Nel ASA
OSE:NEL
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Nel ASA
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So welcome, everyone, to this Q2 presentation. Very nice to see a few people here in the room. And welcome, everyone, following this via the web. I think you'll find this quarterly presentation particularly interesting. And you can pose your questions already now or through the presentation. I'll try to cover as many as possible at the end.So let's move to the agenda. The agenda is as follows. We will quickly go through Nel in brief, then move on to the first quarter highlights and the financial review. I'll give you a lot more details on the Herøya expansion. And here, we will have a little surprise for you at the end. We will cover the key developments of the quarter, but also cover some more important developments that we've seen throughout Europe in recent months. And then we'll finish off with the summary and outlook and Q&As.Let me start in the traditional fashion with Nel in brief. What makes Nel different and unique is that we cover both electrolyzers and fueling stations. We do cover also PEM and alkaline, and we are a pure-play technology, hydrogen technology company that delivers in-house leading developed and produced technologies. We're also becoming increasing global. We have manufacturing facilities in Norway, Denmark and the United States. And we also have people and organizations in many other relevant countries and locations like California, Korea, Japan, China and other places around Europe.We are still the largest electrolyzer manufacturer in the world. We've delivered more than 3,500 systems in 80 countries plus. And we're also leading on fueling stations where we have sold more -- sold or have under construction more than 110 stations in 13 countries.As mentioned, we have 3 main manufacturing locations. We have Wallingford, Connecticut facility, where we have more than 50-megawatt PEM capacity. Here, we have room to expand within the premises as you can see from -- you see a picture of the building. We have our Herøya facility in Norway, nameplate capacity 500 megawatt of alkaline production. And then we have our Herning, Denmark facility that can produce up to 300 fueling stations -- hydrogen fueling stations per year.We have long experience in each of the respective areas. We have 20, 30 years in PEM, we have almost a century in alkaline, and we have more than 15 years in the hydrogen fueling station business. And we obviously then also have a large portfolio of equipment sitting out in the field, working as references for new and existing customers when they want to look at new equipment.We've updated this overview with the 2020 numbers and the positions remain largely the same. Nel is still the largest. Not much has changed from that point of view from 2018, 2019. And we still have the unmatched track record of 3,500 systems sitting out in the floor or sold over the years in more than 80 countries. Two out of the 4 top-4 companies are Chinese, for your reference. And some of the companies making a lot of noise and getting some attention in the field are not even on the list. So let me then move on to the second quarter highlights and financial review. Revenues ended at NOK 164 million, up 10% from the same quarter last year. We are still impacted negatively by the COVID. Things do take some more time when you're not able to travel and when you're not able to meet face-to-face. Luckily, we do now see the light in the end of the tunnel. Things are about to change even though it may take a bit longer time. The order backlog was close to NOK 1.1 billion. Many small orders contributed to this development.And in terms of highlights of the quarter and beyond, in quick order, we got a PO from HTEC in Canada. We signed a Frame agreement with Wood and Aibel. We entered into a collaboration with First Solar. We got a PO for H2Energy. We joined Ovako in fossil-free steel rolling and milling projects. We got a PO from a PEM electrolyzer for the first nuclear to hydrogen in the U.S.; a PO from Everfuel for a fleet of taxis in Aarhus; and last but not least, we signed a joint development agreement with SFC Energy for decentralized energy generation and storage. We'll cover many of these topics or all of them a bit later in the presentation. But we have not been sitting still. We have a decent revenue development. However, you should expect higher growth going forward and as we ramp up more production capacity. As usual, EBITDA was negatively impacted by so-called ramp-up costs and nonrecurring elements. Pretax profit was also negatively impacted by the valuation of Nikola and Everfuel, and you'll probably continue to see swings in this area. But we do hold close to NOK 3.1 billion in cash and have a good financial muscle to execute on our plans.To give you a bit more flavor on the effects, Q2 effects, negative effects on EBITDA. We are obviously and, as we've said, preparing for the future. And naturally, that contributes negatively. We are building up the entire organization, in