Powercell - Portfolio Addition

This is another company added to my portfolio last week operating in the fast-growing clean hydrogen fuel-cell market and with HQ in Sweden. It was formed in 2008 and is a spin-off from Volvo Motors who were researching fuel cell technology in the 1990s. It has a current market cap. of 15bn SEK (equivalent to £1.4bn).

What They Do

Powercell develops and supplies fuel cells, systems and support services that reduce the environmental impact of energy generation. Their mission is to create a fossil-free society.

For over a decade the company has developed and refined fuel cell technology which provides clean power for transport and other stationary applications. Their systems can be used in many forms of road transport including shipping.

Many readers will have heard of Wuhan, China as it was the location of the first coronavirus cases back in January however what few if any will know is that it is also home to the Wuhan Tiger Fuel Cell Company which has been a customer of Powercell since 2017.

 

Wuhan Tiger Hydrogen Bus

The company is developing fuel cell-powered vehicles for the Chinese market and using a system based on the Powercell S2 stacks. A bus equiped with this system recently clocked up over 40,000 km - equivalent to one lap around the world. Despite daily intensive use in tough conditions, the stacks have proved very robust and reliable and given no problems. These buses with the hydrogen fuel cell stacks are demonstrating a very practical alternative to fossil fuels. The fuel cell bus was given the green light for production in 2018 by the authorites and Wuhan Tiger have now purchased 54 buses but the potential is absolutely huge.

The company have since established a subsiduary - Powercell Fuel Cell (Shanghai) Ltd headed by Yibo Zhao who has been with Powercell since 2017. China has now introduced big subsidies to encourage fuel cell powered transport to address pollution levels in major cities and climate concerns. Obviously there are big opportunities presented by China with a population of 1.4 billion.

In 2019, the company signed a deal with Bosch in relation to their S3 Powercell fuel stack and last week they received an order from Bosch worth €2.5m for delivery throughout the rest of this year.

In April they signed an agreement worth €6.9m with a leading European shipyard for the supply of a megawatt marine fuel cell system. Heavy diesel used in most large ships is very carbon intensive and the International Maritime Organisation are looking ways to decarbonise global shipping by 2030.

past 12 months

As a result of this progress and the various contract announcements, the share price has taken off in the past few months. Sales have grown rapidly from just 12.2m SEK in 2016 to 66.9m last year and are forecast to exceed 100m this year with 26.7m already in the bag for Q1. Of course, there will be the uncertainty of Covid to take into account and Q2 results should give a clearer picture.
 
I am hoping there will be much more to come - especially as the EU have decided to give green hydrogen a central role in their plans for post-Covid recovery and the transition to net zero emissions by 2050. Having said that, the shares have had a good run and are currently close to their all-time high point so there could be some profit taking and volatility in relation to Covid-19.

The shares were added to my green portfolio last week at the price of 297 SEK with proceeds from the sale of my holding in Proton Power.

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 in a niche sector can be rewarding but is higher risk - always DYOR!