Parent Shares during
the previous 12 months. This requirement would also be triggered by the acquisition of Class A Ordinary Shares and Class B Ordinary
Shares by any person holding (together with its concert parties) between 30% and 50% of the voting rights of Parent if the effect of such
acquisition were to increase that person’s voting rights by 0.05% within a 12-month period.
Anti-takeover provisions
in Parent’s M&A could make an acquisition of Parent more difficult. Parent’s M&A contains provisions that may delay
or prevent a change of control, discourage bids at a premium over the market price of Class A Ordinary Shares, adversely affect the market
price of Class A Ordinary Shares, and adversely affect the voting and other rights of shareholders of Parent. These provisions include:
(i) permitting the board of directors of Parent to issue preference shares without the approval of Parent’s shareholders, with
such rights, preferences and privileges as they may designate; and (ii) allowing the board of directors of Parent to adopt a shareholder
rights plan upon such terms and conditions as it deems expedient in the interests of Parent.
The operation of the Irish Takeover Rules
may affect the ability of certain parties to acquire Class A Ordinary Shares.
Under the Irish Takeover Rules
if an acquisition of ordinary shares were to increase the aggregate holding of the acquirer and its concert parties to ordinary shares
that represent 30% or more of the voting rights of Parent, the acquirer and, in certain circumstances, its concert parties would be required
(except with the consent of the Irish Takeover Panel) to make an offer for the outstanding ordinary shares at a price not less than the
highest price paid for the ordinary shares by the acquirer or its concert parties during the previous 12 months. This requirement
would also be triggered by an acquisition of ordinary shares by a person holding (together with its concert parties) ordinary shares that
represent between 30% and 50% of the voting rights in Parent if the effect of such acquisition were to increase that person’s percentage
of the voting rights by 0.05% within a 12-month period. Under the Irish Takeover Rules, certain separate concert parties will be presumed
to be acting in concert. The board of directors of Parent and their relevant family members, related trusts and “controlled companies”
are presumed to be acting in concert with any corporate shareholder who hold 20% or more of Parent.
The application of these presumptions
may result in restrictions upon the ability of any of the concert parties and/or members of Parent’s board of directors to acquire
more of our securities, including under the terms of any executive incentive arrangements. Accordingly, the application of the Irish Takeover
Rules may frustrate the ability of certain of our shareholders and directors to acquire our ordinary shares.
Investors may face difficulties in protecting
their interests, and their ability to protect their rights through the U.S. federal courts may be limited, because Parent is formed under
Irish law.
Parent is a company formed
under the laws of Ireland, all of its properties are located outside of the United States, a majority of our directors and officers
reside outside of the United States and all our assets are and are likely in the future to be located outside of the United States.
As a result, it may be difficult, or in some cases not possible, for investors in the United States to enforce their legal rights
against us, to effect service of process upon our directors or officers or to enforce judgements of United States courts predicated
upon civil liabilities and criminal penalties on our directors under United States laws.
Our corporate affairs will
be governed by our M&A, the Irish Companies Act and the common law of Ireland. The rights of shareholders to take action against the
directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Irish law are governed by
the Irish Companies Act and the common law of Ireland. The rights of the Parent shareholders and the fiduciary responsibilities of our
directors under Irish law may not be as clearly established as they would be under statutes or judicial precedent in some jurisdictions
in the United States. In particular, Ireland has a less developed body of securities laws as compared to the United States,
and some states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law.
The jurisdiction and choice of law clauses
set forth in the Amended and Restated Warrant Agreement, and Parent’s status as an Irish company, may have the effect of limiting
a warrant holder’s ability to effectively pursue its legal rights against Parent in any United States court.
The Amended and Restated Warrant
Agreement provides that disputes arising under the Amended and Restated Warrant Agreement are governed by New York law and that Parent
consents to jurisdiction in courts of the State of New York or the United States District Court for the Southern District of
New York. This provision may limit the ability of warrant holders to bring a claim against Parent other than in courts of the State
of New York or the United States District Court for the Southern District of New York and may limit a warrant holder’s
ability to bring a claim in a judicial forum that it finds more favorable for disputes under the Amended and Restated Warrant Agreement.
The Amended and Restated Warrant Agreement, however, also expressly makes clear that this choice of law and forum provision shall not
restrict a warrant holder from bringing a claim under the Securities Act or the Exchange Act in any federal or state court having jurisdiction
over such claim. To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates
exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations
thereunder. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits
brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Irrespective of the ability
of a warrant holder to bring an action in any such forum, due to the fact that Parent is an Irish company with all of its properties located
outside of the United States, if a warrant holder brings a claim against Parent under the Amended and Restated Warrant Agreement,
the Securities Act or Exchange Act, or otherwise, such warrant holder may have difficulty pursuing its legal rights against Parent in
any United States courts having jurisdiction over any such claims.
Parent may be classified as a passive foreign
investment company for U.S. federal income tax purposes, which could result in adverse U.S. federal income tax consequences to U.S. investors
in Parent’s securities.
Based on the current value
of Parent’s assets and the composition of Parent’s potential income streams, assets and operations, we do not believe Parent
classifies as a “passive foreign investment company,” or PFIC, for the taxable year ended on December 31, 2022, and that it
will not classify as a PFIC for 2022 either. However, the application of the PFIC rules is subject to uncertainty in several respects
and furthermore we cannot assure you that the U.S. Internal Revenue Service, the IRS, will not take a contrary position. Furthermore,
a separate determination must be made after the close of each taxable year as to whether Parent is a PFIC for that year. Accordingly,
notwithstanding the current expectation that we will not be classified as a PFIC, we cannot assure you that we have not been a PFIC or
that we will not be a PFIC for our current taxable year or any future taxable year. A non-US company will be considered a PFIC for
any taxable year if (i) at least 75% of its gross income is passive income (including interest income), or (ii) at least 50%
of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets
that produce or are held for the production of passive income. If we were to be ultimately classified as a PFIC for any taxable year during
which a U.S. holder holds the Class A Ordinary Shares, certain adverse U.S. federal income tax consequences could apply to such U.S.
holder, including (i) the treatment of all or a portion of any gain on disposition of the Class A Ordinary Shares as ordinary
income, (ii) the application of a deferred interest charge on such gain and the receipt of certain dividends and (iii) the obligation
to comply with certain reporting requirements.
Resales of our Class A Ordinary Shares
or Warrants, or the perception that such resales might occur, may cause the market price of the Class A Ordinary Shares or Warrants
to drop significantly, even if Fusion Fuel’s business is doing well.
As of April 28, 2023 we have
an aggregate of 14,532,499 Class A Ordinary Shares and 8,869,633 Warrants outstanding. While a portion of such shares and
warrants are subject to transfer restrictions described elsewhere in this Annual Report, upon expiration of the applicable lock-up periods,
large amounts of Class A Ordinary Shares and/or Warrants may be sold in the open market or in privately negotiated transactions.
Such sales, or the perception in the public markets that such sales will occur, could have the effect of increasing the volatility in
the trading price of the Class A Ordinary Shares and/or the Warrants or putting significant downward pressure on the price of the
Class A Ordinary Shares and/or the Warrants.
Downward pressure on the market
price of the Class A Ordinary Shares and/or the Warrants that likely will result from sales of Class A Ordinary Shares could
encourage short sales of Class A Ordinary Shares and/or the Warrants by market participants. Generally, short selling means selling
a security, contract or commodity not owned by the seller. The seller is committed to eventually purchase the financial instrument previously
sold. Short sales are used to capitalize on an expected decline in the security’s price. Short sales of the Class A Ordinary
Shares and/or Warrants could have a tendency to depress the price of the Class A Ordinary Shares and/or the Warrants, respectively,
which could further increase the potential for short sales.
We also may issue additional
Class A Ordinary Shares, Warrants, or other securities to finance our operations. We cannot predict the size of future issuances of Class A
Ordinary Shares, Warrants, or other securities or the effect, if any, that future issuances and sales of shares of such securities will
have on the market price of the Class A Ordinary Shares or the Warrants. Sales of substantial amounts of Class A Ordinary Shares
or Warrants, or the perception that such sales could occur, may adversely affect prevailing market prices of Class A Ordinary Shares
and/or Warrants.
A substantial number of our Class A Ordinary
Shares may be issued upon the exercise of Warrants and options which could adversely affect the price of our Class A Ordinary Shares.
We have an aggregate of 8,869,633
Warrants outstanding. Each Warrant is exercisable for one Class A Ordinary Share at a price of $11.50 per share. In addition, we have
options to purchase an aggregate of 2,128,554 Class A Ordinary Shares outstanding. If all of the Warrants and options are exercised for
cash, we would be required to issue up to 10,998,187 Class A Ordinary Shares, or approximately 76% of our Class A Ordinary Shares outstanding
as of April 28, 2023. The warrant and option holders will likely exercise such securities only at a time when it is economically beneficial
to do so. Accordingly, the exercise of these securities will dilute our other equity holders and may adversely affect the market price
of the Class A Ordinary Shares.