particular within project execution and the ramp-up costs related to Herøya, we are obviously carrying all the costs without seeing still any revenues. You're probably tired of hearing this, but the COVID situation has often and continued to impact us negatively. We do need to hire regularly external personnel to cover for Nel people that are not able to travel where they should. We have to spend additional hours on various projects around the world due to various restrictions and limitations. And we do expect these negative consequences to continue somewhat, even though we see that things are getting better and improving in the not-too-distant future. These effects are significant and account for roundabout 40% of the negative contribution or the negative result.In terms of the order backlog, it is solid, slightly up from the same quarter last year despite the travel restrictions, et cetera. We closed roundabout NOK 150 million worth of orders in the last quarter, and hence, we were not drawing down significantly on the backlog. Still, we have a very strong pipeline, project pipeline going forward. However, as I've said a few times already, projects are getting larger, they're getting more complex, and it takes more time to get all the details in place. And hence, we will continue to see swings or we could see swings in the order backlog from quarter to quarter.So let me then give you an update on the Herøya expansion. As you know, Herøya will contribute to cost reductions. And based on our cost reduction targets in combination with the development within renewables, we believe that by 2025, you should be able to produce green renewable hydrogen at $1.5 per kilo as a Nel customer. That is basically on par with fossil hydrogen. And that means that we are -- we will start to see what we call reaching fossil parity. It will not happen everywhere at the same time. It will start to happen where energy prices are the lower. And this is very promising for the whole future of renewable hydrogen.The Herøya plant is now ready, and we are cutting costs and scaling up and introducing world-class automation. It's a fully automated chemical line with supporting robot cells. The facility will run according to the latest and greatest lean manufacturing principles. The initial line, 500 megawatt, with space to grow to roundabout more than 2 gigawatts. And we are on track, both in terms of schedule and cost. In other words, we are on time and on budget. We have completed 45,000 man-hours without any total recordable injuries. That obviously says something about the focus on safety. But I think more importantly, it also tells you something about the quality of the team that has undertaken this task, and that continues to work in this facility.Installation according to plan. Factory acceptance tests according to plan. Operations are ready to take over the facility. And we will start to produce to Nikola and Everfuel in the fourth quarter.I was down at Herøya a few days ago, and it was a very impressive facility. It's very different when you see it. Even though the official opening is in the first quarter of next year, I would like to give you a sneak peek already now. So when we were down there on Monday, we brought a few other colleagues, and we brought a camera, and we asked the Plant Director [indiscernible] to give us a tour. And if you stick around to the end, we will show you what I saw at the end of the presentation.So before we go there, we will talk through some of the key developments of the quarter. We signed a 2-megawatt PEM order with H2 Energy. The order is part of the 30-megawatt frame agreement that we signed all the way back in 2019. H2Energy, as you know, is cooperating with Hyundai trucks to introduce 1,600 hydrogen trucks into Switzerland. And this electrolyzer will produce green renewable hydrogen for the increasing number of those trucks.The operators of the trucks as far as -- when we talked to H2Energy, and the partners are thrilled not only on the experience but also the performance of the trucks, and that kind of goes to show that hydrogen really has a great potential within the heavy-duty transportation.We got a purchase order for a 1.25-megawatt PEM facility or PEM order from a U.S. customer. Name still remains undisclosed but probably will soon be. The first -- this is the first ever nuclear to clean hydrogen in the U.S., and it gives us, obviously, a lot of great learnings. It has a massive potential for future scale-up, as you can do this in many other facilities. And here, we actually utilize the dynamic response of the electrolyzer to capture intermittent power of a nuclear power plant, and you would imagine maybe a nuclear power plant wouldn't have intermittent power, but obviously, you don't draw the maximum amount all the time, and you can't shut it down. So actually, at night, for example, you do generate a lot of intermittent power. The value of this contract is 2.6 million, and this program was supported by the H2@Scale program from the DOE, the Department of Energy, because they really feel that