There is ‘no light at the end of the tunnel’ for Norwegian electrolyser maker Nel, which has seen its share price slump by more than 70% over the past 12 months, according to one of Norway’s leading investment banks.

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Nel’s products are more expensive than its competitors’ and the company has lost market share over time, Sparebank 1 Markets analyst Thomas Dowling Næss told Norwegian business daily Dagens Naeringsliv, which is owned by Hydrogen Insight’s parent company DN Media Group.

Næss pointed out that Nel did not announce a single new order in the fourth quarter of 2023 amid an “enormous oversupply of electrolysers on the market” that is expected to continue for the next three years.

“When we look at sales multiples, Nel is more expensive than its competitors and the company has gone from having a very leading position to losing market share over time.”

Nel is the world’s oldest pure-play hydrogen company, having sold alkaline electrolysers since 1927, and was the biggest electrolyser manufacturer on the planet when it acquired PEM electrolysis company Proton OnSite in 2017.

Its share price has fallen by 72% over the past year, from a high of NKr18.48 ($1.77) on 9 February 2023 to NKr5.16 at the time of this article’s publication — and Næss believes this will fall to about Nkr3.50 amid uncertainty as to whether Nel’s largest supply contract for 2024 will actually go ahead, as buyer Woodside Energy has not yet taken a final investment decision on its project.

On top of all this, there is the looming threat that cheaper Chinese electrolysers will take over the market, in the same way that Chinese solar panels did in the 2010s, destroying the European PV manufacturing sector in just a few short years.

Nel CEO Håkon Volldal told Hydrogen Insight back in November 2022 that the European electrolyser sector is at risk of collapse due to cheap Chinese imports — a concern that has led to discussions at the highest level in the EU about preventing subsidies going to China-based electrolyser makers.

Nel is not the only electrolyser maker to have seen its shares slump over the past 12 months.

France’s McPhy has seen an 81.8% fall since 3 February last year; US-based Plug Power’s stocks have fallen by 78.8%, despite a sharp uptick in the past ten days; and the UK’s ITM Power has seen a 60.5% contraction since 3 Feb 2023.

Næss stated that the hydrogen market has lost ground over the past year for three reasons:

  • Investment costs for new giga-scale factories have turned out to be much higher than first thought, driven by inflation and “an immature industry” that did not have accurate calculations of how much things would cost.
  • Electricity prices are extremely high and electricity is the biggest input factor for producing green hydrogen.
  • Subsidies and regulations in the key markets of the US and EU have taken far longer than expected, meaning that project developers have moved more slowly in placing orders.

“Of the projects that were announced in 2021 to be installed in 2023, only 20% have been realised,” he pointed out.

“In the same period, many of the electrolysis producers have built [new manufacturing] capacity. There is an enormous oversupply of electrolysers on the market. We expect that to be the situation in 2024, 2025 and 2026.

“It is quite obvious that the market is going to be large and the competition to become a leader is sky-high. It will be a race to the bottom and the question is, who will persevere and lose money the longest?”

Næss explained that there is little Nel can do turn things around.

“They can’t do anything about the market and they can't do anything about the competition. I see no light at the end of the tunnel now,” he said.

Analyst Martin Huseby Karlsen, from Norway’s biggest investment bank DNB Markets, added: “Nel is a growth company, and the stock market needs confirmation that new orders of a certain size are coming in.

“In our view, the shares are still expensive both compared to other hydrogen companies and, fundamentally, with the current conditions in the hydrogen market.”

Nel declined to comment on the analysts’ points as the company is in a reporting period ahead of the presentation of its annual report and Q4 2023 results on 28 February.

Despite not announcing any new orders in the fourth quarter last year, Nel did receive a 10MW purchase order from Samsung C&T earlier this month.

But this is still a far cry from the 2.2GW order from the Neom green hydrogen company that is now being fulfilled by competitor Thyssenkrupp Nucera.

Both Næss and Karlsen are listed on Nel’s website among the 28 analysts that keep a close eye on the Norwegian electrolyser maker.