We may issue additional Class A Ordinary
Shares or other equity securities without seeking shareholder approval, which would dilute your ownership interests and may depress the
market price of the Class A Ordinary Shares.
An aggregate of 8,869,633
Warrants is outstanding. In addition, we had 2,245,449 Class A ordinary shares available for issuance, and not subject to outstanding
awards, under our Plan. Further, we may issue additional Class A ordinary shares or other equity securities of equal or senior rank in
the future for any reason or in connection with, among other things, future acquisitions, the redemption of outstanding Warrants, or repayment
of outstanding indebtedness, without shareholder approval, in a number of circumstances.
Our issuance of additional
Class A Ordinary Shares or other equity securities of equal or senior rank would have the following effects:
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our existing shareholders’ proportionate ownership interest in us will
decrease; |
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the amount of cash available per share, including for payment of dividends in
the future, may decrease; |
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the relative voting strength of each previously outstanding Class A Ordinary
Share may be diminished; and |
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the market price of the Class A Ordinary Shares may decline. |
If the Class A Ordinary Shares or Warrants
are de-listed from Nasdaq, we could face significant material adverse consequences.
We may be unable to maintain
the listing of our Class A Ordinary Shares and Warrants on in the future. If Nasdaq delists our Class A Ordinary Shares or Warrants, we
could face significant material adverse consequences, including:
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a limited availability of market quotations for the Class A Ordinary Shares
and Warrants; |
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a reduced level of trading activity in the secondary trading market for the
Class A Ordinary Shares and Warrants; |
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a limited amount of news and analyst coverage; |
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a decreased ability to issue additional securities or obtain additional financing
in the future; |
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stamp duty may be chargeable on transfers of Class A Ordinary Shares and Warrants
at a rate of 1% of the greater of the price paid or market value of the Class A Ordinary Shares and Warrants transferred; and |
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our securities would not be “covered securities” under the National
Securities Markets Improvement Act of 1996, which is a federal statute that prevents or pre-empts the states from regulating the sale
of certain securities, including securities listed on Nasdaq, in which case our securities would be subject to regulation in each state
where we offer and sell securities. |
The trading price of the Class A Ordinary
Shares or Warrants may be volatile, and holders of the Class A Ordinary Shares or Warrants could incur substantial losses.
The stock market in general
has experienced extreme volatility in the wake of recent public health emergencies such as the COVID-19 pandemic and political turmoil
such as the war in Ukraine that has often been unrelated to the operating performance of particular companies. As a result of this volatility,
our shareholders may not be able to sell their Class A Ordinary Shares or Warrants at or above the price paid for such securities.
The market price for the Class A Ordinary Shares and Warrants may be influenced by many factors, including the factors discussed
elsewhere in this “Risk Factors” section and:
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the overall performance of the equity markets; |
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actual or anticipated fluctuations in our revenue and other operating results; |
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changes in the financial projections we may provide to the public or the failure
to meet these projections; |
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failure of securities analysts to initiate or maintain coverage of us, changes
in financial estimates by any securities analysts who follow us or our failure to meet these estimates or the expectations of investors; |
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the issuance of reports from short sellers that may negatively impact the trading
price of the Class A Ordinary Shares and/or Warrants; |
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recruitment or departure of key personnel; |
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the economy as a whole and market conditions in our industry; |
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stock market price and volume fluctuations of other publicly traded companies
and, in particular, those that operate in the green energy or hydrogen industries |
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new laws, regulations, subsidies, or credits or new interpretations of them
applicable to our business; |
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negative publicity related to problems in our manufacturing or the real or perceived
quality of our products; |
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rumors and market speculation involving us or other companies in our industry; |
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announcements by us or our competitors of significant technical innovations,
acquisitions, strategic partnerships, or capital commitments; |
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lawsuits threatened or filed against us; |
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other events or factors including those resulting from war, incidents of terrorism
or responses to these events; |
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the expiration of contractual lock-up or market standoff agreements; |
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sales or anticipated sales of shares of the Class A Ordinary Shares and/or Warrants
by us or our shareholders; and |
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the impact of a public health crisis, such as the COVID-19 pandemic, or other
adverse public health developments. |
If securities or industry analysts do not
publish research or publish inaccurate or unfavorable research about our business, the market price of the Class A Ordinary Shares
and/or Warrants and trading volume could decline.
The market price for the Class A
Ordinary Shares and Warrants depends in part on the research and reports that securities or industry analysts publish about us or our
business. If industry analysts cease coverage of us, the trading price for the Class A Ordinary Shares and/or Warrants would be negatively
affected. In addition, if one or more of the analysts who cover us downgrade the Class A Ordinary Shares and/or Warrants or publish
inaccurate or unfavorable research about our business, the Class A Ordinary Share and/or Warrant price would likely decline. If one
or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for the Class A Ordinary Shares
and/or Warrants could decrease, which might cause the Class A Ordinary Share and/or Warrant price and trading volume to decline.
An active trading market of the Class A
Ordinary Shares and Warrants may not be sustained, and investors may not be able to resell their Class A Ordinary Shares and Warrants
at or above the price for which they purchased such securities.
An active trading market for
the Class A Ordinary Shares and Warrants may not be sustained. In the absence of an active trading market for the Class A Ordinary
Shares and/or Warrants, investors may not be able to sell their Class A Ordinary Shares or Warrants, respectively, at or above the
price they paid at the time that they would like to sell. In addition, an inactive market may impair our ability to raise capital by selling
shares or equity securities and may impair our ability to acquire business partners by using the Class A Ordinary Shares as consideration,
which, in turn, could harm our business.
Because we currently do not have plans to
pay cash dividends on the Class A Ordinary Shares, you may not receive any return on investment unless you sell your Class A
Ordinary Shares for a price greater than that which you paid.
We currently do not expect
to pay any cash dividends on Class A Ordinary Shares. Any future determination to pay cash dividends or other distributions on Class A
Ordinary Shares will be at the discretion of the board of directors and will be dependent on our earnings, financial condition, operating
results, capital requirements, and contractual, regulatory and other restrictions, including restrictions contained in the agreements
governing any existing and future outstanding indebtedness we or our subsidiaries incur, on the payment of dividends by our subsidiaries
to us, and other factors that our board of directors deems relevant. As a result, you may not receive any return on an investment in the
Class A Ordinary Shares unless you sell the Class A Ordinary Shares for a price greater than that which you paid for them.
General Risks
As a foreign private issuer, we are exempt
from a number of rules under the Exchange Act, we are permitted to file less information with the SEC than domestic companies, and we
will be permitted to follow home country practice in lieu of the listing requirements of Nasdaq, subject to certain exceptions. Accordingly,
there may be less publicly available information concerning us than there is for issuers that are not foreign private issuers.
As a foreign private issuer,
we are exempt from certain rules under the Exchange Act, including certain disclosure and procedural requirements applicable to proxy
solicitations under Section 14 of the Exchange Act, our board of directors, officers and principal shareholders are exempt from the
reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act, and we are not required to
file periodic reports and financial statements with the SEC as frequently or as promptly as companies whose securities are registered
under the Exchange Act but are not foreign private issuers. Foreign private issuers are also not required to comply with Regulation FD,
which restricts the selective disclosure of material non-public information. Accordingly, there may be less publicly available information
concerning us than there is for companies whose securities are registered under the Exchange Act but are not foreign private issuers,
and such information may not be provided as promptly as it is provided by such companies.
In addition, certain information
may be provided by us in accordance with Irish law, which may differ in substance or timing from such disclosure requirements under the
Exchange Act. As a foreign private issuer, under Nasdaq rules we are subject to less stringent corporate governance requirements. Subject
to certain exceptions, the rules of Nasdaq permit a foreign private issuer to follow its home country practice in lieu of certain of the
listing requirements of Nasdaq. We have elected to follow corporate governance practices under Irish law in lieu of the requirements of
Nasdaq Rule 5635(c) and 5635(d)(2), which require companies to obtain shareholder approval prior to the issuance of securities to officers,
directors, employees or consultants under certain circumstances and when it seeks to engage in a transaction, other than a public offering,
involving the sale, issuance or potential issuance of ordinary shares, which alone or together with sales by officers, directors or substantial
shareholders of the company, equals 20% or more of the ordinary shares or 20% or more of the voting power outstanding before the issuance
at a price below a certain price indicated in such Nasdaq Rule. Irish law and generally accepted business practices in Ireland do not
require that shareholders approve such transactions. Accordingly, shareholder approval is not required for these types of transactions
by Parent.
Parent is an “emerging growth company”
and it cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make the Class A Ordinary
Shares less attractive to investors.
