In its trading update this week ITM Power announced that it has suffered manufacturing issues including delays in finalising the tooling and testing of these stacks, but at the same time it announced that it has made encouraging technological progress with the development of its 2MW MEP 2.0 stack.
Below is the press release.
Trading Update
As outlined in the final results, ITM Power, the energy storage and clean fuel company, continues to make encouraging technological progress with the development of the 2MW MEP 2.0 stack. This latest generation of stack modules represents a step change in performance and operating efficiency, and the core technology continues to perform very well, delivering high conversion efficiency and market leading current density.
Due to manufacturing issues including delays in finalising the tooling and testing of these stacks, the Company now expects that full year output and revenue is likely to be towards the bottom of the current guidance range. The timing of this revenue will be weighted towards the final quarter of the current financial year, and will be dependent on success of the current work to resolve these issues. The previously announced range is 48MW-65MW of delivered product and revenue of £23m-£28m.
These production issues have resulted in limited deliveries of new, first of kind product which in turn has meant only limited field data for performance to assess the level of warranty provisions. As a consequence of the limited field data, the warranty provision for these next generation contracted products will need to materially increase from the current level of £3m at FY22 year end and may result in a revision to EBITDA loss guidance. The accuracy of the product warranty provision will improve as more field data is acquired. This is evolving technology and by its nature that creates inherent uncertainty applicable to any company introducing new technology into a rapidly developing industry.
The Board is aware of the potential risk associated with the growing and uncertain levels of warranty provisions and is seeking to mitigate this portfolio risk. As a result, the Company expects there may be delays in finalising contracts in the final stages of negotiation which could place large scale projects at risk of deferred financial close. The Company remains fully committed to the successful delivery of the order backlog and is working closely with customers to get projects finalised.
The Company continues to benefit from a strong balance sheet with current cash of some £320m, and has an increased focus on operational cash and cost management. Taking into account the committed capital expenditure, a lower level of inventory build, and cost control the year end cash forecast is expected to be £240-270m.
The search for a new Chief Executive Officer is progressing well. Further guidance will be provided as to the current year’s revenue and production as well as warranty provisions in the Trading Update in December.
 For further information please visit www.itm-power.com
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