The share price of Ballard Power is at an all-time low. The published figures for the fourth quarter of 2023 and the entire year 2023 paint a contradictory picture. The future prospects outlined by the board, however, give cause for optimism. Turnover rose in the fourth quarter to 46.8 million USD – an increase of 132 percent compared to the same quarter previous year. Order intake in the fourth quarter amounted to an impressive 64.7 million USD, and the orders on hand (backlog) decreased slightly by three percent to 130.5 million USD, as Ballard received more orders to execute (deliver). However, the orders on hand fell by 21.7 million USD, as there were delays with one customer. This order has not been lost, but cannot yet be counted.
Total turnover in 2023 lay at 102.4 million USD, so the bottom line for the year as a whole was a loss of 0.48 USD per share. These are, however, all snapshots that obscure the company’s prospects, since important markets for fuel cells are only at the beginning of a long phase of strong growth. In the USA, Ballard is working on the construction of a new production facility, as recently announced. And in Texas: There, 20,000 FC stacks, to start, are to be produced per year as well as the MEAs. Investment volume: 160 million USD, and subsidies amounting to 40 million USD are beckoning. Do you build such a plant if you don’t believe in the future of your own technology and its market? By no means.
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FC buses really getting rolling
Impressive is the development in deliveries and incoming orders for FC modules for buses. An example: The bus manufacturer Solaris began its collaboration with Ballard in year 2013 with the purchase of two modules. In the following ten years, Solaris ordered 213 modules. In 2023 alone, it was already 365 modules. According to Ballard, this is just the beginning of a real wave of orders. Similar seems to be the case with cooperation partner for many years NFI: 141 modules in year 2023, which should only be the small beginning of the possible order volume, was the commentary.
NFI unites various bus brands under one roof such as New Flyer (70 percent market share for transit buses in the USA) but also Alexander Dennis (double deckers) and MCI. The annual production amounts to 8,000 buses. The partnership with Ballard has now been strengthened and already 100 FC modules ordered, to be delivered by 2024.
By year 2037, there are to be 650,000 buses globally, according to Information Trends, that will drive with hydrogen. In 2022, it was just about 4,000. Price parity for battery-electric and hydrogen-powered buses should be reached by 2030. Then, there should also be enough H2 stations and the price of hydrogen should be at parity with the price of diesel. Ballard is the clear market leader today and could remain so.
China – the giant awakens
The joint venture with Weichai for the production of FC modules for trucks and buses has still not really got going. Regulatory conditions and support programs as well as initiatives by individual provinces make Ballard confident that things will really get going soon. There, 20,000 complete FC systems (power range from 50 to 200 kW) per year can be built. That corresponds to an annual capacity of 2 GW in FC power. In year 2023, in China, 7,500 FC vehicles were sold – altogether 7,300 FC buses and 13,700 FC trucks. Through special support measures by the province Shandong (where the production is located), the JV will finally get started in 2024.
From the United Kingdom, Ballard has reported an order for 15 MW FC capacity. It entails 150 FCmove modules for an unnamed customer with which a letter of intent for another 296 FCmove modules with delivery by March 2026 exists. It involves off-grid electricity generation from renewable energies. At the same time, Ballard has reported the successful completion of test series for FC backup systems for data centers of Caterpillar and Microsoft. The last could be the basis for major orders.
Has the share price bottomed out?
The share price increase from 1 to 2 USD US-$ (2018 to 2020) to over 40 USD at the end of 2021 and the subsequent decline in the price to currently around 2.70 USD should now lead to a sustained upswing again. This describes the entire H2 ecosystem on the stock exchange: It starts with technological developments that lead to expectations on the stock market, which is reflected in the sharp rise in the share prices of listed companies in the sector.
This was the case at the end of 2021. Then, it came little by little to sharp falls in share prices, related to increasing disillusionment among investors. In accordance with to the Gartner hype cycle, the FC and H2 sector is now entering a long-term upward trend, as the markets are gaining momentum. With hydrogen, this entails production, transport, uses, markets, and much more. It is clear that this is a disruptive new technology and industry.
