Friday 4 October 2019

ITM Power - Finals & Key Partnership Announced

This small AIM-listed clean energy company was added to my portfolio in August. 

It has recently announced results for the full year to end April 2019 (link via ITM website). Sales increased by 40% to £4.6m and grant revenue was up 75% to £7.2m.

However, the company is still not profit-making as it invests heavily to scale-up its operations. Cash burn this year was £15m and the company now needs to raise more cash to keep the show on the road. 

It has therefore announced plans to raise a minimum of £52m from equity fundraising. This involves a new partnership with Linde AG for £38m and then a placing with institutional investors for £14m and an open offer of £6.8m.

Linde Engineering Joint Venture

This is a big deal for ITM. Global industrial engineering group Linde will acquire a 20% stake in ITM for the £38m. The 50:50 joint venture will target an increasing number of companies and governments that are looking to green hydrogen as a solution to tackling climate change. These include the storage of renewable energy and grid balancing as well as the essential task of reducing CO2 emissions from sectors such as transport and heavy industry. ITM will focus on hydrogen production from its electrolysers whilst Linde will look after the engineering and construction side of the projects.

Graham Cooley, CEO of ITM Power plc, said: 
“The major strategic investment from Linde cements a five year relationship between us and provides ITM Power with a world leading partner that brings deep expertise in engineering, procurement and construction and a global customer base. The joint venture will enable us to focus on our core competency of the development and sale of electrolysers, and with Linde as our partner to deliver green hydrogen at scale, The successful fundraising provides the financial resources to exploit this exciting opportunity to the full.

We are seeing increasing global demand for hydrogen as a solution to renewable energy storage needs and the decarbonisation of major industrial processes. The fundraising and our partnership with Linde will help us to meet this demand on a growing scale, deliver efficiencies throughout our supply chain and represents a significant step on our pathway to medium-term profitability”

Energy Observer - World's First Hydrogen Powered Boat

The Case for Hydrogen

Hydrogen is the most commonly occurring element in nature and is set to play a defining role in the 'green' industrial revolution as it replaces fossil fuels. It can be stored and used to power long-distant transport such as cars, lorries, trains and ships. It can be used to generate electricity. It can be used as a gas to replace natural gas for heating our homes. It is a clean source of energy and when used the only emissions are water and heat.

12 m Share Price

The announcement seems to have gone down well with the market as the share price jumped 11% to 48p yesterday. Good news for me as my investment is up 30% since purchase and I will certainly take advantage of the open offer of a top-up to my holding at 40p if available via my broker.

Hopefully these moves can translate to profitability over the coming year.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation... investing in smaller companies can be rewarding but is higher risk - always DYOR!

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