Azelio year-end report 2022

Group financial development
Quarter 4: October – December 2022

• Net sales amounted to kSEK -59 (44)
• Operating profit/loss amounted to kSEK -119,058 (-108,277) after depreciation and amortisation of kSEK -52,851 (-38,901)
• Earnings per share before and after dilution totalled SEK -0.45 (-0.94)
• Profit/loss for the period amounted to kSEK -119,954 (-108,925)
• Cash flow for the period amounted to kSEK 145,734 (-114,263)

Full-year 2022

• Net sales amounted to kSEK 594 (1,162)
• Operating profit/loss amounted to kSEK -493,251 (-364,175) after depreciation and amortisation of kSEK -175,123 (-112,332)
• Earnings per share before and after dilution totalled SEK -3.23 (-3.23)
• Profit/loss for the period amounted to kSEK -496,660 (-365,872)
• Cash flow for the period amounted to kSEK -276,453 (170,787)
• Cash and bank balances amounted to kSEK 226,858 (503,388)
• Equity per share amounted to SEK 2.38 (8.70)

Significant events
Quarter 4: October – December 2022

• An update of the status of the project with Engazaat in Egypt was communicated on October 10 due to Engazaat securing its share of the project financing.
• On October 19, the outcome of the rights issue was published. The Rights Issue provided Azelio with approximately SEK 250 million after deduction of costs related to the Rights Issue. Through the Rights Issue, the number of shares in Azelio increased by 202,785,065, from 115,877,181 to 318,662,246.
• A conditional order to provide energy as a service based on five TES.POD units combined with solar energy, was signed with MPG Built Pty Ltd in Australia and was announced on November 28.

After the end of the period

• On January 16, 2023, Azelio published an update regarding sales, operational targets, and financing. The Company’s commercialization is delayed, which means that the previous delivery target for 2023 will not be reached and that additional financing of the Company will be needed in 2023.
• As previously communicated, the Company needs new financing. The current assessment is that this must be secured by the end of the second quarter. Many different activities to secure this necessary funding have been underway since the beginning of the year, including the exploration of a new rights issue. In parallel, additional cost-cutting initiatives are being planned. The Company continues to be optimistic about getting new orders during the year.

Other events
Quarter 4: October – December 2022

• The complete hybrid system supplying electricity to the visitor center at Noor Energy 1, located in the Mohammed bin Rashid Al Maktoum Solar Park in Dubai, was put in operation. The TES.POD unit in this project was installed in 2021.
• The SAVE Cleantech Utilities alliance, a joint cooperation between Azelio, Engazaat and Mascara NT was launched to offer “Water-and-Energy-as-A-Service” for agricultural needs in off-grid desert locations.
• Azelio published two white papers – one on cluster auto control for its energy storage system, and one on the Combined Heat & Power (CHP) solution.
• LDES Council and McKinsey & Company released a new report, ‘Net-zero heat – Long Duration Energy Storage to accelerate energy system decarbonization’, about long-duration energy storage and heat. The business case with co-generation (CHP) came out very favorably in the report – an application that the Azelio system offers.
• In October, the International Energy Agency (IEA) published its World Energy Outlook 2022, which, among other things, insists that the world has not invested enough in the energy sector, which has made energy systems much more vulnerable to such events that occurred in 2022 - and that a smooth and secure energy transition will require a sharp increase in investment flows within clean energy.
• COP27 in Sharm El-Sheikh, Egypt, took place in November. Alongside industry leaders and government agencies, Azelio was a partner in the Swedish pavilion, hosted by Business Sweden. Azelio’s CEO, Jonas Wallmander, and other company representatives participated in multiple panel discussions and events with prominent parties.

Comments from the CEO
Azelio's offer
Azelio’s direction remains clear. The global need for energy storage solutions continues to grow, which will be crucial in the transition to renewable energy sources. There is especially a need for solutions which can deliver stored energy over time intervals that make it possible, together with renewable energy sources, to cover base load around the clock An example of the state authorities' willingness to support this need is the Inflation Reduction Act (IRA) in the US, which was passed last autumn and focuses, among other things, on significant investments in the energy, energy storage and climate areas. Another example is the EU Green Deal Industrial Plan and Net-Zero Industry Act announced recently by the President of the European Commission at the World Economic Forum in Davos. It is reasonable to expect similar investment efforts elsewhere in the world as well.

We have a clear position in the market with our combination of 13+ hours supply of stored energy, and scalability that makes the system adaptable for efficient distributed use. The fact that Azelio's system can also deliver both electricity and heat, and is already installed commercially on the market, gives us a unique position among alternative energy storage solutions in the market.

Time is money
Despite this, the time to convert ongoing business discussions into signed customer agreements has taken significantly longer than anticipated, which in turn will lead to a liquidity shortage for the Company already at the end of the second quarter of this year. Many different activities to secure this necessary funding have been underway since the beginning of the year, including explorations for a new rights issue. In parallel additional cost-cutting initiatives are being planned. To secure 12 months of continued operation, the Company needs between SEK 150 and 300 million, depending on how large new cost reductions can be implemented.

We are still optimistic about getting new orders during the year and continue to prepare to deliver on these.

Our prioritized markets
We continue our long-term work to establish ourselves in the prioritized markets MENA, southern Africa, Australia and the USA. Through a few selected projects where we initially take a stake in the project and sell the energy to the end customer (EaaS, Energy as a Service), we will secure the reference project that will generate additional business.

We are also working together with partners to create solutions that will make it easier for our customers to secure project financing, removing a roadblock that has resulted in some delayed orders.

In the near future, we are focusing on creating more business in southern Africa and MENA. Here, the development has come the furthest, and I see that we will be able to switch to direct sales first in these markets. In parallel, we are intensifying the strategic work towards the US – the market that I expect will be the largest medium and long term. Work on adapting and certifying the product for the US market is underway and is expected to be completed next year.

The future
All signs indicate that the potential and opportunities for energy storage systems continue to increase – and we have a solution that is a unique and important building block in renewable energy systems going forward.

In recent months, I have travelled a lot in Egypt, the United Arab Emirates, South Africa and the US among other places, and have been strengthened in my conviction that our energy storage system is what customers need and want – and that we are early compared to other technologies, which is a strength but also poses challenges.

The path towards success for a new technology in a new market is not easy, straightforward, nor trouble-free – and the immediate future of Azelio is no exception. All our energy is put into securing new TES.POD orders as well as new financing.

Jonas Wallmander, CEO

The full report is available as an attachment to this release and can also be found on the company website at the following link: https://www.azelio.com/investors/financial-reports-presentations/