Parent is an “emerging
growth company” as defined in the JOBS Act. As an emerging growth company, Parent is not required to obtain auditor attestation of its reporting on internal control
over financial reporting, has reduced disclosure obligations regarding executive compensation and is not required to hold non-binding advisory
votes on executive compensation. This allows an emerging growth company to delay the adoption of these accounting standards until they
would otherwise apply to private companies. Parent has elected to take advantage of such extended transition period. Parent cannot predict
whether investors will find the Class A Ordinary Shares to be less attractive as a result of its reliance on these exemptions. If
some investors find the Class A Ordinary Shares to be less attractive as a result, there may be a less active trading market for
the Class A Ordinary Shares and the price of the Class A Ordinary Shares may be more volatile.
Parent will remain an
emerging growth company until the earliest of: (i) the end of the fiscal year in which Parent has total annual gross revenue of
$1.23 billion; (ii) the last day of Parent’s fiscal year following the fifth anniversary of the date on which HL
consummated its initial public offering; (iii) the date on which Parent issues more than $1.0 billion in
non-convertible debt during the preceding three-year period; or (iv) the end of the fiscal year in which the market
value of the Parent Ordinary Shares held by non-affiliates exceeds $700 million as of the last business day of its most
recently completed second fiscal quarter.
Further, there is no guarantee
that the exemptions available to Parent under the JOBS Act will result in significant savings. To the extent that Parent chooses not to
use exemptions from various reporting requirements under the JOBS Act, it will incur additional compliance costs, which may impact Parent’s
financial condition.
We incur significant costs and devote substantial
management time as a result of being subject to reporting requirements in the United States, which may adversely affect the operating
results of Parent in the future.
As a company subject to reporting
requirements in the United States, we incur significant legal, accounting and other expenses that Parent would not have incurred
as a private Irish company. For example, Parent is subject to the reporting requirements of the Exchange Act and is required to comply
with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act,
as well as rules and regulations subsequently implemented by the SEC, including the establishment and maintenance of effective disclosure
and financial controls and changes in corporate governance practices. Compliance with these requirements increases Parent’s legal
and financial compliance costs and makes some activities more time consuming and costly, while also diverting management attention. In
particular, Parent expects to incur significant expenses and devote substantial management effort toward ensuring compliance with the
requirements of Section 404 of the Sarbanes-Oxley Act, which will increase when it is no longer an emerging growth company as
defined by the JOBS Act.
If we fail to maintain an effective system
of internal controls, we may not be able to accurately report our financial results or prevent fraud.
Effective internal controls
over financial reporting are necessary for us to provide reliable and accurate financial reports and effectively prevent fraud. Our compliance
with the annual internal control report requirement depends on the effectiveness of our financial reporting and data systems and controls.
Inferior internal controls increase the possibility of errors and could cause investors to lose confidence in our reported financial information,
which could have a negative effect on the trading price of our stock and our access to capital.
In addition, our internal
control systems rely on people trained in the execution of the controls. Loss of these people or our inability to replace them with similarly
skilled and trained individuals or new processes in a timely manner could adversely impact our internal control mechanisms.
Future changes in U.S. and foreign tax laws
could adversely affect us.
The U.S. Congress, the Organisation
for Economic Co-operation and Development, and government agencies in jurisdictions where we and our affiliates do business have
focused on issues related to the taxation of multinational corporations. In particular, specific attention has been paid to “base
erosion and profit shifting”, where payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction
with lower tax rates. As a result, the tax laws in Ireland, Portugal and other countries in which we and our affiliates do business could
change on a prospective or retroactive basis, and any such change could adversely affect us.
ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
Parent was incorporated in
Ireland on April 3, 2020 as a private limited company under the name Dolya Holdco 3 Limited. On July 14, 2020, Parent effected a name
change to Fusion Fuel Green Limited. On October 2, 2020, Parent converted into a public limited company incorporated in Ireland under
the name “Fusion Fuel Green PLC.”
On December 10, 2020, Parent
completed a business combination pursuant to that certain Amended and Restated Business Combination Agreement (“Business Combination
Agreement”), which Parent entered into on August 25, 2020, with HL, Fusion Welcome – Fuel, S.A., a public limited company
domiciled in Portugal, sociedade anónima (now known as Fusion Fuel Portugal, S.A., “Fusion Fuel Portugal”),
Fusion Fuel Atlantic Limited, a British Virgin Islands business company and wholly-owned subsidiary of Parent (“Merger Sub”),
and the shareholders of Fusion Fuel Portugal (“Fusion Fuel Shareholders”). Pursuant to the Business Combination Agreement,
(i) Merger Sub merged with and into HL (the “Merger”), with HL being the surviving entity of the Merger and becoming
a wholly-owned subsidiary of Parent, and (ii) Parent acquired all of the issued and outstanding shares of Fusion Fuel Portugal (the “Share
Exchange,” and together with the Merger, the “Transactions”), resulting in Fusion Fuel Portugal and HL becoming
wholly-owned subsidiaries of Parent and the securityholders of Fusion Fuel Portugal and HL becoming securityholders of Parent. Immediately
following the closing of the Transactions, Parent consummated the closing of a series of subscription agreements with accredited investors
(“PIPE Investors”) for the sale in a private placement of 2,450,000 Class A ordinary shares of Parent (“Class
A Ordinary Shares”) at a price of $10.25 per share for gross proceeds to Parent of approximately $25.1 million (the “PIPE”).
Following the Transactions,
HL was dissolved. On April 21, 2021, we formed our U.S. subsidiary, Fusion Fuel USA, Inc. (“Fusion Fuel USA”).
Prior to the Transactions,
Fusion Fuel Portugal was a subsidiary of Negordy Investments, S.A. (formerly Fusion Welcome) (“Negordy”),
a European leader in concentrated photovoltaic technology (“CPV”) technology. Since 2008, Negordy and its related parties,
have installed over 20 solar CPV plants throughout Europe and the MENA (Middle East and North Africa) region, and over time became the
leading CPV solar solution provider in Europe. The management team of Negordy also developed relationships with key stakeholders throughout
the energy, regulatory, and commercial spheres. Recognizing the potential of green hydrogen, the management team of Negordy launched a
subsidiary, Fusion Fuel Portugal, in July 2018, to begin R&D of an alternative to Brown and Grey Hydrogen, with the goal of minimizing
the associated carbon footprint, and to provide a market solution for meeting emissions reduction targets.
Starting with the principle
of recovering waste heat from the solar energy conversion process, Fusion Fuel Portugal began to explore possibilities to use this energy
to generate green hydrogen. Fusion Fuel Portugal’s technology was independently validated by the technology department from Lisbon’s
Instituto Superior de Técnico (the “University”). The University produced a study commissioned by GALP, a major
Portuguese oil and gas multi-national company. The purpose of the study was to perform a technological assessment of the viability of
Fusion Fuel Portugal’s Hydrogen Generator. The study found that the HEVO-Solar’s system presented a “differentiating
advantage” with its technology as it has the typical characteristics of a conventional PEM (polymer electrolyte membrane) electrolyzer,
but with a reduced size that is compact and integrated in a concentrator photovoltaic system. The reduced size of the electrolyzer allows
for thermal and electrical integration through solar concentration directly in the cell. In other similar technologies, the concentrator
photovoltaic system is not conducted within the cell. The University study acknowledges that the HEVO-Solar was built with all of the
appropriate materials available on the market and that the integration of the solar photovoltaic concentration system with the HEVO (formerly
referred to as the DC-PEHG) electrolyzer seems well achieved. Fusion Fuel Portugal did not commission or fund any portion of this study,
nor did Fusion Fuel Portugal have any role in selecting the professor that conducted the study, and has obtained permission to use the
results of the study.
Fusion Fuel is bringing its
proprietary technology to the market after extensive production research and testing, including external green hydrogen purity testing
by LAQV Requimte Laboratory to confirm it can be used for all major industrial purposes and targeted key markets. Fusion Fuel Portugal
has developed its first green hydrogen plant in Evora, Portugal (“Evora”). In addition, Fusion Fuel has begun to seek
to expand its business in Europe, the Middle East and North Africa (“MENA”) region and the United States, as also described
further below in this section.
Evora
Fusion Fuel’s first
solar-to-green hydrogen plant, H2Evora, consists of 15 HEVO-Solar generators with the latest generation of Fusion Fuel’s HEVO micro-electrolyzer.
H2Evora also includes state-of-the-art hydrogen purification, compression, and storage systems, as well as a Ballard Power Systems fuel
cell to convert the green hydrogen into electricity to be fed into the national grid.
Installation at H2Evora is
complete and our HEVO-Solar generators have been operating since the fourth quarter of 2021. The facility received its long-awaited commissioning
in the third quarter of 2022. This was not only the first solar-to-hydrogen plant in Iberia, but also the first plant producing and using
green hydrogen as an energy storage medium all in one integrated facility.
