Announcement PDF ASX ANNOUNCEMENT | 29 August 2024 Appendix 4E This report details the consolidated results of Provaris Energy Ltd, ABN: 53 109 213 470 (“Provaris” or "the Company") and its controlled entities (“the Group”) for the year ended 30 June 2024. Comparatives are for the year ended 30 June 2023. RESULTS FOR ANNOUNCEMENT TO THE MARKET Revenue from ordinary activities — Profit/(Loss) from ordinary activities after tax attributable to members Net profit/(loss) for the year attributable to members Down Down 2024 2023 $’000 $’000 — — — 51% 51% (6,135) (6,135) (12,407) (12,407) Cents Cents 0.04 0.79 Net Tangible assets per security – at the end of the year DIVIDENDS No dividends have been paid or declared since the start of the financial year by the Company. The directors have recommended that no dividend be paid by the Company in respect of the year ended 30 June 2024. The Company does not have a dividend reinvestment plan. DETAILS OF ENTITIES OVER WHICH CONTROL HAS BEEN GAINED OR LOST DURING THE YEAR The Group incorporated a 100% owned Norwegian subsidiary Provaris Norway AS during the financial year. The Group did not gain or lose control over any other entities during the year. DETAILS OF ASSOCIATES AND JOINT VENTURE ENTITIES The Group did not have any associates or joint venture entities during the year. AUDIT This report is based on financial statements which have been audited. COMMENTARY ON THE RESULTS Commentary on the results for the period is contained within the Annual Report that accompanies this announcement. Norm Marshall Company Secretary +61 481 148629 nmarshall@provaris.energy ASX.PV1 Martin Carolan Managing Director & CEO +61 404 809019 mcarolan@provaris.energy @ProvarisEnergy Sydney: Level 14, 234 George St, Sydney NSW 2000, Australia Oslo: Level 17, KPMG bygget, Sørkedalsveien 6, 0369 Oslo, Norway Provaris Energy Ltd. info@provaris.energy First mover supply of hydrogen to Europe PROVARIS ENERGY LTD Annual Report 2024 CONTENTS Page Corporate Directory 1 Chairman and Managing Director’s Letter 2 Operations Report for 2024 4 Directors’ Report 14 Corporate Governance Statement 31 Consolidated Statement of Profit or Loss and Other Comprehensive Income 32 Consolidated Statement of Financial Position 33 Consolidated Statement of Cashflows 34 Consolidated Statement of Changes in Equity 35 Notes to the Financial Statements 36 Consolidated Entity Disclosure Statement 66 Directors’ Declaration 67 Auditor’s Independence Declaration 68 Auditor’s Report 69 Additional Information as at 23 August 2024 74 66 CORPORATE DIRECTORY DIRECTORS: Greg Martin (Independent, Non-Executive Chairman) Martin Carolan (Managing Director and Chief Executive Officer) Andrew Pickering (Independent, Non-Executive Director) David Palmer (Independent, Non-Executive Director) COMPANY SECRETARY: Norman Marshall ABN: 53 109 213 470 ASX CODE: PV1 WEBSITE: www.provaris.energy REGISTERED OFFICE: Level 14, 234 George St Sydney NSW 2000 Tel: +61 (2) 9127 8250 AUDITORS: Ernst & Young 11 Mounts Bay Road, Perth WA 6000 Tel: Fax: SHARE REGISTRY: +61 (8) 9429 2222 +61 (8) 9429 2436 Computershare Investor Services Pty Ltd Level 17 221 St Georges Terrace Perth, Western Australia 6000 Tel: Fax: +61 1300 787 272 +61 (8) 9323 2033 1 CHAIRMAN AND MANAGING DIRECTOR’S LETTER Dear Shareholders, Provaris Energy has experienced another year of significant progress, and as we reflect on the key milestones achieved in FY24, we are proud of our advancements in shipping technology, our collaborations on hydrogen supply projects, and the commercial progress with German utilities seeking hydrogen supply. This year we are particularly excited about the momentum we have gained in Europe, especially in Norway and Germany. These key industrial hubs are increasingly focused on securing an economical, safe and efficient supply of green hydrogen to meet their decarbonisation goals. European governments have made substantial strides in translating policy statements into legislation, alongside expanding funding schemes to foster the development of a robust hydrogen economy. Our strategic decision to geographically concentrate our resources on Europe is yielding positive results, with growing awareness leading to collaboration agreements for both upstream hydrogen supply and downstream ports and offtake. The advantages of our compression technology and the advanced development of our H2Neo carrier have been pivotal, culminating in the signing of three Memorandum of Understanding (MOU) with prominent German utilities, including Uniper who are in the top four for energy supply to industrial users. This reflects the growing recognition of Provaris as a trusted partner and positions compression as a viable alternative for hydrogen supply and import, helping Germany meet its requirement to import up to 70% of its hydrogen needs. Recognising the growing demand for alternative hydrogen supply and transport solutions across regional Europe, Provaris