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.
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.
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
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 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.
“Life punishes those who arrive too late” is the famous Gorbachev quote. The inverse could be applied to hydrogen at this time: The stock market punishes those who come too early. The shares of H2 companies are trading at a price level as if the supermolecule has no future. Far from it! The stock market wisdom of contrary opinion recommends doing the opposite of what the majority of investors are doing at the stock market.
Warren Buffett would add that you should not change your mind at the stock market if the general mood suggests it. On the contrary: Buy shares whose whole stories are simply “round,” and despite short-term disruptive factors remain unperturbed, as long as the outlook is right. Looking at the current situation, there are many opinions that view hydrogen and fuel cells critically. Also the increasing employment of batteries will then be brought into the field and their advantages underscored, such as energy density, travel range, new materials and recycling. But that is not a convincing counter-argument, because there are real synergies between the battery and hydrogen. However, if we apply the above contrary opinion to shares in the H2 sector, one should buy now and reduce the price or engage this complex of topics completely newly at the stock exchange, as prices have bottomed out and are set to rise gradually and sustainably.
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The stock market thrives on dreams, and they are clearly present here – climate change and decarbonization are setting the pace. Every day, projects around the globe are announced that deal with the production and use of hydrogen in various applications and markets. All of this is real, even if the implementation will still take some time and some projects are still in the planning phase. Worldwide, projects with a volume of over 500 billion USD have been announced – and probably only five to ten percent of these are in actual implementation. Note, however: These are clearly defined projects.
Different speeds
The ramp-up and concrete implementation of hydrogen projects are taking place at different speeds – from region to region, from country to country, from business to business. The reasons for this are manifold. It is often regulation that prevents, delays or, on the contrary, accelerates important developments.
Current examples: A few weeks ago, US president Biden launched a program of seven billion USD to support the construction of seven H2 hubs in the USA. The good thing about it: Private capital of an additional 40 billion USD will be stimulated by the the 7-billion-dollar boost through the market economy. And just as the Inflation Reduction Act pragmatically makes capital available to companies, other countries and economic zones should likewise proceed to spark comparable dynamics.
Interesting is the glance at certain markets such as long-haul transport by truck. In agreement are the majority of truck manufacturers that hydrogen will be the energy source especially for heavy goods, whereas on short treks, it’ll be the battery or a hybrid of the two – depending on field of application and radius. Emissions legislation and CO2 levies will make the transition from diesel to hydrogen and batteries necessary. We’re talking about several million trucks that step by step need to be modified for the future.
In parallel, the charging or refueling infrastructure will be established. Tesla with its Supercharger network is a good example for this, because the company itself has solved the chicken-and-egg problem. That the ramp-up will take a few years yet is clear to see. Companies such as Ballard Power, Cummins Engine, Nikola Motors, Hyzon Motors and many others are in the process of positioning themselves perfectly for the ramp-up. And what applies to heavy transport also goes similarly for maritime transport (here again are Ballard, Bloom Energy, Cummins) and rail. Companies that position themselves correctly in terms of technology and create the necessary capacities will benefit from the future development.
South Korea and Japan are leading the way, as is China. In the USA, it is California, as the highest-performing federal state, that has fully recognized the potential of hydrogen. Interesting is also a glance at the world map in terms of ammonia as a basis for the transport of regeneratively produced hydrogen: 177 major projects have been announced worldwide – the production of hydrogen and transport over long distances via ammonia (NH3) will then increase sharply starting 2026, which also ensures that hydrogen will be available in ever larger quantities at falling prices (up to 1 USD per kilogram is the forecast for the next 10 to 15 years).
At the major trade fairs and conferences, spirits were high even though the companies know that the implementation of many projects will take a while – longer than expected. The large number of partnerships and project descriptions makes it impossible not to be optimistic. In my view, a boom will emerge that will be based on and boosted by development in countries such as China.
Analogous to 2020
The stock market, in my opinion, is entering a new phase that can be compared with the period from 2017 to 2020, when there was a price explosion in H2 shares. The difference between the years around 2020 and those from 2024 to 2030, however, is that in the future there will be a steady, long-term and sustainable upturn in the H2 sector – surely again with some price exaggeration upwards as well as downwards, but rising in trend.
Companies have built up production capacities, optimized their products, realigned their business models and are preparing for the ramp-up. They will be able to deliver when the market demands it. The stock exchange will anticipate this step by step, provided the industry proves that it is possible to earn money with regeneratively produced hydrogen. Then, a comparison with the years 2017 to 2020 is inappropriate in that the prices in the future will sustainably rise, because a new megatrend is running its course – worldwide.