Benavente
In the second quarter of 2021,
we purchased a 14,000m3 factory in Benavente, Portugal for €5.0 million, inclusive of taxes. The renovations of the
facility in Benavente, which began in late 2021, were completed in the first quarter of 2022.
The second quarter marked
the start of the first production lines at our Benavente facility, which will ramp up to around 500 MW over the coming years. It is a
major milestone for Fusion Fuel and for Iberia, as the first industrial electrolyzer production to go live across Portugal and Spain.
Our vision for Benavente is for it to be an industry-leading, state-of-the-art electrolyzer manufacturing facility, using automation and
robotics wherever possible to improve the efficiency of production. In line with our efforts to be a leading clean energy company, we
partnered with Helexia to instal 1 MW of solar power on the roof of Benavente, which will not only reduce our carbon footprint, but will
also lower our production costs given the exceedingly high cost of energy today.
In the fourth quarter of 2022,
we announced we completed our planned sale and leaseback of the Benavente electrolyzer manufacturing factory to CORUM Eurion, an ESG certified
real estate investment fund managed by CORUM Asset Management. The €9.3 million transaction generated net proceeds of nearly €7.5
million after certain holdbacks and deposits for the lease-back contract. The proceeds will be used by us to continue the buildout of
the Benavente factory, fund the development of Fusion Fuel owned projects and HEVO-Chain technology, as well as for general corporate
purposes.
Other Portugal Market Operations and Partnerships
In the first quarter of 2022,
the Portuguese government announced the passage of Decree-Law 30-A/2022, which approved a set of measures aimed at accelerating the energy
transition by simplifying the procedures for the installation and start-up of renewable energy projects, including green hydrogen production.
While the larger projects we have under development are currently not expected to be impacted by this legislation, we believe it will
significantly accelerate the permitting process for some of the small-scale projects we are developing, such as refueling stations. Due
to the modular nature of our HEVO based solutions and our unique ability to develop small-scale, grid-independent electrolysis economically,
we stand to benefit significantly from this new decree. We have spoken at length about the permitting delays we have faced - an unfortunate
but natural outcome of a novel technology in a nascent industry - so we are extremely pleased to see that regulators are recognizing the
need to streamline the permitting process and fast-track the projects that will help Europe realize its ambitious decarbonization commitments.
During the second quarter
of 2021, Fusion Fuel submitted three projects to Portugal’s Operational Program for Sustainability and Efficient Use of Resources
(“POSEUR”). One of these projects related to a company-owned HEVO-Sul project located in Sines, Portugal. In the second
quarter of 2022, we received approval from the POSEUR for the HEVO-Sul project. The Portuguese government has allocated €40 million
in direct grants for the POSEUR program, which aims to support the production of green hydrogen and other renewable gases, and Fusion
Fuel has been approved for €4.3 million in grant for this project. At the beginning of August 2022, we submitted our first claim
under this agreement, which amounted to €2.6 million.
On August 18, 2022, we announced
that we were successful with our application under the Component 14 (“C-14”) of the Portuguese Recovery and Resilience
Plan for our HEVO-Industria project in Sines, Portugal. The award of €10 million marked the largest single-project grant award in
the application. Our HEVO-Industria project will consist of around 10 MW of electrolyzer capacity along with a hydrogen refueling station
and capabilities for gas blending requirements.
New and Future Markets
United States and North
America
Passage of the Inflation Reduction
Act (“IRA”) in the United States on August 16, 2022, changed the game in our favor. The financial incentives of the
IRA, in particular the $3/kg production tax credit, will immediately make our green hydrogen competitive with grey hydrogen. Considering
these tailwinds, we communicated our intention to accelerate our growth strategy into North America. To that end, in the third quarter
2022 we announced our first anchor project in the United States, a $180 million, 75 MW solar-to-green hydrogen facility to be located
in Bakersfield, California. Due to the unique combination of solar irradiance, the incentives available under California’s Low Carbon
Fuel Standard program, and proximity to large-scale offtake in the form of logistics hubs, heavy industry, and natural gas infrastructure,
Bakersfield is the ideal cornerstone of our North American commercial strategy. The project, which will be jointly developed alongside
Electus Energy, will feature a refueling station for heavy duty commercial vehicles, along with the balance of plant equipment for filling
and distributing compressed cylinders to supply local industrial customers. We have already obtained the necessary land lease option and
commenced pre-feasibility work with Black & Veatch as the lead contractor for the project and are targeting final investment decision
on the project in 2025 , with commissioning expected in 2027.
Expansion into North America,
beginning with Bakersfield, is a pivotal step forward for Fusion Fuel. To ensure we can deliver on Bakersfield and secure additional development
opportunities in this new market, we have begun building out our North American team, with particular focus on our business and project
development capabilities. However, both the scale of Bakersfield and the need for the majority of our equipment to be sourced in the US
in order to be eligible for the incentives provided by the IRA, will necessitate the development of a manufacturing facility in North
America. Given the scope of the addressable market in North America, particularly in light of the anticipated 2024 introduction of the
HEVO-Chain, this would lead to a step change in our production capacity over the back half of the decade. We are in the early stages of
that process and will continue to update the market as we refine our production strategy.
In the second quarter of 2022,
we were also accepted into California Fuel Cell Partnership.
Europe
In Europe we continue to see
a severe and prolonged energy crisis. This situation has been triggered by
several factors including the conflict in Ukraine and the broader geopolitical tension that it has created, as well as extreme drought
conditions in several countries which has dramatically reduced the energy output from hydroelectric power generation. All of this has
only increased the importance of an energy source and industrial feedstock that is not only clean and can help reach the carbon reduction
targets, but that can also be produced within the European Union. In the recent months we have seen increased public discussions, including
from the German Chancellor and the Portuguese and Spanish Prime Ministers, on intra-European pipelines that could also carry clean hydrogen.
This year has also seen the most extensive opening of grants and government funding for green hydrogen infrastructure and projects ever
in Europe. This is a trend which we believe will persist well into the middle of the decade given the strategic importance of green hydrogen
for Europe to help realize its decarbonization and energy security ambitions. We have been fully engaged with the existing programs in
Southern Europe and have been incredibly successful in securing support for several industry-leading projects.
We believe the Italian market
is a natural extension of our core European business owing to its excellent solar irradiance, existing natural gas infrastructure, proximity
to our Benavente production facility, and stated ambition to integrate green hydrogen within its energy portfolio over the coming years.
In that vein, in the
third quarter of 2022 we announced a joint agreement with Duferco Energia SpA to extend our reach into Italy. The agreement
establishes the framework for developing a commercial pipeline in Italy and select countries in the MENA region for technology sales
and project development. Fusion Fuel will utilize Duferco’s local sales network, knowledge of local markets, and deep
expertise in shipping and logistics while serving as our “boots on the ground” for the development of that market. The
first project under the agreement will be a 1.25 MW pilot project at Duferco’s industrial facility in Giammoro, Sicily, which
would produce an estimated 46 tonnes of green hydrogen per annum and will be developed in 2024. Our strategy is to build on
the commercial blueprint we have employed successfully in Portugal and Spain focusing on the mobility and industrial segments. We
will look to develop a mobility backbone in Southern Italy, beginning with four integrated solar-to-hydrogen refueling stations by
the end of 2024. In parallel, we will pursue opportunities to develop hydrogen hubs around industrial centers in Northern Italy,
akin to how we have approached the Sines region in Portugal. One of our initial targets will be to work with Duferco to deploy our
HEVO-Chain technology at their steel mill in Brescia, Italy. We are confident this multifaceted strategy, enabled by our
best-in-class electrolyzer technology, will facilitate the establishment of Fusion Fuel as an early leader in the Italian green
hydrogen market.
Commercialization
In the first quarter of 2022,
we formally signed a technology sale agreement with KEME Energy for a 1.2MW green hydrogen facility, which had earlier received approval
for €1.4 million in funding from Portugal’s POSEUR programme. We also signed a significant framework agreement with Hive Energy,
a prominent UK-based developer of renewable energy assets to develop large-scale green hydrogen projects in Spain. These are highly credible
and established players in the clean energy space, and we view them – along with Exolum – as strategic partners for Fusion
Fuel in the Iberian market. We recognize the importance of aligning Fusion Fuel with strategic partners across the value chain, we expect
that to be a key element of our strategy going forward.
We continue to make substantive
progress in building strategic relationships which bring additional technical resources and broaden our commercial footprint, including
but not limited to the agreements we have entered into with Toshiba (focused on MEA development), Duferco Energia SpA (opening up the
Italian market) and Electus Energy (our partner in our recently announced project in Bakersfield, California).
