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Siemens Energy – Light at the end of the tunnel

Siemens Energy – Light at the end of the tunnel

Siemens Energy is on the right track, as the latest figures show. Although the wind subsidiary Gamesa, like before, is registering losses, all other divisions are doing well and are profitable – trend rising. That the stock market also sees it that way is shown by the share price being at times over 14 EUR. You must simply give the integration of Siemens Gamesa time. That won’t happen in weeks, but rather in one to two years. Starting 2026, this unit should be profitable again and by then enable a cost reduction potential of 400 million EUR.

At the same time, the market for offshore wind is growing enormously, and there will be more and more synergies, such as with electrolyzers for offshore hydrogen production, visible. Here, things will grow together that belong together, because renewable wind power should be converted into molecules on site, which are then transported by ship and pipeline to consumers. Whether the onshore wind division – and this is where the problems lie at Gamesa – can and should be maintained as an activity is questionable, if the technical problems cannot be solved sustainably.

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Siemens is divided into many divisions, all of which are growing at different rates and contribute to the success of the conglomerate. The division Gas Services reported a turnover of 10.9 billion EUR at an operating profit of 1.033 billion EUR. The division Grid Technologies has made 7.2 billion EUR turnover at 0.54 billion EUR profit, and Transformation of Industry had 4.4 billion EUR turnover at 0.228 billion EUR profit. Let me make a simple thought experiment here:

What would happen if Siemens Energy would take one of these divisions public as a spin-off (as a company share), like what parent company Siemens did with Siemens Energy? Could perhaps 30 to 40 percent of Gas Services proportionately be worth 2, 3 or 4 billion EUR on the stock market and Siemens Energy allow this equivalent value via an initial public offering (IPO) as an inflow of capital? With this capital, Siemens Energy could then finance strategic acquisitions from its own resources. New business models could be developed in order to bring together the offshore wind division of Siemens Gamesa with the electrolyzer division, with the aim of producing offshore hydrogen. Wouldn’t it even be interesting, to enter into hydrogen production itself with partners and customers and to bring in hardware from Siemens Energy to projects as assets or contributions in kind? All this would open up new and sustainable sales areas for Siemens Energy, is my purely theoretical consideration.

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New on the supervisory board: Prof. Veronika Grimm

The appointment of Prof. Veronika Grimm to the supervisory board of Siemens Energy – criticism came from the ranks of the economic experts due to possible conflicts of interest – I think it is expedient, because this is where expertise from the theoretical field flows into the practical work of a company. Grimm with her expertise in the energy sector has a special position in the council of wise men, because she thinks pragmatically and is open to technology, and also esteems hydrogen with the importance that the supermolecule has. From this Siemens Energy can profit. On topics that directly affect Siemens Energy she will not issue an opinion. In advisory bodies like the economic council sit theorists.

Record order intake

The power plant strategy finally adopted by the German government (see p. 26) leaves rooms for a lot of imagination for Siemens Energy, because many a major order for gas turbines could and should land here, as there are only few capable providers like Siemens Energy anyway. It is a good sign that the first quarter of fiscal year 2024 was able to be concluded with a profit before special effects of 208 million EUR. The impressive 24 percent increase in order intake to 15.4 billion EUR in the quarter catapulted this to a record level of over 118 billion EUR and, if it continues like this, is also expected to reach 140 to 150 billion EUR on an annualized basis (estimate).

Summary: Buy and leave alone. As a full-service provider, the conglomerate is in the right and, above all, high-growth markets of energy production, especially in the area of hydrogen, perfectly positioned.

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: Sven Jösting, written March 15th, 2024

 

Nikola Motors – Outlook speaks for the company

Nikola Motors – Outlook speaks for the company

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.

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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.

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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.

Author: Sven Jösting, written March 15th, 2024

Hyzon Motors – Strong patent position

Hyzon Motors – Strong patent position

Hyzon Motors will start production of 200‑kW modules for commercial vehicles in the USA in the second half of 2024. This should then lead to a recovery of the strongly depressed share price via incoming orders. Parallel to this are running product presentations such as the recent one in Melbourne (Australia) with the 200‑kW Hyzon Prime Mover at the Kangan Institute Automotive Centre of Excellence. Deliveries in New Zealand, Australia, Europe and the USA are planned for later in the year. This fuel cell system can be used in many other applications and markets at the same time: rail vehicles, maritime transport, stationary energy, mining vehicles, etc. It will be interesting to see which customers this 200‑kW single stack will find and the order potential that will result, especially as it offers a cost reduction potential of over 25 percent and conserves 30 percent of the space and weight – compared with a 110‑kW system. A first major market for Hyzon will be the employment in commercial vehicles in Australia, where the company has an important location with around 50 employees.

