TIDMITM
RNS Number : 4606B
ITM Power PLC
10 June 2021
10 June 2021
ITM Power plc
("ITM", "ITM Power", the "Group" or the "Company")
Trading Update
ITM Power (AIM: ITM), the energy storage and clean fuel company,
provides a trading update for the year to 30 April 2021. This
update also includes progress on the contracts backlog and tender
pipeline, the Bessemer Park Gigafactory, ITM Linde Electrolysis
GmbH ("ILE"), ITM Motive, ITM Support and ITM Academy, as well as
the outlook for the current financial year to 30 April 2022 and
beyond.
Highlights:
4/2021 4/2020 % change
Work in Progress* GBP35.4m GBP21.8m +62%
Contracts backlog** GBP154.0m GBP52.4m +194%
Tender pipeline
*** GBP607m GBP263m +131%
*Work in Contracted backlog
Progress
**Contracts Contracted backlog and contracts in the final stages
backlog of negotiation and preferred supplier backlog
***Tender Quotations submitted in response to commercial
pipeline tenders in the last 12 months
-- Contracts backlog of GBP154.0m (GBP52.4m) constituting 290MW of electrolysers up 194% YoY
-- GBP35.4m (GBP21.8m) Work in Progress up 62% YoY representing 43MW of electrolysers
-- 10MW of the Work in Progress is the Refhyne project recognised on stage of completion
-- The balance of the Work in Progress is expected to be delivered in FY22
-- Tender pipeline of GBP607m (GBP263m), up 131% YoY, value to ITM Power is GBP364.2m
-- Tender pipeline constitutes 593MW of potential electrolysis demand
-- Bessemer Park Gigafactory positions ITM Power strongly to meet rapidly growing demand
-- Installation of the 10MW Refhyne project completed, with inauguration on 2 July
Market Progress:
-- Rapid hydrogen market development, with projects now at the 100MW scale
-- Eight governments stated explicit electrolyser targets totalling 144GW by 2030
-- Number of reports suggest further acceleration of hydrogen market development
-- The IEA report "Net Zero by 2050: A roadmap for the Global
Energy Sector" published on 18 May states that a "global
electrolyser capacity of 3,585GW needed by 2050."
-- The Aurora "Hydrogen Market Attractiveness Report" published
on 11 May states that the current pipeline of potential
electrolysis projects is over 200 GW, 85% of which is in Europe
New Contract awards:
-- 24MW sale to Linde Gas for the Leuna Chemical Complex in Germany
-- Additional aggregate sales of 10MW across Germany, Austria, Japan, Tasmania and France
-- New market sectors: semiconductors, multi MW scale wind coupling
-- EUR5m EU funding for OYSTER (offshore electrolysis) with Orsted and Siemens Gamesa
New projects under negotiation or preferred supplier status:
-- Partnership with Snam to develop projects with preferred
supplier status for the first 100MW of electrolysers
-- Planned 100MW expansion of Shell Refhyne to 110MW - subject to securing match funding
-- Plans submitted for the 20MW Whitelee project in Glasgow with ScottishPower (Iberdrola)
Corporate:
-- ITM Motive established as a separate company, wholly owned by ITM Power
-- Tom Rae and Katherine Roe appointed as Non-Executive Directors of ITM Power
-- Recruitment of key talent to maintain market leadership continues
Unaudited Financials:
-- Expected Total Revenue GBP4.0m (GBP5.4m) for the year to 30
April 2021, impacted by Covid-19 and IFRS15 recognition rules
-- EBITDA and EBIT losses for the year expected to be broadly in
line with management expectations
-- Cash position GBP176m (GBP41.0m) at year end 2021
Outlook:
-- The Company currently expects to produce (and recognise
revenue for) 50MW of electrolysers in the financial year ending 30
April 2022
-- Of this, 33MW are already contracted in the backlog, with the
balance of 17MW in advanced stages of contract negotiation
-- Recognised revenue will be strongly weighted to the second
half of the financial year given manufacturing lead times
-- The Company now has significant manufacturing and operational
capacity, and a blueprint to substantially increase that capacity,
to address market demand for its developing suite of products as
the market continues to move at pace towards large scale
projects
Dr Graham Cooley, CEO, ITM Power plc, commented: "Traction in
the electrolyser industry has been even more rapid than we were
anticipating. At the same time, we moved into a gigawatt factory in
January, which positions us strongly to meet rapidly growing global
demand reflected in a contracts backlog and tender opportunity
pipeline materially ahead of our original expectations. We are very
much looking forward to welcoming customers and investors to a very
busy Bessemer Park as soon as we are able."