We view partnerships as a
powerful tool to create meaningful value for our shareholders, whether through raising our corporate profile, extending our commercial
footprint, strengthening our supply chain, or deepening our technology advantage. One example of strategy in action is a memorandum of
understanding we recently signed with Toshiba Energy Systems and Solutions Corporation (“Toshiba ESS”). The agreement
envisions Fusion Fuel helping Toshiba ESS expand its commercial footprint into the European electrolyzer and green hydrogen markets, and
Toshiba ESS supplying Fusion Fuel with its advanced membrane electrode assemblies for evaluation for use in our proprietary HEVO micro-electrolyzer.
The most effective alliances are those based on complementary assets and shared advantages, and we certainly believe that that is the
case for Toshiba ESS and Fusion Fuel. We look forward to further advancing our relationship with Toshiba ESS over the coming months and,
ultimately, helping to create a unique value proposition and durable competitive advantage.
Corporate Information
Parent serves as a holding
company for Fusion Fuel Portugal and its subsidiaries. Parent’s principal executive office is located at The Victorians, 15-18 Earlsfort
Terrace, Saint Kevin’s, Dublin 2, D02 YX28, Ireland. Parent’s telephone number is +353 1 920 1000.
The SEC maintains an internet
site (http://www.sec.gov) that contains report, proxy, and information statements and other information regarding issuers that file electronically
with the SEC. Such information can also be found on Parent’s website (https://www.fusion-fuel.eu/). The information on or accessible
through our website is not part of this Annual Report.
B. Business Overview
About Fusion Fuel
Fusion Fuel is committed to
accelerating the energy transition and decarbonizing the global energy system by making zero-emissions green hydrogen commercially viable
and accessible. Fusion Fuel has developed a revolutionary new electrolyzer design – the HEVO – that will allow it to produce
grid-independent green hydrogen more efficiently and cost-effectively than conventional PEM systems, without any associated carbon emissions.
The company’s unique competitive advantage
is based on the following core attributes, which collectively underpin Fusion Fuel’s differentiated positioning in the marketplace:
![](https://content.edgar-online.com/edgar_conv_img/2023/05/16/0001171843-23-003359_market.jpg)
Fusion Fuel's mission is to provide the world with
innovative green hydrogen solutions that accelerate the transformation of the global energy sector and enable the sustainable reduction
of carbon emissions. Hydrogen is an important commodity for the global economy – it is a critical input in the refining and ammonia
production sectors, However, conventional production of hydrogen is highly carbon-intensive, accounting for roughly 2.2% of global total
carbon emissions globally. Fusion Fuel’s novel green hydrogen production solutions will enable the production of cost competitive
green hydrogen and help decarbonize the hard-to-abate sectors like refining and ammonia production.
Examples of Internally Generated
Projects
PORTUGAL-H2 EVORA
Fusion Fuel’s first
solar-to-green hydrogen plant, H2Evora, consists of 15 HEVO-Solar generators with the latest generation of Fusion Fuel’s HEVO micro-electrolyzer.
H2Evora also includes state-of-the-art hydrogen purification, compression, and storage systems, as well as a Ballard Power Systems fuel
cell to convert the green hydrogen into electricity to be fed into the national grid.
Installation at H2Evora is
complete and our HEVO-Solar generators have been operating continuously since the fourth quarter of 2021. The facility is currently awaiting
formal commissioning. This was not only the first solar-to-hydrogen plant in Iberia, but also the first plant producing and using green
hydrogen as an energy storage medium all in one integrated facility.
![](https://content.edgar-online.com/edgar_conv_img/2023/05/16/0001171843-23-003359_h2evora.jpg)
PORTUGAL-GREENGAS
GreenGas project consists
of 40 HEVO-Solar generators which will produce approximately 45 tons of green hydrogen per year. The GreenGas plant will be connected
to the Autonomous Regasification Unit of the city of Evora.
The green hydrogen produced will demonstrate two
use-cases:
|
● |
Direct injection into the Evora natural gas network to pilot hydrogen blending
– all of the solar tracker structures are already in place, and we are waiting on deployment of the HEVO micro-electrolyzers as
well as some Balance of Plant equipment. |
|
● |
Compression and bottling in cylinders for sale to industrial and mobility users. |
This is Portugal’s
first utility-scale project to produce green hydrogen from solar energy and blend green hydrogen at scale into a local natural gas distribution
network. Installation of this facility is currently underway.
![](https://content.edgar-online.com/edgar_conv_img/2023/05/16/0001171843-23-003359_h2evorafac.jpg)
PORTUGAL-HEVO-SUL
The HEVO-Sul project is comprised of 4.3 MW of
electrolyzer capacity. The plant will have a maximum annual production capacity of approximately 418 tons of green hydrogen annually,
if using both solar and night-time functionality. The facility will be located in Sines, Portugal. The hydrogen is expected to be used
for several different applications, including injection into the natural gas distribution network, as an input in the production of green
ammonia, as well as bottling in pressurized cylinders for industrial uses.
Fusion Fuel has received approval
from Portugal’s Operational Program for Sustainability and Efficient Use of Resources (POSEUR) for its proposed HEVO-Sul project.
The Portuguese government has allocated €40m in direct grants for the POSEUR program, which aims to support the production of green
hydrogen and other renewable gases, and Fusion Fuel has been approved for €4.3m in grant for this project.
The HEVO-Sul project is expected
to be built in the second half of 2023.
![](https://content.edgar-online.com/edgar_conv_img/2023/05/16/0001171843-23-003359_phevo.jpg)
PORTUGAL-H2 HEVO-SINES
Fusion Fuel is leading the
‘Sines Green Hydrogen Valley Alliance’, a consortium which also includes KEME Energy, Transition2Green, and HyLAB Collaborative
Laboratory.
The centerpiece of the initiative
is Fusion Fuel’s €147m H2 HEVO-Sines project, a 91 MW solar-to-hydrogen plant with an annual production capacity of 9,163 tons
of green hydrogen, which would avoid the emission of 73,940 tons of CO2 annually.
H2 HEVO-Sines is part of a
portfolio of projects that comprise Fusion Fuel’s large-scale IPCEI project in Sines, which would produce an estimated 61,848 tons
of green hydrogen annually, equivalent to 606 MW of electrolysis capacity, once fully ramped up in 2026.
In the third quarter of 2022,
we announced that we were successful with our application under C-14 of the Portuguese Recovery and Resilience Plan for our HEVO-Industria
project in Sines, Portugal, for around 10 MW of the Sines project portfolio. The award of €10 million marked the largest single-project
grant award in the application. In addition, Fusion Fuel has secured over €20m of grants under the C-5 program of Portugal´s
Resilience and Recovery Plan for the remainder volume of the project.
![](https://content.edgar-online.com/edgar_conv_img/2023/05/16/0001171843-23-003359_phevoh2.jpg)
OTHER PROJECTS IN PORTUGAL – TECHNOLOGY SALES
SINES GH2 SOLAR
Fusion Fuel is supplying its
HEVO-Solar technology to KEME Energy, which is developing a 1.2 MW solar-to-green hydrogen farm in Sines and is expected to produce an
estimated 77 tons of green hydrogen per annum.
C-5 ELVAS
Fusion Fuel will be using
its HEVO based technology to install a green hydrogen production facility and a Hydrogen Refueling Station (HRS) solution in Elvas, Portugal.
The project counts with the partnership of GALP and is expected to be installed in 2024 and has secured a €3.6m grant.
KEY PROJECTS IN SPAIN- TECHNOLOGY
SALES
EXOLUM - MADRID
Fusion Fuel has developed
a turnkey solar-to-hydrogen plant located in Madrid, Spain for the Spanish fuel logistics and distribution company, Exolum. The project
includes 21 HEVO-Solar units along with a co-located refueling station, which will serve as proof of concept of hydrogen for mobility
applications. In the third quarter of 2022, we commenced construction on the Exolum project and the project is expected to be commissioned
in 2Q of 2023.
CSIC
Fusion Fuel has been selected
as the hydrogen production technology provider for a 0.5 MW tender launched by CSIC (Consejo Superior de Investigaciones Cientificas)
in Spain. The project includes 22 HEVO-Solar units along with a co-located refueling station (supplied through a separate tender and by
another party). The first deliverables for the project are due in 2Q 2023 and Fusion Fuel will supply all materials by the end of 3Q 2023.
OTHER PROJECTS
Fusion Fuel continues to develop
projects in Portugal, Spain, Morocco, Australia, and the United States. The development of projects is a key factor in developing
our sales pipeline. Projects are all started in a dedicated SPV which can then be transferred at a time that we decide to a financial
investor which either buys the ready built plant from Fusion Fuel or takes on the contractual obligation to provide the financing for
the technology deployment to the project. Across several markets, Fusion Fuel has around 1.5 GW of projects in pipeline.