has been actively conducting the necessary technical and commercial due diligence activities for potential new collaboration partners. We remained focused on our goal to become an integrated hydrogen development company and our dedication to innovation and partnership has positioned us as a trusted leader and partner for hydrogen supply throughout Europe. As we expand our reach, we have deepened our collaboration with strategic partners, extending our agreement with Norwegian Hydrogen, to build on the feasibility work completed in early 2024. Additionally, we have also initiated pre-development activities with Global Energy Storage to establish and develop a compressed hydrogen import facility at their terminal in the Port of Rotterdam, Netherlands. Despite recent unforeseen delays in the fabrication of the prototype tank, Provaris has made significant progress in the design and engineering of the world’s largest pressurised hydrogen tank. We had successfully completed key design milestones and were on track with construction until June 2024, when the unexpected bankruptcy of the main sub-contractor caused a suspension of activities. Since then, we have been in active dialogue with the facility's secured lenders to explore viable options for resumption of the prototype tank production as soon as possible. We remain confident that the construction and testing of the prototype tank will secure Class Approval for our H2Neo carrier – a groundbreaking, world-first, achievement in bulk-scale hydrogen maritime transportation, which we are extremely excited about. Financially, we have successfully secured funds to support our collaboration agreements and advance the design and construction activities of our prototype tank. In November 2023, we completed an equity capital raise of $1.9 million. Additionally, in the last quarter of FY24, we secured a $3 million strategic convertible bond standby facility with Macquarie Bank, complemented by the completion of a $1 million Share Purchase Plan (SPP) after the reporting period. As we move into FY25, we are determined to build on the momentum of the past financial year. With global demand for hydrogen on the rise and our unique compressed hydrogen business model, Provaris is well positioned to progress towards binding agreements required for the developing a comprehensive of hydrogen supply chain using our proprietary H2 carriers and barge storage solutions. 2 CHAIRMAN AND MANAGING DIRECTOR’S LETTER We would like to extend our appreciation to our dedicated team, valued shareholders and strategic collaboration partners for their continued support, trust and confidence in Provaris. A detailed summary of the operations and outcomes for financial year 2024 is presented in the Operations Report that follows. We look forward to keeping you updated you on our progress in the coming year. Greg Martin Chairman Martin Carolan Managing Director 3 OPERATIONS REPORT Advancing Commercialisation and Technical Maturity through an Integrated Development Model During the period Provaris continued to develop its unique intellectual property (IP) and its pioneering approach to developing a regional marine compressed hydrogen supply chain. This model presents a viable alternative for the production, storage and transport of hydrogen. As communicated earlier this year, the Board’s strategic decision to concentrate the Company’s resources in Europe, supported by our Oslo office, has led to a substantial increase in Provaris’ visibility, credibility and commercial progress. Today, compressed hydrogen is increasingly recognised as a viable alternative for hydrogen supply, particularly for green hydrogen (from renewable generation sources that meets stringent European regulations. The key factors driving the relevance of our approach in the European hydrogen market include: • • • • Critical need for Bulk-Scale Storage and Transport Solutions: The demand for safe, efficient and cost-effective bulk-scale storage and transport solutions is essential to meet regional and global hydrogen supply goals. Scarcity of Gaseous Hydrogen Export Projects: There is a notable lack of supply projects producing gaseous hydrogen for export. Most current projects are targeting the production and export of hydrogen derivatives such as ammonia or methanol. Unique IP and Compression Efficiency: Our proprietary IP, combined with the simplicity and efficiency of compression technology, enables increased volumes of hydrogen to be shipped at a lower delivered cost. Alignment with German Utilities: German utilities are focussed on a portfolio of H2 supply alternatives, including regional projects that can supply gaseous hydrogen at a price and scale that align with their customer demands and regulations. Our confidence is supported by the European hydrogen market being focused on a diverse portfolio of hydrogen supply alternatives, including regional projects that can deliver gaseous hydrogen at a price