hydrogenics corporation equity analysis stock symbol - hygs:nasdaq
TRANSCRIPT
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Dev Bhangui Lino Camargo
Senior Analyst, Disruptive Technologies and Innovations Associate, Equity Research
647.426.1658 647.426.0289
[email protected] [email protected] see end of this report for important disclosures
Hydrogenics Corporation(HYG TSX, HYGS-NASDAQ, $12.10)
Fuel Cells on the Move in 2013: HYGS Established Leader
in H2Generation, Emerging One in P2G Storage
Increasing renewable generation intensifying grid imbalance issues: Renewables are filling the gap created by mothballing of nuclear and phasing out o
coal-fired plants.
Renewables crossing 1015% of grid capacity can cause failures due to inhereninstability of supply and the obvious lack of storage buffers in traditional grid designs
Currently, no generally applicable utility-grade, bulk storage solution meets thcomplete demand for capacity, price and duration.
Utilities are therefore forced to either curtail renewable generation or accept heftincremental costs in paying customers to purchase the excess capacity.
Power to Gas (P2G) storage solution: HYGS emerging as a leader:
Generating H2 using renewables and injecting it in gas pipelines for storage (P2G) gathering momentum due to its price, simplicity, versatility and scalability.
P2G is a high-capacity, long-term, demand responsive and transportable solution that able to use existing infrastructure without modification, and is economical.
HYGS has close ties with E.ON, the largest EU utility, and has won 7 out of 19 projects Germany, currently the most advanced energy storage market; 10 projects rema
unawarded.
HYGS has 12 MW P2G units deployed, 10MW being developed for commercial roll-ouAn established H2generation leader, experiencing new growth opportunities
Leading share of industrial H2market, outperforming rival 2:1, over 60 years of legacy. H2generation demand should grow due to the build-out of refuelling stations, with fu
cell electric vehicles (FCEVs) debuting in 2015.
EU gas utilities are leveraging P2G to stay relevant and enhance the value of thenetwork; they constitute a large and easily penetrable market for P2G.
Enbridge is building the first North American P2G storage system in Ontario, with HYGS apartner, and expects this to be followed by a 510MW commercial facility.
Power systems unit firing on all cylinders:
Commscope FC units for telecom back-up power delivered in Q2/13. Larger telecom orders from Commscope expected in 2014 after hot/cold season tests. $92M order from a European propulsion OEM will drive multi-year revenue. Fast-growing power systems revenue puts HYGS within arms reach of break-even.History has been hard, but future looks bright (finally):
We understand HYGShistory of operational losses and ongoing investor pain. HYGSpast investments have seeded this harvest, with clear signals from last 3 quarter HYGS leading share of industrial H2 market provides a hedge for the investor, whi
exposure to significant growthall from powerful partnersprovides the upside.
We see multiple areas for revenue growth, leading to positive cash flow by H2-CY2014.Valuation:Our $15.50 target price is derived using a DCF methodology based on a 13
discount rate and 4% terminal growth. We believe HYGS is a leading pure play in thhydrogen-based renewables industry, which is growing its revenue at a CAGR of 30%+
the near and medium term; its peers are growing at an average of 1819%. Our targ
implies 1.8x 2014E EV/Sales. HYGS is currently trading at 1.5x 2014E EV/Sales; its peers a
trading at an average of 3.3x. Given 2013 revenue acceleration, our estimates for 39
revenue growth in 2014 (vs. 19% for peers), formidable strategic partners/customers,
dominant position in Germany and a possible medium-term take-out from the likes of an
one of Siemens, other turbine OEMs or gas utilities, we believe HYGS should trade at
premium multiple, justifying our valuation and target.
INITIATING COVERAGE
Rating: Buy
Target Price: $15.50 (+28.0%)
Initiating CoverageRating Buy
Target $15.50
Revenue 2013E (MM) $44.4
EBITDA 2013E (MM) $(6.6)
EPS (F.D.) 2013E $(1.10)
Share data (estimated pro forma)
Shares O/S (Basic) (MM) 9
Market Cap (MM) $108.9
Enterprise Value (MM) $98.5
Average Weekly Volume (THSD) 65
Dividend Yield N/ANet Cash (MM) $12.3
Fiscal Year End 31-Dec
Financials F2013E F2014E F2015E
Revenue (MM) $44.4 $62.4 $84.3
EBITDA (MM) $(6.6) $1.6 $7.5
EPS (F.D.) $(1.10) $0.02 $0.69
DCF/Share $13.8 $15.6 $17.6
Company Description: Hydrogenics Corporation is a
globally recognized developer and provider of hydrogen
generation and fuel cell products and services, serving
the growing industrial, utilities and clean energy
markets. Based in Mississauga, Ontario, Canada,
Hydrogenics has manufacturing and operations in
Belgium and Germany.
Source: BigCharts.com
October 2, 201
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Hydrogenics Corporation
Dev Bhangui 647.426.1658 [email protected]
Lino Camargo 647.426.0289 [email protected] Page | 2
Investment Thesis
Mississauga, Ontario-based Hydrogenics (HYGS) is a leader in industrial and commercial
hydrogen generation systems, their applications and fuel cell (FC) solutions. HYGS has
manufacturing facilities in Belgium and Germany. Over the last 60 years, HYGS and its
predecessors have built partnerships with tier 1 players in the hydrogen value chain, some
of which are strategic investors in the company and leverage their distribution muscle tomarket HYGS products worldwide.
A pioneer and emerging player in the P2G (Power to Gas) method using hydrogen-based
energy storage, HYGS has a leading share of the German renewables energy storage
market, considered the most progressive, fast growing and demanding in the world. After
many years of posted losses, HYGS sits at an inflection point due to multiple growth
opportunities, which we expect to occur concurrently and in the near term. This growth is
driven by increasing interest from auto OEMs in fuel cells driving hydrogen refueling station
build-outs, the close relationship between HYGS and E.ON driving P2G energy storage and
large OEM orders for power systems, which have already resulted in a record backlog.
Germany will reduce coal generation capacity to cut GHG emissions and nuclear plants in
the wake of the Fukushima disaster. This has further intensified Germanys need forrenewable storage. As such, several P2G-based energy storage projects are expected to
move quickly from demo to roll-out. Roll-out projects are expected to be at least 10x demo
size, and HYGS is well positioned to experience this accelerated growth in the coming
quarters. In addition to recently winning the bid for a 1MW P2G facility with its strategic
investor Enbridge, we expect HYGS to also build the subsequent 510MW capacity
commercial unit.
While several technologies have been battling each other for a piece of the renewable
energy storage market, hydrogen-based solutions hold an edge due to their economics,
response, simplicity, higher capacity and location flexibility in storage and consumption,
which are particularly appealing to the utilities. Leveraged to the fast-growing hydrogen
economy, investors should view HYGS as a hydrogen pure play, which has a limiteddownside risk due to a strong legacy foundation of recurring revenue in traditional
industrial hydrogen supply, combined with significant upside in hydrogen fueling stations
for transportation infrastructure, back-up power for telecom and P2G energy storage, as
well as potential to build-own-operate some of these assets through Enbridge, its partner-
investor. While history does not conjure pleasant memories, given the performance trends
apparent in the last three quarters, the outlook for the company, our discussions with
management and checks with industry players leads us to believe that HYGS is in the initial
stages of history-reversing value creation. We suggest investors buy the stock and benefit
from this opportunity.