Recent Developments
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· |
On May 19, 2022, the Company announced that it had signed a Memorandum of Understanding with Toshiba Energy
Systems and Solutions Corporation (“Toshiba ESS”), which provides a framework for the companies to pursue technical and commercial
collaboration in the green hydrogen sector. Pursuant to the Memorandum of Understanding, the Company would evaluate the use of Toshiba
ESS’ membrane electrode assemblies (“MEAs”) within its HEVO micro-electrolyzers, and Toshiba ESS would explore using
the local sales channels it has developed in areas such as the thermal power business to expand sales of the Company’s PEM electrolyzers
in Australia and other countries. The two companies also agreed to explore potential collaboration opportunities for future sales of Toshiba
ESS’ solid oxide electrolysis cells, which Toshiba ESS targets bringing to market in 2025. The two companies have been working together
on the testing and adaption of the Toshiba membrane to fit with the HEVO technology. Testing to determine whether this can be accomplished
for mass scale production is expected to be finished in the first quarter of 2023. If it can be accomplished, the parties will look to
move to mass scale production during the first half of 2023. |
|
· |
In June 2022, the Company completed installation of the HEVO production line at the Company’s Benavente
facility in Portugal. The Company expects to achieve up to 100 megawatts (“MW”) of installed electrolyzer production capacity
in 2023 (when operating with 3 shifts), which is expected to increase to approximately 500 MW in 2025. In November 2022, the
Company completed the installation of a 1 MW solar array on the roof of the Benavente factory at its facility. |
|
· |
In June 2022, the Company engaged TUV SUD, an association of experts that provides safety, security, and sustainability
solutions, to perform a twelve-month performance audit of the Company’s HEVO-Solar technology system. As of the most recent interim
report provided to the Company in November 2022, the overall system (Solar to Hydrogen) is performing in excess of 15% above the product
data sheet specifications. The Company also retained Black & Veatch Management Consulting, LLC to perform an independent assessment
of the HEVO-Solar Hydrogen Generator and the Company’s ability to consistently deliver the HEVO-Solar technology with the quality
required to meet its technical specifications. That project was successfully completed in August 2022. |
|
· |
On June 6, 2022, the Company entered into an At the Market Issuance Sales Agreement (the “ATM”)
with B. Riley Securities, Inc., Fearnley Securities Inc. and H.C. Wainwright & Co., LLC, for the potential issuance of up to $30 million
of the Company’s class A ordinary shares. Between July 11, 2022, and November 14, 2022, the Company sold an aggregate of 681,926
class A ordinary shares pursuant to the ATM for aggregate net proceeds to the Company of $3,685,792. |
|
· |
On June 23, 2022, the Company announced that its “Sines Green Hydrogen Valley Alliance” had been
selected by the Agenda Coordination Commission to advance to final negotiations for grant funding through Component 5 of the Portuguese
Recovery and Resilience Plan. The centerpiece of the Sines Green Hydrogen Valley Alliance is the Company’s H2 HEVO-SINES project,
a 3,000 HEVO-Solar unit facility – equivalent to 75 MW of electrolysis capacity – that is expected to reach final investment
decision in 2024. On December 7, 2022, the Company announced that it had completed the financing discussions and submitted the terms of
acceptance for €36 million in grant funding secured by the Sines Green Hydrogen Valley Alliance. Of the €36 million awarded
to the consortium, €22.5 million is to be allocated to the Company’s H2 HEVO-SINES project, and €3.5 million is to be
allocated to the Company to fund research and development of its proprietary electrolysis technology. The balance of the funding will
be allocated to other projects within the Company’s consortium for which the Company is a technology partner, including those sponsored
by KEME Energy, Transition2Green, and HyLAB Collaborative Laboratory. |
|
· |
On August 18, 2022, the Company announced that it had been approved for an estimated €10 million in grant
funding through Component 14 of the Portuguese Recovery and Resilience Plan to develop its 6.6MW HEVO-Industria green hydrogen project
in Sines, Portugal. The €25 million, 300 HEVO-Solar unit project is expected to reach final investment decision in the first half
of 2023. |
|
· |
On September 29, 2022, the Company announced that it had entered into a €5 million contract with Gedisol
Energiá, Sociedad Limitada, a Spanish developer, to supply technology for a 144 HEVO-Solar unit, 3.2 MW green hydrogen project
to be developed in Andalucía, Spain, which would produce an estimated 200 tonnes of green hydrogen per year. |
|
· |
On October 6, 2022, the Company announced that it had entered into a €2 million contract with KEME Energy
to supply technology for a 62 HEVO-Solar unit, 1.2 MW green hydrogen project in Sines, Portugal. The Company and KEME had previously announced
the execution of a collaboration agreement in February 2022. |
|
· |
On November 10, 2022, the Company and Ballard Power Systems (“Ballard”) announced the successful
commissioning of the Company’s H2Évora plant. H2Évora is Portugal’s first solar-to-green hydrogen facility and
first fully integrated hydrogen-to-power demonstration project. The 15 HEVO-Solar unit facility includes a 200-kilowatt FCwaveTM fuel
cell module supplied by Ballard, which is used to convert green hydrogen into electricity, enabling the Company to sell power into the
electric grid during periods of peak demand. |
|
· |
On November 18, 2022, the Company announced that it had entered into a commercial agreement with Duferco Energia
SpA (“Duferco”) to jointly develop the green hydrogen ecosystem in Italy. The inaugural project under the agreement is a 1.25
MW green hydrogen pilot project to be developed at Duferco’s industrial site in Giammoro, Sicily. The Company is expected to supply
50 of its HEVO-Solar trackers for the proposed project, which would be installed in the first half of 2024. The broader objective of the
commercial agreement is to build a pipeline of project development opportunities and turnkey technology-sale projects, leveraging Duferco’s
local sales network, knowledge of local markets, and extensive shipping and logistics’ expertise. |
|
· |
On November 23, 2022, the Company introduced its HEVO-Chain system, marking its entry into the centralized
electrolyzer market. The HEVO-Chain hydrogen unit consists of 16 HEVO micro-electrolyzers interconnected along a string, representing
11.2 kW of electrolysis capacity and outputting 5.6 kg of hydrogen per day at a pressure of 4 bar. The HEVO-Chain system is designed for
a standard 19” rack cabinet, allowing for up to eight units to be integrated seamlessly alongside the power electronics and water
purification system. The HEVO-Chain is currently undergoing comprehensive performance and reliability testing and the first units are
expected to enter commercial use in the second half of 2024. The Company also submitted a patent application associated with the HEVO-Chain
technology. |
|
· |
On November 28, 2022, the Company announced that it had entered into an exclusive joint venture agreement
with Electus Energy to develop a 75 MW, $180 million green hydrogen project in Bakersfield, California. The project would be capable of
producing up to 9,300 tons of green hydrogen per year including nighttime operation, and the Company expects to reach final investment
decision in early 2024 and commission the project in the first half of 2025. The Bakersfield project is the cornerstone of the Company’s
US commercial strategy, which is focused on opportunities in hydrogen mobility and logistics. |
|
· |
On December 7, 2022, Parent announced that it had been approved for a total of €36 million in grant funding
for its “Sines Green Hydrogen Valley Alliance” through Component 5 (“C-05”) of Portugal´s Recovery and Resilience
Plan. The component – Mobilizing Agendas for Business Innovation – is intended to align stakeholders from across the entire
value chain to develop the domestic green hydrogen ecosystem. The Company had previously disclosed that it had been selected for financing
awards, subject to further negotiations with the Agenda Coordination Commission. These discussions have now been concluded and Fusion
Fuel has submitted the respective award contract duly signed and expects to receive the award by mid-January 2023. |
Of the €36 million awarded to the consortium, €22.5
million will be allocated to Fusion Fuel’s H2 HEVO-SINES project, a 3,000 HEVO-Solar facility – equivalent to 75 MW of electrolysis
capacity – that will be developed, owned, and operated by the company. Fusion Fuel has already secured 121 hectares of land within
the Sines area for the development of the project, which is expected to reach final investment decision and commence construction in 2024.
The green hydrogen to be produced is expected to be used in decarbonizing local industry, mobility applications, and for blending into
the natural gas grid. Another €3.5 million will be allocated to Fusion Fuel to fund research and development of its proprietary electrolysis
technology. The balance of the funding will be allocated to other projects within Fusion Fuel’s consortium for which the Company
is a technology partner, including those sponsored by KEME Energy, Transition2Green, and HyLAB Collaborative Laboratory.
|
· |
On December 23, 2022, the Company announced that it had completed a sale and leaseback of its electrolyzer
manufacturing factory in Benavente, Portugal to CORUM Eurion, an ESG certified real estate investment fund managed by CORUM Asset Management.
