Hydrocharged: Nucera just the start of Europe’s hydrogen IPO wave

ECM Pulse 24 July

Hydrocharged: Nucera just the start of Europe’s hydrogen IPO wave

Hydrogen is one of the hottest sectors in European equity capital markets, with IPOs in the industry benefitting from the sweet spot of high growth and scarcity of listed peers.

The sector has been growing in importance alongside Europe’s push towards renewable energy. One of the continent’s most successful IPOs in 2023, Thyssenkrupp Nucera [ETR:NCH2], was centred on the growth of green hydrogen and the pitch has so far paid off. The USD 658m IPO, the largest hydrogen listing in Europe to date, priced just below the midpoint of its indicative range and is trading up around 15%.

The momentum of large hydrogen deals follows on from the USD 507m listing of Industrie De Nora [BIT:DNR] last year.

Hydrogen is still a nascent sector in European equity, but the pricing of larger deals such as Nucera and De Nora is a sign the market is starting to come into its own.

The IPOs of Nucera and De Nora benefitted from broader investor interest in the sector and a lack of dedicated public hydrogen companies. For investors that do not buy into early-stage private rounds or want to invest in public companies for liquidity reasons, equity capital markets are one of the few ways to make sizeable investments.

“Hydrogen is exciting, we already have one mandate in that space and suddenly big institutional blue-chip investors knocking on our door,” said an ECM banker reflecting on the sector outlook post-Nucera. “There are not enough public equities out there, so they have to invest in ECM.”

This news service previously reported that the Nucera IPO book was filled with dedicated ESG specialist investors looking for outsized exposure to hydrogen. Out the gate, Nucera also attracted a huge name, BNP Paribas Energy Transition Fund, part of BNP Asset Management, which took EUR 85m worth of shares in the deal.

Ulrik Fugmann, co-head of the environmental strategy group at BNP Paribas Asset Management, told ECM Pulse that the participation of a large investor like BNP AM can make the difference in getting an IPO across the line when traditional ECM investors are nervous about deploying capital.

“It was a big risk to take for us to cornerstone this,” he said. “If Nucera could not get enough demand, we would have bought more. We feel comfortable on its business prospects.”

A different shade of green

Environment-focused investors looking for performance differentiators in their portfolio are also contributing to the recent success of hydrogen producers within equity capital markets.

Unlike most wind and solar assets, which tend to be high income generating assets but with limited growth prospects, hydrogen investment is largely about future performance and the growth of a nascent technology.

“There are plenty of fans of the sector and there are greater returns to be made compared with solar and wind that are becoming a little more tired; it is tougher to find something where there is tremendous upside,” said a banker close to Nucera. “With some of those companies looking overvalued, hydrogen has an advantage and more potential buyer upside.”

Fugmann says that hydrogen remains one of the key sectors where BNP AM is investing in new renewable technologies, alongside some investment in residential solar. Hydrogen is a sector with significant momentum behind it, he added, but still one where valuations are attractive and underinvestment high.

The future growth angle of Nucera’s IPO meant it was priced at a relatively cheap valuation, leading to even greater potential alpha, claimed one of the bankers close to the deal.

Despite being the biggest contributors to Europe’s power generation, wind and solar can still be a problematic equity story, as shown by the 33% drop in Siemens Energy’s [ETR:ENR] share price, reportedly due to turbine failures.

Incidents like this, the banker close to Nucera said, are helping to drive interest towards other renewables sectors, like hydrogen, to ensure portfolio diversity.

There are now plenty of hydrogen-focused IPO candidates in Europe including French hydrogen fuelling solutions manufacturer Atawey and hydrogen-powered taxi company Hype.

Spain’s Calvera Hydrogen was also reported to be seeking an anchor investor as part of its longer term plans towards public markets.

As is often the case with thematic ECM issuance, momentum begets momentum.

“Hydrogen is a theme and will continue to be until it eventually gets played out with everyone listing their hydrogen subsidiary,” the Nucera banker said.

But until then, hydrogen ECM is on the up.

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