Chairman's letter to sharehilders - A Must Read

Letter to shareholders from Chairman, Charles Whitfield.

I personally think this is a great, all issues covered, update on the current position of the company in the Green Hydrogen / Blue Ammonia space.

To me the company appears perfectly positioned. What do you think?

DYOR

Dear Shareholders, I have received so many emails on the topic of recent announcements in quarterly reports of energy majors about their terminations and write-offs surrounding green Hydrogen projects, that I thought it would be appropriate to put together a note for you in order to give you our view of what is playing out and what the ramifications of that will be. In the past week alone: Woodside announced the cancellation of its H2OK project in Oklahoma, USA. Fortescue suspended its Arizona and Gladstone PEM50 green hydrogen projects. BP ceased work on its AREH green hydrogen project in Port Hedland, WA. Collectively these decisions represent the write-off of approximately half a billion dollars of shareholders capital. This comes on the back of a litany of other green hydrogen projects that have previously been curtailed by major companies including Air Products who wrote down U$3.1bn of green hydrogen associated jobs that cost then CEO Seifi Ghasemi his job. So, what does this mean for NH3 Clean Energy? Well–dare I say it–I told you so. Back in January of this year I was quoted in The Australian and The Telegraph that the focus on green hydrogen was misdirected and that we had identified at the outset that it was not commercially viable but blue ammonia is. There are two main issues that the NH3 management team identified back in 2022 when we were devising our strategy and subsequently the plant. Hydrogen is very hard to store and very hard to transport For hydrogen to work, production really need to be close to your market / user to make it viable. Having a small plant next to a bus depot to refuel busses works – having an enormous plant to produce volumes that need to be transported miles or hundreds of miles to an end user does not. Green Hydrogen is power and water intensive Producing green hydrogen (even as a feed stock for ammonia) via electrolysis uses large amounts of electricity and water and is hard to scale, add to that using intermittent renewable electricity and the commerciality and economics become impossible with current technology and infrastructure. By contrast, ammonia—a compound of hydrogen and nitrogen—is much easier to store and transport, even more so than LNG. As if to underline the difference in fortunes of blue and green projects, in the statement where Woodside announced the shuttering of the green hydrogen project, they also noted that they remain committed to the Beaumont blue ammonia project in Texas which is similar to our own WAH2 project. Woodside bought into the Beaumont project in August last year for U$2.35bn in cash when it was under initial construction. As of June 30, Woodside said the project was about 95% completed. When we make the claim that we are “Australia’s leading clean ammonia project” it is on the basis of the opinion of industry insiders. The corporate sector has largely woken up to the realities. Government, particularly on the east coast, has been slower to shift—but Premier Cook and the WA Government are showing strong support behind a pragmatic path forward. We have had very positive interaction with both the Premier’s office and ministers of energy and ports. Given that there are almost no green hydrogen / ammonia horses left in the race to back, it is inevitable that, if there is to be a near term hydrogen / ammonia industry it will be blue and we are in the box seat in that case. That all said, unlike the green hydrogen projects, we have never proceeded on the reliance of government support. The project was always designed on the basis of pure commerciality – any support we get by way of common user infrastructure, grants to ourselves or our CCS, pipeline or water partners is upside. Ultimately we see the recent headlines not as a setback for hydrogen, but as a realignment toward what works. The focus is shifting away from speculative mega-projects requiring heavy subsidies, toward commercially sound ventures like WAH2. This leaves us in that most enviable of positions – being a monopolistic seller in a high growth market – exciting times ahead! That said we’re mindful that casual observers may now begin to paint the entire hydrogen sector with the same brush. To you NH3 shareholders who have dig deeper into the reality, I thank you and keep spreading the good word! With regards, Charles Whitfield Chairman NH3 Clean Energy