ITM Provides Positive Trading Update on its 1st Q 2020: Record Backlog of £52.4m

By June 8, 2020 17   min read  (3207 words)

June 8, 2020 |

ITM Hydrogen Station

ITM Power (AIM: ITM), the energy storage and clean fuel company provides a trading update for the year to 30 April 2020. This update includes progress on the contracts pipeline, the effect of the Covid-19 pandemic on the results for the year just ended, the progress of the new joint venture ITM Linde Electrolysis GmbH (“ILE”) and updates on some of the major projects currently underway.


· Record backlog of £52.4m, comprising £21.8m under contract and £30.6m in negotiation

· Backlog up 24% since 27 January and not yet reflecting the ILE activity

· Higher quality tender opportunity pipeline (“ToP”) of £263m

· Contract award for 8MW electrolyser secured

· Bidding with Linde, via ILE, very strong and close collaboration with Linde Engineering enabling ITM Power to focus solely on its core manufacturing competence as opposed to EPC activities

· Shell Refhyne project programme progressing well with all five 2MW electrolysers built and phase one of factory acceptance testing successfully completed

· Legacy projects, Covid-19 delays and Brexit transition effects on EU grant funding increase expected EBITDA loss for the year ended 30 April 2020 to £17.5m, in line with expectations

· Minor Covid-19 impact on Bessemer Park fitout programme (now expected to open in Q4 2020)

· Rapid hydrogen market development – three European governments have stated explicit electrolyser targets for 2030: Germany 5GW, Holland 3-4GW and Portugal 2GW

· Cash position £41.0m at year end, £38.5m at the end of May

Dr Graham Cooley, CEO, ITM Power plc, commented: “The emerging trends in different industrial sectors, together with increasing acceptance by governments around the world that green hydrogen is an essential vector to achieve their carbon reduction commitments, bode very well for the electrolysis market. Against this background, ITM Power with partner Linde is very well placed to capitalise on the major opportunities we expect to arise from the continuing drive towards climate change mitigation.”


The market for electrolysis is growing very strongly due to the changing perspectives of industrial leaders and policymakers. In the last year, the offshore wind and gas sectors have started to advocate green hydrogen as the means for sustaining their long-term business models. At the same time, in the transport sector, a renewed focus has been placed on the development of zero-emission heavy vehicles, where fleets need to be refuelled with large amounts of hydrogen on a regular basis.


The contracts backlog today stands at a record level of £52.4m (£42.4m as at 27 January 2020), an increase of 24%, comprising £21.8m of projects under contract and a further £30.6m of awards in the final stages of negotiation. The tender opportunity pipeline (ToP) stands at £263m (£248m as at 27 January 2020), comprising 32 active commercial tender responses over the last 12 months with an average project size of £7.7m (£7.2m) reflecting strong industrial demand for larger systems. The ToP is now more highly qualified and comprises only high probability projects. In many cases the ToP does not include the Engineering, Procurement and Construction (“EPC”) component of bids, which it did before the formation of the joint venture with Linde. This is expected to increasingly become the norm going forwards.

ITM Linde Electrolysis GmbH (ILE) Update

ILE was incorporated in Germany in January 2020 with Andreas Rupieper appointed as Managing Director to provide global green hydrogen gas solutions using ITM Power’s PEM electrolysis technology and Linde’s world class EPC expertise. Since then, ILE has made significant progress with an operational centre established in Dresden and several full-time business development appointments made.

As a 50/50 joint venture between ITM Power and Linde Engineering (“Linde”), ILE leverages access to the capabilities of both parent organisations and offers an extremely strong value proposition which spans the full project life cycle from feasibility to plant realisation. Uniting Linde’s EPC capabilities, hydrogen processing and application technologies expertise with ITM Power’s proprietary PEM electrolyser technology means ILE can provide fully optimised turnkey packages.

ILE is already engaged in numerous proposals for the deployment of large-scale electrolysis equipment. It has won its first feasibility study for the installation of a 100MW plant at an oil refinery and also a major Front End Engineering Design (FEED) study for an additional 100MW plant.

Collaborative work with Linde Engineering

A constant in ITM Power’s product strategy is standardisation and modularisation. This remains central to both cost reduction and production capacity ramp up as the Company transitions into its new production facility at Bessemer Park.

