Contact

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.

Advertisements

Has the Plug Power management overestimated themselves and started too many projects at the same time? There’s talk of seven to nine giga-projects (production facilities for FC stacks, electrolyzers, hydrogen, cryogenic technologies, etc.) in the USA and four others around the world. For this, the capital drain is very high. At the same time, certain regulations are not yet in place. And the credit expected from the Department of Energy (DOE) as part of the Inflation Reduction Act in the amount of 1 to 1.5 billion USD not be ready until 2024 at the earliest, as there are extensive tests and conditions involved.

Plug itself does not yet produce liquid hydrogen, but buys it on the market. This has led to further problems, as it is associated with high costs and losses. Parallel is the frozen cash of over one billion USD (restricted cash), which in turn, in my estimation, could be connected with the major customers mentioned here.

Tight liquidity situation

Still only 567 million USD was the amount of cash in the bank for Plug Power at the end of the third quarter. The many parallel projects, however, require further financial support before sales and the associated profits can be generated. That will take some time. The hyperboles uttered under CEO Andy Marsh to influence the stock exchange via investor relations are backfiring.

It is now to be expected that Plug will attempt to raise new equity by issuing shares and/or convertible bonds, which in view of the figures will no longer be so easy. Based on current share prices, any major capital increase (share issue) will only be possible at low prices. The board has stated a number of internal problems, from the situation with the purchase of hydrogen to delays in the start-up of production facilities as well as problems with supply chains.

The strong order intake in the electrolyzers segment may be reassuring, but it should be feared that competition will increase sharply, causing profit margins to shrink. Direct quote from the company: “Unprecedented challenges in the supply of hydrogen in North America.”

Short Interest

This figure – in December 158 million Plug Power shares – I always look at very closely, because it shows in which form speculation against a company and its share price is taking place. If the news is good, a price turbo (squeeze) could come about, but in Plug’s case it shows that the short sellers are correct in their assessment. I assume, though, it’s exactly big customers such as Amazon and Walmart who may have hedged their option rights via short selling. Both together have received over 100 million of these rights as a gift and can change them with very low conversion rates into shares. Theoretically, both have several billion USD (book) profit in their books if they go short at 70, 60, 50, 40, 30 USD per share – their purchase prices were are about 1.29 to 13 USD per share via exercise of the warrants. But that’s just a guess on my part – no guarantee.

I have always been critical of this deal because Plug has “baited” customers with it. And restricted cash of one billion USD is directly related to these major customers. The reason: This involves guarantees, warranties, security for technical support, spare parts and much more. Plug Power must provide such guarantees to customers such as Walmart and Amazon so that it can soundly implement orders, meaning operates H2 refueling stations for forklift trucks and ensures that there is always enough hydrogen available. The result is around one billion USD in restricted cash, frozen financial resources that cannot be used in any other way. Will companies like Amazon remain forever exclusive customers Plug Power regarding forklifts and their H2 refueling stations? The question arises because there are fewer orders from Amazon for the retrofitting of forklift trucks. Why?

Plug loses power-to-X project in Denmark

Via the consortium partner Plug Power Idomlund Denmark, Plug had actually been awarded the contract for the first power-to-X project in Denmark with a total of 280 MW of electrolysis capacity over six projects in its pocket. Then came the setback on November 20, 2023: Plug did not manage to provide a bank guarantie within the specified timeframe. It is probably about 28.3 million euros – no guarantees.

Summary: I had advised restraint until the figures for the third quarter were on the table. They are now here, but a buy still does not present itself, because it will still take time until the company creates clarity. On the contrary: Wait and see. Traders, however, can become active, since price fluctuations driven by the news will remain very high (high volatility), because the stock market has already severely punished the company (minus 40 percent alone on Nov. 10, 2023).

The question also arises as to whether Plug Power cannot avoid including partners in some projects, as it has already done with Fortescue. But that would come at the wrong time, because the possible conditions would be determined by the partner and investor rather than Plug Power itself. Will assets now possibly even have to be squandered?

