Announcement PDF 2023 Annual Report 1 Corporate Directory Directors Share Registry Terry Stinson Non-Executive Chairman Automic Group GPO Box 5193 Sydney NSW 2001 1300 288 664 (within Australia) Michael Fitzpatrick Non-Executive Director Grant Mooney Non-Executive Director Anthony Shields Non-Executive Director Auditors Subsidiaries HLB Mann Judd Level 4, 130 Stirling Street Perth WA 600 CETO Wave Energy Ireland Limited Chief Executive Officer Jonathan Fiévez Company Secretary Grant Mooney 4th Floor, North Block, Rockfield Central, Dundrum DN 16, Ireland Carnegie Technologies Spain S.L. Claudio Coello, 24 – 4A2 28001 Madrid, Spain CETO Wave Energy UK Limited 6 Redheughs Rigg, Edinburgh, EH12 9DQ, Scotland Registered Office Postal Address 21 North Mole Drive North Fremantle WA 6159 PO Box 39 North Fremantle WA 6159 Telephone: (08) 6168 8400 Website: www.carnegiece.com ASX Code: CCE 2 Contents Chairman’s Report 02 Company Overview 06 Global Context and Opportunity 09 CETO Technology 12 MoorPower Technology 17 Partnerships and Collaborative Ecosystems 19 Garden Island Microgrid 21 Additional Information 22 Financial Report 26 3 01 Chairman’s Report “I am delighted to present the Annual Report for Carnegie Clean Energy for the financial year ending 30 June, 2023.” Terry Stinson - Carnegie Clean Energy Chairman. In an era defined by how we meet climate challenges and how quickly we can transition to a clean energy future, this has been a year of significant progress and accomplishment. Carnegie has remained steadfast in pioneering an innovative solution to our global problem. Not only are we a frontrunner in delivering wave energy, but also as a leader in delivering a sustainable energy future. Throughout the year, Management has delivered on key milestones and is gathering momentum. Over the past year, Team Carnegie has delivered the most significant technical and commercial progress in all my time with the company and they deserve to be congratulated. These are truly exciting times. From CETO, new opportunities have emerged. These have included MoorPower, adding diversification to the business and additional opportunities to create new commercial business streams. Our purpose has not changed or wavered. As a team, we are committed to harnessing ocean energy to make the world more sustainable. In delivering on our purpose, our aim is to become the global leader in this new renewable source of energy, wave energy. We will deliver clean, renewable technologies, products and clean energy to the world while also delivering value to our shareholders and stakeholders. 4 Industry Landscape Governments and businesses worldwide continue to accelerate moves toward renewable sources of energy. It is becoming increasingly clear that to meet our emissions and renewables targets, we require a broader range of renewable energy technology solutions. This is among the key challenges of our generation. Ocean energy provides a zero emission, almost limitless energy source that the world is increasingly focused on as a critical part of the solution. And right around the world governments are committing to the development of this technology. In the past year, the focus has been from Europe and in the USA, global leaders in fostering new renewables technologies. The EU’s strategy for offshore renewable energy includes specific wave and tidal deployment. It targeted at least 1GW by 2030. In recent months, the French government announced support of at least €65 million for a tidal energy farm, the EU awarded €40 million for two tidal energy farms via Horizon Europe funding, and the EU Innovation fund backed two major ocean energy projects, a hybrid wind and wave platform project and a wave energy project. In May 2023, the US Department of Energy (DOE), announced US$45 million for tidal development and US$25 million to wave energy technologies was awarded in 2022. China also has a specific strategy for ocean energy. Meanwhile, the global commitment to 85% from renewables by 2050 continues. Carnegie Clean Energy is a front runner in this emerging global wave energy industry, recently validated by external experts with significant commercial opportunities. Australia continues existing carbon reduction initiatives with a focus on reduction in greenhouse gas emissions, targeting 43% reduction by 2030 (below 2005 levels). Offshore wind projects are advancing and growing in Australia. With support for ocean energy growing in Australia, wave energy projects should be explored. I expect Australian Government support for ocean energy technology development projects, like tidal and wave energy, to grow rapidly in the future, with continued success mirroring our success with wave energy projects in Europe. The Blue Economy CRC, partially funded by the Australian Government, is making a significant contribution to the development of ocean energy technologies and continues to be a key partner and supporter of Carnegie projects over