Combining this analysis with the long-term Elliott wave chart results in a picture in which the Ballard share is now bottoming out (a current sell-off as the end of the downward spiral), just at a time when investors almost no longer want to believe in the company’s success, which is expressed in the very low share price and the market valuation of about 0.8 billion USD with, at the same time, 751 million USD in the bank. Today we have real figures, if you only look at the more than 1,680 buses that drive with Ballard technology. The hydrogen costs per 100 km are sinking massively. The modules are also becoming increasingly competitive thanks to cost-cutting programs and material optimizations – also in comparison to battery-electric and diesel-powered buses.
If the cost of diesel fuel is on average 240 USD per day and battery-electric is 16 USD for electricity per day, then the fuel cell (hydrogen) is in between at on average 85 USD per day. The charging times of a battery-electric bus must also be taken into account, however, whereas vehicles can be refueled in just a few minutes with hydrogen or diesel. Especially for certain applications (with long distances, hilly terrain, weather influences), the hydrogen bus is superior to the battery-electric bus.
In addition, hydrogen is becoming increasingly cheaper. Whereas the average price per kg has been still around 10 euros up to now, an average of 6.48 EUR should be feasible in one to two years, in two to three years 3 to 5 EUR per kg, and in 10 to 15 years, so they say, it could even be as little as 1 to 2 USD per kg. The total cost of ownership for the hydrogen bus will fall massively, and diesel will need to be replaced.
Ballard is calmly focusing on the scaling of its technologies and the imminent ramp-up of important sectors such as heavy transportation. Already in the current year 2024, incoming orders for FC modules for buses are set to rise sharply, where the turnover is expected to be split 30 to 70 percent between the first and second half of the year. Order intake will have an impact on the share price, and the next quarterly figures less so.
Summary: Ballard is very well positioned in terms of its finances. With over 750 million USD liquidity, the company will be able to manage its future growth (expansion of existing capacities, geographical expansion) very well from its own resources. Key markets such as FC buses and trucks are in the starting blocks and will ensure very high growth for the company in the long term. That this all is taking longer than expected is normal for the development of a new market. The year of the actual breakthrough (profit zone) will be 2025/26, as the most important framework conditions (including availability of H2 infrastructure) will be created and the regulation as well as support programs worldwide (USA, EU and Asia) will take full effect in a positive sense. Ballard is likely to be one of the winners of this development. The year 2024 will be characterized by rising order intake. Buy and leave alone. Investment horizon: at least two to three years.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
Interview with Thomas Korn, CEO of water stuff & sun
Startup company water stuff & sun has developed a novel technology that is designed to provide a safe and easy way to store hydrogen. The solution’s key component is its microvalve system. A pressure regulator controls the release of hydrogen progressively from 1,000 bar down to just a few bar. H2-international spoke to Thomas Korn, CEO of water stuff & sun, about how it works and the challenges encountered.
H2-international: Mr. Korn, the storage and refueling of hydrogen is a challenging issue. How do you solve that problem?
Korn: As it stands, the storage of hydrogen in conventional compressed gas tanks is complex and expensive. There is a trade-off between performance, safety and cost. We have a surprising solution to this: Instead of using a small number of large cylindrical tanks, our technology allows us to store the same amount of hydrogen in multiple spherical carbon-fiber vessels the size of a tennis ball. The silicon microvalve system, which is built into every pressurized ball, means that all the vessels act identically and in unison, just like a large tank. The expense involved in ensuring the safety of hydrogen stores can be significantly reduced if the energy is split into multiple small vessels. As a result, we save almost half the carbon fiber material compared with a standard pressurized tank. We call these ball-shaped high-pressure storage vessels Sfeers.
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They allow hydrogen cells to be scaled as required and integrated into hydrogen batteries of any shape. Green hydrogen can thus be used in a variety of motive and stationary applications such as trucks, drones and airplanes. The next generation of these energy stores will be 95 percent lighter and up to 30 times cheaper than lithium ion batteries – while still carrying the same amount of energy.
Fig. 2: Doing the rounds: a Sfeer ball at the EES trade fair in Munich
How does the hydrogen battery work?
