Hazer Group CEO Glenn Corrie on future prospects for innovating hydrogen

Paul Sanger: I'm Paul Sanger for the Finance News Network, and today I'm talking to Hazer Group, trading under the ASX code HZR with a market capitalization of around 108 million. Hazer Group is a pioneering technology development company, undertaking the commercialization of the Hazer process, a low emission hydrogen and graphite production process. The Hazer process enables the effective conversion of natural gas and similar feedstocks into hydrogen and high quality graphite using iron ore as a process catalyst. Joining me today is Hazer Group CEO, Glenn Corrie. Welcome, Glenn.

Glenn Corrie: Thanks, Paul. Great to be here. Good day to be talking about hydrogen.

Paul Sanger: Absolutely. I think before we get into talking more about Hazer, I'd love to get your thoughts and views on the announcement that came out from the budget last night. Very pro hydrogen, I believe.

Glenn Corrie: Yeah, I think hydrogen and to some extent graphite, the big winners out of last night and we're really excited about it. $8 billion, from what we see, committed to critical minerals, and we are a graphite producer of large scale in the future, but also around $7 billion in totality, I think, to the clean hydrogen and the renewable energy space. So double dinner for us, which is really exciting and puts us in a really strong position as we move into the commercialization phase of our business. And this is a real, from our perspective, a real enabler for the industry to adopt hydrogen as a clean energy substitute for the current processes that are out there. So we think it's a great outcome. The devil's in the detail of course, and that'll come out over time, but from my perspective, it looks like it's twice as good as what Europe's offering and about half as good of what the US are doing in terms of the IRA. So, it's a really big step in the right direction.

Paul Sanger: Yeah, I can't agree more. It is great to see the Australian government getting behind these type of projects. So perfect timing to be speaking about the Hazer Group. Now, it's been a few years since we last had you on the network, so why don't you just give us a quick snapshot of your business.

Glenn Corrie: Yes, very good. So Hazer, Paul, just to remind your listeners and viewers, stands for hydrogen and zero emissions research. So that was the vision back 15, 17 years ago. So a really big vision from the founders of the company. And our logo, which is the inverted triangle has three corner points to it, hydrogen, graphite, and decarbonization. So if you step forward 15 years ago to now, what a vision. We've now got a very advanced technology. Effectively, the easiest way to break it down is we have developed a disruptive and innovative climate technology that converts methane-rich gas and which is 25 times more harmful than CO2. So think of LNG or pipeline, natural gas, biogas, wastewater treatment gas, any methane-rich gas, and we convert that and split it into its pure elements of pure hydrogen and carbon in the form of graphite.

So it's a really unique technology. We do that with using an iron ore catalyst and that's the intellectual property on the company that significantly gives us a lower operating temperature. Think of us, Paul, as one technology that serves three really critical markets, the hydrogen market, the graphite market, and the overall industry decarbonization market with zero emissions.

Paul Sanger: So what you just described to me is what is known as the Hazer process. Is that right?

Glenn Corrie: That's correct, yep.

Paul Sanger: Excellent. Now, recently you announced that the commercial demonstration plant test program has achieved a hundred hours of continuous hot operation. How significant is this milestone for hazer?

Glenn Corrie: Good question. Our commercial demonstration plan, it's the fifth successful time we've scaled this technology up. So we've scaled up about two or three, every two or three years, which is pretty normal for technology ventures. So the fifth time we've done it, it came online at the end of January of this year. We've now been operating since then. And the two objectives of our commercial demonstration panel, the three objectives really, is to operate and demonstrate our technology at a commercial level on a continuous basis, and of course, develop that tech for commercial rollout into the industrial projects that we've got in the pipeline and our foundation projects. So the 100 hours is a really important milestone just for our operation. We've had four runs now of our plant. Improvements every time. 18 hours, 36 hours, 60 hours, and now over a hundred hours.

You can see we're almost doubling the run times and the operational times there as we improve the technology and optimize around it. There's no real magic in it, but the 100 hours is a really important proof point for any technology and its ability to demonstrate its reliability over time. Of course, we're going to be running this for days and weeks and months on end, but for us to get the important data out of our technology to prepare it for the commercialization, a hundred hours is a really important milestone. But we've broken through that, which is really a key achievement for the company.