the past year. The Blue Economy CRC and partners have been instrumental with their support and a key enabler in the development of CETO, MoorPower, and associated wave energy technologies over the past year. Our Glidepath The Product Validation Roadmap, unveiled last year, is on track, with several key milestones achieved over the past year. CETO development progressed rapidly and significantly over the past year, primarily through the support of the EuropeWave Programme with significant performance improvements demonstrated through tank testing of our advanced controllers. MoorPower has progressed with the support of the Blue Economy CRC. EuropeWave and BE CRC awards have validated Carnegie as a viable commercial enterprise and their involvement has demonstrated the power of partnerships. The Wave Predictor continues to be developed as an integral part of CETO. It still has potential as a stand-alone product, but for now, the focus is on its use in CETO rather than as a stand-alone product. Europe is the focal point for wave energy right now, and Carnegie is prepared to access this market through active subsidiaries in Europe including CETO Wave Energy Ireland and our newly created subsidiary Carnegie Technologies Spain. The Carnegie group and its CETO technology really made waves over the past year. 5 From my perspective, the EuropeWave Programme is one of the most powerful commercialisation initiatives yet to be offered to the wave energy industry due to its competitive procurement model which required technologies to compete on key metrics. This is not a typical government funded research and development program. EuropeWave used a competitive bid process, with the leading wave energy technology developers from around the world competing for funding. It pays the developers participating as contractors, with clear deliverables, milestones and penalties. The programme’s focus is on successful commercial outcomes. The goal was to select wave energy technologies most likely to be commercialised on a large-scale basis in Europe. To make this happen, the program filters the competitors proposals through a rigorous process and then funds a scale demonstrator for those that make it through the filter. That deployment is intended to validate commercial viability to key large program developers, energy players, and energy providers in Europe. Similar to offshore wind, once successfully demonstrated, wave technology can be deployed around the world. I’m so proud that the team came out of the final round ranked number one. Amazing validation of our CETO technology’s current status and long-term potential. This meant Carnegie’s subsidiary, CETO Wave Energy Ireland, was awarded a €3.75m contract to build and operate a CETO wave energy converter at the Biscay Marine Energy Platform (BiMEP) in Spain. These are exciting times for Carnegie. A funded and successful EuropeWave deployment serves as the launchpad to prove the CETO technology and will be the catalyst for Carnegie’s future commercial success. Partnerships Partnerships have been and will continue to be a key part of our strategy. Through our upcoming CETO deployment in Spain, Carnegie will establish and develop further relationships with new partners to facilitate the design, development, fabrication, deployment, and maintenance of our CETO scaled demonstrator. 6 The Blue Economy CRC, Hewlett Packard Enterprise and other industry collaborators continue as close partners and many new partners and commercial relationships have developed over the past year. More great partners are expected in the coming years. Strategy In FY23, the board and Management refreshed the strategic plan, and our strategy is clear. We will maintain Carnegie’s position as a global leader in wave energy and accelerate commercialisation of CETO and MoorPower products. If one uses offshore wind industry development as a comparative for future success, we know the potential is significant and the time is now. Carnegie can be the first, the leader, and main player in wave energy starting in Europe, and then worldwide, generating sales, growth, profits, and shareholder value. In the past year, Management has continued to demonstrate a highly efficient use of capital and Carnegie continues to be debt free. Shareholder funds have been managed wisely and responsibly over the year. Directors and Management continue to present Carnegie’s developments and potential to the investment community. In the meetings, I have participated in, parties have expressed sincere interest in Carnegie, however so far, these efforts did not significantly impact the share price over the past year. This is surprising to me considering all that Carnegie has achieved over the past 12 months. The team will continue to deliver our projects and Management will continue to keep the market informed. Summary It is an honour to Chair this company, serving with my fellow directors. In this role, I have the