Hydrogen batteries are low-pressure hydrogen tanks containing Sfeers which are filled at up to 1,000 bar. The hydrogen battery enclosures are designed for low pressures and can therefore be perfectly adapted to the available installation spaces in a wide array of mobility products. When hydrogen is extracted, the pressure in the hydrogen battery enclosure decreases and activates the microvalve system in all the Sfeers once the pressure drops below a mechanically programmed ambient pressure range. These then release hydrogen, together providing the energy required for a hydrogen engine or a fuel cell.
The pressure in the hydrogen battery rises again above the pressure activation level that is set during the manufacture of the micromechanical components. Once the pressure level has been reached, all the microvalves close. The pressure in the battery stays constant or reduces further if the consumer withdraws more hydrogen. The activation pressure is set to the supply pressure of the consumers. The hydrogen battery can be thought of as a low-pressure tank, but with the capacity of a high-pressure tank.
The concept increases the safety level while at the same time reducing the amount of material used. Since their highly adaptable shape means they can make best possible use of the available space, hydrogen batteries outperform conventional pressurized tanks in terms of volumetric and gravimetric power density.
Microvalve technology has its origins in satellite technology. How is this technology produced?
Satellites have a gas propulsion system that secures their position within the communication window. Even in the early days, industrial developers started to use microsystem technology to regulate gases due to financial pressure to make ever smaller and lighter satellites. Our innovation centers on the development of micromechanical switching elements that don’t need electrical energy for their control; instead they are controlled passively by the ambient pressure. As in semiconductor engineering, highly industrialized manufacturing processes are used that can create thousands of identical parts on large silicon wafers. Valves, gas channels and the five-stage pressure regulator are produced and joined in four silicon layers. All chip components are built into a space measuring 4 x 4 x 2.5 millimeters (0.16 x 0.16 x 0.1 inches).
How did you come up with the idea of spherical high-pressure vessels?
The technology was invented by Prof. Lars Stenmark, who taught microsystem engineering in the Ångström Laboratory at Uppsala University and who had already applied earlier inventions to the aerospace industry. When he told me about his hydrogen storage invention, I was all for it. A physical hydrogen storage vessel that combines two existing technologies and resolves the trade-off between safety, cost and performance in hydrogen tanks – we couldn’t resist and founded the company water stuff & sun in January 2017.
Fig. 3: A view of the lab shows the test setup for microchip evaluation
Is there already a prototype?
We have already produced and tested prototypes of switching valves and the key element of the valve system – the pressure regulator – in the clean room of the Ångström lab in Uppsala. We have also put a carbon fiber Sfeer prototype through a burst test and validated our simulation model with the results. At the moment we are building the first system prototype of a hydrogen battery with three Sfeer cells. The prototype and its use in a micromobility application will reach technology readiness level 5 in the first half of 2024. At that point we’ll start to develop hydrogen batteries for specific mobility products with several manufacturers and go on to industrialize them in the next stage. There is a great deal of interest from industry. For example, we have already submitted a joint funding project with an aircraft manufacturer and the German Aerospace Center. We are working with our partner Keyou to develop hydrogen batteries for converting and retrofitting trucks and buses. Additionally, we’ve managed to stimulate interest from a mining machinery manufacturer and a truck OEM.
Returning to the refueling process: Am I right that you are intending to swap the tanks?
Hydrogen batteries don’t need to be refueled in the vehicle; they are exchanged at swap stations or, in the case of small applications, they can also be exchanged by hand. That way, refueling can take place quickly and cost-effectively. The empty hydrogen batteries are refilled at central compressor stations and returned to the swap stations. The low operating pressure and the limited quantity of H2 in the hydrogen battery enclosure makes this ease of handling possible. In comparison with conventional high-pressure or liquid hydrogen refueling stations, the expense and complexity are significantly reduced, which in turn lowers the capital and operating costs and thereby also the hydrogen price. For heavy-duty vehicles, for instance, with hydrogen, several hundred liters of fuel energy equivalent need to be compressed, cooled and transferred. By simply swapping the hydrogen battery, the process can be completed in just a few minutes.
The financing required will be considerable. What are the next steps for your company?