Paul Sanger: So just reading into that, so based on the results of the test program, the confidence that you can take this technology and scale to commercial levels is pretty high?

Glenn Corrie: Absolutely. No red flags. And I wouldn't expect them to be frank with you. Technology ventures are never easy. You can talk to any CEO of any technology company, you'll get the war stories for sure, and we've had our fair share of them over 15 years, and that will take longer than the show permits unfortunately. But we've broken through, and I wouldn't say that we are trying to prove the tech. The tech is proven. What we're now doing is demonstrating it and preparing it for commercialization. And that's a very big difference. We've done it five times. We get similar results every time. We're now increasingly growing our technology, where on the NASA scale of technology development, we're TRL seven, technology readiness level seven, out of nine. So it's a very advanced technology. And with our commercial projects that we've now established in three countries around the world, we're going very quickly into TRL eight. So an accelerated pathway to commercialization. And the CDP is enabling that because our customers and our customer base and our prospective customers can see that the technology is doing what it says it should be doing.

Paul Sanger: Yeah, that was my next question. What is the status of that CDP test program currently?

Glenn Corrie: Going well. So like I say, a number of really successful runs, we've just gone through the 100-hour test. We've ticked off two of the key milestones already, production of hydrogen and graphite, at scale, tick. And now we are into a pretty extended run length for the technology as well. So they are two really important achievements for the tech. The next bit, the next focus, is on how do we optimize it, how do we get the right conversion rates from methane into hydrogen, how do we get the graphite purities that we have seen in the past? And that's optimization. But once you've got the plant running, you can then do those tweaks and optimization. So they were the two critical milestones. "Let's produce hydrogen graphite first." We've achieved that. "Let's get the plant running reliably so we can get reliable information." And, "Now let's go into the optimization phase of the technology and really demonstrate that we can take methane and get the purities and the conversion rates that are required for commercialization."

Paul Sanger: Do you feel you're at the point now where you're about to start discussions or you're having discussions or are they progressing, regarding licensing agreements with potential customers?

Glenn Corrie: Yeah. I say this often. We're walking and chewing gum at the same time. And what I mean by that is we're developing a technology, but the demand for the tech has been really strong. And in fact it's multiplied since we've had the CDP operating and demonstration plant operating. So we've had a lot of inflows of interest. That was expected. There's lots of reasons for those stars aligning as externalities, but from a technology perspective, we're getting a lot of interest in it. We're a CapEx light model, so I've got 25 to 30 people in the company. What we do best is develop the technology. What others do best is they build facilities and we're a CapEx asset light business model, so we take no CapEx risk. It's the fastest, most accelerated pathway to free cash for our company. We've spent $105 million on the tech. We've spent almost all we need now to demonstrate the technology. Getting through the last commercial demonstration part was the biggest wedge of capital we needed to get through. That's passed us. We're now into an asset light model where we can start to license the technology.

We've now demonstrated we can do that. Going back about a week or so ago, we've just signed a commercial contract, a binding agreement with one of our customers in North America, FortisBC. That may not be familiar to many of the listeners, but think about Origin Energy and double it. That's the size of FortisBC. So it's a very large gas LNG utility based in Vancouver, in Canada. We have essentially signed up a binding agreement to license our technology to them and develop a project in the greater Vancouver region for industry. So a really exciting project there and putting licensing terms around it. And we've got two other foundation projects that we're public about at the moment. One in Japan with Chubu Electric and Chiyoda Corp and one in France with Engie. So first-mover advantage in North America, in Japan and in France with three tier one customers. And what I'm excited about the most is what's behind all this because there are multiple discussions going on with oil and gas companies, power producers, steel makers, cement manufacturers, petrochemical plants. So we've got a seriously exciting transformational 12 months ahead of us.

Paul Sanger: And there's not a bigger seal of approval with new technology when you are having agreements arrangements with tier one clients, like you just mentioned. There's your rubber stamp of approval that this tech works, we want it, we want to endorse it and use it. So very impressive. You've got those contracts done already.