and scale that meets industrial customer demands, adheres to European regulations and aligns with the timeline for scaling-up production. Our concentrated efforts in Europe underscore the advantages of the compressed hydrogen supply chain, with the Nordic region emerging as a key supplier to German offtake market. This focus is driven by the region’s proximity, the cost-effectiveness of renewable energy generation, and alignment with the European Commission’s target for import volumes, regulations and available funding schemes. Key highlights of the year have included: • Signing of Three Memorandum of Understanding (MOU)s with German Utility Companies: These Utilities are seeking alternatives for the supply (import and offtake) of hydrogen for their own demand and delivery to industrial users. Notably, one named partner is Uniper Global Commodities, announced in December 2023. We are now collaborating with them to identify suitable H2 supply project(s) to advance development of a complete supply chain. Collectively these three utilities have committed a combined budget of 60 billion Euros towards the Energy Transition by 2030. • Extension of Collaboration with Norwegian Hydrogen: In April 2024, we extended our partnership with Norwegian Hydrogen to accelerate the development of new hydrogen export sites across the whole Nordic region. Building on insights gained from the successful pre-development of the FjordH2 project, these new projects will be strategically located in areas with strong grid 4 OPERATIONS REPORT connections and power supplies. They will feature hydrogen production and compression facilities designed to provide cost-competitive hydrogen supply to Europe. • New collaboration with Global Energy Storage (GES): We initiated a collaboration with GES to develop a dedicated compressed hydrogen import facility at the Port of Rotterdam, providing access to the European market and connection to the European Hydrogen Backbone currently under construction in Rotterdam. Feasibility studies and co-marketing activities are underway, with future operations targeted for 2028. GES will finance and own the terminal. • Optimisation of H2Neo Carrier and Containment Tanks: We completed optimisation studies for the H2Neo carrier and its containment tanks, resulting in significant CAPEX and OPEX savings. By incorporating updated construction methods and material selection, including carbon steel and stainless-steel liner plates, we achieved a remarkable 30% weight reduction for the H2Neo. This reduction allows for further optimisation of speed, power, and fuel consumption, leading to material fuel savings and emission reductions. Additionally, the updated tank design offers an 8% increase in storage capacity to 450 tonnes, with potential further enhancements to be assessed in 2025. • Progress towards Class Approval for the H2Neo: We have entered the final stages of Class Approval for the H2 Neo: With the commencement of fabrication and testing for the prototype tank, marking a world first for this scale of pressurised hydrogen tank. Fabrication is taking place in Norway utilising advanced, automation and robotic laser-hybrid welding technology to construct our proprietary tank design, which features multiple layers of carbon steel plate and an inner stainless-steel liner. • Advancement of Feasibility Analysis for and concept design for Compression Facilities: We advanced feasibility and concept design for compression facilities, demonstrating that our regional compressed hydrogen supply chain can deliver 50% more gaseous hydrogen at a 20% lower cost. • Ongoing Engagements for New Collaborations: We continue to advance technical and economic due diligence processes with several new parties interested in collaborations and partnerships with Provaris. This reinforces our belief in the growing interest in our compressed hydrogen storage and marine transport solutions. Hydrogen Supply Chain Developments During the reporting period, Provaris advanced its collaboration agreements for the development of export hydrogen projects in Norway, leveraging its proprietary compressed hydrogen storage and transport solutions. Ongoing analysis continues to underscore the compelling economics of Compression vs Ammonia supply chains for grid connected sites in the Nordics, offering clear advantages for German Utilities seeking a regional supply of gaseous hydrogen. Provaris is continually optimising its analysis to highlight the economic and commercial benefits of a compressed hydrogen supply chain from Nordic grid-connected sites, delivering hydrogen as gas to Europe’s core hydrogen network. As a case study, key outcomes of using compression for a 300MW grid connected site in Norway, when compared to the ammonia-based supply chain include: • • • • 50% More Gaseous Hydrogen Delivered: Compression delivers 50% more gaseous hydrogen to the customer. 