The need for capital in a tech startup is always an issue – it’s a continuous process. We have just started a new financing round in which our existing investment partners, such as the investment arm of Kreissparkasse Esslingen-Nürtingen, or ES Kapital for short, the company Besto, run by the entrepreneurial Beyer and Stoll families, and machinery and tooling factory Nagel, have already registered an interest. I would refer to them as relatively down-to-earth, regional investors that have been involved from an early stage. The plan is to invest the new cash in the development of a prototype in the motive application area, as mentioned earlier, among other things. The raw materials for the production of semiconductor chips are all affordable. Carbon fiber and silicon are readily available on the market. That is an advantage in terms of further scaling. If everything goes according to plan, we will see the first of our batteries in a vehicle or aircraft by 2025.
Fig. 4: The H2 battery should be quick and easy to swap in and out of a truck
When and how will the market for your solution evolve?
The transformation of energy systems is well under way. Infrastructure for natural gas- and oil-based fuels is being replaced by hydrogen and liquid hydrogen derivatives such as ammonia, methanol or synthetic fuels. The competition for technology leadership and, ultimately, energy leadership began long ago. In China and the USA, many billions of euros are now being invested in hydrogen technologies and their infrastructure; we Europeans are attempting to counter this with the Green Deal. Hydrogen projects are sprouting up all over the place. As far as we are concerned, the market has already started; we’re currently concluding cooperation agreements with initial vehicle and machinery manufacturers.
Where will the first market be that manages to develop?
We need to take a multitrack approach and are therefore also looking at the USA and the Arab world. The country that achieves the lowest hydrogen prices by investing will attract a lot of companies and investment. In the EU and Germany I hope that the greenhouse gas quota gives us an instrument that is competitive.
You won a prize at the World CleanTech StartUPs Awards, otherwise known as WCSA 2023. What particularly impressed the judges?
Firstly, the award as a platform is a very interesting network in itself. Applications for WCSA 2023 were invited by ACWA Power in strategic partnership with Dii Desert Energy and the French institute for solar energy CEA-INES, among others. The judging panel recognized the transformative potential of the hydrogen battery. The innovation could create an efficient and flexible infrastructure for H2. The electricity costs for hydrogen production from renewables are very low in Dubai. That’s why ACWA invited us again at the end of 2023 to present our solution locally. That will be extremely exciting.
In November we received two awards at the Global EnergyTech Awards: the prize for the Best CleanTech Solution for Energy and a special prize for Best Stand Out Performer. We were the only winners from Germany. That helps.
Interviewer: Niels Hendrik Petersen
Fig. 5: Thomas Korn
Thomas Korn has been working in the hydrogen field since 1998. The engineer’s experience includes work at BMW on fuel cell development. In 2015, he co-founded the hydrogen startup Keyou in Munich. The startup water stuff & sun was launched in 2017 in Unterschleißheim, Bavaria. The fledgling company now has 15 members of staff and a branch in Uppsala, Sweden.
The energy providers Thüga und Energie Südbayern (ESB) as well as Energienetze Bayern have converted parts of their gas network to 100 percent hydrogen in a test area. Mid-September 2023, the H2 feed-in system of the research project H2Direkt was put into operation in Hohenwart, regional district of Pfaffenhofen. Already in this heating period will ten customers be provided with pure hydrogen from there for 18 months initially via the rededicated gas network.
“The conversion of a natural gas network to 100 percent hydrogen with minor technical modifications is feasible, and the operation is safe,” said Bayern’s economy minister Hubert Aiwanger at the starting up ceremony. H2Direkt is therefore a blueprint for a climate-friendly energy supply.
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The feed-in system reduces the pressure of the supplied hydrogen and feeds it with 250 millibars into the corresponding network section. The green hydrogen required for this is being supplied by Westfalen AG in trailers by truck to Hohenwart.
The research institute DVGW-EBI had prior to this given the green light for all components installed in the distribution grid area. H2-suitable are also all the components installed in the boiler rooms of the households, including the original existing volumetric gas meters, which are perfectly suitable for accurate measurement with hydrogen. Due to the larger volume flow of hydrogen, they will nevertheless be replaced by commercially available but larger meters.
