INTERVIEW - Bulgarian hydrogen company Hydrogenera mulls IPO

Bulgarian hydrogen solutions company Hydrogenera is looking toward a potential initial public offering (IPO) in 2024 through which it would raise the capital needed to set up a production base for alkaline electrolysers.

This was unveiled by the company’s chief financial officer Dimiter Banov, who, alongside founder and CEO Dragomir Ivanov, spoke with Renewables Now about Hydrogenera’s business model, its slow but sustainable growth, plans for the future and the market as a whole.

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THE BUSINESS

While the company was formally established in 2016 as Green Innovation, its team has been built over the past 12 years. The activities of its new brand, Hydrogenera, cover the entire supply chain and Ivanov stressed that the company does not offer just one or two mass products but instead analyses the project needs of its customers and delivers a custom solution to guarantee maximum efficiency. It also fully handles the automation and control of its systems.

At the end of 2022, Hydrogenera raised about EUR 2 million (USD 2.15m) in financing from the likes of Karoll, Impetus Capital, MFG Invest, and several angel investors. The point, at the time, was to partially secure funds for the construction of a modern production base.

“Eventually, we decided that we should first determine what the needs of the clients really are. In just one year, products have changed tremendously,” Banov stated and added that raising money for the new production facility will be the focus of the planned listing.

GOING PUBLIC

When asked about which bourse he targets, the finance head said that this depends on many factors. “We will pursue either a main segment of the Bulgarian Stock Exchange (BSE) or a Western bourse with a focus on green investments,” he commented. “We are considering the Bulgarian bourse because in Bulgaria there currently are very few green businesses that can satisfy the demand coming from local investors,” Banov explained.

TECHNOLOGY SELECTION

For the production of hydrogen, the company fabricates its own alkaline electrolysers – a proven electrolysis technology that is also the oldest on the market – and when it comes to storage, it bets on metal hydrides, which are characterised with absolute safety and maintain a very high hydrogen purity.

GEOGRAPHICAL FOCUS

Hydrogenera has projects executed in Bulgaria, Turkey and Poland, and is recognising significant interest from Italy and Germany. Ivanov also pointed at Romania as an attractive market.

“And even if we look at the Bulgarian market alone, the volumes of hydrogen required to fulfill the targets under the EU Renewable Energy Directive would make it so that the efforts of a company like ours wouldn’t be enough,” Banov added.

SCALING UP

The largest of Hydrogenera’s existing projects is a 200-kW system but the company expects to complete the execution of its first megawatt-scale order in the first quarter or early in the second quarter of 2024. It is a modular electrolyser purchased by a Bulgarian client.

According to Ivanov, Hydrogenera can manufacture between 10 MW and 20 MW of electrolysers a year. He noted, though, that the company’s annual production capacity depends solely on the demand for its solutions and that doubling current production would not even require a huge investment.

“We seek slow but sustainable growth and this is evident in every aspect of our activities,” Ivanov stated.

FINANCIAL HIGHLIGHT

The two executives also quoted market research conducted about a year ago by an independent analyst that shows Hydrogenera is the only sector player among the likes of Ballard Power, CeresPower, ITM Power, McPhy, Nel, PowerCell Sweden, and Plug Power, to have positive earnings before interest, tax, depreciation and amortisation (EBITDA). “The others are cash burners,” Banov commented.

TENDERS

Asked about whether they plan to take part in upcoming green hydrogen tenders in Europe, Ivanov said the following: “In the future, yes. The idea is to have our hydrogen production plants. However, we will skip the newly launched call of the European Hydrogen Bank. I am not yet sure about the next one. We currently focus on implementing our first 1-MW system, after which we will update our strategy and see whether the company will maintain its own plants.”

THE MARKET

Neither of the two executives believes there is the possibility for overproduction in the wider electrolyser market. Just because of EU regulations, demand will jump to a level where a country like Bulgaria will need several hundred megawatts of installed electrolysers, if not a gigawatt, Ivanov estimates. He gave an example with Bulgaria’s largest refinery, which will need 200 MW just to be compliant with the directive by 2030. “Where will this overproduction come from,” he asked.

Furthermore, Banov believes that the price of electrolysers will not fall soon, as some others do, because demand will outstrip supply. “First, the price goes higher, then deadlines get pushed back,” he said.

THE ISSUE WITH OFFTAKE

As the main obstacles to hydrogen project development in Europe, the two pointed at the offtake and standardisation.

“Presently, I notice growing interest in hydrogen as a fuel. However, this interest has not yet resulted in the mass production and consumption of hydrogen. At the same time, for you to create an investment project, you have to have a way to realise the product, which is currently a bit uncertain. On the other hand, car manufacturers are unable to implement hydrogen-powered vehicles as a product on the market because, in Bulgaria for example, even if you buy such a vehicle, you won’t be able to find where to refuel it. This has led to a phased development of both sides in parallel so that we can reach the point where we have both demand and the necessary production. The EU regulations should take care of that,” Banov said.

The CFO went on to say that right now, it is difficult to convince new clients to adopt hydrogen because of prejudice, while those who already use hydrogen are reluctant to make the shift away from steam methane reformation and toward the pricier renewables-powered electrolysis. At this point, they prefer to pay for their carbon emissions, he added.

THE CHEAPER COMPETITION

As one big mistake project sponsors make, the executives underscored the preference for cheaper electrolysers, most commonly from Chinese manufacturers. They explained that, while such electrolysers are indeed half the price of the competition, so is their efficiency. In the end, it becomes evident that selecting the cheaper option is not profitable, they said.