Thyssenkrupp: hydrogen kit maker steals a march on challengers

Being a legacy operator in a newly seductive sector is not an entirely comfortable experience. After decades spent in a sleepy backwater, one is suddenly surrounded by fleet-footed start-ups ready to snatch one’s territory. How big a moat does a longstanding record really provide?

That is the question investors will ask about Thyssenkrupp’s Nucera, reportedly gearing up for a long-delayed initial public offering. The business, a joint venture with Italy’s De Nora, makes electrolysers, key to the production of green hydrogen for the energy transition.

Green hydrogen could account for more than 10 per cent of the world’s energy needs in a net zero scenario. That will require a lot of electrolysers — about 5500GW by 2050, according to consultancy McKinsey.

Nucera has an early mover advantage. Consider its market position. It has 1GW of manufacturing capacity. The global is about 8GW. Yes, competitors have multiplied. Fellow German industrial conglomerate Siemens has its own electrolyser unit. Listed manufacturers include the UK’s ITM and Norway’s NE. There are also more than a hundred start-ups.

But industrialising electrolyser production is not easy, as ITM’s operational woes show. Its market value has shrunk by 90 per cent in just over three years. Meanwhile, Nucera could deliver the two largest hydrogen projects out there, Neom in Saudi Arabia and an Air Products plant in Texas.

Nucera deserves a valuation at the upper end of its peer group, which today trades between 2 and 5 times 2025 sales. At 4 times, Nucera’s €600mn to €700mn of forecast sales alone fetches about €2.6bn. Tack on the legacy business top line of €300mn for a total just shy of €3bn. That is only about half the original valuation touted for the group. But Thyssenkrupp’s two-thirds share would still be worth almost half of its market capitalisation.

The biggest question revolves around not the group’s competitive position, but the speed of the hydrogen ramp-up itself. Profits will not flow rapidly. In that event, having an established industrial backer will matter.