Patent registrations – Competition with Toyota and Bosch

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Hyzon Motors has applied for a number of patents in the USA, Europe and Asia and many have already been granted. The main focus here is on reducing emissions when using fuel cells, but also on battery systems. What this means in detail is not clear to me, but shows that Hyzon is very active in securing patents and sees in it an important basis for its FC products and utilizations as well as markets. This would put them in direct competition with companies such as Toyota and Bosch. This could – purely theoretically – eventually lead to license revenue.

Hyzon still has with over 100 million USD sufficient capital, but will not be able to avoid taking measures (issue of new shares or participation of a strategic investor) to finance the company’s growth and expansion. The production facility in Illinois is self-financed. Production ramp-up is beginning in the second half of the year. Incoming orders for the FC modules as well as speculation by a strategic partner or investor make the share of Hyzon Motors a very interesting speculation, although the investment is to be classified as highly speculative as you’re dealing with a start-up.

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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.

Author: Sven Jösting, written March 15th, 2024

Cummins Engine – Emissions scandal ended by payment

Cummins Engine – Emissions scandal ended by payment

The share of Cummins Engine brings joy: The share price rose to a new high for the year, after the company was able to settle a long-standing legal dispute – it was about non-compliance with emission standards for engines – with a penalty payment of 1.6 billion USD, and with that this chapter is closed. The total cost of this settlement was 2.04 billion USD. Regarding the value per share, Cummins earned a good 19 USD in year 2023, if including the abovementioned costs. So it was about 6 USD per share.

The dividend remains at a high level – recently 1.68 USD per share in the quarter. Turnover increased by ten percent to 34.1 billion USD in year 2023 and should also further grow in the future. The subsidiary Accelera, which concentrates on the clean energy business (engines, batteries, fuel cells, electrolysis, etc.), was able to increase turnover to 354 million USD and should in the current fiscal year bump this up to 450 to 500 million USD. This area belongs, via the program Destination Zero, to one of the company’s future fields of focus and requires considerable investment. This division will therefore report a loss this year of 400 million USD, which, however, has its logical basis in the high initial investments. Even so, Accelera alone was already able to build up an order volume for electrolyzers of 500 million USD. The spin-off of the subsidiary Atmus Filtration Technologies to the shareholders (swap offer) is also about to be finalized. Cummins holds over 80 percent in this. The company will be valuated with 1.9 billion USD.

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New engine development HELMTM

A share price driver, however, can be the development of a new generation of engines. These units, based on the X15 engine platform, can be operated with natural gas as well as with hydrogen (starting 2028) and e-fuels. HELMTM stands for high efficiency, low emission, multiple fuels. They should accordingly contribute to significantly reducing the diesel demand of today’s customers. Test runs are underway with Walmart and UPS, and also with Paccar for its US class 8 truck Kenworth T680. Cummins is investing 1 billion USD in this project for the time being.

At the current price level – the company has a market capitalization of about 39 billion USD  – the current valuation seems sufficient to me, where Cummins is considered a standard stock with a high dividend yield. I would now remember and rather bet on the comparable competitor from China, Weichai Power, as this company is only half as highly valued as Cummins and additionally owns a special potential in the area of hydrogen and fuel cells. Cummins but will go its own way in hydrogen. The subsidiary responsible for this, Accelera, has very high growth potential, which will have a positive impact on the company as a whole in a few years’ time.

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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.

Author: Sven Jösting, written March 15th, 2024

Ceres Power with strong partners

Ceres Power with strong partners

The main shareholders Bosch and Weichai are already counting on the English Ceres Power and their high-temperature fuel cell systems or their patents and know-how. With the South Korean Doosan Fuel Cell there is a license agreement and the planning of a joint FC production. Now, US company Delta Electronics is joining as a partner, which boasts a turnover of around 23 billion USD (over 80,000 employees) and recently closed a license agreement on the production of FC stacks for hydrogen production in the volume of 43 million GBP with Ceres Power, half of which will be counted towards the turnover for the current fiscal year. Delta will produce FC stacks on a license basis for various applications and markets at its 200 production sites worldwide. The company works with, among others, Microsoft and Tesla.

For us, it is interesting to see that Bloom Energy as well has bet very successfully on high-temperature fuel cells developed in-house (microgrids) and thus makes various energy sources such as natural gas, biogas and hydrogen usable. Bosch too addresses this market segment – among other things via a cooperation and license from Ceres.

