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Weichai Power: Strong share price increase

Weichai Power: Strong share price increase

The share price of Weichai Power has risen by almost 50 percent in the last few weeks. The reason is the partnership with BYD in the electrification of large vehicle fleets. A perfect joint venture, it seems. Weichai Power with BYD could – my guess – be pushing the door open to fuel cells, since alongside battery-electric trucks and other commercial vehicles, the fuel cell is perfect for long-haul journeys.

Weichai has a joint venture with Ballard Power in China (51:49), with a capacity of already 20,000 FC modules per year. And Weichai will be one of the main beneficiaries when in China a large subsidy program for fuel cells and hydrogen comes – maybe 2024 or 2025. Weichai is China’s largest diesel engine manufacturer, which is now moving towards e-mobility – comparable with Cummins Engine in the USA. Weichai is also cooperating with Bosch.

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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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Plug Power: Facts offer little hope

Plug Power: Facts offer little hope

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.

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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.

Nikola Motors: Capital increase at the right time

Nikola Motors: Capital increase at the right time

Short sellers are working massively against the company at the stock exchange. There were shortly even nearly 200 million shares sold short (on Nov. 16 still 193 million). But now, a price change upwards seems very likely. The reason could lie in the comments made at the press conference on the third quarter results, which Nikola – in my words – sees as being on the right track. The company amassed about 250 million USD in liquidity in the third quarter, and now has available 705 million USD in capital access.

The damage due to recalled battery-electric trucks was reported as 61.8 million USD (warranty reserve), where Nikola not only resolved this problem, but employed batteries from a still unnamed supplier that possessed advantages over the previous model, was the comment from the company. Additionally, the truck will be equipped with more features that will give the driver more options during use, for example from a distance using a smartphone app, the truck could be already prepared with heating in the winter and air conditioning in the summer, before the driver gets in. The battery-electric truck will, after the retrofitting in the first quarter, again find its way to customers.

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Now orders can come

There are 277 letters of intent for the purchase of the hydrogen-powered truck. In the fourth quarter, 30 to 50 of them are to be delivered and between 11 and 19 million USD turnover generated. With the battery-electric truck, meanwhile – despite the recall – an individual order of 47 units will be gained. In the next two years, Nikola is determined to deliver on average 250 to 300 trucks of both types per quarter.

The cash burn is at 100 million USD in the quarter, where for the current quarter, the financial effects of the recall on the battery-electric truck are still to be felt (61.8 million USD, of which about 38 million USD is capital that will be used). And the better the scaling of the truck production goes, the more cost-effective they can be manufactured, in order to at the end of the day come out with a good profit margin. Consider this: Money is the future will be earned especially with electricity and hydrogen and not with e-trucks per se. Nikola is at the start of its (success) story.

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California setting the pace

Nikola is concentrating, for good reason, on the US state California. Firstly, the best subsidies (up to around 408,000 USD per truck) are there; secondly, the time pressure for shippers to replace diesel-powered by CO2-free trucks is very high. Already starting 2024, in California only the last-mentioned will be allowed at port facilities, so there will be new registrations only for battery-electric or hydrogen trucks. We’re talking about over 30,000 trucks alone in this market segment – a winning pass for Nikola Motors, since in the Inflation Reduction Act are provided also 2.6 billion USD in subsidies specially for port facilities and also drayage trucks as well as for the H2 infrastructure.

Additionally, the competition for Nikola in this truck segment will be sparse for years to come. The look at the already approved vouchers for e-trucks is cause to celebrate: 96 percent of the vouchers of the California’s HVIP program for hydrogen-powered trucks and 50 percent of the vouchers for battery-electric trucks are attributable to Nikola. After all, Nikola is to have received approval of already over 400 vouchers for the two truck variants. A respectable success.

Lawsuit against Milton won

The lengthy legal dispute with company founder Trevor Milton was won. On October 20 came the decision. Milton must now pay 165 million USD to Nikola, which includes procedural costs Nikola first had to pay and now receives back. It should be noted here that there is still no indication of when the money will flow. Nikola still has to pay a portion to the SEC itself, as they reached a settlement of 125 million USD and must itself fulfill it. If 165 million USD flows from Milton soon, Nikola’s liquidity will rise, as the SEC payments will be divided over the next years.

Goals ambitious but realistic

Currently, Nikola can produce 2,400 trucks of either variant per year. In order to be profitable, sales of 1,000 trucks in 2024 and 1,500 in 2025 are needed. These targets are considered realistic from the company’s perspective, if Nikola delivers 250 to 300 truck per quarter. In my view, there will also be some large orders. Beyond this, declarations like the letter of intent (LoI) with Anheuser-Busch (800 trucks) will also flow into the orders on hand, is my expectation.

Nikola Motors – The Tesla of trucks?