In short: There is currently no need for action, because the expected figures for the current fourth quarter could again be disappointing. In 2024 and in the following years, however, the positive turnaround may come, when Plug has realized the in-house production of hydrogen on a large scale and benefited here from the Inflation Reduction Act, among other things, and also made good money with it. A DOE loan can be a game changer, but it takes time. There is no guarantee of this, even if it can be assumed that the Biden administration will not abandon prestige projects and players like Plug.

Further issues of shares are now even considered necessary and will not be implementable at ideal conditions. Six analysts have already radically changed their assessment – in a negative sense. I didn’t think my forecast would come true so quickly that the value of Bloom Energy would exceed that of Plug Power. Unfortunately, buy on bad-news is not yet suitable here. A buy limit for buying the share at three euros would be a first step. This stock is contemplatable if Plug offers institutional investors a discount on the purchase of new shares as a concession – as a risk discount.

Disclaimer

Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.

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.

Advertisements

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.

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.

Advertisements

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.

Bloom – Get set today for the next year half

Bloom – Get set today for the next year half

Good figures for first quarter 2023: Turnover rose over 37 percent compared with the prior-year quarter to 275 million USD. Regarding the year as a whole, the first half of the year will constitute 30 percent of sales. The whole year is to generate, as forecasted, 1.4 to 1.5 billion USD in turnover. The non-GAAP profit margin was increased by 5.4 percent to reach 21.2 percent in the first quarter. The aim is 25 percent for the fiscal year. The profit is related to cost-cutting measures.

Bloom has almost entirely used its liquidity to massively expand its inventory of parts and equipment, in order to put them into use in existing projects – especially in South Korea: 315 million USD in the first quarter. Bloom ended this quarter with a cash reserve amounting to 483 million USD. Some analysts will view this critically. If you read the text for the press conference on the financial results, the rapid sale of the parts should result in a significant increase in liquidity after invoice receipt in the second half of the year.

Advertisements

In March, major customer and major shareholder SK Ecoplant transferred its second tranche in the amount of 311 million USD (13.5 million preferred shares for 23.05 USD each), making it the largest single shareholder. Bloom has additionally successfully tapped the capital market through a green bond in the form of a convertible bond with a three-percent coupon and 18.85 USD conversion price per share. Initially, they should have totaled 500 million USD, but this was quickly bumped up to 550 million. Also the additional option in the amount of 82.5 million USD will certainly find institutional investors. This is a clear sign of confidence in the company.

According to the investor conference on May 23, 2023, Bloom plans to have a freely available liquidity of 900 million USD at the end of the year. Some analysts, however, view the convertible bond negatively, as a dilution of the share capital could come about as a result of these. Bloom has options here, though, so it does not necessarily have to come to a dilution if this convertible is turned into shares during its course. The share price must also be much higher for that to occur. Exactly these low prices are buy prices, as through the build-up of electrolyzer production to 2 GW this year, business growth in 2024 and the following years would experience a further boost.

Successful pilot projects create new fields of activity

The combination of the use of CHP waste heat and over 85 percent efficiency is finding expression in the first orders in Italy and Belgium for 10 MW each. Delivery in the second half of the year is planned. In parallel, the production of high-temperature electrolyzers is to really get going in 2024. In addition, the time for start-up of the systems or even their shutdown lies at only ten minutes.

The 4-MW electrolyzer from Bloom can generate 2.4 metric tons of hydrogen per day. Bloom has cooperations regarding this with project developers and companies active in ammonia, oil and gas production. In Taiwan, a 10 MW order was able to be processed within a short time in the first quarter, which did not come in until fourth quarter 2022. This speaks for Bloom.

With the US Department of Energy (DoE), in Idaho National Lab, a plant with a 100-kW electrolyzer was able to be successfully simulated. The running time was 4,500 hours, with the result of 25 percent higher efficiency in the production of low-cost hydrogen compared to other electrolyzer technologies.

SK Ecoplant creating real synergies

SK Ecoplant, as part of South Korea’s largest energy corporation SK Group and largest single shareholder, is bringing Bloom Energy along to its own projects in Asia – like also recently with a 4.5 billion-USD project in the province Newfoundland and Labrador, Canada. Hydrogen is to be produced with 1 GW of wind power there and shipped around the world as an export commodity in the form of green ammonia. Siemens Energy is supplying the PEM electrolysis, while Bloom’s high temperature electrolyzers will be put to use for hydrogen production as well as waste heat, which will be fed into ammonia production or used for heating.