There will be an analyst and investor presentation today at
1400h BST on the Investor Meet Company platform:
https://www.investormeetcompany.com/itm-power-plc/register-investor
Also today, ITM Power's partner Linde will be holding a green
hydrogen seminar between 0900h and 1130h BST (1000h-1230h CET)
which will cover the Company's JV with Linde, ILE GmbH. Those
wishing to attend should register at:
https://www.engineering.linde.com/green-hydrogen-seminar2
For further information please visit www.itm-power.com or
contact:
ITM Power plc +44 (0)114 551 1205
James Collins, Investor Relations
Investec Bank plc (Nominated Adviser
and Broker) +44 (0)20 7597 5970
Jeremy Ellis / Chris Sim / Ben
Griffiths
Tavistock (Financial PR and IR) +44 (0)20 7920 3150
Simon Hudson / Edward Lee / Tim
Pearson
About ITM Power plc:
ITM Power plc manufactures integrated hydrogen energy solutions
for grid balancing, energy storage and the production of renewable
hydrogen for transport, renewable heat and chemicals. ITM Power plc
was admitted to the AIM market of the London Stock Exchange in
2004. In October 2019, the Company announced the completion of a
GBP58.8 million fundraising, including an investment by Linde of
GBP38 million, together with the formation of a joint venture with
Linde to focus on delivering renewable hydrogen to large-scale
industrial projects worldwide. ITM Power signed a deal to deploy a
10MW electrolyser at Shell's Rhineland refinery. In November 2020,
ITM Power completed a GBP172m fundraising, including a GBP30m
investment by Snam, one of the world's leading energy
infrastructure operators. ITM Power operates from the world's
largest electrolyser factory in Sheffield with a capacity of 1GW
(1,000MW) per annum. ITM Power received an order for the world's
largest PEM electrolyser of 24MW from Linde in January 2021. Other
customers and partners include Sumitomo, Ørsted, Phillips 66,
Scottish Power, Siemens Gamesa, Cadent, Northern Gas Networks,
Gasunie, RWE, Engie, GNVert, National Express, Toyota, Hyundai and
Anglo American among others.
Introduction
Global demand from industry for electrolysers to decarbonise
production processes, and from utilities and power companies to
store renewable energy, is accelerating - the potential scale of
demand originally underpinned the Company's decision to invest in a
step change in capacity at the new Bessemer Park facility. ITM
Power is well positioned to take advantage of the acceleration in
demand - our investments in the Bessemer Park facility have yielded
not only the largest PEM electrolyser production facility anywhere
in the world today with a significant 1GW per annum capacity, but
can also serve as a blueprint to further scale production as and
when required.
Pipeline
The contracts backlog today stands at a record level of
GBP154.0m (GBP52.4m) constituting 290MW of electrolysers, up over
194% YoY; comprising GBP35.4m (GBP21.8m) of projects under contract
and in progress and a further GBP118.6m of awards in the final
stages of negotiation or subject to preferred supplier status.
The full system tender opportunity pipeline stands at GBP607m
(GBP263m), up 131% YoY, of which the value to ITM Power would be
GBP364.2m; this constitutes 593MW of full electrolyser systems
comprising 68 active commercial tender responses over the last 12
months with an average project size of GBP8.9m (GBP7.2m),
reflecting strong industrial demand for larger systems. For ITM
Power to add a bid to the tender pipeline, it needs to be a
financed project, quoted within the last 12 months and expected to
be contracted in the next three years. ITM Linde Electrolysis and
ITM have jointly responded to GWs of early stage enquiries over the
last 12 months providing indicative pricing, which do not yet form
part of the tender pipeline.
