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ThyssenKrupp's hydrogen subsidiary goes public

An exciting IPO is expected to take place in Frankfurt in the next few days as ThyssenKrupp subsidiary Nucera today announced the long-awaited details of its initial public offering. The offering is expected to comprise 30 million shares to be priced between €19 and €21.5. Gross revenues are expected to be in the range of €500 million to €566 million, valuing the company at roughly €2.4 billion to €2.7 billion. This is slightly lower than the 3 billion euros that investors were looking for in the run-up to the IPO. with the proceeds expected to be used to invest in the electrolysis business. With the fund subsidiary of BNP Paribas and Saudi Arabia's sovereign wealth fund PIF, two major anchor investors have already committed to subscribe to the stock. However, ThyssenKrupp itself would also like a stake in the hydrogen subsidiary in the future.

Hydrogen as an alternative to nuclear power

The era of nuclear power plants in Germany is over for the time being. The "traffic light" government in Berlin is sticking to its 2011 coalition agreement to phase out nuclear power by 15 April 2023. There had been a small extension due to the recent energy crisis, but that too has passed. According to the announcements of the ruling Greens, Germany will get all its energy from renewable sources in the future, with nuclear power and electricity generation from fossil fuels giving way to sustainable wind, solar and hydro power plants. Hydrogen will be the newest addition. It is currently being touted as an energy wild card. The most important question, however, is how long it will take before industrial production is affordable and how much it will ultimately cost the country. ThyssenKrupp and its H2 subsidiary Nucera will play an important role in this process.

ThyssenKrupp or Nucera?

ThyssenKrupp shares have performed well so far this year, gaining 17%.  Last year, the stock lost 48% and the market had priced in the corresponding risks on the energy and raw materials side with large discounts. These negative factors are now easing significantly, giving the group some breathing room, although pension obligations of €3 billion continue to weigh on the balance sheet. There is some optimism for 2023 and 2024, as the order situation should improve again due to rising public budgets to combat climate change. The MDAX stock currently has a market capitalisation of just €4.0bn, reflecting the significant discount for some parts of the business. 
Nucera's growth is expected to really take off in the coming years. At least that was the prediction in the run-up to the IPO. In the first half of the current financial year, Nucera generated revenues of €306 million and EBIT of €13.3 million. By the 2024/25 financial year, Nucera aims to achieve sales of between €850 million and €950 million with "alkaline water electrolysis". Break-even is also planned by this time. In addition, the company says it has an order book of €1.4 billion for the coming years.

Conclusion

Nucera is definitely a beacon of hope for the hydrogen sector in Germany for ThyssenKrupp, but also for its own future. Whether investors will benefit from this IPO, however, remains to be seen. The history of recent IPOs, especially in the US, is anything but positive. Moreover, Nucera is not yet sustainably profitable, so investors will have to wait a long time for profits to materialise. An investment should therefore be carefully considered, especially from a valuation perspective compared to other hydrogen companies. Ultimately, even the parent company ThyssenKrupp may be a better alternative, as it retains a minority stake that could act as a turbo for the rest of the company's value.


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