There is a need to differentiate between the various FC sectors and individual companies, however. It depends on how one as a company is positioned in the “right markets,” because competition in terms of profit margins is also increasing in parallel. For example, the production of electrolyzers in China is up to 70 percent cheaper than the global competition. Companies that earn money from hydrogen as a consumable and commodity are, in my opinion, better valued by the stock market than pure plant builders. The business models will influence the development of share prices in various ways, since what counts in the end is the return on investment (ROI), the company’s profit.
Book tip, indirectly on the topic (German-language): “Zukunft – eine Bedienungsanleitung” by Florence Gaub (ISBN 9 78323 283724)
But what you need as an investor is composure and time. Buy and leave and buy again little by little to achieve a good average price. Safer than individual investments in this are of course H2 funds (ETFs), of which there are plenty and which do not differ greatly in the composition of the securities. According to the cost-average principle, always buy more. Consider this: Facebook, Tesla, Google and Amazon were also not a success story right from the start, but rather after various numbers of beginning years demanded enormous capital expenditures and also justified logical losses in the start-up phase.
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.
Author: Written by Sven Jösting, December 15th, 2023
My number one in this segment was and remains Bloom Energy, even if the share price, despite the recent price gains, does not come close to reflecting the prospects. In the third quarter, the turnover was able to rise nearly 37 percent to over 400 million USD. There is much to suggest that the current fourth quarter will also show a strong upward trend – 1.4 to 1.5 billion USD should be the total for 2023. The non-GAAP profit margin was able to rise in the quarter an impressive 12.4 percent from the previous year to 31.6 percent. Non-GAAP profit in the third quarter amounted to 51.8 million USD, so an improvement of 80.3 million USD compared to a non-GAAP loss of 28.5 million USD in Q3 2022. I am concentrating here on the non-GAAP figures, as these exclude special factors and one-off effects.
In year 2024, Bloom should not only be cash flow positive, but also operationally profitable. The cash on hand of 650 million USD at the end of the third quarter must also be seen from the aspect that material inventories with value of over 400 million USD (capital employed) were significantly increased, so existing orders can be processed quickly and, because of the parts on hand, there are no supply chain problems.
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Production sites centrally consolidated
Bloom is concentrating fully and completely on the Fremont location, because production there is highly efficiently automated (state-of-the-art facility). As a result, nearly 100 employees were let go (overhead in Sunnyvale), which was interpreted to mean that the company was not doing well (comments in chat rooms and analyses) – by no means the correct interpretation, because higher automation saves on costs. Everything has an upside and a downside.
Exciting is the outlook of CEO K. R. Sridhar: The enormously increasing energy demand – for example for AI – will be drive the business of Bloom and its energy servers, because it’s not just about the quantity of clean energy, but also about its permanent availability (24/7) and security. Power-to-heat models enable the simultaneous use of generated energy for electricity and heat, as the energy generated in the process and its waste heat can be used immediately for heating (process heat) and also for cooling. The perfect cycle. As the electricity grids are reaching the limits of their capacity, island solutions like that of Bloom are coming in the focus of many businesses. While natural gas is still being used for the time being, it will successively be replaced by hydrogen in its many colors.
In parallel, the company’s own carbon capture technology will reduce the CO2 footprint. Here Sridhar also makes interesting allusions to the potential of its own high-temperature SOEC electrolysis. All the same, Bloom with its electrolysis technology is participating in four out of the seven hydrogen hub projects of the Biden administration (seven billion USD investment in seven H2 production centers spread across the USA). The business with the electrolysis will start in 2024, but will then make a real contribution to the company’s growth starting 2025. CEO Sridhar has said, “Bloom Energy is executing at a high level on innovation and growth.” Summary: The stock market story is round. In year 2024, we should see again prices over 30 USD, if the company’s forecasts are met.
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.
Author: Written by Sven Jösting, December 15th, 2023
Setting up various production lines for stacks is at the focus for Ballard Power. With these, the company can act and deliver during the ramp-up in the next years. With still nearly 800 million USD in the bank, Ballard is in a comfortable situation and is able to finance all investments from its own resources. That the company is valued at the stock exchange with only about one billion USD seems incomprehensible in view of the prospects.
