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FIVE TAKEAWAYS FROM SECOND QUARTER RESULTS FOR LISTED HYDROGEN "PURE PLAY" COMPANIES

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Justin Milberg's picture
Managing Member KV Catalyst IM LLC

Justin Milberg is an analyst and currently serves as a Managing Member of KV Catalyst IM LLC with a focus on the hydrogen economy.  Previously, he served as a Managing Director at Resource...

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As European governments begin to allocate funding for various hydrogen related projects, the US Inflation Reduction Act of 2022 (“IRA”) will provide another powerful catalyst for the already fast-growing hydrogen economy. Nevertheless, implementation of that legislation will take time, so it is instructive to review second quarter results published by so-called “pure play” listed hydrogen companies for clues regarding the current state of the hydrogen economy. Five takeaways from second quarter results are:

1) Electrolyzers are the most commercially robust sub-sector of the hydrogen economy currently. Electrolyzer specialist Nel saw a 30%+ year over year increase in backlog. Plug Power indicated that electrolyzers will make up 1/3rd of Q3 revenue from almost nothing in the prior year quarter. Italian electrode manufacturer, Industrie De Nora, reported that its energy transition backlog (largely components for electrolyzers), doubled from the end of March to the end of July.

2) Even as demand for electrolyzers gains momentum, conversion of sales pipeline into contracted orders has moved more slowly than expected a year ago. Some of those delays relate to the same supply chain, energy and inflation issues impacting the overall global economy. The slow processes involved in funding allocated subsidies and promulgating final regulatory rules as well as local permitting reviews have further extended time frames to final investment approvals. Overall, management teams seem confident that the pace of orders will accelerate in the second half of the year.

3) Initial increases in hydrogen production are driving demand for storage solutions. Cylinder specialist Hexagon Purus announced that 100% of its 2022 hydrogen transportation equipment capacity and 60% of its 2023 capacity is already sold. Likewise, Chart Industries announced $134.5m in orders for hydrogen liquefiers.

4) Within the fuel cell sub-sector, demand is growing most quickly for stationary units, especially those able to operate with natural gas or methanol until dependable supplies of clean hydrogen are available. Beyond environmental benefits, customers are sometimes finding that fuel cells offer a more timely energy solution than attaching to an already overburdened electricity grid.

5) Fuel cells for mobility applications are a laggard in the sector. The lack of fueling infrastructure (addressed in the IRA) is an impediment to adoption. Moreover, issues with the economy in China, expected to be a leader in fuel cell commercial vehicle adoption, have weighed on growth. Notably, mobility fuel cell specialist Ballard Power saw declining revenue year over year although the company also has a growing stationary unit business. 

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