ITM Power (ITM LN) & Nel (NEL NO) Norway

Energy

Accelerating competition in hydrogen electrolyzers the key reason for continued Sell recommendations - as the industry moves to scale production (post 2025) industry dynamics for EU OEM electrolyzer incumbents turns negative: tech becomes diffused, advantage shifts to the “lowest cost at right performance” and more vertically integrated players gain share. Prior to 2025 green hydrogen production will disappoint - models only 3MW vs. EU target 6MW & Street ~4.5MW. Real demand from new industries will only really start in the 2030’s - ITM and NEL are unlikely to be independent by then and both will have to raise capital in the next few years.

- 04 February, 2022

EU Net Zero Ideas: Cable offers long term FCF & returns, Electrolysers do not

HVDC players (Nexans, Prysmian and NKT) offer improved growth, margins and ROIC as interconnection becomes a key enabling technology for net zero. The US market could triple. Barriers to entry are high and incumbents are well placed to be the main beneficiaries.

Electrolyser producers (Nel and ITM Power) face increasingly competitive industry dynamics (similar to German solar in 2008) and overcapacity / pricing pressure through 2030. Current leaders are unlikely to generate cash in the coming decade or remain independent. Both could raise capital again.

- 29 October, 2021