Strategically interested companies could and should seize the opportunity and get on board with Ballard stock as long as the stock market valuation is so low. What if a Mr. Adani were to come knocking again? Or automotive suppliers such as Dana, Tyco or Magna? Anything is possible. The only protection against this: significantly higher share prices, so a stock market valuation that matches the future prospects.
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Figures have little informative value
Current sales will be dramatically exceeded in the coming years, when the ramp-up of the FC markets for commercial vehicles of all kinds, ships and rail vehicles begins. In this respect, the quarterly losses in 2023 and 2024 are due to high R&D expenses and the expansion of capacity and have little to no meaning. What if in a few years’ time instead of the still scant individual orders of 50, 100, 200 FC modules per year, 1,000, 5,000, 10,000 and more FC modules were to be delivered – and for each individual market? Then Ballard would have the necessary capacities and could deliver.
Opening of the Still’s FC production site in location Hamburg
The forklift truck manufacturer Still (subsidiary of Kion, majority-held and part of the Chinese Weichai Group – which in turn holds about 15 percent in Ballard Power) is relying on the FC stacks from Ballard Power. On November 10, 2023 in Hamburg, the ceremonial opening of the first production line for 24-volt fuel cell systems took place. In the future, 4,000 FC forklifts will roll off the production line there every year.
7-billion-dollar hydrogen hub plan
Ballard benefits indirectly from the planned establishment of a US-wide network of seven hydrogen production centers (hydrogen hubs). This is because the widespread production of green hydrogen is a great opportunity for many – and even more so in the future – Ballard customers to invest in products that can use hydrogen: shipping companies, trucks, buses, ships, rail vehicles and many more. In six of the seven hubs, Ballard sees the perfect positioning for itself and its customers in hydrogen and fuel cells.
Forsee Power proves to be a stroke of luck
If you look at the current figures of the French battery manufacturer Forsee Power, you have to give Ballard credit for a good hand with the investment – Ballard is one of the largest single shareholders. A massive 83 percent increase in turnover in the third quarter to 47.9 million EUR. In the first nine months, that amounts to a plus of 67.6 percent to 126.6 million EUR. For the whole year, it is to be 160 million EUR, then 235 million EUR in 2024, and 850 million EUR turnover in 2028 is the goal.
The two companies work perfectly together, as the batteries from Forsee are put to use in, among other things, the FC systems of buses and Ballard customers. Forsee at around 2.50 EUR per share seems to me to be a good buy if you want to have batteries in your portfolio and see it as a complement to the fuel cell.
Solaris is the perfect forerunner
The Polish bus manufacturer Solaris is continuously ordering more FC modules from Ballard, 350 in total this year alone – another 62 were recently added. Since Ballard supplies various bus manufacturers as a partner for the fuel cell, Solaris is a very good example. This market is only at its start, and Ballard as number one and frontrunner already has experience of over 100 million kilometers traveled. The newsletter Information Trends see the market for FC long-haul buses in general as one of the fastest growing hydrogen markets.
In the next 15 years, globally over 73.4 billion USD are to be invested in new FC buses. The forerunner is China. FC buses are becoming increasingly cheaper, even if they’re still more expensive than pure battery-electric buses. Convincing here are the arguments of range and time or type of refueling. Parallel to this, the H2 infrastructure is being established. Consider this: Ballard has more than ten big bus manufacturers that exclusively rely on fuel cells from Ballard. In China, Ballard via a joint venture with Weichai Power is also the supplier for various bus manufacturers there – that is only one of the over 30 platform partnerships. Currently, there are tenders for over 17,000 buses worldwide.
Individual orders increasingly larger
Randy MacEwen as CEO has said: from small series occurs the ramp-up to large series. From batch sizes of 10 to 100, there are now massive numbers. The same goes for many other markets: The rail vehicle manufacturer Stadler reports that they are waiting for the acceptance for 25 hydrogen-powered trains, after having already received a firm order for four such trains in California.
In trucks, OEM partners such as the German company Quantron rely on Ballard: Among other things, they deliver hydrogen-powered small trucks Ikea. The platform partnership with Ford for the F-Max raises great expectations: What would it mean if Ballard were to supply FC modules for over 10,000 trucks per year? It is important to be, like Ballard, a technology leader and also have the ability to deliver (capacities).
My only concern: What happens when a big player in the market takes advantage of the situation and makes Ballard a takeover offer – like Cummins has done with Hydrogenics? A participation in a strategic partnership would be a share price turbo, though.
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.
Author: Written by Sven Jösting, December 15th, 2023
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