For this hypothesis, I earned a lot of criticism. One cannot compare a startup like Nikola, though, with the success story of Tesla. One can say: Tesla started small, then came Elon Musk. The company reported heavy losses for many years and was even on the verge of bankruptcy before the breakthrough came. In the first three years, Tesla earned money, but not with the e-cars but with  emission rights that could be sold to other car manufacturers. Tesla solved the chicken-and-egg problem by providing the electricity for the battery-electric vehicles itself by establishing a charging network made of its own Supercharger stations. Who would have bought a car from Tesla if there had been no charging option – as a package, even free of charge for years?

Nikola is doing the same – only for trucks with the help of electric charging stations and H2 refueling stations. Nikola wants to earn money with electricity and the self-produced or purchased hydrogen. In the USA are waving high subsidies of three USD per kg. Tesla continues to address the market for e-cars, but Nikola the segment for trucks. Both companies can be considered disruptive – they change markets and business models. Both are first movers.

Tesla and its CEO was met with much skepticism, but they proved that change is possible. Nikola is doing the same – only for commercial vehicles. Whether both can be compared with regard to the development of their valuation or share prices time will tell. For Nikola I am extremely optimistic.

Chief financial officer leaves the company

Stasy Pasterick was just six months in office as CFO. She is going over to Universal Hydrogen in the same capacity. It will be interesting to see who her successor will be.

Capital increase secures the company

On December 6, 2023, Nikola’s plan to raise fresh capital on the stock market became known. It entails a convertible bond of a nominal 175 million USD with 8.25-percent coupon (green bonds) with maturity December 2026 (0.90 USD conversion price per share) and 100 million USD in new shares at 0.75 USD per share. The share price fell from around 1 USD probably because – no guarantee – a hedging took place, so the price was depressed, as one can retain and stock up on the share after the capital raise. The share also fell because short sellers wanted to use the capital increase as a negative for themselves.

In accordance with experience, this measure will have already been successfully implemented by the time you read these lines. With it, Nikola is then thoroughly financed and will ultimately have 500 million USD in the bank. That the share price is rising above 1 USD again is also in the nature of things, because the financiers (investment banks such as Nomura) will most likely not accept a delisting of the share (it will come to this if the price sinks below 1 USD for a longer time).

Summary: Nikola is well on the way to positioning itself as a first mover in CO2-free trucks in the USA – first in California, later across the whole country and in parallel in Canada, where likewise large subsidy sums up to 380,000 CAD per truck are waving. Comprehensive funding programs are acting as a turbo, as the buyers of the trucks can comply with the regulatory pressure and are financially incentivized as well. The H2 infrastructure is being established by the company itself, but will be financially accompanied by business partners such as Voltera (EQT) and is receiving a boost by a 7-billion-USD program of the Biden administration, in which seven hydrogen hubs are to be established in the USA. The stock market will not be able to avoid newly valuing Nikola as a startup: In the right market at the right time. Maybe Nikola will even be the H2 share that develops the most price potential. What’s the phrase? No risk, no fun.

Nikola’s management team is considered excellent. CEO Stephen Girsky pointed out that this includes top managers who no longer actually have to work in a start-up, but who are happy to contribute their expertise to make the company’s vision a reality. This is the right approach – out of conviction and with experience.

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.

Hyzon Motors: Sensible withdrawal from Europe

Hyzon Motors: Sensible withdrawal from Europe

The numbers for the third quarter and the outlook promise a very exciting future for Hyzon Motors and its 200‑kW FC modules for trucks. Series production will begin in the second half of 2024. The activities will be concentrated at one location in the USA. Hyzon with its subsidiary is withdrawing from Europe. That is the right step, since a young company should concentrate on the market that is most important to the company, in order to use the limited capital resources in a targeted way.

Hyzon, however, is still looking for a fulfillment partner in Europe who can independently bring to use the company’s FC stacks, comparable to the partnership with Fontaine Modification in the USA or one like Quantron with Ballard Power. Hyzon is focusing on the USA and Australia/New Zealand, where a hydrogen-powered waste collection truck was recently delivered to Remondis. The FC modules are produced in the USA, which makes sense given the subsidies.

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Hyzon will also benefit from the development of the H2 hubs, because the MACH2 project in the Midwest lies in the vicinity of its own production facility and belong to the projects of the DOE subsidized as part of the seven billion-dollar hydrogen hub program (awards of one billion dollars for each hub).

At the same time, Hyzon announced that they have agreed with the SEC to a payment of 25 million USD, payable in three installments over the next few years. This concludes this unspeakable issue, which is based on the misconduct of the former board of directors (accounting scandal). The cash burn per month can be massively reduced, and for ramp-up of module production only about five million USD is required. At the end of the third quarter are still 137.8 million USD in the bank, at a capital requirement of 10 million USD per month.

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With the parent company and majority shareholder Horizon from Singapore, the IP license agreement was able to be extended until 2030 and could also be extended to other activities: So Hyzon is also planning to introduce new 300‑kW FC single stacks into the stationary energy supply of data centers and hospitals. Ballard Power and Bloom Energy are already active in this area.