The 100-percent H2-capable condensing boilers come from the cooperation partner Vaillant. As part of the research project, regulations for the measurement of hydrogen are also being drawn up. The measuring concept for the field test has been approved by the calibration office (Eichamt) or the state office for weights and measures (Bayerisches Landesamt für Maß und Gewicht, LMG). H2Direkt is part of the TransHyDE project “Sichere Infrastruktur” (secure infrastructure) and funded by the German ministry for education and research (see p. 15).
Hydrogen Regions series: HydroHub Fenne living lab
The power plant site in Fenne, Völklingen, a long-standing power generation facility which celebrates its centenary this year, is now the focus of Iqony’s plans to meet the future energy needs of the industrial region of Saarland. Owned by the STEAG Group, Iqony specializes in renewable energy, hydrogen projects, energy storage, district heating and decarbonization solutions.
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The site is already a major energy intersection for the state of Saarland in southwestern Germany and is at the crux of the area’s district heating supply. Along with the present facility, the site will in future be home to HydroHub Fenne, an addition that will ensure it remains an essential part of Saarland’s energy system in the years ahead.
“Due to its existing infrastructure, we see the site as ideally suited to the building of a hydrogen production facility at this location. The existing grid connection allows us to draw sufficiently large amounts of renewably generated power to produce renewable hydrogen here, close to the point of use,” explains Patrick Staudt who is in charge of hydrogen at Iqony Energies, a Saarland-based subsidiary of Iqony.
The project will need to comply with the provisions of the European Union’s Renewable Energy Directive (RED) and its associated German legislation so that the hydrogen produced in Fenne can also be classified as climate neutral according to the strict criteria set out in EU law. Iqony’s own trading division will provide support to make sure this happens.
IPCEI notification is vital
Depending on the number of operating hours, HydroHub Fenne will produce approximately 8,200 metric tons of green hydrogen a year. “The current plan is to commission the plant in 2027 – assuming that the latest statements on the completion of the IPCEI notification by the European Union are correct,” says Patrick Staudt.
IPCEI stands for Important Project of Common European Interest. Iqony applied to have its Saarland hydrogen project recognized as an IPCEI back in spring 2021. Dominik Waller, who is responsible for project development alongside Patrick Staudt, explains the significance of the decision: “Our project needs to gain recognition as an IPCEI to allow the German government to support us financially with the investment. It’s impossible without IPCEI notification due to European law on competition and state aid.”
The prospects are looking good for the project in Fenne. A final decision is expected in Brussels by the end of 2023 – more than two years after the original announcement was due. “Once we have the funding authorization from the EU, it will then be a matter of the government putting specific funding in place. That should happen in the first quarter of 2024 which will mean we are on track in terms of the project schedule,” elucidates Patrick Staudt.
Public funding of the project is necessary because there is not yet a functioning market for hydrogen in general or for green, i.e., renewable, hydrogen in particular. Hydrogen can help industry or, for example, local public transport avoid carbon dioxide emissions. However, hydrogen finds itself in financial competition with other energy sources such as natural gas. In economic terms, hydrogen is no match for other energy forms at present, precisely because a competitive marketplace has still to develop.
“We see this as a classic chicken-and-the-egg problem: Potential hydrogen producers are holding back on their investment decisions, waiting for definitive signs of future off-takers. On the other hand, potential off-takers are not investing in converting their processes and plant technology while there is no guarantee that the required hydrogen will be available in sufficient quantities in the future. The only way of getting out of this dilemma is if public authorities provide investment security for both sides in the form of funding,” acknowledges Dominik Waller.
As for the level of funding for HydroHub in Fenne and the overall capital outlay, Iqony is not at liberty to divulge specific figures for competitive reasons. However, a few hundred million euros are expected to be invested in the project. “We won’t be able to give a more exact figure until the tender for the plant technology has been concluded,” says Patrick Staudt. Though this will only be when the funding letter has been received. According to Staudt, this once again shows how fundamentally important the conclusion of the IPCEI process is in order to progress the project further.
