Nel ASA
OSE:NEL
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
2.924
8.498
|
| Price Target |
|
We'll email you a reminder when the closing price reaches NOK.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Nel ASA
You don't have any saved screeners yet
Okay. Then we can start 8:00. Welcome, everyone, that has taken their time to come here and listen to our Q2 presentation. Welcome to everyone also following this on the web. As normal, we will take questions both in the room after the presentation and also over the web. You can start to write your questions already now. Okay, we have a bit of a feedback issue here. Sorry. [Foreign Language] Sorry about that. So we will obviously start with the highlights as normal. Q2 highlights, we will talk about what happened in the segments. We need to talk about our...
Please, I can't hear you down here. Can't hear you.
Could you maybe move over here? We will talk about the Nikola contract, obviously, and then we need to talk about the announcement that we made last night, which was our expansion at Notodden. And in this context, I will also have some help from Anders Søreng, who will talk a bit about the expansion.Moving to the highlights of the quarter. The top line ended at close to NOK 136 million, which is basically the best quarter we've ever had in terms of turnover. That means an organic growth of roughly 60% that we're very happy with. And after we had our raised capital at the end of June, we're now carrying close to NOK 480 million worth of cash. We received a change order, an additional change order from Nikola related to the demo stations. We received a very large contract related to commercial stations. We secured UL certification. We got a station order in Korea. We got -- after the quarter, we received 2 orders from Norway and Germany. And yesterday, the board approved our expansion at Notodden, where we intend to build the world's largest electrolyzer factory. We will talk more about all of these issues in the coming slides. Starting with the income statement and the income statement highlights. As I mentioned, top line grew significantly and almost tripled and the underlying organic growth was close to 60% that we're very happy about. We try to deliver aggressive growth, and that is what we continue to do. EBITDA still is negatively impacted from ramp-up cost and those elements. But taking a leadership position and growing this company means that you need to invest also in OpEx. You need to expand into new markets. So that, obviously, has carried some cost so that when we adjust for that, the underlying EBITDA was negative NOK 8.8 million.We also have a good financing position at the moment. As mentioned, we have close to NOK 480 million worth of cash. And that is, obviously, partly also due to the capital raising that we did just at the end of the second quarter. We issued 90 million new shares at NOK 3.12. The demand was good when we launched the transaction. And that meant that we were also able to sell off 50 million shares of F9. F9 is an investor, which you may remember, came in through the Proton acquisition, and they had a -- F9 had a lock up that was about to run out. So it was very good for us to be able to bundle that, issue the new shares and also be able to sell existing shares in the same package, which means that we were -- we then avoided having a big share overhang. So that is something that we are very happy about and that we were able to do that actually before the end of the quarter, just before the summer. We then have plans to do a repair issue, 15 million shares. And if everything goes according to plan and we get the prospectus signed off, we will do that in the middle of September. So if you were a shareholder on the 28th of June, 2018, you should follow that closely and participate, if you would like. We need to do the questions afterwards, if you're okay. So I'll give you a brief update on the segments before we move into the larger pieces of news. As you know, Nel is a global, pure-play hydrogen technology company. We have facilities now in Norway, Denmark and in the U.S. and we have offices and agents in all the various relevant markets. We are capable of delivering all kinds of electrolyzers, from the smallest unit that you can have on your desk to big, multi-megawatt plants. And we're able to bundle that with various fueling solutions for buses, for cars, for trucks, et cetera. We have delivered electrolyzers now into 80 countries. And when we deliver or install the fueling solutions into South Korea next year, that will be country #10 in terms of fueling equipment.In terms of quarterly highlights, we received our UL certification for the U.S. stations early part of this quarter. UL certification is a safety body that basically certifies the equipment for the U.S. We