Nel, the hydrogen expertise firm, reported a blended set of monetary outcomes for the primary quarter of 2024 on April 17. Whereas the corporate noticed income progress, it additionally confronted a damaging EBITDA. Key developments included securing contracts and partnerships, receiving vital funding for R&D and a Michigan facility, and exploring a spin-off of its Fueling division. Regardless of the challenges within the hydrogen sector, Nel stays optimistic about its future orders and market place.
Key Takeaways
- Nel reported Q1 revenues of NOK 387 million and a damaging EBITDA of NOK 16 million.
- The corporate secured a 10-megawatt electrolyser contract with Samsung (KS:) C&T and partnered with Fortescue Future Industries for the 80-megawatt Phoenix Hydrogen Hub.
- Nel is contemplating a spin-off and separate itemizing of its Fueling division, which noticed a forty five% YoY income progress.
- The corporate acquired $165 million in complete funding for a Michigan facility and varied R&D initiatives.
- Nel goals to commercialize a high-capacity fueling station in 2025, concentrating on a 15% market share.
Firm Outlook
- Nel is targeted on assembly market calls for with its protected applied sciences and patents, supported by a robust R&D group.
- The corporate’s services, together with the one in Herning, are well-positioned for the approaching years with restricted funding wanted for brand spanking new merchandise.
- Nel is engaged on creating pressurized alkaline and next-generation PEM applied sciences.
Bearish Highlights
- Nel reported a damaging EBITDA of NOK 16 million for Q1.
- The PEM Electrolyser section skilled a decline in revenues.
- The corporate faces challenges within the hydrogen sector that aren’t particular to Nel and requires market assist to progress.
Bullish Highlights
- Nel’s Alkaline Electrolyser section confirmed a 20% YoY progress, and the Fueling division noticed a forty five% YoY income progress.
- The corporate secured vital funding and partnerships, indicating confidence in its future prospects.
- Nel has a robust money place and has reversed damaging developments so as consumption.
Misses
- A remaining funding determination for the 4-gigawatt facility is pending resulting from market demand and regulatory clarifications.
- Fluctuations in income between quarters are anticipated because of the construction of contracts.
Q&A Highlights
- Executives supplied particulars on the Fortescue change order and its affect on income.
- They mentioned the necessity to present progress on the Michigan facility mission to retain subsidies.
- Nel addressed the affect of rates of interest on buyer choices and backlog expectations.
Nel (ticker: NEL), with its deal with hydrogen expertise, offered its earnings name with a mix of constructive developments and ongoing challenges. The corporate’s first-quarter outcomes highlighted its strategic strikes, together with securing a significant contract with Samsung C&T and a partnership for the Phoenix Hydrogen Hub.
Nel’s dedication to innovation is clear in its R&D funding and the potential spin-off of its Fueling division, aiming to capitalize on the rising hydrogen mobility market.
Regardless of the setbacks, Nel’s executives confirmed optimism, pointing to the alkaline section’s stability and the corporate’s capacity to keep up a robust money place. In addition they famous the significance of presidency assist and the necessity for market demand to finalize funding choices.
With the hydrogen sector going through broader challenges, Nel’s deal with securing extra orders and supporting market progress stays central to its technique shifting ahead.
InvestingPro Insights
Nel ASA’s (ticker: NLLSF) monetary efficiency and strategic initiatives within the first quarter of 2024 mirror an organization navigating by the complexities of the hydrogen expertise market. The InvestingPro knowledge and suggestions present deeper insights into the corporate’s monetary well being and market place.
InvestingPro Information:
- Market Cap: $711.56M, showcasing the corporate’s measurement and investor valuation.
- Income Progress (final twelve months as of This fall 2023): A powerful 83.75%, indicating vital gross sales will increase year-over-year.
- Worth % of 52 Week Excessive: 34.03%, suggesting that the inventory is buying and selling considerably beneath its excessive over the previous yr, which might indicate a possible low cost for buyers.
InvestingPro Ideas:
- Nel ASA holds extra cash than debt on its stability sheet, which is a constructive signal of monetary stability and should present the corporate with flexibility to put money into progress alternatives or climate financial downturns.
- Analysts anticipate gross sales progress within the present yr, a bullish sign for buyers trying on the firm’s potential to extend income and market share.
For buyers in search of a complete evaluation, there are 9 further InvestingPro Ideas accessible for Nel ASA, which might present additional steering on the corporate’s inventory efficiency and monetary outlook.