opportunity to be a part of the development of a new clean energy technology, to be involved and work with an amazing team of engineers and commercial professionals, working both here in Australia, and in Europe, to develop, deploy and demonstrate new and exciting renewable energy technology and new clean energy products. I’m proud to be part of introducing a new energy technology to the world that can provide a return to shareholders, while making the Earth a better place for us, and for our children. The Carnegie team, Directors, Management, and all employees, sincerely thank our shareholders for their support over the past year, and for many shareholders, thanks also for many years past. We also welcome our new shareholders who have just joined Carnegie. Together, we have embarked on a journey that holds immense promise for a sustainable and prosperous future. Terry Stinson Non-Executive Chair Our strategic plan for future success is solid and we are delivering great results. As with other emerging technologies, the commercialisation process will take time. My personal view is that there will be increased interest from capital markets as Carnegie Clean Energy continues to deliver on the strategy and milestones. 7 02 01 Company Overview Carnegie CEO and Board of Directors Carnegie Clean Energy is a global leader in the wave energy industry with a portfolio of products including CETO and MoorPower, our core wave energy converters. Carnegie’s renewable wave energy technologies capture and convert energy from ocean waves into electricity that can power large utility grids, remote communities, and offshore demand applications like aquaculture. Carnegie has the knowledge and skills to support the world’s transition to net zero through the successful deployment of wave energy. The global need for renewable energy is critical and wave energy remains a vast untapped opportunity. Our wave energy technologies capture the consistent global currently untapped wave energy resource to provide reliable, predictable, clean energy. With a long track record of wave energy development including modelling, simulations, tank testing, rapid small-scale prototyping, and large commercial scale prototypes and arrays, Carnegie is a world leader in the emerging wave energy industry. 8 The wave energy industry is entering a key inflection point, with growing recognition that ocean energy has an important role to play in remaking our energy systems to meet the global climate change imperative. Upcoming projects across the ocean energy industry will unlock the commercial potential of the sector by validating the technologies, providing increased exposure to investors and supporting the commercial roll out of projects worldwide. Our ACHIEVE Programme, which will deploy a CETO prototype in the Basque Country in 2025 with the support of a contract from the EuropeWave Programme and funds from the Spanish Government, will mark an exciting new stage in the history of Carnegie and the CETO technology. Meanwhile, in Australia, Carnegie’s MoorPower projects with the BlueEconomy CRC and key salmon producers Huon and Tassal will expand the market opportunity for wave energy in offshore aquaculture applications. Wave energy is unique. You can’t see wave energy but you can power a city on it day and night. Listed on the Australian Stock Exchange (ASX: CCE) with over 12,000 shareholders, Carnegie is an Australian company with global markets. We are headquartered in Fremantle, Western Australia but our reach is international with active subsidiaries in the UK, Ireland and Spain playing a key role in the European market expansion. 10 Our team includes world class engineers, scientists, accountants, analysts and other professionals that all share a passion for technology, renewable energy and sustainability. The team is driven by our shared purpose to harness ocean energy to make the world more sustainable. The Board of Directors is driven by the same purpose and vision and are active and invested in the business. 03 Global Context and Opportunity To avoid the worst impacts of climate change, the world needs to rapidly transition to a clean energy system – one that reduces emissions to reach net-zero while also supporting progress towards our sustainable development goals. Renewable energy technologies are set to become the dominant source of energy to achieve this global clean energy transition. While wind and solar have played a key role to date, other renewables like wave energy are required to complement these efforts. Wave energy is an untapped resource that will play an important role in this growing renewable energy portfolio. Wave energy is clean, consistent, predictable and abundant. It is present day and night. There has been a notable surge in efforts to progress ocean energy over recent years. These efforts include the introduction of offshore renewable energy legislation, policies and incentives in the United States, Europe and