The €9.3 million transaction generated net proceeds of nearly €7.5 million after certain holdbacks and deposits for the lease-back
contract. The proceeds are expected to be used by the Company to continue the buildout of the Benavente factory, fund the development
of Fusion Fuel owned projects and HEVO-Chain technology, as well as for general corporate purposes. Savills Portugal advised the Company
on the transaction. The 14,333 sqm factory, which is located in the Vale Tripeiro Industrial Park in Benavente, was originally built in
2004. The site was acquired by Fusion Fuel in 2021 and was fully refurbished by Fusion Fuel as part of its transformation into a world-class
PEM electrolyzer manufacturing facility, and now features a 1 MW rooftop solar PV array along with electric vehicle chargers. |
|
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On January 30, 2023, the Company announced that it had signed an offtake agreement with Portuguese natural
gas utility provider Dourogás for green hydrogen produced from Fusion Fuel’s projects in Portugal. This represents Fusion
Fuel’s first offtake contract aimed at blending green hydrogen within the Portuguese natural gas grid, and a first-of-its-kind agreement
to support the Portuguese government in meeting its decarbonization objectives. Portugal’s national hydrogen strategy, adopted in
2020, laid out high-impact targets including a 15% blend of hydrogen in its natural gas distribution network and 2 GW of electrolyzer
capacity by 2030. The first hydrogen to be blended will be produced at Fusion Fuel’s GreenGas project in Evora. The facility is
expected to be commissioned in 2023 and would produce roughly 40 tonnes of green hydrogen per annum. Dourogás will be able to use
this hydrogen in its domestic, industrial and mobility NGV segments, sectors where the Dourogás Group is the market leader. Portugal's
largest gas distribution network, Galp Gás Natural Distribuição – recently renamed Floene – is expected
to build the infrastructure to enable blending in the grid as part of its broader commitment to the energy transition. |
|
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On February 28, 2023, the Company announced that Fusion Fuel Spain had been awarded a grant of €3.3 million
towards capital investment in a 2.4 MW green hydrogen project aimed at industrial decarbonization in Spain. The grant has been awarded
through the H2 Pioneros Program, to which €150 million had been earmarked to support commercial projects across the renewable hydrogen
value chain. H2 Pioneros is one of the first funding calls under the Strategic Projects for Economic Recovery and Transformation (‘PERTE’)
program, a €6.9 billion financing tool created under Spain’s recovery and resilience facility to support initiatives in renewable
energy, green hydrogen, and energy storage. Fusion Fuel’s project is one of only 19 across Spain that were awarded grant financing
through H2 Pioneros. The 2.4 MW project is planned to be developed in Toledo and is intended to supply green hydrogen to local industrial
customers to replace the carbon-intensive natural gas currently used in industrial processes. The green hydrogen facility will feature
the latest generation of Fusion Fuel’s HEVO solution and is expected to produce roughly 110 metric tonnes of green hydrogen per
annum. The €3.3 million subsidy represents approximately 57% of the total estimated capital cost of the project, which the Company
expects to build and commission during 2024. |
|
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On March 7, 2023, the Company and Toyota Material Handling España, S.A. (‘TMHES') announced that
they have signed a collaboration agreement to promote the development of the green hydrogen fuel cell forklift market in Spain. The collaboration
seeks to further strengthen TMHES’s leadership position in the domestic zero emissions forklift truck segment by offering end-to-end
solutions of fuel cell forklifts combined with green hydrogen production and hydrogen refuelling infrastructure provided by Fusion Fuel
Spain and its industrial partners. Fusion Fuel and TMHES will offer a fully financed solution that combines Hydrogen-as-a-Service –
guaranteeing security of supply at competitive prices – with TMHES’s market-leading operational rental and leasing solutions
for their range of forklift products. Both Fusion Fuel and TMHES view the logistics and material handling sector as uniquely well suited
to benefit from the advantages of hydrogen energy and consider fuel cell forklift solutions as a critical decarbonization vector, particularly
in logistics operations requiring heavy loads and high operating hours. Fusion Fuel and TMHES aim to deploy their green hydrogen solutions
to legacy forklift truck fleets, as well as to integrated hydrogen logistics projects that combine the full spectrum of fuel cell vehicles
for supply chain, distribution and materials handing operations. |
|
· |
On March 20, 2023, the Company announced that it had been awarded €3.6 million in grant funding through
Component 5 (“C-5”) of Portugal’s Recovery and Resilience Plan to develop a 1 MW decentralized green hydrogen production
facility co-located with a hydrogen refueling station in Elvas, Portugal. Fusion Fuel had previously been awarded €36 million in
C-5 funding for its “Sines Green Hydrogen Valley Alliance” consortium.The grant is part of a broader funding award allocated
to the Moving2Neutrality Alliance, a consortium of 13 partners spearheaded by Petrogal, a subsidiary of Galp Group, that is focused on
solving the challenge of decarbonizing commercial and industrial mobility by developing sustainable fuels production hubs in Sines and
other strategic locations in Portugal. Fusion Fuel’s project, which will be co-developed with Galp, will serve as the benchmark
for exploring the concept of decentralized production of green hydrogen for mobility applications in Portugal and abroad. The facility
will be developed in Elvas, on the Portugal-Spain border, strategically located on one of the main freight corridors between the two countries.
The project envisions 1 MW of electrolysis capacity, producing up to 400kg of green hydrogen per day, along with the associated balance
of plant to achieve the purity and compression required for mobility applications. The facility will also include an integrated hydrogen
refueling station intended to serve light and heavy-duty commercial vehicles. Fusion Fuel’s scope for the project – green
hydrogen production and compression to 40 bar – is expected to require approximately €7.2 million of capital investment. |
|
· |
On March 28, 2023, the Company announced that it had signed a ten year offtake contract with European developer Hydrogen
Ventures Ltd for thirty tonnes of green hydrogen per annum. First orders are expected to be delivered in the fourth quarter of 2023.
The hydrogen will be produced at the company’s projects in Evora, Portugal, where Fusion Fuel is expanding its production capacity
to roughly 50 tonnes per annum by year end. Hydrogen Ventures, which is developing a pipeline of green hydrogen projects and entering
into supply contracts with local industrial and municipal customers, expects to use the hydrogen for mobility applications in Portugal.
This contract represents Fusion Fuel’s second hydrogen purchase agreement in Portugal to date, providing long-term stability and
price security to the nascent hydrogen ecosystem: a critical step forward in the creation of a more robust and competitive market for
green hydrogen. |
Except
for the project with Exolum Corporation, S.A. (“Exolum”) and the CSIC project previously
announced and further discussed herein, the Company is currently under no obligation to proceed with, and therefore no penalties or liabilities
would be imposed on the Company with respect to, any of the projects set forth above if the Company determines, for any reason, not to
proceed with such project. With respect to projects where the Company or its partners have been awarded grants, they are only required
to either proceed or reimburse any funds received if grant funds have actually been transferred to the Company. The Company only commits
to a project when definitive contracts with the hydrogen off-taker or the technology buyer are signed. In determining whether to proceed
with a project, the Company considers several factors including, but not limited to, timing to completion, project financials and target
return, relationship with the partner or client and the production capacity available. Accordingly, other than the Exolum and CSIC projects,
there can be no assurance that the Company will actually proceed with any of the projects set forth above.
In
addition, as previously announced, we are in continual negotiations with third parties to fund our operations. Although discussions and
negotiations continue to progress with such third parties, including in some cases the execution of non-binding letters of intent or term
sheets, none have reached the stage of executed definitive agreements at this time. As negotiations are fluid, it is possible that any
particular negotiation could accelerate or be abandoned at any time. An announcement of any material agreement with a third party would
be made when and if a material definitive agreement is reached with such third party.
Business Strategy & Vision
Fusion Fuel aims to enable
meaningful emissions reductions through viable economic means using green hydrogen. In doing so, Fusion Fuel believes it can become a
major player in the global hydrogen economy over the next 10 years.
Fusion Fuel aims to develop
a technology and project pipeline in Southern Europe and the MENA region as a first phase in its strategy execution, and continue to expand
into other strategic markets globally, including Australia and the United States.
Fusion Fuel Business Lines
Fusion Fuel’s HEVO based
technology is expected to be a leading product in the industry for generating cost-effective green hydrogen in the markets in which
it seeks to operate. In addition, the Fusion Fuel team collectively has extensive experience in establishing and operating sustainable
energy plants, as well as relationships with many sustainable energy stakeholders and hydrogen users (ranging from natural gas networks
and grids, oil refineries, ammonia producers, regulators and related government departments). Fusion Fuel is focused on two core business
lines that build on its hydrogen generator.
|
1. |
The first business line, “Technology”, is focused on creating and selling HEVO based solutions that produce cost-competitive green
hydrogen for client use and operation. There are a number of industrial processes that require hydrogen and providers that currently produce
their own hydrogen supply through highly carbon-intensive methods. Fusion Fuel intends to equip them with hydrogen generators to produce
hydrogen without carbon emissions and with no cost disadvantage. For the years ended December 31, 2022 and 2021, no revenue was generated
from this business line. First inflows from this business line have been received in the second quarter of 2023. |
|
2. |
The second business line, “Project Development”, is focused on entering
into green hydrogen purchase agreements for the output of hydrogen at competitive prices. The current prices for green hydrogen as well
as the prices predicted in the coming years suggest that Fusion Fuel will be able to establish and operate production plants with internal
rates of return above 10% and likely in the 15-20% range. The business line creates revenues through two ways, one the sale of green hydrogen
which will start in the 2H 2023 (see Hydrogen Purchase Agreements in previous section), the second is through the sale of projects in
development which can either generate development fees and/or technology sale pipelines through the supply of units to projects we develop
and sell on. |
Fusion Fuel’s industry
and business require continuous innovation and improvement. To this end, the R&D team has already designed the next generations of
the hydrogen generator to be developed. This innovation aims at not only improving the efficiency of the product, but also reducing the
costs of production. Continuous R&D is a core part of the ongoing strategy for the firm.
