RCS - Hydrogen Utopia Intl - Sunday Times – Online Article 5 May 2024

Hydrogen Utopia InternationalAnnouncement

07/05/2024 07:15

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RNS Number : 3507N  Hydrogen Utopia International PLC  07 May 2024

 

Hydrogen Utopia International PLC

 (the 'Company' or 'HUI')

 

Sunday Times - Online Article 5 May 2024

Hydrogen Utopia International PLC, a company specialising in turning
non-recyclable mixed waste plastic into hydrogen and other carbon-free fuels,
new materials or distributed renewable heat, would like to inform shareholders
that there were 2 errors in the article published in The Sunday Times, on 5
May and entitled 'After years in the doldrums, is legal cannabis finally on a
new high? Legalisation has proved a false dawn, whether for medicinal or
recreational marijuana.'

Please note the following 2 errors:

1. The Sunday Times article states that harvest is every 8 weeks. This is
incorrect. Harvest is currently every 3 weeks and anticipated to reduce to
every 2 weeks from late August/September when 5 commercial greenhouses are
expected to be fully operational; by then, 25 harvests a year of approximately
200kg of dried flowers per harvest are expected.

2. The Sunday Times article states that HUI owns Ohrid. This is incorrect. HUI
has exercised its option to acquire 49% of Ohrid Organic Limited, parent
company of Ohrid Organics DOO on 29 December 2023.

The Sunday Times online article dated 5 May 2024 can be accessed by readers
with a digital subscription in this link:
https://apple.news/AsZAYtzn8Sv6Ib26J0JL0pg

The original article is reproduced below.

After years in the doldrums, is legal cannabis finally on a new high?
Legalisation has proved a false dawn, whether for medicinal or recreational
marijuana

In the mountain valley above North Macedonia's Lake Ohrid, eagles glide on the
thermals against a clear blue sky. The air is crisp and alpine-clear. But
beside a bumpy road flanked by densely forested hills, a pungent smell fills
the air - the citric aroma of high-grade cannabis flowers.

These rural hills in the former Yugoslavia, and on the Greek side of the
border to the south, hide a nascent European heartland for the cultivation of
legal marijuana. After boom followed bust for the cannabis industry during the
waves of legalisation in North America and Europe, there are hopes among brave
investors that the region may form the basis of a sustainable business.

In a series of laboratory-clean greenhouses behind high barbed-wire fences at
Ohrid Organics, men and women in medical-grade scrubs tend to thousands of
cannabis plants in various stages of development. They clone, prune and
monitor them as, thanks to a mixture of artificial heat and light, they go
through an accelerated growing process. Harvest under such conditions comes
every eight weeks.

"They're so beautiful! They're like my children," declared the delighted chief
executive, Robbie Donchevski, a former semiconductor engineer who returned to
his home country after a career in Taiwan.

Entry to the growing areas is allowed only through pressurised air jets that
blow away any spores, insects or germs on visitors' clothes and hair that
could infect the plants. There is a good reason for the obsessive cleanliness.
These plants are destined entirely for the medical marijuana market - largely
in Israel, Britain and Germany. When dried and packaged, Ohrid can guarantee
they are free of pesticides and fungicides that might harm patients weakened
by multiple sclerosis, epilepsy or other muscular conditions for which
cannabis is claimed to be helpful.

And why is the location in this remote corner of eastern Europe so prized?
Because an abundance of sunshine, water, cheap energy and labour up here means
Donchevski can produce his weed for only 30 cents a gram. Most medical-grade
marijuana is grown in hyper-optimised conditions completely indoors, using
much more energy for heating, ventilation and artificial lighting.

A typical indoor "grow" - as farms in the industry call them - in Portugal or
Israel would produce flowers at a cost of perhaps about €2 (£1.70) a gram.
In the UK - where there are about four big grows in various undisclosed
locations - costs run at about £4 a gram, industry experts said.

It remains to be seen whether Ohrid, owned by the London-listed firm Hydrogen
Utopia, will thrive where farms in more expensive sunspots such as Portugal
have gone bust. It is still in the testing stage after an €800,000 upgrade.
But having just won its first order in England - for 50kg per month priced at
€2.50 a gram - Donchevski is optimistic.

In 2017, as legalisation was about to sweep through North America, a stream of
companies planning huge licensed grows to feed the expected boom raised money
on the stock markets there. Canada won most of the floats because it had more
relaxed rules than Wall Street. Shares in Aurora Cannabis tripled in value,
making the Toronto-listed company worth about C$5 billion by the end of the
year. Canadian rivals such as Aphria and Canopy Growth followed close behind.

Cannabis has been a plant in which investors - perhaps fittingly - have
endured dizzy highs followed by crushing lows. It seemed entirely logical, as
legislation stipulated that governments wanted licensed and regulated
producers to thrive and squeeze out illicit growers. But in the years to come,
investors found that when Canada and some American states legalised, pot
smokers did not go rushing to the shiny new licensed producers in anywhere
near the numbers expected.

These regulated farms, bound by strict rules on quality control and testing,
found it impossible to compete with the decades-old black market growing the
stuff in attics and garages.

Stockbroker Canaccord Genuity was responsible for bringing most of the
companies to the Toronto Stock Exchange. As its London-based broker, Alex
Brooks, recalled: "After a go-go 2017, in 2018 and 2019 it all basically went
to shit." Shares in Aurora, Aphria and co collapsed.

Much of the blame can be placed on a basic misunderstanding - among the
economists drafting the legalisation regime - of how the black market
operated. Brooks explained that the street price of cannabis had been around
C$6 or C$7 a gram for years. So, regulators assumed, set up the legal
producers to sell within 5 or 10 per cent of that and you should take the
market from the bad guys.