this is an area that has a lot of potential for the future.We signed an agreement with SFC Energy AG, which is a leading provider of hydrogen and methanol fuel cell for stationary and mobile applications. They have actually sold more than 50,000 fuel cells. So they've been around and are really one of the leaders in this field. And here, we are combining the leadership position of SFC and the leadership position of Nel to basically address and cooperate to address a new segment in the market, which we think is going to be growing and going to be important.Here, we will start with our mature and proven technology components and put them together. But we will obviously develop this over time, and the target is to have 500-kilowatt range, which is basically on par with the traditional diesel generators that you see out in the field so we can actually replace those generators. And the solution here, well, basically take renewable energy and store it, and it will release it either on demand or as backup power. And the estimated size of this market in Europe in 2030 is around about EUR 15 billion, and that's in Europe alone. So we're very excited about this cooperation, and we'll push forward to get going.We also signed 2 important framework agreements with Wood and Aibel. This is to strengthen Nel's global delivery capabilities and project execution muscle. We are now working with the best, and we do cover the globe, as you can see. And we are already working on a long list of projects. I know we will win projects with Aibel and Wood, but we do not know exactly why. So it may still take time. We will see.Collaboration. We signed a collaboration agreement with First Solar, which is a leading manufacturer of solar panels. With this partnership, we will further improve our product offering and improve the integration between the renewable and the electrolyzers so that it becomes more dynamic. It flows better together. Initially, we'll work on the SCADA system and the control system and the software, but then we will obviously increase the integration over time and may even incorporate hardware elements from the PV power and the electrolyzer and everything with the target to reduce the cost of green renewable hydrogen, make it easier and more dynamic to combine the technologies.We also joined a very exciting partnership with some very impressive partners, Ovako, Volvo, Hitachi ABB and H2 Green Steel, for hot forming of steel. Hot forming of steel and rolling of steel has a lower technical barrier than introducing green renewable hydrogen in green -- in raw steel. And here, you basically -- it's easy to replace the fossil gas that is used today with the green renewable hydrogen. So there are limited changes to the downstream process, and that is positive. That means that you have a market which is coming faster. You also have less commercial barrier. It's easier to make it commercially fly because you use all of the elements of the electrolyzer. You use the oxygen, you use the hydrogen and you also use the heat. And finally, you don't necessarily have to make massive sites. There are many sites like this all of Europe that would need a similar solution. Here, we do get a head start, we do get insight and we are able to work on this project and get a better position, hopefully, to address this market also going forward. We will get back to you in the third quarter with more information on this whole space.We also have to cover some other important things that happened within the hydrogen space in Europe. The IPCEI program was established to accelerate hydrogen technology and market in Europe. IPCEI stands for important projects for common European interest, basically promoting cross-border R&D and industrial projects that should accelerate the European development and generate future jobs. IPCEI will basically allow states to fund up to 100% of the CapEx but also support on the OpEx really to accelerate a particular industry and now IPCEI program is focusing on hydrogen.Nel has been proactively building partnerships and have been reviewing the projects and participating in various tenders. There are approximately 140 projects in the IPCEI program currently, which is shortlisted. And when we look at the list of projects, we think that we could be relevant in more than 80 of these projects. In terms of timing, it does take time, as you understand, from a launch of a program and the implementation of the program until the funds are deployed and the projects are executed. So keep that in mind, it will take some time, but fundamentally, very promising and very positive for the hydrogen industry.We also saw the Fit for 55 package. The European Commission, which launched this very long report, basically telling how Europe should do the [ energy utilization ] and cut CO2. It's a 3,000 page document, and hydrogen is mentioned more than roundabout 1,000 times in the document, which is really good, and the 3 areas, which are really focusing a lot on hydrogen. First one, by 2030, half of all the fossil hydrogen produced in Europe will have