20% Lower Delivered Cost: The delivered cost is approximately 20% lower, providing a discount of around €1.80/kg. 20% Reduction in Capital Intensity: Capital intensity is decreased by 20% per kilogram of hydrogen delivered. Significant Increase in Value: The overall value and returns of grid-connected sites can increase substantially (5-10x). 5 OPERATIONS REPORT Nordic sites are well positioned to address the scarcity of gaseous hydrogen molecules needed to scale up supply for industrial sectors in Germany. The low volumetric density of hydrogen is effectively counterbalanced by a substantial increase in energy efficiency - 97% for compression compared to 65% for ammonia when delivered as gas. Three non-binding MOUs signed with International Energy Companies for Hydrogen Supply to Europe Building on an extensive and targeted marketing strategy, Provaris signed two non-binding Memorandum of Understanding (MoU) in the December 2023 quarter, including one with Uniper Global Commodities. This momentum continued in the March quarter culminating in a third non-binding MoU with a prominent international energy company. These agreements reflect the growing interest from major energy players in Provaris ’innovative hydrogen supply solutions for Europe. Each of the MOUs will evaluate Provaris' complete hydrogen delivery chain, which includes our proprietary H2Neo carriers and H2Leo barge solutions specifically designed for regional gaseous hydrogen transport. Joint investigations are ongoing during 2024, with any definitive project agreements to be considered upon completion. The increasing attention on Provaris' hydrogen delivery value chain is driven by the flexibility and simplicity of our proprietary technology for compressed hydrogen storage and marine transportation. Our unloading infrastructure, is adaptable to various locations and by utilising regional supply sources we can offer lower delivered costs compared to other long-range bulk carrier alternatives, enhancing the appeal of our solutions. Our continued focus on Europe continues to demonstrate the critical role compressed hydrogen can play in meeting large import needs of Northwest European ports. Our objective is to provide the most cost-effective compressed hydrogen supply for regional volumes, aligning with market demand and funding schemes to mitigate investment risks. Extension of Collaboration with Norwegian Hydrogen AS for New Hydrogen Export Sites in the Nordics In April 2024, Provaris signed a new Collaboration Agreement with Norwegian Hydrogen AS to jointly advance the identification and development of multiple sites in the Nordic region for the large-scale production and export to European markets. Building on the insights gained from the successful predevelopment of the FjordH2 project in 2023, these projects will leverage locally available renewable energy to produce hydrogen for shipment to European ports. The new sites will be strategically located in areas with strong grid connections and power supplies facilitating the construction of state-of-the-art electrolysers, and hydrogen compression facilities linked to export jetties. Provaris’ H2Neo carriers will be used to transport the hydrogen, while the H2Leo barge provide storage solutions, ensuring efficient and reliable delivery to the European market. The FjordH2 project, targeting hydrogen production capacity of 270MW at full development and an annual export capacity of ~42,000 tonnes of green hydrogen remain a mature project. A power reservation capacity of 20MW has already been secured and an additional application for a further 250MW reservation capacity is currently under review by the Norwegian grid authorities. 6 OPERATIONS REPORT Regional focus on hydrogen supply from the Nordics to North West Europe Collaboration with Global Energy Storage (GES) to Develop Import Facility at Port of Rotterdam for European Market Access. A significant collaboration announced this year with GES marks a key milestone in establishing a gaseous hydrogen import facility at the GES terminal in Rotterdam, facilitating the connection of hydrogen supply to the European, market using Provaris’ H2Neo carriers. GES is developing a multi-client, multi-product terminal in Rotterdam, designed to import both refrigerated ammonia and compressed hydrogen, with redelivery options via barges, rail, truck and the H2 grid (HyNetwork) operated by Gasunie. Under the collaboration, GES and Provaris will undertake a comprehensive prefeasibility study during 2024 to evaluate the technical and economic viability of berthing and unloading of Provaris’ H2Neo compressed hydrogen carriers. The collaboration will also include the joint marketing of the proposed facility, with Provaris responsible for the transporting hydrogen in the H2Neo carriers and GES handling the discharge and injection into the hydrogen grid. Importantly, GES will finance, own and operate the terminal. 