Tuesday, 28 January 2020

ITM Power - Half-Year Results

Earlier this month I posted an article suggesting hydrogen could transform the global economy. It's 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 is a clean source of energy and when used the only emissions are water and heat.

So, last year I decided to add a few companies to my green portfolio which I hoped would be able to take advantage of this revolution. One of these additions was ITM Power - a small AIM-listed clean energy company added to my portfolio in August 2019.

It has recently announced results for the half year to end October 2019 (link via Investegate).

Whilst revenues doubled to £2.4m (2018 £1.2m), grant income reduced to just £1.4m (2018 £3.8m). Total income for the period therefore fell by £1.2m or 24%.
The company has seen an increase in qualified tender opportunities to £248m - 37 projects and a corresponding backlog of £42.4m - £16.3m under contract and £26.1m in the final stages of negotiation.

The company made a loss of £9.8m and has been adversely affected by legacy issues connected to the Shell Refhyne project. The joint venture with Linde is likely to reduce exposure to future development risks.

Despite the setbacks, the company maintains a positive outlook. Global energy markets are increasingly recognising the need for the use of green hydrogen for energy storage, transport and heating. The UK Committee on Climate suggest we will need between 6 and 17GW of electrolosys to reach net zero emissions by 2050. ITM with its partner Linde are well positioned to benefit from these opportunities.

Linde Joint Venture

Global industrial engineering group Linde has now acquired 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.
6m comparison v AFC Energy and Proton Power
(click image to enlarge)

The results are disappointing but the markets seem fairly relaxed and the share price closed at 105p today - quite a jump from my purchase price of 37p last August. Hopefully the company can make some progress to profitability over the coming year or two with their new partners.

For the time being, this can return to the bottom drawer.

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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