to be replaced by green renewable hydrogen or CO2-free hydrogen. That is close to 40 gigawatts of electrolyzer. If you convert that to electrolyzer capacity, it's close to 40 gigawatts. That is equivalent to 16,500 of our largest electrolyzers or 72 years of production of the 500-megawatt production line. So it is -- it tells you a bit about the potential.Number two, the document also stipulates that in terms of fueling stations, there should be a minimum -- or maximum distance of 150 kilometers between each station across all the European transport network and in every urban node across Europe. And last but not least, it suggests that the emission trading scheme should also apply and include the production of green renewable hydrogen. And that means that you will -- if you produce green renewable hydrogen, you will receive quotas and the quotas can be traded, as you know, in the open market.So a lot of good focus on hydrogen and really promising for the future. The proposals are now with the European Commission. It needs to be discussed in European parliament. And then we are looking for the final approval and implementation. Hopefully, that will start or that will be concluded sometime in the first half of next year. But again, things are promising, very good for the future, but it takes a bit of time.Hydrogen Europe has been critical for the development, I believe, in -- for the hydrogen development in Europe and continues to be so and is also recognized for it. So we have a record high number of members at the moment. We do then have a better funding situation, and we do now strengthen the organization quite significantly in Hydrogen Europe to be capable of doing more and pushing stronger. We are, obviously, honored and I'm obviously honored to be selected and be elected as the President of this organization. That gives us the opportunity to influence. But it also allows us to meet all of these great other people that are on the board, companies like Salzgitter, Equinor, Gasunie, Vattenfall, Iveco, Toyota, Airbus, really great, competent people, good forum to meet but also obviously good forum to push the industry going forward.So with that, let me then move over to the summary and outlook before we take a look at the Herøya facility. We have not changed this slide of the outlook. The outlook for hydrogen is, as you've seen, better than ever. But as you've seen from this presentation and what we talked about now, orders does not always flow in a linear fashion. And the many large and attractive funding schemes will take some time before they are implemented. There may -- it may take some time before you see a lot of concrete being poured and a lot of steel being welded. In the meantime, the only thing we can do is to prepare for the future, build a relevant organization, be ready to deliver and really make sure that we maintain our leadership position. And that will mean that we will incur additional costs to keep that position.So to summarize, Nel is a pure-play, independent hydrogen technology company with a proven track record. We have decades of experience in both PEM and alkaline. We have constructed and operated some of the largest renewable hydrogen production facilities in the world. And through scalability and cost leadership, we now continue to cut cost of equipment, really contributing and helping green renewable hydrogen to outcompete the fossil hydrogen. We're also delivering strongly on our partnership strategy, which we've talked about a number of times. We've signed some really important agreements with leading world-class EPC companies. We are improving our product offering beyond what we have in-house, both upstream towards solar but also downstream -- with First Solar and downstream with Haldor Topsøe and now also FSC Energy AG, basically, making our products relevant in all -- in other markets and integrating forwards and backwards.So before we go into the Q&A, let's show you what I experienced at Herøya on Monday. So let's see if we can get this rolling. We need to coordinate.So welcome to Nel's brand-new electrolyzer facility, fully automated, 500-megawatt first line with a potential to expand to more than 2 gigawatts, producing electrolyzer at a revolutionary cost, contributing to the $1.50 per kilo target. We have dedicated more than 3 years with world-class teams to really design all the nitty-gritty details of the automated robot cells and the chemical line, completely unique to Nel. And you've heard me talk a lot about this, so let's go and take a look.So then we are inside this very large production hall, and we'll give you an interesting tour and a good overview without revealing all the secrets because there is a lot of secrets there. But to help us do that, I have the Plant Director, [indiscernible]. You will take us around and explain the different steps?
Yes. It's a pleasure to have you here today. I'll take them around the plant and show them production line.
So where do we start?
I suggest we start all the way down there.
All the way?
All the way, Cell 1.
Excellent. Very good.