Close collaboration with Linde Engineering has been transformational for ITM Power. The availability of engineering capacity, market experience, technical expertise and the Linde supply chain has enabled ITM Power to accelerate development in multiple areas. Of particular relevance is the ability to accelerate compliance work for the deployment of products and systems in a greater number of international territories.

A key reason behind the collaboration with Linde Engineering was to enable ITM Power to focus solely on its core competence – the manufacture of electrolysis equipment – as opposed to EPC activities. Both the bidding of projects and their execution benefit from a redistribution of efforts which ultimately makes ITM Power more efficient. The synergies between the two companies have made for swift collaboration and have generated enthusiasm within the team.

Unaudited Results

The financial year to 30 April 2020 does not yet reflect any of the benefits of the new arrangements with Linde. The financial performance was also impacted by project delays due to Covid-19 and losses resulting from EPC work on legacy projects. Whilst activity remained at similar levels to 2019, total income recognised is expected to be approximately £7.0m1 (unaudited) (2019: £17.6m), a decrease of 60 per cent year-on-year.

1 Includes sales revenue and grant income against both development projects and HRS sites in the UK

Sales revenue was £3.0m (£4.6m), down 30 per cent with the effect of Covid-19 reducing revenues by approximately £1.2m due to the fact that income is recognised upon completion of on-site work, and certain programmes due to complete in the year suffered Covid-related site closures.

Grant revenue was £4.0m (£14.3m), down 70 per cent. This reflects the challenges experienced in obtaining new grant funding from the EU post-2016 and increasingly the ongoing strategy of focusing on commercial sales rather than grants. The Company does expect grant income to continue to play a role in the business in the future and this will predominantly come from appropriate funding calls from the UK Government.

The adjusted EBITDA2 (unaudited) loss from operations of approximately £17.5m (£6.7m) is in line with expectations. The increased EBITDA loss is a reflection of the Group’s transition into a pure manufacturing business as the Company closes out legacy projects and invests in production skills and product improvements. The principal component of the EBITDA loss stems from the installation of product at the Refhyne site, not from the build (manufacture) phases of projects. In closing out the legacy projects, the Company has realised a gross loss of £4.8m in the 2020 financial year, of which £3.5m is attributable to the world’s largest PEM electrolyser system at the Wesseling Shell refinery through the Refhyne project in Germany. The transformative joint venture and close collaboration with Linde will in future mitigate such losses through large-scale installations as it will allow ITM Power to focus solely on the production of modules and standard products, rather than project execution on-site, which will be quoted and executed by Linde.

2 EBITDA includes grant income recognised on the income statement

Total financial assets at the year-end were approximately £50.7m (£19.8m as at 30 April 2019), comprising £39.9m (£5.2m) of cash, £1.1m (£1.7m) of cash on guarantee and deployed working capital (debtors less creditors) of £9.7m (£12.9m).

Effect of the Covid-19 Pandemic

The health and safety of our employees and their families, suppliers and customers is paramount. Consequently, in accordance with government guidelines, all non-essential work was stopped at ITM Power locations and on customer sites from 17 March 2020. However, the Group’s Hydrogen Refuelling Stations “HRS” were deemed by the Met Police as an essential service and have continued to operate in accordance with government guidelines throughout the lockdown.

All seven customer sites where ITM Power is working to install equipment have been closed, delaying site acceptance testing which has impacted revenue recognition for these contracts. The Company is working with partners to get back on site as soon as it is possible and expects to recover the majority of delays. ITM Power currently employs 190 staff with recent recruitment focused on the areas of production, standard product design, commissioning and after sales support. At the peak of the Covid-19 related lockdown, the Company had 28 staff furloughed, but expects all staff back from furlough by the end of June. The Company is operating remotely where possible.

Bessemer Park

Progress on Bessemer park pre the Covid-19 pandemic was on schedule with a target completion date in mid-August. Work continues on-site, but with reduced capacity in order to comply with social distancing. The principal contractor has now advised that the revised target completion date is in Q4 2020 and progress from now will continue to be carefully monitored. The site will have an annual capacity of 300MW per annum from opening, which will expand to 1GW (1,000MW) per annum by 2024.