Glenn Corrie: Best validation you can get when you've got customers knocking on your door saying, "We like your technology better than others." And that's a great validation of the technology. And we're putting words into action. We're not talking about doing things, we're actually doing them. We've got our CDP operating and we're licensing our tech at the same time. So it's a really exciting point for the company at this stage.

Paul Sanger: Yeah, it's a very, very compelling story. Now, the Hazer Group, recently you received a grant from the Australian Renewable Energy Agency. What other forms of government assistance are available to the company, if any?

Glenn Corrie: We were very fortunate, big shout out to ARENA. Over the last few years we've received about $10 million from ARENA to support the company, which has been well received. That's been put to good use with our commercial demonstration plant and getting that operating. We've got a couple more milestones ahead of us. We just recently ticked one off. We've got another one in site with operational milestones ahead of us. So we continue to get support from ARENA. I think the 1.3 that's been allocated out of the budget last night is also, again, endorsement to the industry. So we hope that some of that comes our way as well and gets earmarked for technologies. Sometimes technologies get left on the sidelines, but I think, in this instance, we've already received some support and we're on the radar screens.

What other avenues are out there, or at least some areas of support? We, annually, also are the recipient of a fairly generous R&D rebate, and that's applicable to many technology ventures. We get a lot of what we spend back. Half of what we spend back actually, in the technology. So we see that typically in Q3, Q4, and we've spent a lot on the tech last year. So we expect to receive a sizable rebate again this year. There's a variety of non-refundable grant programs that are out there at the federal level as well as the state level. So I'm really positive about what federal and state governments are doing to support companies like ours. We'll just continue to put our best foot forward and see what we can get.

These, what I call non-dilutionary sources of income are really important for us. We raised just recently close to $15 million through a placement and an SPP, which is really well-supported by existing and new investors. And we've got now, with that, plus our existing cash plus all of these government grants and R&D rebates and other things that I'd call non-dilutionary, gives us a very robust pot of liquidity for us and an extended runway for us to get through some really important milestones in the next 12 to 18 months, even further. Our business is very flexible. We're a low cost business. We spend very little and we have zero debt. So we've got lots of funding flexibility.

Paul Sanger: And in short, what you're saying there is your balance sheet is sufficiently positioned to support your future plans.

Glenn Corrie: That's right. Yep.

Paul Sanger: And just to finish up today. Looking ahead, what newsflow can investors and shareholders anticipate for the remainder of 24 and beyond into 2025 for Hazer?

Glenn Corrie: Buckle up, Paul. This is the most exciting hydrogen story, we think, in the market. There's not many of us. We're a technology venture, we're not a project developer. And that's a big difference to a lot of the other listed groups alongside us. So our technology can go global and that's what we're starting to see. First-mover advantage. I'd like to think the stars are aligning for us. The CDP's online operating, doing everything that it says on the packet. So that's really important that we've ticked a lot of the technology milestones. There's obviously more to do, but we are in the right place in terms of the tech and we are getting good feedback from the data that we're receiving. Commercial pipeline, we've got three foundation projects. We've just signed up a license agreement in Canada. We've got two more in flight that are public. We've got a bunch of others in the pipeline.

But to nail that first commercial deal was really important for us to set the framework for how we think about the commercialization. We're on an attractive valuation, is the best way to put it. We don't think it's a fair representation of the business we're building. That's okay. We'll continue to kick goals, Paul. And I'm a strong believer that if you focus on the underlining business, then the share price and everything else will follow. The analysts that cover us out there today, on average, I think have us at around a $1.50 to $1.70 per share. We trade 45 to 50 cents at the moment. That's three times money. That gets us close to a half a billion dollar valuation, which if you put all of our projects together that we've got in the pipeline and you put that into an economic model, this could easily be a billion dollar platform. And that would only be 10 projects in 10 years, and that would be a half a percent of today's hydrogen demand.

So the price is big. Hazer's position is very robust. The opportunity is now because we can provide a technology that's available to plug in today as opposed to over the next 10 years. And we're a low cost opportunity to produce and accelerate the transition to hydrogen.

Paul Sanger: Well, Glenn, I'm well buckled up now in my seat. Really interesting overview and a chat with you today. Many thanks for your time. It's been an absolute pleasure.

Glenn Corrie: Thanks, Paul. Great stuff.