ITM Linde Electrolysis GmbH (ILE)
As a 50/50 joint venture, ILE can access the capabilities of
both ITM Power and Linde Engineering. In so doing, the business has
an extremely strong value proposition from feasibility to plant
realisation. As such, ILE is uniquely able to offer large-scale,
turnkey solutions to the market including full EPC capability.
ILE has enjoyed a successful period winning feasibility, front
end engineering design (FEED) contracts and execution projects and
is currently conducting three such FEED studies. Notable among the
execution projects are the sale of a 24MW electrolyser which will
be operated at a Total facility in Leuna, Germany and the
completion of a 100MW FEED study for Orsted and Philipps 66 that
will act as a blueprint for further 100MW+ projects. Both are
representative of the rapidly growing demand for larger
electrolyser systems, which is where the ILE offering is
particularly compelling.
Collaboration between ITM Power, Linde Engineering and ILE is
intense and productive. ILE currently has 14 full time staff, up
367% over the last 12 months and as a consequence, the market
offering has developed rapidly. Crucially for ITM Power, the
relationship enables the business to focus on electrolyser
standardisation and modularisation. This in turn allows ITM Power
to accelerate development, cost reduction and the transition to a
high volume specialist manufacturer. By focusing on its core
competencies in this way, ITM Power can effectively and rapidly
scale the business.
Snam S.p.A. (Snam)
The strategic partnership between ITM Power and Snam signed in
October 2020 is proceeding well. ITM Power and Snam have a
constructive dialogue around several green hydrogen projects
leveraging on their respective knowledge and strengths. Snam has
supported ITM Power's Strategic Advisory Committee on key decisions
on commercial activities and the Company's Technology Management
Committee has also benefited from Snam's input into research and
development roadmaps, by reflecting Snam's understanding of
hydrogen markets. Snam's secondments to the ITM Power team in
Sheffield are enabling the two companies to foster synergies for
the development of new projects, as well as technology and
manufacturing improvements.
Unaudited Results
Revenue for the financial year to 30 April 2021 is expected to
be GBP4.0m. This was the first year in which ITM Power worked with
Linde as part of the joint venture, ILE, which resulted in sales
contracts being secured with a value of GBP12.8m. These contracts
were ongoing at year-end and therefore no revenue was recognised
from the efforts of the JV in the financial year. The revenue
performance was also impacted by some project delays, particularly
in Australia, in relation to Covid-19 restrictions. Had these
restrictions not impacted revenue, it would have stood at GBP5.5m.
These Australian projects are expected to conclude in Q1 FY22.
EBITDA and EBIT losses in the financial year to 30 April 2021
are expected to be broadly in line with management expectations.
This result reflects in part the impact of Project Accelerate,
whereby the Group is targeting next generation products two years
early. To facilitate this, headcount has increased from 189 at 30
April 2020 to 275 today, up 46%. This enhancement of capability has
accelerated the technology development, allowed for a homologation
exercise to happen for all target markets (due to conclude in FY22)
and led to further investment in production skills, product
improvements, after-market service capability and business
development.
Total net current assets excluding stock at the year-end were
approximately GBP176m (GBP50.7m as at 30 April 2020), comprising
GBP176.1m (GBP39.9m) of cash and deployed working capital (debtors
less creditors) of GBPnil (GBP9.7m).
Effect of the Covid-19 Pandemic
The health and safety of our employees and their families, our
suppliers and customers remains paramount. Consequently, in
accordance with government guidelines, all non-essential work was
stopped at ITM Power locations until Government restrictions were
lifted.
As previously announced, many customer sites where ITM Power is
working to install and commission equipment were closed for
periods, causing delays to project delivery, which has impacted
revenue recognition for these contracts. The Company worked closely
with partners, suppliers and staff to get back on site as soon as
possible in all cases, and has recently had teams in Germany,
France, Netherlands and Australia. Staff were COVID tested prior to
any travel to ensure their safety and the safety of our
customers.