So here we are at Cell 1. This is where it starts. We load the plates with special designed pallets from our supplier. It's handled by a forklift by the operators, and this is the only place where they handle a plate before the end of the line. It's quite accurate. It's 2 millimeters on each, and that's why we need these special designed pallets. So the robot picks up the plates, the electrode plates and the support plates, and hand these over to the surface treatment station. So I suggest we move over there and see what goes on at that station.This is Cell 2, the surface treatment station. This is where we texturize the surface of the cathode plates to get the chemistry exactly right for the quality that we are so famous for, and we clean the surface of the other plates. As you can see, it's all fenced off like the rest of the robot cells for safety reasons. So after the surface treatment, we head over to where we load the chemical lines in Cell 7.1.So now we are at the unloading and loading station, where we either load the chemical line or unload it. So what happens here is that the robot will either pick up the plates from the surface treatment station and load it to the carrier jig, which you see is the green square over there. Highly accurate. It's 10 different points which needs to be hit with the robot. And of course, that's quite difficult. It takes some engineering. This transport jig is also carrying the power for the electrochemical process. So it's a dual function.And on unloading after the chemical line, we also laser tag the support plate, which then gives us a unique serial number for each electrode. So not only can we trace it at the customer site, but we can trace everything that has happened to it throughout our process and back to our suppliers. So of course, between the unloading and loading station, we have the chemical lines. That's why we're loading them. So let's head over to the chemical line and take a look at that.This is the chemical line. This is the heart of the factory where all the magic takes place. This is where the surface of the electrodes are being made and where the world-class quality is what is happening. Of course, I can't go into the details of what's going on in the [ baths ], but we have 47 [ baths ] with different processes, all from rinsing to our magical process. So we -- it takes roughly 8 hours throughput time, but this is what makes up the factory itself.We have 3 lines. We have one buffer line to make sure that the chemistry is running all the time throughout the day. And then we have 2 lines for the different products, one line handling the cathode and the support plate and the other one doing the anode plates. After this, it's back to the unloading station, which we saw earlier, and then into the assembly station, which we can take a look at now. So let's head over there.We're now at the assembly station, the final station where we put things together. We assemble the electrode plates together with the support plates to make out the electrode. There's 5 robots in total in this cell where 4 of them are assembling and 1 is handling. So the bigger one in the back is supporting the 2 individual cells, which can operate individually for maintenance in one, while the other one is running. So this is where the electrode is actually put together, and this is where we have a complete product. And after this one, we do the final inspection and package, which we'll head over to and see now.This is the last call of this line. This is where we do quality control and packing. So every cell is handled into one of these 4 quality control places where the operator will go in and do a visual control, particularly on the chemistry to make sure that's okay. So once that approved, the robot will fill it to the crate, where it will be prepared either for in-house assembly or shipment to customer. So that concludes the tour. Let's head over back to Jon.
Okay. That was the tour? Great. Really good to see it live. Quite impressive, I must say. You've had your operational team now here going for quite a while. Haven't you?
Yes. We've been here for over a year preparing, looking at the 3D models digitally, writing standardized work procedures, testing them, preparing as good as we can on the theoretical part. And now we're starting to be able to play with the equipment and learn hands on as well.
But the robot has -- are aligned and everything fits together and...
Yes. They've been tested both individually and partly also together. Last part of this month, we will spend testing them -- the whole line, making sure that everything works, and then we will take over from project in September, and we'll start ramping up later in Q3.
Perfect. So in a couple of weeks, you will take it over and kick out the project team, clean out and that's going to be good.
Yes. And start production.
That's going to be excellent.
Yes. Looking forward to that.
And so what's the kind of the unique elements coming out of this, except for the scale and, obviously, the cost?
Well, as you say, those are probably 2 of the main drivers, but I think we have excellent equipment to maintain good quality, stability, so high quality over time, which will also result in good quality on the electrolyzer for our customers.
And consistency because if every cell is identical, you will improve the performance of the whole stack.
Yes.
So the product coming out here is going to be of high quality and very consistent.
World class.
Excellent. And the ramp-up, we have base customers ready to go. They are -- they want this material as quickly as possible?
Yes, and we're ready to give it to them. So we'll start producing in early Q4, and we will ramp up according to market demands.
Yes. But you'll start production in Q3?
Yes. Yes, of course.
Start to ramp up and then will continue into Q4?
Yes.
And then we will adjust it according to market demand.
Yes.
And then the official opening will be in the first quarter?
Yes.
So then we will be -- you will welcome us back?
Absolutely. I look forward to it.
That will be great. Thank you. Thank you very much.
Thank you.
Very good. I hope you liked that, a little sneak peek. I hope you also understand that you need -- you basically need a world-class team and a world-class technology to be able to pull this off. You don't walk off the street and put something like this together.So on that note, I think we will move over to the Q&A part. And Kjell Christian will join me. We will also get some more help, and I will move a bit over and...
