E-fuels – irrespective of their disputed suitability for the car sector – will be essential for the decarbonization of the transport sector. Hence German transportation minister Volker Wissing is continuing with his campaign to ramp up e-fuels. On June 4, 2024, he underlined his approach by hosting the second International E-Fuels Dialogue in Berlin and used the event as a launchpad for his “Berlin declaration.” According to information from the German transportation ministry, it was an “agreement on technological openness, joint research and development and uniform standards.”
Fig.: The Berlin declaration is signed by German transportation minister Volker Wissing, the Lithuanian minister for transport and communication Marius Skuodis and the Japanese parliamentary vice minister for economy, trade and industry Taku Ishii (from right)
efuels-dialog-2024-07.jpg
Source: BMDV
Wissing explained: “E-fuels are, alongside battery electric propulsion and hydrogen, an important option for future climate-smart transportation – in the air, on the water and on the road. […] We want to encourage research and development as well as the construction of production plants. For this, we’d like to attract private-sector investment as well. We will further accelerate the expansion in renewables.”
Marius Skuodis, minister for transport and communication in Lithuania, said: “Thanks to its considerable renewables potential, Lithuania is in a position to become a producer of hydrogen and associated synthetic fuels.” Taku Ishii, parliamentary vice minister for economy, trade and industry in Japan, added: “The concept of the ‘triple breakthrough’ – realizing decarbonization, economic growth and energy security simultaneously – has a key role to play in achieving a carbon-neutral society. In this context, e-fuels are capable of contributing significantly to the triple breakthrough.”
The next edition of the E-Fuels Dialogue will be held in Tangier, Morocco, in summer 2025.
ILA in Berlin
E-fuels were also a key topic at the ILA Berlin Air Show which took place in the German capital from June 5 through 9, 2024. It was here that the former petroleum association and now industry association for fuels and energy en2x indicated that there will be “an EU blending mandate for sustainable aviation fuels (SAFs) from next year.” Chief executive Christian Küchen explained: “Quotas alone are, however, not enough to stimulate the investment that is now required in SAF production. The EU’s E-SAF quota will rise to 5 percent in 2035. It’s not clear at the moment if the plants needed for this will be ready in time.”
At the air show, the association handed over a list of demands including 10 suggested actions to the German government’s representative for German aerospace Anna Christmann and the parliamentary state secretary at the German transportation ministry Oliver Luksic.
Project developer Enertrag has appointed Tobias Bischof-Niemz to the board. From the beginning of April 2024, the hitherto head of new energy solutions will be responsible for the newly created executive division of “Projects International & Technology.” The move will see the number of board members rise from three to four.
Jörg Müller, supervisory board chairman, founder and principal shareholder of the company located in Uckermark in eastern Germany, explained: “We are convinced that Dr. Bischof-Niemz, with his extensive experience and expertise, is the ideal candidate for the board position of Projects International & Technology. His commitment to sustainability and his successful track record in the design and implementation of integrated renewable power plants that combine power, hydrogen and heat production make him a key figure for the further development of Enertrag at a global level.”
The appointment by Enertrag, which now employs over 1,000 staff members, is the company’s response to growing international interest. Prior to joining the board, the 47-year-old was in charge of the organization’s international activities and sector coupling solutions.
“Today is a good day for industry location Germany, climate protection and sustainable jobs in our country” – German economy and climate protection minister Robert Habeck was referring to the first bidding process for carbon contracts for difference, which the German government launched in mid-March 2024.
Fig.: Robert Habeck explains his policy
Habeck.jpg – Wolf, bitte die Bildqualität so gut wie möglich optimieren
Source: Screenshot BMWK (German economy ministry) video
“With the carbon contracts for difference, firstly, we are promoting modern, climate-friendly industrial systems of tomorrow. Through this will come new technologies, value chains and infrastructures. This helps, secondly, industry worldwide to switch to climate-friendly production. And thirdly, with the carbon contracts for difference, we are setting new international standards for efficient and low-bureaucracy funding,” he added.
Abroad, this step will be admired with envy, according to Habeck: “Cool what you’re doing in Germany. We want that too.”
Even if some people in Germany don’t like to hear that – because they are all too willing to participate in Habeck bashing – you have to give him credit for getting a lot of things off the ground during his time in office. And if representatives of the chemical industry in particular describe these carbon contracts as a “right step,” not everything can have been wrong.
Opinions on Habeck are currently divided: For some, he is not green enough, too pro-business, too industry-friendly – for others, he is too green, too idealistic, too poetic.
But if you look at what has been kicked off in recent months – in particular due to Habeck’s commitment – it can be seen, even with strong climate protection glasses: Germany has come through the last few winters well and now has several LNG terminals built in record time. Germany is gradually getting the energy policy framework that so many people have been calling for, which provides planning security – be it in the heating or transportation sector, but especially in the industrial sector.