While the move will provide significantly more production space, emphasis is on processes, semi-automation and efficiency to support repeat build of standard products and modules. As part of the move, ITM Power will be adopting dedicated production cells, improved in-line testing together with line-side feed of materials and data capture. The investments made in new machinery to automate repetitive processes will unlock stack production capacity while ensuring precise quality control. The site also benefits from a 5MW grid connection enabling two 2MW systems to be tested in parallel or one 5MW module at any one time. Factory Acceptance Testing is an important stage in the production cycle and one which has suffered from constraints in the Company’s current facility.

The Company has spent two years developing the new manufacturing process for the factory, which includes semi-automation, a new process for stack manufacture and process layout to achieve a 1GW manufacturing capacity. This blueprint can now be replicated so that capacity expansion in other territories could be very effectively achieved.


As a vertically integrated company, ITM Power continues to place strategic focus on the development of its technology. The technology roadmap is driven by the business plan and targeted at reducing cost, increasing performance and expanding production capacity. Over the course of the last 12 months, using the Company’s extensive testing facilities, ITM Power has completed verification work on a number of machines which will bring semi-automation to stack production. This has been an important development and is central to achieving a step change in future production capacity while also bringing important cost reductions.

ITM Power has achieved further improvements to stack efficiency through incremental advances within the laboratory. As per standard process, such improvements are to be integrated into the commercial offering after verification testing. The knowledge of processes within high performance PEM stacks that ITM Power has developed is deep and extensive and will continue to drive improvements at the stack level.


In addition to its arrangement with Linde, the Company currently has a portfolio of 34 projects and a team of 10 dedicated 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. They are now working towards getting back on to the customer sites that were closed due to Covid-19.

The 10MW Shell Refhyne programme is progressing well and has provided the Company with valuable ‘first of a kind’ lessons. ITM Power’s manufacture of the 10MW electrolysis plant is ongoing, with all five 2MW modules now built and these have completed the first stage of Factory Acceptance Testing (up to 85% load). Site works in the Rhineland Refinery are progressing but delays are now anticipated due to Covid-19 restrictions affecting suppliers and the testing and build phases. Cost overruns are anticipated for the project due to higher than anticipated EPC costs, primarily installation and commissioning costs for key components. The Company is working with Shell to seek to minimise anticipated cost overruns, currently forecast to be £3.5m, in line with previous guidance.

The ITM Power 1MW Big Hit electrolyser on the Orkney Islands is now generating hydrogen from excess wind, following a successful coupling to the onsite wind turbine. The project continues for a further two years collecting data and evaluating performance and the business case for island hydrogen systems.

Hydeploy has continued to undertake hydrogen blending tests in the Keele gas grid using the ITM Power 0.5MW electrolyser and delivered the longest period of continuous blending operation to date in March 2020 supplying gas for domestic heat and cooking. Whilst the Hydeploy site is currently shut down, blending testing will continue once UK Government restrictions are lifted.

The ITM Power 1MW electrolyser at the EnergyStock site in the Netherlands successfully filled tube trailers during March and April and the hydrogen gas produced by the ITM Power electrolyser was used to provide fuel for the first hydrogen train in the Netherlands, on its maiden voyage.

The ITM Power 0.5MW electrolyser central to the Pau bus refueler project in France was put into operation and enabled the launch of Pau City’s Hydrogen Bus Fleet in December 2019. Since then over nine tonnes of hydrogen have been produced and used by the buses in seven days per week refuelling, prior to the site shutting down in March as a result of Covid-19 restrictions.

A number of other projects are in the final stages of commissioning but are currently on hold due to Covid-19 restrictions, The Company’s Project Managers continue to work with customers and suppliers to mitigate delays and prepare for returns to site. This is expected to have an impact on revenues in the current financial year but the impact is currently too uncertain to quantify.

The Company was pleased to announce the award of phase two of the Gigastack project from the UK’s Department for Business, Energy and Industrial Strategy in February 2020. Following an earlier feasibility study, this project will support the development of a 5MW stack module. Carrying over proven technology and processes from the Company’s current stack generation, the development will represent an increase of 150 per cent in module capacity. The Gigastack project also includes a FEED study with Orsted and Phillips 66 for a 100MW electrolyser system at the Phillips 66 refinery in Humberside.


