Nel, a Norwegian company specializing in hydrogen technology, has announced its consideration of spinning off and separately listing its fuelling division in 2024. This decision comes as part of a strategic review initiated at the end of 2022. While unveiling its fourth-quarter report, Nel highlighted challenges facing the hydrogen sector, including a lack of subsidies and oversupply issues, which have hindered the sector’s ability to scale up efficiently.
The fuelling division of Nel, responsible for designing, manufacturing, and installing hydrogen fuelling stations, has experienced underperformance in recent quarters, leading to financial losses. Despite this, Nel’s shares experienced a notable surge, initially opening 20.7% higher and eventually settling at a 6.2% increase, reflecting investor optimism in response to the spin-off announcement and the narrowing of EBITDA losses.
In the fourth quarter, Nel reported an EBITDA loss of 106 million Norwegian crowns, surpassing the company’s provided consensus forecast, which had anticipated a loss of 177 million crowns. While this represents an improvement from the previous year’s loss of 216 million crowns, the fuelling segment’s results were still deemed unsatisfactory by the company.
Analysts have expressed mixed views regarding Nel’s decision to spin off its fuelling division. Andreas Nibe Nygaard, an analyst at Kepler Cheuvreux, acknowledged the challenges facing the struggling business and questioned the potential value of the spun-off entity. On the other hand, Anders Rosenlund, an analyst at SEB, suggested that the fuelling division should be shut down altogether, expressing doubts about its viability as a separate listed entity.
Should the spin-off proceed, Nel plans to distribute the spun-off shares as a dividend-in-kind to all existing shareholders, with a renewed focus on its electrolyser offering following the split. This strategic move aims to position Nel as a more profitable and streamlined company post-spin-off. However, Rosenlund cautioned that Nel may encounter heightened competition from low-cost producers in the electrolyser market.
The hydrogen sector has garnered significant attention as countries worldwide strive to transition to cleaner energy sources to combat climate change. Hydrogen is considered a promising alternative to fossil fuels due to its potential to produce energy without emitting greenhouse gases. However, the sector’s growth has been hampered by challenges such as high production costs, limited infrastructure, and regulatory uncertainties.
Nel’s decision to explore the spin-off of its fuelling division reflects the company’s efforts to navigate these challenges and streamline its operations. By focusing on its core electrolyser business, Nel aims to capitalize on growing demand for hydrogen-based solutions in sectors such as transportation, industry, and energy storage.
Looking ahead, Nel will need to carefully assess the potential risks and benefits associated with the spin-off of its fuelling division. While the move may unlock value for shareholders and enable Nel to concentrate on its core strengths, it also poses challenges, including the need to address underperformance and heightened competition in the evolving hydrogen market landscape.
In conclusion, Nel’s consideration of spinning off its fuelling division underscores the dynamic nature of the hydrogen sector and the company’s strategic response to market conditions. As Nel navigates this transition, stakeholders will closely monitor developments to gauge the long-term impact on the company’s financial performance and competitive position within the hydrogen industry.