But it turned out that the black market operators' street price was nothing
like a fair reflection of their cost price. As soon as licenced marijuana
arrived, with its laboratory-controlled levels of the active compounds THC and
CBD, the price on Canadian streets dropped 20 per cent.

Far from winning over dope smokers to the legitimate market, the complete
opposite happened as street pot became available for pin money. "It was just
not possible to match the illegal cost structure with high-quality legal
supply," Brooks said.

Much of the legitimate cannabis grown in Canada ended up simply being
destroyed due to a lack of customers. In the US states that liberalised, it
was even worse, according to Brooks: "The price went straight down to 50 cents
a gram. And obviously, you can't make legal supply work at that price."

The situation in the United States was made worse because cannabis was not
allowed to be shipped across state lines, meaning companies had to set up
costly growing facilities in each state, adding still more to their overheads.

Britain, like many European countries, did not want to follow Canada and the
states in the US that legalised marijuana for recreational use. But in
September 2018, following publicity around cases of sick children whose
parents wanted to give them cannabis-based medicines to ease their pain, Sajid
Javid, then the home secretary, relented. A law was passed allowing specialist
doctors to prescribe them after a referral from a GP. It was designed to help
ease conditions such as multiple sclerosis, epilepsy, the nauseous
side-effects of chemotherapy and anxiety.

The regulatory shift inspired hopes for the flagging legal trade. But the
hurdles to get a prescription were so high that the rush investors hoped for
never materialised. As in the US, growers in Britain were not allowed to
export their crop.

About 70 specialists across the UK are thought to be prescribing medical
cannabis and with a lack of central data collection, the market size is hard
to estimate. The market research group Prohibition Partners has estimated that
63,000 people will have been treated with medical cannabis in the UK by the
end of this year.

Toby Shillito, an investment banker turned adviser to companies setting up
cannabis facilities, is a stern critic of the current UK's regime. "Hardly
anybody is using medical cannabis," he said. "Doctors don't prescribe it
because it's not part of the medical school curriculum - and for the patient,
it's difficult to get."

Patients must retrieve their medical records from their family GP, take them
to a private cannabis clinic "and then hope that the specialist will prescribe
it for you", he said. "It's a great shame," Shillito added. "We should be able
to build a British industry with British science, with cutting-edge
technology, creating jobs and stopping the black market, the stabbings and all
the rest of the appalling stuff that goes with it."

Britain's biggest distributor and manufacturer is Curaleaf, a US cannabis
giant set up by Boris Jordan - an American banker who has been controversial
since the Ukraine war due to his many years working in Russia. Curaleaf has
its own grow in Portugal, from where it imports cannabis oil or flowers in
bulk before they are processed in Sunderland into pastilles, drops and other
formats. Jonny Hodgson, its UK managing director, said dried flowers make up
more than half of prescriptions, which patients inhale through a vaporising
device. Smoking cannabis remains illegal, even for medicinal purposes.

Hodgson said: "Here in the UK, it is frustrating. People are not aware they
can get cannabis legally prescribed to them; they think THC is illegal."

Germany has been one of Europe's most progressive countries on cannabis and
last month relaxed its rules further, removing cannabis from the "narcotics"
list - making it far easier for doctors to write prescriptions and pharmacies
to give them out. The move triggered a wave of new prescriptions in Germany,
with one teleclinic alone said to have treated about 100,000 patients in the
first two weeks. In the UK, though, regulatory change is not seen as likely -
either by a Labour or Conservative government.

In the US, meanwhile, deregulation continues apace, both for medical and
recreational use. Last week President Biden's administration indicated that
the federal government would recommend reclassifying marijuana as a less
dangerous drug and permit its medicinal purposes, opening up its use to all
states. The share price of Curaleaf, which issued a statement describing the
move as "monumental", shot up by nearly 20 per cent last week. At nearly C$8 a
share - the company is based in New York but listed in Toronto - that was some
way off its highs of C$16, but it signalled a partial recovery in the
beaten-up sector.

Back in Macedonia, Donchevski - who says he does not use cannabis himself - is
optimistic that his "babies" will find plenty of customers in Europe and
Israel. "These plants are beautiful," he said. "They're better than roses."

For further information, please contact:

Hydrogen Utopia International PLC

Aleksandra Binkowska

+44 20 3811 8770

 

Alfred Henry Corporate Finance Limited (LSE Corporate Adviser)

Nick Michaels/Maya Klein
Wassink

+44 20 3772 0021

 
 
 

Novum Securities Limited (Broker)
 

Jon Belliss/Colin
Rowbury

+44 20 7399 9400

 

About Hydrogen Utopia International PLC

 

HUI aims to become one of the leading new European companies specialising in
turning non-recyclable mixed waste plastic into carbon-free fuels, new
materials or distributed renewable heat.

 

A HUI facility uses non-recyclable mixed waste plastic as feedstock and turns
it into syngas from which new products and energy can be produced. HUI
anticipates that its revenues will be derived from a variety of sources,
dependent upon location and configuration of the HUI facilities, including the
sale of syngas, hydrogen and other gases, electricity and heat sales, and the
payment to it of fees for a given quantity of non-recyclable mixed waste
plastic received at a HUI facility.

 

HUI will target areas where there is significant private sector interest or
potential, financial backing is accessible and or where substantial EU and/or
government funded sources of grants and loans are or may be available. The
global increase in fossil fuel-based energy prices reinforces the need for
alternative, price competitive energy sources, which HUI's business model can
provide.

 

The pressing need to deal with growing amounts of waste plastic combined with
a real momentum in the use of hydrogen from renewable sources may pave the way
for a rapid deployment of and investment in HUI facilities.

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