Fig. 2: Site development
Tenders on the market
Another stipulation resulting from the funding conditions for an IPCEI-designated project is that the hydrogen produced can’t simply be sold in the usual way. “We’re obliged to use tenders to bring our product to market so that all potentially interested parties have a chance to participate,” states Dominik Waller. This is where the Fenne location is said to be to the company’s advantage, since it already has a disused gas pipeline connection that could be employed in future to link HydroHub Fenne to the hydrogen supply network being created. Waller continues: “It’s also why we are paying close attention to the current discussion on the government’s plans for a core hydrogen network – and here we see the need for further improvement, especially for Saarland.”
This expressly applies not only to the delivery of the future electrolyzer in Fenne through the core network draft, which was presented by FNB Gas to Germany’s Federal Network Agency in November 2023, but also to the present STEAG and Iqony power plants in Bexbach and Quierschied (Weiher power plant). “At both sites we want to build new, hydrogen-compatible gas power plants – just like the government itself has set out in its 2030 target, so we can switch off old coal-fired units, meet our national climate goals while at the same time ensuring the security of supply if wind and solar power aren’t available in sufficient quantities,” says Andreas Reichel, CEO of STEAG and Iqony.
Reichel adds: “Current government plans do not yet envisage bringing the core hydrogen network to these two locations, which will be necessary to make this happen. That said, we’re grateful to the Saarland regional government for its reassurance that this is precisely what it will be campaigning for in Berlin.” If such efforts are successful, it would enable Iqony to build new power plant capacity in Saarland by 2030 which is urgently needed to guarantee security of supply as well as ensure the green transformation of power generation in Saarland.
In the medium and long term, it is then hoped that these and other new gas power plants will be run on hydrogen to provide a reliable, carbon-neutral supply of energy. If the core hydrogen network planned by the German government is not immediately routed to within close proximity of the sites, this will be completely impossible. Despite the unresolved issues, Iqony is optimistic about the realization of its hydrogen and power plant projects on the River Saar:
“We have the technical and commercial expertise from more than 85 years in the global energy industry, we have the right locations and we have proven through the construction and commissioning of one of the world’s most advanced combined-cycle power plants in Herne, Nordrhein-Westfalen, at the end of 2022 under difficult COVID-19 conditions, that we can carry out challenging large-scale engineering projects on time and on budget – if the regulatory environment allows us to do so,” concludes Andreas Reichel.
Author: Dr. Patrick Staudt, Dominik Waller, both from Iqony
The company HPS Home Power Solutions has unveiled a new generation of its seasonal energy storage system. The Picea 2 now uses lithium batteries, which makes installation in the home easier due to the lower weight. With twice the power, the appliance is also equipped for e-mobility and heat pumps.
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The new research and development site is located almost directly next to the youth center of FC Union Berlin in an industrial area in Berlin-Niederschöneweide. In the future, not only kickers but also installers and partners will be trained there. But not only that; the new version of the seasonal storage unit is also to be manufactured there. “On-site installation is even more cost-effective for us, as the transport costs come out lower,” stated company founder and CEO Zeyad Abul-Ella – left in December 2023 and since then only still a shareholder – at the first presentation of the new device to an exclusive circle of visitors.
Nine years after its founding and a good five years after the first presentation of a Picea model at the trade fair Energy Storage in Düsseldorf 2018, there is a whole series of further developments of the product. The device has needed to change with the times. With Picea 2, the output power has therefore doubled to 15 kilowatts, which makes it possible to cover higher energy requirements, for example for an e-car or a heat pump. In the event of a power failure, the backup power supply ensures that important installations in the household are supplied with a stable power supply. “For each of the three phases of the three-phase current, the device now delivers five kilowatts of power,” explained Abul-Ella.
The new generation of the storage system also offers an increased connected load for photovoltaic systems – picking up on the trend in the market. Through new power electronics, according to HPS, efficiency was able to be increased, which means that higher levels of self-sufficiency are now possible. The energy utilization efficiency (Nutzungsgrad) including heat utilization is 90 percent. The electrical efficiency is between 35 and 40 percent.