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Full transcript – Nel ASA (NLLSF) Q1 2024:
Hakon Volldal: Good morning from sunny Oslo. It is Wednesday, seventeenth of April, and we’re able to current Nel’s First Quarter 2024 Outcomes. My title is Hakon Volldal. I’m the CEO. With me in the present day, I’ve our CFO, Kjell Christian Bjornsen; our Head of Communications, Lars Nermoen; and our SVP Fueling, Robert Borin. We’re going to cowl Nel briefly, the highlights from the primary quarter, business developments, we’re going by a fueling presentation to present some background on fueling, as we ponder a spin-off and separate itemizing of the Fueling division and summarize and do Q&A. Now Nel is pure-play hydrogen expertise firm with a worldwide footprint listed on the Oslo Inventory Trade since 2014, main electrolyser producer with greater than 3,500 items delivered to greater than 80 international locations all over the world since 1927. Additionally, a number one producer of hydrogen fueling stations with greater than 140 station modules bought or in progress to 14 international locations. Manufacturing services in Norway, the U.S. and Denmark. World gross sales community, roughly 670 staff. Most popular partnering with the business leaders throughout quite a lot of industries and NOK 3.3 billion in money reserves implies that we’re nicely capitalized. So let’s get to the transient, the primary quarter highlights. Listed here are the outcomes. Revenues of NOK 387 million. The EBITDA of minus NOK 16 million. Order consumption, NOK 459 million. Order backlog on the finish of the quarter, NOK 2,437 million and a money stability of NOK 3,260 million. With regards to the important thing developments within the first quarter, we signed a 10-megawatt electrolyser contract with the Samsung C&T. We renewed our relationship with Nikola (NASDAQ:) and likewise partnered with the Fortescue Future Industries on the 80-megawatt Phoenix Hydrogen Hub within the U.S. We introduced an ambition to discover a spin-off and separate itemizing of our Fueling division. We acquired $75 million in funding for the deliberate Michigan facility. And Nel along with companions acquired USD 90 million in funding for 7, that means a number of additionally R&D initiatives. After closing of the quarter, we acquired an extra $40 million — $41 million in further tax credit score for manufacturing growth in Michigan. Group financials. If we take a look at the highest line, it is up from NOK 341 million to NOK 387 million, helped by onetime results from the Nikola FFI settlement. EBITDA, vital enchancment, helped by the identical NOK 96 million in one-off results from the Nikola and FFI settlement, serving to additionally then EBITDA and EBIT and pre-tax earnings. We have now a strong money place, as you may see, NOK 3.3 billion, which implies there is no such thing as a instant want to lift further fairness regardless of what’s being stated within the media. We’re nicely capitalized to fund our progress. The growth packages for Heroya and Wallingford remained on plan. Capability utilization will, nevertheless, be adjusted to match demand. And we will take a look at the main points. For the primary time, we separate out the Alkaline and PEM divisions. So we cut up the electrolyser section into Alkaline and PEM to present you extra particulars on how we’re doing, and which means we now have 3 segments. We have now Alkaline Electrolyser; we now have PEM Electrolyser; and we now have Fueling. Trying first then at Alkaline Electrolyser financials. We have now a 20% year-on-year progress, once more, helped by the Nikola FFI settlement with NOK 50 million — NOK 118 million — sorry, NOK 54 million in affect from that settlement. And as you may see, the EBITDA is up by NOK 118 million. And the rationale we now have an enchancment in EBITDA above the NOK 54 million from the Nikola settlement is that we even have some provisions that we now have in constructive one-off results on the underside line. You may argue 20% progress, it needs to be increased for Alkaline a minimum of once you alter for the one-off results from Nikola. And the factor is, we do not acknowledge revenues based mostly on manufacturing solely. We do not acknowledge revenues based mostly on variety of electrodes produced each day. We have now milestone income — milestone-based income recognition. And within the first quarter, there have been just a few vital milestones that we reached. Which means, we had restricted mission revenues within the first quarter. We are going to compensate for that in coming quarters. In order that’s why progress is just 20%. And EBITDA, once more, positively impacted by one-off results from Nikola and likewise different one — constructive one-off results from the FFI settlement associated to guarantee provisions, et cetera. It needs to be famous although that for the previous 4 quarters, the Alkaline enterprise is sort of breakeven on EBITDA degree regardless of utilizing one line solely and to not default capability. So I feel the enterprise mannequin for alkaline is confirmed with clear scale results. What we’d like now are extra orders when the orders come, this can scale and you will notice profitability. So the Alkaline enterprise is definitely in fine condition to scale up with the — with constructive contribution. If we flip to the PEM enterprise, the PEM enterprise is much less mature than the Alkaline enterprise, and you’ll see that from the outcomes, revenues a bit extra up and down. We had NOK 52 million in revenues within the first quarter in comparison with NOK 77 million 1 yr in the past. That is down 33% and it is resulting from phasing, once more of mission revenues and few milestones being reached within the quarter. We had a decline of NOK 20 million on the EBITDA line from NOK 23 million a yr in the past to minus NOK 43 million this quarter, and that is amid decreased revenues. Once more, a enterprise that should scale additional. And with a view to obtain that, we’d like extra manufacturing capability to permit clients to position larger orders with Nel. So first, we’d like the capability, then the orders will come. It is tough to justify putting massive orders except you’ve gotten the capability or capacity to ship these orders inside an affordable timeframe. And that is why the growth in Wallingford is vital, and it stays on monitor. The growth will add capability, however it’ll additionally deliver down the price of — the unit price of stacks produced, as we not solely automate and scale up the totally different steps, however we additionally launched new methods of manufacturing the totally different parts of the PEM stacks. Fueling had a forty five% year-on-year income progress, once more, helped by the renegotiated Nikola provide settlement, NOK 42 million from — in one-off — constructive one-off results from that on the Fueling aspect. EBITDA improved by NOK 10 million. And the constructive one-off results from the Nikola provide settlement have been partly offset by stock changes for discontinued merchandise and likewise some additional provisions. In case you take a look at order consumption and backlog, we