Our $15.50 target price is derived using a DCF methodology based on a 13% discount rate
and 4% terminal growth. We believe HYGS is a leading pure play in the hydrogen-basedrenewables industry, which is its growing revenue at a CAGR of 30%+ in the near and
medium term. Its peers are growing at an average of 1819%. Our target implies 1.8x
2014E EV/Sales. HYGS is currently trading at 1.5x 2014E EV/Sales; its peers are trading at an
average of 3.3x. Given 2013 revenue acceleration, our estimates for 39% revenue growth in
2014 (vs. 19% for peers), formidable strategic partners/customers, a dominant position in
Germany and a possible medium-term take-out from the likes of any one of Siemens, other
turbine OEMs or gas utilities, we believe HYGS should trade at a premium multiple,
justifying our valuation and target.
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Hydrogenics Corporation
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Industry Background
The Situation: Renewables are filling large gap in our ever-increasing energy needs
Various countries are not expected to be on track to meet IPCC-based emission targets set
for 2020. On the other hand, there are fears that if we continue to consume the fossil fuels
at the current rate of acceleration (see Exhibit 1), some of these resources, such as oil, will
peak and begin their decline as soon as 2015. As populous countries in emerging markets
and BRICS in particular are posting higher economic growth rates, this issue will become
exacerbated. Continued global warming will not only increase the frequency of natural
disasters like flooding, droughts, etc. but also building our defenses for the fall-out will cost
us in billions of dollars, which can be avoided. To curb and control global warming, we need
to keep the Earth temperature rise below 2C (3.4F) compared to the pre-industrial times.
Exhibit 1 World Fuel Consumption Is Ever Increasing
Source: Peak Oil
It is estimated that by 2050, all the energy we need could come from renewable or
sustainable sources. Solar, wind, geothermal, biofuels, biomass and others have been
worked on in tandem with a view to find solutions.
Currently, none of these alternatives rank economically on par with the fossil fuels and
have yet to reach mass adoption rates. Economics for adoption is a game of appropriate
price points and scale. Governments around the world have made massive investments in
funding renewables innovation, research and product development. They have passed
subsidies and have issued mandatory policies for transportation and utility industries with
a view to encourage end users and bring price points down for mass market adoption.
Consequently, renewables production really took off after 2001 for wind and after 2005 for
solar, and today in Germany the renewable power generation capacity can support 50% of
the consumption on a typical summer weekend.
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Hydrogenics Corporation
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Exhibit 2 New vs. Decommissioned Power, EU Region
Source: CleanTechnica
But continued challenges to this picture exist and new ones emerge. Nuclear disasters like
Fukushima have evoked strong negative public opinion, forcing many nations to take
several nuclear reactors off line (Exhibit 2). Coal plants continue to be shut down to reduce
GHG emissions. Renewable power has to fill this large and increasing gap, as shown in
Exhibit 3.
Exhibit 3 Share of Renewables in Power Generation is increasing
Source: IEC White Paper, Grid integration of large-capacity Renewable Energy sources and use of
large-capacity Electrical Energy Storage, Oct. 2012
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Hydrogenics Corporation
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The Issue:Increasing proportion of renewable power causes electrical grid imbalance
As such, an increasing proportion of our energy consumption will come from renewable
sources (as shown in Exhibit 3), causing its own issues integration and imbalance. With
electricity generally created on-demand, the traditionally designed electricity grid has no
inherent storage capacity and this causes problems with increasing penetration of
renewables. Energy sources like solar and wind are inherently variable. Sun will shine and
wind will blow at their whim and they could generate supply peaks during demand troughs.
This supply excess introduced into the grid causes imbalance, overheats transmission
network and leads to a safety triggered shutdown. An excess beyond 1015% can cause
blackouts. Utilities have not yet found cost-effective means of storing this energy. As such,
they often curtail the energy produced by renewables or pay customers to off load excess
power (bearing negative tariffs) to prevent such imbalances. Asset utilization for
renewables is far below that of conventional systems and full potential cannot be realized
until suitable storage mechanisms are in place. This is a sad state of affairs, as significant
investment and tax dollars have gone into this sector.
The Solution: P2G storage
Industry has tried various solutions to solve this issue pumped hydro, compressed airand batteries have been the most common. Pumped hydro is the most tried and tested and
accounts for 80% of energy storage from renewable excess production (EPRI 2012 report).
But this solution is limited by geography, cannot respond quickly to renewable power
downs (such as when wind dies suddenly) and not feasible for flat terrains like Holland.
Others like compressed air and batteries face geographic, capacity or high cost drawbacks.
Utilities need massive amounts of capacity to store the excess renewable energy at low
costs. They also need flexibility to move these massive amounts from places of storage to
places of consumption.
Exhibit 4 Hydrogen Energy Storage vs. Alternatives A Comparison
Source: Electricity Storage Association
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Hydrogenics Corporation
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As illustrated in Exhibit 4, the hydrogen-based P2G method provides an effective solution.
It is comparable in capacity to Pumped Hydro Storage and Compressed Air Energy Storage
but more cost effective and responsive to demand variations. Renewable power could be
used to generate hydrogen via electrolyzers. The hydrogen produced could be stored in
existing natural gas pipelines (P2G) and transported, to be used where and when needed.
One of the obvious benefits provided by P2G and the subject of focus from varioustechnology blogs and articles is seasonal storage and timeshift. In low season when supply
exceeds demand, the energy created by renewables is stored to be utilized during the high
season, when demand exceeds supply. Similarly, during evenings and nights, when
electrical tariffs are lower, the excess energy produces hydrogen which is stored and
utilized during day time when the demand and tariffs are higher. Besides salvaging the
excess renewables energy that is curtailed by utilities, P2G projects can make money
capturing the spread between high and low tariffs. Based on the tariff structure in the US,
and at current P2G pricing levels of $0.5/MW, break-even point on investment can be
reached in 2.5-4 years.
Exhibit 5
Power to Gas
The How to Schematic
Source: North Sea Power to Gas Platform and KEMA
Thus, P2G acts as a shock absorberfor the electricity grid, providing dynamic response
and the necessary capacity to cope with the variability in output of renewable electricity
sources. First, P2G has fast load following capability; second, it is flexible in terms oflocation of storage and scale; third, there is enough capacity in the gas grid for energy
storage on a seasonal scale (energy capacity of gas pipelines is 3x electrical grids); and
hydrogen, when injected, travels across the existing natural gas pipeline network and can
be tapped at various industrial and commercial consumption points. Thus, P2G can turn
renewables into dispatchable power plants, helping maintain a balanced electricity grid.
The P2G solution integrates power and gas infrastructure in an unprecedented way,
creating value from both and helping extend their life span (Exhibit 5).
