Sunday, 6 June 2021

McPhy Energy - Update


In January 2020 I took a look at the global potential for green hydrogen and suggested it could transform the global economy.

Last month the IEA released its pathway to net zero by 2050. The report called for an end to all new fossil fuel production and a radical shift to renewable energy to limit global warming to 1.5C. They suggest that hydrogen will play a big part in the transition and increase from 10% today to 70% by 2030 and that half of this increase will be green hydrogen from electrolysis of water.

Since deciding to move to a more climate-friendly portfolio in 2018, I have added several clean hydrogen-focused companies to my green portfolio including Powercell, Nel Hydrogen, ITM Power and Ceres Power. McPhy Energy was added in May 2020.

The Company

McPhy Energy is based in France and specialises in the manufacture of clean hydrogen storage and production solutions. Their focus is centered around helping clients in the transport and energy sectors to transition to business models based on zero-carbon emissions using green hydrogen.

The company has grown very rapidly over the past year - market cap approx €735m (listed in France). It has manufacturing bases in Germany and Italy as well as a distribution network in Asia and the Americas. Its products include a hydrogen electrolyser to split water and produce clean hydrogen and also sells solid-state hydrogen technology.

Results

In March the company reported strong revenue growth of 20% in 2020 - up to €13.7m (€11.4m 2019). The company raised €180m via an over-subscribed share placing last October which means they are well capitalised for their growth plans with cash reserves to €197m. 

Laurent Carme, CEO of McPhy, said: "The year 2020 marked a decisive turning point for the entire hydrogen industry. The launch of major public projects in Europe with the hydrogen strategy unveiled by the Commission in June, and in France with the announcement in September of the €7 billion investment plan, made clear the fantastic potential of renewable hydrogen to succeed in the energy transition.

However, despite a 75% increase in orders and the increase in revenues, this has not yet translated into profits with a net loss posted for the year of -€9.3m (-€6.3m for 2019).

H2 Filling Station

By the end of 2020 the company had over 44MW of electrolysers and 35 hydrogen stations installed or in the process of being installed. Some large deals look promising...McPhy has recently been selected by Nouryon and Gasunie, two leading industrial players, to equip one of the largest zero-carbon hydrogen production units in an industrial environment in Europe. Also they have secured a contract with the project company Hympulsion to equip the largest zero-emission hydrogen mobility deployment project in France and one of the most ambitious in Europe.
 

The company are in the final planning stages for a new gigafactory for the production of electrolysers with a capacity of 1GW and which is due to start production in 2024.

McPhy One Year Share Price
(click to enlarge)

The shares were purchased in my ISA last year at €5.60 . I took profits on half of the shares at €25 to release funds for my house purchase which completed last November. The remaining holding went on to reach a high of €40 by January but have since fallen back sharply along with most other clean energy stocks and currently stand at €26.50 and account for 4% of my green portfolio. I am hoping the shares can soon get back on an upward trajectory but I am expecting some volatility along the way.

There is naturally a lot of coverage being generated about clean energy and climate change generally. The big oil companies are under fire over their carbon emissions and are looking to transition to a cleaner, more sustainable business model. EDF has a stake in McPhy, German giant Linde acquired a stake in ITM and Bosch has a stake in Ceres Power.

Clearly the world is now starting to take climate change seriously and there is a real commitment to achieving net zero emissions by 2050. This simply cannot be achieved without the use of renewable green hydrogen on a large scale.

It will be interesting to see how the European hydrogen sector develops over the coming year as we start to come out of the coronavirus pandemic and look to build back better.

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 individual companies listed on a foreign exchange can be rewarding but is higher risk compared to collective investments - always DYOR!

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