7 OPERATIONS REPORT GES Terminal Site at the Port of Rotterdam Completion of Prefeasibility and Collaboration with Gen2 Energy AS During the reporting period a comprehensive Prefeasibility Study was completed for the proposed Afjord hydrogen project site in Norway. The study identified no significant technical or economic obstacles to transporting of green hydrogen from Afjord to a port in central Europe. The study analysed various production scenarios ranging from 22kpta to 66ktpa for export, resulting in delivered hydrogen prices between EUR 4.57 to 5.67 per kg. No material technical challenges were identified with the development of the site for compressed hydrogen production and loading. Despite the competitive economic outcomes, when compared with a containerised shipping solutions or alternative hydrogen carriers for the site, the collaboration between the parties was not extended. However, Afjord remains of strategic interest to Provaris given our advancement with German utilities seeking volumes of hydrogen, in gaseous form, from Norway. Hydrogen Ship Development and Class Approvals During the reporting period, significant progress was made in advancing Provaris’ proprietary IP for hydrogen storage, bringing the company closer to achieving final Class Approvals. In July 2023, Provaris awarded Norway-based Prodtex AS (Prodtex) a contract to design, construct and test a prototype scaled tank, alongside SINTEF, the country’s leading independent research organisation. American Bureau of Shipping (ABS) and Det Norske Veritas (DNV) are appointed to jointly certify the project and provide final Class Approvals. The testing phase will ensure that the full-scale tank design can safely store hydrogen, undergoing rigorous fatigue and over pressurisation tests that simulate 25 years of operational use. A major milestone was the finalisation of the production design and pre-construction activities for a groundbreaking multi-layered carbon steel prototype tank, the first of its scale. This included the development of a digital twin and the procurement of carbon-steel material for the outer layers and stainless-steel for the inner liner. Construction of the prototype tank began in March 2024, utilising advanced automation and robotic laser-welding techniques. This marks a significant leap forward in demonstrating the safety and performance benefits of Provaris' proprietary tank design, which incorporates multiple layers of carbon 8 OPERATIONS REPORT steel plate with an inner stainless-steel liner. The prototype, with dimensions of approximately 2.5m diameter and 9m length, it has a capacity for 650 kg of hydrogen at a design pressure of 250 barg. Using innovative construction methods and material selections, including carbon steel and stainlesssteel liner plates, the prototype tank has achieved a remarkable 30% weight reduction. The reduction not only enhances the tank’s structural efficiency but also allows for further optimization of speed, power, and fuel consumption, leading to significant fuel savings and emission reductions. Location of Prodtex’s fabrication facility, in Fiskå (Norway) In addition to the ongoing support from ship classification society ABS, Provaris engaged DNV to issue a Front-End Engineering Design (FEED) Statement for the optimised design of the full-scale H2Neo carrier and containment tanks, which is expected to deliver substantial CAPEX and OPEX savings. Illustration of Provaris’ H2Neo carrier and H2Leo storage providing simultaneous operations for loading and unloading of compressed hydrogen at 250 barg MOAP Throughout early 2024, Provaris maintained active dialogue with shipyards. The lighter cargo tanks resulting from the optimised design, offer flexibility during installation, increasing competition among shipbuilders and potentially reducing costs for buyers. Updated ship outline specifications are currently under review with a select group of yards, supported by Clarksons, who are appointed as our advisor. 9 OPERATIONS REPORT During April, May, and early June 2024, the prototype tank construction made good progress, providing confidence in the translation of the 3D models and detailed design into automated robotic handling and laser welding of the first half of Provaris’ innovative and proprietary hydrogen prototype tank. From Digital Twin to Precision Material Handling Robot and Mounting of Plate Robotic Laser Welding & End-cap Jig illustrating layering of carbon steel plate All drawings and illustrations include a copyright © 2023Provaris Energy Ltd Group High Quality of Prototype Tank Construction The construction of the Prototype Tank has instilled strong confidence in Provaris that high-quality tanks can be produced efficiently through automation. The successful transition from the 'digital twin' (design) to robotic handling and welding has validated our ability to fabricate complex steel structures in a highly cost-effective manner. This advanced approach significantly reduces the labour-intensive component of capital expenditure typically associated with complex steel construction projects. Robotic-laser welding plays a pivotal role in lowering the capital cost for the tanks by removing a significant amount of labour cost. This innovation allows up to 80% to 85% of costs to be attributed to materials, providing greater predictability and stability in future profit margins. Provaris has focused on shifting the cost ratio from the typical 50/50 split between material and labour to a target of 80/20, favouring material costs. Our experience thus far indicates that we are on track to achieve this goal, highlighting the efficiency and quality of our automated production process. 