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However, in countries like Germany, significant excess capacity in electrical power
production has compressed the tariff spreads enough whereby any type of storage cannot
be financially justified. In addition, the new generation of power plants are cheaper and
respond faster to issues caused by power-ups and downs inherent with the sun fading and
the wind dying. Non-believers in energy storage proclaim that the storage market need is
questionable and it will not develop as envisaged. However, as the Storage Benefit Analysis
table below in Exhibit 6 illustrates (, only $311/Kw out of $13,463/Kw of benefit (which is
only 6.5%) is delivered by time shiftversus several benefits provided by storage in areas
of load following, regulation, transmission and distribution support and black starts.
Exhibit 6: Economic Analysis of Bulk Storage Benefits for Electric Grid
Source: Sandia Labs (excerpt from an economic analysis of bulk storage for Renewable energy
applications, 2011)
Hydrogen can also be used to power fuel cells a cheaper, safer and longer-life
alternative for transportation, stationary back-up and motive power than batteries. Due to
its capacity, hydrogen can offer long driving ranges and short fueling times. Advantages of
H2 over alternatives are illustrated in Exhibits 7 and 8. The technical superiority of H2over
BEV in Exhibit 7 and massive cost advantages over all other alternatives in Exhibit 8 are
especially apparent.
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Exhibit 7 Comparison of Rated Power, Energy Content and Discharge Time of Different
EES Technologies
Source: IEC Electrical Storage Whitepaper 2011 and Fraunhofer ISE
Exhibit: 8 Technical and Economical Features of Various Power Storage Technologies
Source: European Commission Directorate-General for Energy, Working Paper)
Japanese auto OEMs such as Toyota have recognized the hydrogen fuel cell potential to
power the autos and are releasing models expected to be in commercial production by
2015. After neglecting the FC potential in favour of solar and batteries and lagging the
European Union (EU), the U.S. Department of Energy has now made an about-turn in its FC
policy in a bid to catch up with California Hydrogen Highway, which is leading the effort.
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The Office of California Governor Edmund G. Brown has published its 2013 Zero Emissions
Vehicle (ZEV) Action Plan, which includes a roadmap toward putting 1.5 million ZEVs on
California roads by 2025. Hydrogen fueling infrastructure investment has been keeping
with the auto industry. In 2010, there were 200 fueling stations worldwide, which grew to
340 in 2011. Currently, there are 503 (according to H2 Stations.org) and this is expected to
grow to 5,200 by 2020, providing a growth thrust to hydrogen generation and FC-based
transportation and motive power industry.
Exhibit 9: Hydrogen Demand for Transportation
Source: Pike Research
Opportunities
Increasing renewable energy capacity intensifying grid imbalance issues:
A lag with respect to IPCC 2020 emission targets, phasing out of coal plants and
mothballing of nuclear reactors in the wake of the Fukushima disaster have left a large and
increasing energy generation gap which renewables must fill. Germany currently produces
50 GW of renewable power, sufficient to satisfy almost half of a typical summer weekendbase load need, and is projected to reach 179 GW by 2020, according to Frost & Sullivan's
Energy group.
However, once in excess of 1015% of grid capacity, integration of renewables, in absence
of a flexible storage, causes grid imbalance issues and blackouts. Utilities therefore
ironically curtail renewable capacity, which has been expensive to install. Sources of
variability in renewable energy production sun and wind producing excess capacity
during demand troughs cannot be controlled, but effective storage can be. Utilities need
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storage capacities which are large, can be used for the long term, cheap and can provide
rapid response to demand.
Industry has tried various solutions to solve this issue pumped hydro, compressed air
and batteries have been the most common. Currently, pumped hydro accounts for 80%+ of
storage due to its vast capacity and quick response. But this solution is limited by
geography to build large reservoirs at an elevation, not feasible for flat terrain nations like
Holland. Harnessing the stored energy from pumped hydro needs electricity generation
and transmission network, making it less cost effective. Similarly, compressed air storage
has been used but low energy density of air and geographic dependence of underground
caverns limits large storage. Other geography independent methods, such as batteries and
supercapacitors, have been used, but large capacity can be provided only for a short period
of time (few minutes) and batteries occupy a large ground footprint, besides being
expensive. All these methods have another limitation: energy is stored where it is produced
(could be remote areas or offshore, in case of wind farms) and has to be transported to the
place of consumption, adding to the costs.
Estimates vary for the addressable market for energy storage but there is no denying that itis experiencing massive growth. Lux Research estimates it at 50 GW growing to 165 GW by
2017. Exhibit 10 shows the estimated total addressable storage market and projected
energy investment from the industry to 2020.
Exhibit 10 Addressable Market for Energy Storage and Industry Investment
Source: American Vanadium
P2G, an economical storage solution that enables place and time arbitrage: HYGS
emerging as a leader: Storing large capacity over long periods of time requires a stable,
scalable and cost-effective medium that is not dependent on geography. Hydrogen solves
all of these issues. Hydrogen is one such carrier which is stable in the liquid and gaseous
form and can be stored for long periods of time (such as a season). It is also miscible with
other gases such as natural gas, and hence can use existing gas pipelines without any
modification at 515% concentrations.
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P2G has emerged as a large and utility-scale solution and is experiencing a significant
momentum via utility adoption. Renewables produce power that is used to run
electrolyzers to produce hydrogen. Hydrogen is fed into existing natural gas pipeline
infrastructure, where it could be stored throughout the low season. At the time of
consumption, it could be transported by the same pipeline to a combined cycle gas power
plant or could be piped into end-user homes, recovering the energy during its use. This
application is scalable, avoids multiple conversion inefficiency losses and uses existing gas
networks, without any modifications. Due to hydrogens embrittlement and leakage
characteristics, the infusion cannot exceed 15%. However, since the gas infrastructure
capacity is 3x the electrical grid capacity, even a limit in high single-digit percentage will
likely provide enough storage capacity for several years.
In the P2G method of energy storage implementation, Germany is the most progressive
nation and HYGS is a well-acknowledged leader. HYGS holds key patents on ways to
introduce H2 into gas pipelines without affecting the grid balance, which needs a thorough
understanding of utility processes involved in maintaining that balance. Of the 18 German
demo projects in the 12 MW range, nine have been decided. HYGS has won seven versus
two for the competition and is awaiting the decision on balance. We expect HYGS to win atleast 50% of the remaining demo projects. Recently, the 2 MW facility, where E.ON
partnered with Swiss Gas, was opened commercially. The next 1 MW order is expected to
be delivered this quarter. With a stamp of German approval and a formidable partner like
E.ON, arguably the largest utility in the world, HYGS is well positioned. Everyone in Europe
has been watching the German progress on P2G. U.K., which has a similar issue as Germany
with high and rising percentage of renewable energy production, is expected to follow
Germanyslead. Revenue from P2G initiatives in Germany will make an impact on HYGS
financials only when the country moves from demo-sized 12MW capacities to commercial
stages of 10 MW or larger capacity modules. If this happens, P2G contracts priced at
~$1.5$2.0M/MW should be able to add significant growth in 2014.
