During 1Q23, hydrogen economy companies continued to grow revenues at a rapid pace and management teams were encouraged by increasing diversification of customers and projects. Nevertheless, deteriorating margins and balance sheet issues weighed heavily on some companies in the sector.
1) Robust growth but cash flows remain under pressure
While mobility sales are uneven, many hydrogen companies including Bloom Energy, Everfuel, Hexagon Purus, Nel, Plug Power, PowerCell Sweden, SFG Energy as well as DeNora’s Energy Transition business and Cummins’s Accelera business recorded 1Q YoY sales growth of 35%-100%+ often with comparable growth in backlogs. Unfortunately, meeting rising demand and staying competitive means more pre-emptive spending on salespeople, manufacturing capacity and R&D. Just by way of example, Nel announced it will build a new gigafactory in Michigan, Hexagon Purus has multiple capacity expansion projects underway around the world and Plug Power has multiple green hydrogen plants under construction. While there are unique circumstances at play for each individual company, pure play hydrogen management teams are under increasing pressure to articulate a path to positive cash flows.
2) Capital needs are rising just as capital markets are becoming less forgiving
For many publicly listed pure play hydrogen companies, capital reserves built in highly receptive markets during 2020 and 2021 are dwindling. At the same time, CapEx and R&D expenditures necessary to reach scale and profitability remain high. While not unique to the hydrogen sector, several companies that that went public through SPAC transactions present the most extreme case studies for this dynamic. Advent Technologies, Hyzon Motors and Nikola have seen their share prices drop below $1 raising questions about how they will fund operations going forward. That said, even Plug Power, which has ~$1.5bn of cash and liquid securities on its balance sheet, spent significant time on its earnings call responding to questions about funding options for late 2023 into 2024 including project financing, asset backed loans and DOE loans.
3) Capital markets remain accessible to many hydrogen pure plays but on less favorable terms
Public companies raising capital in Q1 included Nel, Hexagon Purus, Chart Industries (acquisition financing), Nikola, Beijing Sinohytec, Enapter and Everfuel. Subsequent to its 1Q earnings announcement, Bloom Energy also launched a notably large $550 million convertible senior note offering. Many of these companies raising capital have experienced sharp declines in share prices subsequently partially due to concerns about dilution and credit risk. As such, some companies are also implementing more creative capital solutions such as Everfuel’s EUR200m project finance JV with Hy24.
Mon, May 22