Parker Meeks, CEO of Hyzon, responded to a question about why his company was focusing exclusively on fuel cells and not electric vehicles: „The experience with battery-electric trucks for many has been one in which the usable range is not what they imagined, especially when going uphill, which is the case even in the Los Angeles Basin. If you know the area, if you’re going somewhere where there’s a long distance, you’ll probably have to drive up a hill. Fuel cell trucks do not lose power, and this is the crucial factor that makes them particularly suitable for heavy transport as opposed to transporting drinks.”

Summary: In the USA Hyzon is working on establishing and expanding capacities in order to ramp up production of the 200‑kW FC modules. The partnership with Fontaine Modification suggests that a large sales market is emerging here, as Fontaine rebuilds trucks or retrofits vehicles and Hyzon as a technology partner in this comes perfectly into use with its FC modules. In this context, we can also well imagine that Fontaine through parent company Marmon Holdings has a direct stake in Hyzon. There will surely be capital measures (new issue of shares), and the entry of a strategic partner would be the ideal way to achieve this.

A highly speculative, very interesting investment. Hyzon is suitable as an admixture to Ballard Power and Nikola Motors, as these three companies can be jointly assigned to the area of fuel cells in commercial vehicles.

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.

FuelCell Energy: A turnaround at last?

FuelCell Energy: A turnaround at last?

Here, I am cautious. The company, in my opinion, does not yet offer any convincing prospects, expressed in terms of expected growth, orders and sales through the use of its technology, which was also supported by the share price drop to 1 USD. From this very low level, the price has now turned around, driven by the news. It looks as if a gradual rise in the share price is now imminent. FuelCell Energy reports a number of projects in Africa, the USA and Canada. Nigeria for example, plans to generate at least 30 percent of its energy from renewable sources by 2030 (MoU with Oando Clean Energy).

FuelCell Energy speaks of projects, but so far without naming order values; however, it is clear that demand for FC technologies such as solid oxide fuel cells (SOFC) is increasing. In Canada, a project with FuelCell Energy as technology partner was nominated for the Innovation Fund Award. Together with the companies Kinetrics and Bruce Power, the energy production of Ontario Power is to be expanded by hydrogen. And FuelCell Energy is about CO2-free hydrogen in commercial vehicles and about using electricity from nuclear power plants for hydrogen production (surplus electricity). Although this is only a pilot project, orders for high-temperature electrolyzers from FuelCell Energy are expected in the future.

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Summary: The company has a healthy balance sheet structure and sufficient equity for financing. Unfortunately, FuelCell Energy does not yet have a long-term strategy that we can understand as to how FC technology and IP are to be used profitably. Cooperations such as that with ExxonMobil and IBM in the field of carbon capture sound very exciting, but how is money to be earned with such? The share will go its way, especially as support programs (Inflation Reduction Act) and the need for safe, clean energy form the basis for this. An own electricity portfolio (own plants, energy sales via PPA) will form the basis of the company’s earnings in the long term. A perfect FC/H2 share for traders.

Disclaimer

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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.

Wikifolio BZVision – Back to Start

Wikifolio BZVision – Back to Start

The portfolio managed by the author with name BZVision (exchange-traded fund, BZ stands for the German term for fuel cell) on Wikifolio (www.wikifolio.com) perfectly reflects the development of fuel cell shares. After growth of over 100 percent per year in the years 2018 to 2020, the portfolio is now back to square one. While earlier, positions in FuelCell Energy, Plug Power and Hydrogenics (taken over by Cummins Engine) were contained, there are only three securities in the portfolio today: Ballard Power, Bloom Energy and Nikola Motors. Compared to a broadly diversified hydrogen ETF, this is highly speculative. The reasoning for this is that these three titles cover all aspects of the application of fuel cells and hydrogen. Whether transport (commercial vehicles such as trucks and buses, ship and rail transport), energy generation or in-house production of hydrogen. Geography too is taken into account (USA, Europe and Asia). This is not a recommendation. Once a month is a commentary on the portfolio and performance. BZVision: ISIN – DE000LS9QJG9 / WKN: WF00BZH2VI.

Why no recommendations for other FC securities?

I take a very close look at companies such as Nel Asa, ITM, PowerCell, Nucera and many others. As I assume that competition, especially from China, will increase significantly in the field of electrolyzers, it may even be that high growth in orders does not necessarily lead to higher profit margins. Leading Chinese solar cell manufacturers such as Longi are building large capacities in electrolyzers. The quality of these products are not – as talks with experts on site suggest – to be inferior to European producers, for example. However, there are large price differences. At the same time, demand for all types of electrolyzers (SOEC, PEM, alkaline) is increasing dramatically worldwide. Companies like Bloom Energy, Plug Power, FuelCell Energy and Siemens Energy adequately cover the area of electrolyzers as part of their business models – sometimes with technology leadership like at Bloom. Furthermore, the comparison of the stock market valuation of the companies in relation to sales, incoming orders and liquidity is a criterion. Clear, however, is: From the ramp-up of the hydrogen economy, all companies involved will benefit – including in their share price performance. Exciting are the prospects of big gas producers such as Linde, Air Products and Air Liquide. These will especially benefit from the subsidy programs for green hydrogen. In the next issue of H2-international, there will be more background on this.

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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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