The latest E.ON P2G order for a 1 MW PEM electrolyzer was followed by a similar-sized P2Gorder by Enbridge for energy storage into its facilities. Enbridge considers this a commercial
facility to be connected to the grid, to be followed by a 510 MW facility, and is working to
try and improve Canadian legislation on gas injection. We expect the P2G Enbridge facility
to be built in Southern Ontario, a region attractive for P2G due to proximity to refineries,
salt caverns, a natural gas network and energy variability driven by healthy wind
generation near Lake Huron. Such a facility is expected it to be the first of its kind in North
America. Due to close a strategic relationship between the two, we will not be surprised if
HYGS has an opportunity to jointly own some of these P2G assets as the initiative
progresses.
Despite the current P2G momentum, there is a sobering thought for the long term.Currently, nearly 50% of Germanys 60GW electrical energy consumption can be supplied
by solar on a summer weekend (as experienced in July 2012 and 2013). Currently installed
capacity in Germany is 34.5 GW (solar) and 30.5 GW (wind). Installed capacity via
conventional sources was estimated to be another 61 GW (according to Germany Trade
and Invest, 2013). Thus, Germany faces significant excess energy capacity. Hence, the price
spread between peak and trough energy prices has decreased significantly, neutralizing the
time shift arbitrage. The new generation power plants can provide fast response to
demand fluctuations and, in some cases, are cheaper than current storage alternatives.
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Refurbishing and extending the life of existing pumped hydro storage would be the
cheapest way of increasing storage, but even that has been made uneconomical by the
above factors. H2storage needs gas pipelines, which most electrical utilities dont own and
have to partner with a gas utility (E.ON partnered with Swiss Gas at the recently
commercialized P2G facility at Falkenhagen). Hence, for electrical utilities in Germany,
storage may not hold any appeal as a supply-demand shock absorber but as a means of
converting excess into profitable export. Even with the winding down of nuclear and coal
plants, surpluses of around 40 GW are expected by 2020.
At $0.5M/MW of storage costs in 2013, and assuming future cost reduction of 50%, we
expect the addressable storage market in German electricity grid to be $10$20B.
HYGS: An established leader in H2generation, experiencing new growth opportunities:
HYGS facilities in Belgium have over 60 years of history in electrolyzer-based generation for
industrial hydrogen. While 95% of the industrial H2 is produced by steam reformation of
natural gas or methane and then carried to the consumption sites in compressed form by
bottles or tankers, some applications need on-site generation or high purity. Hydrogen
production through hydrolysis of water is the only solution. This is a $100$200M/yearmarket growing at 510%/year Hydrogenics commands a steady 2530% market share,
outselling its nearest competitor two-to-one. It competes on quality, reliability and years of
reputation. The company uses Air Liquide and Linde as its preferred supply partners, who
dominate the industrial hydrogen landscape. High-purity hydrogen is required in glass,
power plant cooling, semiconductor fabrication, etc. as steam reformation leaves
unacceptable impurities like CO, carving a niche for electrolytic hydrogen.
While we have covered the revenue growth in electrolyser orders due to P2G momentum
Via E.ON and Enbridge contracts as described above, other opportunities in P2G for selling
hydrogen generation solutions abound and are discussed below.
Gas companies own an extensive network of pipelines used to supply natural gas tohouseholds, commercial and industry major consumers are refineries and combined
cycle generation plants owned by electric utilities. An increasing proportion of renewables
in the power mix threatens the future of gas companies. There is increasing evidence that
gas companies are investing in P2G as a means of extending the economic life of their
assets, capturing value and staying relevant.
As an example, a major entity driving P2G adoption is North Sea Power to Gas Platform. It
is a consortium of 11 leading gas companies in Europe (includes gas utilities of Switzerland,
Sweden, Austria, Germany, Denmark, Belgium and Netherlands) which have joined forces
in the newly established Power to Gas Platform to further develop the concept of P2G: the
conversion of renewable power into gas. The group expects to utilize excess power from
intermittent wind and solar, store it in the gas grid for short- and long-term usage,transport it to remote parts where it is needed and where the electrical grid is inadequate,
and provide H2from renewable sources as feedstock for industry and mobility.
P2G is of particular interest for the North Sea area, as its on and offshore natural gas
infrastructure is well developed. In addition, the combined generating capacity of offshore
wind farms on the North Sea could reach around 100 GW by 2030, while the PV capacity
installed in the countries surrounding the North Sea is expected to increase from 35 GW in
2012 to almost 60 GW in 2020. Hydrogenics is a member of the group and will likely benefit
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from MFN-like status for its P2G solutions. At current prices, this addressable market is
~$15$20B.
In another P2G initiative, Audi is expected to open a renewable energy e-gas plant in
Werlte, Germany. The power-to-gas facility Audi built in Germany works in two steps:
electrolysis and methanation. In the first step, the plant uses surplus green electricity to
break water down into oxygen and hydrogen in three electrolyzers. While the hydrogencould one day power fuel-cell vehicles, for now, in the absence of an area-wide
infrastructure, a second step is carried out directly: methanation. The hydrogen is reacted
with CO2 (obtained from its own bio gas plant) to produce synthetic methane, or Audi e-
gas. It is virtually identical to fossil natural gas and will be distributed via an existing
infrastructure, the German natural gas network, to the CNG filling stations. The plant is
scheduled to begin feeding Audi e-gas to the grid this fall.
The Audi e-gas plant will produce about 1,000 metric tons of e-gas per year, chemically
binding some 2,800 metric tons of CO2. This roughly corresponds to the amount that a
forest of over 220,000 beech trees absorbs in one year. Water and oxygen are the only by-
products. Besides, avoiding CO2 emissions, syngas holds significant potential in curtailingcontroversial fracking activity currently used to unlock the natural gas trapped in rock
formations.
Exhibit 11: Projections for H2Retail Fuel Stations Growth in the EU
Source: Company Presentation EU Hydrogen FCEV Coalition Workshops
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In addition, recently, the traditionally slow growth hydrogen generation business received
another shot in the arm, by the build out of hydrogen fueling stations, due to auto OEMs
interest in bringing FCEVs to the market by 2015. Through powerful partners, such as Linde
and Air Liquide, Hydrogenics has helped build 45 out of 200 built globally until 20102011.
About 5,200 fueling stations are expected to be operational by 2020 worldwide. Exhibit 11
shows projections for H2retail fuel station growth in the EU.
California, the EU and Japan are regions experiencing the highest activity in such a build
out, due to push and incentives from local governments. The U.S. offers a 30% investment
tax credit up to $200,000/station built until 2014. In FY2012, Japan invested ~$240M in fuel
cell and hydrogen energy programs, nearly twice as much as the U.S., and included
$37.71M for hydrogen infrastructure & vehicle demonstration projects. The addressable
market in fueling stations is expected to be $2B, according to Hydrogenics.
Power systems unit firing on all cylinders:
HYGS as a public company is unique due to nearly 40% ownership by strategic entities
Commscope, Enbridge and GM. Two of those investors contributed to the massive year-
over-year growth of the company during the last year when Commscope placed asignificant fuel cell order for telecom tower back-up. HYGS then won a massive $92M
multi-year order for a power propulsion system (fuel cells) with prominent European OEM
(unnamed at clients request) with whom it has been working with for the last 10 years.