How high Bloom’s share in the project will end up cannot be said at present, but the participation itself via SK Ecoplant should already be valued as very positive. Starting 2025, green hydrogen is to be produced there, and then green ammonia from 2026 onwards. The combination of 600 MW of SOFC electrolysis (Bloom) and PEM electrolysis (Siemens Energy) are to produce 60,000 tonnes of green hydrogen per year in the first stage. From this will result 360,000 tonnes of green ammonia. Such a project is sure to find imitation around the world.

Demanding forecast

In year 2026, Bloom will reach a 5 to 6 billion USD turnover. The area of electricity production, with 25 to 30 percent, is to generate growth of 2.5 to 3 billion USD. New markets like electrolysis and carbon capture are to correspondingly reach 1 to 2 billion USD, where 500 million USD will come from maritime. Bloom has expenditures, though, related to the exchange of old Energy Servers to that of the newest model, which for now is incurring costs. In the end, however, this will lead to more energy security and higher margins.

JP Morgan has new price target: 20 USD

Bloom’s prospects in share prices JP Morgan analyst Strouse sees at 20 USD for now, following the sharp decline in price in recent weeks, as Bloom is very well positioned in the long term. From 15 to 20 USD sounds like a lot at first, as this is over 30 percent above current price quotations. I see the share in the next 12 to 24 months rather at over 30 USD, and can imagine even prices of over 50 USD if the forecasted figures are achieved and the company sustainably enters the profit zone – possibly starting 2024.

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.

Written by Author Sven Jösting, June 9th, 2023

Ballard Power – The calm before the storm

Ballard Power – The calm before the storm

The decline in the share price of Ballard Power in the past months is ascribed to the impatience of the many investors who assess primarily the short-term potential of this market leader in the PEM FC area. What counts is the long-term outlook of the company.

Current quarterly figures give credit to the skeptics. Ballard itself is not fighting this, as they are working unperturbed on the long-term strategy: establish production capacities, cooperations and pilot projects. This will be accompanied by capital outflows as well as the “logical” losses that it will entail. Ballard has enough capital in the bank to be able to implement the plans without outside pressure: 864 million USD in the bank account speaks for itself.

Advertisements

At the same time, Ballard is working on the constant optimization of its technologies, be it the MEA for the fuel cell, the FC modules, or the stacks for various applications, to be among the top suppliers on the market. But how will the stock market react when the production sites in China, Europe, the USA and Canada (eventually also in India – see Cummins with Tata) are utilized to capacity and then promise, in addition to high sales growth, a good profit?

China could be the wild card

Ballard president Randy McEwen is traveling for several weeks through China to meet with representatives of public authorities, ministries, companies, customers and municipalities as well as other players important for Ballard. This is certainly about understanding why China’s H2 support program has yet to be approved. The probably still largest FC stack production facility in the country – operated as a JV by Weichai and Ballard – is still “unemployed.”

That a larger program will come is, for me, no question, as many companies and regions or cities in China have now seized the topic in a variety of ways on their own (e.g. capacities for different electrolyzer types, stacks, vendor parts, FC trucks, H2 pipelines, refueling stations). For these is expected a high growth potential, which ought to be made use of. Perhaps China will still surprise the world with an H2 program in 2023 that not only matches, but makes the equivalent programs in the USA, Europe, Japan and elsewhere look smaller?

What would happen if China also gave passenger car fuel cells a boost with a national quota? China already did this for the battery– in the largest automotive market in the world – with the EV mandate, and all auto companies producing in the country have had to adapt to it. Ultimately, China has provided the foundations for battery-electric mobility worldwide.

By the year 2030, 1 million vehicles refuelable with hydrogen are to be running in China. Perhaps this goal will be adjusted against the South Koreans, since South Korea wants to be able to fuel over 6 million vehicles with hydrogen by 2040. For Ballard, a positive turnaround could come about very quickly from this, which would then also help the share price soar.

150 million kilometers clocked

Ballard meanwhile reports 150 million kilometers driven (93.2 million miles) by commercial vehicles and buses equipped with its technology – and smoothly. Worldwide, 3,800 buses are driving with Ballard inside. The Canadian company is setting an industry and sector standard with this. They are very well positioned in terms of total cost of ownership, according to CEO Randy McEwen.

