UK electrolyser company ITM Power has warned that issues with the manufacture of its new 2MW ‘MEP’ units could delay financial close on some large-scale green hydrogen projects.

The firm says it may take longer than expected to finalise its contracts with customers as delays in certain areas, including tooling and testing, have limited the amount of performance data available on the new product line. This has led to a “material increase” in the provisions it needs to make for product warranties.

“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,” ITM says in a trading update that sent the London-listed company’s share price sharply lower.

“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.”

“There may be delays in finalising contracts in the final stages of negotiation that could place large-scale projects at risk of deferred financial close” ITM

ITM says the manufacturing issues mean it now expects its full-year output and revenue to be “towards the bottom” of the current guidance range, which is 48–65MW of delivered product, and £23–28mn ($26.5–32.4mn) for revenues.

Stockbroker Arden Partners says the latest manufacturing issues could potentially harm the rate at which ITM increases its future revenues.

“We can understand that this represents the growing pains of a technology company transitioning to being a manufacturer, and have confidence that these issues will be overcome in time, but nevertheless this news has already had a significant impact on the shares today, and the company could do with showing some solid progress in order to help reassure the market,” it says.

Period of expansion

Problems with the new product line come amid a period of aggressive expansion by ITM, which raised £250mn in equity financing last year. Its 1GW/yr facility at Bessemer Park in Sheffield was completed in January, and the firm recently acquired a site for a second factory in nearby Tinsley capable of producing 1.5GW/yr of electrolysers that it hopes to be fully operational by the end of 2023.

A third international facility, expected to have 2.5GW/yr of capacity, will bring the firm’s total electrolyser manufacturing capacity to 5GW/yr by the end of 2024.

The company has strategic partnerships with several major energy players including Shell, industrial gases firm Linde, Italian gas infrastructure firm Snam and commodities trader Vitol.

ITM says its search for a new CEO is progressing, following the announcement in September that current head Graham Cooley is stepping down after nearly 14 years at the helm. Cooley will remain at the company in a senior strategic role.

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Author: Stuart Penson