ITM flounders in wake of Arup hydrogen deal

ITM Power share price slides, despite the announcement of a collaboration with Ove Arup & Partners on hydrogen refuelling stations and hydrogen power systems. Photo credit: ITM Power

ITM Power share price slides, despite the announcement of a collaboration with Ove Arup & Partners on hydrogen refuelling stations and hydrogen power systems. Photo: ITM Power

By Jason Deign

A deal with engineering and consultancy giant Ove Arup & Partners last week has not prevented hydrogen systems developer ITM Power from sliding in value.

Arup’s memorandum of understanding should have been an end-of-year fillip for ITM Power, but investors on the UK’s Alternative Investment Market punished the company by driving stock levels to their lowest level all year.

As Energy Storage Report went to press the stock was trading at under GBP£22 a share. The stock fell more than 5% the day after the Arup announcement.

At that point the company, which now has a market capitalisation of £38.5m, had lost almost a quarter of its value since May.

“It currently has negative earnings,” noted, a Belize-based financial intelligence platform.

Fighting hard to restore investor confidence

The share slide is disappointing for ITM Power given that the company has fought hard to restore investor confidence following a profit warning in January.

Throughout the year the company has issued a relentless stream of announcements that provide an indication not only of the company’s own progress but also that of hydrogen commercialisation in general.

Last month, for example, ITM Power completed an all-electrochemical hydrogen refuelling station in Sheffield and got planning permission for another site at the UK’s Centre for Engineering and Manufacturing Excellence.

That was in England. In the USA, meanwhile, ITM Power became the first developer to bring into operation a site under the California Energy Commission’s 2014 funding program for hydrogen fuelling stations.

Previously, in October, ITM Power had signed its first fuel contract, with Toyota, and inked an agreement to provide zero-emission commercial vehicles with Arcola Energy and Symbio FCell.

Securing a strategic investor

ITM Power also secured JC Bamford Excavators (JCB) as a strategic investor in March.

The earth-moving equipment manufacturer became ITM Power’s largest backer after injecting £4.9m into the hydrogen business via two obscure subsidiaries, JCB Research and Valebond Consultants.

In a June presentation to shareholders, ITM Power said it had £9.97m of projects under contract and a further £5.79m “in final stages”.

These included 17 refuelling stations in operation, being built or contracted in the UK, plus two more in California, with a total contract value of almost £12.9m.

The company also listed a number of significant power-to-gas projects for clients such as Thüga and RWE in Germany and the European Marine Energy Centre and National Grid in the UK.

Engagement at an all-time high

“Customer engagement with our energy storage and grid balancing products and with our hydrogen refuellers is at an all-time high,” claimed Graham Cooley, CEO, in a press note at the time.

In theory, the company is set to benefit from growing interest in hydrogen across a number of key markets.

In Germany, for example, a European Union report on the commercialisation of energy storage in Europe, published in March, predicted the size of the power-to-gas market would reach 46GW in 2030 and up to 170GW in 2050.

And in the UK the government pumped £6.6m into seven hydrogen refuelling projects in April.

ITM Power bagged two of the projects, which comprised upgrades to four refuelling stations and the creation of two new facilities, respectively.

Five other projects

The other five projects were split between Air Products, Fuel Cell Systems, the University of South Wales and Honda UK.

Last month, however, the UK Hydrogen and Fuel Cell Association called on the UK government for greater support.

Chairman Dennis Hayter said: “The UK has a number of world leading hydrogen and fuel cell companies operating in the global market.

“Government support is needed now to make the UK an attractive place to manufacture and, thus, grow and retain current capability.”

The call underscored the fact that while there is growing awareness of hydrogen’s potential, other than Japan few markets are looking to adopt it in much of a hurry.

Behind batteries in terms of commercialisation

Certainly, hydrogen still remains very much in second place behind batteries in terms of its commercialisation potential.

And that’s a problem for companies such as ITM Power, which need to become profitable fast so they can start delivering returns to shareholders. ITM Power’s bosses know this.

In June they said: “ITM Power’s key strategic goal is to become cash-flow positive in the shortest period possible and the company has successfully prevented the cost base materially increasing despite revenues rising.”

Until that positive cash flow materialises, commitments such as the one announced with Arup will only matter when they come with pound signs attached.

Tellingly, while Cooley stated the Arup deal was “an excellent opportunity to identify new sites for hydrogen refuelling stations and other energy-related projects,” neither party said how many projects would be developed.

What has happened to ITM Power’s share price since the announcement may be an indication that investors now need something a bit more concrete to stay on board.

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