29.08.2022, Author: Stefan Feulner

Stock news: First Hydrogen - The hydrogen high-flyer — The agreement between Germany and Canada promises considerable potential

  • Wasserstoff
  • Fuel Cells
  • Renewables
  • Hydrogen

The quest for independence from Russian oil and gas is pushing politicians to come up with forward-looking alternative solutions. An agreement has now been concluded between Canada and Germany that is likely to represent a quantum leap for the hydrogen industry. The joint declaration of intent to invest in hydrogen and establish a transatlantic supply corridor between Canada and Germany marks the beginning of Canada's establishment as a major hydrogen producer. One of the biggest beneficiaries is likely the Canadian company First Hydrogen. CEO Balraj Mann already announced that "our 'Hydrogen-as-a-Service model' will be an emissions-free ecosystem solution for Canada and the rest of the world." The opportunities for this are excellent. At the same time, First Hydrogen is valued at a market capitalization of CAD 208.79 million and is still far from the billion-dollar stock market values of its competitors.

Investing in the hydrogen future

The process that began with the National Hydrogen Strategy in Germany, the "December 2020 Strategy in Canada", or the "10-Point Plan" in the United Kingdom, is now being accelerated significantly due to the recent geopolitical conflicts. The Western world wants to get away from Russian oil and natural gas and sees the expansion of renewable energies as the key to independence. In this context, hydrogen as an energy carrier is to contribute as a focal point to the achievement of climate targets. A first comprehensive hydrogen agreement has been reached between Germany and Canada, and further cooperation between Western countries is likely to follow in the near future. The joint declaration of intent to invest in hydrogen and establish a transatlantic supply corridor marks the beginning of Canada's establishment as a major hydrogen producer. Natural Resources Canada projects that the global hydrogen market will reach CAD 2.5 trillion by 2050, with the country with the maple leaf in its flag expected to be one of the leading suppliers.

Since the start of the Ukraine conflict, First Hydrogen's stock has significantly outperformed its peer group. Source: S&P Capital IQ Pro, as of 08/26/2022

Transportation sector in focus

The transport sector in particular currently still requires the greatest efforts to achieve climate targets, as it is precisely here that CO2 emissions have risen over the past three decades, even though carmakers have been tinkering with vehicle efficiency on a global scale. While battery-powered automobiles are likely to prevail in passenger cars, hopes rest on hydrogen fuel cell technology for light and heavy-duty commercial vehicles, which are responsible for about 35% of transportation emissions.

Again, Canada has identified the domestic use of hydrogen as a key to meeting its climate change commitments. It has developed a program, the Clean Fuel Standard, to reduce greenhouse gas emissions and accelerate the deployment of clean technologies and fuels. With the announcement of funding for zero-emission medium- and heavy-duty vehicles - the program is expected to provide CAD 547.5 million over four years - demand for commercial vehicles powered by green hydrogen is expected to explode. Already, CAD 3 billion is reserved in Canada's 2022 budget for zero-emission vehicles and related infrastructure.

First Hydrogen benefits from all sides

Not long ago, the Canadian company, based in Vancouver and London, was known only to die-hard industry insiders. But since the end of last year, the newcomer has mutated into the stock market star of the hydrogen sector. Despite general market corrections due to the Ukraine crisis and fears of recession, the share has posted a performance of 200% since the beginning of the year. The market capitalization is currently CAD 208.79 million and still has considerable catch-up potential compared to its peer group. The reasons for the clear outperformance are manifold and fundamentally based, as First Hydrogen intends to cover the entire value chain in the hydrogen segment in the coming years. As outlined in our detailed Report 1/2022, the Canadians are working with globally established partners such as Ballard Power and AVL Powertrain UK, as well as using a "best-of-strategy " to develop and manufacture zero-emission, hydrogen-powered commercial vehicles. This involves relying on existing technologies and a proven chassis, resulting in high cost and time benefits. In addition to manufacturer and technology neutrality, a clear plus is central assembly and cooperation with smaller factories worldwide. That means country-specific specifications, such as those for a "British Van", a "European Van" or a "Canadian Van", can be easily adapted. Thus, after successful testing in the UK, a Canadian variant should be easy to duplicate, allowing First Hydrogen to drive closer to the aforementioned Canadian government money pots.

First Hydrogen's utility van successfully completed initial test drives and is attracting interest from major fleet operators. Source: First Hydrogen Corp.

Successful trial operation boosts interest

In terms of the trial operation of the two demonstration vehicles developed, the first operational readiness test drives were completed successfully. The fuel cell systems, including the stack supplied by Ballard Power Systems, underwent extensive calibration and testing in Graz, Austria. The commissioning process ensures that the vehicles' hydrogen and high-voltage electrical systems meet the highest possible safety standards. As part of this process, Essex County Fire and Rescue Service has tested the vehicles at AVL's Basildon facility in the UK and confirmed that the control measures implemented are in favor of the vehicles being road legal in that county. This important step will allow the vehicles to be tested in a variety of road and driving conditions to confirm their performance before First Hydrogen conducts operational trials in real-world conditions with major fleet operators in early 2023.

Moreover, following the first successfully completed test phase, demand for the "utility vans" continues to grow. In the meantime, across all sectors, 12 fleet operators have come forward to take part in further tests of the demonstration vehicles. Interested parties include telecoms, express services, national utilities and infrastructure companies, a UK national supermarket chain, a national towing and recovery association, an ambulance fleet, a national fleet leasing group, and a carbon-free technology group. First Hydrogen's management anticipates that expressions of interest for future vehicle orders are likely to flutter into the order books due to these trials.

The development of a prototype H2 refueling station is another building block in covering the value chain. Source: First Hydrogen Corp.

Covering the complete value chain

In addition to developing and producing light commercial vehicles, the first-class management team is already thinking ahead. "Hydrogen-as-a-Service" is the magic word. Last year, a cooperation agreement was signed with FEV Consulting GmbH, based in Aachen, Germany, to develop a prototype for a customized refueling system for the hydrogen mobility market. The development of an H2 refueling station network in North America is now likely to be on the agenda in order to be able to supply customers with the fuel of the future going forward.

To round off the value chain, four sites for the production of green hydrogen have already been identified in the UK, and two projects have been submitted for a first round of funding to the UK government's Net Zero Hydrogen Fund via the subsidiary First Hydrogen Limited. The goal here is to supply the Company's automotive customers with a large part of their green hydrogen requirements from production in order to be able to refuel First Hydrogen's fleets of light commercial vehicles equipped with fuel cells. Due to policy progress in Canada, green hydrogen production plans will now be expanded to North America.

Rob Campbell, Director and CEO of First Hydrogen Energy, commented, "These are truly remarkable times. Plans for the transatlantic German-Canadian hydrogen supply corridor and the historic US Inflation Reduction Act are announced in the same month. Green hydrogen is a global phenomenon, and First Hydrogen plans to manufacture and supply green hydrogen solutions for commercial vehicles in North America, the UK and Europe."

Interim Conclusion

First Hydrogen's evolution in recent months into a "Hydrogen-as-a-Service" provider is proceeding at breakneck speed. With the completion of the first test drives of the utility van, another important milestone towards roll-out has been reached. Covering the value chain from the production of green hydrogen to the construction of refueling facilities and the sale of light commercial vehicles also includes significant economies of scale. Furthermore, the expansion to North America has significant potential, especially after the announcement of the hydrogen cooperation between Canada and Germany. This makes it possible for the Canadian company to access the Canadian government's money pots from several sides. Compared to its peers, First Hydrogen's stock market valuation continues to lag behind the competition, in some cases significantly, despite the recent strong performance.

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