Germany is making efforts to keep energy-intensive companies in the steel, glass, cement and chemical industries in particular in the country and to accommodate them. Germany is also forging international partnerships for the import of hydrogen and the transfer of technological expertise (see H2-international May 2024: p. 12 – Norway as partner country of Hannover Messe).
In addition, the IPCEI projects are finally gaining momentum (see p. 28), and even the update to the 37th ordinance on implementation of German emissions reduction law (37. Verordnung zur Durchführung des Bundes-Immissionsschutzgesetzes) was passed by the German parliament on March 14, 2024.
These and many other measures have led, among other things, to a 10.1 percent reduction in climate emissions in 2023 compared to 2022, which corresponds to the largest decrease in CO2 equivalents since 1990.
Yes, this decline is certainly due in part to Germany’s currently reduced economic strength. So? It is quite clear that a transformative process in the energy sector means that production cannot continue at the same level as before. And exactly this is wanted, because we can no longer afford to waste as much energy and as many resources as before.
A moderate decline in economic power is, in my opinion, very manageable for the time being and should be viewed positively, as this is precisely what will break up outdated structures and ensure the country’s future viability. It will now be a matter of keeping the right degree in sight, to find a balance between pressure to act and reasonableness.
This applies not only to the government, but also to the people, who also possess a great deal of responsibility – be it the choice of the next car or the next heating system. Less grumbling and more sustainable action can sometimes work wonders.
As of January 2024, the DWV has a slightly shorter name. Instead of being called the German hydrogen and fuel cell association (Deutscher Wasserstoff- und Brennstoffzellen-Verband e.V.) it will – once again – be known as the German hydrogen association (Deutscher Wasserstoff-Verband (DWV) e.V.). The latter is exactly the same name it had when the association was founded in 1996 before it was subsequently changed.
A statement from the association says that the name change is designed to underline “its technological openness and the diversity among its member companies” and its position as “the only national association for hydrogen which covers the whole value chain and expertly represents the interests of all hydrogen technologies (not just explicitly the fuel cell).” The decision to make the amendment was approved by a large majority at its 28th general meeting which took place last November in Berlin.
The Plug share price fell quickly to under 3 USD (2.50 USD at low) and then rose again to over 4 USD. At a price of less than 3 USD, it was possible to build up excellent trading positions (see H2-international Feb. 2024). Is there now a turnaround in the price trend or was this just a brief flare-up before the downward trend continues? Or will there even be an upward trend reversal?
There is a great opportunity for Plug Power to receive a credit (loan) totaling 1.6 billion USD from the US Department of Energy (DOE) as part of the Inflation Reduction Act. This is to come in the third quarter, although there are also rumors that it could be approved much earlier, but I won’t take part in this speculation. In this ideal scenario Plug will then have sufficient capital to establish and expand several production facilities, for example in Tennessee and New York, and start production there. The stock market will value this – if it happens – very positively: with higher share prices.
But a loan is borrowed capital that has to be repaid. What are the conditions? How high is the interest or coupon? What are the repayment arrangements? Will the loan be paid out immediately in full or in installments and with target definitions (milestones)? What is Plug doing with the money? If there is no clarity about this or the loan is not approved in the first place, then the stock market will be miffed or react in disappointment, with the consequence of falling share prices.
Parallel to this is running a share placement program (at-the-market) worth 1 billion USD. Of this, already over 305 million USD, through the placement of 77.4 million shares, have flowed into Plug’s account. This will also correlate positively with the DOE credit: If this is granted, Plug’s share price will – even if possibly only for a short time – climb, and this then enables the perfect placement of shares via ATM in the ramp-up. This money from the ATM program can be used to solve the short-term liquidity problem, since the cash on hand lay at just 135 million USD December 31, 2023.
There are also other possible difficulties, because the US Treasury Department is defining how hydrogen must be produced in order to receive the subsidy of up to 3 USD per kg. Plug is relying very heavily on this funding, but there are still questions: From which location must the regenerative energy come from, in what amount and at what point in time? And at which location must the electrolysis take place? With this are, like in the EU, a series of bureaucratic hurdles – unfortunately.
Disappointing figures
What are these figures: The turnover in fiscal year 2023 amounted to, instead of the expected 1.2 billion USD, only 891 million USD. The loss even amounted to 1.4 billion USD, which corresponds to a minus of 2.30 USD per share. The press conference on the results in March raised more questions than it answered.
For example, the material inventory is to be reduced by a value of 700 million USD via the delivery of finished products to customers. Whereas in 2023 only 400 million USD was invested in this area, no more capital is to flow into here in 2024.