are actually the first company that have been able to achieve U.S. certification of our stations. That means that it's going to be easy for our customers to install. You don't need to have your local fire marshal or other governmental bodies coming in and certifying the station. And that is typically how it's been done in the past. You build a fueling station and then you basically certify it. So this, we believe, will make our product offering more attractive. It's taken us quite a lot of time. So we're very happy with that development. So we have now EC certification for Europe and then we have UL certification for the U.S.We saw quite a lot of interesting developments in Korea for those of you that follow that closely. We received an order from Korea for the first fueling station. That is Nel's breakthrough into Korea, and we expect to see more fueling stations to be delivered into Korea. We had a joint venture with Deokyang, the gas company, but we decided to take over that joint venture and actually turn it into a fully owned subsidiary, simply because we needed to speed up activities and we needed to get our own people on the ground and more aggressively pursue that market. We are in the process of establishing a new office in Seoul. We also saw that the Korean government initiated this special-purpose company, which is intended to increase activities in the hydrogen sector and launch more fueling stations. As you know, Hyundai is very aggressively also pursuing this market in terms of cars, and they received record orders for their new Hyundai NEXO. So that was a very positive development. This special-purpose company is similar to H2 Mobility in Germany. But in H2 Mobility, we are not a member. But in this, we are a member. So we are participating with our renamed Nel Korea into this. So we have the possibility to influence also the development in Korea, which we're happy about.After the quarter, we received an order from Uno-X Hydrogen for 2 additional stations to be located according to the new Uno-X Hydrogen in Hvam and Ski, Akershus. And that means that the coverage around Oslo, the main highways into Oslo from the West, from the Northeast and from the Southeast, will be covered by fueling stations, making it easier for the user that live in and around Oslo. These orders will go into 2019 order book because we are already covered for '18. Same we saw in Germany. We received an order for 2 more stations into Germany, H2 Mobility and as also these stations will obviously go into next year's order book. H2 Mobility is the German body or company that is owned by a lot of large industrial partners that are basically deploying all the infrastructure in Germany. We are not a member, but we are very happy to continue to sell equipment into H2 Mobility even if we are not a member. Actually, we're the only nonmember that is selling equipment into H2 Mobility. So that is something that we're very happy about. They are positive to our equipment and they have launched an app, which you may want to take a look at, at your own time, H2.LIVE. We've taken a picture of it here on the right-hand side of the screen. There, you can actually constantly see the status of all the fueling stations in Europe or the stations in Germany and you can see which one has already been constructed and are online and which one is coming up later. So it's a kind of useful little tool that you can take a look at.We saw the launch of the Energy Observer. Not everyone of our shareholders picked up on the fact that Nel has installed or has sold their electrolyzer into this vessel. This is a catamaran, as you can see, which is fully driven by renewable power, wind and solar. And it will travel the world for the next 6 years. It's financed by the European Union and by the French government and a number of partners. And it has installed then wind power and solar power, and it will produce that when the wind is blowing and the sun is shining. And then it turns it into hydrogen, stores it and uses the hydrogen to -- for propulsion and other applications during the night when there is no renewable -- no possibilities to make renewable power. So that is a very interesting project. The vessel also come to Norway at some point, and we will let you know when that happens. But it's interesting to hear they actually take saltwater and they make hydrogen from completely renewable power, which is an interesting concept. And the learnings from this project will go into various applications both onshore and offshore. So more information to come on this as we move forward. So let's talk about the Nikola partnership. We call it the partnership because we are very closely working with Nikola to be able to support, I mean, their ambitious deployment of fueling station equipment. The partnership consists of basically 