ITM is working in full COVID compliance with production and
essential services on site at our Gigafactory in Sheffield, where
staff are encouraged to enrol in the UK testing and vaccination
program, and COVID testing is available onsite. Work is progressing
to allow remaining staff to return to site as the lockdown is
lifted, with the expectation that the lifting of restrictions on 21
June will allow all staff access to our new facility.
The Bessemer Park Gigafactory
The Company moved into Bessemer Park in January 2021, and the
factory has been in production for the last three months. The
historic ITM sites closed, with dilapidations complete, and all
staff are under one roof. The strategy of becoming a standardised
products manufacturer is being realised at Bessemer Park, with
parts being built to stock to reduce lead times. The Company has
also deployed and resourced its remote support centre, with
technical specialisations available 24/7 to support customer
products anywhere in the world and provide best-in-class service.
The move to, and development of, Bessemer Park has also provided
ITM with an effective blueprint for future large-scale
manufacturing facilities, including identification of scope for
further automation.
Technology
ITM Power continues to place strategic focus on the development
of its technology. The opening of Bessemer Park earlier this year
saw the Product Development and Technology teams relocate into the
new Technology Centre. The additional space provides an excellent
location to build on the Company's 20 years of experience and
accelerate key development activities. The ITM Power technology
roadmap is focused on reducing cost, increasing efficiency and
expanding production capacity of our electrolyser stacks and
products.
Over the last period particular emphasis has been placed on
verification of improvements at the stack level. These have
included improved membrane materials, ultra-low catalyst loadings
and in-house component preparation. The now co-located technology
and production teams work particularly closely together as new
manufacturing machines are adopted by the business to underpin
production capacity ramp up and prepare for the larger 5MW
Gigastack platform.
Cost Reduction and supply market risk
Product cost reduction is an important focus area for ITM Power.
Last year the Company presented a full system price reduction plan
including a target to halve the average product price within five
years. The strategy to achieve these improvements is centred on
standardisation and modularisation of the product offering
alongside fully leveraging global buying power of partners and an
integrated technology roadmap. The single biggest gains are
available from the PEM stack and the power conversion systems. ITM
Power has brought key stack preparation processes in-house with the
move to Bessemer Park. Together with semi-automation and in-line
quality assurance, this has achieved both cost reduction and
capacity expansion for the stack platform.
The economies achieved from scale are key to cost reduction. The
move to 5MW modules from 2MW modules, the increased factory
throughput achieved by increased product demand and the associated
efficiencies in the supply market all lead to significant cost
reduction.
Another focus area has been continued reduction of precious
metal loading. Over the last 10 years, the use of precious metals
within ITM Power stacks has reduced by over 80%. This core
competency and vertical integration enabled ITM Power to achieve
the 2030 EU target of 0.4mg/W for precious metal loading for
electrolysers in 2019 and significant further progress has been
made since then. As a manufacturer of its own catalyst inks, ITM
Power has been working on the reduction, recycling and reuse of
precious metal catalyst loading for 20 years. As part of the
Company's existing cost reduction plan, these developments will be
rolled out in phases, subject to ITM Power's well-established
verification process. This long running activity makes an important
contribution to cost reduction and provides some insulation against
the risk of supply constraints in the precious metal supply
chain.
These and other developments, together with the productive
collaboration with Linde on product value engineering, is ensuring
solid progress against cost and performance targets. Providing
comparable EUR/kW pricing for full electrolyser systems is
challenging owing to the complexity and variability in scope of
supply. In addition to direct sales of containerised electrolyser
systems, a significant route to market is via ITM Linde
Electrolysis, whereby core electrolysis modules are supplied to
Linde Engineering for integration within a wider solution tailored
to the end user requirements. In this way, both companies focus on
where they add value, enabling the business to be scaled
effectively.
Projects
The Company currently has a portfolio of 33 live projects and a
team of 12 dedicated international and multi-lingual project
managers, including Italian, French and German speakers, who work
closely with clients to support the delivery of projects and
products to time and budget.
The Refhyne project reached a significant milestone in April
with the installation of the venturi roof. Multidisciplinary teams
from ITM Power and ITM Power GmbH are working on site to commission
Europe's largest PEM electrolyser in preparation for the public
inauguration of the facility on 2 July 2021.