reversed the development on the order consumption aspect. Within the first quarter of 2024, we booked NOK 459 million in new orders, and that is in keeping with what we did a yr in the past, 2% down, and it is above what we now have reported within the earlier 3 quarters. Which means the order backlog was pretty steady. It is down 13% year-on-year, however quarter-on-quarter, it remained flat. The order consumption got here largely from Alkaline Electrolysers and likewise some on the PEM aspect with much less on the Fueling aspect. And you’ll see additionally the backlog is predominantly on the Alkaline aspect with PEM at NOK 400 million and Fueling NOK 300 million. Business developments within the quarter. This was in accordance with our information, the most important introduced mission that was awarded within the electrolyser business in — in the course of the first quarter of ’24. So complete, we now have calculated of 36 megawatts have been awarded to all of the totally different electrolyser OEMs. And this was the most important mission, the one mission of 10 megawatts or above awarded within the quarter. It was awarded to Nel from Samsung C&T. Order worth, EUR 5 million. Will probably be in-built South Korea. And this would be the first off-grid inexperienced hydrogen manufacturing mission for Samsung C&T. They may do the EPC work themselves. And it is also vital to note that they’ve a big pipeline of electrolyser initiatives. So it is a buyer that would doubtlessly grow to be vital to Nel over time. We renewed our relationship with Nikola. As you’ve gotten seen with constructive one-off results for each the Alkaline enterprise and the Fueling enterprise. The outdated provide settlement from 2018 was canceled, and we are going to enter into a brand new provide settlement for 110 stacks, and that’s roughly 275 megawatts of electrolyser capability. It isn’t a agency order but, and it isn’t included within the backlog. We are going to embody it within the backlog after we obtain agency buy orders. The brand new provide settlement is aligned with our most popular scope of provide on electrolyser initiatives, that means stack plus stability of stack. And as a consequence of renegotiating the unique provide settlement, Nel acquired $9 million in compensation. One other vital mission linked to the earlier settlement with Nikola is that Fortescue Future Industries has acquired the Phoenix Hydrogen Hub mission from Nikola. They’ve taken over the mission, which implies they’ve additionally taken over the 80-megawatt of electrolyser stacks that Nel has already delivered to Nikola. So as to function these stacks, you want further gear, and we now have signed a contract with Fortescue for stability of stack gear, i.e., the fuel separation gear you want and likewise up to date warranties and ensures for the stacks that we delivered beforehand to Nikola. The contract has a worth of $11 million, and the mission will probably be in-built Phoenix, Arizona, United States. Please observe that the mission has already taken a remaining funding determination, and this can grow to be considered one of North America’s largest electrolyser programs. The most important electrolyser plant in Europe are 20 to 40 megawatts. That is 80 megawatts. So it is a sizable step in growing the scale of hydrogen manufacturing vegetation. The primary quarter was the quarter of huge bulletins with regards to public funding. And as you may know, we now have introduced our plan to construct an electrolyser plant in Michigan within the Detroit space. And to assist our progress there, we on thirteenth of March have been awarded $50 million from the Division of Vitality with a $25 million maxim grant from the State of Michigan to speed up the constructing of that plant. Then on April 4th, we have been awarded $41 million in tax credit by the Qualifying Superior Vitality Undertaking Tax Credit score, 48C program, additionally a Division of Vitality initiative. Which means, if we embody additionally the profit bundle that we negotiated with the State of Michigan, again in 2023, we now have amassed near $170 million in assist and roughly half of that quantity will probably be money incentives. The opposite half are — these are tax credit and decreased charges on totally different gadgets. On this plant 4-gigawatt facility, we are going to manufacture our next-generation applied sciences. So it isn’t solely about getting the monetary assist to construct it and the market demand to assist it, but it surely’s additionally about making the applied sciences prepared for mass manufacturing. Remaining funding determination has not but been taken. In fact, we’re not going to maneuver forward except there may be market demand. And with regards to the U.S., it is vital to make sure that the rules with regards to how a lot assist or incentives will our clients obtain after they produce hydrogen, that must be clarified. And we’re nonetheless ready for the ultimate rules on that for the Inflation Discount Act by the Treasury Division that may come out later. Along with the assist for our Michigan facility, we additionally apply for funding of R&D initiatives. And within the first quarter, Nel along with a number of companions have been granted $90 million in assist from the U.S. Division of Vitality. And we’re speaking about 7 R&D initiatives. We’re the main associate on one of many initiatives, and we’re contributing on others. And the mission we’re spearheading is expounded to low-cost, clear AEM electrolysis. AEM is a expertise that you could possibly very, I feel simplistically say, is a PEM stack working in an alkaline surroundings. And the aim is to make the most of the small footprint of the PEM stack. And the truth that in an alkaline surroundings, you should utilize cheaper supplies than you are able to do within the regular PEM surroundings. So that you get the price advantages of the alkaline operation, and also you get measurement profit and the differential strain on the PEM aspect. It is a expertise that’s seen as, say a third-generation expertise. And lots of corporations have come out and say that they work on AEM. Nel has labored on this expertise for greater than a decade. And we proceed to work on it to qualify it, although we do not assume it is appropriate but for large-scale initiatives. It’s a very attention-grabbing expertise for the longer term. We are going to undertake roughly 10% of the work beneath the 7 R&D packages, after which you may calculate our share of the $90 million in direct R&D funding and assist. However the U.S. is an efficient place to be today for doing each R&D work on electrolysers and doubtlessly constructing new electrolyser vegetation and services. Then I am executed for some time, and I’ll welcome Robert Borin, our Senior Vice President of Fueling to present some particulars on our Fueling operation. In our earlier quarterly report, we introduced the ambition to discover a separate itemizing and potential spin-off of the Fueling division. And Robert is right here to present you a presentation on what the Fueling division is doing and what they’re as much as. So welcome, Robert. The ground is yours.