10 OPERATIONS REPORT Delays in Prototype Tank Construction In June 2024, Provaris was notified of an unexpected suspension of all activities at the fabrication facility due to the unexpected bankruptcy of the primary sub-contractor. In response Provaris has engaged in discussions with the facility’s secured lenders to explore alternative solutions for resuming and completing the prototype tank. This includes evaluating options for- leasing the existing facility, or potentially, acquiring the facility along with its material, plant, and equipment. We are actively identifying and engaging with potential partners who have expressed an interest in supporting our plans for restarting the prototype tank fabrication as swiftly as possible. Additionally, we are reviewing alternative contractors and sites across Norway and Europe with experience in automation and robotic laser-hybrid welding to ensure we have a robust plan for proceeding with the project. Extension of Tank IP for Alternative Industrial Hydrogen Storage Solutions Provaris has extended its tank intellectual property (IP) to include new small-scale hydrogen storage tanks for industrial and maritime applications., with storage capacities ranging from 1 to 10 tonnes of hydrogen. This expansion opens additional commercial avenues and potential early revenue opportunities ahead of hydrogen shipping. The company is leveraging its existing tank design, originally developed for its hydrogen shipping vessels, to introduce a highly cost competitive storage solution for stand-alone ground-based applications. The new hydrogen storage tanks are designed with layered steel, offering a more cost-effective alternative to carbon fibre or glass fibre designs. Whilst these tanks are not intended for the mobile applications such as trucks, they are well suited for marine bunkering, refuelling stations, and industrial buffer storage. They provide a viable alternative to current containerised composite solutions. For example, upcoming EU legalisation are expected to drive significant demand for cost-effective storage, large scale hydrogen storage, particularly for hydrogen refuelling stations across European member states. With the increasing focus on clean renewable energy, effective storage of compressed hydrogen is crucial to hydrogen supply chain. Traditional carbon steel pressure vessels are a commonly used for smaller volumes of compressed hydrogen, typically storing between 10-100 kilograms at lower pressures. For larger-scale storage, containerised tube matrices or high-cost carbon-fibre and glass fibre solutions are often employed, though these can introduce higher costs and complexities. Our pre-marketing efforts have generated interest from various projects in the maritime and industrial hydrogen sectors, which are progressing towards construction and operational phases. Advancing these opportunities will depend on the timely resumption and completion of the prototype tank. 11 OPERATIONS REPORT Illustration of proposed storage tanks at 1,000 kg, 5,000 kg, 10,000 kg hydrogen capacity next to an existing 40-foot storage container unit which has a capacity range up to 900 kg. Tiwi H2 Project, Tiwi Islands, Northern Territory Provaris acknowledges that its proposed Tiwi H2 Project is located on the traditional lands of the Munupi people. It is a privilege to have the support and such a close working relationship with the Munupi Clan and other key stakeholders. The Tiwi H2 Project is an integrated compressed hydrogen production and export initiative, targeting South-East Asian markets. The project includes the development of a 2.4 GW solar generation capacity, a HV transmission line, a 90ktpa green hydrogen production facility, port infrastructure utilising the existing Port Melville facility, and a fleet of Provaris’ proprietary H2Neo carriers for export. During the period project activities and expenditure slowed as Provaris focused on securing key agreements with the Tiwi Land Council and Tiwi Plantation Corporation, particularly regarding land access. Efforts to secure temporary access to 2 cleared areas, within the 36,000ha plantation for installation of solar monitoring trailers did not result in agreement with the Tiwi Plantation Corporation. Additionally, the ongoing administration and sale process of the Port