Besides the initial phase of $36M for delivery within two years, the order comes with a
$10M advance for product development and exclusivity for eight years (read: recurring
revenue and a captive customer for years to come). All units for the Commscope telecom
order were delivered by Q2/13 and are being tested in the field for hot and cold seasons. If
the tests go well (we believe they will), we expect larger roll-out orders commencing at the
end of 2013/early 2014. Delivery of several demo orders has primed the commercial roll-
out funnel where the orders are expected to be magnitudes larger, potentially catapulting
HYGS above the break-even point earlier than expected, which is in FY2014. Power systems
target opportunities in telecom and data centre back-up power, material handling andpropulsion equipment, with an addressable market estimated at $2$3B.
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Exhibit 12 DC Back-up Power Addressable Market
Source: Company Presentation
History is tough but future looks equally bright (finally):
We understand the pain of a tech investor invested in a company ahead of its time. HYGS is
one such story with a sordid past. Several years of losses, financings, reverse splits have
have inflicted pain and made investors leery of the space and the players. However, all
these years of investments have seeded tomorrows harvest, and since the last year,
prospects have changed dramatically.
Going forward, we view HYGS as a significantly hedged play due to the decades old and
relatively shielded industrial H2 business of $25M/year as profitable and provides a safety
net, upon which growth layers in power systems, hydrogen fueling stations and P2G energy
storage systems will be built, inflecting the company quickly beyond the break-even point
and toward financial self-sustainability. Growth is further de-risked by HYGSgo-to-market
strategy by partnering with long-term customers like Linde and Air Liquide, and strategic
investors like Commscope and Enbridge.
Larger competitors like Siemens (which are major vendors of wind generation equipment in
Germany) are watching HYGS growing success, profile and prominent wins in Germany,
and may have made acquisition overtures in the past and are likely to keep HYGS on their
active radar of potential targets, providing an additional value realization for patient
investors. All of these catalysts coming together almost concurrently convince us of a
potential bright future for HYGS to be fully visible by H2-2014.
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Exhibit 13: HYGS Go-to-Market Strategy Leverages Established Networks
Source: Company Presentation
Risks
Fuel cells may not be able to reach commercializable mass-market price points: Stacking
of PEM cells is a precision activity and since build volumes are low, stacks are builtmanually. Stack building is a manually intensive and highly skilled activity, and hence labour
intensive. High costs of platinum catalysts and high maintenance to prevent CO poisoning
and reduced catalytic activity also significantly add to the costs. Both of these factors make
fuel cells, especially PEM cells, an expensive choice, eroding their smaller footprint
advantage. While research is ongoing for CO resistant catalyst coatings on electrodes, or to
operate FCs at higher temperatures to increase their efficiency and CO resistance,
production of FCs may not scale high enough to bring the costs down by incentivizing
better catalyst materials or robotizing assembly, which will lower the productions costs
and, consequently, mass acceptance.
P2G may not take off with German electrical utilities dampening short-term upside for
electrolyzers: Imminent commercialization expected to be driven by German electrical
utilities may not materialize due to Germanysenergy excess situation (discussed earlier).
German utilities like E.ON may not undertake the P2G commercial roll-out with units of 10
MW and larger in the near term. Mitigant: we believe the medium-term P2G upside will be
driven by gas utilities, such as the North Sea Alliance Platform, for a myriad of reasons,
discussed earlier.
Another strike on electrolyzers is that round-trip efficiency for P2G using electrolytic H2 is
low at 20% (wind to electrolysis to H2 to fuel cells to electricity) versus 50% for H2
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production from steam reformation of natural gas. H2 produced from electrolyzers is
expensive versus that produced from methane reformation. So long as high H2purity and
on-the-site production is not necessary, it dampens the P2G business case for hydrolyzers
Customer concentration: HYGSrecord backlog and its near-term revenue conversion are
driven by three-four customers. In Q2/13, four customers constituted 55% of revenues.
Current revenue inflection, if unmatched by follow-on orders from these customers may beshort-lived. For example, Commscope may not follow through with orders in early 2014 on
telecom back-up power, due to delays in testing and ultimately orders from its carrier
customers. Mitigants: major customers as strategic investors and P2G pioneer advantage.
Valuation
Hydrogenics has entered H2-FY2013 with a record $50M backlog 1.6x its FY2012
revenue. Most of the backlog is translated into revenue in two quarters. New generation
electrolyzer products are being readied for 10 MW and larger-scale P2G projects. New
products are also being developed for strategic partner and P2G customer Enbridge, on
track to build and commission the first P2G facility in North America. HYGS is also
developing next generation products and solutions in propulsion systems for its $92M OEMcustomer. Outlook is further brightened by nine P2G projects in Germany, where HYGS has
won a lions share of wards so far, are yet undecided.
We are also awaiting results of hot/cold season tests on the hundreds of telecom back-up
FC units delivered to Commscope the largest strategic investor and customer. With a
significant footprint with several dominant carriers and tower asset owners, we believe the
power systems units sales funnel is primed.
We believe HYGS is sitting on several, simultaneous layers of sales growth in 2013 and
2014. Its customers are market leaders in their own sector and some are investors. Most
have just moved off successful demo stages and are transitioning to commercial stages,
orders of magnitude larger than demo stages. As such, we believe HYGS will be cash flowand EPS positive in H2-FY2014, creating significant shareholder value, and we urge
potential investors to buy before this value creation.
Our $15.50 target price is derived using a DCF methodology based on a 13% discount rate
and 4% terminal growth. We believe HYGS is a leading pure play in the hydrogen-based
renewables industry, which is growing its revenue at a CAGR of 30%+ in the near and
medium term. Its peers are growing at an average of 1819%. Our target implies 1.8x
2014E EV/Sales. HYGS is currently trading at 1.5x 2014E EV/Sales; its peers are trading at an
average of 3.3x. Given 2013 revenue acceleration, our estimates for 39% revenue growth in
2014 (vs. 19% for peers), formidable strategic partners/customers, a dominant position in
Germany and a possible medium-term take-out from the likes of any one of Siemens, other
turbine OEMs or gas utilities, we believe HYGS should trade at a premium multiple,justifying our valuation and target.