Robert Borin: Thanks very a lot for that, Hakon, and good morning to you all. My title is Robert Borin. And this morning, I’ll stroll you thru our strategy to what I consider is without doubt one of the most attention-grabbing areas in hydrogen. I am, after all, speaking in regards to the space, the place I spend my day-after-day, which is hydrogen mobility. I’ll stroll you thru why I consider that hydrogen fueling is a superb market alternative, not essentially within the 2 totally different — it is a possibility that’s not laying too far out sooner or later and why I consider that Nel is in a terrific place to take a number one position on this market with the next-generation merchandise already on the best way. As I simply stated, my title is Robert Borin, and I am presently heading Nel’s Fueling enterprise. I am additionally excited to tackle the position as CEO for the brand new fueling firm after a possible spin out. I’ve been on this place for the final 3 years. And earlier than that, I’ve a previous within the wind enterprise, the place I used to be each in Siemens and in Vestas. My final place earlier than becoming a member of Nel was as member of the chief administration group in Mitsubishi Vestas Offshore, the place I used to be chargeable for the operations. Marcus Halland isn’t within the presentation in the present day, however having a previous in KPMG and Align (NASDAQ:) and 6 years in Nel in varied positions within the finance. He’s our absolute most popular candidate for the CFO place for the brand new fueling firm to return. And collectively, Marcus and I are very excited to tackle this subsequent chapter within the historical past of our firm. I wish to begin out by providing you with a fast refresher on how our hydrogen mobility enterprise appears to be like like in the present day. Briefly, we develop, and we ship hydrogen fueling options for the mobility market, and we now have been doing so for the final 20 years plus. For the reason that begin, we now have bought within the neighborhood of 140-plus programs, and the market cut up between these programs are roughly 50-50 between the U.S. and the European Union with an extra 50 stations or so in Korea. Most of those stations have been manufactured on our location in Herning, which is, by the best way, one of many world’s largest hydrogen manufacturing services for hydrogen fueling stations. We have now service hubs on 3 totally different continents with places in key markets, each within the U.S. and Europe and, after all, additionally in Korea. These stations have been produced, put in and bought by most of our — or a few of our plus 250 staff. And final yr, we had a income of roughly EUR 32 million. Within the hydrogen worth chain, our merchandise within the fueling enterprise are positioned someplace within the candy spot between manufacturing of hydrogen and consumption of hydrogen. Which means our gear is ready to take hydrogen from a supply, compress it, cool it and put it in both a automobile for consumption or in a trailer for transportation. We consider that additionally trailer filling alongside with excessive capability fueling or heavy-duty fueling will probably be a giant enterprise space for us within the coming few years. If we’re zooming in even additional, we — our scope of provide ranges from provide panels and mainly a provide panelist, the place you join a trailer coming to dump of hydrogen or you may join an electrolyser or you may join any form of supply on the connection panel or the provision panel. Then we, after all, additionally provide hydrogen storage and the primary occasion, which is the fueling station. After which we now have numerous totally different dispensers which you can connect with this. If we take a look at our enterprise from a companies viewpoint, we’re delivering companies which might be ranging all the best way from set up and commissioning to operations and knowledge monitoring and so forth. So we’re doing the total worth chain. If we’re evaluating hydrogen mobility to different sources of vitality for transportation, comparable to fossil fuels or batteries, there are numerous benefits with fueling. Among the extra apparent ones are, after all, the full lack of emissions from the outlet should you examine it to fossil fuels and the comparably lengthy driving ranges should you examine it to batteries. However among the much less apparent benefits, particularly after we are speaking about high-capacity filling and heavy-duty autos which might be, after all, the quick filling instances, if we begin out with that. So we will switch vitality similar to 1 megawatt hour battery in — with a neighborhood of 10 minutes. And sure, after which, to place that in perspective, 1 megawatt hour battery could be comparable to roughly 10 as much less. If you’ll do that with the most effective charging applied sciences of in the present day, it’ll take nicely above 5 to six hours. If we take a look at the grid connection, our fueling stations can really be positioned pretty distant, and that’s as a result of we or the approaching excessive capability fueling station would require lower than 1 megawatt of grid connection. In case you examine that to a comparable charging station that will require extra within the neighborhood of 10-megawatt grid connection. And simply to place that in slightly little bit of perspective as nicely, town of Herning, the place we now have our manufacturing services positioned is a metropolis of roughly 50,000 folks and has a base load of round 11 megawatts. So it goes with out saying {that a} excessive capability fueling station is the higher different with regards to connecting or grid connections. If we take a look at the hydrogen market of in the present day, hydrogen is, after all, already a big market with near 90 mega ton hydrogen produced on a yearly foundation. That is in the present day primarily dominated by industrial use. Hydrogen has the potential to play an vital position within the transition from fossil-based fuels to extra renewable and inexperienced energies. And that is why the market is believed and forecasted to develop an element of three within the coming a long time. And it is also believed that hydrogen mobility and particularly excessive capability and heavy-duty transport will probably be one of many main drivers for this progress. Clearly, a driver for progress is in any form of business is the supporting regulatory framework and the funding panorama, and there was many initiatives within the final 5 years to 10 years that has been backing hydrogen mobility. However there’s one particular occasion I wish to level out from final yr, summer season final yr that’s — that I consider is a recreation changer. And that’s that the so-called AFIR or the Different Fuels Infrastructure Regulation was put into laws. What AFIR says is that alongside the so-called TEN-T, which is the trans-European transport community, mainly all the key highways all through Europe. Alongside the TEN-T, each 200-kilometer one fueling station or one excessive capability fueling station must be constructed on both sides of the highway. This really equates to within the neighborhood of someplace between 650 to 700 stations. All in all, that must be constructed earlier than 2030. Nevertheless, if we take a conservative take a