to a lesser extent, Australia. This is driving increasing investment in ocean energy as evidenced by investments being made by the European Commission and ambitious national governments like the US, Spain and the UK. Wave energy’s inherent predictability and consistency make it an attractive option for countries seeking to diversify their energy portfolios and reduce dependence on fossil fuels. The growth of the global ocean energy sector is driving increased support and investment in project delivery and research and development to support ongoing cost reductions. This is providing opportunities for Carnegie and its international subsidiaries to rapidly advance our technologies along its commercialisation pathway. Our recent EuropeWave contract award for the deployment of CETO at Biscay Marine Energy Platform (BiMEP) in Spain is an example of how international commitments to supporting the growth of the ocean energy sector is delivering progress on CETO’s commercialisation journey. The additional funding awarded by the Spanish Government to enhance that deployment in Spain provides further validation of the technologies leading position. Delivery of ocean energy will generate economic growth, job creation, and innovation within coastal communities globally. The positive impact extends beyond just provision of clean, secure energy and supports revitalisation of coastal regions and employment transition in regions. Why Wave Energy Oceans cover more than 70% of the surface of our planet and offer significant opportunities to support our sustainable transition. Global investment in ocean energy continues to increase and Ocean Energy Europe (OEE) forecasts a €653b (A$1,078b) market potential for ocean energy by 2050. Wave energy’s strength lies in its reliability and predictability. Ocean waves are influenced by well-understood factors like wind patterns and bathymetry, allowing for accurate forecasting. This predictability enables us to confidently estimate wave energy production over time, facilitating strategic planning and seamless integration into the grid. Unlike wind and solar energy, which can experience rapid fluctuations due to weather conditions, wave energy is more consistent. Waves exhibit steadier patterns, resulting in a stable and dependable energy output. The consistent nature of wave energy production can reduce the reliance on energy storage solutions like batteries, which are essential for stabilising the intermittent output of wind and solar systems. This not only enhances grid resilience but also potentially leads to cost savings by minimising infrastructure and maintenance expenses. 11 Complementary Renewable Energy Portfolio: Wind, Solar and Wave United Nations Sustainable Development Goals Carnegie supports the United Nations Sustainable Development Goals (SDGs) to create a better and more sustainable future for all. As we reflect on the past year, we are proud to share several key SDGs that resonate with our mission and vision. SDG 6: Clean Water and Sanitation Ocean energy can power desalination to transform seawater into clean water, ensuring access to clean water for coastal communities. SDG 7: Affordable and Clean Energy Carnegie remains at the forefront of the clean energy revolution. We will continue to develop affordable, sustainable wave energy solutions that reduce carbon emissions. 12 SDG 8: Decent Work and Economic Growth Our commitment to innovation and sustainable practices is not only contributing to environmental preservation, but also creating employment opportunities and driving economic growth in the regions we operate. We believe that a green economy can be a source of prosperity for all. SDG 9: Industry, Innovation, and Infrastructure Carnegie is driving innovation in wave energy infrastructure, leading to advancements that will benefit industries, economies, and societies globally. We are committed to technological excellence and sustainable development. SDG 11: Sustainable Cities and Communities Our work is not only about technology but also about transforming communities into sustainable, resilient hubs along our coastlines. By providing clean energy solutions and infrastructure, we are empowering coastal communities to thrive in a rapidly changing world. SDG 12: Responsible Consumption and Production We recognise the importance of responsible consumption and production. By promoting the use of clean energy, we are contributing to a more sustainable future, where resources are used efficiently and sustainably. SDG 13: Climate Action The fight against climate change is a global priority. We continue to play our part by harnessing the power of the oceans to generate clean, renewable energy. SDG 14: Life Below Water Through innovation and responsible ocean energy solutions, we are committed to safeguarding the rich biodiversity of our oceans. SDG 17: Partnerships for the Goals None of these achievements would be possible without the strong partnerships