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Last
Market
EV
Company
Ticker
Price
Cap
2013E
2014E
2015E
2013E
2014E
2015E
2013E
2014E
2015E
MaxwellTechnologies
M
XWL
$9.1
$262.9
$237.0
$192.8
$205.5
NA
$19.0
$25.4
NA
$0.2
$0.4
NA
Electrovaya
EFL
$1.1
$79.0
$80.8
$4.6
$15.2
$44.5
($4.1
)
$0.1
$2.1
($0.1
)
($0.0
)
NA
ITMPower
ITM
$0.7
$91.7
$82.4
$1.7
$6.3
$12.0
($8.7
)
($6.4)
($5.0
)
($0.1
)
($0.1
)
($0.0
)
ProtonPower
PPS
$0.0
$29.8
$43.4
NA
NA
NA
NA
NA
NA
NA
NA
NA
BallardPowerSystems
BLD
$1.7
$171.0
$160.1
$60.4
$75.9
$97.7
($15.8
)
($10.4
)
$4.5
($0.2
)
($0.2
)
($0.1
)
FuelCellEnergy
FCEL
$1.3
$243.9
$230.2
$179.7
$200.3
$256.7
($23.6
)
($3.3)
NA
($0.2
)
($0.1
)
NA
PlugPower
P
LUG
$0.7
$72.8
$69.6
$31.3
$60.0
NA
($22.0
)
($9.9)
NA
($0.5
)
($0.2
)
NA
CapstoneTurbine
C
PST
$1.2
$353.7
$345.3
$128.5
$149.4
$186.8
($18.9
)
($9.2)
$12.8
($0.1
)
($0.0
)
$0.0
Average
$85.6
$101.8
$119.5
($10.6
)
($1.9)
$3.6
($0.1
)
($0.0
)
($0.0
)
Hydrogenics
H
YGS
$12.1
$108.9
$98.5
$44.5
$62.5
$84.3
($6.6
)
$1.6
$7.5
($1.1
0)
$0.0
2
$0.6
9
Company
Ticker
2013E
2014E
2015E
201
3E
2014E
2015E
MaxwellTechnologies
M
XWL
12.2x
9.1x
NM
1.2x
1.1x
NM
Electrovaya
EFL
NM
673.0x
38.1x
12.4x
3.7x
1.3x
ITMPower
ITM
NM
NM
NM
48.6x
11.7x
6.1x
ProtonPower
PPS
NM
NM
NM
NM
NM
NM
BallardPowerSystems
BLD
NM
NM
35.6x
2.3x
1.8x
1.4x
FuelCellEnergy
FCEL
NM
NM
NM
1.6x
1.5x
1.2x
PlugPower
P
LUG
NM
NM
NM
1.9x
1.0x
NA
CapstoneTurbine
C
PST
NM
NM
27.3x
2.7x
2.3x
1.9x
Average
12.2x
341.1x
33.7x
10.1x
3.3x
2.4x
Hydrogenics
H
YGS
-15.0x
62.8x
13.1x
2.2x
1.6x
1.2x
Source:CapitalIQEstimates,
BloombergandByronEstimates
EV/EBITDA
Revenue(US$M)
EBITDA
(US$M)
EPS(US$M)
EV/SALES
iit
:
r
r
ls
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Hydrogenics Corporation
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HydrogenicsCorporation
IncomeStatement
USD$'000
FY2011A
Mar-12A
J
un-12A
Sep-12A
Dec-12A
FY2012A
Mar-13A
Jun-13A
Sep-13E
Dec-13E
FY2013E
FY2014E
Revenue
23,8
32
5,7
24
8,2
59
7,8
97
9,9
26
31,8
06
12,3
12
9,7
71
11,2
00
11,1
69
44,4
52
62,4
50
CostofSales
18,3
44
4,9
19
6,7
87
6,2
39
8,6
16
26,5
61
8,7
70
7,2
05
7,9
20
8,0
15
31,9
10
42,4
70
GrossProfit
5,488
805
1,472
1,658
1,310
5,245
3,542
2,566
3,280
3,154
12,542
19,980
GrossMargin%
0
14%
18%
21%
13%
0
29%
26%
29%
28%
28%
32%
OperatingExpenses
General&Administrative
11,740
2,953
3,221
3,462
3,115
12,751
3,622
4,875
3,600
3,700
15,797
15,791
%
Revenues
0
51.6
%
39.0
%
43.8
%
31.4
%
0
29.4
%
49.9
%
32.1
%
33.1
%
36%
25%
Research&Development
2,934
1,149
843
1,573
1,041
4,606
938
1,080
1,100
1,000
4,118
3,650
%
Revenues
0
20.1
%
10.2
%
19.9
%
10.5
%
0
7.6
%
11.1
%
9.8
%
9.0
%
9%
6%
OtherOperatingExpense/(Income)
50
-
-
(5)
-
(5
)
-
-
-
-
-
-
%
Revenues
0
0.0
%
0.0
%
-0.1
%
0.0
%
0%
0.0
%
0.0
%
0.0
%
0.0
%
0%
0%
TotalOperatingExpenses
14,724
4,102
4,064
5,030
4,156
17,352
4,560
5,955
4,700
4,700
19,915
19,441
%
Revenues
61.8
%
71.7
%
49.2
%
63.7
%
41.9
%
54.6%
37.0
%
60.9
%
42.0
%
42.1
%
44.8
%
31.1
%
EBIT(Operatingincome)
(9,236)
(3,297)
(2,592)
(3,372)
(2,846)
(12,107
)
(1,018)
(3,389)
(1,420)
(1,546)
(7,373)
539
EBITMargin%
-39%
-57.6
%
-31.4
%
-42.7
%
-28.7
%
-38%
-8.3
%
-34.7
%
-12.7
%
-13.8
%
-17%
1%
EBITDA
(8,286)
(3,093)
(2,332)
(3,163)
(2,649)
(11,675
)
(820)
(3,185)
(1,216)
(1,342)
(6,563)
1,569
EBITDAMargin%
-35%
-54.0
%
-28.2
%
-40.1
%
-26.7
%
-37%
-6.7
%
-32.6
%
-10.9
%
-12.0
%
-15%
2.5%
NetInterestExp.
(171)
(63)
(78)
(88)
(74)
(303
)
(85)
(94)
(90)
(90)
(359)
(400
EBTIncl.UnusualItems
(9,746)
(3,181)
(3,145)
(3,081)
(3,272)
(12,679
)
(1,551)
(4,516)
(1,660)
(1,686)
(9,413)
139
EBTMargin%
-41%
-55.6
%
-38.1
%
-39.0
%
-33.0
%
-40%
-12.6
%
-46.2
%
-14.8
%
-15.1
%
-89%
0.2%
TaxIncome(Expense)
-
-
-
-
-
-
-
-
-
-
-
-
NetIncome
(9,746)
(3,181)
(3,145)
(3,081)
(3,272)
(12,679
)
(1,551)
(4,516)
(1,660)
(1,686)
(9,413)
139
NetMargin%
-41%
-55.6
%
-38.1
%
-39.0
%
-33.0
%
-40%
-12.6
%
-46.2
%
-14.8
%
-15.1
%
-21%
0.2%
EPS(GAAP)
Basic
($1.58)
($0.4
8)
($0.4
2)
($0.4
0)
($0.4
2)
($1.72
)
($0.2
0)
($0.5
3)
($0.1
9)
($0.2
0)
($1.10)
$0.02
Fully
iluted
($1.58)
($0.4
8)
($0.4
2)
($0.4
0)
($0.4
2)
($1.72
)
($0.2
0)
($0.5
3)
($0.1
9)
($0.2
0)
($1.10)
$0.02
ii
:I
)
:
t,
itl
t
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Hydrogenics Corporation
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Lino Camargo 647.426.0289 [email protected] Page | 20
Appendix A: Management and Board of Directors
Management
President and Chief Executive Officer Daryl Wilson was appointed President and Chief Executive Officer in
December 2006. Prior to joining Hydrogenics, he held seniorleadership positions at Royal Group Technologies Inc., ZENON
Environmental Inc., TOYOTA and DOFASCO Inc. Mr. Wilson is a
director of ATS Automation Tooling Systems Inc. In 1990, Mr. Wilson
earned an MBA from McMaster University in Operations
Management/Management Science. He is a Professional Engineer
and holds a Bachelors degree in Chemical Engineering from the
University of Toronto. Mr. Wilson is a Chartered Director (C.Dir),
having graduated in 2009 from Directors College.
