Release Date: July 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NEL ASA (NLLSF, Financial) successfully spun off its fueling division, Cavendish Hydrogen, allowing it to focus solely on electrolyzer technology.
- The company secured a significant technology licensing agreement with Reliance Industries, providing a new revenue stream and enhancing its competitive edge.
- NEL ASA received USD 41 million in additional tax credits for manufacturing expansion in Michigan, supporting future growth.
- The company completed construction on Line 2 at Heroya, increasing its annual alkaline production capacity to 1 gigawatt.
- NEL ASA has a strong cash position with NOK 2.2 billion, reducing the need for immediate additional equity financing.
Negative Points
- Revenues in the second quarter were down 10% year-over-year, indicating challenges in maintaining sales momentum.
- The company reported a negative EBITDA of NOK 79 million, reflecting ongoing profitability challenges.
- NEL ASA's cash balance decreased from NOK 4.1 billion last year to NOK 2.2 billion, partly due to investments in Cavendish Hydrogen.
- There is uncertainty regarding the execution of capacity reservation agreements, which could impact future production planning.
- The company faces risks related to order backlog, including potential delays and cancellations, which could affect future revenue.
Q & A Highlights
Q: Can you clarify the utilization rates for Heroya's Line 2 and the impact on EBITDA breakeven?
A: We will run Heroya at less than full speed for the next couple of quarters due to our backlog. The pace towards EBITDA breakeven depends on the volume we produce and deliver, so quicker order intake will accelerate reaching positive EBITDA. - Kjell Bjornsen, CFO
Q: What is Nel's approach to exploring new technologies like solid oxide and AEM?
A: We are evaluating solid oxide and AEM technologies, which show promising theoretical KPIs. However, more time is needed to reach competitive CapEx levels. Solid oxide requires high temperatures, suitable for specific processes, while AEM combines benefits of PEM and alkaline technologies. These are not expected to be highly relevant this decade. - Hakon Volldal, CEO
Q: Can you provide details on the Reliance deal and expected royalties?
A: We have already booked revenues from the Reliance agreement, with an upfront and running portion. Reliance plans to reach 2 gigawatt scale next year. The deal is a significant revenue opportunity, but its size depends on Reliance's execution. Currently, the focus is on alkaline technology. - Hakon Volldal, CEO
Q: What is the status of the 200 megawatt US contract and its impact on Heroya utilization?
A: We continue to see progress on the project and funding, and have received a sizable amount already. If the project is not realized, we will remarket the 200 megawatts, but this is not in current plans for Heroya's utilization. - Kjell Bjornsen, CFO
Q: How does the European auction result impact the economic viability of green hydrogen projects?
A: The auction premium of EUR0.40-EUR0.50 per kilo is insufficient to close the gap with gray hydrogen. Some offtakers are willing to pay a premium to decarbonize, which is crucial for jump-starting the industry. Funding helps, but the premium is not enough alone. - Hakon Volldal, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