we have forged with governments, organisations, and communities around the world. Together, we are driving towards a sustainable and prosperous future for all. In the coming year, Carnegie remains dedicated to our mission of delivering clean, sustainable wave energy solutions and fostering partnerships that will support progress against these Sustainable Development Goals. for 17 Partnerships the goals 14 Life below water water and 6 Clean sanitation 7 Affordable and clean energy work and 8 Decent economic growth consumption 12 Responsible and production 13 Climate action Innovation, 9 Industry, and infrastructure Cities 11 Sustainable and communities 13 04 CETO® CETO® Technology Named after a Greek sea goddess, our CETO wave energy converter captures the vast and untapped energy within our oceans, transforming it into electricity that seamlessly integrates into the grid or demand application and complements other renewable energy technologies. What sets CETO apart is its unique design—a fully submerged, point absorber type wave energy technology with advanced control that allows us to optimise its operations. Beneath the ocean’s surface, our submerged buoy moves in harmony with the motion of the waves, and it is this orbital motion that drives the power take-off (PTO) units within the buoy. Through this process CETO converts ocean waves into a source of clean, grid-ready electricity. Our commitment to environmental sustainability is at the core of CETO’s design. The submerged buoys minimise visual impact and support the system’s resilience against extreme weather conditions. 14 Markets for CETO are large and diverse, spanning from remote and island communities seeking to reduce their dependence on fossil fuels to large utility scale grid-connected installations contributing to comprehensive clean energy portfolios. As the technology progresses along its commercialisation pathway and cost of energy continues to decrease, Carnegie envisages the addressable market for wave energy to expand, forming a growing adoption curve previously seen in the solar PV and offshore wind industries. No Visual Impact – fully submerged and invisible from shore Security – provides emissions free sustainable energy and water security to countries & islands Developed & Tested – over 15 years of onshore, wave tank and tens of thousands of hours of in-ocean testing Scalable – modular array design Flexible – operates in variety of water depths, swell directions, tides & seafloor conditions Clean – minimal environmental impact, co-exists with marine life Storm Survivability – fully submerged & extreme wave mitigation system Desalination – zero-emission freshwater co-production allows pseudo energy storage 15 ACHIEVE Programme The ACHIEVE Programme will deploy a CETO prototype at the Biscay Marine Energy Platform (BiMEP) in the Basque Country, Spain in 2025. This will entail delivery of the final detailed design, manufacture, assembly, PTO testing, integration testing, installation, commissioning and two years of CETO operations at BiMEP. ACHIEVE is being delivered under a €3.75m contract awarded through the EuropeWave Pre-Commercial Procurement Programme. The project is enhanced and extended through a €1.2m grant awarded by the Spanish Government through the RENMARINAS DEMOS Program. Both of these wins were awarded subsequent to the end of the financial year. Combined, this support enables a strong, wellfunded validation of the CETO technology in an open ocean deployment site. The delivery of this project marks a key turning point in CETO’s commercial pathway and unlocks the commercial roll out of the technology. BiMEP - CETO Deployment Site for ACHIEVE Programme 16 EuropeWave Contract In September 2023, Carnegie’s subsidiary, CETO Wave Energy Ireland Limited, was awarded a contract for its ACHIEVE Project which will deploy a CETO unit in Europe via the EuropeWave Pre-Commercial Procurement (PCP) Programme. The EuropeWave contract award for the ACHIEVE Project, valued at €3.75 million ($6.3 million AUD), illustrates Carnegie’s leading position in the sector. CETO Wave Energy Ireland was selected in a competitive selection process, which started with 36 technology developer applications and was narrowed down through three competitive selection rounds to 3 final companies that were offered contracts for deployment. The ACHIEVE Project bid received the highest score in the final selection round which gave the team first choice of deployment location. This contract for deployment of CETO through the ACHIEVE Project follows on from the competitive selection and successful performance of CETO in previous phases of the EuropeWave Programme, for which Carnegie delivered a compelling CETO design for sites in both Scotland and the Basque Country, two tank testing campaigns, power take-off testing, techno-economic analysis, technology certification pathway, commercial activities and more. The EuropeWave PCP is a collaborative