Release Date: February 26, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NEL ASA (NLLSF, Financial) reported a significant improvement in EBITDA, reducing losses by 60% over the past two years.
- The company has a strong cash reserve of NOK1.9 billion, providing a solid financial foundation.
- NEL ASA secured a EUR135 million grant to industrialize its next-generation pressurized technology in Norway.
- The company has expanded its manufacturing capacity to 1.5 gigawatts, with fully automated facilities in Norway and the US.
- NEL ASA has established partnerships with industry leaders such as Reliance, Saipem, and Korea Hydro and Nuclear Power, enhancing its market position.
Negative Points
- Order backlog decreased from NOK2.4 billion in Q1 2023 to NOK1.6 billion by the end of Q4 2024, indicating a decline in new orders.
- The company announced a temporary halt in production at Herøya due to lower order intake in 2023 and 2024.
- NEL ASA is facing challenges with some projects at risk of cancellation, including a large project in the US and another in Germany.
- The PEM segment has not shown the expected progress, with revenues down 12% year on year.
- The company is undergoing organizational downsizing, reducing capacity by 25% to align with market demand.
Q & A Highlights
Q: What gives you confidence that the order intake for Nel will be much better?
A: Hakon Volldal, CEO, explained that the confidence is based on specific discussions with customers who now have a more realistic view on the cost of green hydrogen and market willingness to pay. Projects are more mature with completed permitting and engineering, and there is a clear timeline for final investment decisions (FID).
Q: Can you provide insights on the lead times and cash flow for PEM projects compared to alkaline?
A: Kjell Bjornsen, CFO, stated that lead times for containerized PEM solutions are typically 9 to 15 months from signature to operation, shorter than for alkaline. Cash flow is structured to be neutral to positive on a project basis, with payments received as milestones are achieved.
Q: Can you break down the NOK35 million of other income?
A: Kjell Bjornsen, CFO, clarified that this income is mainly from grants and contract research, reducing R&D costs. It does not include revenue from customers or cancellation fees.
Q: How competitive is the next-generation alkaline system compared to current market solutions?
A: Hakon Volldal, CEO, noted that while it's tough to compete with gray hydrogen due to electricity costs, the next-generation platforms aim to significantly improve CapEx and OpEx, making them competitive with current market offerings.
Q: What is the status of the PEM stack development with GM, and its potential impact on Nel's margins?
A: Kjell Bjornsen, CFO, mentioned that the PEM stack, developed with GM, is expected to reduce costs by 70-80% compared to 2024 levels. The licensing fee to GM is not substantial, and the commercialization is expected in the near future, potentially boosting PEM margins.
Q: How secure is the NOK1 billion backlog, and what guarantees are in place?
A: Kjell Bjornsen, CFO, explained that the backlog is based on firm contracts with cancellation fees and upfront payments. The difference now is that projects have full funding stacks in place before equipment orders are placed.
Q: How competitive is US-made PEM equipment in the European market?
A: Kjell Bjornsen, CFO, stated that Nel's PEM products command a premium due to performance guarantees and proven reliability. The company is adjusting its supply chain to remain competitive in both the US and Europe.
Q: What is the purpose of the EUR135 million grant, and how will it be utilized?
A: Kjell Bjornsen, CFO, explained that the grant covers up to 60% of investment and running losses for the new technology introduction. It supports scaling production capacity to 4 gigawatts, contingent on reaching certain milestones.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