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The share price of Ceres, like all other listed FC companies, has suffered greatly in recent years, but seems to me to have reached a price level at which one should build up positions. The partnerships with large companies allow the expectation of sustainably high revenue from licenses and sales, without Ceres having to strongly invest in the build-up of production capacities. Conclusion: A good portfolio addition in the area of FC and H2 technology.

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.

Author: Sven Jösting, written March 15th, 2024

Group rotation will drive hydrogen forward

Group rotation will drive hydrogen forward

Sven Jösting’s stock analysis

#Shares from the crypto universe and from many technology companies are currently reaching new highs. Armaments are also booming on the stock market in view of the many global, some war-like, political conflicts. Only the topic of hydrogen and fuel cells is still leading a shadowy existence, with prices at crash level, which however – still – fully obscures the prospects of sustainably produced energy, and above all of hydrogen.

The stock exchange also always works according to the principle of group rotation, according to which always exactly these topics slide back into the focus and center of investor interest that have been completely neglected up to now but have excellent prospects. Precisely why I expect that, after almost three years of falling share prices, the trend will now gradually reverse and a sustainable, long-term upward trend on the stock market is beginning that is based on very high company growth.

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To many market participants, it is unclear at this time how hydrogen will be available in large quantities, although it is already clear today that production volumes will increase enormously and prices will fall. All this, however, doesn’t happen overnight: Gigantic capacities in electrolyzer technology – PEM, AFC, AEM, SOFC – must arise to be able to produce sufficient hydrogen.

Hydrogen economy is on its way and will come!

“The H2 economy is on its way and will come,” was the conclusion of the H2-Forum in Berlin (Feb. 19 and 20, 2024, see p. 20). One speaker explained that we’ve now come, after overinflated expectations, “out of the valley of the dead” and on solid ground. Now, it’s all about assessing risks and partaking in concrete projects, which would mean investments in the whole area of hydrogen. From talk to action.

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If we take a visionary look into the years 2030, 2035 and 2040, it’s clear what technologically needs to be on course today. Green and, temporarily, blue hydrogen (produced by natural gas reforming – 70 percent less CO2) will dominate and replace gray hydrogen from natural gas, eventually CO2-freely. Regeneratively produced hydrogen will be a raw material that receives a market price as a commodity on the stock exchange. Those producers who have large quantities of low-cost renewable energy (solar, wind and hydropower) at their disposal and have the necessary access to water (above all seawater) will get a tradable commodity that they can sell on the world market, with high profit margins, or use themselves.

In the last case, it can be observed that countries with ideal framework conditions are increasingly thinking about using the hydrogen produced locally themselves, by setting up corresponding industries, instead of selling it to countries like Germany, as energy is a very important location factor.

Hydrogen and the stock market

In countries such as China and individual regions like the US state of California are developing hydrogen strategies that have model character and can serve as a blueprint for the world. In China, over 1,200 H2 refueling stations are to be in operation by 2025. Currently, it’s about 400. South Korea wants long-term to establish more than 1,600 H2 refueling stations in the country. Here in Germany are, as before, around 100 in operation.

Companies with capacities for fuel cell stacks and modules for commercial vehicles are in the starting blocks (Bosch, Cummins, Ballard, Hyzon, Toyota, Hyundai, etc.), because these markets will be huge. Several million trucks and buses can be assumed to be converted to battery or fuel cell (also in combination) in the next ten to twenty years. Hydrogen engines are also attracting a lot of attention, as various prototypes have already been developed (Bosch, Cummins, Toyota).

The question of the right H2 shares can be answered well with this context, as primarily companies will win that have a mature technology, operate with robust business models, are able to deliver and possibly profit from the consumable hydrogen itself, if they can produce it themselves at low cost or distribute and use it as a commodity.

Here beckons the prospect of a good profit margin with high growth potential. On the stock exchange, however, there is right now in the area of hydrogen a phase of disappointment, as firstly everything is not going so quickly and secondly setbacks must also be overcome. In addition to questions of implementation speed, there are often also regulatory issues on the timeline. That the stock market has not yet recognized the potential of the companies through their share prices and valuations is easy to see from the current prices. There is no question that there will be a complete reassessment, however, even if it will take longer. Be patient. We are only at the beginning of this new mega-trend – also on the stock exchange. Let’s wait for the group rotation; then, everything will happen very quickly.

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: Sven Jösting, written March 15th, 2024