On 26 February 2021, Shell announced its development plans for
its Rhineland Refinery in Germany. These include an increase in the
capacity of the ITM Power PEM electrolysis plant by 100MW. Shell's
partners for the Refyhne II electrolysis project are ITM Power, ITM
Linde Electrolysis GmbH (ILE) and Linde. Subject to finalising
contracts and securing some match funding, construction will begin
next year.
The Gigastack project on Humberside has been widely recognised
as the UK's flagship renewable hydrogen project. This was
particularly highlighted in the two Government publications, the
"10-Point Plan for a Green Industrial Revolution" and the "Energy
White Paper: Powering our Net Zero Future". The Phase 2 project
funded by the UK's Department for Business, Energy and Industrial
Strategy is creating a blueprint for deploying scaleable
electrolyser technology across the UK. The Gigastack project is
nearing an important milestone in its delivery, as project partners
ITM Power, Orsted and Philips 66 are set to publish a final report
in July 2021, which will outline findings and progress in key areas
of focus including the 100MW electrolyser front-end engineering
design (FEED) study.
The Company's Project Managers continue to work with customers
and suppliers to mitigate delays resulting from Covid-19. This is
expected to have an impact on the H1/H2 phasing of revenues
recognised in the current financial year, but with ongoing changes
to quarantine and travel rules the impact is currently too
uncertain to quantify.
ITM Motive
On 4 May 2021 ITM Motive Limited ("ITM Motive") registered in
England with company number 13290733, as a separate, wholly owned
subsidiary of ITM Power PLC. All English refuelling assets owned by
ITM Power (Trading) Limited and resources and personnel have been
transferred to ITM Motive. ITM Motive owns and operates a portfolio
of 12 Hydrogen Refuelling Station (HRS) assets in the UK. ITM
Motive has 13 staff in total, with four new team members joining in
the next two months. The company is based in Sheffield at Shepcote
Enterprise Park. ITM Motive expects to rapidly grow its network of
refuelling stations in the UK with a focus on larger vehicle fleets
and is already talking to potential partners which could provide
investment, complementary engineering skills and access to
markets.
ITM Support
ITM Power has expanded its remote operating centre as part of
its transition to Bessemer Park. The facility is staffed 24 hours a
day by experienced engineers to provide immediate support to
clients around the world. Remote access to, and visibility over,
electrolyser equipment in the field which is subject to different
operating conditions provides valuable data which support learning
and ongoing product improvement.
ITM Power has developed a partnership with Optimal for on-site
support of its electrolyser systems in Australia. Partnering in
this way enables ITM Power to ensure clients receive excellent
after sales support internationally. As the number of electrolyser
deployments grows, uptake of aftersales support packages will
increase and is expected to develop into an attractive and
recurring revenue stream.
Outlook
ITM Power's strategy to be ready with capacity as demand
increased and establish market leadership in PEM electrolysis has
proved to be the right one. Governments and industry around the
world are increasingly coming to the realisation that hydrogen
produced by electrolysis from renewable power is the only true zero
carbon footprint production process available. And PEM
electrolysis, with its ability to couple directly to intermittent
renewable power, is the only technology currently available at
scale.
In terms of the outlook for the current financial year ending 30
April 2022:
-- The Company currently expects to produce (and recognise revenue for) 50MW of electrolysers
-- Of this, 33MW are already contracted in the backlog, with the
balance of 17MW in advanced stages of contract negotiation
-- Recognised revenue will be strongly weighted to the second
half of the financial year given manufacturing lead times
The effect of the Covid-19 pandemic on economic activity
globally has produced a situation where many governments and
supra-national bodies such as the EU are now seeking to combine
major economic and industrial recovery plans with achieving lower
greenhouse gas emissions - green recovery strategies.
These factors bode well for ITM Power's growth prospects. The
Company now has significant capacity, and a blueprint to
substantially increase that capacity, to address market demand for
its developing suite of products. The partnerships already in place
bring increased access to markets, global reach and worldwide
execution capability. ITM Power is deliberately positioned to take
maximum advantage of the expected growth in its markets.
-ends-
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