2 contracts, consists of a demo station contract and it consists of a commercial station contract. And we will talk about both of them, but let me start with the demo station contract. We announced this earlier this year. But in the second quarter, we received a change order for the demo station contract. They wanted us to do more work and added more to our contract. It's basically 2 stations with a standard A-485 electrolyzer and a standard fueling station except that we have tweaked it, so they can fill faster and in more volume so it's adapted to trucks. One of these stations will then be installed outside their factory in Phoenix, Arizona. The other one, we don't know yet, but probably in California somewhere. So they can drive their prototype fleet or trucks back and forth. We will start to install this towards the end of this year and then we'll continue to install them into next year. And Nikola will also have the possibility to add more equipment over time to these stations.Then just before the end of the quarter, we announced our large multibillion Norwegian kroner contract with Nikola for their commercial stations. This is a completely different contract and obviously, a completely different concept. Here, we will deliver exclusively 448 electrolyzers to Nikola with all the associated fueling equipment. It's equivalent to 1,000 megawatt or 1 gigawatt of capacity. And there has never been signed such a large contract in the history of hydrogen. In terms of value, we've not been allowed to disclose the value of the contract. It also depends on the amount of service and support we will deliver. But Nikola gave one example of -- to illustrate in some way, and that's the part of the contract which will go to Anheuser-Busch. Nikola stated that this part alone will represent more than $0.5 million -- $0.5 billion or $500 million. So it is a valuable contract and it's important for many reasons. So one of the reasons we will talk about later, the fact that such a contract allows us to scale up. And when you scale up, it's a very, very important driver for getting costs down. When you get costs down, hydrogen becomes relevant in more and more markets. So that is a critical element for us. So this, the outcome of this, basically aligns perfectly with our cost road map. We scale up and we get the cost down and we started to talk to our investors already last year about our ambition to drive cost down, and this aligns perfectly. So if you go back to the presentation from last quarter -- from the last few quarters, we had talked about these cost road maps. So this will then allow us to expand at Notodden. We will deliver electrolyzer stacks from Notodden. We will deliver fueling equipment from Denmark, and then we do the frames and pipes and more simple stuff, we will source locally in the United States. And we already now start to build up the organization to support this. We need a separate project organization, which will basically start to work on this project.Nikola is developing very well also. We are very happy to see and support their development. They are continually derisking their business case, which we think is good. There are now a number of very strong, large partners that are contributing to their development and to their rollout. They received more than 11,000 preorders for trucks. One of them, obviously, was a large one from Anheuser-Busch for 800 hydrogen trucks, and Anheuser-Busch is one of the largest breweries in the United States. So a very important part. They have 5 breweries and a number of distribution centers. So obviously, you can start to see where you should prioritize building the infrastructure to support this. Anheuser-Busch, they want to replace all their diesel trucks. So that's basically what they're doing with hydrogen. On top of that, Nikola recently announced that they raised USD 100 million in their C-round financing, which is very positive. And they also state that they will raise more in the same round. So we can say that Nikola has made a lot of progress, and I think that is very positive.So then we need to talk a bit about the news from yesterday. We, the board -- we had a board meeting yesterday, obviously. And the board decided and approved the investment in Notodden, which -- where we will build the biggest electrolyzer factory in the world. It will be automated, fully automated and I've asked Anders Søreng, who is heading up the electrolyzer division, to comment, tell you a bit more about this exciting project. Anders Søreng has -- is also the CTO of Nel and he has a relevant background because he has participated in building up similar plants for REC in Singapore, where we had a 1.5-gigawatt plant and which was also very high automated. So Anders, if you could help me a bit and take us through some of the main elements.