“At Ballard, we are designing our PEM fuel cell engines for heavy-duty mobility applications where zero emissions, reliability, and durability are key differentiators for end-user total cost of ownership. We continue to set the industry benchmark for PEM fuel cell performance in our target markets. The accumulated distance driven by FCEVs powered by our technology underlines Ballard’s customer focus and commitment to reliable service and high uptime. We achieve this industry milestone at a time when we are seeing growing customer interest in the adoption of hydrogen fuel cells in our key mobility verticals of bus, truck, rail, and marine, as well as off-highway and stationary power applications.”

Randy McEwen, Ballard chief

First quarter has little predictive power

Order volume ended up good: 137.7 million USD, a doubling from the same period the previous year. Turnover for the quarter reached 13.3 million USD, which was below analysts’ expectations. Good things can be expected from the second half of the year. McEwen sees a very busy second half of 2023 and an excellent year 2024.

In the bus sector came three new OEMs, so companies that build buses and are relying on the FC module and knowhow from Ballard. Van Hool and Solaris have long been satisfied customers. Over 500 FC buses are currently set to be ordered in Europe, a large share of which equipped with Ballard. Meanwhile, 1,500 transit buses are in the tendering process – in Europe. For me, however, this is just an indicator of a development that will really pick up speed in the coming years.

The same pertains to commercial vehicles, where gradually the major truck manufacturers are turning, in addition to battery-electric solutions, to hydrogen. About this, McEwen said, “To be clear, the truck market is in the very early phases of fuel cell market adoption.” Here, Ballard is supplying stacks to various OEMs such as Quantron, and further customers may follow. In the area of trains, things are also slowly getting underway, which the rising orders of Ballard partners Stadler and Siemens Mobility show. Their customers are increasingly opting for a mix of battery-electric and hydrogen-powered trains. Ballard is also well positioned here – often in competition with Cummins or Alstom.

First Mode has raised its order for FC modules for heavy mining trucks from 30 to 35, and it’ll be likely 400 units in total for its partner Anglo American. For Canadian Pacific Rail (CP), locomotives have already been equipped with FC modules. Larger orders will probably come, and can be expected in the second half of the year.

In Norway, meanwhile, the ship MF Hydra was put into operation. Liquid hydrogen is turned into energy with the help of Ballard’s 200-kW module. The ferry for 300 people can travel for up to 21 days with it.

Everything out of pocket

The capital invest in the amount of 37.5 million USD in the first quarter mainly went into increased spending on R&D and product development – with over 860 million USD in the bank, not an issue. Interesting is an analyst’s question of why Ballard wants to allow new authorized capital to be given (so the possibility of issuing further shares), since it has sufficient liquidity at its disposal. This here is only about an extension of an expiring program or entitlement to issue further shares, so the tenor. They will also not make this a custom, was the answer.

I would interpret it differently: Ballard could quickly issue further shares if a takeover (acquisition) of a strategically interesting company presents itself, and quickly generate own capital through these shares or their equivalent, without having to dig into the high cash cushion. Everything has two sides.

Summary

Ballard may seem boring and is a big disappointment in terms of share price. The company has a very good standing, however, and is establishing and expanding its international presence, and is positioning itself so that it can in the future make and sell large numbers of stacks and modules for a variety of FC markets and thus earn money. As a partner of various OEMs, Ballard can Provide FC expertise and knowhow to a number of companies. These OEMs do not need to research and develop in this direction themselves: They buy turnkey products from Ballard and enter in competition with companies such as Toyota and leading truck manufacturers.

The China card would open up all possibilities should the country agree to a comprehensive H2 program, as Ballard would then be a big winner. Besides China, Ballard should also put its focus into India, which has a strong interest in hydrogen (see report on p. 58). Ballard equipped the first H2 train to run there. Thinking about the JV of Cummins and Tata Motors, Ballard could enter a similar venture with Ashok Leyland or Reliance. But that is only my personal view. Whoever sees Ballard in the medium or long term should use the severely depressed share prices for new and further buys.

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.

Written by Author Sven Jösting, June 9th, 2023