Cooperation with competent partners
The device now uses an external inverter from SofarSolar, in which the software for the storage system has accordingly been adapted. “We do what we are really good at. For all other components, we rely on cooperation with partners,” said trained civil engineer Abul-Ella. The latter applies to both the inverter and the lithium batteries.
The AEM electrolyzer comes from the German-Italian company Enapter. The abbreviation AEM stands for anion exchange membrane. The technology uses more cost-effective materials such as steel instead of titanium and combines the advantages of alkaline electrolysis with the flexibility and compactness of PEM electrolysis. Enapter co-founder Vaitea Cowan was also present at the product launch, and Hans-Peter Villis, former EnBW (Energie Baden-Württemberg AG) director as well as partner from the very beginning and today chairman of the supervisory board at HPS.
Specifications for developers
“A tough requirement for the technical developers was to retain the dimensions for the slide-in boxes for the electrolyzer and the fuel cell in the energy center of the original Picea,” stressed Abul-Ella. The first Picea customers are pioneers. They should therefore also benefit from the innovations and be able to switch to them easily at a later date. A further development in the electrolysis module cools the hydrogen to 5 °C. This makes it possible to take in four to five times the amount of gas, because the moisture is now removed before storage.
New are also status displays that, at the touch of a button on the device or via the app, provide information about important system and storage statuses. The system always consists of an energy center and a hydrogen storage tank with a compressor that is installed outside the house on a concrete foundation. This foundation is absolutely essential.
The energy center unit has slimmed down considerably and now weighs 70 percent less: instead of 2.2 metric tons, now only 700 kilograms (1540 lbs). Reason is the switch from lead-acid to lithium batteries from the company Pylontech. The overall height has also reduced by 15 centimeters compared to its predecessor to 1.85 meters (6.07 ft). Doesn’t sound like much, but can be decisive for installation in a basement.
The Picea 2 costs at minimum 99,900 euros
The Picea module converts the surplus solar power in summer into hydrogen. In this way, large amounts of energy can be stored efficiently and over long periods of time. In winter, the gas, via a fuel cell, can be converted back into electricity and heat. The long-term storage capacity is up to 1,500 kilowatt-hours of electricity. In the smallest version with 16 gas cylinders, it is 300 kilowatt-hours.
The smallest version of the Picea 2 costs 99,900 euros. The gross price is the same as the net price, as the sales tax for the device, including storage units, is zero percent. With more storage capacity, the cost rises to up to 140,000 euros. This applies to a new construction where the installation can also be planned. In existing buildings, it can be a bit more complicated, so the amount may increase to up to 160,000 euros.
The demand seems to be there. Because over 500 devices of the first generation have been sold to date. More than 100 are installed at customers’ spaces.
The turnover in the amount of 198.7 million USD in the third quarter lay considerably below expectations, the loss per share amounts to a minus of 0.47 USD per share with the expected minus of 0.30 USD per share – in the negative sense. The loss for the first nine months of the financial year lies over 725 million USD. But the cash on hand at the quarter end of still only 567 million USD is rather irritating, as the board always spoke of sufficient liquidity.
It is now certain that at least 500 million USD in new liquidity – in the short term – must be obtained in order to be able to adequately finance all projects, is the opinion of the specialist analyst from Morgan Stanley, Andrew Percoco. This then puts further pressure on the share price – if it happens, – since institutional investors want a discount on the entry price.
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Has the Plug Power management overestimated themselves and started too many projects at the same time? There’s talk of seven to nine giga-projects (production facilities for FC stacks, electrolyzers, hydrogen, cryogenic technologies, etc.) in the USA and four others around the world. For this, the capital drain is very high. At the same time, certain regulations are not yet in place. And the credit expected from the Department of Energy (DOE) as part of the Inflation Reduction Act in the amount of 1 to 1.5 billion USD not be ready until 2024 at the earliest, as there are extensive tests and conditions involved.
Plug itself does not yet produce liquid hydrogen, but buys it on the market. This has led to further problems, as it is associated with high costs and losses. Parallel is the frozen cash of over one billion USD (restricted cash), which in turn, in my estimation, could be connected with the major customers mentioned here.