Thank you, Jon Andre. So today, I have the pleasure to give you more insight into our latest capacity expansion project and also, say a little more how we will intend to support Nikola on electrolyzer equipment. So first, some facts and figures about the new Notodden facility. It will have a nameplate capacity of 360 megawatts. That's roughly 10x more than what we have today. It will become the world's largest electrolyzer manufacturing plant. As Jon Andre said, it will be highly automated and designed to achieve the all-time low-cost levels. It will be built on an extension of our current facility and the total investment of approximately NOK 150 million. So the team at Notodden has already done a very good job of increasing production capacity from 20 to 45 megawatts per year, and that's mainly through debottlenecking. However, when implementing the new conduction expansion, we'll be able to deliver approximately 360 megawatts per year. And that equals approximately 160 full-size cell stacks. All these numbers assumes a 5-shift operation utilizing both the new and the old production line. For large capacity electrolyzers, we target a system cost reduction of approximately 40%. The project will initial -- will be initiated this year, September, October, and we target to have it fully operational first half of 2020. For driving this project, we recruit about 30 to 40 new people to support increased production as well as other key support functions. And at the end of 2019, we will have around 60 to 70 new people engaged at -- sorry, 60, 70 people engaged at Notodden. So when we designed this new plant, our ambition was to take -- I'm sorry, our ambition was to take electrolyzer production to a new level. One important enabler was to decide to invest in a high degree of automation that supported both accuracy in production as well as eliminating heavy manual workload for employees. We will implement advanced system integration and data monitoring. This will be used for documentation or quality and as well as a basis for our improvement work. A part of ensuring quality and reducing cost is also to work closely with our suppliers. The new plant setup and the manufacturing principles will support this focus going forward. A new factory standard as the one we are investing in here will give us the possibility to meet and hopefully exceed the initial plant targets we have set. So our team consisting of experienced Nel personnel, mixed with complementary experienced personnel from similar expansion projects, will be the winning team to make this investment a success.So what we want to show is that we're increasing manufacturing volumes in combination with efficient manufacturing design solutions. Electrolyzers will go from being a niche solution to become the mainstream choice. In addition to the green aspect, also prices will be more and more competitive to SMR. Nel will continue to deliver the most efficient electrolyzers to the market, but now at an even lower price. Thank you. And over to you again, Jon Andre.
Thank you very much for that. We will hear more from Anders hopefully in the Q&A session. But we're trying to really make a change here. And the large contract gave us the opportunity. We have already the largest facility on fueling stations. We are now building the same on electrolyzers. We really want to be able to drive the cost down and be able to make hydrogen relevant in more and more markets. So I think this is very important. Just to put it into perspective, we have about 40 megawatt of capacity in the U.S. already and we have about 40 megawatt capacity in Norway on PAM and alkaline. And that already makes us by far the biggest. So now, we are basically taking a lot of steps forward in terms of maintaining our leadership in terms of size and cost.So let me then round off by going through the summary and outlook. I showed you this slide a number of times, repeating the same message. We still have the same ambition: to make a fast-growing multibillion Norwegian kroner company, and we do it through focusing and delivering on these 6 elements. We want to have technology leadership. We want to have cost leadership and I think we have proven that in our various areas. We want to be the preferred partner, which means that the total commercial capabilities and the package that we put together for the customer should be the preferred solutions. We want to have a strong financial backbone so we are -- keep funding our companies so that we are well funded. We want to have a global presence in all the relevant markets where there is a momentum on hydrogen. And I think we continue to deliver on these ambitions.When we are looking then into the more specific outlook, and keep in mind, we tend not to guide a lot, but we give a bit of an outlook, we did a private placement by the end of June and we are now well funded to execute on the existing business case and the expansion plans that we talked about and announced yesterday. When we do these expansion plans and when we want to keep a leadership position and keep our growth trajectory, we obviously need to add cost, so you need to keep that in mind. We need to add cost sometimes early in new markets, and that will have a negative effect on EBITDA. We also have -- in particular, this year, we also carry quite a lot of legal cost, not because we have -- are running a lot of large contracts, but also because we have a case going, which we talked about earlier. We continue to build up our activities in South Korea. We are -- we see the positive market developments there and we are now moving our sales office to Gangnam in Seoul, and we are employing some people. We have already signed on some people, which I will talk more about later, which I think will be interesting. So Korea is a strong, interesting market for us. We already have an agent in China, but we are adding our own employees and we are setting up an office in Shanghai. And then we continue to work more on our market penetration strategy into China. When I say market penetration strategy, I mean not selling remotely into China, but actually, seeing how can we potentially have a partner in China with a close relationship. And this, we have talked about also this before, this is a complicated matter so it needs to be done in the right way. And then the Herning facility. We now have the official opening of that facility, ribbon cutting ceremony on the 21st of September. So that's also a nice milestone to mention in the outlook.So with that, I think we have completed the presentation part of this session. And we are obviously open to taking questions, both here in the room, but also over the web. There is a microphone. So if you could be so kind to wait for the microphone, we will also be able to broadcast your question outside this room.