The company recently appointed Katherine Roe as non-executive director of the company. Katherine had a 14 year plus career in investment banking and corporate finance, initially with Morgan Stanley and subsequently with Panmure Gordon where she was a Director within Investment Banking and headed up the energy team from 2010 to 2014. Her knowledge and experience of investment markets and the energy industry will add a directly relevant skill set to the governance and strategic direction of the Company.

The Company also recently appointed Duncan Yellen as Managing Director of ITM Motive, the division of ITM Power responsible for the UK build, own and operate portfolio of hydrogen refuelling stations. ITM Motive will be established as a separate, wholly owned subsidiary for the management of the Company’s refuelling assets, and will own and operate a network of 11 publicly accessible hydrogen refuelling station by the end of 2020.

The Company also announced the formation of the H2OzBus Project and the signing of a memorandum of understanding with strategic partners. The Consortium will undertake a project to deploy an initial 100 hydrogen fuel cell electric buses in cities across Australia in Phase 1, with the intention to use this as a seed for more widespread roll-out. The H2OzBus Project partners are Ballard Power Systems, BOC Limited, Transit Systems, Palisade Investment Partners and ITM Power.


Governments are increasingly recognising the role of green hydrogen as a decarbonisation tool. The U.K. government has introduced an overarching net zero target and placed an early focus on decarbonising industrial clusters that will lead to progressively larger deployments of electrolysers. In the Netherlands, the Dutch government has recently presented its green hydrogen vision for achieving a sustainable energy system that is reliable, clean and affordable. A total of three European governments have now stated explicit electrolyser targets for 2030: Germany 5GW, Holland 3-4GW and Portugal 2GW.

The EC has recently established a Clean Hydrogen Alliance to accelerate the decarbonisation of EU industry. In addition, it is about to introduce a Renewable Energy Directive II, which will facilitate green hydrogen adoption by refineries and introduce a Smart Sectoral Integration Package which is widely expected to set targets for hydrogen admixtures in the gas grid. These emerging policy frameworks will have a major impact on the scale of the European electrolysis market.

The German government announced in its stimulus package of 3 June 2020 that it will present a national hydrogen strategy in the short term. Accordingly, a programme for the development of hydrogen production plants will be developed to demonstrate industrial-scale production of up to 5GW total output in Germany, operational by 2030. For the period up to 2035, but until 2040 at the latest, an additional 5 GW will be added if possible. To implement all these measures, the German government will invest €7bn.

Alongside the predicted growth trajectory for electrolysis, the cost outlook for green hydrogen is also positive. The Hydrogen Council expects green hydrogen to become cost competitive with grey hydrogen by 2025 assuming a €50 per ton CO2 price. An 80GW electrolyser target for Europe by 2030 has been proposed, where electrolysers feed into a hydrogen transmission network that interconnects the renewable energy resources of the North Sea, Morocco and Ukraine with the demand centres of Europe. Further afield, Australia is actively pursuing opportunities to export green hydrogen and has estimated that 69 per cent of the 2025 global market for hydrogen will lie in its four target markets of China, Japan, Korea and Singapore.

Against this encouraging market backdrop ITM Power has made good progress in the period. The near term outlook is well underpinned by the record contract backlog, which does not yet reflect the benefit of substantial opportunities being bid through the ILE joint venture, and highly qualified tender opportunity pipeline.

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 £58.8 million fundraising, including a subscription by Linde of £38 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 forecourt siting agreement with Shell for hydrogen refuelling stations in September 2015 (which was extended in May 2019 to include buses, trucks, trains and ships), and in January 2018 a ‘first of a kind’ project to deploy a 10MW electrolyser at Shell’s Rhineland refinery. ITM Power announced the lease of the world’s largest electrolyser factory in Sheffield with a capacity of 1GW (1,000MW) per annum in July 2019. Customers and partners include Sumitomo, Ørsted, Phillips 66, National Grid, Cadent, Northern Gas Networks, Gasunie, RWE, Engie, BOC Linde, Toyota, Honda, Hyundai and Anglo American among others.

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