Good. So my name is Kjell Christian Bjornsen, CFO of Nel. I think we will start with questions from the audience, if there are any. There is one question from the audience. Please take your name before you ask the question.
So the hydrogen industry, there's a lot of exciting things happening. Lots of players getting involved both the really big ones, and we see a lot of small ones also. So it's an exciting dynamic market as such. And I'm curious with regards to M&A, are you experiencing any incoming dialogue requests? And what about yourself? Are you looking at the market for potential acquisition targets to expand on the business model either vertically or horizontally?
Well, you probably can also add here, Kjell. We do -- at least when we -- we constantly look at the market and see if there are opportunities there. And it could be opportunities which could extend our offering or it could be a technology component that we can add to our existing offering. But you don't always have to acquire someone. You can also achieve quite a lot with corporations and agreement. And I think that's a -- a good thing here is that if you find partners that have no conflicting interest but really are interested in pulling together and addressing a new market together, you can do quite a lot with that also. And at least we've been quite successful in actually saying that we will basically be the best at what we can do, and then we will try to cooperate with other partners in areas. We can't handle everything ourselves. We are still -- even if we are the largest electrolyzer business, we are still a small company.So that's -- but it doesn't mean that we will not see things happening on the M&A side. And obviously, with the increasing dynamics in the stock market, this could also create opportunities in many -- as you obviously know, in many ways, it could create opportunities for others, but it could also create opportunities for us that we can utilize. When it comes to interest -- incoming interest, I think it's difficult to make any particular statements. But...
I would say there is a lot of movement. So -- and we try to stay in all the dialogues that are going. Whenever a broker has a mandate, we want them to call us, and we have manned up in that area to be able to handle all of these dialogues that are going around the industry. But M&A is an area where you need to look at 100 targets, look deeply at 20, talk to 5 and then maybe you get a deal out on the other end. So it is even more bumpy than the pipeline in the hydrogen industry.Any other questions from the audience? I think then we'll go over to the questions that have come in from the web. We'll try to cover most of them. And then we'll also summarize some of them at a bit higher level. We did get a few questions around the video that popped up in a side window on some viewers, so you didn't see it so well. The whole video will be available as a full file on our web page later so you can go back and forth and zoom in and really enjoy the sneak preview afterwards if you lost out on it.We'll start a bit with fundamentals. We still get a question on PEM versus alkaline, both on IPCEI projects, on the general pipeline and other things. And there's a question on, do we have a perspective now on which technology will be the winner in the future?
I think we still feel that the jury is out and will actually be out, we think, for quite some time on the PEM versus alkaline. Both technologies are moving rapidly forward. I think many have, a few years ago, disregarded the potential of alkaline because it has been a technology which has been around for some time. But as you can see now, when you address it and when you work systematically with introduced automation and scale, you are completely changing the cost picture of that technology. And there are also a lot of improvement potential on that technology. So that means that there will be a huge step forward in terms of cost reductions in that. But it's going to be hard to keep up in the short term for any other technology.Obviously, alkaline also includes pressurized alkaline. We have some very promising steps on that and working on that for the next generation platform, which is not concluded yet. When it comes to PEM, it obviously has different characteristics. It's more expensive in CapEx, but it is more dynamic, and it has a smaller footprint. So depending on what the customer focuses on, you will see demand for different systems. Typically, the requests for alkaline are much bigger, the hundreds of megawatts. Typically, their requests are alkaline. On PEM, you will tend to see that we closed more with smaller system. We -- the largest PEM facility that we have -- or the largest PEM contract we have closed is 20 megawatt, while it is much larger than alkaline.So we think that we need to be in both platforms for still a number of years. We do think that we will make a lot of business on both platforms for still a number of years because the customers have different priorities. And I can only refer to the solar industry here that had multicrystalline, monocrystalline and thin-film technologies, all living in parallel and serving slightly different markets for many, many, many years and continues to do so. So this will change over time, but I think for the time being, it's very important to have a positioning like we have, and it gives us the opportunity to just offer the best of the different platforms without arguing which one is the better.