[indiscernible] from SEB. On the Nikola contract, given the size of it, the large size of it, given the growth ambitions to Nikola and also, the ambitions they have, how do you assess the counterparty risk for Nikola?
Well, we see what they do and what kind of partners they are involving themselves with. And so far, we see a positive development. We see that they are working closely with Fitzgerald to set up their leasing arrangement and the financing. They're working with Bosch on the technology side. And they're working with a number of important partners, which I think is good. They have a financing leasing structure, which I think is quite clever. And Trevor talked about this in our conference call, where they are basically flipping their lease contracts. And then they continue to be successfully funding money. They raised now money on a $1.1 billion valuation. And they continue to generate good value for their shareholders. So obviously, there is more risk to Nikola than it would be to a large industrial gas company but a large industrial gas company wouldn't have the same ambition and wouldn't be able to do what they are doing. They are basically changing -- completely changing and turning upside down the heavy-duty transportation segment, and I think it needs to -- you need to see someone like that, that are basically dedicated and have such strong ambitions to be able to do it. And we've seen it in the past. Look at what Tesla have done. They've been able to successfully execute even if, I think, the business model that Nikola is planning is much more robust than -- so we will see.
Karl Johan Molnes, Norne, while the microphone is back here and while we are at Nikola, 2 questions there. You were invited to participate in the capital raising of Nikola. And since you haven't written anything about that, I guess you didn't participate in that.
We have not participated yet. But we have the opportunity to do so and we continue to evaluate that opportunity.
The second question is have you been informed about the location of the first station? So are they all greenfield or are they located next to existing truck stops?
Well, the demo stations, we have the first location and we have the -- we have a few alternative second locations. In terms of the commercial stations, we have not gone into that. But keep in mind that the first commercial station will be installed and ready to operate in 2020. So we still have some time. This is also up to Nikola and their -- some of their customers, and obviously, one of their very large customer, Anheuser-Busch. So you can imagine that you would try to figure out this route, let's cover this route first. You deploy the trucks to cover this route and then you go to the next route and the next route, and then you build a grid like that and you try to focus on which route can cover the most amount of demand from the customers. So that is an exercise that is currently ongoing and which shall continue for some time. But we don't need to know the location just yet. So we are fine with that. Okay. Any more questions from the room or shall we look at if we have some questions from the web, Bjørn?
There is one here who is wondering about our patents and IP position, if you can give a brief comment on that.
Yes. So we do have a lot of patents, especially in the PAM electrolyzer area and in the fueling station area. There, it makes a lot of sense to have patents. I think we -- I think Proton alone has about 80 patents and we do have quite a lot in Denmark. These are new technologies, so here, we need to be careful and protected well. And obviously, when you sell a piece of equipment to someone, then that someone can open up and see, so you need to protect it. When it comes to some of the production processes that we are implementing, for example, at Notodden, we have a completely unique and secret sauce, so to speak. We don't patent it. We basically don't tell people about how we do it. If you tell them about how you do it, then you have basically released it to the world. And it's not easy to go into everyone's plant and see if they're using your recipe. So in some cases, we patent. In some cases, we have so-called trade secrets, where we don't. And I think we have a pretty robust strategy on this. Obviously, being a small company, you always need to chase and check, but I think we have a pretty robust strategy on that.
And then there is never a quarter presentation without a question about the RotoLyzer. Can you -- there's a question here asking can...
Yes, the RotoLyzer was not a focus of this.
What's happening with the RotoLyzer is the question?
I think I covered that in -- we had an investor call this summer, and I think I covered that. We are working, continue to work on the RotoLyzer, and we do still believe it has enormous potential. We did a lot of testing of the RotoLyzer at the end of last year, as everyone -- as we talked about, we did long-term testing. The quality of the gas was very good and it performed as we wanted. However, we were able to identify a number of areas improving the concept in terms of robustness. And when I mean robustness, when you sell a piece of equipment to a customer, you would like it to have a very low maintenance level. So it should just run and run and run, and that's how electrolyzers in [indiscernible] are running. You basically turn it on and you leave it for 8 years, 10 years and then you -- so you would like to have as little maintenance as possible. And through that long-term testing, we identified a number of improvement points in that category. And that we said we would like to capture those improvements. So basically, we are now adapting the concept slightly. We will share more with you later, and we will test it during the fall and then we will give you a detailed update on those elements later this year.