look at the time strains out there, we consider that this can result in minimal 400 stations being constructed earlier than 2030. And we’re, after all, within the candy spot for delivering gear to those 400 stations. And that is solely Europe alone. If we take a look at the USA, the funding panorama has already been put in place, the place within the neighborhood of $2.5 billion has been placed on the desk for funding round hydrogen infrastructure. And nevertheless, the legislative panorama isn’t absolutely put in place but, however we anticipate that to return with the same regulation like AFIR additionally within the U.S. within the coming yr or years right here. So — however the vital half is that the funding has already put in place. It goes with out saying that we consider that we now have what it takes to fulfill the calls for of AFIR and the market progress within the coming years. Hydrogen mobility is a younger market. And we now have — however we now have been there from the start, accumulating experiences the final 20 years to guarantee that we’re studying and shifting ahead on this market. Our present applied sciences and patents are protected worldwide. And our group of R&D professionals is greater than 60 folks sturdy. So it goes with out saying that each from a competence viewpoint and capability viewpoint, as a company, we now have what it takes to fulfill these calls for. And talking about capability, from a capability viewpoint, we’re nicely positioned in our present services in Herning for the subsequent coming years. That is, by the best way, additionally one of many world’s largest hydrogen mobility manufacturing services. So restricted investments are wanted for adapting to the brand new sort of merchandise that we are going to be supplying going ahead. And at this facility, we now have every thing from design and testing to manufacturing and repair. So the total worth chain beneath the identical roof, which is a superb benefit. At the moment, sure, as I stated, this is without doubt one of the largest services for manufacturing on this planet. And naturally, once more, to fulfill the necessities of AFIR and different rules which might be coming proper now. one of many main issues that we’re engaged on proper now’s, after all, the excessive capability fueling station. And it is vital to level out that this will probably be one of many first actual excessive capability fueling stations that will probably be put into the market. It’ll have a capability of — within the neighborhood of 4,000 kilos per day, comparable to 260 kilos per hour. It is roughly 4 vans per hour, and that is what you are able to do on a traditional diesel station as nicely. And that is vital as a result of from a business viewpoint, you actually should be at diesel parity with regards to fueling vans like this. And searching on the specs of the station, we will join as much as 6 dispensers, which can also be an vital facility or vital characteristic, in order that we will — relying on what you wish to fill on these fueling stations, we will join both high-capacity dispensers or LDV dispensers. Essential can also be that this station will probably be compliant with a newly outlined customary for high-capacity filling in Europe and the U.S., which is the SAE J2601-5. In order that’s tremendous vital that we’re compliant in that. So this capability of the brand new high-capacity fueling station isn’t — doesn’t solely meet the demand of AFIR and TEN-T rollout, but it surely’s additionally what we consider is placing us within the candy spot for high-pressure gaseous supply, which is round 4,000 kilos per day. So to summarize, in 2023, we began the event of the excessive capability fueling stations. For the reason that starting, we now have capitalized on our learnings from the LDV market. And we’re taking all of that and placing it into the case for top capability to derisk the enterprise case and to guarantee that it is a profitable launch. The subsequent era of product is anticipated to be commercialized in 2025. And our ambition is to seize a reasonably modest 15% of the market, as a place to begin right here, however that is the place we’re in the present day. So with that, I wish to say thanks for listening this morning and hand again over to Hakon once more. Oh, sorry.
Hakon Volldal: Thanks, Robert. Then the one factor left for me earlier than we go to Q&A is to summarize the primary takeaways from the quarter. And I feel the constructive EBITDA within the Alkaline Electrolyser section, even adjusting for the one-off results, you may see from the main points we have now supplied on this section particularly that we’re very near be breakeven over an extended time period, and that is additionally utilizing lower than 1 full line at Heroya. So the argument that we’d like gigawatts and gigawatts of manufacturing capability to get to black figures within the Alkaline division isn’t actually true. We have confirmed that over many quarters that we’re getting very shut. We want — we’d like extra orders, however after we get them, this enterprise scales nicely. We reversed the damaging developments on the order consumption aspect. We’re again on monitor with NOK 459 million so as consumption. That is the very best quarterly order consumption since a yr in the past. We have now maintained our money place, NOK 3.3 billion, no near-term want to lift more money. We acquired lots of authorities assist within the U.S. for funding the deliberate electrolyser facility in Michigan, and we have now amassed $170 million in assist. And that, after all, comes on prime of the money reserves that we now have. And as Robert simply defined, we proceed to discover a spin-off and separate itemizing of our Fueling division. We consider that the fueling enterprise may have the next probability of being profitable out there by itself and that it is helpful to the electrolyser enterprise that we will deal with that additionally. So 2 separate entities that may discover their very own methods and plans with out making an attempt to create synergies between 2 companies that aren’t actually there. Then I wish to invite my colleagues up on stage, so we will get going with the Q&A.
A – Lars Nermoen: Sure. Good morning, everybody. My title is Lars Nermoen. I am Head of Communications in Nel, and I’ll information you thru this Q&A periods. For those that wish to ask questions, please use the increase hand operate and we are going to name out the title and activate the microphone to the one subsequent in line. And then you definitely even have to recollect to activate the microphone in your finish. Notice that we are going to maintain the digicam disabled for probably the most calling in and a minimum of maintain a most of 1 query per individual resulting from time constraints. If we now have extra time, you may at all times come again in line. You too can ship us an e-mail to ir@nelhydrogen.com if we do not have time to reply all of the questions. In order a reminder, from earlier quarterly shows, we is not going to touch upon outlook particular targets, detailed phrases and circumstances on contracts, in addition to questions on particular markets. We can even respect if modeling questions are taken offline. So the primary one on my listing is Leonard Chris. Your microphone has been activated.