Chief Financial Officer and Corporate Secretary Robert Motz was appointed Chief Financial Officer, Corporate
Secretary of Hydrogenics Corporation, in Nov. 2012. Mr. Motz was
previously Chief Financial Officer and then Chief Executive Officer of
Aeroquest International Limited from 2008 to 2012 (at the time aTSX-listed company). Prior to his role at Aeroquest, Mr. Motz served
in a senior financial leadership role at Agility Logistics, Co., AMJ
Campbell Inc. and Motorola Canada Limited. Mr. Motz is a Chartered
Accountant and a Chartered Professional Accountant, having
received his designation in 1987.
Vice President, Sales and Marketing Wido Westbroek joined the company in 2006 as Vice President,
Operations, of the Belgium OnSite Generation business and
subsequently was appointed Vice President and General Manager for
Hydrogenics Europe n.v. in 2007. Mr. Westbroek was appointed to
his current position in Aug. 2011. His former career, spanning 18
years, was with Powerlasers, a developer and manufacturer of
unique laser welding technology and a maker of auto parts for
automotive OEMs based in Canada and the U.S. Mr. Westbroek
received his Bachelor of Science in Physics at the University of
Waterloo in Ontario.
General Manager, OnSite Generation Filip Smeets joined Hydrogenics in 2011 as General Manager of the
Belgian-based OnSite Generation business. Mr. Smeets was
previously a general manager with Cabot Corporation, a global
performance materials company, headquartered in Boston,
Massachusetts. During his 12-year tenure at Cabot Corporation, he
held increasingly responsible positions in marketing and business
leadership. Mr. Smeets received his Master's degree in Chemistry
from the University of Antwerp in Belgium.
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Board of Directors
Douglas S. Alexander, Chairman, joined the board in May 2006 and has served as
Chairman since May 2009. He is a director and member of the Audit Committee of Critical
Outcome Technologies Inc., Biorem Inc. and Equitable Life Insurance Company, and has
served as the Chief Financial Officer of various Canadian public companies for 15 years. Mr.
Alexander was formerly the lead director and chair of the Audit Committee of SaxonFinancial Inc. He served as a director of Stuart Energy from 2003 to January 2005. From
1999 to 2004, Mr. Alexander was Executive Vice President and Chief Financial Officer of
Trojan Technologies Inc., an international environmental high technology company. Mr.
Alexander is a Chartered Accountant and is a member of the Institute of Chartered
Accountants in Scotland and Ontario. He is also a Chartered Director, having graduated
from the Directors College, a joint-venture between McMaster University and the
Conference Board of Canada.
Mr. Michael Cardiff has been an Independent director of Hydrogenics Corporation since
November 2007. Mr. Cardiff is the Chief Operating Officer of SAP Canada. Prior to that, he
held numerous senior positions in a number of technology companies, including multi-
nationals such as EDS and IBM, as well as start-up companies such as Fincentric,Convergent Technologies, Tandem and Stratus Computer. Mr. Cardiff is currently a director
of Medic Alert. He has also served as a director of Burntsand Inc., Descartes Systems
Group, Husky Injection Molding Systems, Solcorp, Visible Genetics, Spectra Security
Software Visible Decisions and the Toronto Film Festival, Roy Thomson Hall. Mr. Cardiff has
received many awards including A Canadian Export Life Time Achievement Award. He is a
member of and holds the ICD.d designation from the Institute of Corporate Directors.
Mr. Joseph Cargnelli is Chief Technology Officer, Director of Hydrogenics Corporation. Mr.
Cargnelli is one of the founders and served as a director from January 1996 to January
2005, when he resigned in connection with the closing of the Stuart Energy acquisition. Mr.
Cargnelli was re-elected at the meeting of shareholders on May 17, 2005. Mr. Cargnelli
served as the Treasurer from January 1996 until July 2000. Mr. Cargnelli was appointed asthe Vice President, Technology in July 2000. His title was changed to Chief Technology
Officer in April 2003. Mr. Cargnelli earned both a Masters of Applied Science degree in
Mechanical Engineering and a Bachelor of Applied Science degree in Mechanical
Engineering from the University of Toronto. From April 1992 to April 1993, Mr. Cargnelli
served as a Research Engineer with the Laboratory of Advanced Concepts in Energy
Conversion Inc., a laboratory engaged in the research, development and demonstration of
alkaline fuel cells and hydrogen storage methods. Mr. Cargnelli is a member of the
Professional Engineers of Ontario.
Mr. Henry J. Gnacke has been an Independent Director of Hydrogenics Corporation since
May 2008. Mr. Gnacke is a Director at Variety Foods Services Inc. He is also a senior advisor
to Mobias Motors and is currently a Senior Director at OHorizons LLC., a corporate advisoryfirm, specializing in acquisitions and operations in the Automotive sector. Formerly, he was
the Executive Director, Global Purchasing Supply Chain at General Motors Corporation. He
was responsible for Alternative Propulsion Technologies and specifically Fuel Cell
propulsion and storage systems. Mr. Gnacke has over 30 years of experience and has held
numerous positions at General Motors Corporation, including several international
assignments in the Middle East, Asia and Europe. Mr. Gnacke is the nominee of General
Motors Corporation in connection with the strategic alliance with General Motors
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Corporation. Mr. Gnacke is a Chartered Director (C.Dir), having graduated from Directors
College in 2012.
Mr. Norman M. Seagram is an Independent Director of Hydrogenics Corporation. He
served as Chairman of the Board from July 2000 to December 2006, as Lead Director from
JanuarySeptember 2007, and subsequently as Chairman until May 2009. Mr. Seagram was
President of Sportsco International LP (SkyDome) from February 2001 to March 2003. FromSeptember 1996 to May 1997, he was President and Chief Executive Officer of Molson Inc.
(now Molson Coors), a company he had previously served for 24 years in a variety of senior
management positions. From October 1992 to August 1996, Mr. Seagram was Chairman
and Chief Executive Officer of Air Liquide Canada, Inc., a producer of industrial gases. He is
Chairman of the Toronto Symphony Foundation, a trustee of Trinity College School and the
Toronto Symphony Foundation, and a director of Harbourfront Foundation. He has served
on the advisory board of the Faculty of Applied Science and Engineering, University of
Toronto and INSEAD, Fontainebleau, France. He is a former director of the Toronto
Economic Development Corporation (TEDCO).
Daryl Wilson, President and Chief Executive Officer (see above)
Share Ownership of Management and Directors (as of May 8, 2013)
Source: Company Reports
Beneficial Owner Shares DSUs RSUs Stock Options Total Securit
Douglas S. Alexander, Chairman 998 42,632 Nil Nil 43,630
Michael Cardiff, Director Nil 20,417 Nil Nil 20,417
Joseph Cargnelli, Director 156,100 24,015 56,574 64,500 301,189
Henry J. Gnacke, Director Nil 13,730 Nil Nil 13,730
Norman M. Seagram, Director 1,428 49,175 Nil Nil 50,603
Don Lowry, Director Nil 477 Nil Nil 477
Daryl Wilson, Pres. & CEO 4,000 78,636 108,989 185,399 377,024
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Hydrogenics Corporation
Dev Bhangui 647.426.1658 [email protected]
Lino Camargo 647.426.0289 [email protected] Page | 23
Appendix B: Business Description
Hydrogenics reports the top line of its financial performance in two business segments:
OnSite Generation (electrolysers) and Power Systems (Fuel Cells). Below, we provide a
description of both lines of business.