Good. I think the next question, and we do have quite a lot of questions this time around.
So we will be faster.
We need to be a bit faster. We have a question on earlier announced framework agreement with Hydrospider [ Life ] and also the MoU on Statkraft Celsa. Is there any news on them? And when can we share and how will we update the markets on this earlier announcement?
So we will update the market on these announcements when we have significant news to talk about. When it comes to the initiatives in Switzerland, I think we just communicated that we signed an agreement in the last quarter with -- under that frame agreement. And obviously, we will continue to report if we sign off POs related to framing, and we'll continue to report that. When it comes to Statkraft Celsa, we will obviously also talk more about that when we -- when that project is progressing.
We have gotten quite a lot of questions about supply chain disruptions and increasing raw material costs. And we haven't guided on the exact impact, and we will not do so. But it's fair to say that it creates a bit of an impact on results but also a lot of impact on the organization. We do need to use our sourcing resources to really chase down some raw materials. It is -- there's global disruptions in the value chain due to COVID. It's a real phenomenon. And it has also led to a lot of additional work on the Herøya expansion project. So we are very, very happy with some of our sub-suppliers that have really stepped up to deliver on time on that one. Is there anything you want to add...
No, I think it's really accurate. I mean you need to work very systematically on it. And some of the equipment elements at Herøya were -- we had red flashing lights for some time, and the team really had to work together with sub-suppliers to be able to control that risk and get the equipment in and get it on time and get it commissioned. So you're absolutely right. It just consumes more time and -- but that's the way it is.
And then we've got follow-up questions on IPCEI. So more than 80 projects. Can we provide a breakdown by technology and when we expect to close the orders? I think this is the most -- largest group of questions that came in on that one.
I think we can probably give some more on that. I think it was important for us to talk a bit about IPCEI because, first of all, we will obviously not win all 80 projects, but it means that we are working systematically on a number of them. But I think the most important thing for us to communicate is that people tend to be a bit impatient when they don't see -- when they see a month or 2 without any kind of significant orders, you tend to get worried. But I think the fundamentals is that things are -- do take some time. From a program is announced, until it's implemented, until funding flows, it does take a bit of time. And that's why it's important for us to prepare for what comes out of it and not become too scared and frustrated if things take a bit of time. So we can try to provide some more information on IPCEI maybe in the next quarterly presentation, but it was important kind of to at least start to communicate on that.
And then on a related topic, we get some questions, and we know that some of our competitors are talking about pipelines, tender pipelines and pipeline development. Can we provide any flavor of that even if we're not providing the figures?
I think the pipeline, obviously, is the list of projects where your technology is available and that you're working on. And the difficulty with reporting on the pipeline is that sometimes a project, even it's delayed, but sometimes it doesn't -- even doesn't happen. There is someone that is trying to get -- have an initiative and they want to do get things started and then they find out, in this particular case, it doesn't fly. So we felt that so far, it's a bit vague, but I can say that we have close to $5 billion pipeline of projects that we are working with. So it's huge. That's not the issue. There are a lot of opportunities there. It's just working systematic with it and turning the pipeline into an opportunity, turn the opportunity into -- and working on it as an order, finding a solution for the customer and eventually signing the contract and delivering. That's where -- that takes a bit of time sometimes.
Good. We got a question on PEM capacity and a concrete question. The fact that we don't have PEM in Europe, does that hold us back in terms of winning orders in Europe on PEM?
Not yet, but we do want. I mean, we have thought about, obviously, the next expansion step for PEM. And that is something that we are looking at, and we are also looking at the location. And Europe is not a bad suggestion because we think that the European market will continue to grow, and we need to obviously have capacity available when it does.One of the challenges with PEM is obviously the manufacturability, the ability to automate. And it is a product which is less mature and has not the same level of manufacturability as we have been able to develop on the alkaline, which took us some time. So that also needs to happen in parallel. You don't only want a big empty building with a lot of people putting all of this together. You need to develop the way you produce, the design of the product needs to be matched to the way you want to manufacture it. So we -- those topics we do work on, location and manufacturability and also looking at the timing of expansion.