Christopher Leonard: Hello, guys. Chris Leonard from UBS. Possibly I will simply ask a few questions.
Lars Nermoen: Sure. Please go forward, Chris.
Christopher Leonard: Are you able to hear me?
Lars Nermoen: Sure. We are able to hear you.
Christopher Leonard: Sure. Chris Leonard from UBS. Possibly simply to ask on the commentary from U.S. Treasury talking in regards to the finalization of laws there for the 45B tax credit. Is there any view out of your aspect on timing of once you anticipate this to be finalized as a result of in your report, you are additionally talking about nonetheless have ambitions to win massive orders within the coming durations. Does that additionally relate to the U.S. market? Is that achievable this yr?
Hakon Volldal: I do not assume we now have distinctive insights into the timing of when these rules will probably be finalized. We have now supplied our views and share that with the treasury, however we don’t know when the ultimate rules will come out. And as we do not know that, it is also exhausting to foretell when the large-scale orders within the U.S. will probably be positioned. Some initiatives will proceed whatever the rules, however constructive rules and readability on the rules will, after all, assist. So we’re eagerly awaiting as many others, these remaining rules to return out.
Lars Nermoen: Thanks, Chris. And the subsequent one on my listing is Landon Skye. I’ve activated your microphone. Please go forward.
Skye Landon: Skye Landon from Redburn Atlantic right here. I consider that is the primary time that you’ve got cut up out the Alkaline and PEM enterprise. I’d have an interest to get slightly little bit of colour round why now? And associated to this, how ought to we take into consideration the event of Alkaline Electrolyser EBITDA for the remainder of 2024 following your sturdy 1Q outcomes? Do you anticipate this to be constructive going ahead?
Hakon Volldal: So section in any firm is an ongoing dialogue, and we now have had that dialogue internally over a while. We see that now with the expansion we have had and the revenues over the past yr, it made sense to present the cut up. We have now been giving small drops of this previously. We’re commenting on order consumption or income progress on a subsegment degree within the commentaries, but it surely’s mainly right down to the scale that these segments have now reached and the truth that it offers further helpful info for U.S. analysts. With regards to the outlook, we do not touch upon the outlook on a quarterly foundation. However as — has been stated earlier, the enterprise mannequin on the Alkaline aspect is now confirmed. It is right down to how a lot we produce within the manufacturing facility and truly ship to clients. And there, we now have given nice element about our backlog within the annual report as nicely. So I assume, that is the brief reply to your query.
Lars Nermoen: Sure. The subsequent query is coming from Alex Jones.
Alexander Jones: Alex Jones from Financial institution of America. You talked about on the U.S. plant that it does not simply rely on market demand, but in addition your new applied sciences being prepared. May you give us a little bit of an replace on each pressurized alkaline and the kind of next-generation PEM on the place you’re and once you may anticipate that aspect of the plant to be able to go?
Hakon Volldal: Sure. We’re progressing in accordance with plan. We — on the pressurized alkaline aspect, we consider we now have a reasonably distinctive and game-changing idea. We’re testing full-sized electrodes at Notodden in our check facility. The plan is to then construct full-scale stacks and likewise the primary pilot facility. I feel the primary pilot facility we goal to construct subsequent yr. And to remind you that the constructing block that we have commented on previously, pressurized alkaline constructing block 1 module is 25 megawatt. And which means, it takes slightly little bit of time to construct that. It is — to place it in perspective, it is the identical measurement as the most important electrolyser plant in operation in Europe in the present day. In order that will probably be constructed, I feel, subsequent yr to qualify the entire idea. However we’re progressing. Check outcomes are very promising and constructive. We’re trying into manufacturing ideas for that. And which means — what we do in Michigan will in all probability be pressurized alkaline and the next-generation PEM stacks that we develop along with GM. Additionally, that mission is progressing nicely. We’re within the sweet store along with GM all their outcomes over the previous decade and making an attempt to determine the optimum approach of placing that collectively in an electrolyser context. So I would say each improvement initiatives are on monitor. I’d in all probability assume that we are going to do testing up till finish of 2025 and that the primary business merchandise then we’re within the ’26 sort of timeframe. With out being too particular, there are uncertainties linked to R&D improvement initiatives, however I’d assume second-generation applied sciences could be accessible ’26 and onwards.
Lars Nermoen: Thanks. The subsequent one on my listing is Naisheng Cui.
Naisheng Cui: Naisheng Cui from Barclays. Congrats for the nice outcomes. Two questions, if I’ll, please. The primary one is on income. I perceive there is a lack of main milestones on the Alkaline Electrolyser mission. I simply surprise should you can present a bit extra colour on that. Is that due to delay? What’s your plan on that going ahead? And my second query is in your view for a few of your friends as a result of I do know a few of your friends from the oil majors, they closed a few of their hydrogen fueling station in California and in Europe within the final month or 2. And I simply surprise what’s your view on that?