The production at locations such as Georgia, Tennessee and Louisiana is to be ramped up and contribute to an increase in the profit margin. These sites are already capable of producing liquid hydrogen for the company itself and supplying it to customers. The Texas and New York sites will only be continued once the DOE loan has been approved, as otherwise they tie up too much liquidity.
In addition, there is to be price raisings (among others for H2, stacks and electrolyzers) and a cost-cutting program of 75 million USD. Liquid hydrogen is currently still being purchased, which entails losses, but is to be replaced by self-produced hydrogen.
After Plug Power – I reported in detail – established production facilities in the USA and internationally in a variety of ways and thus severely strained liquidity, the planned cost-cutting program amounting to 75 million USD is now to take effect. Whether this amount will be sufficient may be doubted, however, because it seems downright ridiculous in view of the Plug’s liquidity problems and comes much too late. That the company has started to produce liquid hydrogen at several locations and has delivered to customers like Amazon and Walmart is good news for now, but will at first have little influence on the company figures.
With orders for electrolyzers too has Plug scored, but it will be some time before significant sales and thus profits are visible here. That the Saudi sovereign wealth fund Public Investment Fund (PIF) at the end of 2023, with the selling of 5.67 million shares, has completely withdrawn from Plug is not a good sign.
Summary
Words must now be followed by deeds, because all too often very full-bodied forecasts have been made. That Plug will bring partners on board for some projects seems very likely. And also the spin-off (partial sale) of some units is conceivable, if liquidity cannot be adequately presented soon. However, there is currently no need for action. Plug is clearly on my watch list, though, as the company is active in the right markets at the right time. Once the financial problems have been solved, there will possibly also be changes in management, which has lost trust, and Plug will continue on its way.
Over 170 million shares sold short (short interest, status mid-February) are dubious, however, as there is massive speculation against the company or – keywords Amazon and Walmart (warrants) – a form of hedging is being used – no guarantees. All the same, already 10 million shares were short covered in January/February. On the other hand, it is this short interest that can sometimes have a price-driving effect via the covering (short squeeze) when good news is reported. Everything has two sides.
There is still no need for action, however, since the publication of the figures for the first quarter is pending. That various business media in Germany count Plug Power among their top investments in hydrogen befuddles me, though. There are more convincing H2 investments.fa
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.
The press conference in February 2024 on the fourth quarter results and the entire year 2023 and, above all, the outlook for the current fiscal year support my very optimistic assessment of this start-up. Of the 42 built Tre FCEVs, 35 were delivered in the fourth quarter. Seven are currently being tested by fleet operators. The battery-electric trucks, Tre EVs, after the problems with the batteries and their replacement in the course of the year, will return to their buyers by the end of the second quarter.
Nikola can immediately sell every built Tre FCEV, because the demand is there, but there are now not yet enough parts from suppliers. In 2024, 300 to 350 are to be sold. Strong is the position with the coupons called (California) HVIP vouchers, from which Nikola can sell almost all (99 percent, 355 out of 360) for hydrogen-powered vehicles. We’re talking about up to 408,000 USD subsidization per FC truck. With the BEVs, there were 95 vouchers by the end of January 2024.
Focusing on California and Canada in the initial phase is smart in view of the support programs there. In parallel, Nikola is working via its subsidiary HYLA on important locations (including port facilities in California such as LA or in Orlando, Florida) to initially supply the necessary hydrogen with the help of mobile H2 refueling stations (significantly less regulatory work than with fixed locations), to then set up fixed H2 refueling stations depending on experience and demand.
On top of that is the partnership with FirstElement Fuel, a company that already operates locations at important hubs (ports such as Orlando) and supplies 100 to 200 trucks per day with the necessary hydrogen there. Sufficient hydrogen is available in any case, according to a take from the press conference. That already includes the Tre FCEVs to be delivered and their H2 requirements. Currently in development are nine locations of their own HYLA program in addition to those of FirstElement Fuel. Altogether, over 60 H2 refueling stations will emerge there in the future.
All important positions filled – with top talent
The CFO position has now also been filled: Thomas B. Okray is the new chief financial officer. He can boast an impressive CV: Okray was CFO at companies like Eaton, but also in a leading position in the logistics division (fulfillment) at Amazon and 14 years in top positions at GM – also as CFO.
With Jonathan Pertchik, Nikola is bringing in a managing director that already been successful as CEO at TravelCenters of America. The company was acquired by BP and is one of the largest truck stop operators in the USA. Here someday, hydrogen refueling stations from Nikola could be positioned – comparable to Pilot Flying J – if it came to a cooperation (an idea).
Ole Höfelmann will be, via the subsidiary HYLA, president of Nikola Energy. Before, he was responsible for the company’s global infrastructure activities. In his career, he has held numerous management positions for 30 years at Air Liquide, among other things as CEO of Air Liquide Spain with 3,000 employees. In addition, he worked at Plug Power as head of the electrolysis division. Furthermore, he is a board member of various associations such as the California Fuel Cell Partnership.