Tight liquidity situation
Still only 567 million USD was the amount of cash in the bank for Plug Power at the end of the third quarter. The many parallel projects, however, require further financial support before sales and the associated profits can be generated. That will take some time. The hyperboles uttered under CEO Andy Marsh to influence the stock exchange via investor relations are backfiring.
It is now to be expected that Plug will attempt to raise new equity by issuing shares and/or convertible bonds, which in view of the figures will no longer be so easy. Based on current share prices, any major capital increase (share issue) will only be possible at low prices. The board has stated a number of internal problems, from the situation with the purchase of hydrogen to delays in the start-up of production facilities as well as problems with supply chains.
The strong order intake in the electrolyzers segment may be reassuring, but it should be feared that competition will increase sharply, causing profit margins to shrink. Direct quote from the company: “Unprecedented challenges in the supply of hydrogen in North America.”
Short Interest
This figure – in December 158 million Plug Power shares – I always look at very closely, because it shows in which form speculation against a company and its share price is taking place. If the news is good, a price turbo (squeeze) could come about, but in Plug’s case it shows that the short sellers are correct in their assessment. I assume, though, it’s exactly big customers such as Amazon and Walmart who may have hedged their option rights via short selling. Both together have received over 100 million of these rights as a gift and can change them with very low conversion rates into shares. Theoretically, both have several billion USD (book) profit in their books if they go short at 70, 60, 50, 40, 30 USD per share – their purchase prices were are about 1.29 to 13 USD per share via exercise of the warrants. But that’s just a guess on my part – no guarantee.
I have always been critical of this deal because Plug has “baited” customers with it. And restricted cash of one billion USD is directly related to these major customers. The reason: This involves guarantees, warranties, security for technical support, spare parts and much more. Plug Power must provide such guarantees to customers such as Walmart and Amazon so that it can soundly implement orders, meaning operates H2 refueling stations for forklift trucks and ensures that there is always enough hydrogen available. The result is around one billion USD in restricted cash, frozen financial resources that cannot be used in any other way. Will companies like Amazon remain forever exclusive customers Plug Power regarding forklifts and their H2 refueling stations? The question arises because there are fewer orders from Amazon for the retrofitting of forklift trucks. Why?
Plug loses power-to-X project in Denmark
Via the consortium partner Plug Power Idomlund Denmark, Plug had actually been awarded the contract for the first power-to-X project in Denmark with a total of 280 MW of electrolysis capacity over six projects in its pocket. Then came the setback on November 20, 2023: Plug did not manage to provide a bank guarantie within the specified timeframe. It is probably about 28.3 million euros – no guarantees.
Summary: I had advised restraint until the figures for the third quarter were on the table. They are now here, but a buy still does not present itself, because it will still take time until the company creates clarity. On the contrary: Wait and see. Traders, however, can become active, since price fluctuations driven by the news will remain very high (high volatility), because the stock market has already severely punished the company (minus 40 percent alone on Nov. 10, 2023).
The question also arises as to whether Plug Power cannot avoid including partners in some projects, as it has already done with Fortescue. But that would come at the wrong time, because the possible conditions would be determined by the partner and investor rather than Plug Power itself. Will assets now possibly even have to be squandered?
In short: There is currently no need for action, because the expected figures for the current fourth quarter could again be disappointing. In 2024 and in the following years, however, the positive turnaround may come, when Plug has realized the in-house production of hydrogen on a large scale and benefited here from the Inflation Reduction Act, among other things, and also made good money with it. A DOE loan can be a game changer, but it takes time. There is no guarantee of this, even if it can be assumed that the Biden administration will not abandon prestige projects and players like Plug.
Further issues of shares are now even considered necessary and will not be implementable at ideal conditions. Six analysts have already radically changed their assessment – in a negative sense. I didn’t think my forecast would come true so quickly that the value of Bloom Energy would exceed that of Plug Power. Unfortunately, buy on bad-news is not yet suitable here. A buy limit for buying the share at three euros would be a first step. This stock is contemplatable if Plug offers institutional investors a discount on the purchase of new shares as a concession – as a risk discount.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
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