Hakon Volldal: So if I ought to take the primary one on income recognition, that is right down to the contract construction. So for instance, we might have a milestone saying we ship a sure variety of stacks. And at a sure time line that’s agreed with the client. After which, we now have to attend till we now have that quantity of stacks, after which that we attain that particular date. So it is actually nothing main about it. It is simply that our firm and that is again once more to why we do not give steering. Our firm continues to be so depending on a restricted set of contracts that particular person milestones on the person contracts will result in fluctuations between quarters. That is simply one thing that you might want to and get used to sadly. We stay with it. It is a noise within the modeling. With regards to the closing of fueling stations, that is actually not our friends, however perhaps Robert might try this.
Robert Borin: Sure. Completely. If we take a look at the particular closings of stations, each in Europe and within the U.S., it’s extremely clear to see that these stations are gentle responsibility stations with pretty low capacities. And the market is, as we converse proper now, very a lot centered on transitioning from light-duty and private automobile filling to excessive capability and heavy-duty automobile filling. In order that can also be what we see and the intel that we now have from our clients.
Hakon Volldal: After which simply to be clear on the — simply to be clear on the worth chain positioning, we produce the stations, we do not personal and function them. So what you are speaking about could be present and potential clients which might be — which might be closing down stations.
Lars Nermoen: [indiscernible] in line is Anders Rosenlund. Your microphone has been activated.
Anders Rosenlund: I’ve a query on the Fortescue a part of the Nikola announcement earlier this yr. You stated $11 million from Fortescue. Has these $11 million being included within the order consumption in Q1 in alkaline, and likewise was roughly 50% of these $11 million income acknowledged throughout Q1?
Hakon Volldal: So we do not go into particulars on the person contracts. Nevertheless, what we stated after we introduced the deal is that the Fortescue took over the prevailing buy order with Nikola, the place there was remaining income to be acknowledged. So web impact from begin of quarter to finish of quarter on backlog on that half could be restricted. There’s been just a few million {dollars} income acknowledged within the quarter, primarily associated to what has already been delivered to Nikola. We had some provisions for guarantee and different issues. And now with a delay, and a brand new time line, we see that we are going to not be needing that and the place the brand new buyer has paid for an prolonged guarantee.
Anders Rosenlund: If I’ll, my query is admittedly, would the outcomes have been roughly [ $150 million weakest ] if it hadn’t been for this alteration order with Nikola.
Kjell Bjornsen: In case you take a look at the Nikola in isolation, the $9 million is clearly singled out as a one-off occasion. With regards to the Fortescue change order, there may be right that there’s a few million {dollars} of constructive affect on that mission on this quarter. Nevertheless…
Hakon Volldal: [indiscernible] complete enterprise. It is like — it is further gear like all new contract. So there’s nothing magic about it. It might have been one other contract.
Kjell Bjornsen: And we don’t single out when we now have corresponding damaging results of this on different initiatives as nicely. So sure, it stands a bit out because it’s one order in 1 quarter. However there’s positives and negatives on nearly each mission in nearly each quarter.
Lars Nermoen: Subsequent query is from Elliott Geoffrey.
Elliott Geoffrey: Only a fast query on the U.S. subsidies you’ve got acquired. Is there like an expiration date on the tax credit or any of the subsidies on the subject of when you might want to announce it for the — on the Michigan facility. Any colour on that will be nice.
Hakon Volldal: Sure. There are — I imply, they are not — they do not final endlessly. In fact, when politicians grant subsidies to corporations like Nel, they wish to see us take motion, however in addition they understand that it isn’t at all times easy to maneuver on. So there have been some necessities to take sure actions that do not essentially indicate lots of CapEx for Nel. We have to specify what sort of location are we . We have to decide to sure different actions. And also you sometimes have, as an example, 2 years to three years earlier than you might want to make the heavy investments and which means we now have time, So they are going to — these subsidies is not going to expire instantly. It isn’t like if we do not do something in ’24, we are going to lose all of it. However we have to present that we’re actively engaged on the mission, and we have to make in all probability some capital commitments throughout ’25 if we wish to maintain the subsidies.
Lars Nermoen: The subsequent one in line is from Yoann Charenton. I’ve opened up your microphone.
Yoann Charenton: Hopefully, you may hear me. Yoann Charenton from Bernstein. I’ve 2 questions, if I’ll. The primary one is about commerce receivables. How lengthy are you able to maintain commerce receivables late earlier than this triggers a possible money funds beneath compensation mechanism that is likely to be linked to letter of credit or the monetary instrument that you’ve in place? In order that’s the primary query. The second query is simply taking a look at your annual report, you present that roughly 80% of your backlog on the finish of final yr will result in efficiency obligations in 2024. Given that you’re not saying that capability utilization at your electrolyser factories will probably be adjusted, are you continue to anticipating 80% of the backlog to result in efficiency obligation in 2024?
Hakon Volldal: Sure. So let me deal with each of these. So to begin with, with regards to the receivables, if there had been a approach of accumulating them simply, then we’d have collected them and/or pulled on financial institution ensures or different issues. So there’s one mission specifically that is been with us for some time, the place we now have given element and proceed to present element. We’d, after all, have beloved that mission to go on. Simply as a reminder, we now have acquired a significant amount of money from the client. We’re working carefully with the purchasers to assist the client fund the mission and transfer forward with the mission. And we now have safety over the gear that has been delivered and management over that. So if the mission does not transfer forward, our stability sheet could be intact. With regards to the efficiency obligations or the anticipated income, we’re not by what we’re saying now, commenting on an expectation that may delay the backlog. We are going to proceed to ship the backlog in keeping with what has been agreed with clients. What we’re saying is that after we are actually throughout quarter 2 getting as much as a gigawatt run charge manufacturing facility, sure, capability at Heroya. And later within the yr, 500 megawatt in Wallingford is not going to be producing flat out to inventory. We are going to — after we are the best way to make the most of that capability, we will probably be what we now have within the backlog and what we now have of possible wins. So there could also be some working capital buildup, however we’d reasonably save the capital then tie it down in stock.
