Thyssenkrupp Nucera IPO: Our Analysis
Nucera will enter the public market like its European peers such as Nel, ITM Power, Siemens Energy, etc. through an IPO in the coming weeks. The company is a leader in Chlor-Alkali electrolysis and aims to leverage to become a leader in Alkaline Water Electrolysis (AWE). There is no doubt that the green hydrogen market will get significantly bigger. However, with many players in the arena, irrespective of technologies, the sector’s prospects hinge a lot on cost reductions and scale.
Nucera, the hydrogen subsidiary of Thyssenkrupp AG, is preparing for a significant market move by announcing plans to launch an initial public offering (IPO) with the goal of raising approximately €566 million. Thyssenkrupp, which holds a majority stake of 66% in Nucera, and the remaining shareholder, Italy's Industrie De Nora SpA, owning the remaining 34%, intend to sell a combined total of up to €85 million. The IPO has attracted interest from two major investors. Saudi Arabia's Public Investment Fund is considering acquiring up to €163 million of the offering, while BNP Paribas Asset Management plans to purchase up to €85 million for its energy transition fund. Nucera will enter the public market like its European peers such as Nel, ITM Power, Siemens Energy, etc. The company is a leader in Chlor-Alkali electrolysis and aims to leverage to become a leader in Alkaline Water Electrolysis (AWE).
Our Analysis
Where Nucera might have the edge
One key point worth highlighting is that Nucera is likely to benefit from prior industrial manufacturing experience and this can give Nucera an edge in manufacturing at scale, something that is proving to be a challenge for first-time manufacturers in the hydrogen arena. Lastly, it also has partners in De Nora (34% ownership in Nucera) and Uhde, which can tackle the EPC part of these green hydrogen projects and de-risk project execution.
All in all, we believe the IPO is good for both Thyssenkrupp and Nucera, but putting the latter’s Chlor-Alakali business aside, Nucera faces an uphill task to establish itself as a leader in the green hydrogen market.
Our Analysis
- In our view, Nucera’s story sounds similar to its main Alkaline competitor Nel. Both companies have experience in building electrolysers and aim to leverage that experience to assert their leadership in the green hydrogen space.
- Another key similarity that Nucera shares with its peers is that the equation of profitability relies on building scale and reducing capex as well as opex. This implies that achieving break-even will be a challenging task and is not a strong near-term possibility. So, as far as the AWE business is concerned, Nucera is in the same boat as its peers.
- Order intake has grown notably in the recent past and the IRA in the US and the Net Zero Industry Act in the EU offer strong support to this trend. But, despite an undeniable need for electrolysers, sticky demand trends are yet to be seen and confirmed.
- It is hard to ascertain the competitiveness of Nucera’s AWE module as its competitors also have modules that can prove to be competitive. So, while Nucera may have the edge in some areas, a peer may have it in other(s). Hence, competitive intensity is only going to ramp-up.
- Lastly, Nucera has a nameplate manufacturing capacity of 1GW, with ITM Power having already achieved that and Nel getting there soon. As highlighted in our note on Nel, the demand dynamics are improving, but we estimate that global supply is still materially ahead of demand. So, OEMs will need to take a ‘scale-as-you-go’ approach with regards to their plant capacities.
Where Nucera might have the edge
One key point worth highlighting is that Nucera is likely to benefit from prior industrial manufacturing experience and this can give Nucera an edge in manufacturing at scale, something that is proving to be a challenge for first-time manufacturers in the hydrogen arena. Lastly, it also has partners in De Nora (34% ownership in Nucera) and Uhde, which can tackle the EPC part of these green hydrogen projects and de-risk project execution.
All in all, we believe the IPO is good for both Thyssenkrupp and Nucera, but putting the latter’s Chlor-Alakali business aside, Nucera faces an uphill task to establish itself as a leader in the green hydrogen market.
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