And there's a question about Nikola. We've been a long-term shareholder in Nikola, but shares have now been listed for some time. And the question is, why are we still the shareholder basically?
Well, we became a shareholder to show support and have skin in the game and really help Nikola accelerate. And we are not necessarily a strategic shareholder, but we've been there to show our support. We haven't set a time for a particular kind of deadline for any of our engagements. But at least it gives us an opportunity to access more funds if we sell it at some point. But I don't think I will try to preannounce and predict anything in this regard.
And then next question on relationship with Everfuel. How exclusive, how tight is the relationship with Everfuel? That's the question we have gotten in from the audience.
Well, we do have an exclusive agreement with them up to a certain point. And we do also work very closely with them. The Everfuel team, many of them, not all of them, because they've grown a lot, but the core team of Everfuel came from Nel. It was a spin-off of Nel, and we're obviously still an investor. And we do really want to support them to make them succeed. So -- but obviously, there are things that we cannot supply. So whatever they need to source that we cannot supply, they can obviously source from others. And in some cases, it will not fit exactly what we are offering. So that's probably as much as I can say.
And then we have gotten some questions around new and exciting technologies. So hydrogen producing solar panels are next-generation solid oxide technology. Do we have a new technology perspective now?
No. But I do think that we do monitor what's going on, basically. We do spend quite a lot of time on that. But I must say, many of the technologies that come up, which sounds too good to be true, they very often are too good to be true. When you look at it -- when you get the specialists to really look into it, there are things that doesn't really hang together. And it needs to also be commercial. I mean you need to -- the output needs to be competitive. It needs to be scalable. So there are kind of many elements that you need to look at when you see a technology. And very often, we see that is traditional stuff that actually runs faster and drives costs faster than what is really technically advanced. We saw that in solar also. It's the basic cut wafers that are making the cheapest and not the integrated window, roof super special solar panels. So you need to have a healthy skepticism but still be curious enough to investigate what's going on.
Good. And then there's a couple of questions around guidance on when do we want to plan to earn money or when do we want to give progress on cost reduction targets, et cetera, et cetera. And that is something we haven't started doing. We have not started doing guidance, and we have no immediate plan to start doing guidance.I got one small question before the final one, and that is the [ $20 ] price assumption in electricity in $1.5 per kilo target. That's not an average, something that someone points out. So why do we still refer to that when we say $1.5 per kilo by 2025?
It's basically because you need to refer to something. I mean you -- we see that our -- some of our other friends in the industry are referring to targets, but they have a lower electricity cost. And then obviously, it's easier to -- if you have a cheap -- if you have free electricity, it's easier to achieve the target than when you have -- when you need to pay for the electricity. So with the $1.5 per kilo target, we wanted to have a reference to the electricity assumption, but we also wanted to include everything, the building, the civil works, the cost of capital, all of those elements that typically you can take out of the equation and make the target easier to reach. So this is what we believe is a transparent target. And from that point of view, it's a good target.
Good. And then on the final note, we get some questions again back to the big picture. Some people are saying the hydrogen-related projects in the range of $500 billion. And others are commenting that we're only talking a lot about Europe and European market. So what's really our perspective on the global market, market outside Europe? How big can this be?
I think -- we do think that hydrogen will be big. We have estimates about the market size. If you refer back to capital market presentation, we have estimates on the market size on a global basis. We have estimates on -- we are referring to reports and people that have spent even more time analyzing this than us, basically cutting the market up in different segments and you see the growth curves, et cetera, et cetera. So I think we'll keep referring to that for the time being. I think that information is still relevant. If anything, the potential is larger and not smaller. So I think we just have to keep working and be ready and make ourselves relevant.
And we do invest quite a lot also outside Europe when it comes to sales and marketing with setting up new legal entities, hiring salespeople all over the world. So we are definitely not only focusing on Europe.
No, no, no. No, that's right. That's right.
So then it is the final note if you want to say anything at the end.
Well, I think we are very glad to have a few faces here physically. That's really motivating and inspiring. And hopefully, we will now get out of this COVID-19 pandemic, and we can start traveling again. So welcome back to the third quarter presentation in a few months. Thank you.
Thank you.