Okay. We can have another one. Do we have one here?
Karl Johan?
Karl Johan Molnes from Norne again. While we have you here and on tape, it's important to bring out all the new things that are happening. So PowerCell signed a contract with Siemens to help them with marine applications for hydrogen. Will that be something that you will be able to supply hydrogen stations, filling dispenser solutions on land as part of the Hyon Corporation? Or is PowerCell operating on their own here?
No. PowerCell is -- as you mentioned there, the Hyon Corporation is very important. It's 3 companies working together. It's PowerCell, Nel and Hexagon, owning Hyon 1/3 each. And we have people in that company who are able to -- they specifically focus on marine applications. They develop concepts and sell those concepts to end customers. And then they turn around to their parent companies and they ask for equipment contribution from PowerCell, from Hexagon and from Nel. So the customer has just one interface. So before Hyon, if you were a vessel operator, a ferry carrier or owned a fleet of fishing vessels, you would need to talk to 3 companies and you would need to kind of piece everything together and try to fit everything into how do I fuel, how do I store, how do I run my vessel. Now you can talk to one company. And I think we all, all of the parent companies are trying to make concepts that fits into this marine application area. So you will see that PowerCell has taken a step forward and cooperating with Siemens. They also have formally received certification of their fuel-cell concept, which has been marine-ized for marine application. So they can then contribute into the JV. And Hexagon is doing their thing and we are basically developing fueling solutions specifically for these applications. So we haven't seen any orders yet, but I think they have -- we talked about that they have a lot of leads that they're working on. And I think we'll see more and more marine applications because it makes so much sense to use hydrogen in those applications. Okay?
We have another one from the web. Were the cost reductions from the Notodden expansion calculated in the H2V contracts or will the costs now be even lower after the expansion?
So as I mentioned, these cost reductions aligns with what we have already communicated in the past. We have a road map and we've been quite aggressive just basically making that public, showing what is our ambition in terms of reducing cost. And specifically related to -- I don't talk about specific contracts, but obviously, depending on when you buy and how -- when you buy your equipment and how large your equipment is, you can then tap into that cost-reduction road map. And I believe that H2V was an example of a contract that was aligned with the cost-reduction road map. Okay?
I'm wondering, does Nel have a new price issue recently?
Sorry if we have a...
A new price issue.
New issue.
Yes, new issue.
Yes, new issue.
I guess, financial support.
At the moment, we are -- at the end of the second quarter, we had close to NOK 500 million worth of cash. So we now are well-funded to execute on our current expansion plans. So we don't have any plans for any new equity raising.
Okay. Next question is what do you think about in the next maybe a few years, can Nel operate normally without financial support or issue from outside?
We haven't gone into the details about our future financing. But sometimes, you see a huge opportunity and you want to capture that opportunity and you know that, that opportunity will create a lot of value for the shareholders, but you need to finance it. So then we will see. At some point in time, Nel could also have debt opportunities. Today, we have 0 debt. So I think we will need to address the financing when the time is right. And when we see the opportunity, if there is a large opportunity, if we need to address that in some way. But at the moment, I can say that we have -- we are well-funded and we are able to do what we want to do. Okay? I think we'll take one more and then I think we need to round off.
I'm just wondering, the 27th of June, Nel got its first short position from GSA Capital on 6.6 million shares. Is that of any concern or...
I can't really worry about whether people sell or buy or what the share price is. I try to worry about how do we build the company, how do we expand, how do we recruit the right people. And then the share price is what it is. And I've tried to guess many times if the share price should go up or down, and I always guess wrong. So I'm so happy I don't have to rely on that type of expertise. Okay. Thank you very much for coming, everyone, and welcome back again next quarter. Thank you.