The Technology
The HEVO is Fusion Fuel’s
proprietary miniaturized PEM electrolyzer. It has been designed to be small, lightweight and, critically, able to be mass produced. In
order to miniaturize the PEM electrolyzer, a radically different approach was taken to the MEA design, titanium plate designs and overall
flow fields in the system – these form the basis of Fusion Fuel´s core intellectual property.
Fusion Fuel uses the HEVO
as the basis for its two core products, the HEVO-Solar and the HEVO-Chain.
![](https://content.edgar-online.com/edgar_conv_img/2023/05/16/0001171843-23-003359_core2.jpg)
In the HEVO-Solar solution
the process is coupled with CPV technology such that system is a grid-independent hydrogen generator. This coupled approach for generating
hydrogen significantly increases the total system efficiency, results in a low cost per kilogram of hydrogen produced, and benefits from
the high automation level of mass producing the HEVO. Fusion Fuel uses this process to extract hydrogen from water molecules without the
creation of any carbon emissions and with oxygen as the only biproduct. Therefore, the output is designated green hydrogen, which is hydrogen
created in a fully carbon-free process, as opposed to the traditional methods of creating hydrogen which produce upwards of 9 tons
of carbon emissions for every ton of hydrogen produced (designated as “grey hydrogen”).
The HEVO-Solar uses both the
electricity produced by the photovoltaic cells and the heat captured from the CPV 2-axis panels, thereby reducing the total amount of
electrical energy required for the electrolysis process. This increases the efficiency of the Fusion Fuel solution compared to other current
market products. Because the process requires solar irradiation, locations with higher levels of solar irradiation would produce higher
amounts of hydrogen on an annual basis at a lower cost per kilogram (as capital expenditure related to the equipment is spread across
a larger production output).
The HEVO-Chain uses our HEVO
electrolyzers in a chain to create a centralized electrolyzer solution that is modular and can be scaled as needed. We can supply three
versions of the HEVO-Chain, 1) a 20-foot containerized solution that can house up to 1 MW of electrolyzer capacity, 2) a 40-foot containerized
solution that can house up to 2.5 MW of electrolyzer capacity, and 3) a non-containerized solution that is more cost efficient for larger
projects but which requires tailoring according to the project size.
The HEVO-Chain is a revolutionary innovation in the
design of centralized PEM electrolyzers. Rather than relying on a traditional cell-stack, the HEVO-Chain builds off Fusion Fuel’s
proprietary HEVO architecture, enabling the system to operate at higher efficiency – roughly 49 kWh / kg of hydrogen – and
avoid the losses that stem from more conventional electrolyzer stack designs. Each HEVO-Chain hydrogen unit consists of 16 HEVO micro-electrolyzers
interconnected along a string, representing 11.2 kW of electrolysis capacity and outputting 5.6 kg of hydrogen per day at a pressure of
4 bar. A planned second-generation unit is expected to increase the pressure at the outlet to 20-30 bar, among additional improvements.
As with the HEVO-Solar, the HEVO-Chain was built with modularity and scalability in mind – it is designed for a standard 19”
rack cabinet, allowing for up to eight units to be integrated seamlessly alongside the power electronics and water purification system.
The HEVO-Chain is currently undergoing comprehensive performance and reliability testing. The company expects the first HEVO-Chain units
to enter commercial use in 2024.
Working Capital Items
Currently, Fusion Fuel’s
inventory consists of raw materials purchased for the production of its HEVO-Solar and HEVO-Chain solutions. Fusion Fuel has entered into
multiple agreements with MagP, for the assembly and installation of Trackers. Please refer to the Related Party Transactions section of Item
7 – Major Shareholders and Related Party Transactions for further information on these agreements.
Distribution, Marketing and Strategic Relationships
Fusion Fuel has established
strategic relationships with various stakeholders in the Green Hydrogen market, including partner companies, suppliers, potential clients
and government agencies, many (if not all) of which are proprietary in nature and give us our competitive advantage.
Fusion Fuel Portugal has been
included in the Portuguese Government’s Strategic Roadmap for Hydrogen and has applied for a grant for a Green Hydrogen project
in Evora. Discussions with stakeholders are ongoing in Europe, the MENA region, and North America.
Environmental Issues
There are no significant pollutants
or other hazardous emissions from Fusion Fuel’s operations, the CPV technology, the HEVO or any other functions used by Fusion
Fuel in extracting Green Hydrogen, nor are any anticipated. In addition, the are no carbon or hazardous emissions that result from Fusion
Fuel’s extraction of hydrogen, and the only biproduct of the process is oxygen. As such, we do not expect the Company would be materially
impacted by the passage of any climate change legislation, regulation or accords that seek to impose a carbon tax or curtail carbon-intensive
business activities. Furthermore, none of the Company’s manufacturing or corporate facilities are located in geographies particularly
susceptible to geological or climate risks. We expect that the continued heightened attention and importance given to environmental issues
are likely to benefit Fusion Fuel as the interest and value of its zero-carbon solution increases. It is possible that climate change
legislation, regulation or accords could increase demand in this market and thereby increase competition, but such activity may also normalize
hydrogen as a broadly used and accepted energy source.
Competition
To our knowledge there are
no similar technologies or systems to Fusion Fuel’s HEVO based technologies. We believe this technology is innovative,
disruptive, and original. The centralized electrolyzer technology, which is used by Hydrogenics, ITM Power, Plug Power, NEL Hydrogen,
Giner and McPhy, among others, represents the main competition to Fusion Fuel’s technology. Even though Fusion Fuel’s technology
currently has a significantly higher efficiency rate than the centralized electrolyzer, it is expected that there will be further evolution
in the efficiency of the centralized electrolyzers, and so we expect the market to remain competitive.
Fusion Fuel is faced with
competition from several aspects of the industry, namely:
|
(a) |
Traditional hydrogen production methods — which can continue to improve
their efficiency and lower costs, making the change to Green Hydrogen more costly to consumers. Companies in this space include Linde,
Air Liquide, Air Products, and Praxair, among others. |
|
(b) |
Green Hydrogen technology providers — these are typically centralized
electrolyzer solutions used in combination with electrical energy from renewable sources or even blue hydrogen providers (hydrogen produced
through traditional means with carbon sequestering techniques). There is significant investment in this space and improvements in this
technology could lead to more intense competition in the hydrogen production market. Companies in this space include Hydrogenics, ITM
Power, NEL Hydrogen, Plug Power McPhy, and Giner, among others. |
|
(c) |
Green Hydrogen providers — companies that sell Green Hydrogen as an end
product. This is still an emerging market and will include large energy companies as well as investors who buy and operate established
hydrogen plants. Companies in this space include Engie Hydrogen, Air Liquide, Air Products, Linde, and Shell, among others. |
Fusion Fuel believes competition
in this industry will be driven by the final price of Green Hydrogen per kilogram as an output. Efficiency of energy conversion will be
a secondary competitive factor. Because Fusion Fuel’s solution produces Green Hydrogen at cost levels that are highly competitive
to Brown Hydrogen and significantly less expensive than other producers of Green Hydrogen, we do not believe we will lose cost competitiveness
in the market. However, there is significant and continuous R&D in the industry which will drive competition. For this reason, Fusion
Fuel maintains a strong investment in R&D activities, capitalizing on the accumulated know-how from its team and prospective
partners. Fusion believes this is a key factor to achieve sustainable growth and market differentiation, and maintaining the technological
lead over other market solutions. We believe that Fusion Fuel has achieved a major breakthrough for the energy sector as a whole, and
Fusion Fuel aims to position itself as the leading expert on Green Hydrogen, leveraging all the positive outcomes that our solution can
achieve in multiple areas and businesses.
Fusion Fuel can benefit from
competition as the market grows as such competition may drive down costs and promote continued innovation for externally sourced components
and systems. For example, the hydrogen piping and storage systems at each of Fusion Fuel’s hydrogen plants are externally sourced
and a general increased interest in the hydrogen market may lead to further improved products or reduced prices from Fusion Fuel’s
suppliers.