effort between Wave Energy Scotland (WES) and the Basque Energy Agency (EVE), with the overarching goal of expediting the development of cost-effective wave energy converter systems that can withstand the challenges of the ocean environment. The ACHIEVE Project team embarks on delivering this EuropeWave contract alongside consortium partner SAITEC Offshore Technologies, and a group of subcontractors including Hewlett Packard Enterprise, Lloyd’s Register EMEA, Hutchinson, Quoceant, VGA, Advanced Composite Structures Australia, and Julia F. Chozas Consulting Engineer. The company maintains ownership of the intellectual property, results, and any tangible assets produced during the ACHIEVE project. RENMARINAS DEMOS Spanish Government Grant Carnegie’s subsidiary, Carnegie Technologies Spain (CTS), was awarded a €1.2m grant for its AGUAMARINA project in September 2023. The AGUAMARINA funding complements the EuropeWave contract for the ACHIEVE Project and enables additional activities to be delivered for this key CETO deployment in Europe. Ultimately this funding improves and de-risks the activities whilst supporting Carnegie’s ambition for this deployment to unlock the commercial roll out of the technology globally. Managed by Spain’s IDAE (Instituto para la Diversificación y Ahorro de la Energía), the RENMARINAS DEMOS program is promoting the investment in marine renewables actions through four key subprograms. CTS’ AGUAMARINA Project is receiving €1.2m funding through Subprogram 3: The development of marine renewable technology The EuropeWave project has received funding from the European Union’s Horizon 2020 Research and Innovation Programme under grant agreement No 883751. 17 demonstrators. The RENMARINAS DEMOS program follows the main strategic lines of action identified in the recent Roadmap for the development of offshore wind and marine energy in Spain, targeting 40-60 MW of marine energy deployment by 2030, and is supported by NextGenerationEU funds via the Spanish Plan de Recuperación, Transformación y Resiliencia (Plan for Recovery, Transformation and Resilience). The funding will provide additional support to enhance and extend the activities associated with the ACHIEVE project and supports further collaboration with the deployment site. The funding will provide an additional year of operations offshore, doubling the deployment of the CETO device. Planned wave prediction activities will be expanded delivering additional improvements to the advanced control capabilities to be demonstrated during the operations period. The funding will also support local infrastructure including foundations and the dynamic cable to attach to existing electrical infrastructure. Collaboration, engagement and knowledge dissemination with stakeholders and directly with the Biscay Marine Energy 18 Platform (BiMEP) will also be supported by AGUAMARINA. 05 MoorPower® MoorPower® Technology As the aquaculture sector moves operations further offshore, new challenges are encountered to access clean and reliable energy. Without shore-based power, energy intensive offshore aquaculture operations such as feeding barges are reliant on diesel generators with many associated costs, risks and carbon emissions. This is also true of many moored vessels across the blue economy. Carnegie’s solution to address this challenge is MoorPower, a spin-off that incorporates core aspects of Carnegie’s CETO technology and know-how into a novel wave energy converter system for use in offshore energy demand applications. The first market for this product would be aquaculture barges and vessels that require energy for electrical loads operating offshore. Carnegie’s new wave power product addresses the challenge of securing clean and reliable energy and replaces the diesel generation that would otherwise be required. The concept and vision for MoorPower grew out of engagement with stakeholders in the Blue Economy CRC (BE CRC) including key aquaculture companies and their technology providers, ensuring that Carnegie understood their requirements, constraints and challenges. 19 MoorPower Scaled Demonstrator Project In October 2021, Carnegie launched the $3.4m MoorPower Scaled Demonstrator Project with support from Australia’s Blue Economy Cooperative Research Centre (BE CRC) and a consortium of partners. This important project is taking MoorPower from concept to an operating prototype and allow future users to see the technology in action. As part of the MoorPower Scaled Demonstrator Project currently underway, Carnegie is designing, developing, building and operating a scaled demonstrator of the MoorPower technology in collaboration with Blue Economy CRC and leading partners, including aquaculture leaders such as Huon Aquaculture and Tassal. The scaled demonstrator will be deployed and operated just offshore from Carnegie’s office and research facility in North 20 Fremantle, Western Australia. Operations will commence in late 2023. Fo