HydrogenicsLines of Business
OnSite Generation
OnSite Generation business segment is based in Oevel, Belgium, and develops products for
industrial gas, hydrogen fueling and renewable energy storage markets, using waterelectrolysis technology. Onsite Generation includes the design, development, manufacture
and sale of hydrogen generation products.
The products developed in this business line are mainly sold to leading merchant gas
companies, oil and gas companies, fueling stations, electric power utilities, and small,
medium and large scale energy storage products.
Given the potential opportunities, the company has expanded into a new energy storage
application, Power to Gas , a technology that converts electrical power to fuel. So far, this
business remains included in OnSite; nonetheless, it is expected to benefit both the
electroylizer and fuel cell segments.
Power Systems
Power Systems is based in Mississauga, Ontario, Canada, with a satellite facility in
Gladbeck, Germany, and develops products for energy storage, stationary and motive
power applications. It is based on Proton Exchange Membrane (PEM) fuel cell technology,
which transforms chemical energy liberated during the electrochemical reaction of
hydrogen and oxygen into electrical energy. This division includes the design, development,
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Dev Bhangui 647.426.1658 [email protected]
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manufacture and sale of fuel cell products, and is well supported by commercial product
and project work.
Hydrogen generation systems, which use alkaline and PEM water electrolysis technologies,
are sold directly to industrial customers, as well as through leading merchant gas channel
partners.
Also, this division targets back-up power for telecom and data centre installations, motive
power applications and heavy-duty applications, such as buses, trucks and utility vehicles.
Hydrogenics Product Line
The companys product line is divided into three categories:
I) Industrial Hydrogen Generators by Electrolysis
INDOOR INSTALATION INDOOR INSTALATION
POWER PLANT SOLUTIONS
INDOOR LARGE CAPACITY
TheHySTAT Indoor Version i s a modular electrolyzer composed
of skids and enclosures that are easily interconnected.
HyLYZER PEM Electrolysis Technologyis a modular electrolyzer
which uses clean dei onized water and either AC or DC electricity toproduce up to 1.1 and 2.2 normal cubic metre per hour (Nm3/h) of
hydrogen. The ele ctrolysis reaction takes place within a proton
exchange membrane (PEM) cell stack.
Models:
- HyLYZER-1 Nm3/h
- HyLYZER-2 Nm3/h
A HySTAT10-60 unitsconsists of a hydrogen
generating unit wi th our proprietary IMET cell
stack, a control/power panel with controlle d
AC/DC conversion to produce hydrogen in a safe
and reliable way.
It is adapted specifically to meet the requirements of higher capacity installation in excess of
500Nm3/h.
TheHySTATOutdoor Version is a turnkey
hydrogen generation plant that comes installed
inside a modified ISO high cube shipping
container.
The container hosts the ele ctrolyzer and theoptional util ity equipment such as the water
treatment system & cooling systems.
All mechanical and el ectrical interconnections
are made inside the contai ner, which simplifies
and reduces the installation costs on site.
The container is weatherized and can be
installe d in temperatures ranging from -20C to
Hudrogenics offer complete packages
to deli ver hydrogen in a safe and
reliable way to cool down generators
with no concessions on quality of its
equipment.
This ensures hydrogen availability atall time .
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Dev Bhangui 647.426.1658 [email protected]
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Source: Company Reports
II) Energy Storage and Fueling Solutions III) Fuel Cell Power Systems
POWER-TO-GAS MOBILITY POWER
HYDROGEN FUELING STATIONS Defence, Aerospace and Security
REMOTE COMMUNITIES Defence, Aerospace and Security
Hydrogenics is pioneering Power-to-Gasan
innovative energy conversion and storage
solution using electrolysis.
Power-to-Gas is a highly eff ective way of
integrating renewables. It can provide a rapid,dynamic response to the Independent Grid
Operators signal to adjust to the variations in
renewable generation output.
Unlike other e nergy storage technologies,
Power-to-Gas provides the means to both
store and transport energy.
TheHySTAT fueling station uses dvanced
electrolysis technology to split water into
hydrogen and oxygen, using only electricity.
Hydrogenics offers complete hydrogen
fueling stations with modular capacities
ranging from 20 kg to 130 kg/day and
beyond. T
The hydrogen is dispensed at 350 or 700 bar.
Hydrogenics build and install standalone
hydrogen energy storage and power stations
for remote communities. For 1MW and largerscale renewable energy systems, a
Hydrogenics HES consists of Hydrogenics
modules that can be configured and
integrated:
HySTATElectrolysis Systems
HyPM XR Fuel Cell Systems
It offers transportation application to
displace outdated petroleum burning
technology with clean, ef ficient, reliable and
abundant hydrogen power.
Hydrogenics products:
HyPX Power Packs for powering electric
motors in place of conventional lead-acid
battery packs
HyPM HD Fuel Cell PowerModules
Hydrogenics provides a link to a cleaner energy
future by filli ng the energy gaps in the air,
space, land and underwater.
Hydrogenics offers solutionsto leave behind
burning oil, gas and diesel for the advantages
of advanced hydrogen technologies for remoteand intermittent power needs.
Power Systems products are operating in
remote locales and commercial/industrial
facilities around the globe:
HyPM XR Fuel Cell Powe r Modules
HyPMRacks with multiple fuel cell modules
and power electronics in 19-inch server
equipment racks
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Fuel cells 101 (Excerpts from FuelCellToday)A fuel cell is like a battery in that it generates electricity from an electrochemical reaction.
Both batteries and fuel cells convert chemical energy into electrical energy and also, as a
by-product of this process, into heat. However, a battery holds a closed store of energy
within it and once this is depleted the battery must be discarded, or recharged by using an
external supply of electricity to drive the electrochemical reaction in the reverse direction.
A fuel cell, on the other hand, uses an external supply of chemical energy and can run
indefinitely, as long as it is supplied with a source of hydrogen and a source of oxygen
(usually air). The source of hydrogen is generally referred to as the fuel and this gives the
fuel cell its name, although there is no combustion involved. Oxidation of the hydrogen
instead takes place electrochemically in a very efficient way. During oxidation, hydrogen
atoms react with oxygen atoms to form water; in the process, electrons are released and
flow through an external circuit as an electric current.
Fuel cells can vary from tiny devices producing only a few watts of electricity up to large
power plants producing megawatts. All fuel cells are based on a central design using two
electrodes separated by a solid or liquid electrolyte that carries electrically charged
particles between them. A catalyst is often used to speed up the reactions at theelectrodes. Fuel cell types are generally classified according to the nature of the electrolyte
they use. Each type requires particular materials and fuels and is suitable for different
applications.
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Hydrogenics Corporation
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