Jul 21

Thyssenkrupp Mulls Hydrogen Spinoff Even as Green Loses Its Luster

Stephen Bierman
May 13, 2021
Image: Thyssenkrupp

Thyssenkrupp mulling a potential offering of its hydrogen business shows that corporates are still interested in market valuations, even after clean-burning fuel players crashed from January highs.

The German engineering and steel conglomerate is considering an IPO, or a deal with a special purpose acquisition company, for Thyssenkrupp Uhnde Chlorine Engineers (TKUCE), said Chief Executive Martina Metz on an investor call yesterday, according to a Reuters report. Thyssenkrup has hired an investment bank to explore options on TKUCE, which is the world’s largest supplier of chlor-alkali membrane technologies used to produce hydrogen.

TKUCE, a joint venture with Italy’s De Nora (which owns 34% to Thyssenkrupp’s 66%), may have a fair value of EUR 2.8 billion according to Reuters, citing Credit Suisse research.

Hydrogen investors in general are suffering a big hangover as a green wave share surge recedes. Yet the current pain is more likely to be growing pains in an energy transition, rather than a collapse for the expensive – but environmentally friendly – fuel.

“After numerous false starts and despite the recent sell off in hydrogen and broader renewable names, I do believe it’s the enduring trend and the beginning of something big just like electric vehicles were a few years ago,” said Elchin Mammadov, a senior equity research analyst for European Utilities at Bloomberg, in a podcast discussion about the sector more broadly and unrelated to the IPO consideration.

The European Union has ramped up efforts to cut carbon emissions and fight global warming over the past year as the COVID-19 pandemic spurred greater social consciousness in investments. Hydrogen, as a means to carry energy, was inserted into national plans as a key pillar in what has come to be known as the energy transition.

Share prices in industry players like Plug Power, ITM Power, McPhy, Ballard Power Systems and Nel ASA at the time responded as if shot out of a cannon. Plug Power’s valuation crested $30 billion in a January 52-week high, up roughly 30 times from what had been a fairly steady previous five years. Its peers followed a similar trajectory.

The hydrogen bubble has burst since then. Some industry players are trading at either a little above or a little below half that January high. Yet, in many cases, their share value is still more than five times that of just several years ago.

Share price gains in this sector were always driven by the notional future, racing ahead of hydrogen’s current capacity. In this case, the future is probably a little further away than markets estimated. Energy is a conservative industry with long investment lead times due to the large sums involved. The announcement of an energy transition itself does not change the pace of investment.

State backing does help direct capital, however. Markets took notice and industry players have diverted investment to greener endeavors. With Thyssenkrup considering a stand-alone offering and other majors pushing ahead with hydrogen development, it seems clear that the industry is in for a major development in scale – even if markets are still working out how to price it. 

Stephen Bierman

Stephen Bierman is a finance and energy reporter with over 15 years of experience, including at Bloomberg News and Energy Intelligence.

Tweets at: @StephenBierman1

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