Carla Tully completes the executive board. She has held leadership positions in Fortune 150 companies, among other things as co-founder of Earthrise Energy (over 1.5 GW of renewable energy), was on the board of the Citizens for Responsible Energy Solutions Forum and in management positions at MAP Energy (2.4 billion USD market cap) and AES Corp. Nikola can thus draw on extensive expertise in the areas of M&A, private equity and CSR. Therefore, Nikola is optimally equipped for the future in all leadership positions.
Truck in use – Customers very satisfied
Several customer reports on long-distance journeys with hydrogen-powered trucks are very positive: Coyote Container drove from the Port of Oakland to Long Beach, then to Iowa and Ontario and back to the Port of Portland – 866 miles (1,393 km) on just one tank of H2. MTA Trucks drove 519 km (322 mi) from Edmonton to Calgary and back. The tank was still 40 percent full at the end of the route – at minus ten degrees Celsius. Other examples refer to trips of over 1,000 miles in one day with a full load.
Special potential with the Badger?
Yes, you read correctly: In 2023, Ember acquired the market rights (IP, design) and prototype for this strong-looking SUV named Badger from Nikola. Nikola sold these items as part of an equity swap (exchange via contribution in kind) to Ember and received 30 percent of the company in return. No capital will flow from Nikola, as it is concentrating on the e-truck. Certain is that the Badger, as an FC/battery SUV, could give serious competition to the Cybertruck of Tesla, should it come onto the market in time. Whether Ember and other OEMs and partners will actually implement this project is, however, still unclear.
Psychologically, however, it is a strong sign that Nikola is indirectly in the boat here. It will be interesting to see. Because the Badger once served as the basis for a cooperation with GM and resulted in a two-digit billion valuation of Nikola Motors at the stock exchange. There were 6,000 pre-orders at the time. Just think of it as a nice side topic, but it could be very exciting when things get concrete here and well-known names such as Magna, Dana, GM and many others pick up the ball. Consider this: The design of such a car too, which you already have, also costs a lot of capital – not to mention that the start of production requires a lot of capital, even if there are companies (OEMs) that could ramp up existing production capacities very quickly. Then, the Badger would be on the market in just a few years. Anything is conceivable.
Summary
With over 460 million USD in free capital (unrestricted cash), the company is initially well positioned. Cost-cutting measures, optimization and normal scaling effects in production (the more trucks are built and sold, the lower the unit price and the closer the break-even point becomes) will characterize the year as a whole, where the capital use on a quarterly basis is to noticeably sink. And 400 to 450 trucks of both types are the initial sales target for 2024, with expected turnover at 150 to 170 million USD. It should be noted, however, that order intake could end up significantly higher, even if it doesn’t affect turnover until 2025.
Nikola is still in the start-up phase. Theoretically, 2,400 trucks per year could already be produced if all supplier parts were available. As far as the share price is concerned, CEO Stephen Girsky repeated himself, Solomon-like, when he said – to the effect – that the stock market itself will be the best judge if the forecasts made come true. Bound to that is my expectation that we will soon see prices of over 1 USD (or significantly more) again when what is forecasted happens. A reverse split (share consolidation) as a measure to raise the share price over 1 USD is then naturally superfluous. (With a price of under 1 USD, it can theoretically come to a delisting of the NASDAQ on July 7 after a 180-day period that however can be extended.)
The price behavior of the share at this time will still be dominated by short sellers and naked short sellers that massively bet against the company and the share price. Mid-February, 217.6 million shares were sold short. This short interest could with good news lead to short covering (in the extreme case to a squeeze) – is my personal view, and only that.
On the other side, institutional investors like Norges Bank (who holds 10.25 percent in Nikola), Blackrock, Vanguard and others are buying, which can be seen as a good sign and should. Against the company founder Trevor Milton Nikola has already won in court, and it is now working on an enforcement title. After all, it entails 165 million USD. Milton still holds over 51 million shares, which could possibly be collected as a partial payment – no guarantees.
The share price is now being driven primarily by incoming orders for e-trucks. Out of the current test series with fleet operators could result – is my expectation – also many a large order.
Nikola is to be seen as a start-up. This is a new, disruptive market at the beginning of a long-term trend. Until the transition to the profit zone (2025/26), a lot of capital still needs to be invested (logical losses), but the stock exchange will gladly make it available if the forecasts come true and anticipate it in the share price development. The investment bank Baird recently announced a target price of 2 USD. Other investment banks may follow. The volatility of the share will remain very high. Daily fluctuations of five or even more than ten percent are normal. Not for investors with weak nerves.
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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