Lars Nermoen: Subsequent is Sean McLoughlin. Sean, have you ever activated your microphone. Okay. Then I feel we now have to maneuver on to the subsequent one, which is Rajpal Kulwinder.
Kulwinder Rajpal: So I simply wished to get your ideas on the order improvement. Clearly, it is encouraging to see that orders are rising quarter-over-quarter, and as you stated that the order consumption degree has been the very best within the final 1 yr. So what are you seeing in your interactions with the purchasers? Are they nonetheless delaying choices largely due to increased rates of interest? Or now since we see that the rates of interest may stick round for some time, so they’re simply going to go forward with the FIDs?
Robert Borin: I feel there are — there are a handful of initiatives that may proceed no matter what occurs on the political degree with regards to assist, however we additionally see that resulting from excessive rates of interest and resulting from initiatives changing into costlier than in all probability clients anticipated some time again, they wish to make the most of any public funding they may get. And which means within the EU 120-plus initiatives utilized for funding by the hydrogen financial institution, that cash is meant to be handed out on the finish of April, not handed out, however they’re imagined to announce the winners of that public sale on the finish of April, begin of Could. That readability will assist sure initiatives, the place Nel is concerned progress, and that would — that would assist us e book further orders. Within the U.S., as I stated, we watch for the clarifications on the tax — manufacturing tax credit. It isn’t crystal clear what’s going to occur. And firms, our clients are usually not eager on shifting on except they’ve extra visibility on the enterprise case. So I feel there’s lots of speak about billions of {dollars} or euros being handed out to hydrogen builders. That is not true. It hasn’t occurred but. I imply, not a single euro nearly has been paid out or a greenback. So our clients are ready for that money. And till they’ve that money, they are not keen to go forward and place it for a purchase order order with Nel or another for that sake. And I feel that is what you see out there. It isn’t solely Nel. This isn’t Nel particular. That is sector-specific, business particular. And I am hopeful that with the announcement of the hydrogen financial institution outcomes and likewise the ambition to launch the second spherical of funding by the hydrogen financial institution in Europe with the next complete quantity to be handed out and likewise readability on the Division of Vitality hubs and the economic initiatives for a number of billion {dollars} and the tax — manufacturing tax credit, there are quite a few initiatives, the place Nel is actively concerned that may take FID in ’24. However the — the irritating half is that we do not absolutely management it, proper? It isn’t solely as much as us. The one factor we will do is to place Nel as the most effective provider of electrolysers, get our prices down, the effectivity up. We do that each single day, however we’d like slightly little bit of assist and push from the market with a view to transfer ahead.
Kulwinder Rajpal: That is useful. And just a bit…
Lars Nermoen: Sorry. I’m — it was not on goal, sorry. Sorry, you are on again once more. Sure.
Kulwinder Rajpal: Just a bit follow-up. So I wished to know in regards to the EBITDA in alkaline, notably. Clearly, the Nikola one-off is evident, however you talked about there was one other one-off. So what was that?
Hakon Volldal: So the remark, once more, that was made after we introduced the renegotiated settlement with Nikola and the handing over of that mission from Nikola to Fortescue is that we additionally had some provisions. And for instance, guarantee provisions associated to what has already been delivered to Nikola, the place now with a delayed or prolonged time line, we might launch a few of these. Once more, within the broader context, on each mission, we now have some positives and a few negatives each quarter. So we’ve not singled these out or adjusted for them, as we would not alter for damaging results of the same form on different initiatives.
Kjell Bjornsen: We do not have an adjusted EBITDA. We have now an EBITDA determine. And that’s comprised of how we carry out on a number of initiatives. And in any reporting interval, there are setbacks, the place we spend more cash, extra hours. There are additionally positives, the place we do not spend as a lot cash as we deliberate. And on this quarter, we have been in a position to launch among the provisions that if we had booked this 100% in keeping with what really occurred, earlier quarterly outcomes would have been stronger, and this one could be a bit weaker. However total, it evens out. And I feel the development you may see on the alkaline aspect is sort of steady. The previous 5 quarters are underlying in — on the identical degree. It is barely damaging, however not massively damaging like lots of people assume. It is near breakeven. It does not take a miracle to get that enterprise into constructive EBITDA — EBITDA. And keep in mind, it is one line at Heroya, not being absolutely utilized throughout ’23.
Lars Nermoen: Thanks, all. We’re operating out of time. So we have to wrap up. So I will depart the phrase lastly to Hakon for some remaining remarks.
Hakon Volldal: No, I feel we’re proud of the leads to the primary quarter. We do acknowledge that there are constructive one-offs. However I feel as a reminder, each internally and externally, it is potential to have fun constructive one-offs as a result of we’re often grilled on damaging one-offs. So when we now have these constructive one-offs, it isn’t as a result of they by accident occur. It is also resulting from exhausting work by folks and intelligent negotiations and good contracts being landed. So I feel we should always respect the sturdy leads to the primary quarter. We do acknowledge that we have to get extra orders, fill the factories. And after we try this, the outcomes can even enhance considerably. So we — we proceed to do what we will, and that’s to make our merchandise higher and our positioning higher. And I feel we try this efficiently, and that we’d like some extra assist from the market when it comes to orders. So with that, thanks for watching our first quarter outcomes and see you once more in just a few months, I assume.
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